[Senate Hearing 105-427]
[From the U.S. Government Printing Office]
[DOCID: f:39866]
S. Hrg. 105-427
DEPARTMENTS OF VETERANS AFFAIRS AND HOUSING AND URBAN DEVELOPMENT AND
INDEPENDENT AGENCIES APPROPRIATIONS FOR FISCAL YEAR 1998
=======================================================================
HEARINGS
before a
SUBCOMMITTEE OF THE
COMMITTEE ON APPROPRIATIONS UNITED STATES SENATE
ONE HUNDRED FIFTH CONGRESS
FIRST SESSION
on
H.R. 2158/S. 1034
AN ACT MAKING APPROPRIATIONS FOR THE DEPARTMENTS OF VETERANS AFFAIRS
AND HOUSING AND URBAN DEVELOPMENT, AND FOR SUNDRY INDEPENDENT AGENCIES,
BOARDS, COMMISSIONS, CORPORATIONS, AND OFFICES FOR THE FISCAL YEAR
ENDING SEPTEMBER 30, 1998, AND FOR OTHER PURPOSES
__________
American Battle Monuments Commission
Consumer Product Safety Commission
Corporation for National and Community Service
Department of Defense--Civil
Department of Health and Human Services
Department of Housing and Urban Development
Department of the Treasury
Department of Veterans Affairs
Environmental Protection Agency
Executive Office of the President
Federal Emergency Management Agency
General Services Administration
National Aeronautics and Space Administration
National Credit Union Administration
National Science Foundation
Nondepartmental witnesses
Selective Service System
U.S. Court of Veterans Appeals
__________
Printed for the use of the Committee on Appropriations
Available via the World Wide Web: http://www.access.gpo.gov/congress/
senate
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COMMITTEE ON APPROPRIATIONS
TED STEVENS, Alaska, Chairman
THAD COCHRAN, Mississippi ROBERT C. BYRD, West Virginia
ARLEN SPECTER, Pennsylvania DANIEL K. INOUYE, Hawaii
PETE V. DOMENICI, New Mexico ERNEST F. HOLLINGS, South Carolina
CHRISTOPHER S. BOND, Missouri PATRICK J. LEAHY, Vermont
SLADE GORTON, Washington DALE BUMPERS, Arkansas
MITCH McCONNELL, Kentucky FRANK R. LAUTENBERG, New Jersey
CONRAD BURNS, Montana TOM HARKIN, Iowa
RICHARD C. SHELBY, Alabama BARBARA A. MIKULSKI, Maryland
JUDD GREGG, New Hampshire HARRY REID, Nevada
ROBERT F. BENNETT, Utah HERB KOHL, Wisconsin
BEN NIGHTHORSE CAMPBELL, Colorado PATTY MURRAY, Washington
LARRY CRAIG, Idaho BYRON DORGAN, North Dakota
LAUCH FAIRCLOTH, North Carolina BARBARA BOXER, California
KAY BAILEY HUTCHISON, Texas
Steven J. Cortese, Staff Director
Lisa Sutherland, Deputy Staff Director
James H. English, Minority Staff Director
------
Subcommittee on VA, HUD, and Independent Agencies
CHRISTOPHER S. BOND, Missouri, Chairman
CONRAD BURNS, Montana BARBARA A. MIKULSKI, Maryland
TED STEVENS, Alaska PATRICK J. LEAHY, Vermont
RICHARD C. SHELBY, Alabama FRANK R. LAUTENBERG, New Jersey
BEN NIGHTHORSE CAMPBELL, Colorado TOM HARKIN, Iowa
LARRY CRAIG, Idaho BARBARA BOXER, California
ROBERT C. BYRD, West Virginia
(ex officio)
Jon Kamarck, Clerk to Subcommittee
Carolyn E. Apostolou
Minority Staff
Sally Chadbourne
C O N T E N T S
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Thursday, February 25, 1997
Page
Executive Office of the President: Council on Environmental
Quality and Office of Environmental Quality.................... 1
Department of the Treasury: Community Development Financial
Institution.................................................... 27
National Credit Union Administration............................. 63
Tuesday, March 4, 1997
Corporation for National and Community Service................... 81
U.S. Court of Veterans Appeals................................... 109
American Battle Monuments Commission............................. 121
Department of Defense--Civil: Cemeterial Expenses, Army.......... 139
Selective Service System......................................... 145
Tuesday, March 11, 1997
Consumer Product Safety Commission............................... 155
General Services Administration: Consumer Information Center..... 165
Department of Health and Human Services: Office of Consumer
Affairs........................................................ 169
Tuesday, March 18, 1997
Federal Emergency Management Agency.............................. 193
Tuesday, April 8, 1997
Environmental Protection Agency.................................. 247
Tuesday, April 22, 1997
Executive Office of the President: Office of Science and
Technology Policy.............................................. 433
National Science Foundation...................................... 457
Thursday, May 1, 1997
Department of Veterans Affairs: Office of the Secretary.......... 511
Tuesday, May 6, 1997
National Aeronautics and Space Administration.................... 601
Tuesday, May 13, 1997
Department of Housing and Urban Development...................... 665
Nondepartmental witnesses........................................ 723
Department of Veterans Affairs............................... 723
Department of Housing and Urban Development.................. 732
Environmental Protection Agency.............................. 830
Federal Emergency Management Agency.......................... 889
National Aeronautics and Space Administration................ 896
National Science Foundation.................................. 909
Miscellaneous................................................ 923
DEPARTMENTS OF VETERANS AFFAIRS AND HOUSING AND URBAN DEVELOPMENT AND
INDEPENDENT AGENCIES APPROPRIATIONS FOR FISCAL YEAR 1998
----------
THURSDAY, FEBRUARY 25, 1997
U.S. Senate,
Subcommittee of the Committee on Appropriations,
Washington, DC.
The subcommittee met at 9:38 a.m., in room SD-192, Dirksen
Senate Office Building, Hon. Christopher S. Bond (chairman)
presiding.
Present: Senators Bond, Burns, Stevens, Bennett, Mikulski,
and Lautenberg.
EXECUTIVE OFFICE OF THE PRESIDENT
Council on Environmental Quality and Office of Environmental Quality
STATEMENT OF KATHLEEN MC GINTY, CHAIR
OPENING STATEMENT OF CHRISTOPHER S. BOND
Senator Bond. Good morning, and welcome to the VA, HUD, and
Independent Agencies Subcommittee meeting. We will come to
order.
My apologies. I have spent the better part of the morning
stuck in traffic. If this were the D.C. appropriations
subcommittee, I would have questions on the construction
schedule. But all I can do now is apologize to the witnesses,
guests, and fellow members.
This is the subcommittee's first hearing on the fiscal year
1998 budget. I welcome the new members of the subcommittee, and
I look forward to working with our ranking member, Senator
Mikulski, and she probably has a story about traffic on the
Baltimore-Washington Parkway which will exceed my story.
I welcome our witnesses and guests.
We will face another year of very difficult budget
decisions as Congress continues to focus on its priorities and
seeks to balance a budget by the year 2002. I must emphasize
the need to continue to be proactive in consolidating and
reforming our many Federal programs, including many under the
jurisdiction of this subcommittee. There was much to be done
over the last several years, but there is a lot of work still
to be done.
In particular, after 4 years of sharp decline, the Federal
deficit is likely to begin to increase again, so that by 2010,
when some of us, past baby boom and baby boomers, begin to
retire, the deficit is going to skyrocket unless Congress makes
meaningful policy and spending changes. It took us more than
200 years to acquire our first trillion dollars of debt. We are
now increasing our outstanding debt by $1 trillion about every
5 years. This is a mortgage on America's future that is going
to be difficult to sustain.
I note, with interest and some concern, the President's
budget proposes some $92 billion in budget authority for the
departments and agencies under the VA, HUD, and Independent
Agencies Appropriations Subcommittee jurisdiction, of which $72
billion is discretionary spending. I would note that this
amount represents a proposed increase of approximately $8
billion over the current level. As I understand it, there are
discussions underway between leaders, the Congress, the White
House, and OMB about reaching a budget agreement. We have some
very important spending priorities to meet in this
subcommittee, and I will fight to assure that all of our
programs are adequately funded, but I would have to say that
unless some agreement is reached that is a very ambitious goal
for our 602(b) allocation.
prepared statement
This morning we will hear testimony from four of the
independent agencies under the subcommittee's jurisdiction,
Council on Environmental Quality, the National Credit Union
Administration, the Neighborhood Reinvestment Corporation, and
the community development and financial institutions fund.
While programs covered by today's hearings are small relative
to others in the subcommittee's portfolio, they are very
important programs and activities that impact millions of
Americans.
[The statement follows:]
Prepared Statement of Senator Bond
The VA, HUD and Independent Agencies Appropriations Subcommittee
hearing will come to order. This is the Subcommittee's first hearing on
the fiscal year 1998 budget. I welcome the new Members to the
Subcommittee, and, as always, I look forward to working closely with
our Ranking Member, Senator Mikulski. I also welcome our witnesses and
guests this morning.
The Appropriations Committee and the VA/HUD Appropriations
Subcommittee will face another year of very difficult budget decisions
as the Congress continues to refocus its priorities and seek to balance
the federal budget by the year 2002. I cannot emphasize enough the need
to continue to be proactive in consolidating and reforming our many
federal programs, including many under this subcommittee. We have done
much over the last several years, but there is still a lot of work to
be done.
In particular, after four years of sharp decline, the federal
deficit is likely to begin to increase again so that by 2010, when the
babyboomers begin to retire, the deficit will skyrocket unless the
Congress makes meaningful policy changes. While it took us more than
200 years to acquire our first trillion dollars of debt, we are now
increasing our outstanding debt by a trillion dollars every 5 years,
with the total national debt now standing at some $5.3 trillion. This
means that every man, woman, and child in our Nation has an individual
debt of almost $20,000. This is the mortgage on America's future that
we must begin to pay off now.
In particular, I am concerned that the President's budget proposes
some $92 billion in budget authority for the departments and agencies
under the VA, HUD and Independent Agencies Subcommittee, of which $72
billion is discretionary spending. The amount proposed represents an
increase of approximately $8 billion over the current level. And I must
tell you, absent some very compelling reasons, it is going to be very
difficult for this subcommittee to provide any increases over our 1997
budget levels.
This morning we take testimony from 4 of the independent agencies
under the subcommittee's jurisdiction: the Council on Environmental
Quality, the National Credit Union Administration, the Neighborhood
Reinvestment Corporation and the Community Development Financial
Institutions fund. While the programs covered by today's hearing are
small relative to others under the subcommittee's portfolio, they are
important programs and activities that impact millions of Americans.
panel i
We will hear first from Ms. Kathleen McGinty, Chair of the Council
on Environmental Policy or CEQ, which is responsible for coordinating
federal policy on environmental issues as well as primary
responsibility for implementation of the National Environmental Policy
Act (NEPA).
The Administration is requesting a budget for CEQ for fiscal year
1998 of $3.02 million and 23 Full-Time equivalent employees. This
Budget Request represents an increase for CEQ of $584,000, a 24 percent
increase over the fiscal year 1997 Appropriation and an increase of 4
FTE's.
I look forward to your testimony this morning.
panel ii
The second panel consists of Mr. John Hawke, Jr., the Under
Secretary for Domestic Finance for the Department of the Treasury, and
Ms. Kirsten Moy, Director of the Community Development Financial
Institutions fund program. The Administration's Budget Request for the
CDFI Fund asks for an increase of $75 million from $50 million for
fiscal year 1997 to $125 million for fiscal year 1998. I also
understand that the President also plans to ask for increases each year
to bring the 5-year total to $1 billion by fiscal year 2002.
The CDFI fund was established in the Community Development and
Regulatory Improvement Act of 1994 to provide equity investments,
grants, loans, and technical assistance to new and existing community
development financial institutions such as community development banks,
community development credit unions, community development loan funds,
community development venture capital funds and micro-loan funds.
CDFI funds are intended to enhance the capacity of these
institutions to finance economic development, housing, and community
development in distressed urban and rural communities.
I am very concerned about the amount of the CDFI funding request,
especially as we prioritize the funding needs of some of the primary
programs and activities under this subcommittee, such as the renewal of
expiring section 8 housing assistance contracts and the additional cost
of Veterans medical care. The CDFI fund is the new kid on the block--it
has no track record and looks like a number of other programs and
activities that are designed to revitalize distressed communities.
In addition, we need to see how well the CDFI funds will leverage
other public and private investment in distressed communities and also
to what degree any leveraged investment is being drained from other
activities and programs currently serving distressed communities. I
also am interested in understanding the extent to which CDFI's
discourage traditional financial institutions from opening branches and
lending in distressed communities. Opening special banks for distressed
communities is not necessarily the best way to revitalize and
incorporate these communities into, hopefully, the overall economic
growth and revitalization of our urban and rural areas.
I look forward to hearing your testimony
PANEL III
The third panel consists of Mr. Norman D'Amours, Chairman of
National Credit Union Administration (NCUA), and Mr. George Knight,
Executive Director of the Neighborhood Reinvestment Corporation.
NCUA is responsible for the chartering and regulating of federal
credit unions. In addition, NCUA administers an insurance fund to carry
out a program of insurance for member accounts in federal credit unions
and State-chartered credit unions which apply and qualify for
insurance. There are currently some 7,200 federally chartered credit
unions and it is estimated that approximately 4,500 State-chartered
credit unions will be insured by NCUA by the end of 1997.
The NCUA is self-funded through an operating fee on its member
institutions and from reimbursements from the insurance fund for
administration of the insurance fund.
Second, Mr. Knight will testify on the Administration's budget
request for the Neighborhood Reinvestment Corporation which calls for
flat funding of $50 million for fiscal year 1998. Neighborhood
Reinvestment was created in 1978 to help local communities establish
working partnerships between residents and representatives of the
public and private sectors through nonprofit entities which include
neighborhood housing services, mutual housing associations and
apartment improvement programs. Collectively, these nonprofits are
known as the NeighborWorks' network.
Neighborhood Reinvestment and the NeighborWorks' network
have a long track record and have become a good model of how the
federal government can spend a small amount of money and reap
tremendous benefits. For example, as the written testimony ably states,
$38.7 million in fiscal year 1996 appropriations allowed the
Neighborhood Reinvestment and NeighborWorks' to leverage
$420 million in affordable housing investments.
Again, I look forward to the testimony.
STATEMENT OF FRANK R. LAUTENBERG
Senator Bond. In the absence of Senator Mikulski, I will
call on Senator Lautenberg for his opening statement.
Senator Lautenberg. Thank you, Mr. Chairman. I will be
relatively brief, and relatively brief around here may have
different meanings for different people, but we will try.
[Laughter.]
I thank you for calling this hearing. I welcome Ms.
McGinty. If I may be so familiar, Katie, you have made many
important contributions here. We are glad to see you here
making the case for your small department--small, but
important.
Mr. Chairman, the Federal Government may have a single
agency devoted to environmental protection, but every agency
has environmental responsibilities and interests. The
Department of Energy spends more money on hazardous waste
cleanup than EPA. The Navy has taken dramatic steps to reduce
pollution at sea. And NOAA's weather satellites have provided
dramatic scientific information on the ozone hole and global
warming.
Additionally, although EPA enforces Superfund, the largest
responsible parties are not Fortune 500 companies. They are the
Department of Defense and the Department of Energy. Given the
many agencies involved in environmental protection, it is
important that some organization coordinate environmental
policy. And the Council on Environmental Quality performs that
critical task. And it generally does a good job.
One area where there have been problems is the processing
for reviewing disputes under NEPA, the National Environmental
Policy Act. I have some concerns about the process, and I am
pleased that the President has proposed to review it, to
reinvent it perhaps. For one thing, we need to ensure that
environmental impact statements are easier to understand so
that public participation can be more meaningful. It is also
critical that the environmental impact statement process become
a real tool in agency decisionmaking rather than a paperwork
exercise, to justify an agency previous intention.
I understand that the President's budget would provide
increased funding for four new staffers, to establish primarily
a new NEPA process. And I hope that we can find the funds to
make that happen. I think it is a very important step. I think
that it needs to be attended to, and I think it is a relatively
small request to take this important step.
So I look forward to Ms. McGinty's comments on these
issues, and I, once again, Mr. Chairman, thank you for holding
this hearing.
Senator Bond. Thank you very much, Senator Lautenberg, and
since we have been joined by the chairman of the full
committee, I would like to call on Senator Stevens for any
comments.
Senator Stevens. Thank you. I have no comment.
Senator Bond. Thank you.
I will now welcome and turn to our ranking member, and say
that we are looking forward to working together in another
challenging year, and hope that we can pass one good VA, HUD,
and Independent Agencies bill, and move on with the business.
Senator Mikulski, welcome.
STATEMENT OF BARBARA A. MIKULSKI
Senator Mikulski. Thank you very much, Mr. Chairman, and
again, I apologize for my tardiness today. We oversee the space
program, and I wish I could do as good a job getting down from
Baltimore on the Baltimore-Washington Parkway as our astronauts
do fixing the Hubble.
I would like to welcome our new members to the panel,
Senators Craig, Harkin, and Boxer, who I know will be active
participants, and in this, today's hearing. I am looking
forward to hearing what Ms. McGinty has to say about the CEQ's
effort to study the effectiveness of its authorizing
legislation, the NEPA, and to examine proposals aimed at
reinventing the interagency process to carry out that statute.
As we look at so many of the issues impacting on the
environment, interagency coordination is absolutely essential.
I will also be looking forward to listening to Mr. George
Knight of the Neighborhood Reinvestment Corporation, which is
really one of the best little agencies I think we have in the
Federal Government. It has a modest budget of $50 million, and
really does help communities empower themselves. I think you
and I appreciate its self-help initiatives.
Also on the issues of the community development, the CDFI,
we look forward to hearing what they have to say, particularly
leveraging Federal dollars, and the role that they will play in
microenterprise initiatives, which I know will be crucial to
economic development in our own country. We have seen how they
work abroad. I would like to see how they work in our inner
cities, and hopefully they can be a tool to welfare reform.
And last but not at all least, I welcome an old colleague,
Congressman D'Amours, on behalf of the National Credit Union
Administration. I am worried about the credit unions. There are
a lot of lawsuits about credit unions. Some are in fragile
condition. I just want to be sure that they again are a tool
for empowerment at local levels, but yet do not leave us with
another unfunded fiasco.
Senator Bond. Thank you very much, Senator Mikulski. We
will now hear first from Ms. Kathleen McGinty, Chairman of the
Council on Environmental Quality [CEQ], which is responsible
for coordinating Federal policy on environmental issues, as
well as the primary responsibility for implementation of the
National Environmental Policy Act [NEPA], which has already
been mentioned here today.
I note the administration is requesting a budget for CEQ in
fiscal year 1998 of $3.02 million and 23 full-time equivalents.
This budget request represents an increase for CEQ of over $\1/
2\ million, or a 24-percent increase over fiscal year 1997
appropriations and an increase of four full-time employees.
I look forward to your testimony. Welcome, Ms. McGinty.
STATEMENT OF KATHLEEN MCGINTY
Ms. McGinty. Thank you very much, Mr. Chairman and members
of the committee. It is a pleasure to appear before you today
to present the President's request for CEQ for fiscal year
1998. I want to start by thanking all of you, and especially
your staff, who have been very much available to CEQ in the
last years to really help us do our job.
I would like to focus today on three things: First,
briefly, the level of our request; second, our work over the
past year; and third, I'd like to turn to our top priority for
the coming year, which is the reinvention of the National
Environmental Policy Act. First, the level of our request.
As you know, Mr. Chairman, CEQ currently operates at a
staff level of 19 FTE's and a budget of $2.4 million. Our
request today is for 23 FTE's, which would be $3,020,000. As
you noted, Mr. Chairman, especially in these budget times, this
increase in percentage terms is significant. However, I would
like to emphasize to the committee that even at 23 FTE's, CEQ
would still be significantly below the average in the Bush
administration, which was 31 FTE's, and very significantly
below CEQ's peak staffing level of nearly 70 FTE's during the
Nixon administration.
These resources are critical, Mr. Chairman, if CEQ is to
take on what I will describe in a moment as our very first
priority, the comprehensive reinvention of NEPA. Many,
including the Western Governor's Association, industry,
nongovernmental organizations, and others, have urged us to
undertake this effort, and I agree with them, it is a top
priority. But I do need resources to get that job done,
resources that could be taken out of the daily fire fights that
we find ourselves constantly involved in and consumed by,
people who are senior, professional, dedicated staff who really
can get this job done.
As I noted, I will return to the substance of this endeavor
in a moment. Before doing that, I want to turn briefly to some
of CEQ's work over the past year that we anticipated in our
meetings last year. As this committee is aware, CEQ has
responsibility both for immediate oversight of the
environmental impact assessment process conducted by every
Federal agency, as well as in our capacity as the President's
senior environmental policy advisers, policy coordination, and
dispute resolution among agencies on environmental matters.
First, environmental assessments. CEQ has worked hard over
the last year to use NEPA as it was intended, to improve agency
implementation and decisionmaking. For example, CEQ used NEPA
to design a process that will allow us to conclude even the
most complex habitat conservation plans, and these are the
plans that we have developed under the Endangered Species Act
that provide for species protection but also gives certainty to
landowners. Through NEPA we will complete those processes for
even the most complex HCP's in 10 months or less.
I recently returned from Washington State, where I signed
our latest HCP with the Governor of Washington. That HCP will
cover 1.6 million acres, and gives the State of Washington 70
to 100 years certainty that it has fulfilled its Federal
Endangered Species Act obligations. We achieved that through
NEPA.
In addition, CEQ responded to the request of Gov. Tony
Knowles, the Alaska delegation, members of the oil industry,
and others, to launch a process to identify lands for possible
oil production and environmental protection in the national
petroleum reserve in Alaska. Because of our efforts and because
of NEPA's ability to integrate various statutes, we will be
able to see that process through to completion in 18 months or
less. This builds on our effort that we achieved in just 6
months to allow for the export of oil from the Alaska North
Slope.
Through NEPA, CEQ has also worked, for example, to cut
processing times for timber salvage sales. Now, we complete
them in 1 year instead of the 3 years that was previously
required. We worked recently to resolve a longstanding dispute
between the Air Force and the FAA that now allows military
training activities again to be commenced in Alaska. And we
provided most recently for the transfer of the Homestead Air
Force Base in Florida to Dade County, FL, but in a way that
will ensure that Everglades restoration is not impaired. So we
are improving the environmental assessment process and
implementation.
On the policy front, CEQ has worked hard coordinating the
agencies and resolving disputes. CEQ developed, for example,
targeted reforms to RCRA. These reforms will avoid duplication
between RCRA and the Clean Water Act. They were developed and
signed into law last year, and in their implementation industry
will save tens of millions of dollars. CEQ also worked to
achieve an agreement that will ensure the financial viability
of the Bonneville Power Administration, while also securing
significant resources and sufficient resources to protect and
restore salmon in the Columbia and Snake Rivers. This agreement
was significant not only in substance, but also for the first
time it opened up Federal salmon decisionmaking to the tribes
and to State and local governments. That had not been done
before.
Working with the States' Attorneys General and the
International Association of Police Chiefs, CEQ also designed a
bill to take on environmental crimes. This bill, among other
things, will provide for enhanced partnerships and the sharing
of resources between Federal and State and local law
enforcement officials.
Finally, CEQ worked to craft significant reforms in a
wetlands program, and now with OMB to ensure that nonstructural
options are offered to flood victims in the wake of the recent
flooding experiences we have seen. So CEQ has worked hard to
ensure coordination, coherence, and efficiency in environmental
policy matters. NEPA is an effective tool to that end.
Turning briefly now, Mr. Chairman, to our proposal to
reinvent NEPA, we hope to build on the progress we have made
and that I have just discussed, as well as the new learning and
insights we have gained as a result of our NEPA effectiveness
study. We are already underway, working with the Western
Governors Association; Governors Geringer and Kitzhaber most
particularly have launched working groups in three areas:
timber, oil and gas, and grazing. But as the committee knows,
NEPA applies to every major Federal action, so there is much
more to be done.
We can use NEPA better to integrate environmental concerns,
and we know for sure that NEPA is the tool through which we can
provide much more access to citizens and State and local
government. I would like to launch a multistakeholder process
to get this done. I would like to bring in our universities and
our best scientists and academic talent. It is indeed my top
priority, but, Mr. Chairman, I do need additional resources to
get the job done. I look forward to working with the committee
to that end.
Thank you.
Senator Bond. Thank you very much, Ms. McGinty. Your full
statement, of course, will be made a part of the record. We
appreciate your summaries.
ELIMINATION OF CEQ
Ms. McGinty, the first year President Clinton was in office
he proposed eliminating CEQ as part of a streamlining effort,
and later reversed his decision and decided to support CEQ, but
to keep staffing at a modest level. I would note that CEQ is
not at the lowest historical staffing level, which was 13, from
1984 to 1989. In fact, the average staffing level, as opposed
to the authorized level for the past 16 years, has been just
below 19 FTE's. Can you provide us any specific examples from
last year which would illustrate where your staffing level fell
short?
Ms. McGinty. Throughout the course of the last several
years, Mr. Chairman, our staffing level has fluctuated. As you
noted, in the beginning of the administration the proposal was
to establish a new office in the White House to handle these
matters. That office would have been staffed at 10 FTE's.
Over the course of the last several years, CEQ has been
built back up from 10 to the current level of 19 FTE's, so we
have been on average in that range of staff, from 10 to now we
have built back up to 19.
Senator Bond. What work was not getting done?
Ms. McGinty. I am sorry. For example, on the lesser levels
of staffing we are about to present to the committee a combined
CEQ annual report. As the committee is aware, Senator Mikulski
has often looked to this report for the data, very important
data, it contains.
CEQ fell behind in preparing that report. But now we are
finally on the verge of catching up, and we have done that by
combining 2 years' worth of analysis into one single report.
In addition to that, we also have just recently finished
the NEPA effectiveness study, but that, too, was delayed by
1\1/2\ years because of reduced funding levels.
Senator Bond. How much of your time do you spend on putting
out these reports? Senator Mikulski has suggested making it
biannual. Is there that much new information every year that
you have to come up with a new report? How much time and effort
do you put in on that?
Ms. McGinty. It is a significant investment of time and
effort. What we have found, however, and we found it when we
were lapsed 1 year in providing the report, is that
particularly in academia and many scientists really rely on
that annual series of data. They use it for their own studies,
their own reports, and again, we found that out as we fell
behind in producing that volume of data.
It is a significant investment for us. We do take it very
seriously, and what we have found is that there are many people
who rely on it.
PROJECT XL
Senator Bond. You mentioned project XL in your written
testimony, and you say it is the centerpiece of the
administration's effort to reinvent environmental regulation,
and the President has indicated his strong support, saying it
marks the end of one size fits all Government regulations. When
we look at the reality as opposed to the rhetoric, we are a
little concerned about it.
You testified 2 years ago the administration would be
launching 50 initiatives in 1995. Yet today, as I understand
it, there have only been three project approvals, and, in fact,
of the eight original pilot XL projects announced in November
1995, only one has been given final approval, and only three
additional projects are in negotiation. Three of the original
project participants have withdrawn completely, and industry
executives have told us that EPA is too enforcement oriented
for a voluntary program to succeed. The senior director for
environmental affairs for Annheuser Bush, one of the eight
pilot projects which later withdrew, said, ``we could not seem
to get the out of the box thinking we wanted to get out of
them.''
What lessons have you learned over the past 2 years from
project XL? Why have there been so many problems, so little
progress, and specifically, what are you doing to see the
President's commitment for alternative compliance approaches is
carried out?
Ms. McGinty. Senator, the project XL, as you indicate, has
been a comprehensive effort to really try to produce a whole
new way of achieving environmental excellence. Now, in setting
that ambitious of a target for ourselves, we also have run into
some significant difficulties in getting the job done. I think
the difficulties speak really to the newness and the magnitude
of what we are trying to take on.
What we have done to continue to work through the program
is to reconvene a series of meetings with various stakeholders
to really understand the issues that they are encountering with
the program. And they seem to boil down to two. The program
requires that there be stakeholder participation in
implementing the environmental performance plan. The program
also requires that in ``throwing away the rule book,'' that a
company be willing to achieve superior environmental
performance.
Both of those phrases--stakeholder participation and
superior environmental performance, have not been well enough
understood so that as each project has moved forward there has
been confusion with regard to those elements of the program.
Recently, a Federal Register notice was issued to help
flush those conflicts out, and a stakeholder process convened
to comment on the new suggestions that have been made. Now,
over the next several weeks what we will do is reissue that
Federal Register notice, taking in the comments now of
participants in the program and try to help provide some
clarity with regard to those two concepts that do seem to have
proven to be difficult.
Senator Bond. I will come back to that, because I have a
couple of more questions on that. But let me turn now to
Senator Mikulski.
Senator Mikulski. Thank you, Mr. Chairman.
Ms. McGinty, the NEPA effectiveness study identified
certain areas, in which there was poor interagency
coordination, conflicting regulations, inadequate public
participation, too much paperwork, and so on. And having
identified those, which can be true of almost any organization
in America, your report had no navigational chart or no series
of recommendations on how to address those individual issues.
Do you have a specific list that you want accomplished and
defined timetables that you want? In other words, some of these
are more pressing than others. Would you outline your tasks and
timetables on addressing the effectiveness study, because
resources and staff should define mission and purpose, and
mission and purpose is dealt with in these issues. Do you want
to comment?
Ms. McGinty. Yes; thank you. Starting from the
effectiveness study and the five or six themes that came out of
that that you just articulated, we have moved from those themes
to try to apply them now in the first phase of this reinvention
effort to three specific areas. The first one is timber, the
second is oil and gas production, and the third is grazing. And
what that means is that we want to look in those three sectors
to see what the experience is of whether there are conflicting
regulations, whether the public is not sufficiently involved.
Yes?
Senator Mikulski. Just to continue a conversational
approach here, so rather than saying I am going to address too
much paperwork, what you are doing, then, is taking a topic
that actually affects a private sector, like grazing and
timber--of which our colleagues here have intense interest in,
and then take these four problem areas and look at a topic that
affects private sector environmental concerns and does direct
impact on the local community. I think that is an excellent way
to go about it, rather than something called--not good
coordination.
Ms. McGinty. Instead of just generalities, we really wanted
to get very specific, and one specific thing, for example, that
we would like to do, and the timing and the paperwork problems
that you mentioned, we want to give people who are seeking
Federal leases the opportunity, the right, to come in and
negotiate a timeframe, so that they know that the permitting
process will take x amount of time. But they have the right to
come in and be given that certainty. They do not have that now.
Senator Mikulski. Let us just take the grazing issue. I
know Senator Burns will probably have followup questions in
this, but that is what I hope we can do, a more conversational
approach.
Grazing is one of your tasks to be dealt with. Do you have
a timetable where you say at the end of this period we then
hope we will have resolved our internal management processes to
have dealt with creating procedures. Not necessarily to make
everybody happy with the decisions, but at least our internals
and our mechanisms will be in place.
Ms. McGinty. Yes; we hope, actually, over the next several
months, in a short timeframe, to be able to produce several
very concrete recommendations, in the grazing sector for
example. We will take those recommendations, and then open the
process up. I visited extensively with Governors Geringer and
Kitzhaber about this. The University of Wyoming and the
University of Montana will be engaged in providing a forum for
us to have our recommendations aired by the folks who are most
affected.
Senator Mikulski. Is it reasonable to expect that those
three topics could have been dealt with by the beginning of the
fiscal year, October 1?
Ms. McGinty. Oh, I believe so, yes. In terms of very
specific concrete recommendations, yes.
Senator Mikulski. Well, I'd like to ask, Ms. McGinty, that
when we are actually at our markup stage we would like to have
a progress report, and then what you need to do that, because
then, one, we will see if you have made progress, with all due
respect, and then second, what it took to make the progress.
Ms. McGinty. OK.
Senator Mikulski. The second thing is FEMA. You know we are
a FEMA-obsessed committee here because that is where all the
natural disasters come in. FEMA, as you know, has raised
concerns and yellow flashing lights that often environmental
mandates, particularly emergency rehabilitation, often impede
their efforts. We are not talking about long-range restoration.
I wonder if you could talk about your coordination with FEMA,
not that we waive or cavalier or swashbuckle over these regs,
but when they are out there and we have got floods on the
Missouri or like what we faced in Western Maryland, the
Potomac, et cetera, you have got to make decisions and you
cannot go through a lot of complicated environmental stuff.
Ms. McGinty. Yes; absolutely, especially in the context of
emergency response. We very recently were faced with this,
especially in the wake of the flooding in California. I was
contacted by Senator Feinstein and Congressman Fazio, who laid
out to me that they thought their constituents were very
concerned and confused about this, not certain that they could
take emergency actions to respond to the flood.
We called the relevant agencies together--FEMA, the Fish
and Wildlife Service, the National Marine Fishery Service, EPA,
all of them--and quickly got an analysis done that yes, in
fact, there are emergency provisions in each one of these
statutes, and that the conditions in California warranted the
invocation of those emergency procedures. Within 36 hours we
put out statements in California and the Pacific Northwest to
make clear that the environmental statutes in no way slowed
down or would impede emergency actions to respond to the flood.
Senator Mikulski. I am going to offer two suggestions to
you, and I know my time is up. It would be wonderful to spend
the whole morning talking about this. But two things: First of
all, hats off on the California response. But this is going to
happen everywhere. And I am going to suggest two things. One,
that you might want to think about SWAT teams from these
agencies to work with FEMA exactly on that, at a significant
senior level where decisions will have validity.
The other is that when FEMA does its maneuvers, and they do
them in States, and they do them in special situations, the
earthquake maneuver and so on, their simulations, that you be
part of that simulation. And, I think, it would be very
innovative, so that when they simulate how to respond to save
lives, then you are there to talk about what you would do to
follow up to save communities. And think about that, talk to
James Lee Witt, and, I think, it could be very innovative, and,
I think, it would be very energizing for your staff.
Ms. McGinty. That is an excellent suggestion. I will do
that.
Senator Mikulski. To have SWAT teams and maneuvers.
Ms. McGinty. Sounds exhilarating.
Senator Lautenberg. It sounds like they will be out there
with flack jackets. [Laughter.]
Senator Mikulski. I have seen several environmental issues
in Maryland where we have had horrendous national disaster
years, as has Senator Bond. Senator Lautenberg has very serious
issues in New Jersey relating to chemicals.
Anyway, enough said.
Ms. McGinty. Thank you.
Senator Bond. Thank you, Senator Mikulski. I feel like we
are almost in the Defense Appropriations Subcommittee.
Senator Mikulski. Senator Stevens is having a profound
impact on my psyche.
Senator Bond. That is a good idea, and you will want to go
to Alaska, like the rest of us do this year. It is not
required, but it is not a bad idea.
Now let me turn to Senator Burns.
PREPARED STATEMENT OF CONRAD BURNS
Senator Burns. I have a statement that I want to put in the
record, Mr. Chairman.
Senator Bond. Without objection, it will be so ordered.
[The statement follows:]
PREPARED STATEMENT OF SENATOR BURNS
Thank you, Mr. Chairman. Good morning, ladies and gentlemen. Mr.
Chairman, I would like to take this opportunity to commend you on your
prompt attention to appropriation matters this Congress. We have a lot
of work to accomplish this year and, considering our present fiscal
situation, it might not be easy to choose which projects to fund.
Therefore, it is important that we begin our work quickly with close
attention not only to the needs of Federal agencies individually, but
to the needs of the Nation.
For example, Mr. Chairman, I have noticed that some agencies are
requesting more than double the amount they requested in fiscal year
1997. Mr. Chairman, with the economy in the shape that it is, each
Federal agency should be trying to limit their expenses, not increase
them, because if we increase the funds for one agency, it means that
another agency will have to accept higher cuts than it would have
normally expected.
And, unfortunately, Mr. Chairman, we will have to determine if each
Federal agency is really a needed organization in today's economy. We
must do all that we can to ensure that we do not have two or three
agencies performing the same tasks--this only leads to confusion and/or
double billing the Federal Government for essentially the same work. It
is our job to ensure to the American people that we are spending their
hard earned tax payer funds with due diligence.
Again, thank you, Mr. Chairman, for the opportunity to comment on
these proceedings and for your timely attention to these vital matters
to our Nation.
Senator Burns. Ms. McGinty, I was going to have you give me
10 reasons why you should be funded at all. Now, I want you to
give me 19 reasons why you should be funded at all.
Ms. McGinty. OK. I guess I can try. One, I think that we
need better coordination among our agencies on environmental
matters, and that is CEQ's role.
Two, I think we need to streamline and cut paperwork, and
that also is CEQ's role.
Three, I think that in many different Federal decisions
environmental impact should be taken into account, and that,
again, is CEQ's role.
Four, NEPA is the statute that provides for State and local
government participation in Federal decisionmaking.
Senator Burns. Let us stop right there now. I will let you
make 15 of them in writing to me.
It just seems to me if we have, and EPA, they do not want
to visit with any other agency, you do not want to visit with
any other agency, no other agency wants to visit with you, I
just feel like, because you all went to Montana and made a
little deal, and that ain't going to fly, is it?
Ms. McGinty. I believe we are on track with that, although
I am very respectful of your views on this subject.
Senator Burns. Well, you tell me how it is going to fly,
because I will tell you what, Plum Creek has pulled out.
Ms. McGinty. Yes; that is right. The Governor, as you might
know, is still very much engaged, and has been working with us
closely on it. The company is still very much engaged, and has
worked in good faith from the beginning of this process, and
continues today. The agencies, I think, are producing a lot of
good work on this front.
Senator Burns. But your groups--in other words, your
environmental groups in Montana--are not going to allow this
thing to move forward, and I think I said at the git-go that
this was a pie in the sky, that it just jerks people around,
that their lives are in the balance locally. This is policy
that was made on a feel-good methodology, and then to come in
here and ask for more money and more people to do more crazy
things, it is absolutely--I do not see how you can justify it,
Katie. And I will tell you what, and I love your smile and I
think you are a bright young woman, but I will tell you what,
as far as any value to the American people or to the community
of Montana or Wyoming or Idaho, and Utah will love you, you
tell me what value--and you go out there and you say things to
the press that sound good, but it is just not like that. And
you made this deal, and then you ask for more money. Boy, I
will tell you one thing. I thought I was pretty brazen as an
auctioneer, but I am not near as brazen as this.
Ms. McGinty. Well, Senator, I certainly respect your
opinion, and I certainly understand, and you have made very
clear, and have been clear to us from the beginning with regard
to the New World Mine proposal about your views on that. But I
do believe that CEQ has performed a very valuable role, and
continues to, on issues that, I believe, are also very
important to your constituents.
Senator Mikulski and I were just discussing what we have
done, already, to help streamline things like grazing
practices, and to make it easier to provide----
Senator Burns. How many people do you have there in that
CEQ that knows one thing about grazing? Do you have anybody
down there from the Society of Range Management?
Ms. McGinty. No; I do not.
Senator Burns. That is right. You do not have one soul down
there that can tell us diddly doo about what a cow will eat and
what they will not, what a sheep will do and what they will
not. Now, you might have some people down there who know the
difference between clean water and bad water, but that is about
all. And this is what I am saying. We have got an Agriculture
Department. In other words, all of this is redundant.
I am going to be right honest with you. I am going to vote
to defund this whole thing, because you have not been honest
with people, and I am just to the point of frustration like you
cannot believe. People's lives are in the balance. And that is
what I am saying. We have got people that are making policy
that do not know diddly doo about nothing. And I am probably
one of them.
Ms. McGinty. Senator, it is true that CEQ is not an
institution that has specific substantive expertise in the
various areas. What CEQ works to do, though, it is the statute
that says that people with expertise have to be brought into
the decisionmaking process. NEPA is the statute that says you
have to open the doors, you have to let the public in, you have
to disclose what your intentions are.
I would not presume to second-guess the technical judgment
of a particular agency. But when you have two agencies with
clashing technical judgment, or when you have an agency that
does not want to let State or local government or private
citizens participate, that is when we get involved, to try to
help repair where there are differences or to ensure that
people have an opportunity to participate.
But you are exactly right. It is not an institution with a
cadre of scientists or a cadre of economists in specific
disciplines.
Senator Burns. But you put a lot of weight on NEPA. Yet you
went out there and interjected your own decision before the
NEPA process was allowed to be completed. You do not even have
faith in your own law in NEPA. You made that decision on the
New World Mine before the NEPA process was completed.
Ms. McGinty. That is absolutely true, Senator.
Senator Burns. Well, then why?
Ms. McGinty. Because the NEPA process is invoked when a
Federal Government agency is going to undertake an action and/
or when a citizen requests that a Federal Government agency
takes an action.
Senator Burns. But the process was in progress. Let it be
completed.
Ms. McGinty. The requesting company in this instance asked
that that action cease and desist because they wanted to pursue
an alternative course.
Senator Burns. They are just as wrong as you are.
Ms. McGinty. Well, the action was undertaken at their
instance.
Senator Burns. Well, but I am saying that they are just as
guilty as you are.
Senator Bond. Thank you very much, Senator Burns.
Senator Burns. I will go upstairs and jump on Babbitt. He
is upstairs. I will vote to pull all of your funds on this.
Senator Lautenberg. Mr. Chairman, may I?
Senator Bond. Senator Lautenberg.
Senator Burns. I have no use for it.
Senator Lautenberg. Thank you very much, Mr. Chairman.
Ms. McGinty, when did you write the NEPA law?
Ms. McGinty. Senator, it was written in 1969, and signed
into law by President Nixon.
Senator Lautenberg. Oh, so you did not write it.
Ms. McGinty. No; I did not, sir.
Senator Lautenberg. So, are you here defending what you
think is a legitimate process?
Ms. McGinty. Senator, I have come to see it as invaluable.
Senator Lautenberg. I do not think you are so brazen. I
think you have got to do it. You are the lawyer in this case.
You are defending an agency in which you have deep belief. So
stick with it.
Now, I would like to know how many of those who made
decisions here--perhaps you can help me--make decisions about
defense who have never seen war. I would like to know how many
scientists have been up in the ozone hole who are making
decisions here? What the devil do they know about ozone holes?
They have not been there.
Ms. McGinty, stick to your guns. You have an important
function to maintain there. We have agencies all over the place
who are involved in environmental decisions. And Lord knows
that we will save more lives and make lives more pleasant for
millions of people if you and the others who are involved in
environmental questions here can solve the problems that we
have.
I do not want my grandchildren drinking toxic or
contaminated water or breathing toxic air. Neither do I want my
aunt or my uncle, elderly people, breathing toxic air. You have
got to do what you have to do. You are on the side of right.
You are saving lives, and you have got to stick with it.
Do you know the TRI process and the TRI program?
Ms. McGinty. Yes; I do.
Senator Lautenberg. You know I have some involvement with
it. Are you aware that the toxic release inventory, on a
voluntary basis, has saved, in the period from 1989 to present
day or last year, 44 percent--reduced by 44 percent--toxic
emissions in the air. It is a voluntary program.
I can tell you in my State, which Senator Mikulski
acknowledged, we have very serious environmental problems,
because we are a crowded State. We have a proud industrial
past. Unfortunately, that past has caught up with us in the
wrong way, and as a consequence we are flooded with Superfund
sites and toxic air problems. Our neighbors to the west are
very generous. They deposit their contaminants all over our
soil with no charge, by the way, I might add. The fact of the
matter is that companies in New Jersey sprung to the idea of
participating in this voluntary program.
The success was enormous. Some companies save 90 percent--
reduced by 90 percent--the toxic emissions that they were
putting previously into the air, and many of them found that
they had a recoverable asset going out of those smokestacks,
and they brought them back into the shop and used them to make
paints and other solvents and things of that nature. And they
found out not only did they contribute to the neighborhood and
the community, but they also contributed to their bottom line.
So then, why should not an XL program work, if we can enlist
the support of the private sector?
Ms. McGinty. Senator, I have every confidence that it will,
and, in fact, it has. There are three agreements that have been
reached under project XL already, and some of them are huge.
One of them in particular is the difference between the
economic cutting edge competitiveness of an industry and
falling behind, and that is the one with Intel. The Intel
Corp., as you know, is involved in the development of
semiconductors. And with computer technology constantly
changing, the competitiveness of that industry depends on being
able to change their production processes very rapidly. They
can do that under XL. If it were not for XL, they would face a
very serious competitiveness challenge.
Now, the chairman does point to some of the challenges we
are having in broadening the program, but I really do believe
that is because it is a very ambitious program, and it is going
to be tough.
Senator Lautenberg. I want to say, for the chairman of this
subcommittee, who has many times mentioned his interest in
securing a budget that balances and making certain that we
reduce our expenses wherever we can, but Mr. Chairman, I have
got to compliment you, because you have stuck with some of the
programs that I know you had some questions about because you
were persuaded by the evidence that these were decent programs,
and I commend your objectivity even as you focus on the budget
reductions that you obviously advocate.
Ms. McGinty, I close by just saying that I hope you
continue doing what you do. I think you have to make the case a
little more clearly. I think it does look redundant. We have
EPA, and people are not quite sure in the outside world--I am
not even sure if we on the inside world are certain about it,
but what are the functions. But when you lay it out, and you
say yes, there is defense, and yes, there is energy, and yes,
there is agriculture, all these departments performing what I
think are fundamentally excellent and required services. Can
they do them cheaper? Perhaps. Can they do them better?
Certainly. But I think coordination of all of these departments
is essential, and I hope that CEQ can achieve the mark that it
was originally designed for.
Thank you.
Ms. McGinty. Thank you.
Senator Bond. Thank you, Senator Lautenberg. I appreciate
your kind comments. I believe that we must work toward a
balanced budget. I think there is bipartisan agreement there. I
happen to think, as I have stated on many occasions, that this
subcommittee has taken more than its share of cuts. We have
some very, very important priorities with costs that are
continuing to escalate. The housing area is one that we will be
discussing later.
Senator Mikulski. That is going to be a big balloon.
Senator Bond. Is that a big enchilada?
Senator Mikulski. The section 80 spiraling contracts.
Senator Lautenberg. I was stuck in traffic that day.
Senator Bond. We all may be stuck in traffic. [Laughter.]
SPENDING PRIORITIES
Senator Bond. But there are some difficult problems. I
raised the question about the budget in the beginning because I
am not sufficiently optimistic to think that we will get a
602(b) allocation which would accommodate all of the spending
priorities the President recommended.
Ms. McGinty, I want to come back to project XL. I believe
in the concept of project XL. I do have some problems with how
it is being implemented, and I noted in your testimony you
seemed to think that the problem was primarily with
understanding by the other non-Federal Government agencies that
they just did not get it as to how XL would work. And I note
that when 3M withdrew from project XL, the Minnesota Pollution
Control Agency said--we were all there, it was clearly stated--
there were elements at EPA who had not weighed in, powerful
elements. Intel, itself, you cited as one of the examples. The
Governors affairs manager said there were too many EPA offices,
too many levels of regulators, they were negotiating with
people who were not making the decisions.
I wonder, are you listening to the people who are getting
out of the program, the States and the private sector? Because
frankly, there has not been a lot of progress, and there have
been a lot more dropping out than are staying in the program.
So there is a problem. Are you listening to the people?
Ms. McGinty. Yes; and I think fair enough, Mr. Chairman, in
terms of pointing not only to those who might participate in
the program not understanding the elements of it, but the
agency itself trying on a new suit here, and one that does not
necessarily fit exactly right the first time around. That is
certainly involved here, too.
One of the things that we have seen in the program, again
listening to participants, is that it is uneven. Some regions
of EPA have taken this issue up and have implemented it much
more smoothly than other regions. There seems to be some
regions who kind of get the idea more quickly than others. So
there are internal difficulties.
Senator Bond. Let me ask this, and I apologize that we are
short on time, the global environmental management initiative
received a draft report which said that both CSI and project XL
suffered from a lack of clear ground rules, raising serious
questions about the viability of the programs without
fundamental statutory reforms. The President's Council,
Presidential Congressional Commission on Risk Assessment and
Risk Management, says EPA needs the legal authority to provide
flexibility. The President's Council on Sustainable Development
says that it needs a new regulatory system with greater
flexibility and alternative compliance legislation. In the past
we have raised this question. It has been the position of the
administration we get the job done without new statutory
authority.
It looks like the evidence is beginning to come in that
there does need to be some statutory changes. Are you ready to
support any such changes in alternative compliance legislation?
Where do we stand on those issues?
Ms. McGinty. Well, we did feel, Mr. Chairman, that it was
important to road test some of these issues, and that is what
we have been doing over the last year.
I think we will get further evidence in as this work that I
mentioned before continues, to try to elucidate, as you just
pointed to, what are the ground rules. Frankly, it has been a
little surprising to us that in trying to eliminate some of the
rules, to allow people to choose their own way and get there as
efficiently as they can, they have come back and said but we
need at least a few more ground rules.
So we do have some experience now, and I would look forward
to working with you and your staff and talking about that and
see what we might do now with this information that we have in
hand.
SMALL BUSINESS REGULATORY ENFORCEMENT
Senator Bond. Would you please let us know about the people
who want more ground rules? I had not heard that. I would be
interested to see that. But I really think we have gotten to
the point where we need legislation, Amoco, Yorktown, and
others.
Let me ask you about the ozone fine particles. You know
that this has raised a great deal of concern. Senator Chafee,
chairman of the EPW Committee has even suggested EPA should
delay the fine particle standard. We passed a little measure
last year that I played a role in called the Small Business
Regulatory Enforcement Fairness Act, which requires the
participation by small business in the process, plus other
standards to take care of the concerns of small business.
No. 1, I am concerned about the process. Have you looked
at, from the administration's standpoint, whether EPA's rule is
subject to the Small Business Regulatory Enforcement Fairness
Act? And No. 2, do you see a need for further scientific
evidence on the benefits of the proposed standards? Everybody
recognizes there is a scientific concern about the health
risks. The second part of the question is from a substantive
standpoint and an impact standpoint, do you see need for the
delay that Senator Chafee has suggested?
Ms. McGinty. Mr. Chairman, let me step back for a second
and describe CEQ's role in the context of this pending
rulemaking. What we have worked to do and will continue now as
the comment period is still continuing but will come to a close
in the middle-end of March, is to work with the other offices
in the White House, and particularly OMB and the National
Economic Council, to ensure that as comments are coming in that
they are made available in real time to the other agencies that
have an interest in this and that have technical expertise
themselves to be able to review and comment.
The second thing we will do is to provide a forum, whether
it is State or local governments or various interested parties,
to be able to come in and comment personally on the proposed
rules.
Separate and aside from that process, we will ensure that
there is adequate time for review of the rule before it goes
final. But at this point in time, while we are still in the
comment period, I do not have a separate substantive judgment.
I can assure the committee that I will be engaged as those
reviews and judgments come in, but the rule is still pending
and the comment period is still open on it. And so we are
awaiting those comments coming in.
Senator Bond. I did not catch your answer to the question
about small business.
Ms. McGinty. On the small business SBREFA, in terms of the
applicability of SBREFA to a particular standard--first of all,
let me say that SBREFA is a statute the administration
wholeheartedly supports, and we very much welcome your
willingness in letting us work with you last year and your
staff working with us to put that together. So we are very much
supportive of it.
In terms of the applicability of the statute to a
particular standard, to a particular proposed standard or rule,
that is a determination that is economically involved, legally
and technically involved. It would be on this issue as on other
issues that are a matter of such technical expertise, I would
not normally form a separate opinion of it. I would look to the
agency that has expertise in that area. In this instance it
would be a combination of EPA and the office in the White House
that is charged specifically with these kinds of matters, which
is the Office of Information and Regulatory Affairs. And I know
that they have reviewed that question, and I know that they
have come up with a determination about it. I have not
undertaken to make a separate determination of it myself.
Senator Bond. Senator Mikulski.
Senator Mikulski. Ms. McGinty, again, there are many topics
that we could cover in our conversation with you. But I think
what is arising here is first of all there is a lack of clarity
about what CEQ does. This is no-fault with you. Please do not
misunderstand me. And, therefore, what are the models? Are you
the EPA czar? Are you the equivalent of McCaffrey on the
environment? Are you supposed to be the EPA czar? That is a
different function.
Are you to be more like the Office of Science and
Technology Policy, which coordinates on certain topics like
ozone or science education, and an advisor to the President,
but you are not the science czar for America?
I think we need a clarification on this, because I think it
is more the latter model. You were not meant to be the
environmental czar, therefore, not be held accountable for
every environmental perceived screw-up, whether it is Interior
or EPA or agencies within Interior or Agriculture or whatever.
The second point here is that I recall when I first chaired
the subcommittee, all the work with CEQ was spent producing
this report, and often they were late, and that is what they
did. That is all they did. And more often than not, they did
not do it that well or in a timely fashion. And that is when
there began doubts on what the function of CEQ was.
Now, I believe your predecessor under Mr. Bush laid new
groundwork and things began to move more smoothly, and now this
is what you are doing. I think as we move forward here we need,
and I think it is appropriate, that you articulate what your
role is.
If we look at the models, first of all we love czar. We
think that somehow or another that is going to accomplish it.
If czars worked so well we would not have had revolutions.
[Laughter.]
Ms. McGinty. Senator, in terms of those models, the more
apt one, and a very apt one, is the Office of Science and
Technology Policy. The role is to coordinate the various
agencies, and every agency has some environmental mandate or
mission.
To take the Superfund Program, for example, I do not
implement it. I do not enforce specific remedies at specific
sites. However, I have to be concerned with the fact that we
have got a Department of Energy and a Department of Defense
that are themselves responsible for Superfund cleanups.
Senator Mikulski. But Dr. Gibbons, and we will talk to Dr.
Gibbons, neither proposes new legislation or new regulatory
frameworks, but essentially just more efficiently coordinates
the resources, particularly topical when they go across agency
lines.
Ms. McGinty. Yes; exactly. Exactly right. That is exactly
the model.
On Superfund, again, the reforms that we have seen to take
land use into account when planning a cleanup, that is the kind
of thing that comes out of a process that CEQ chairs, and we
hear from a DOE and a DOD to share their experience under the
Superfund Program, and we get insights. So we have ideas as to
how to reform the programs.
Senator Mikulski. Well, I think this is what we need to
talk about in terms of your funding and expectations of you,
and not hold you accountable for every faulty decision or
perceived faulty decision in these particular areas. And I am
afraid this is where we are drifting to, because as I
understand, the Office of Science and Technology proposed no
new legislation, no new regulatory framework, it did not solve
the science problems. Dr. Gibbons is not out there finding a
cure for cancer, for prostate cancer, but essentially advising
the President and the Vice President on how we should organize
our resources on life sciences, am I right?
Ms. McGinty. Exactly right, yes. That is the model.
Senator Mikulski. Thank you, Mr. Chairman.
Senator Bond. Thank you, Senator Mikulski.
Senator Bennett.
Senator Bennett. Thank you, Mr. Chairman. I appreciate your
willingness to let me visit a subcommittee that I very much
enjoyed. I am sorry I had to leave because of other priorities.
Senator Bond. Well, we miss you, and we are delighted to
have you as a member emeritus.
Senator Bennett. All right.
Ms. McGinty, you and I have had some exchanges, both in
hearings and in writing, and I appreciate the chairman's
willingness to let me use this forum to pursue some of those
exchanges.
It will come as no surprise to you that I want to talk
about the monument in southern Utah, and to lay the predicate
again for this record. The decision to create this monument was
made without any consultation whatsoever with any elected
official in the State of Utah. The Governor was kept out of any
considerations. Senator Hatch and I were both kept out of any
consideration. Congressman Orton, in whose district it was, was
kept out.
I asked you in a hearing before the Energy and Natural
Resources Committee if you would provide us, and provide me
specifically, with all of the written background relating to
this decision, because, as I rehearsed there, while we had the
conversations prior to the designation of the monument, people
from your office kept insisting this was being handled by the
Interior Department. My conversations with the Secretary and
people in the Interior Department show they insist that this
was being handled by the White House and no one would admit to
having been the lead agency or the lead staff group to advise
the President.
So I asked you to give me all of the background that was
used in the decisionmaking process. And on Valentines Day I
sent you a letter that was not necessarily a valentine saying
that almost 6 months had gone by and I had heard nothing. And I
received back from Shelly Fidler, Chief of Staff, a letter
saying you were traveling but they wanted to be responsive
immediately and apologizing for the delay, and this is what I
got as the substance of what went into the President's decision
to create 1.7 million acres of a national monument in Utah
without any consultation from any elected official in Utah:
A manual entitled ``The Ecosystem Approach, Healthy
Ecosystems and Sustainable Economies,'' dated June 1995; a
legal description of the Antiquities Act and what you could do
under it; a speech given by Ray Clark, Council of Economic
Quality of the United States, in Quebec City, dated June 16,
1994; and then written answers to questions from other Members
of Congress--James Hansen, that was useful, he is from Utah;
here is a letter signed by Bruce Babbitt written to Carol
Browner dated May 29, 1996; and questions for the record for
Ms. McGinty from Senator Thomas and other members of the
committee, and your response to Senator Thomas.
Frankly, I do not consider that responsive to my letter,
and I wanted to come here and raise this with you.
Second, I will tell you if you do not know that a number of
publications in Utah have submitted freedom of information
requests for the same information and have been denied. They
are anxious about that. They are pursuing their rights under
the Freedom of Information Act, and feel that they have a right
to more information about the process that was followed in the
creation of this.
Further, people in the press--and we all learn what we
learn about the press, have reported names of people who were
involved, who were consulted, who were part of the
decisionmaking process, including people from the Southern Utah
Wilderness Alliance and other environmental groups, the Sierra
Club, et cetera, who were allowed access to information that
was denied elected officials. That is, they were part of the
process of drawing maps and making decisions concerning land
use in this monument.
I am not going to attack anybody. I am not going to send
somebody to break their knees or knock out their windshields or
scratch up their cars or do anything. I simply want to know to
whom the President turned, or you as the President's agent, to
whom did you turn for information on this?
This is a very, very significant issue. It affects a very
large number of my constituents. It is a major environmental
effort on behalf of all of the people of the United States,
creating one of the largest, if not the largest, national
monument in the country, and we have no official idea who did
it. And yet we are faced with a 3-year management plan to try,
in the words of Leon Panetta when he called me to tell me about
it, to pick up the pieces after the fact. It will be much
easier for us to pick up the pieces after the fact if we have
some understanding of the pattern, the thoughts, the
motivations, that went into the creation of this thing in this
particular fashion.
So I am here to ask you once again if you will review my
letter of February 14 where I get very specific in the things
that I ask for, and do your best to be responsive to those
specific requests, and however well-meaning your staff was to
try to get you off the hook and get me something in a hurry, I
am not really interested in copies of speeches that were 2
years old prior to the decision the President made.
Ms. McGinty. Thank you, Senator. There are three or four
points I think you made. I will do my best to respond to them.
First, in terms of the materials that were sent to you
after your February 14 letter, they were the exact and complete
set of materials that we sent to the committee immediately
after the hearing, which was September 26, including in the
hearing record, because your request was part of the hearing
record to have those materials submitted, we submitted that
stack of papers that is specific to the monument that you
pointed to. That outlines the analysis. That is the complete
analysis that was done supporting the designation of the
monument. I tried to deliver that immediately. It was part of
the hearing record.
We were told at that time that the committee separately
would make it available to each member. I suppose that did not
happen, and so what my staff did 1 week ago was to resubmit
those materials to your office directly. And so what you have
there is both the materials that were directly responsive to
your question, but just in order to not leave anything out you
have the entire set of materials that were offered to close the
hearing record.
Senator Bennett. If I may, I do not consider this
responsive to my question. I can understand why the committee
did not circulate all of the materials to me.
I want to know the specific analysis that went into this
monument. I do not want general statements about the
Antiquities Act, I do not want general statements about
ecosystems, this was a very significant act taken by the
President of the United States deliberately keeping a number of
people in the dark with respect to what was going on. It
obviously did not burst full blown from the head of Zeus. There
was obviously a great deal of staff work that went into it.
I want to know the names of the people who participated in
those sessions, and I want to see the memos they created. And
as I said to you, and will repeat again, as far as the press is
concerned, they are now quoting people outside of the
administration as saying they were part of the process, and I
want either confirmation or denial of that, and the only way I
can get that is to get a list of the names of the people who
really were involved.
Again, I am not going to put out a contract on somebody who
was involved. Nobody has anything to fear. I just want to know
the process that was followed and the people that were
involved. This is clearly not responsive to that request.
Ms. McGinty. Fair enough. Let me mention two things, if I
might. One is the materials that you have there are not just
generalities about the Antiquities Act. That package of
materials includes the complete itemization of all of the
archeological, geological, and cultural factors that were
identified in the monument area, and as you know, that is
required to be identified pursuant to the Antiquities Act. So
the materials are very specific in terms of where those
archeological sites are and what they are.
Senator Bennett. I do not disagree, but they are very
incomplete.
I am sorry I have taken so much time, Mr. Chairman.
Senator Bond. Senator, I apologize. We have two very
important panels to follow. Let me just say that I think that
Senator Bennett has made a reasonable request. To the extent
that you and CEQ have knowledge and participated, I will be
interested personally in reviewing your response to his
question to, the extent that CEQ was there, who did what, and
when. I am sure that Senator Bennett will enjoy reading about
the Antiquities Act. I believe he wants to know who did what,
and that will be of interest to us.
Senator Mikulski, any further questions to Ms. McGinty?
ADDITIONAL COMMITTEE QUESTIONS
Senator Mikulski. No; and I will look forward to hearing
the followup on this conversation, and particularly the FEMA
part, which I think offers a great opportunity for saving lives
and saving communities.
Ms. McGinty. Yes; thank you.
Senator Bond. Thank you very much.
Ms. McGinty. Thank you, Mr. Chairman.
[The following questions were not asked at the hearing, but
were submitted to the Council for response subsequent to the
hearing:]
Questions Submitted by Senator Bond
Question. NEPA Effectiveness Study. Recently CEQ released its
``NEPA Effectiveness Study.'' CEQ found that while the NEPA process
overall is sound, at times its implementation fell short of goals. For
example, ``interagency coordination is hampered because agencies often
have different timetables, requirements, and modes of public
participation;'' and ``citizens sometimes feel frustrated that they are
being treated as adversaries rather than welcome participants in the
NEPA process.''
While deficiencies with the NEPA process were identified, the
report contains no specific recommendations for change. Why?
Answer. On the occasion of the 25th anniversary of the National
Environmental Policy Act (NEPA), CEQ initiated a study to examine the
effectiveness of NEPA and prospects for improvements in the NEPA
process. In January 1997, CEQ released the findings of this study,
``The National Environmental Policy Act: A Study of its Effectiveness
After 25 Years'' (hereinafter referred to as the NEPA Effectiveness
Study).
To summarize briefly the findings of the Study; first, NEPA works.
Agencies must now take a ``hard look'' at the environmental
consequences of proposed actions before they make a final decision.
They must consult with other federal agencies and tell the public what
they are proposing to do, invite public views on their proposals, and
respond to those views. NEPA also calls for agencies to tell state,
local, and tribal governments of their plans, and provides agencies
with a mechanism to coordinate overlapping jurisdictional
responsibilities. In large part due to NEPA, federal agencies today are
better informed about the consequences of their actions on communities
and are more likely to take community views into consideration. Used
well, agency implementation of NEPA reduces conflict and saves scarce
resources.
Despite these successes, however, as you noted, NEPA's
implementation at times has fallen short of its goals. In some cases,
the NEPA process takes too long and costs too much. Agencies produce
documents that are overly long and sometimes too technical for most
people to use. Training for agency officials, particularly senior
officials, is at times inadequate. Some agencies confuse the purpose of
NEPA, acting as if the detailed statement called for in the statute is
an end in itself, rather than a tool to enhance and improve decision
making.
The purpose of the NEPA Effectiveness Study was not to provide a
detailed blueprint for change, but to give an overall assessment of the
statute and to provide a starting point for our reinvention efforts.
Instead detailed recommendations will be forthcoming as part of our
NEPA Reinvention effort.
CEQ believes that many of the deficiencies identified in the
application of NEPA can be corrected through improvements in agency's
NEPA processes. The first phase of the our Reinvention effort focuses
on the grazing, timber, and oil and gas sectors to determine what types
of process changes can be effected to increase the efficiency of NEPA.
If we find barriers that require regulatory change, we will pursue such
changes.
Question. Will it be up to the individual agencies to devise
improvements to the way they carry out the NEPA process? What guidance
will CEQ provide to the agencies to streamline and improve the process,
and what exactly will CEQ's role be in improving NEPA's effectiveness?
Answer. Inasmuch as each agency has different missions and
different planning processes, it is unlikely that a ``one-size-fits-
all'' approach from CEQ would be productive. It is more likely to be
successful if agencies understand the opportunities for improvement and
make those improvements within the context of their own mission.
Agencies are currently responsible for their NEPA compliance and
their management of the NEPA process. Improvements will necessarily
come from within. Reforms can be institutionalized in each agency's
NEPA procedures, and CEQ is encouraging all the agencies to review
their procedures with an eye toward streamlining. CEQ will consult with
each agency as they review their NEPA procedures.
Question. Two years ago, you testified that one of your priorities
was reinvention of the NEPA process, including cutting processing time
and consultation time. What specific improvements--such as the numbers
of duplicative or inconsistent regulations which have been eliminated--
have been made in the last two years?
Answer. One of the most important steps in this regard was the
elimination of duplication between the processes for complying with
NEPA and the Endangered Species Act for Habitat Conservation Plans
(HCP's). These are plans that permit landowners to conduct certain
activities over a long period of time, with the certainty and stability
of a site-specific tailored agreement. Previously, applicants were
going through two separate processes to comply with the two statutes.
This resulted in duplicative analyses and public hearings for the same
actions. This duplication has now been eliminated, significantly
reducing permit processing time for private applicants. In fact, even
the most complex HCP can now be completed in under ten months.
CEQ has also expended considerable effort in working with the Food
and Drug Administration (FDA) over the past two years to streamline
their NEPA process and reduce unnecessary submissions. According to the
FDA, the changes being made as a result of that effort will result in
an annual cost savings to industry of approximately $15.7 million, as
well as improve FDA efficiency by eliminating unnecessary agency review
costs of approximate $1 million. Equally important is that the
regulations do not compromise the FDA's efforts to promote NEPA's
policies and goals for better, more informed decision making.
Similarly, CEQ worked with the Department of Energy (DOE) as they
developed proposed revisions to their NEPA regulations. DOE's final
rule includes several streamlining features such as: establishing new
categorical exclusions; expanding existing categorical exclusions; and
eliminating the preparation of extensive documentation prior to
preparation of an environmental impact statement (EIS). In consultation
with CEQ, DOE simplified public notification requirements and
streamlined the requirements for the content of Findings of No
Significant Impact. These changes, and others like them, focus
available resources on significant environmental issues, and reduce
costs and staff time while ensuring the environmental assessment
process is useful to decisionmakers and the public.
CEQ is currently working with the Air Force to find streamlining
opportunities. One clear opportunity to save time and money is to
eliminate the necessity to have public hearings instead of informal
public meetings. We have pointed out to the Air Force that public
hearings are more expensive and not required by CEQ regulations. We are
also reviewing additional categorical exclusions which will reduce the
amount of documentation associated with Air Force NEPA compliance. We
are also jointly exploring opportunities for integrating analytical
requirements, eliminating duplication of effort. We expect that these
revised regulations will be final this summer.
As you may recall, CEQ and the Federal Highway Administration
(FHWA) cosponsored a conference in 1995 which focused on methods to
streamline the NEPA process used in the development of highway
projects. As a result of this very productive conference, the
Department of Transportation (DOT) is developing a proposed rulemaking
that will link NEPA and its principles to DOT's decision making
process. The proposed rules will affect the Federal Highway
Administration (FHWA), the Federal Railroad Administration (FRA), the
Federal Transit Administration (FTA) and the Coast Guard. The objective
of these DOT agencies is to develop a single NEPA regulation that will
reduce paperwork, streamline and expedite transportation planning and
decision making, and lead to one overall public interest decision that
integrates social, economic and environmental effects and
considerations, including economic development, health and
environmental protection and community and neighborhood sustainability.
CEQ is also working with other agencies as they amend their NEPA
procedures, including the Department of Housing and Urban Development
and the U.S. Army. I want to reiterate that CEQ will continue to take
advantage of these reinvention opportunities but we hope to institute
even more sweeping changes through our NEPA Reinvention initiative.
Question. What specifically do you anticipate to be accomplished
this year through the new NEPA reinvention initiative?
Answer. We have already begun a process to examine current NEPA
practices with regard to grazing, timber and oil and gas. Federal
agencies that have responsibilities for NEPA issues in these three
sectors are working cooperatively to suggest areas where improvements
can be made.
As you may know, the lead CEQ staff member on NEPA Reinvention is
currently on maternity leave. As I mentioned to your staff, CEQ has
brought on Robert Cunningham to lead our NEPA Reinvention Team. We also
expect Ms. Mesa to return to resume her work after her leave is
completed.
The University of Wyoming will host a conference this week to help
us identify additional activities we can cooperatively engage in to
broaden the dialogue and to help us make additional progress. The
University of Montana, as well, has offered to help us contact
stakeholders and to use the University as a resource in our project.
The Western Governors' Association and the Western States' Foundation,
as well, have expressed interest in working with us to accomplish NEPA
Reinvention.
In addition, we are shortly to begin meetings with stakeholders to
review the product of the initial interagency discussions and to
solicit stakeholder input. Within several months, we also hope to begin
discussions with the leadership of the federal agencies with
responsibilities in our three sectors to educate them about the
opportunities for reform that we have identified.
Needless to say we will bring the products of all of these
discussions with interested Senators and House Members and their
staffs.
By the end of this fiscal year we expect to have specific
recommendations for some significant changes to current NEPA practices
in the three sectors we have identified as our targets of opportunity--
grazing, timber and oil and gas. The kind of improvements we would
consider a success would reduce the time necessary to make decisions;
result in more cooperation between federal agencies; reduce costs; make
processes more transparent for the user communities; improve public
participation; as well as other efficiency improvements that are
identified through the examination of options.
Question. FEMA has told my staff of their frustration of meeting
NEPA requirements in projects resulting from Presidentially-declared
disasters. Staff who administer disaster programs often have limited
expertise or time to evaluate effectively and document environmental
considerations. NEPA is often seen as significantly slowing the funding
and construction of these very critical repair, renovation, rebuilding
and mitigation projects following disasters. FEMA tells my staff that
the most important support CEQ can provide to FEMA is guidance on
measures FEMA can undertake to expedite the NEPA process. What are you
doing to help FEMA in this regard, and will you report back to the
Subcommittee on progress made?
Answer. FEMA recently consulted with CEQ and we provided guidance
to clarify that a project that has already been categorically excluded
from NEPA documentation under FEMA's NEPA procedures can proceed
without further documentation. We are consulting with FEMA regarding
procedures related to several particular projects, including the Rodeo
Channel Stabilization in Hesperia, California, the Rolling Hills storm
drain and slope restoration in Yorba Linda, California, and certain
projects in Hawaii. In addition, we are reviewing FEMA's NEPA program
related to disasters generally, so as to identify possible
opportunities for streamlining. We will be happy to report back to the
Subcommittee on our progress later this spring.
DEPARTMENT OF THE TREASURY
Community Development Financial Institutions
STATEMENTS OF:
JOHN H. HAWKE, JR., UNDER SECRETARY OF TREASURY FOR DOMESTIC
AFFAIRS
KIRSTEN MOY, DIRECTOR
opening remarks
Senator Bond. The second panel consists of Mr. John Hawke,
the Under Secretary for Domestic Finance with the Department of
Treasury; and Ms. Kirsten Moy, Director, Community Development
Financial Institutions Fund Program. The administration's
budget request for CDFI asks for an increase of $75 million,
from the $50 million for fiscal year 1997 to $125 million to
fiscal year 1998, and the President has indicated the intent to
include increases for a 5-year total to $1 billion.
This fund was established in the Community Development
Regulatory Improvement Act in 1994, and to provide equity
investment grants and loans, and the purpose is to enhance the
capacity of these institutions to finance economic development
housing and community development.
I am concerned about the amount of funding in the CDFI
request as we have to prioritize and deal with the other
competing needs I am also concerned that CDFI does not have
much of a track record. I need to understand to what degree
leverage investment is being drained from other activities
serving distressed communities, and how and whether CDFI is
discouraging traditional financial institutions from opening
branches and lending in distressed communities.
I look forward to hearing your testimony.
Mr. Hawke, I guess if you would begin.
STATEMENT OF JOHN H. HAWKE, JR.
Mr. Hawke. Mr. Chairman, thank you very much for affording
me the opportunity to make a brief statement in support of the
community development financial institutions fund. CDFI has
been a high priority of the President since the time he took
office. It is a program with great potential for bringing the
residents of our inner cities into the economic mainstream, an
effort that I believe is vitally important to all of us.
The fund's aim is to expand access to credit and financial
services in poor urban, native American and rural communities,
areas in which one of the biggest obstacles to economic
development is a lack of access to private sector capital.
Access to financial institutions is fundamental to the efforts
of residents of these economically distressed areas to lift
themselves out of poverty.
When CDFI was assigned to the Treasury Department, it was
established as an independent office reporting to the Under
Secretary for Domestic Finance. In October 1965, Kirsten Moy
was brought on board as Director of the fund.
She brought to the fund a wealth of experience from her
work as senior vice president of the real estate subsidiary of
the Equitable Life Assurance Society of the United States, and
portfolio manager of Equitable's Community Mortgage Fund, a
pension fund vehicle for investments in affordable housing and
economic development. I believe that everyone who has observed
the great skill that she has brought to bear on this task would
agree that we are extremely fortunate to have her in this
position.
In January 1996, CDFI received 268 applications for CDFI
awards, with requests for funding 10 times the amount
available. After a rigorous review by the fund, 32 CDFI's were
selected to receive nearly $37 million in financial and
technical assistance. The CDFI Fund also received 50
applications under the Bank Enterprise Award Program, and 38
banks and thrifts were selected to receive bank enterprise
awards.
Last month, the President announced the winners of the
Presidential Award for Excellence in Microenterprise
Development to highlight the accomplishment of entrepreneurs in
this area. The fund has effectively promoted partnerships
between community-based financial institutions, banks, and
other private sector sources, leveraging scarce Federal
resources to attract private dollars into credit-starved
communities. That, in turn, fosters cooperation and synergy in
efforts to revive economically distressed areas.
For example, Senator Bond, in your State, Douglass
Bankcorp, the oldest African-American owned bank west of the
Mississippi is receiving $1.9 million in equity and technical
assistance from the fund to support its expansion to serve
Kansas City. In partnership with Kansas City Neighborhood
Alliance, they are developing a comprehensive plan to promote
affordable housing and small business development to foster
market activity in low-income neighborhoods.
In addition, Senator Mikulski, in Maryland the Bank
Enterprise Award Program helped trigger a $10 million
investment by NationsBank in the employment opportunities fund,
which invests in small businesses located in or employing
residents of the Baltimore empowerment zone.
In this era of scarce budgetary resources, we must choose
our priorities carefully and focus on those that have long-term
payoffs for our economy and our society. The fund is a top
priority of the President precisely for that reason. It uses a
very modest amount of Federal funding as a base for attracting
private capital, and its payoff is in the long-term health of
our national economy by helping break the cycle of poverty,
make our Nation more productive, and fostering higher economic
growth.
We have been and continue to work diligently to make the
CDFI and the BEA programs a success.
PREPARED STATEMENT
Mr. Chairman, I appreciate this opportunity to speak to
you, and Mrs. Moy will now discuss the program in greater
detail.
[The statement follows:]
PREPARED STATEMENT OF JOHN D. HAWKE, JR.
Mr. Chairman, distinguished members of this Subcommittee, I thank
you for the opportunity to testify this morning on the President's
fiscal year 1998 budget request for the Community Development Financial
Institutions Fund.
CDFI has been a high priority of the President since taking office.
It is a program with great potential for bringing the residents of our
inner cities into the economic mainstream, an effort that I believe is
vitally important to all of us--no matter where we live or what our
incomes may be.
The Fund's aim is to expand access to credit and financial services
in poor urban, rural and Native American communities, areas in which
one of the biggest obstacles to economic development is a lack of
access to private sector capital. Access to financial institutions is
fundamental to the efforts of residents of these economically
distressed areas to lift themselves out of poverty.
When CDFI was assigned to the Treasury Department, it was
established as an independent office reporting to the Under Secretary
for Domestic Finance. In October 1995, Kirsten Moy was brought on board
as Director of the Fund. She brought to the Fund a wealth of experience
from her work as Senior Vice President of the real estate subsidiary of
the Equitable Life Assurance Society of the United States and Portfolio
Manager of Equitable's Community Mortgage Fund, a pension fund vehicle
for investments in affordable housing and economic development. I
believe that everyone who has observed the great skill she has brought
to bear on this task would agree that we are extremely fortunate to
have her in this position.
Since it began operating in October 1995, the Fund has already made
a significant contribution to increasing access to private sector
capital, by catalyzing interest in this program. In January of 1996,
CDFI received 268 applications for CDFI awards, with requests for
funding ten times the amount available. After a rigorous review by the
Fund, 32 CDFI's were selected to receive nearly $37 million in
financial and technical assistance. CDFI also received 50 applications
under the Bank Enterprise Award program, and 38 banks and thrifts were
selected to receive Bank Enterprise Awards. Last month, the President
announced the winners of the Presidential Awards for Excellence in
Microenterprise Development to highlight the accomplishments of
entrepreneurs in this area.
The Fund has effectively promoted partnerships between community
based financial institutions, banks and other private sector sources,
leveraging scarce Federal resources to attract private dollars into
credit starved communities. That in turn, fosters cooperation and
synergy in efforts to revive economically distressed areas. For
example, Douglass Bancorp, the oldest African-American owned bank west
of the Mississippi, is receiving an investment from the Fund to support
its expansion to serve Kansas City, Missouri. In partnership with
Kansas City Neighborhood Alliance, they are developing a comprehensive
plan to promote affordable housing and small business development to
foster market activity in low income neighborhoods. In addition, the
Bank Enterprise Award program helped trigger a $10 million investment
by NationsBank in the Employment Opportunities Fund, which invests in
small businesses located in, or employing residents of the Baltimore
Empowerment Zone.
In this era of scarce budgetary resources, we must choose our
priorities carefully, and focus on those that have long term payoffs
for our economy and our society. The Fund is a top priority of the
President precisely for that reason: It uses a very modest amount of
Federal funding as a base for attracting private capital, and its
payoff is in the long-term health of our national economy, by helping
break the cycle of poverty, making our nation more productive and
fostering higher economic growth. We have been and continue to work
diligently to make the CDFI and the BEA programs a success.
Mr. Chairman, members of the Subcommittee, I appreciate this
opportunity to speak to you today. Ms. Moy will now discuss the program
in greater detail.
STATEMENT OF KIRSTEN MOY
Senator Bond. Ms. Moy.
Ms. Moy. Chairman Bond, Senator Mikulski, distinguished
members of the subcommittee, this is my first opportunity to
testify before you, and I appreciate it very much.
The CDFI fund, as you mentioned, was authorized by the
Riegle Community Development and Regulatory Improvement Act of
1994, and its purpose was to address the critical problems of
capital access in urban, rural, and native American
communities.
To this committee, the problems of access to capital are
surely no stranger. Access to capital is an essential
ingredient for creating and retaining jobs, developing
affordable housing, revitalizing neighborhoods, and building
local economies.
The fund runs two programs. The first of these, the CDFI
Program, stimulates the creation and expansion of a diverse set
of private community-based for-profit and not-for-profit
financial institutions. These CDFI's, as they are known,
complement the role of traditional financial institutions by
filling market niches which such institutions are not well
positioned to serve.
The CDFI's themselves include a broad range of
institutions. They include community development banks,
community development credit unions, loan funds,
microenterprise funds, community development venture capital
groups, and these CDFI's provide a wide range of financial
products and services to distressed urban and rural communities
and underserved populations. They do not only housing or
consumer loans, but commercial loans, loans for small business,
loans for community facilities, and many other things.
The Bank Enterprise Awards Program, which is designed to
work hand-in-hand with the CDFI Program, recognizes the key
role that traditional financial institutions, banks, and
thrifts, have played in community development lending. They
complement the CDFI Program by strongly encouraging these
institutions to support CDFI's, and they also incentivize
increased lending in distressed communities by these
organizations.
Of the institutions recognized in the first round of the
Bank Enterprise Award Program nearly two-thirds supported
CDFI's, with a total of nearly $66 million in support. For many
of these organizations, it was their first effort to support a
community development financial institution.
The Treasury Department, we believe, is uniquely situated
to carry out the CDFI initiative. As the executive branch's
leading agency in setting financial institutions' policy, the
Treasury Department is strongly committed to increasing access
to capital and investment in distressed communities.
The Department does this through the efforts of the CDFI
fund, but also through its commitment and the commitment of the
Office of the Comptroller of the Currency, and the Office of
Thrift Supervision, to a strong and effective Community
Reinvestment Act.
The Treasury Department is also strong in its support of
Federal tax policy for such efforts as the low income housing
tax credit.
During the first year, as Under Secretary Hawke mentioned,
we received and reviewed 268 applications, undertook a rigorous
and comprehensive look at all of them, announced the selection
of 32 CDFI's to receive approximately $37 million in awards,
and announced the selection of 38 banks and thrifts to receive
approximately $13 million in bank enterprise awards.
Just last month in January, President Clinton announced the
award winners for the Presidential Awards for Excellence in
Microenterprise Development, a nonmonetary award program
implemented by the fund which is designed to recognize the best
in the business of microentrepreneurship, a growing phenomenon
in the United States.
I would like to remind the committee that in the midst of
all these activities, the fund, as a startup organization, also
managed the challenge of developing almost from the ground up
internal controls, financial management systems, monitoring and
evaluation functions, and a host of other organizational
development issues. These systems we feel are critical to
ensure the effective use of scarce public resources.
Though the fund is young, its impact can already be seen. I
believe that the fund has been proven particularly effective in
six areas: Leveraging of private resources, forging linkages
with the financial services industry, creating viable self-
sustaining institutions that will not need to be assisted or
subsidized forever, expanding access to the economic
mainstream, restoring healthy marketing activity, and
catalyzing new community development activity.
You have already heard Under Secretary Hawke talk about
initiatives in Kansas City and in Baltimore to forge
partnerships and restore healthy market activity. Let me
mention a few more examples.
The fund's ability to leverage private sector funds in
distressed communities is truly dramatic. The fund first of all
requires, at a minimum, that every dollar awarded under the
CDFI Program be matched by at least $1 of non-Federal moneys.
But it does not stop there. In the near term over the next 2 to
3 years, the $37 million awarded to CDFI's will, in our
conservative estimate, leverage three to four times the amount
of the original awards.
Over the long term, the fund's investments are expected to
support lending and investment in these communities of 10 to 20
times the amount awarded.
The CDFI fund is very focused on creating viable, self-
sustaining institutions. The Vermont Community Loan Fund, for
example, which is a relatively small organization at $2.5
million of assets, finances housing, small business, and
community facilities.
Very importantly, the Vermont Community Loan Fund, through
its good business practices and track record, has achieved
notable success in attracting investments from a diverse array
of private sector players, including individuals, religious
institutions, foundations, and corporations. The fund's
investment in Vermont will help the loan fund build on its
record to expand its services to communities across the State.
The CDFI fund is also focused on catalyzing new activity,
we seek to use our scarce resources to jump-start new
initiatives, not permanently subsidize them. For example, the
fund's investment of a $1 million loan in Tlingit-Haida
Regional Housing in Alaska will begin home mortgage lending in
Alaska's three urban areas. These will be among the first
sources of mortgage loans that are available and affordable to
lower-income Alaska Natives.
I see my time is up.
PREPARED STATEMENT
Senator Bond. Ms. Moy, we will be delighted to make your
full statement a part of the record, and we apologize if we
have run longer than we intended.
[The statement follows:]
PREPARED STATEMENT OF KIRSTEN S. MOY
Chairman Bond, Senator Mikulski, and distinguished members of the
Subcommittee, I would like to thank you for the opportunity to testify
this morning on the President's fiscal year 1998 budget request for the
Community Development Financial Institutions (CDFI) Fund which is
within the U.S. Department of the Treasury. The President's budget
requests $1 billion over the course of the next five years for the CDFI
Fund. In fiscal year 1998, the request proposes $125 million to support
the Fund's initiatives.
The CDFI Fund, which was authorized by the Riegle Community
Development and Regulatory Improvement Act of 1994, was created to
address the critical problems of urban, rural and Native-American
communities that lack access to capital. Access to capital is an
essential ingredient for creating and retaining jobs, developing
affordable housing, revitalizing neighborhoods, and building local
economies. Over the past decade, much evidence has been presented that
there are significant capital gaps in distressed communities. Given the
unique character of the credit market in low-income communities, this
market niche is often not recognized or well understood--making it
difficult for conventional market players to meet the needs of this
market without local partners. Thus, in many communities, needed
financial products and services may be entirely lacking or may not be
available or offered at prices that low-income people can afford.
The CDFI Fund represents a new direction for community development
initiatives. It leverages limited public resources to invest in and
build the capacity of private sector institutions to finance community
development needs in distressed communities. The Fund's efforts are
designed to help turn dysfunctional markets in distressed communities
into well functioning local economies--thereby stemming the tide of
disinvestment and creating economic opportunity for residents. The Fund
accomplishes its mission by working with community based financial
institutions and conventional banks and thrifts. The partnerships
formed by these players will play a key role in helping to restore the
functioning of distressed markets, enhance capital access for these
communities, and enable them to join the economic mainstream. The
Fund's investments are targeted to organizations that emphasize market
discipline and performance as a strategy for restoring markets.
The Treasury Department is uniquely situated to carry out this
initiative. As the Executive Branch's lead agency in setting financial
institutions policy, the Treasury Department is strongly committed to
increasing access to capital and investment in distressed communities.
The Department does this through the efforts of the CDFI Fund, its
commitment and the commitment of the Office of the Comptroller of the
Currency and Office of Thrift Supervision to a strong and effective
Community Reinvestment Act, and Federal tax policy including strong
support for the Low Income Housing Tax Credit. Nearly seventy-percent
of the Fund's awardees under the CDFI and Bank Enterprise Award
Programs are credit unions, banks, thrifts, or bank holding companies.
The commitment of the Department to integrate distressed communities
into the greater financial services industry and the economic
mainstream is key to future viability of neglected and disinvested
neighborhoods.
FIRST YEAR ACCOMPLISHMENTS
Calendar year 1996, the first full year of the Fund's operations,
was a very exciting and significant year:
--In January, the Fund received 268 applications for the CDFI Program
and more than 50 applications for the Bank Enterprise Award
Program in response to its interim regulations and Notices of
Funds Availability issued in October 1995.
--The Fund undertook a rigorous review process of the CDFI Program
applicants including a thorough analysis of an applicant's
financial and programmatic track record, financial strength and
stability, management capacity, business development strategy,
matching funds, and projected community development impact.
--Secretary Rubin announced the CDFI Fund's selection of 32 CDFI's to
receive nearly $37 million in financial and technical
assistance.
--Secretary Rubin announced the CDFI Fund's selection of 38 banks and
thrifts to receive $13 million in Bank Enterprise Awards.
--In January 1997, President Clinton announced the award winners for
the Presidential Awards for Excellence in Microenterprise
Development, a non-monetary award program implemented by the
Fund which is designed to recognize the best in the business of
entrepreneurship.
--In the midst of these activities, the Fund also managed the
challenges of starting up a new organization including
developing financial systems, internal controls, monitoring and
evaluation functions, and other organization development
issues. As a new organization, the Fund has built many of its
management systems virtually from the ground up, or has been in
the process of converting transitional, temporary systems to
permanent ones, and creating and refining needed control
systems. These systems are critical to ensure effective use of
scarce public resources.
NEED AND IMPACT
The capital needs of urban, rural and Native-American communities
are indeed great--but very difficult to quantify. I believe that the
dramatic response of the private sector to the initiatives of the Fund
provide a clear illustration of the vast unmet capital needs. In its
first funding round, the Fund received 268 applications for the CDFI
Program from community based organizations in need of investment
capital and technical assistance. The requests for funding exceeded
$300 million--approximately 10 times the amount of resources initially
made available for the first funding round. It should be noted that
applicants that submitted requests represent only a portion of the
universe of organizations that are likely to be eligible for the
program and represent only those communities that are fortunate enough
to have a community based financial institution. The Fund also received
applications from over 50 banks and thrifts--an excellent start for a
program relatively unknown among the banking industry.
Although the Fund is young, its impact can already be seen. The
Fund has proven effective in leveraging resources, forging linkages
with the financial services industry, creating viable self sustaining
institutions, expanding access to the economic mainstream, restoring
healthy market activity, and catalyzing new community development
activity.
Leveraging Private Resources
The Fund's ability to leverage private sector funds into distressed
communities is dramatic. The Fund requires, at a minimum, that every
dollar awarded through the CDFI Program be matched by at least one
dollar of non-Federal monies. In the near term--over the next two-to-
three years--the $37 million in equity and debt capital awarded to
CDFI's will conservatively leverage three-to-four times the original
awards. Over the long term, the Fund's investments are expected to
support lending and investment of 10-to-20 times the amount awarded.
Self-Help of North Carolina is a national leader in community
development finance. Yesterday, the Fund executed a $3 million grant to
Self-Help. Over the next five years, it is conservatively projected
that the CDFI Fund's grant and matching funds will enable Self-Help to
provide more than $100 million to finance affordable housing and small
business loans over and above what they could have done without the
Fund's assistance.
Forging Linkages with the Financial Services Industry
In a short period of time, the Fund has been successful in forging
key partnerships between banks, thrifts and CDFI's through the Bank
Enterprise Awards Program. The $13.1 million in Bank Enterprise Awards
generated nearly $66 million in equity investments and other financial
support to CDFI's. In addition, the program generated $60 million in
direct lending and financial services in some of the nation's most
distressed neighborhoods. For example, the Bank Enterprise Award
Program helped catalyze a $10 million investment by NationsBank in the
Employment Opportunities Fund which invests in small businesses located
in or that employ residents of the Baltimore Empowerment Zone.
Creating Viable Self-Sustaining Institutions
The Fund is distinctive from many other Federal initiatives because
it focuses on the development of viable, self-sustaining institutions
to carry out the work of financing community development. The Vermont
Community Loan Fund, a small organization that finances housing, small
businesses and community facilities, has achieved notable success in
attracting investments from a diverse array of individuals, religious
institutions, foundations, and corporations. The Fund's investment will
help the Vermont loan fund build on its highly successful track record,
expand its services to communities across the state, and provide new
investment in Burlington's Old North End Enterprise Community where
over thirty-percent of its residents live in poverty.
Expanding Access to the Economic Mainstream
The activities of the First American Credit Union illustrates how
the Fund's resources will help bring under served communities into the
economic mainstream. The credit union, which serves Native-American
reservations throughout Arizona, New Mexico and Utah, provides basic
financial services. These basic financial services include checking and
savings accounts and consumer and home improvement loans--for people
that otherwise would have no access to these services. The Fund's
assistance will be used to expand lending and introduce ATM services to
rural, sparsely-settled low-income communities.
Restoring Healthy Market Activity
Douglass Bancorporation, the oldest African-American owned bank
west of the Mississippi, will receive an investment from the Fund to
support its expansion to serve Kansas City, Missouri. Douglass, in
partnership with the Kansas City Neighborhood Alliance, has developed a
comprehensive plan to restore healthy market activity to low-income
neighborhoods by promoting affordable housing and small business
development.
Catalyzing New Activity
The Fund's philosophy is to use its scarce resources to catalyze
and jump start new initiatives--rather than permanently subsidize them.
For example, with the Fund's investment of a $1 million loan, Tlingit-
Haida Regional Housing will begin home mortgage lending in Alaska's
three urban areas. This will be among the first sources of mortgage
loans that are affordable to low-income Alaska Natives in these
markets.
SUMMARY OF FIRST FUNDING ROUNDS
The CDFI's selected to receive investment from the Fund represent a
broad array of institutional types--both non-profit and for-profit--and
provide a broad range of financial products and services including
consumer loans, affordable housing loans and investments, small
business development, and community facilities such as day care and
health care facilities. The group of selected CDFI's serve communities
in 46 states and the District of Columbia. Approximately half of these
initiatives serve predominantly urban areas, 25-percent serve
predominantly rural areas, and the balance serve a combination of both.
Twenty-four of the 32 awardees serve an Empowerment Zone or Enterprise
Community.
Through the Bank Enterprise Award Program, the Fund has made awards
to 38 banks and thrifts located in 18 states and the District of
Columbia that ranged in asset size from a small community bank of $21
million to a major money-center bank of $320 billion. The awardees
include national banks, Federal savings banks or thrifts, state-
chartered commercial banks, and one state chartered mutual saving bank.
the president's fiscal year 1998 budget request
The President and Secretary Rubin strongly support the increased
funding for the CDFI Fund. The $125 million requested for fiscal year
1998 is proposed to be allocated as follows: $80 million to be invested
to support CDFI's; $40 million for the Bank Enterprise Awards Program;
and $5 million for administrative related costs. Most of the $80
million to be used to support CDFI's will be invested directly in such
institutions in the form of equity investment, loans, capital grants,
and deposits. As part of its provision of assistance to CDFI's, the
CDFI Fund intends to launch an important training initiative which will
significantly enhance the capacity of private sector organizations to
provide a full range of training and technical assistance services to
CDFI's at affordable prices. In addition, a new secondary market
initiative that the Fund will implement has the potential to leverage
substantial new sources of private capital to support CDFI's.
CDFI PROJECTS
Senator Bond. I am going to turn to Senator Mikulski for
questions after asking just one question to begin. We have
heard all of these glowing reports. It is no surprise to me
that everybody is anxious and making applications for funds,
but--maybe my staff is not up to date--I do not find any
evidence that a single dollar of the $32 million in CDFI funds
has actually been obligated or leveraged on a single project.
Has anything happened yet on this?
Ms. Moy. Indeed it has, Senator. First of all, the money
has all been obligated.
Senator Bond. I mean, has any money gone out to a project?
Has it been spent?
Ms. Moy. Yes.
Senator Bond. Is something happening?
Ms. Moy. First of all, we run two programs, Senator, so
that in the Bank Enterprise Award Program, which is a very
important program, 75 percent of our moneys have actually been
disbursed in that program to the participating banks, who have
already completed their activities and who have already showed
the impact of what they have done.
Under the CDFI Program, we have closed one transaction to
Self-Help in North Carolina for $3 million. We have spent the
first year putting the systems and procedures in place to make
sure that as we disburse this money we can monitor the impact
and trace the actual use of the moneys.
We now have in place our infrastructure to disburse these
moneys. For instance, we have all the appropriate legal
documents. In the next 4 to 6 weeks we expect to disburse all
of the money that we can to organizations that are ready to
receive them, which is approximately one-half of the
organizations.
Senator Bond. So you are saying no money under CDFI has
actually gone out.
Senator Mikulski.
Senator Mikulski. Mr. Hawke, good morning. Ms. Moy, first a
cordial welcome to you from the committee.
I would like to just say, looking at your background, that
we are very fortunate to have someone of such strong private
sector experience managing the CDFI fund. I know that the whole
issue of access to credit for low-income communities has been
part of my life for more than 30 years, and yet, at the same
time, I had enormous skepticism about creating the CDFI fund.
Just very quickly, when I was a young social worker in
Baltimore I helped start a credit union in an African-American
community. Of course, all they had was the opportunity to
borrow money from, really, street-corner or store-front usury
programs. Then, working as a city councilwoman and then a
Congresswoman, I dealt with the red-lining provisions, and then
came the famous Community Reinvestment Act.
When the CDFI fund was proposed, my question was, why do we
need this? Why don't we just push the big banks to do community
reinvestment, that was the big concern, rather than create new
Government entities where we played banker, instead of letting
the banks who know how to be banks be banks in communities.
Do you follow all that?
Ms. Moy. Yes; I think so.
Senator Mikulski. Now, you present this really excellent
testimony, and I have been looking at the WEB Program, the
Women Entrepreneur Program in Baltimore, as well as the
NationsBank effort to work with the Baltimore empowerment zone.
Could you just tell me very briefly, because we must move
ahead. Your testimony essentially answers many of the fears and
concerns that I had. But if you could: These issues of linkage,
leverage, and availability to people, like $6,000 level loans
for women, could you tell me how this actually worked in
Baltimore? Maybe take one of those projects on linkage and
leverage, and tell me why the Community Reinvestment Act would
not have met that need, or are we playing bank when maybe we
should pursue other options?
Ms. Moy. Those are excellent questions, and they are truly
intertwined. The whole concept of CDFI's is that they are
specialized, private institutions that fill niches that
traditional financial institutions cannot fill.
Why can't these banks fill these niches? It would be too
easy to say that they simply do not want to do it, though in
some cases that is true.
Capital gaps often arise not because of risk or return, and
not even perception. They arise for very nitty-gritty reasons
and for very unglamorous reasons. For instance, the size of a
transaction--you mentioned the $6,000 loan. It is not economic
for most traditional financial institutions to make investments
in that size because of their infrastructure and because of
their overhead.
Size is a common problem. Volume is a common problem.
Financial institutions look to cookie-cutter their investments
in order to do large volumes, which improves their profit
margins. This is not possible with many types of community
development loans, I have found. I have not been at it as long
as you, Senator, but I am older than I look, and I have been at
it for some 20 years.
Senator Mikulski. I am not. [Laughter.]
Ms. Moy. In the 20 years that I have been doing this in the
private sector, I have been able repeatedly to build products
for my company that capitalized precisely on those capital
gaps, areas they could not serve well.
I think the real way to make an impact is to push banks to
do as much as they possibly can, and to work in partnership
with CDFI's to cover the areas that they cannot.
In virtually every instance, our CDFI's are working with
traditional banks, and with the Bank Enterprise Award Program,
many of them are beginning to get more support from these banks
than they ever have.
Senator Mikulski. So you are not in lieu of the bank?
Ms. Moy. Oh, absolutely not. I think the private sector
works because people specialize. People do what they do best,
and that is what they should be doing in the private market
system. Our CDFI's in many cases are second to none in
delivering certain types of credit.
In many cases, they develop an innovative product, show the
private sector how to do it. And there are actually banks that
are beginning to do small amounts of microenterprise lending,
based on some of the models that have been pioneered by the
CDFI's. The fund made a $450,000 grant to FINCA, which is a
microenterprise organization working in Washington, DC, and in
Baltimore. FINCA works with different local community-based
organizations, one of them being WEB, and they have pioneered
the peer lending----
Senator Mikulski. Which is the Women Entrepreneurs Program.
Ms. Moy. In Baltimore, exactly, with a peer lending model,
and they are adapting that international model, which has had
so much success overseas, to the domestic market, and WEB is
one of the first groups they are working with.
Senator Mikulski. What do they do?
Ms. Moy. In this country, microenterprise groups do not do
just lending. They provide significant amounts of technical
assistance. They do a lot of handholding. They train people in
sound business practices. They help them actually startup their
businesses. They provide peer and other group support to small
organizations, which inevitably run into challenges during
their first year, and they are there to provide additional
capital as these organizations grow.
Mr. Hawke. If I could add just one comment, Senator
Mikulski, the CDFI fund also functions to leverage private
capital from sources other than ordinary banking institutions,
so it does tap into a broader range of leveraging.
Senator Mikulski. Like what?
Ms. Moy. Individuals, religious organizations,
corporations, foundations.
Senator Mikulski. Well, thank you. I look forward to
learning more about this. I know that my time has expired. You
have answered many of my questions. I mean, my questions first
of all about the CDFI fund. This is why these hearings are so
important.
I knew WEB was important, and I knew NationsBank was coming
into Baltimore, but they needed a trade group, a channel, a
fiscal channel to get the resources down to the right level.
The reason WEB is working is not only because of the money, but
the technical assistance. A local credit union in a church
might be able to give microloans, but they would not have done
the technical assistance for someone who might be opening a
home-based business like sewing and alterations.
Ms. Moy. Yes; many of them are in home-based businesses,
actually.
Senator Mikulski. I really look forward to learning more
about it. I have a great passion for microenterprise, I've seen
how it has worked around the world. It really fortifies me to
hear that it is now working in Baltimore and other communities.
I think we need to closely monitor this with lessons learned,
but I think the fact that it is beyond the Community
Reinvestment Act, which was kind of a mandate, this is really
helping them fulfill a social responsibility, but in a way that
is most effective at the street corner or neighborhood level,
is that right?
Ms. Moy. That is correct.
Senator Mikulski. Well, thank you very much.
Ms. Moy. Thank you, Senator.
Senator Bond. Thank you, Senator Mikulski.
I have been very much impressed by the testimony, as
Senator Mikulski was, but I am very much concerned about the
performance. As we put out the first $3 million, we will be
waiting to see if it works.
PERFORMANCE STANDARDS
I am going to have a series of questions about your
standards, about how we know if it is going to work. You
present a great vision for something that might work, and
before we go down the path of building this $50 million to $125
million to $1 billion, you have got to show me that this thing
works.
I mean, nobody can argue with the glowing testimony. It
sounds great. But there is an awful lot I want to see about how
this works, what the standards are. I will submit that for the
record.
Let me ask you here one nasty little question. How are you
regulating CDFI to ensure that the funds are being used
appropriately, that these entities will pose no financial risk
to the taxpayer, and what happens to a financially troubled
CDFI?
Ms. Moy. Senator, I do not regard that as a nasty question.
I think it is a fundamental question that is a very important
one.
The time that we have spent putting systems in place is
precisely for this reason. I do not think anyone wants another
program that does not work or has a troubled record. Our
statute requires us to negotiate with each CDFI a set of
performance goals that go right into the legal document that
becomes the legal vehicle by which we award them moneys. They
are required to report to us quarterly and annually on these
goals, and we can take sanctions if they do not satisfy them.
Among the performance goals that are negotiated are
financial and programmatic goals, and financial covenants of
various sorts.
In doing so, the fund is cognizant of the individual needs
of each organization and how it is different. At the same time,
we require performance from everyone. The organizations that we
selected we selected because of their impressive financial
situation, condition, stability, management capacity and so
forth.
Senator Bond. Will you be doing examinations of them?
Ms. Moy. Absolutely.
Senator Bond. And Treasury is responsible for that? When it
goes bad, who do we hang, you? [Laughter.]
Mr. Hawke. Senator, I am confident that we will be
insisting on systems being in place to achieve the objectives
you have right from the beginning of this program.
Senator Bond. But who do we hang out to dry?
Mr. Hawke. This is an operation of the Treasury Department,
Senator Bond.
Senator Bond. So you are volunteering? You are the one? You
are the belly button we point at?
Mr. Hawke. Yes, sir; this is one of our bureaus. We do not
interfere with the independence of the decisionmaking of the
CDFI fund, but the one thing that Director Moy and I have
talked about again and again from the very beginning of this
program was the need not only to have systems in place to
assure that the process of making grants was transparent and
had integrity to it, but that the followup process was
demanding.
Senator Bond. You are responsible for what happens if one
of them gets troubled. What do you do with it?
Ms. Moy. It depends on why they are in trouble. I mean, it
is possible for people to get into trouble through no fault of
their own. When you constantly monitor an organization and look
at their financials on a quarterly basis, you are generally not
surprised by things that happen. You see trends.
The best answer, actually, the best solution is to
intervene before you have a problem. We certainly do not want
to be surprised by a problem.
Senator Bond. I just realized--do you take it over? I tell
you what. Let me ask that you send me those answers, because we
do have a series of questions that we would like to find out
about, the goals, the standards, the performance objectives,
and I am going to ask our staff, both sides of the staff to
monitor what is actually happening, and I thank you very much
for your testimony.
You present a great vision of what might happen, and we
want to see that it does.
Senator Mikulski. And as you can see, there is both support
and skepticism here. The skepticism is not harsh. We want to
know what are we getting into, what our obligations are, and
make sure it is not another hollow opportunity.
Perhaps in following up with our staffs, you could do it in
a case example tracing through microenterprise, what happens if
an individual defaults, what happens if the organization is in
trouble, et cetera, et cetera. But also, how do you work in the
first place: The anatomy of the good news, and then what would
happen if there is bad news. This is asked in a no-fault way,
but we need to get to know each other.
Ms. Moy. We would be happy to do that. Thank you, Senator.
[The information follows:]
OBJECT CLASSIFICATION SCHEDULE--DIRECT OBLIGATIONS
[Dollars in thousands]
----------------------------------------------------------------------------------------------------------------
Fiscal year
--------------------------------------------------
Object classification 1997 proposed 1998 budget
1996 actual operating level estimate
----------------------------------------------------------------------------------------------------------------
Personnel compensation: Permanent positions.................. 590 1,500 2,700
--------------------------------------------------
Total personnel compensation........................... 590 1,500 2,700
==================================================
Civilian personnel benefits.................................. 137 375 725
Travel and transportation of persons......................... 97 100 200
Transportation of things..................................... 8 25 5
Rent, communications and utilities:
Rental payments to GSA................................... ............... 340 45O
Rental payments to other agencies........................ 163 100 ...............
Communications, utilities and miscellaneous charges...... ............... 80 60
Printing and reproduction.................................... 71 80 100
Other services............................................... 1,336 975 900
Supplies..................................................... 48 75 80
Equipment.................................................... 346 350 280
Grants, subsidies and contributions.......................... 46,701 71,000 119,500
--------------------------------------------------
Total obligations...................................... 49,497 75,000 125,000
==================================================
Unobligated balance available, SOY........................... (49,878) (45,000) (20,000)
Unobligated balance available, EOY........................... 45,000 20,000 20,000
Unobligated balance expiring................................. 381 ............... ...............
--------------------------------------------------
Total enacted appropriations and budget estimate....... 45,000 50,000 125,000
----------------------------------------------------------------------------------------------------------------
ANALYSIS OF FISCAL YEAR 1997 APPROPRIATED LEVEL
[Dollars in thousands]
------------------------------------------------------------------------
FTE Amount
------------------------------------------------------------------------
Fiscal year 1997 Proposed Operating
Level.................................. 23 $75,000
Fiscal year 1998 Estimate............... 35 125,000
------------------------------------------------------------------------
DIGEST OF FISCAL YEAR 1998 BUDGET ESTIMATES BY ACTIVITY
[Dollars in thousands]
----------------------------------------------------------------------------------------------------------------
Fiscal year Fiscal year Fiscal year
1996 actual 1997 proposed 1998 budget
Budget activity ----------------- operating level estimate
---------------------------------
FTE Amount FTE Amount FTE Amount
----------------------------------------------------------------------------------------------------------------
Management and administration:
Administrative services.................................. ... $2,760 ... $3,650 ... $4,500
Administrative expenses for Direct Loan Program \1\...... ... 35 ... 350 ... 1,000
--------------------------------------------------
Total management and administrative expenses......... ... 2,795 ... 4,000 ... 5,500
Assistance to CDFI's (other than direct loans)............... ... 30,560 ... 43,150 ... 59,500
Direct loan subsidy.......................................... ... 3,003 ... 12,850 ... 20,000
Incentives for depository institutions....................... ... 13,139 ... 15,000 ... 40,000
--------------------------------------------------
Subtotal, operating level.............................. ... 49,497 ... 75,000 ... 125,000
Unobligated balance available, SOY........................... ... (49,878) ... (45,000) ... (20,000)
Unobligated balance available, EOY........................... ... 45,000 ... 20,000 ... 20,000
Unobligated balance expiring................................. ... 381 ... .......... ... ..........
==================================================
Total enacted appropriations and budget estimate...... 10 45,000 23 50,000 35 125,000
----------------------------------------------------------------------------------------------------------------
\1\ The amount for fiscal year 1998 is a ``not to exceed'' amount that may be used for administrative expenses
for the Direct Loan Program.
______
COMMUNITY DEVELOPMENT FINANCIAL INSTITUTIONS FUND
Summary Justification of Fiscal Year 1998 Budget Estimates
GENERAL STATEMENT
The CDFI Fund represents a new direction for community development
initiatives, by using limited public resources to invest in and build
the capacity of the private sector to address the community development
financing needs of distressed urban and rural communities. The CDFI
Fund's initiatives are designed to unleash large amounts of private
capital, emphasize private sector market discipline, and take full
advantage of private sector human talent, energy and creativity.
Decisions about which specific projects and businesses to finance are
left to the private sector. The effect of these efforts will be to
address market inefficiencies which exist in distressed communities,
restore healthy private market activity, promote entrepreneurship,
revitalize neighborhoods, generate tax revenues, and empower local
residents.
Through the CDFI Program, the CDFI Fund stimulates the creation and
expansion of a diverse set of specialized, private, for profit and
nonprofit financial institutions known as community development
financial institutions (CDFI's). These specialized institutions
complement the role of traditional financial institutions by filling
niches in the market which traditional financial institutions are not
well positioned to serve. CDFI's cover a broad range of institution
types, such as community development banks, community development
credit unions, community development loan funds, community development
venture capital funds, and microenterprise loan funds. They provide a
wide range of financial products and services to distressed urban and
rural communities and to low income populations, such as commercial
loans and investments to start or expand small businesses, loans for
first time home buyers, loans to rehabilitate rental housing, and loans
for community facilities. The CDFI Fund will: (1) invest directly in
CDFI's that satisfy high quality standards and raise private matching
funds; (2) provide training and technical assistance to improve the
capacity of CDFI's; and (3) implement secondary market initiatives
which draw in new sources of private institutional capital to support
the activities of CDFI's.
In its first round under the CDFI Program, the CDFI Fund selected
32 organizations to receive a total of $37.2 million in equity
investments, loans, capital grants and technical assistance. But this
barely scratches the surface of what needs to be done to achieve the
full potential of CDFI's.
Interest and demand for the CDFI program has dramatically exceeded
expectations, with requests for assistance last year exceeding $300
million. The interest demonstrated by the initial pool of applicants,
plus continued growth and interest in new CDFI formation, indicate the
dramatic potential for future investment for the CDFI Fund to stimulate
expansion of the diverse CDFI industry.
In addition to making increased direct investments in CDFI's, the
CDFI Fund is planning to take full advantage of the potential of the
diverse and growing CDFI field by implementing new initiatives to
expand the Fund's tools for assisting CDFI's, and keeping the Fund on
the cutting edge of innovation. An important new training initiative
will significantly enhance the capacity of private sector organizations
to provide a full range of training and technical assistance services
to CDFI's at affordable prices. This initiative will emphasize quality
and market discipline in the training and technical assistance services
delivered by private sector providers. By using its resources to
enhance capacity in this way, the CDFI Fund will build on the existing
marketplace for these services, which will be a much more effective
approach than if the Fund were to provide these services directly. In
the long term, this initiative will also help ensure the maximum
effectiveness of the CDFI Fund's future investments in an increasing
number of CDFI's.
While supporting the creation and expansion of new types of
specialized private financial institutions, the CDFI Fund's programs
also recognize the key role being played by traditional financial
institutions--banks and thrifts--in community development lending and
investing. In recent years, many such traditional financial
institutions have increased their efforts to lend and invest in
distressed communities. By offering incentives to such traditional
financial institutions through its Bank Enterprise Awards (BEA)
Program, the CDFI Fund builds on these trends and assists traditional
financial institutions in enhancing their direct community development
lending, as well as in investing in CDFI's.
In the first round of the BEA Program, the CDFI Fund made a total
of $13.1 million in incentive awards to 38 insured depository
institutions. These awards supported more than $120 million in total
community development investments by banks and thrifts. By making
improvements in the program and by engaging in increased outreach to
the banking and thrift industries, use of the program can be
dramatically enhanced.
As a new organization, in addition to refining its programs and
developing new initiatives, the CDFI Fund is working to develop a full
set of performance goals, measures and numerical targets in time for
the fiscal year 1999 budget presentation. Included in this year's
presentation is some initial thinking on possible performance measures.
______
activity: 1. management and administration
Functions: Provides management, staff and other services which
enable the Fund to develop and implement policies and programs, monitor
investments, and provide support functions for these activities.
Mission Statement: Management and Administration is intended to
develop and implement the initiatives of the CDFI Fund with the highest
possible quality and professionalism to maximize the capacity of the
Fund to achieve its objectives.
[In thousands of dollars]
------------------------------------------------------------------------
Fiscal year
-----------------------------------
1996 1997 1998
actual estimate estimate
------------------------------------------------------------------------
Budget Authority \1\................ 2,795 4,000 5,500
------------------------------------------------------------------------
\1\ These amounts include administrative expenses for the Direct Loan
Program.
Performance Goal: To build a strong staff with skills and
experience appropriate to the fund's unique activities.
----------------------------------------------------------------------------------------------------------------
Objective Performance measure (indicator) Type of measure
----------------------------------------------------------------------------------------------------------------
Emphasize quality, relevant Number of staff hired to fill targeted positions that Output.
experience and record of have the desired skills and professional experience.
achievement in hiring.
Contribution of staff in meeting overall performance Outcome.
goals of CDFI Fund through meeting of goals in
individual performance plans.
Build a staff reflecting Number of staff sorted by diversity characteristics...... Output.
appropriate diversity that can
serve as a model for other
organizations.
Ongoing training and skills Number of CDFI Fund staff members that attend training Output.
development of existing staff. sessions or other educational and developmental
opportunities.
Design and implement system to Implement internal data collection and retrieval system Output.
evaluate impact of Funds' programs. on participating CDFI's.
Design CDFI performance evaluation process and complete Output.
paper setting forth approach to long term impact
evaluation.
----------------------------------------------------------------------------------------------------------------
activities: 2 and 3. assistance to cdfi's (including direct loans)
Functions: The Fund makes investments in quality CDFI's, by
providing assistance in the form of equity investments, loans, capital
grants, and deposits or shares. The form of financial assistance
depends on the individualized needs of a CDFI as reflected in a
realistic business plan, consistent with its ability to raise private
matching funds in a comparable form. The Fund will also assist CDFI's
through training and technical assistance initiatives, and by providing
assistance to organizations that enhance the liquidity of CDFI's.
Mission Statement: Assistance to CDFI's is intended to spur the
creation and expansion of these specialized private financial
institutions and to enhance both immediate private sector capacity to
address community development financing needs in distressed
communities, as well as to strengthen the long term capacity of these
institutions to serve such needs and help restore healthy private
market activity in distressed communities.
[Dollars in thousands]
----------------------------------------------------------------------------------------------------------------
Fiscal year
-----------------------------------------------
1996 actual 1997 estimate 1998 estimate
----------------------------------------------------------------------------------------------------------------
Budget Authority (Other than Direct Loans)...................... $30,560 $43,150 $59,500
Budget Authority (Direct Loan Subsidy) \1\...................... $3,003 $12,850 $20,000
Direct Loan Level \2\........................................... $6,660 $33,316 $52,521
Direct Loan Subsidy Rates \3\ (Percentage)...................... 45.09 38.57 38.08
----------------------------------------------------------------------------------------------------------------
\1\ For fiscal year 1997 and fiscal year 1998 these are upper limits. The actual mix between loans and other
forms of financial assistance will depend on the individualized needs of CDFI's as reflected in realistic
business plans, consistent with their ability to raise private matching funds in a comparable form.
\2\ For fiscal year 1997 and fiscal year 1998 these are upper limits, based on the assumed direct loan subsidy
rate.
\3\ The 45.5 percent subsidy rate for fiscal year 1996 that appears in the President's fiscal year 1998 Budget
should actually be 45.09 percent.
Performance Goal: To strengthen and expand the network of private
financial institutions to address the community development financing
needs of distressed urban and rural communities and underserved
populations.
----------------------------------------------------------------------------------------------------------------
Objective Performance measure (indicator) Type of measure
----------------------------------------------------------------------------------------------------------------
To increase the cumulative number Number of CDFI's which receive financial assistance from Output.
of CDFI's to which the Fund the CDFI Fund which have not previously received such
provides financial assistance assistance.
while maintaining high quality
standards and promoting diversity.
Cumulative number and percent of participating CDFI's by Output.
geographic region, institution type, urban v. rural
focus.
To implement a secondary market Issuance of regulations and Notification of Funding Output.
initiative to bring increased Availability (NOFA).
liquidity for CDFI's.
To implement effective training Number of participants in training and technical Output.
and technical assistance assistance programs.
initiatives which enhance the
capacity of CDFI's now and in the
future.
Number of CDFI's which report improved capacity as a Output and
result of participating in training and technical outcome.
assistance programs.
----------------------------------------------------------------------------------------------------------------
activity: 4. incentives for depository institutions
Functions: Through the Bank Enterprise Awards (BEA) Program, the
Fund makes cash awards to banks and thrifts that increase their
community development lending, investment, and provision of financial
services. The Fund will use up to one-third of program funds for BEA.
All insured banks and thrifts are eligible to participate.
Mission Statement: The BEA Program is intended to provide
incentives and rewards which assist traditional financial institutions
in prudently enhancing their activities in distressed urban and rural
communities, by direct lending and investing and also by investing in
CDFI's.
[In thousands of dollars]
----------------------------------------------------------------------------------------------------------------
Fiscal year
-----------------------------------------------
1996 actual 1997 estimate 1998 estimate
----------------------------------------------------------------------------------------------------------------
Budget Authority................................................ 13,139 15,000 40,000
----------------------------------------------------------------------------------------------------------------
Performance Goal: To increase the general effectiveness and
community development impact of the Bank Enterprise Award (BEA)
Program.
----------------------------------------------------------------------------------------------------------------
Objective Performance measure (indicator) Type of measure
----------------------------------------------------------------------------------------------------------------
Simplify and reform regulation to Incremental and cumulative number of awards.............. Output.
improve program participation.
Reforms proposed......................................... Output.
Incremental and cumulative dollars awarded............... Output.
Develop and propose legislative Legislative improvements proposed........................ Output.
improvements to the program.
Expand the awareness of the BEA Implementation of effective outreach program to Outcome.
program by working with the appropriate regulatory entities, trade associations and
appropriate regulators and trade others as appropriate.
associations.
Number of applicants in program.......................... Output.
----------------------------------------------------------------------------------------------------------------
DEPARTMENT OF THE TREASURY
Community Development Financial Institutions Fund Programs
federal funds
General and Special Funds:
For grants, loans and technical assistance to qualifying community
development lenders, and administrative expenses of the Fund,
$125,000,000, to remain available until September 30, 1999, of which
$20,000,000 may be used for the cost of direct loans, and up to
$1,000,000 may be used for administrative expenses to carry out the
direct loan program: Provided, That the cost of direct loans, including
the cost of modifying such loans, shall be defined as in section 502 of
the Congressional Budget Act of 1974: Provided further, That these
funds are available to subsidize gross obligations for the principal
amount of direct loans not to exceed $53,000,000: Provided further,
That not more than $40,000,000 of the funds made available under this
heading may be used for programs and activities authorized in section
114 of the Community Development Banking and Financial Institutions Act
of 1994.
Additional committee questions
Senator Bond. Thank you very much, Ms. Moy and Mr. Hawke.
[The following questions were not asked at the hearing, but
were submitted to the Institutions for response subsequent to
the hearing:]
Questions Submitted by Senator Bond
no track record and rushing the product
Question. The President's Budget is requesting a substantial
increase (150 percent in the funding for the CDFI Fund including the
CDFI program and the Bank Enterprise Act) from $50 million in fiscal
year 1997 to $125 million in fiscal year 1998, with an overall target
of $1 billion by fiscal year 2002. This is a substantial increase for a
new program, especially a new program without a proven track record or
any experience. How do you justify this large increase?
Answer. The requested increase in funding is justified by the great
demand and need for the types of assistance provided by the CDFI Fund.
The dramatic response to the CDFI Program during its first funding
round provides an illustration--and good proxy--of the demand and unmet
needs for the Fund's products. The Fund received 268 applications for
the CDFI Program from organizations in need of investment capital and
technical assistance. The requests for funding exceeded $300 million--
approximately 10 times the amount of resources initially made
available. The applicants that submitted requests represented only a
portion of the universe that are likely to be eligible for assistance.
Moreover, the Fund has received inquiries from a substantial number of
groups expressing interest in the formation of new CDFI's. Finally, it
should be noted that because of limited resources available to the
Fund, those applicants that received funding received, on average, only
60 percent of the amount requested.
CURRENTLY AVAILABLE FUNDING
Question. I understand that the CDFI Fund actually obligated
approximately $37.2 million for the CDFI program and approximately
$13.1 million for the Bank Enterprise Act (BEA) program. How much
additional funding does the CDFI Fund currently have available for
funding new awards during fiscal year 1997 and when does the CDFI Fund
plan to make this funding available?
Answer. For funding new awards during fiscal year 1997, the Fund
currently has available $95 million in appropriated funds. The Fund
recently published notices in the Federal Register for its second
funding rounds of the CDFI Program and the BEA Program (see Attachments
1a and 1b). The CDFI Program notices indicate that the Fund intends to
make available up to $40 million for this program which is expected to
be fully obligated by September 30, 1997.
By the summer, the Fund plans to issue funds availability notices
for funding rounds for training (authorized pursuant to Section 103 of
the Riegle Community Development and Regulatory Improvement Act of 1994
(Public Law 103-325)) and for a secondary market initiative (authorized
pursuant to Section 119 of the Riegle Community Development and
Regulatory Improvement Act of 1994) totaling approximately $20 million.
The Fund anticipates obligating the funds for these two new initiatives
by the end of calendar year 1997.
As required by the Fund's authorizing statute, one-third of all
appropriated program monies must be made available under the BEA
Program. Thus, the Fund must make available $30 million for the BEA
Program. On March 7, 1997, the Fund published a notice in the Federal
Register announcing the availability of $16.25 million for the second
funding round of the BEA Program. However, if requests exceed $16.25
million during the second funding round, the Fund intends to obligate
as much of the $30 million as possible by September 30, 1997. The
balance of the unobligated BEA monies will be rolled over into next
funding round which is expected to be announced in the Federal Register
in October 1997.
Question. In addition, the testimony seems clear that not a single
dollar of the $37.2 million in CDFI program funds have actually been
obligated or leveraged on a single project or activity. If this is
true, how do you measure the success of the CDFI program for which
there is not data?
Answer. The Fund has obligated $37.2 million in equity investments,
grants and loans under the CDFI Program and disbursed or initiated
disbursements of $13.6 million--or 37 percent--of such obligated funds.
The Fund expects to disburse nearly all of its fiscal year 1995 monies
by September 30, 1997. The Fund is working diligently to disburse the
remaining awards as expeditiously as possible after the Fund and each
awardee enters into a formal agreement that requires the institution to
comply with performance goals that are rigorous and tailored to the
unique elements of the institutions and the needs of the communities
they serve and abide by other terms and conditions pertinent to the
award. The requirements for the formal agreement are set forth in
Section 108(f)(2) of the Riegle Community Development and Regulatory
Improvement Act of 1994. As discussed the Fund recently published
notices in the Federal Register for the CDFI Program and the BEA
Program announcing the availability of funding rounds for fiscal year
1996 and fiscal year 1997 appropriated dollars most of which it expects
to obligate by September 30, 1997.
Some data currently exists that allows the Fund to measure the
success of the CDFI Program. For example, the CDFI Program has already
demonstrated a significant ability to leverage funds from non-Federal
sources. More than $50 million of such matching money has already been
raised and received by the 32 organizations selected for funding in the
first funding round of the Program. This money has, in turn, leveraged
additional funds and resulted in a total of over $100 million raised
and made available to finance community development activities. In
several cases, actual development transactions have already occurred.
For example, one of our awardees reports that the Fund's $3 million
grant has already enabled it to effectuate $24 million in home mortgage
and commercial lending transactions. Over the next two to three years,
the $37.2 million in CDFI Program awards are expected to leverage three
to four times that amount in total capital raised for these
institutions.
Question. In addition, how many grant agreements have actually been
signed or entered into under the CDFI program? Please provide a list
that describes each grant, each grant agreement, and the date on which
the grant agreement was signed or executed, and the date and amount of
the disbursement of any funds. Please list each BEA award by award,
date of award and by activity.
Answer. The Fund enters into an Assistance Agreement with each
awardee prior to providing any assistance to such awardee. The Fund may
provide assistance in the form of an equity investment, deposit, loan,
grant, technical assistance, or some combination of these instruments.
To date, the Fund has entered into ten Assistance Agreements with
awardees under the CDFI Program. Under the BEA Program, the Fund must
enter into an Award Agreement with each awardee prior to providing an
award to such awardee. All awards are in the form of a grant under the
BEA Program. To date, the Fund has entered into Award Agreements with
all of the 38 institutions selected to receive assistance under the BEA
Program. Please see Attachments 2a and 2b which describe each form of
assistance provided under the CDFI Program, the date on which each
Assistance Agreement was executed, the amount of disbursement of each
CDFI Program award and each Bank Enterprise Award, the date on which
each Bank Enterprise Awardee Agreement was executed, the amount of
disbursement of each Bank Enterprise Award, and the activities for
which such award was granted.
SUCCESS OR FAILURE OF THE CDFI PROGRAM
Question. When will there be enough data and program experience to
analyze the strengths and weaknesses and the successes and failures of
the CDFI program? What benchmarks have you established for analyzing
the use of CDFI program funds? What steps have you taken for program
integrity to prevent fraud and abuse by CDFI program grantees? Has the
CDFI Fund established post-award audit review requirements for each
CDFI grant? If not, why not?
Answer. The Fund will collect financial and performance data from
CDFI Program awardees on a quarterly and annual basis. This information
will be compiled and reported to Congress as part of the Fund's annual
report. The Fund is taking great care to design and implement the
systems and procedures necessary to effectively monitor and evaluate
the use of its assistance, impact of its investments, and the financial
and managerial soundness of the organizations it funds. To this end,
the Fund requires awardees to report at least annually on the manner in
which Fund assistance has been used. The Fund negotiates with each
award winner specific performance goals and financial soundness
covenants for non-regulated financial institutions. In this manner, the
Fund attempts to ensure program integrity and prevent fraud and abuse
by awardees.
In addition, the Fund has worked closely with the Treasury
Department's Office of Inspector General and has sought the assistance
of consultants in developing its internal quality control systems and
procedures.
The Fund's Assistance Agreements with each unregulated CDFI awardee
requires such awardees to submit audited financial statements to the
Fund each year. In the case of regulated institutions, the Fund
requirements seek to conform, to the greatest extent possible, with the
financial reporting requirements of each awardee's Federal regulatory
agency.
LEVERAGING OF FUNDS
Question. What are the yardsticks used to determine whether a CDFI
grant applicant can leverage other funds successfully? What do you look
for in a CDFI grant applicant in assessing the ability of the grant
applicant to meet the needs of a distressed community successfully
(i.e. Do you look for roots in a community? Do you look for a track
record of community development experience? Do you look for a firm
commitment of funds?)
Answer. CDFI Program awardees are required to raise a one-to-one
match for each dollar of funds requested. Applicants must submit
evidence of their ability to leverage such matching monies as part of
their application for assistance. Firm commitments are the best
evidence of such ability, but other factors such as strength of the
applicant's fund raising strategy and track record are also considered.
However, the Fund will not disburse any assistance until the requisite
matching funds are raised. The selection criteria provide that the Fund
give additional consideration to applicants that have firm commitments.
The CDFI Program Regulations, at 12 C.F.R. Sec. 1805.902, state that
``at a minimum, a firm commitment must consist of a binding written
agreement between an Awardee and the source of the matching funds that
is conditioned only upon availability of the Fund's assistance and
other such conditions as the Fund, in its sole discretion, may deem
appropriate. Such agreement must provide for disbursal of the matching
funds prior to, or simultaneous with, receipt by the Awardee of the
Federal funds.''
The matching funds represent only the initial leverage resulting
from a CDFI Program award. Applications are evaluated, in part, by
evaluating the potential for ongoing sources of funds that will be
leveraged by the Fund investment. Potential sources of leverage include
any excess match over the minimum required match, leverage of net worth
infusion through borrowing and recycling of loan funds, and attraction
of additional investment into specific deals to be financed by the
CDFI.
The Program's evaluation criteria are designed to ensure that
Federal resources are invested prudently and in a manner that maximizes
the potential of investing in organizations with long-term viability
that will serve their communities on a long-term self-sustaining basis.
CDFI awardees are selected based on track record, management capacity,
skills and experience, quality of the business plan, ability to raise
matching funds, and community development impact.
REVIEW PROCESS AND REVIEWERS
Question. What is the review process for applications for CDFI
program funding? What is the specific criteria used for assessing
applications? Describe the scoring/ranking system used for reviewing
the applications. Was the criteria applied consistently and uniformly
for all applications?
What was the review process for the CDFI program applications?
Answer. The review process used to select CDFI award recipients in
the first funding round was described in the regulations and applicable
notice of funds availability notice (see Attachment 3), published in
the Federal Register on October 19, 1995. The regulations and notice
did not prescribe a scoring/ranking system for evaluating applications;
instead those documents set forth a process similar to an investment
analysis methodology utilized by private sector investors. CDFI award
recipients were chosen on the basis of a wide range of factors
including track record, management capacity, skills and experience,
quality of the business plan, ability to raise matching funds, and
community development impact. These criteria were applied fairly and
consistently to all applicants.
Winners were chosen as a result of a tiered review process. In an
effort to conduct the review in an efficient manner, the Fund conducted
different ``tiers'' of the process simultaneously. Tier 1 of the review
process was intended to ensure that each applicant met the eligibility
requirements and submitted complete application materials. Tier 2 of
the review process was intended to ensure that each applicant meeting
the Tier 1 requirements possessed the financial and organizational
capacity to be a successful CDFI. The Fund actually performed each Tier
2 review as part of a Tier 3 review since each factor under Tier 2 was
thoroughly examined under Tier 3. Tier 3 of the review process
considered additional factors and ultimately resulted in the selection
of award winners.
The selection criteria listed in the regulations were also
reflected on the guidance sheet given to contractors and Fund staff
that performed the qualitative reviews of applications (see Attachment
4). The evaluation process and criteria aimed to ensure that the Fund
invested prudently in a manner that maximized the potential of
investing in organizations that could continue to provide capital in
their communities on a long-term self-sustaining basis. As part of the
Tier 3 review, 59 organizations were determined to be sufficiently
competitive to be invited by the Fund for an interview with the final
review panel. Of those interviewed, 32 were selected to receive an
award. In conducting the reviews, the Fund used permanent staff, as
well as outside experts, to supplement and complement internal staff.
On April 4, 1997, the Fund published revisions to its interim
regulations in the Federal Register that made modest changes to the
review process (see Attachment 5). Sections 1805.800 through 1805.802
of those regulations outline the evaluation and selection process.
Without eliminating any of the evaluation factors, the revised interim
rule restructures the process of evaluating applications described to
expedite the process and improve efficiency.
The current revised interim rule consolidates what had been Tier 2
(financial and organizational capacity) and Tier 3 (other qualitative
criteria) reviews into one set of substantive review criteria. However,
the selection criteria originally set forth on October 19, 1995, are
retained. The current regulations clarify that the criteria to be
considered include the quality of the applicant's business plan and the
extent and nature of the applicant's potential community development
impact that will be catalyzed relative to the amount of assistance to
be provided by the Fund. While ensuring fairness and consistency, the
Fund will seek to implement the evaluation and selection process in a
manner that takes into consideration the unique characteristics of
applicants that vary by organizational type, total asset size, and
stage of organizational development.
UNBIASED AWARD STRUCTURE
Question. What safeguards have the CDFI Fund implemented to ensure
an unbiased grant award system? For example, have any of the reviewers
or panel reviewers for the CDFI program ever been employed by any of
the applicant organizations or their affiliates or ever sought or
maintained client relationships with such organizations? If yes, please
provide details including the names of individuals, organizations and
the dates of the affiliation or the employment.
Answer. The CDFI Fund established a selection process with respect
to all CDFI Program applications that was unbiased, fair, thorough and
rigorous and included safeguards to ensure that no one person possessed
a dispositive influence over which entities were chosen as winners. All
Awardees under the CDFI Program were chosen by a unanimous decision of
a panel composed of five people. The CDFI Fund evaluated factors
including track record and financial strength; capacity, skills and
experience of the management team; quality of the applicant's business
plan; ability to raise non-federal matching funds; and community
development impact.
The CDFI Fund staff and outside contractors were used in the
initial review stage, with each contractor reviewing one or two groups
of applications, with groups defined on the basis of type of
organization (and in some cases, further defined by region of the
country). The tasks for these reviewers during the initial review stage
was to review each application carefully in order to make
recommendations about those applications that were potentially
competitive and therefore should be given further consideration by the
second-stage review panel.
The second-stage review panel reached all of its decisions
unanimously. This review panel made evaluations, performed due
diligence, and unanimously determined which applicants would receive
assistance. The decisions of the second-stage review panel were subject
to the approval of the CDFI Fund Director.
The Fund's Deputy Director, Steve Rohde, was an employee of the
Local Initiatives Support Corporation (LISC), an award recipient, prior
to joining the Fund. Mr. Rohde has not had any financial interest in
LISC since leaving his position with the organization. Like all other
CDFI Program winners, LISC was chosen as a result of a rigorous
selection process in which no one person had dispositive influence. The
review panel that ultimately selected LISC as a winner made a unanimous
decision with respect to LISC and all other winners.
Prior to joining the CDFI Fund, the CDFI Fund Director Kirsten Moy
served as a member of an advisory committee in connection with the New
York activities of the Low Income Housing Fund, a CDFI Program winner.
As a volunteer advisor, Ms. Moy was not compensated for her service on
the committee.
The Deputy Director of the CDFI Fund, in consultation with
individual reviewers, identified actual and potential conflicts of
interest that reviewers had with respect to any applications, and the
Deputy Director made the determination that a particular set of facts
could lead to a conflict and, therefore, prevented an expert from
reviewing a particular application, as follows:
(a) Dan Lopez was a member of the Board of Directors of the Low
Income Housing Fund and was not assigned that application.
(b) James Paquet was on a detail from the State of Michigan to the
CDFI Fund under the Intergovernmental Personnel Act. Mr. Paquet was not
assigned any applications from Michigan. Instead, he was assigned a
group of applications consisting of business loan funds in the
Northeast region.
(c) In the early to mid 1980's, Laura Henze Russell had been
Executive Director of an organization now known as the Local Enterprise
Assistance Fund, based in Boston. Ms. Russell was not assigned the
application of Local Enterprise Assistance Fund. She was assigned a
group of applications consisting of business loan funds from the
Midwest and West regions.
(d) Fredric Cooper formerly worked for The Enterprise Foundation,
which had a relationship with the San Antonio Housing Trust Foundation,
an applicant. Enterprise Foundation was not an applicant. Mr. Cooper
was assigned a group of housing loan funds from the Northeast and
Midwest.
(e) Alan Okagaki had been an employee and subcontractor of
Shorebank Advisory Services and a consultant to Southern Development
Bancorporation. After an initial look at the Albina Community Bancorp
application Mr. Okagaki informed the CDFI Fund that there was
significant material in that application that Mr. Okagaki recognized as
having been previously prepared by Shorebank Advisory Services. He was
excluded from reviewing the applications of Shorebank Corporation,
Douglass Bancorp, Louisville Development Bancorporation, Southern
Development Bancorporation, and Albina because Shorebank Advisory
Services had had a consulting relationship with these institutions.
(f) In the second stage review panel, Paul Pryde, who did not
participate in the initial stage review, recused himself from two
applications, McAuley Institute and Community Bank of the Bay, because
of an appearance of a conflict.
GRANT REVIEWS
Question. Did the CDFI Fund accept revisions to applications from
certain applicants? What rules did the CDFI Fund establish with regard
to revisions to ensure a fair process for all CDFI applicants? If
revisions were permitted for any grant application, please provide the
details of each revision, including all dates and contacts between the
CDFI fund and the applicant?
Answer. The Fund does not accept revisions to applications from any
applicants. The Fund's regulations, at 12 C.F.R. Sec. Sec. 1805.700 and
1806.206, provide that the Fund ``may request clarifying or technical
information'' with respect to any application submitted to the CDFI or
BEA Program, respectively. Consequently, when the Fund determines that
it is appropriate and necessary for its decision making, it requests
clarifying or technical information from applicants.
In addition, the Fund accepts from all applicants supplemental
information that updates previous submitted material or otherwise
informs the Fund of changes in information previously submitted.
Question. Did any reviewer or panel reviewer provide assistance to
any of the applicants or their representatives with respect to the
preparation or revision of any part of an application or for
supplemental information provided to or requested by the CDFI Fund? If
yes, please provide the date and details of each occurrence.
Answer. The Fund or its reviewers did not provide assistance to any
of the applicants or their representatives with respect to the
preparation or revision of any part of an application or for
supplemental information provided to or requested by the Fund. Section
105(c) of the Riegle Community Development and Regulatory Improvement
Act of 1994 (Public Law 103-325) states that
[t]he Fund shall provide an outreach program to identify and
provide information to potential applicants and may provide
technical assistance to potential applicants, but shall not
assist in the preparation of any application.
Accordingly, the Fund provided an outreach program to applicants.
Such outreach was accomplished through workshops, publications and
other means and included general information about the Fund's programs
and their requirements. The Fund provided outreach services to all
interested parties on an equal basis.
FEDERAL REGISTER
Question. On March 18, 1996, the CDFI Fund published in the Federal
Register a waiver of the deadline for receipt of an application under
the CDFI and BEA programs for certain applications. What was the nature
and reason for this waiver? Please provide a detailed list describing
all application materials and information which were received by the
CDFI Fund between the original deadline of January 29, 1996 at 4:00
p.m. and March 13, 1996.
Answer. On March 18, 1996, the Fund published a waiver in the
Federal Register of its January 29, 1996, 4 p.m., application deadline
for the CDFI and BEA Programs. The Fund determined it would accept an
application if: (1) the application was actually received by the Fund
on January 29, 1996; (2) the application was mailed with a postmark
date on or before January 29, 1996; or (3) the application was
delivered to a professional courier service on or before January 29,
1996. This waiver was based on the determination that such waiver
promoted the achievement of the purposes of the CDFI Program and the
BEA Program and their underlying statutes. Several factors contributed
to the Fund's determination to grant this waiver. First, in the first
year of implementation of these programs, it was determined to be in
the Fund's interest to seek the broadest possible participation.
Second, preparing an application required an extensive amount of work
which, without the waiver, might have gone to waste merely because of a
technical failure in the mail or delivery process. Third, given the
fact that these programs are new, and some of the applicants had never
previously applied to the Federal government for funding, there
appeared to have been some confusion about the precise requirements for
delivery of an application in a timely fashion. Finally, the effect of
the requirement that the Fund be in receipt of an application by a
specified time appeared to have had a disproportionate effect on
applications from geographically remote places. Thus, strict
enforcement of the deadline could have hindered the Fund in achieving
its geographic diversity objectives. See Attachment 6 for a list of
items accepted between January 29, 1996, 4 p.m., and March 13, 1996.
FUTURE FUNDING
Question. When will the CDFI Fund announce the next round of
funding? You appear to be 4 to 5 months behind the schedule of your
first round.
Answer. On March 7, 1997, the Fund published a Notice of Funds
Availability for the second round of the BEA Program (see Attachment
1b). On April 4, 1997, the Fund published Notices of Funds Availability
in connection with the CDFI Program (see Attachments 1a).
financial safety and soundness requirements
Question. How will CDFI entities be regulated to ensure that CDFI
funds are being used appropriately and that these entities will not
pose a financial risk to the American taxpayer. What happens to a
financially troubled CDFI?
Answer. CDFI Program awardees are required to comply with numerous
federal requirements and reporting mandates that are intended to
protect the taxpayers' interest. In the event that an awardee does not
comply with the aforementioned requirements, the CDFI Fund has a range
of remedies that it may employ. These mandates or requirements include:
(1) Compliance with government requirements including all Federal,
state and local laws, regulations, ordinances, applicable Office of
Management and Budget Circulars, and applicable Executive Orders;
(2) Mandatory reporting to the U.S. Department of the Treasury
Inspector General of the existence or apparent existence of fraud,
waste or abuse of Federal assistance;
(3) Provision of financial and activity reports, records,
statements, and documents as may be requested to ensure compliance with
the assistance agreement. An Awardee is required to provide full and
free access to its officers and facilities and all books, documents,
records, and financial statements relating to the use of assistance;
(4) Compliance with all record retention requirements set forth on
OMB Circular A-110 and, pursuant to such Circular, retention of all
financial records, supporting documents, and statistical records
pertinent to the assistance;
(5) Maintenance of records necessary to disclose the manner in
which assistance provided is used and demonstrate compliance with the
requirements of the CDFI Program regulations and the assistance
agreement;
(6) Submission of quarterly reports after the end of each fiscal
quarter in a form that is prescribed by the CDFI Fund in the assistance
agreement;
(7) Submission of an annual report that includes, among other
things, information regarding the manner in which assistance or
matching funds were used, financial condition and financial
performance, activities and initiatives engaged in which enhance the
awardee's ability to promote community development, the awardee's
strategy for achieving its performance goals or enhancing its financial
performance, and the ethnic, racial or gender composition of its
borrowers or investees;
(8) Compliance with the Equal Credit Opportunity Act, where
applicable; and
(9) Compliance with restrictions on certain insider activities.
DISPLACING BANKS
Question. There has been some concern that CDFI's could indirectly
discourage more traditional financial institutions may not feel welcome
or may conclude that their presence is not needed. Couldn't this result
in isolating distressed communities even more from access to mainstream
financial resources and opportunities for economic revitalization? How
are you monitoring this concern?
Answer. The roles of CDFI's and traditional financial institutions
are mutually reinforcing. CDFI's are not a substitute--and should not
be considered a replacement--for traditional financial institutions.
CDFI's complement the strong and active role that banks and thrifts
should play in providing credit within distressed communities. CDFI's
are specialized, private financial institutions that fill niches that
traditional financial institutions cannot fill--or will not fill on
their own. The credit needs in distressed communities are often unique
and require innovative solutions. CDFI's are distinct from traditional
financial institutions because they have developed specialized
expertise in delivering certain types of credit--such as micro loans,
financing day care or public health care facilities, or financing
housing for people with AIDS or other special needs. In many
communities, CDFI's have pioneered innovative new products that were
later adopted by local banks or developed partnerships with banks to
address unique local needs. For example, many microenterprise programs
work with low income entrepreneurs that have credit problems or that
don't meet standardized underwriting criteria. In these cases, the
micro enterprise programs work with these individuals to build their
business skills and history as credit-worthy business borrowers. After
the borrowers have developed a track record, they are often
``graduated'' to become borrowers of traditional financial
institutions. Many traditional financial institutions see their
partnerships with CDFI's as a vehicle to reach into markets that they
could not otherwise reach. In fact, the CDFI Fund's Bank Enterprise
Award Program recognizes the importance of these relationships and is
designed to foster partnerships between CDFI's, as well as promote
increasing lending and service provision within very distressed
neighborhoods. (Attachment 7 describes the impact and activities
generated by the BEA Program.) In summary, CDFI's help to integrate--
not isolate--distressed communities into the economic mainstream.
draining of existing economic development resources
Question. There is often a concern that there is only so many
dollars in the private market available for economic development and
affordable housing resource. Since there are such expectations for the
CDFI program to leverage significant non-federal funds, has there been
any review of where this capital is coming from, and whether it is
likely to be drained from other funding sources traditionally used for
community development and housing projects?
Answer. The vast majority of matching funds received by assisted
CDFI's are from private sector sources of capital. Of the 31
organizations selected to receive CDFI assistance, 72 percent derived
all of their matching funds from private sources (e.g. banks,
corporations, foundations, individuals) and 19 percent derived between
99 percent and 70 percent of their matching funds from private sources.
Only three awardees raised less than 70 percent of their matching
monies from private sources.
BANK ENTERPRISE ACT
Question. The Bank Enterprise Act (BEA) has been implemented as a
separate account under the CDFI Fund. Under BEA, traditional financial
institutions are encouraged through BEA awards to invest, lend and
provide other financial services in distressed communities. Isn't it
better to encourage through the BEA the availability of traditional
financial services and credit in distressed communities than to
establish a new and separate banking system for these communities?
Answer. CDFI's and traditional financial institutions both play
complementary and important roles in serving the credit and financial
service needs of distressed communities. In fact, the CDFI Program and
BEA Program were crafted by Congress to work together. Specifically,
the CDFI Program requires award recipients to obtain matching funds
from non-Federal sources and permits monies committed by banks and
thrifts under the BEA Program to assist in meeting that match. In
addition, under the BEA Program, banks and thrifts that provide support
to CDFI's are given priority consideration for BEA funding. Hence, the
CDFI Program and the BEA Program are both critically important to
improving access to credit and promoting revitalization and deserve
support. Please also see answer to Question 12.
STAFFING NEEDS
Question. Please describe your staffing needs for administering the
CDFI program. Since there are so many types of entities and activities
involved, how will you ensure program integrity?
Answer. The CDFI Fund is in the process of adding staff in certain
critical areas to ensure that key functions are and/or will be
adequately covered. Among these critical areas are program operations,
finance and administration, and awards management. The CDFI Fund is
seeking to hire an individual to oversee these areas as its Deputy
Director for Operations/Chief Financial Officer. In addition, the CDFI
Fund plans to hire, among other professional and technical staff, the
following in each of these areas: program operations--a program manager
who will focus exclusively on the CDFI Program and possibly someone to
manage the CDFI Fund's training and technical assistance initiatives;
finance and administration--a comptroller as well as a staff
accountant; awards management--an award administrator and possibly a
portfolio analyst.
GOVERNMENT PERFORMANCE AND RESULTS ACT
Question. What are you doing to comply with the Government
Performance and Results Act? What is your timetable to develop your
goals, strategic plan, performance measures and outcomes?
Answer. In the implementation of GPRA, the CDFI Fund is ahead of
schedule for compliance. Although the first annual performance plan is
not due until fiscal year 1999, the CDFI Fund submitted its first plan
as part of the fiscal year 1998 budget justification which included
performance goals, measures and outcomes--a year ahead of schedule. It
is the policy of the Department of the Treasury to integrate the annual
performance plan with the annual budget justification.
In regards to the 5-year strategic plan, the CDFI Fund intends to
have a final draft of the 5-year strategic plan in the coming weeks and
looks forward to consultations with Congress and other stakeholders in
developing a final plan. The CDFI Fund plans to submit its 5-year
strategic plan to the Department and OMB in the near future. The CDFI
Fund looks forward to utilizing this important tool to measure the
impact and effectiveness of its programs.
CRITERIA FOR SELECTING CDFI'S
Question. The testimony indicates that a wide variety of CDFI's--
new, old, rural, urban--have been awarded assistance under this
program. What were the most critical criteria used for selecting CDFI's
for assistance? What is the most common weakness in an application for
denying CDFI assistance?
Answer. The key evaluation criteria used for selecting CDFI's for
assistance include track record and financial strength; capacity,
skills, and experience of the management team; quality of the
applicant's business plan; ability to raise non-Federal matching funds;
and community development impact. Attachment 8 discusses factors that
tend to separate successful from unsuccessful applicants in the first
funding round. Through the review process, the CDFI Fund found a wide
variety of institutions working to serve the community development
finance needs of their communities. These institutions are diverse in
type (banks, credit unions, non-profit loan funds, microenterprise loan
funds, venture capital organizations, lending consortia, and others),
the types of communities they serve (urban, rural, Native American),
the types of products and services they provide (small business loans
and equity investments, housing loans, community facility loans,
training and technical assistance, and others), and, finally, their
strategies for promoting economic opportunity and revitalization.
What these organizations have in common, however, is a deep
commitment to serve their communities by building stronger local
markets and catalyzing new economic activity; leveraging resources of
private, public and non-profit sectors; building linkages with the
financial services industry; and developing viable, self-sustaining
financial institutions.
Common problems shared by these institutions include: (1)
difficulties in raising investment capital to support their activities
because, in part, their returns may not be as high as some other
private sector investment opportunities; and (2) the need to develop
further their institutional capacity to expand their activities within
the needy communities they serve. In evaluating applicants that were
best poised to make the greatest community impact, the CDFI Fund
observed several critical factors, including good management; the
importance of strategic assessment and planning in charting an
institution's activities; having sufficient net worth and a capital
structure appropriate to the nature of the activities the institution
is engaged in; the existence of well-functioning internal financial
systems; and a solid portfolio review system for managing risk.
______
Attachment 7
profiles of the first round awardees under the bank enterprise award
program
community impact of the bank enterprise award program
The Bank Enterprise Award Program (the ``BEA Program'') was
designed to provide incentives to insured depository institutions
(banks and thrifts) to invest in community development financial
institutions (CDFI's) and to increase their lending and provision of
financial services in economically distressed communities throughout
the nation.
Awards are determined based on the increase of eligible activities
between two designated six-month evaluation periods. To ensure
appropriate use of limited Federal resources, awards are disbursed only
after the activities proposed by the institutions have been completed.
Collectively, the bank and thrift awardees have provided nearly $66
million in support to CDFI's and $60 million in new lending and
financial services in economically distressed communities. The
activities for which each of the institutions received an award are
described in the following profiles.
There are no statutory or regulatory restrictions or requirements
on institutions with respect to the use of their BEA award dollars
after the completion of proposed activities. The CDFI Fund is happy to
report that the vast majority of the institutions receiving awards in
the first round have indicated that they plan to use their awards to
expand their existing community development work. These activities
would enhance the impact of the BEA Program and are described in the
profiles.
Bank of America Community Development Bank, Walnut Creek, California
Award: $1,585,510
Rewarded activities.--Bank of America Community Development Bank
was awarded $1,585,510 for increasing its commercial real estate,
multi-family housing, and business lending in distressed communities
across California. The bank made nearly $25 million in loans in
targeted neighborhoods. Bank of America Community Development Bank
projects that its activities will generate more than 185 units of
affordable housing and 300 jobs.
Post award activity.--Bank of America Community Development Bank,
together with Bank of America, F.S.B., has pledged to invest its entire
combined award back into the community. $1.1 million of their award
money has been used to establish the Bank of America Leadership
Academy, a nine-month program that provides training for senior
management of community development organizations. The Leadership
Academy is funded jointly by Bank of America Community Development
Bank, Bank of America, F.S.B., and the Local Initiatives Support
Corporation (a certified CDFI and a 1996 CDFI Program awardee); it is
conducted by the Development Training Institute. The Academy is
expected to run for three years and train 105 leaders of community
organizations across the nation. An additional 20 percent of the
combined awards will go to the Low Income Housing Fund, a certified
CDFI and a 1996 CDFI Program awardee which provides loans for very low-
income housing development across the country. Bank of America
Community Development Bank is currently considering the designation of
the balance of its award.
Bank of America, F.S.B. Portland, Oregon
Award: $521,735
Rewarded activities.--Bank of America, F.S.B. was awarded $521,735
for increasing its commercial real estate and business lending in
targeted neighborhoods in Denver, Las Vegas, and San Antonio. The Bank
made nearly $6.2 million in loans in needy communities. Bank of
America, F.S.B. projects that this activity will create or retain more
than 150 jobs.
Post award activity.--Bank of America, F.S.B., together with Bank
of America Community Development Bank, has pledged to invest its entire
combined award back into the community. $1.1 million of their award
money has been used to establish the Bank of America Leadership
Academy, a nine-month program that provides training for senior
management of community development organizations. The Leadership
Academy is funded jointly by Bank of America Community Development
Bank, Bank of America, F.S.B., and the Local Initiatives Support
Corporation, a certified CDFI and a 1996 CDFI Program awardee; it is
conducted by the Development Training Institute. The Academy is
expected to run for three years and train 105 leaders of community
organizations across the nation. An additional 20 percent of the
combined awards will go to the Low Income Housing Fund, a certified
CDFI and a 1996 CDFI Program awardee which provides loans for very low-
income housing development across the country. Bank of America, F.S.B.
is currently considering the designation of the balance of its award.
Bank of America, Illinois, Chicago, Illinois
Award: $514,815
Rewarded activities.--Bank of America, Illinois was awarded
$514,815 for increasing its affordable housing and small business
lending activity in distressed communities on the near north, west and
south sides of Chicago. The bank also made loans of nearly $3.7 million
to Neighborhood Housing Services (NHS) of Chicago, Community Investment
Corporation (CIC), and the Illinois Facilities Fund (IFF), all
certified CDFI's. The bank's loan to NHS will be used to finance home
improvement loans to low- and moderate-income homeowners in distressed
neighborhoods. The loan to CIC will be used to finance multi-family
apartment buildings in low- to moderate-income communities. The bank's
loan to IFF will be used to support mortgages to non-profit social
service agencies.
Post award activity.--Bank of America, Illinois is using $150,000
of its award to make grants to low- and moderate-income home-buyers for
downpayment assistance. In addition, the bank made $155,000 in grants
to NHS, CIC, and IFF, and the Southland Community Development
Corporation, a new loan fund in the Chicago area. The bank has also
made available a total of $75,000 in grants to smaller community
organizations--in particular, those focused on affordable housing,
economic development, and education of disadvantaged youth. The bank
will also make available grants up to $500 to community organizations
nominated by bank employees.
Bank of Louisville, Louisville, Kentucky
Award: $15,000
Rewarded activities.--Bank of Louisville was awarded $15,000 for
making an equity investment of $100,000 in the Louisville Development
Bancorp. The Louisville Development Bancorp is a newly-established
community development bank corporation and a certified CDFI that seeks
to revitalize the Louisville Enterprise Community and surrounding
neighborhoods.
Post award activity.--Bank of Louisville plans to use its award to
benefit the Louisville Development Bancorp in the form of a grant to
its non-profit subsidiary.
Central Bank of Kansas City, Kansas City, Missouri
Award: $99,869
Rewarded activities.--Central Bank of Kansas City was awarded
$99,869 for increasing its deposit-taking activities and consumer and
commercial real estate, housing, and business loans in distressed
neighborhoods. During the first six months of 1996, this bank provided
more than $8.3 million in loans and services. In addition to
facilitating neighborhood redevelopment through its single- and multi-
family housing activities, the bank made a significant loan to help a
major manufacturer and employer remain in the community.
Post award activity.--Central Bank of Kansas City is using its
award to finance revitalization efforts in its neighborhood, which
includes the distressed community designated in its BEA application.
These efforts are focused on home improvement and rehabilitation
lending. The award is, in part, being used to finance the
rehabilitation of a former drug house in the neighborhood. The bank's
$70,000 loan to a non-profit group at a concessionary interest rate
accounts for 70 percent of the financing for this project. The bank
expects to use the returns from this loan for other community
development activities.
The Chase Manhattan Bank, New York, New York
Award: $2,699,625
Rewarded activities.--The Chase Manhattan Bank was awarded
$2,699,625 for making nearly $18 million in investments in 14
organizations that finance community development. The organizations
receiving assistance are Low-lncome Housing Fund, Greater Jamaica Local
Development Company, Community Loan Fund of New Jersey, Capital
District Community Loan Fund, Nonprofit Facilities Fund, Leviticus
25:23 Alternative Fund, Bethex Federal Credit Union, Lower East Side
People's Federal Credit Union, New Community Federal Credit Union,
Homesteaders Federal Credit Union, BHA Residents Community Development
Federal Credit Union, Central Brooklyn Federal Credit Union, Parodneck
Foundation, and Enterprise Social Investment Corporation.
Post award activity.--The Chase Manhattan Bank is using its award
to make grants to CDFI's in its service area through its CDFI Support
Program. These grants can be used for capital and operating expenses
and to serve as matching funds for CDFI's applying to the CDFI Program.
Citibank F.S.B. California Marketplace, San Francisco, California
Award: $412,270
Rewarded activities.--Citibank F.S.B. California Marketplace was
awarded $412,270 for increasing its multi-family housing lending in a
distressed neighborhood by more than $5.1 million. Citibank's efforts
focused on financing two multi-family projects in Los Angeles developed
by FAME Housing Development Corporation, a non-profit affiliate of the
First African Methodist Church. Citibank also provided technical
assistance to FAME Housing in structuring these transactions.
Post award activity.--Citibank F.S.B. has established a loan pool
with its award. This pool will loan funds at concessionary terms to
community organizations for initiatives such as affordable housing and
childcare centers in low-income communities.
Citibank N.A., New York, New York
Award: $227,250
Rewarded activities.--Citibank N.A. was awarded $227,250 for
providing investments totaling $1,515,000 to 13 organizations serving
distressed communities throughout the United States. The organizations
receiving investments are ACCION New York, ACCION Texas, Chicago
Community Loan Fund, FINCA, Florida Community Loan Fund, Illinois
Facilities Fund, Institute for Community Economics, Leviticus 25:23
Alternative Fund, Low-Income Housing Fund, McAuley Institute, New
Jersey Community Loan Fund, Nonprofit Facilities Fund, Northern
California Community Loan Fund, Washington Area Community Investment
Fund, and the National Federation of Community Development Credit
Unions.
Post award activity.--Citibank N.A. is using its award for
activities that help build the capacity and skills of CDFI's. Among
these activities is a grant to the National Association of Community
Development Loan Funds to launch a series of courses for CDFI staff and
board members.
City National Bank of New Jersey, Newark, New Jersey
Award: $162,065
Rewarded activities.--City National Bank of New Jersey was awarded
$162,065 for increasing its lending commitments in distressed
neighborhoods by nearly $2 million. In the first six months of 1996,
the bank committed loans totaling $3,367,000 to consumers and for
commercial real estate, single-family housing, multi-family housing,
and small businesses. City National Bank of New Jersey is a minority-
owned national bank.
Post award activity.--City National Bank of New Jersey has not yet
determined the use of its award. Currently, City National Bank of New
Jersey is applying in the second round of the BEA Program for its
increased loans for the purchase and renovation of one- to four-family
homes.
Coast Federal Bank, West Hills, California
Award: $149,709
Rewarded activities.--Coast Federal Bank was awarded $149,709 for
providing loans, grants, and technical assistance to the Clearinghouse
CDFI and Los Angeles Neighborhood Housing Services. These CDFI's both
promote the development of affordable housing in distressed
neighborhoods throughout Southern California.
Post award activity.--Coast Federal Bank is using its award as a
reserve fund for affordable housing loans and is further supporting
affordable housing in Southern California through its close
relationships with the Clearinghouse CDFI and Los Angeles Neighborhood
Housing Services. Bank officials serve on the governing board of each
of the CDFI's; the bank has helped in fundraising and has made
operating grants and in-kind contributions to each. Additionally, the
bank is encouraging other financial institutions to support CDFI's by
disseminating information about the BEA Program.
Cole Taylor Bank, Wheeling, Illinois
Award: $115,500
Rewarded activities.--Cole Taylor Bank was awarded $115,500 for
making $1,050,000 in loans to the Illinois Facilities Fund (IFF) and
Chicago Community Loan Fund (CCLF), both certified CDFI's. IFF makes
real estate loans to non-profit social service agencies. The proceeds
from Cole Taylor Bank's loan to IFF will be used to finance projects in
Chicago's near west and lower west sides and Humbolt Park. CCLF
finances affordable housing and economic development projects.
Post award activity.--Cole Taylor Bank's award has acted as an
encouragement of further community development activities. The bank is
currently contributing toward Neighborhood Housing Services of
Chicago's goal of opening 20 new offices in the city. Specifically,
Cole Taylor Bank is supporting the office in the Back of the Yards
neighborhood by providing operational support, participating in a
revolving loan fund for flexible and low-cost home improvement
financing, and developing a new affordable homes construction project.
Community Capital Bank, Brooklyn, New York
Award: $215,461
Rewarded activities.--Community Capital Bank provides business,
housing, and commercial loans to projects in distressed communities
throughout New York City. In the first six months of 1996, Community
Capital Bank provided nearly $2.6 million in loans for small business
development and affordable housing construction and support for
entrepreneurial development initiatives among public housing residents.
Community Capital Bank was awarded $215,461 for increasing its lending
activities during this period.
Post award activity.--Community Capital Bank, a certified CDFI, is
using its award to increase its capacity to make loans in distressed
communities. Activities toward this end include increasing loan staff
and improving accounting controls with the assistance of an outside
consultant. In addition, the award has helped the bank maintain its
preferential interest rates on loans made to non-profit organizations.
First National Bank of Chicago, Chicago, Illinois
Award: $322,230
Rewarded activities.--First National Bank of Chicago was awarded
$322,230 for making a $1,998,200 investment in The Shorebank
Corporation (Shorebank) and a $150,000 capital grant to Neighborhood
Housing Services (NHS) of Chicago, both certified CDFI's. Shorebank,
based in Chicago's south side, is a bank holding company that serves
numerous distressed communities. First National's investment enabled
Shorebank to acquire Indecorp and expand its service area to nine new
neighborhoods in the south and mid-south sides of Chicago. The grant to
NHS of Chicago will serve as a capital infusion for its revolving loan
fund to support home improvement and rehabilitation loans and loans to
people unable to obtain traditional mortgage financing.
Post award activity.--First National Bank of Chicago will use
$150,000 of its award to make ``equity-equivalent'' investments in the
Chicago Community Loan Fund and the Chicago Association of Neighborhood
Development Organizations' Self-Employment Loan Fund, both certified
CDFI's. The bank expects that these investments will leverage an
additional $300,000 for the community groups.
First Union National Bank of D.C., Washington, District of Columbia
Award: $274,550
Rewarded activities.--First Union National Bank of D.C. (First
Union) was awarded $274,550 for increasing its multi-family housing
lending in several distressed neighborhoods. In partnership with local
community development corporations, the bank made loans totaling more
than $5.6 million, including financing a 177-unit apartment building.
Post award activity.--First Union plans to use a portion of its
award to make a loan to a local CDFI. This loan will be unusual for
First Union but, because of the availability of the BEA award, will be
feasible at an interest rate favorable to the CDFI. Through the CDFI,
loan funds will be made available to other community groups for
predevelopment costs.
Fullerton Savings and Loan Association, Fullerton, California
Award: $39,600
Rewarded activities.--Fullerton Savings and Loan Association
(Fullerton) was awarded $39,600 for increasing its single-family and
multi-family housing lending in three distressed communities. Fullerton
made a total of $520,000 in loans to neighborhoods located in Santa Ana
and elsewhere in Orange County.
Post award activity.--Fullerton used its award to make a grant to a
local housing development non-profit organization. The grant will be
used for the operating costs of developing affordable single-family
infill housing in Anaheim. It will also be used, if needed, to provide
second mortgages for the new housing.
Gateway National Bank of St. Louis, St. Louis, Missouri
Award: $26,038
Rewarded activities.--Gateway National Bank, the only minority-
owned bank to be incorporated and operated in the state of Missouri,
was awarded $78,116 for increasing its deposit-taking and lending
activities during the first six months of 1996. Gateway National Bank
is located and serves neighborhoods in the northern portion of St.
Louis.
Post award activity.--Gateway National Bank has used its award to
expand its capital base to meet community needs, including business and
housing lending.
Great Financial Bank, Louisville, Kentucky
Award: $22,500
Rewarded activities.--Great Financial Bank was awarded $22,500 for
making an equity investment of $150,000 in the Louisville Development
Bancorp. The Louisville Development Bancorp is a newly established
community development bank corporation that seeks to revitalize the
Louisville Enterprise Community and surrounding neighborhoods.
Post award activity.--Great Financial Bank has used its award to
benefit the Louisville Development Bancorp in the form of a grant to
its non-profit subsidiary.
Hibernia National Bank, New Orleans, Louisiana
Award: $5,875
Rewarded activities.--In late 1995, Hibernia National Bank
(Hibernia) adopted two neighborhoods as part of the City of New
Orleans' Impact Neighborhood Program. Hibernia was awarded $5,875 for
increasing its small business lending, loans to non-profit
organizations engaging in affordable housing activities, and technical
assistance activities in these neighborhoods during the first six
months of 1996. As part of this effort, Hibernia provided financial
support to three non-profit organizations that conduct home-buyer
training programs for residents of these targeted neighborhoods.
Post award activity.--Hibernia has made its award available to five
community development corporations to use as matching funds for a grant
program sponsored by the Federal Home Loan Bank of Dallas. The $500 to
$2,200 grants made by Hibernia will be leveraged up to a total of
$29,900 for non-profit organizations in Baton Rouge, New Orleans, and
Shreveport focused on affordable housing and homebuyer training.
Household Bank, f.s.b., Wood Dale, Illinois
Award: $88,090
Rewarded activities.--Household Bank, f.s.b. was awarded $88,090
for making a $588,000 investment in Sable Bancshares, a certified CDFI.
The investment enabled Sable Bancshares to acquire the Community Bank
of Lawndale, an African American-owned bank which serves distressed
neighborhoods in Chicago, for the purpose of converting it into a
community development bank. Sable Bancshares has also established a
subsidiary, REG Community Development Corporation, to promote housing
and business development.
Post award activity.--Household Bank, f.s.b. plans to use its award
for community development purposes. The use of the award is currently
being determined through a strategic planning process.
Key Bank of Maine, Portland, Maine
Award: $37,500
Rewarded activities.--Key Bank of Maine (Key Bank) was awarded
$37,500 for making a $250,000 investment in Coastal Ventures Limited
Partnership (CVLP), a subsidiary of Coastal Enterprises, Inc., a
certified CDFI. The bank's investment will create jobs by providing
venture capital to small businesses for start-up and expansion.
Post award activity.--Key Bank plans to use its entire award for
community development purposes. Part of the award is being used to
support a Small Business Information Center in Lewiston, Maine in
partnership with the U.S. Small Business Administration. An additional
part is being used to capitalize an affordable housing loan pool in
conjunction with other lenders.
National City Bank of Columbus, Columbus, Ohio
Award: $275,000
Rewarded activities.--National City Bank of Columbus (National
City) was awarded $275,000 for providing a $2.5 million line of credit
to the Columbus Growth Fund, a certified CDFI, to be used to provide
gap financing for businesses. This financing will enable businesses to
expand and create jobs for residents of targeted neighborhoods.
National City was the lead bank in a partnership with four other
financial institutions to establish the Columbus Growth Fund. The City
of Columbus is also supporting the effort by capitalizing a loan loss
reserve for the Columbus Growth Fund.
Post award activity.--National City has used its award to make a
grant to the Columbus Growth Fund. The grant serves as additional
equity for the Columbus Growth Fund, allowing it to leverage additional
funds in the form of bank loans.
National City Bank of Kentucky, Louisville, Kentucky
Award: $37,500
Rewarded activities.--National City Bank of Kentucky was awarded
$37,500 for making an equity investment of $250,000 in the Louisville
Development Bancorp, a certified CDFI. The Louisville Development
Bancorp is a newly established community development bank corporation
that seeks to revitalize the Louisville Enterprise Community and
surrounding neighborhoods.
Post award activity.--National City Bank of Kentucky has used its
award to benefit the Louisville Development Bancorp in the form of a
grant to its non-profit subsidiary.
Nationsbank, N.A., Charlotte, North Carolina
Award: $1,614,690
Rewarded activities.--Nationsbank, N.A. was awarded $1,614,690 for
making nearly $10.5 million in investments in the National Community
Investment Fund (NCIF) and the Enterprise Social Investment Corporation
(ESIC) and a $420,000 loan to the Low-income Housing Fund (LIHF). NCIF
will use its support to invest in community development banks. The ESIC
investment will expand and improve employment opportunities by
encouraging investments in businesses that employ residents of the
Baltimore Empowerment Zone. LIHF, a certified CDFI funded in the first
round of the CDFI Program, will use its loan proceeds to finance non-
profit sponsors of affordable housing.
Post award activity.--Nationsbank, N.A. is using its award to
expand its existing community development programs throughout the
franchise in 16 states and the District of Columbia. These activities
include using funds to purchase and demolish a low-rise apartment
building in Atlanta's Martin Luther King Historic District so that
affordable, single-family homes can be constructed to complete the
revitalization of the block. It will also be used to establish
community development activities in new markets including St. Louis,
Missouri and Tampa/St. Petersburg, Florida and to subsidize below-
market rate lending to CDFI's.
Nationsbank, N.A. (South), Atlanta, Georgia
Award: $1,199,275
Rewarded activities.--Nationsbank, N.A. (South) was awarded
$1,199,275 for making $7.8 million in investments in the National
Community Investment Fund (NCIF) and the Enterprise Social Investment
Corporation (ESIC) and a $312,000 loan to the Low-Income Housing Fund
(LIHF). NCIF will use its support to invest in community development
banks. The ESIC investment will expand and improve employment
opportunities through encouraging investments in businesses that employ
residents of the Baltimore Empowerment Zone. LIHF, a certified CDFI
funded in the first round of the CDFI Program, will use its loan
proceeds to finance non-profit sponsors of affordable housing.
Post award activity.--Nationsbank, N.A. (South) is using its award
to expand its existing community development programs throughout the
franchise in 16 states and the District of Columbia. These activities
include using funds to purchase and demolish a low-rise apartment
building in Atlanta's Martin Luther King Historic District so that
affordable, single-family homes can be constructed to complete the
revitalization of the block. It will also be used to establish
community development activities in new markets including St. Louis,
Missouri and Tampa/St. Petersburg, Florida and to subsidize below-
market rate lending to CDFI's.
Nationsbank of Texas, N.A., Dallas, Texas
Award: $1,036,035
Rewarded activities.--Nationsbank of Texas, N.A. was awarded
$1,036,035 for making $6.7 million in investments to the National
Community Investment Fund (NCIF) and the Enterprise Social Investment
Corporation (ESIC) and a $270,000 loan to the Low-Income Housing Fund
(LIHF). NCIF will use its support to invest in community development
banks. The ESIC investment will expand and improve employment
opportunities through encouraging investments in businesses that employ
residents of the Baltimore Empowerment Zone. LIHF, a certified CDFI
funded in the first round of the CDFI Program, will use its loan
proceeds to finance non-profit sponsors of affordable housing.
Post award activity.--Nationsbank of Texas, N.A. is using its award
to expand its existing community development programs throughout the
franchise in 16 states and the District of Columbia. These activities
include using funds to purchase and demolish a low-rise apartment
building in Atlanta's Martin Luther King Historic District so that
affordable, single-family homes can be constructed to complete the
revitalization of the block. It will also be used to establish
community development activities in new markets including St. Louis,
Missouri and Tampa/St. Petersburg, Florida and to subsidize below-
market rate lending to CDFI's.
North Shore Bank, Brookfield, Wisconsin
Award: $6,036
Rewarded activities.--North Shore Bank was awarded $6,036 for
increasing its single-family housing acquisition and rehabilitation
loans in distressed neighborhoods in central Milwaukee. During the
first six months of 1996, the bank made a total of $373,000 in loans
for activities undertaken as part of the Milwaukee Affordable Housing
Initiative.
Post award activity.--North Shore Bank plans to use its award to
assist low-income first-time home-buyers in its distressed community.
It will do this through grants to help with downpayments and closing
costs or by helping new homeowners purchase needed equipment to
maintain their homes. Additionally, the bank has continued its support
of the Milwaukee Affordable Housing Initiative and has shown further
commitment to the central city through the completion of a new, full-
service office on King Drive.
Northern Trust Company, Chicago, Illinois
Award: $88,090
Rewarded activities.--Northern Trust Company was awarded $93,713
for making a $624,750 investment in Sable Bancshares. The investment by
Northern Trust Company enabled Sable Bancshares to acquire the
Community Bank of Lawndale, an African American-owned bank which serves
distressed neighborhoods in Chicago, for the purpose of converting it
into a community development bank. Sable Bancshares has also
established a subsidiary, REG Community Development Corporation, to
promote housing and business development.
Post award activity.--Northern Trust Company has committed its
award as part of a package of support to Neighborhood Housing Services
of Chicago, a certified CDFI, to open a new office in the Auburn-
Gresham neighborhood. Northern Trust Company's support includes a $3.5
million loan, $1.5 million in subordinated debt, and a three-year
$150,000 grant to help meet the operating costs of the office. The new
office will focus on renovating single-family homes in this
neighborhood in transition.
Northwest Bank, Oklahoma City, Oklahoma
Award: $3,918
Rewarded activities.--Northwest Bank was awarded $3,918 for
providing operating grants totaling $35,618 to Neighborhood Housing
Services (NHS) of Oklahoma City. NHS of Oklahoma City, a certified
CDFI, promotes homeownership in targeted neighborhoods through
assistance with downpayments, closing costs, and other administrative
expenses.
Post award activity.--Northwest Bank is using its award to fund
community development activities through its Near Northwest Community
Development Corporation. The bank participates in community development
activities in Oklahoma City through partnerships with the city and
local organizations. The bank is also lending in the Paseo area, a
historic district with a large number of small multi-family housing
units.
Norwest Bank, New Mexico, Albuquerque, New Mexico
Award: $5,750
Rewarded activities.--Norwest Bank, New Mexico was awarded $5,750
for making a $50,000 loan and a $5,000 capital grant to the New Mexico
Community Development Loan Fund (NMCDLF). Through its partnership with
the bank, NMCDLF will make loans to small businesses and
microentrepreneurs.
Post award activity.--Norwest Bank has provided its award dollars
as a grant to NMCDLF for small and micro-business lending.
PNC Bank, Kentucky, Inc., Louisville, Kentucky
Award: $75,000
Rewarded activities.--PNC Bank, Kentucky, Inc. was awarded $75,000
for making an equity investment of $500,000 in the Louisville
Development Bancorp. The Louisville Development Bancorp, a certified
CDFI, is a newly established community development bank corporation
that seeks to revitalize the Louisville Enterprise Community and
surrounding neighborhoods.
Post award activity.--PNC Bank, Kentucky, Inc. donated its award to
the LCDB Enterprise Group, a non-profit affiliate of the Louisville
Community Development Bancorp. The grant will help fund a business
center to assist new and emerging small businesses in western
Louisville.
Regency Savings Bank, F.S.B., Naperville, Illinois
Award: $77,250
Rewarded activities.--Regency Savings Bank, F.S.B. was awarded
$77,250 for making a $515,000 equity investment in The Shorebank
Corporation (Shorebank). Shorebank is a bank holding company, a
certified CDFI, that serves numerous distressed communities and is
based on the south side of Chicago. The bank's investment enabled
Shorebank to acquire Indecorp and expand its service area to nine new
neighborhoods in the south and mid-south sides of Chicago.
Post award activity.--Regency Savings Bank, F.S.B. has used its
award to partially offset its equity investment in Shorebank.
Republic National Bank of New York, New York, New York
Award: $519,659
Rewarded activities.--Republic National Bank of New York (Republic)
was awarded $519,659 for providing loans and operating grants totaling
$5,196,592 to 21 community development organizations. The institutions
assisted include Bethex Federal Credit Union, Central Brooklyn Federal
Credit Union, Corporation for Supportive Housing, Greater Jamaica Local
Development Company, Homesteaders Federal Credit Union, Leviticus 25:23
Alternative Fund, Local Initiatives Support Corporation, Lower East
Side Peoples Federal Credit Union, Nonprofit Facilities Fund, Parodneck
Foundation, Union Settlement Federal Credit Union, Washington Heights
Inwood Development Corporation, Enterprise Foundation, and Upper
Manhattan Community Development Credit Union.
Post award activity.--Republic will use its award to leverage an
additional $5 million in economic development and small business
lending in low- and moderate-income communities. In this way, its BEA
award will be leveraged nearly 10 times over in the form of new
lending. The award dollars will be used to provide below market rates
or act as a loan loss reserve for loans Republic will make to non-
profit economic development organizations over the next few years.
St. Francis Bank, F.S.B., Milwaukee, Wisconsin
Award: $11,498
Rewarded activities.--St. Francis Bank, F.S.B. was awarded $11,498
for increasing its single-family housing acquisition and rehabilitation
loans in distressed neighborhoods of central city Milwaukee. During the
first six months of 1996, the bank made a total of $675,000 in loans
for activities undertaken as part of the Milwaukee Affordable Housing
Initiative.
Post award activity.--St. Francis Bank, F.S.B. has used its award
to expand its community lending efforts, including outreach to the
Milwaukee area's Spanish-speaking residents. These efforts include
developing new programs, marketing, and offering home-buyer seminars.
Stock Yards Bank & Trust Company, Louisville, Kentucky
Award: $3,750
Rewarded activities.--Stock Yards Bank & Trust Company was awarded
$3,750 for making an equity investment of $25,000 in the Louisville
Development Bancorp. The Louisville Development Bancorp is a newly
established community development bank corporation, a certified CDFI,
that seeks to revitalize the Louisville Enterprise Community and
surrounding neighborhoods.
Post award activity.--Stock Yards Bank & Trust Company donated its
award to the LCDB Enterprise Group, the non-profit affiliate of the
Louisville Community Development Bancorp. The grant will help fund a
business center to assist new and emerging small businesses in western
Louisville.
Troy Savings Bank, Troy, New York
Award: $389,859
Rewarded activities.--The Troy Savings Bank was awarded $389,859
for increasing its lending within distressed neighborhoods of Troy,
Albany, and Schenectady by $4.8 million. In the first six months of
1996, the bank made over $8 million in loans for housing, small
businesses, and consumer products. The bank's efforts also included
grants and technical assistance to support first-time home-buyers in
the region.
Post award activity.--Troy Savings Bank has created a Small
Business Investment Company (SBIC), whose license is currently pending
with the U.S. Small Business Administration, to foster the growth of
small businesses in the capital region. Through the SBIC, the bank will
set aside $500,000, capitalized in part with its BEA award, for
investment in businesses that agree to locate in the distressed
communities designated in the bank's BEA application. Additionally, the
bank is active in promoting affordable housing in its service area; it
is one of the first institutions to participate in the Federal Home
Loan Bank of New York's First Home Club Program, which provides funds
to match the savings of low-income prospective home-buyers.
Vine Street Trust Company, Lexington, Kentucky
Award: $55,000
Rewarded activities.--Vine Street Trust Company was awarded $55,000
for making a $500,000 loan to Community Ventures Corporation (CVC) to
serve Lexington's highest poverty area. Vine Street Trust Company and
CVC will serve this area by focusing on helping low-income people
access financing for affordable housing.
Post award activity.--Vine Street Trust Company has decided to pass
the award on to CVC to serve as a loan loss reserve and to cover a
portion of CVC's operating overhead expenses.
Wells Fargo Bank of Texas, N.A. (formerly First Interstate Bank of
Texas), Houston, Texas
Award: $97,500
Rewarded activities.--Wells Fargo Bank of Texas, N.A. was awarded
$97,500 for making investments totaling $650,000 in the Southern Dallas
Development Corporation and the Greater Houston Small Business Equity
Fund, Inc. Both of these certified CDFI's provide financing and
technical assistance to small and minority-owned businesses.
Post award activity.--Wells Fargo Bank of Texas, N.A. has not yet
determined how it will use its award. The bank's community development
activities include support to organizations in communities in which
they do business, including Alliance Capital of Houston, Austin
Community Development Corporation, Dallas Inner City Development
Corporation, and Fort Worth Community Development Corporation. The bank
has also supported the Local Initiatives Support Corporation's National
Equity Fund.
______
Attachment 8
first round experience--issues that often separated competitive from
non-competitive applications
Track Record, Financial Strength and Current Operations
Is there a pattern of positive net operating income?
Is net worth as percentage of assets reasonable in context of
institution's activities?
Are delinquency rates under control, in the context of type of
lending?
Are loss rates under control, in the context of type of lending?
What is the fund raising track record?
Does the organization have a good process for strategic assessment
and planning?
Is there a periodic portfolio review, with risk rating?
Does organization consistently generate monthly internal
financials?
Are audit opinions clean, or are they qualified?
Is there demonstrable track record of development impacts?
Is there a track record of innovation in the marketplace?
Capacity, Skills and Experience of Management Team
What is the track record of accomplishment of individual management
team members?
What is the relationship of skills and experience to tasks of
business plan?
Is appropriate staff identified for new activities?
Is there an appropriate mix of skills?
How well do management team members work with each other?
Is staff adequate or is it stretched too thin?
Is there an appropriate compensation structure for attracting and
retaining needed staff?
What is the level of personal commitments of management team
members?
What is the contribution of Board?
Are relationships between staff end Board effective?
What is the track record and capacity of management team members to
adapt to change?
Quality of Business plan
Is the business plan clear, well developed and internally
consistent?
What is the quality of market analysis?
Is there clarity about future products and services?
Is development strategy well thought out?
Are there appropriate links between products/services, market
analysis, and development strategy?
Are future staffing plans adequate, with respect to number and
skill level?
Is there appropriate meshing between lending and technical
assistance?
Is pricing strategy well thought out?
Is process and criteria for evaluating deals appropriate?
Is risk appropriately included in evaluation?
Is there a reasonable balance between financial and social
objectives?
Are projections reasonable or too aggressive?
Are assumptions for projections clearly delineated?
Are loss assumptions reasonable?
Are future staffing needs appropriately reflected in projections?
Do financial projections reconcile?
Are projections consistent with business plan narrative?
Do realistic projections show ongoing viability?
Is plan viable if performance varies from projections?
Is proposed capital structure appropriate?
If consultant is used, is use appropriate?
Matching Funds
Are commitments in hand, or if not, is there a viable fund raising
strategy?
Are matching funds comparable in form and value to financial
assistance requested?
Is business plan dependent on unrealistic match?
Does prior fund raising track record provide confidence about
prospects for securing match?
Community Development Impact as Return on CDFI Fund Investment
Are community development objectives well defined and clearly
focused?
Is there clarity on how CDFI Fund can enhance impact?
Is there a realistic plan to sustain impact of CDFI Fund
investment?
What is the prospective leverage of other resources?
What is the scale of activity?
What are prospects for innovation?
What is the level of distress of target market, and are products
suitable to address needs?
Is institution well connected to community?
What does track record, management, business plan quality suggest
about development impact?
What is the ``bang for the buck?''
NATIONAL CREDIT UNION ADMINISTRATION
STATEMENTS OF NORMAN E. D'AMOURS, CHAIRMAN
NEIGHBORHOOD REINVESTMENT CORPORATION
STATEMENT OF GEORGE KNIGHT, EXECUTIVE DIRECTOR
ACCOMPANIED BY MARY LEE WIDENER, PRESIDENT, NEIGHBORHOOD HOUSING
SERVICES OF AMERICA, INC.
OPENING REMARKS
Senator Bond. Our third panel, Mr. Norm D'Amours, Chairman
of the National Credit Union Administration, and Mr. George
Knight, Executive Director of the Neighborhood Reinvestment
Corporation. As we all know, NCUA is responsible for chartering
and regulating Federal credit unions, itself funded through an
operating fee. Second, Mr. Knight will testify on the
administration's budget request for Neighborhood Reinvestment
Corporation for a flat funding of $50 million, these funding
not-for-profits known as NeighborWorks' Network.
They have a long track record and have become a good model of
how the Federal Government can spend a small amount of money
and reap tremendous benefits. As the written testimony so well
demonstrates, $38.7 million in fiscal year 1996 allowed the
Neighborhood Reinvestment and NeighborWorks' to
leverage $420 million in affordable housing investments.
I look forward to the testimony. Mr. D'Amours.
STATEMENT OF NORMAN E. D'AMOURS
Mr. D'Amours. Thank you, Chairman Bond and Senator
Mikulski. Thanks for the opportunity to present our request
today for funding limits on the NCUA's central liquidity
facility, called the CLF, at current levels. As you know, the
CLF is a liquidity source for credit unions. It is funded by
its members, and can borrow from the Federal financing bank,
even though no such borrowing has occurred in the last year.
For fiscal year 1998 we request a $600 million limit on new
loans, and a $203,000 limit on administrative expenditures. The
requested loan limit has remained constant for 17 years. It
should be noted that NCUA is not requesting an appropriation
for the CLF, merely a limit on its borrowings.
I am pleased to report to the subcommittee that we continue
to streamline the CLF. The result is cost savings for Federal
credit unions.
Our expenses in fiscal year 1996 of $346,000 were
significantly less than our budget limitation of $546,000. The
fiscal year 1996 expenses are more than 50 percent below the
CLF expenses of $767,000 for fiscal year 1993. All of CLF's net
income in 1996 was returned to member credit unions in the form
of capital stock dividends.
In our estimation, the $600 million loan limit we are
requesting is adequate to address unexpected liquidity needs in
what is a very healthy and viable credit union system today.
The request is less than 3.55 percent of the limit set by
statute, which is 12 times paid in oncall capital or an amount
of approximately $17 billion. The borrowing authority is not
used to build up loan volumes, because by statute the proceeds
from CLF cannot be used to expand credit union loan portfolios.
Rather, these funds are advanced strictly to support the
purposes stated in the Federal Credit Union Act, and in
response to circumstances dictated by market events.
Loan demand over the years has resulted in wide variances
in the amount of outstanding CLF loan balances and individual
advances. The relatively low utilization of our total authority
can be viewed as a positive sign of credit unions' present
financial condition. By the end of 1996, all loans were repaid
and no direct loans were outstanding. However, because of a
liquidity shortage involving one of the corporate credit
unions, the CLF became an active liquidity center from December
1994 through February 1995. In that time, we made 601 loans
totaling $389 million. The majority, 509 of them, were
overnight loans.
As intended by Congress, the CLF acted successfully to
provide liquidity and to maintain financial stability during a
temporary liquidity shortage.
Mr. Chairman, Senator Mikulski, we respectfully request
that you support our authorization request in order to continue
the NCUA's and CLF's ability to respond to such adverse
liquidity situations. And that completes my oral statement. I
would ask that my full statement be included in the record.
Senator Bond. Without objection, it will be made part of
the record.
[The statement follows:]
Prepared Statement of Norman E. D'Amours
Mr. Chairman and Subcommittee Members. I want to thank you for the
opportunity to present our request for funding limits on the NCUA
Central Liquidity Facility (CLF) at current levels. Appearing with me
today are Herbert S. Yolles, President, Central Liquidity Facility;
Robert M. Fenner, General Counsel; David Marquis, Director of our
Office of Examination and Insurance; and William C. Poling, our Budget
Officer. Mr. Chairman, as you know, the CLF is a liquidity source for
credit unions. It is funded by its members and can borrow from the
Federal Financing Bank, even though no such borrowing has occurred in
the past year.
For fiscal year 1998, we request a $600 million limit on new loans
and a $203,000 limit on administrative expenditures. The requested loan
limit has remained constant for the last 17 years. It should be noted
that NCUA is not requesting an appropriation for the CLF, merely
limits.
I am pleased to report to the subcommittee that we continue to
streamline the CLF. The result is cost savings for credit unions. Our
expenses in fiscal year 1996 of $346,000 were significantly less than
our budget limitation of $546,000. The fiscal year 1996 expenses are
more than 50 percent below the CLF expenses of $767,000 for fiscal year
1993. All of CLF's net income in 1996 was returned to member credit
unions in the form of capital stock dividends.
In our estimation, the $600 million loan limit is adequate to
address unexpected liquidity needs in credit unions. The request is
less than 3.55 percent of the limit set by statute--12 times paid-in
and on-call capital or $17 billion. The borrowing authority is not used
to build up loan volumes because by statute the proceeds from CLF loans
cannot be used to expand credit union loan portfolios. Rather, the
funds are advanced strictly to support the purposes stated in the
Federal Credit Union Act and in response to circumstances dictated by
market events.
Loan demand over the years has resulted in wide variances in the
amount of outstanding CLF loan balances and individual advances. The
relatively low utilization of our total authority can be viewed as a
positive sign of credit unions' present financial condition. By the end
of 1996, all loans were repaid and no direct loans were outstanding.
However, because of a liquidity shortage involving one of the corporate
credit unions, the CLF became an active liquidity lender from December
1994 through February 1995. The CLF made 601 loans totaling $389.8
million; the majority (509) were overnight loans.
As intended by Congress, the CLF acted successfully to provide
liquidity and maintain financial stability during a temporary liquidity
shortage. Mr. Chairman, we respectively request that you support our
authorization request in order to continue the NCUA's and CLF's ability
to respond to such adverse liquidity situations.
Mr. Chairman and members of the subcommittee, the credit union
movement continues to focus on its mission of involving more people in
America's free enterprise economy. By instilling habits of thrift and
teaching the value and workings of financial discipline, credit unions
are still fulfilling the mandate Congress gave them over 60 years ago.
At NCUA, our strong commitment to the future of credit unions serving
people of limited means remains as resolute as when I last reported to
the subcommittee.
For fiscal year 1997, the subcommittee approved a $1 million
appropriation to be utilized by the Community Development Revolving
Loan Program (CDRLP), which NCUA has administered since 1987. By any
objective standard, the CDRLP has been an overwhelming success and
deserving of continued Congressional support. A $2 million
authorization, the last of a four year $10 million authorization
(Public Law 103-325), remains for fiscal year 1998.
Since NCUA began making loans from an original $6 million
appropriation (now a $7 million total), we have revolved $14.4 million
in 113 separate loans to 79 low-income credit unions. In 1996 alone we
approved $2.9 million in loans and currently we have 6 loan
applications for $1.4 million in funding.
The credit unions use these loans for a variety of different
purposes from housing rehabilitation and consumer loans to micro-
enterprise lending. We expect loan demand to increase smartly as the
year proceeds. We have had one loss in the Revolving Loan Program for
$35,000.
At mid-year 1996 we recognized 298 low-income credit unions, which
translated to a 27 percent annualized growth rate. I am proud to say
that 13 newly state and federally chartered credit unions in 1996
gained the low-income designation. Total assets in these financial
cooperatives are $1.8 billion at mid-year 1996 and loan growth was 13.2
percent. The capital ratio is a strong 11.1 percent and loan
delinquencies (loans 60 days and more overdue) are within reasonable
bounds at 2 percent.
In May 1994, the NCUA adopted a new chartering and field of
membership manual for credit unions replacing our previous version.
These changes are set forth in Interpretive Ruling and Policy Statement
(IRPS) 94-1 that became effective in July 1994. Changes contained in
IRPS 94-1 allow greater flexibility for credit unions wishing to expand
into low-income areas and make it easier for low-income credit unions
(LICU's) to expand their fields of membership and associate themselves
with other credit unions.
This initiative has been one of the more important actions taken by
the Board to encourage larger, healthy credit unions to directly reach
out into low-income communities to give residents a non-profit
alternative to pawn shops, check cashing outlets and the like. In this
way people are brought into the mainstream of the U.S. economy in a
self empowering and responsible manner.
From July 1994 until October 1996 NCUA had granted 73 federal
credit unions permission to open branches in these distressed
neighborhoods and make their services available to a potential of 1.4
million low-income residents. However, following a decision from the
U.S. Court of Appeals for the District of Columbia and then an
injunction from the District Court, NCUA has had to halt this
innovative approach for providing low cost financial services to those
who need it the most.
The ability of credit unions to add low-income groups to their
field of membership arises from an interpretation of the Federal Credit
Union Act NCUA made in 1982 to allow more than one group with each
group having a common bond be part of a credit union. The banks have
successfully challenged this interpretation of the Act and we are
currently waiting to see if the Supreme Court will take up an appeal.
As I will testify before the Financial Institutions Subcommittee of
the House Banking Committee tomorrow, NCUA believes Congress should not
wait for the Supreme Court to rule, but change the Federal Credit Union
Act to allow initiatives, like the one described above, to move
forward. In doing so, Congress will also codify two essential purposes,
or rather benefits, of the 1982 policy change: (1) by permitting
diversity within the membership of federal credit unions, the policy
provides a strong measure of protection against difficult economic
conditions that affect particular groups, industries or the reality of
military downsizing with the abatement of the cold war; and (2) it
makes credit union service available to individuals who otherwise do
not have access to it, such as members of groups too small to run and
support a viable credit union on their own.
The NCUA Board continues to explore ways to bolster low-income
credit unions. Early last year, the Board voted unanimously to adopt a
new interim rule permitting LICU's to immediately accept secondary
capital funds from institutional investors. The additional capital will
be used to support increased lending and services and provide
additional ``matching funds'' for credit unions applying for assistance
from the Community Development Financial Institutions Fund (Public Law
103-325).
The rule includes safety and soundness measures to ensure that
depositors and participating credit unions are aware of the nature and
risk associated with these accounts. For instance, the secondary
capital is not insured by the federal government and this fact must be
disclosed to investors.
In September 1996, the NCUA Board adopted a change to our Rules and
Regulations that removed the current cap of $120,000 for technical
assistance, which is drawn from the earnings of the Revolving Loan Fund
to aid LICU's. The Board believes that technical assistance is a vital
component of the Revolving Loan Program and since 1992 we have
disbursed 216 technical assistance grants totaling some $500,000.
I am particularly proud of the credit union movement coming
together for a conference held last August in Chicago. The gathering,
known among credit unions as the ``Serving the Underserved''
conference, was dedicated to bringing together credit unions of all
sizes to learn how to break down the barriers keeping people from
becoming a part of the American, free enterprise system. The conference
was a tremendous success.
Mr. Chairman, I want to briefly update you on the overall condition
of our nation's credit unions and their federal insurance fund.
Overall, the credit union industry continues to be in excellent health.
The National Credit Union Share Insurance Fund (NCUSIF) had its
best operating year in its 26-year history during 1996. For the second
consecutive year (and the third year in its history), the Fund paid
credit unions a dividend on their 1 percent deposit into the Fund. The
equity level at October 1996 exceeded the statutory ceiling of 1.3
percent or $1.30 per $100 in insured shares (deposits), so NCUA
returned a dividend totaling $102.8 million to federally insured credit
unions. We returned a $103.9 million dividend during 1995.
Meanwhile, the number of problem credit unions (CAMEL supervisory
rating 4 or 5) has continued to decline each year from 1,022 in 1988 to
a record low 286 at yearend 1996. Deposits in these problem credit
unions represented just 0.67 percent of total insured deposits in 1996,
compared to 6 percent of the total in 1988.
The number of credit union failures during 1996 fell to a record
low for the third consecutive year, dropping to 19, and requiring the
Fund to payout $2.3 million, also a record low. The previous lows were
22 failures in 1995, requiring $11 million in member payouts.
Since Congress established federal share insurance for credit
unions, the insurance fund has never had a losing year. Moreover, since
credit unions voluntarily recapitalized their insurance fund in 1985,
its equity level has ranged between 1.25 to 1.30 percent. The current
level is 1.28 percent, and we are projecting that it will again climb
to 1.30 percent by yearend 1997.
During 1996, federally insured credit unions performed admirably by
all objective standards. The yearend 1996 call report data have just
arrived at the agency and the preliminary data show that total industry
assets at the 11,429 federally insured credit unions rose 6.9 percent
to $327 billion. Capital accumulated at the rate of 11.1 percent during
1996, the tenth consecutive year of strong capital growth. The ratio of
capital to assets of federally-insured credit unions, now averaging
11.4 percent of assets, is at a record-high level; net capital is 10.8
percent--the former minus allowance for loan losses.
Loan delinquency and net charge-offs remain very low, actually at
or near historic lows. The delinquency rate is 1 percent of total
loans, while net charge-offs are 0.5 percent. Profitability, as
evaluated by the return on average assets ratio, was a healthy 1.1
percent for last year. This gauge of profitability has remained
unchanged over the last year; and the loan-to-share ratio now stands at
74.6 percent compared to 71.1 percent at yearend 1995.
In general, corporate credit unions (which act as bankers' banks to
the 12,000 natural-person credit unions) are also in good health. The
risk in their investment portfolios that concerned us two years ago
when I last appeared before this panel has been reduced significantly.
Between September 30, 1994, and September 30, 1996, corporate credit
unions' total holdings of Collateralized Mortgage Obligations declined
from $10.2 billion to $4.7 billion.
There are currently 41 corporate credit unions, of which 36 are
federally insured. While capital in corporate credit unions remains low
compared to that in natural person credit unions, there has been an
increasing trend toward capital accumulation, perhaps in anticipation
of new proposed standards the NCUA Board plans to finalize in the near
future. The ratio of reserves and undivided earnings to assets grew
from 2.1 percent as of December 31, 1994, to 2.65 percent as of
December 31, 1996. During that same period, total capital to assets
rose from 4.9 percent to 7.38 percent.
Meanwhile, our ``conflict of interest'' regulation took effect in
January 1996. This rule eliminated any real or perceived
inappropriateness in the relationship between the boards of directors
at corporate credit unions and their state and national trade
associations. I believe that significant progress has been made in the
condition of corporate credit unions, and that proposed revisions to
the corporate credit union regulation will provide additional
improvements.
Mr. Chairman, thank you again, for the opportunity to appear before
this subcommittee and present our requests for the Central Liquidity
Facility. I would be pleased to answer any questions.
STATEMENT OF GEORGE KNIGHT
Senator Bond. We thank you for the good news request, the
success and the no need for appropriations.
Let me turn to another good news story: Mr. Knight.
Mr. Knight. Thank you.
Mr. Chairman and members of the committee, I want to
especially thank you for last year's appropriation. As you
noted in 1996, the $38.7 million that you appropriated was
leveraged, in part, into $420 million, directly impacting the
lives of 16,000 families. Of those, 4,400 were new homeowners,
having the opportunity to start an equity stake not only in
their homes, but also in their families' lives, their
neighborhoods, and their cities.
In the past I have talked a great deal about the
neighborhood revitalization work of the
NeighborWorks' network. During the past year we have
focused on looking at who else benefits, and we looked
particularly beyond the resident-borrower to the block on which
they live, the lender, the insurer, and the city government,
with a real focus on the local tax base impact. I am pleased to
report we also found that the city treasurer benefits as well.
As property values rise, the tax base strengthens, and so do
tax revenues.
LESSONS LEARNED
Looking at what we have learned in the past 20 years, I
wanted to summarize it for you in several quick points. First,
raising the amounts of social investment capital currently
needed by our secondary market, Neighborhood Housing Services
of America--and I am delighted to have Mary Lee Widener, the
president of that unique institution here with me--is
challenging. We are now operating at volumes of $20 million to
$30 million a year. We need social investments that are low-
market rate, but perceived as high risk--even though we have
never missed a payment in 20 years. The effort to raise that
capital is indeed prodigious.
Second, after only 4 years of the NeighborWorks'
Campaign for Home Ownership we have reached the 5-year goal of
10,000 new homeowners. But I think more importantly, we have
shown that lower-income families not only can, but want to be
homeowners. While the portfolio is still early on those first
8,300 owners for which we have delinquency records, the
delinquency reports are coming in looking quite normal, if you
will.
Third, NeighborWorks' organizations do extend
credit. It is an essential strategy in revitalizing a
neighborhood. But they also are involved in a wide ranging
number of social-service activities. And those activities are
equally important to revitalizing a neighborhood.
Fourth, training is terribly important, and the demand is
tremendous. In 1993, the total of participants at the four
neighborhood reinvestment training institutes totaled
approximately 1,300 participants. In 1996, we had almost 2,600
participants. Last week in Atlanta we had 750 participants
alone.
EFFICIENCY MEASURES
Fifth and finally, my board, Neighborhood Reinvestment's
board, recently asked if we were being efficient with the
Federal resources we are given. We looked at three issues. The
first was were we continuing to meet the mission between 1990
and 1996? We could have become more efficient by serving higher
income people. However, we held the income level of the people
served by NeighborWorks' organizations about the
same. So we met the mission test.
Senator Mikulski. What is that income level?
Mr. Knight. It ranged from around 56 percent to 66 percent
of median family income. That translates into the low $20,000
for a family. Since many of the families we serve are single
heads of household, that really represents a very considerable
strain if you have a poor educational background to make
$20,000 to $22,000 a year. That requires a $10 or $11 or $12
an-hour job.
Second, we looked at the leverage of the appropriation over
the past 6 years, and indeed the private dollars leveraged have
increased. I am pleased to report it has almost doubled from
1990 to 1996.
Third, we inquired into the secondary market: Were they
able to handle and manage more aggregate assets for each dollar
that we gave them in 1996 than in 1990? And again, the answer
was yes, and I think a great deal of credit goes to Mary Lee,
and to her marvelous board of trustees and the day-to-day
operating board for that achievement.
With that, I look forward to your questions.
[The statement follows:]
Prepared Statement of George Knight
Mr. Chairman and Members of the Committee, thank you for the
support you have given the NeighborWorks' network and the
Neighborhood Reinvestment Corporation. I am pleased to present the
Corporation's request for fiscal year 1998 for $50 million. We are
especially grateful for the fiscal year 1997 appropriation of $49.9
million.
In fiscal year 1996, the $38.7 million you granted Neighborhood
Reinvestment and the NeighborWorks' network leveraged $420
million in investment. This is a 17 percent increase over the previous
year. The network produced almost 16,000 total units of housing, in
addition to owning 11,000 units of affordable Mutual and rental
housing. Of the 16,000 families, more than 4,400 families became new
homeowners, earning an equity stake in their neighborhoods. The
security of owning a well-insured home and the pride in paying back the
loan creates a sense of ownership and control over the quality of the
community. This frequently leads to action in solving the ``front-
door'' issues of crime, cleanup, education and other quality-of-life
concerns.
A national system for community revitalization that focuses on
addressing the disinvestment and decline in the nation's urban,
suburban and rural communities has been built over the last 20 years.
Currently, we are serving more than 420 communities. The heart of this
system is the 172 local partnerships of residents, members of the
private sector, and public officials that constitute the
NeighborWorks' network.
These NeighborWorks' organizations utilize the full
range of community development tools to positively engage the social,
economic and real-estate dynamics of their communities. Their mission
is focused on turning communities once shunned into neighborhoods of
choice for the benefit of current residents. This isn't about
demographic change; this is about engaging lower-income families in the
mainstream economy and engaging the mainstream financial mechanisms--of
lenders, insurance firms and Wall Street--in lower-income communities.
NeighborWorks' organizations serve communities
characterized by low household income--61 percent of median for African
Americans, 66 percent for Hispanics. NeighborWorks'
communities are also characterized by low rates of home ownership--only
44 percent compared to the national rate of 67 percent.
Who else beyond families and lenders and insurance firms benefit
from this reinvestment activity? Local taxpayers benefit as
neighborhood real-estate markets and, thus, tax bases strengthen. In
Savannah, Georgia's Dixon Park neighborhood, the
NeighborWorks' organization tackled a block with 23
properties, seven of which were severely dilapidated and unoccupied.
After purchase, rehabilitation and sale to new homeowners, the 16
occupied properties now show tax assessment increases of over 65
percent. Needless to say, the seven previously dilapidated properties
show a dramatically higher increase, with tax assessment increases
averaging 337 percent. As a whole, tax assessments for all 23
properties on the block increased by 109 percent--from $777,000 to $1.6
million. Everyone benefitted. More dramatically, in declining markets
such as New Haven, Connecticut, the NeighborWorks'
neighborhood held its own in property values between 1990 and 1995,
even as the city's fell 25 percent.
Beyond the resident owner, the city treasurer and lenders, the next
generation of families in NeighborWorks' communities also
benefits. The assets built by lower-income families who invest in home
ownership are a key ingredient for their future success. Children who
grow up with a stable place to live have improved educational
achievement,\1\ and when the time comes for college, the inter-
generational asset transfer mechanism of a home equity loan is
available for tuition.
---------------------------------------------------------------------------
\1\ Richard Green and Michael White, Measuring the Benefits of
Homeowning: Effects on Children, cited in ``Housing Policy Debate,''
Volume 7, 1996.
---------------------------------------------------------------------------
Does this always happen? No. It can easily be derailed by local
organizational failure, local economic collapse and a host of other
external macro reasons. Our experience, however, is that a difference
can be made and measured.
How do we sustain and increase this? Neighborhood Reinvestment's
role is four-fold:
(1) To work with organizations that meet basic programmatic and
financial health thresholds to expand their capacity;
(2) To offer intense nuts-and-bolts training to the housing and
community development field;
(3) To support Neighborhood Housing Services of America, Inc.
(NHSA) with low-cost capital so that it remains a strong financial
backstop to the NeighborWorks' system. This enables every
responsible homeowner or would-be homeowner--no matter how poor--to
borrow the necessary resources to maintain or secure a safe home; and,
(4) To monitor each local NeighborWorks' organization
for continued responsible financial and programmatic results.
What hampers vastly greater impact?
For local NeighborWorks' organizations, the main
impediment is insufficient amounts of: (1) Flexible, low-cost, equity
capital; and, (2) Funds to put loan counselors, rehab specialists and
community intervention specialists on the streets.
For Neighborhood Housing Services of America, the ongoing struggle
is to create and extend multi-year social-investor incentives and
mechanisms that will assure vastly greater sums of low-market-priced
capital.
What have we learned?
(1) First, that raising social-investment capital for NHSA--
especially in the volumes now needed--is difficult. The low market
financial return combined with a perceived high risk, even though NHSA
has never missed a payment, results in laborious capital-raising
strategies. I'd be remiss to not thank the Trustee and Board leadership
of NHSA for their incredible success in raising more than $250 million
in investment funds.
(2) Lower-income families want to be homeowners--and can be. Four
years ago I informed you that a group of NeighborWorks'
organizations were setting out to create 10,000 new homeowners,
resulting in investment of $650 million in the subsequent five years.
But when the tally is finalized at the end of four years, the five-year
goal already will have been met: 10,100 new homeowners backed by at
least $625 million invested in their homes and neighborhoods. More
importantly, the 30-60-90 day delinquency rate is 4.70 percent,
compared to about 3 percent for the conventional markets and 6-to-7
percent for government loans.
(3) Social service activities--reducing crime, providing
alternative recreation and learning opportunities, cleaning up streets
and vacant lots, enforcing building and health codes--all help to
create confidence in the neighborhood as a place of choice. These
``front-door'' issues, when addressed, lead to spontaneous sociability
so that the ill neighbor is cared for and not ignored, so that doors
are knocked on for block celebrations, so that the local school is
supported.
(4) Training works and is in tremendous demand. Three years ago the
four Training Institutes attracted 1,268 participants for 31,696
contact hours. In fiscal year 1996 that had increased approximately 105
percent for participants (2,595) and 85 percent for contact hours
(58,606).
(5) Financially and most importantly, this work is being done
efficiently with federal resources. Our board of directors requested a
report on multi-year efficiency. Balancing many factors, three measures
were utilized (charts follow):
--The first is the mission test: Over five years, has the
NeighborWorks' system continued to serve lower-
income families? The answer is yes: median incomes were 58
percent in 1990 and rose slightly to 66 percent by 1996,
primarily because of an increased emphasis on recruiting new
homeowners into these distressed communities.
--The second efficiency test measured the total investments by
NeighborWorks' organizations against the
Congressional appropriation. That grew from a 5:1 ratio in 1990
to a 9:1 ratio in 1995. And the investment ratio measures only
the real-estate-related parts of a NeighborWorks'
organization's efforts: it ignores local social-service
activities and does not directly capture our training efforts.
Overall, the amount of private-sector investment leveraged by
public-sector investment has increased steadily since 1993.
--The third efficiency test looked at NHSA in terms of total assets
managed compared to operating costs. That also nearly doubled
from 1990 to 1995.
We are grateful for your support and energetically look forward to
a successful completion of 1997 and continued opportunities in 1998. I
look forward to your questions.
NHSA's Total Assets vs. Neighborhood Reinvestments's Administrative
Grant to NHSA
Dollars:Ratio
1990..............................................................27.7:1
1991..............................................................26.4:1
1992..............................................................29.9:1
1993..............................................................35.8:1
1994..............................................................33.3:1
1995..............................................................45.9:1
1996..............................................................48.6:1
NeighborWorks Organizations Total Investment vs. Neighborhood
Reinvestment's Appropriation
Dollars:Ratio
1990.............................................................. 5.3:1
1991.............................................................. 5.8:1
1992.............................................................. 6.4:1
1993.............................................................. 7.4:1
1994.............................................................. 8.5:1
1995.............................................................. 9.2:1
1996..............................................................10.8:1
========================================================
__________________________________________________
[GRAPHIC] [TIFF OMITTED] T05FE25.000
NHSA's Clients Median Household Income--As a Percentage of National
Median Household Income
[1996 National Median=$35,200]
Percentage
1990.............................................................. 58
1991.............................................................. 59
1992.............................................................. 60
1993.............................................................. 62
1994.............................................................. 61
1995.............................................................. 65
1996.............................................................. 66
Senator Bond. Thank you very much, Mr. Knight.
I will turn to my ranking member, Senator Mikulski, for her
questions.
Senator Mikulski. Senator Bond is being very generous to
let me go first. I have to leave for a leadership meeting, and
I really will have some written questions for you, Mr.
D'Amours, and again, welcome. We were colleagues on merchant
marine and fisheries and oceanography in another life.
Mr. D'Amours. Thank you, Senator. It is good to see you.
Senator Mikulski. I would like to go directly to the
Neighborhood Reinvestment Corporation. Mr. Knight and your
staff, you know I have been a big fan of Neighborhood
Reinvestment, and in my stewardship worked to see it move
ahead. As it moved ahead, I became concerned about a couple of
things. One, could your institution keep its entrepreneurial
approach in place to meet the needs of communities, and then
second, could you avoid becoming a comfort or complacency zone
because you were successful.
Now, what I would like to do is use southeast Baltimore as
an example. Tell me how Neighborhood Reinvestment continues to
follow the same mission, of entrepreneurship in working with
local community leaders? Could you tell me what are the three
goals for your involvement in the southeast Baltimore project?
What measures are you using to determine whether you are
successful or not?
GOALS FOR SOUTHERN BALTIMORE
Mr. Knight. Our three goals are somewhat simpler to state
than they are to achieve in a short period of time. The first
is to strengthen home ownership; that is, to increase the
percentage of home ownership in southeast Baltimore. We can
look at two kinds of measures, process and absolute change. We
can look at the process measures of how many new homeowners,
such as the 50 new homeowners since last June, as well as what
kind of funds we have available. USAA has put forward funds, in
addition to many, many local institutions in Baltimore at a
rate of about 6.5 percent. The long-term measurement, however,
will come over time, and we have a database in place to start
tracking the absolute change in ownership.
Second, stabilize the community. This includes a wide range
of activities to increase the confidence of individuals in the
neighborhood. Among the actions to date has been to create a
large coalition of organizations tackling a wide range of
things. For example, encouraging local institutions to help
finance their employees to purchase homes in the neighborhood,
rewarding homeowners for purchasing in a neighborhood by
providing scholarships to the local school, working with
realtors to promote the neighborhoods and to cleanup and fix-up
kinds of things. Again, the measurement over time will be the
absolute change in market value.
Third, to decrease, significantly decrease, the number of
specific eyesore properties. At this point there are almost 100
properties individually identified. We have, through one of our
partners there, begun to prioritize legal action. A number of
individual buildings have been purchased and are under
construction. We are seeking funds to purchase more buildings.
The absolute measurement will be the decrease in the number of
eyesores.
I think on all three measures, frankly, from my perspective
we will know first from the residents whether they think it is
going well or not.
HOPE VI IN BALTIMORE
Senator Mikulski. Well, Mr. Knight, I am interested in what
was the Neighborhood Reinvestment Corporation or the
Neighborhood Housing Services of Baltimore's intervention. Just
for the committee, southeast Baltimore is a wonderful
community. I represented it as a city councilwoman, and it
faced two converging influences, one by problems created by
sheer demography, meaning a population aging in place, and also
undergoing both an economic and ethnic change. But, second, it
was steadily and gradually moving from primarily a European
ethnic community to a multiethnic, multiracial community, and
very nicely.
Then, along came a HOPE VI project in Baltimore called
Lafayette, and when the public housing came down, the Public
Housing Authority did not stand sentry. They simply dumped
everybody from public housing into this area with no screening
for section 8 assistance, and, therefore, the very role of
Government became a significant and forceful aspect of
destabilization. Section 8, because of its inappropriate use,
was also a tool for destabilization. And you had neighborhood
organizations going through heartbreak, and also deinvesting
and also leaving the community.
Am I right in summarizing that?
Mr. Knight. Absolutely correct.
Senator Mikulski. And the city took no action to correct
itself, yet the community organizations were being quite
gallant in trying to fortify the neighborhood.
Now, it was our suggestion that Neighborhood Reinvestment
Corporation come in to deal with this. Could you just very
briefly say how you have stopped the destabilization? What
organizations from Neighborhood Reinvestment stopped the
destabilization, and what community organizations have you
worked with, and what were your methods?
This was a very melancholy situation in Baltimore, Mr.
Chairman, when the very program that I helped create called
HOPE VI had become a destabilizing tool for one of the
neighborhoods that I had represented--a neighborhood that had
moved very gracefully and effectively toward racial
integration.
Mr. Knight. The organizations including the
NeighborWorks' organization, the Baltimore
Neighborhood Housing Services, to the Able Foundation, Johns
Hopkins, a series of community based CDC's, such as east
Fayette, SDI, a whole series of smaller property-owning or
would-be property-owning organizations, have formed a loose
coalition in which each continues their activity but becomes
identified under a unifying visual umbrella, if you will,
called Southeast Partners at Work. Working together has really
helped to focus broader attention on this southeast
revitalization initiative.
Senator Mikulski. Did you create that?
Mr. Knight. It certainly was an idea that came up in the
meetings in southeast Baltimore that we convened, yes. We
really see our role as the catalyst to get those kinds of
activities moving forward.
Mary Lee has managed to raise several million dollars in
low-market rate interest money that has enabled a number of
stalled construction projects to plunge forward with rapidity.
We have also succeeded in raising some first mortgage money,
again through the secondary market, at a rate of 6.5 percent,
that is enabling a very attractive incentive, if you will, to
those who would move into the neighborhood as homeowners.
Senator Mikulski. Well, I know my time is up.
I also understand you have been working with local realtors
in the private sector. But as I understand it, then the major
force from Neighborhood Reinvestment to pull together different
groups and help these groups empower themselves by being a
loose federation or coalition, was Neighborhood Housing
Services. Is that not the major tool?
Mr. Knight. Neighborhood Housing Services of Baltimore,
yes, is the major point, around which local organizations were
convened to take the action. Neighborhood Reinvestment staff's
role is to convene groups, just as we did on the Navajo
Reservation to start a new organization on the Navajo Nation.
Senator Mikulski. Well, we could elaborate. I want you to
know I continue to be a great supporter of Neighborhood
Reinvestment Corporation. Going through this hopefully was
informative for the chair, because it really shows how
Government itself is both a tool and also a problem. And
Neighborhood Reinvestment Corporation came in and worked with
what was already there, and organized it in a way that began to
stabilize it. There are lots of interesting stories, including
men organizing midnight barbecues. You know, we had drug
dealers, so instead of midnight basketball, the men of the
community just would go out on weekends and barbecue. They
would have friendship and fellowship and push those drug
dealers off the streets.
Mr. Knight. Thank you for your support.
Senator Bond. Thank you, Madam Chair. I would be far more
interested in a midnight barbecue than midnight basketball. I
have gotten past the age when basketball is that appealing to
me.
THE HOME PROGRAM
Senator Bond. Mr. Knight, would you not say that your model
really is one that should be a model for every community in
administering the HOME Program? Is this not a test case for
what we would hope that local governments would be doing with
the flexibility we are giving them. It seems to me you are
bringing it all together.
Mr. Knight. We would hope so, and that is why we spend so
much effort training others to share these techniques, with
people from a wide variety of backgrounds. Our training events
bring together representatives of the public sector, private
sector, community based groups, and church groups to learn from
each other. We think this approach is far more effective than
vastly larger sums of money that would be spent.
Senator Bond. Do not worry about the vastly larger sums of
money. To the extent that we get any money, it has already been
claimed.
Have you worked with communities? Are there people from
local housing authorities or appropriate community development
people from areas which do not have a NeighborWorks'
Program coming in to see what you are doing?
Mr. Knight. Yes; absolutely.
Senator Bond. Are you able to train these people and show
them what you are doing works?
NAVAJO PARTNERSHIP FOR HOUSING
Mr. Knight. Yes; we have just completed a little more than
\1/2\ year's work with the Navajo Nation, creating the Navajo
Partnership for Housing. It will, we hope, over the next
several years lead to the production of 10,000 units of
moderate housing on tribal lands, which is desperately needed.
It is a partnership composed of many local financial
institutions, several national institutions, including Fannie
Mae Federal Home Loan Bank of Seattle, Zion National Bank,
Northwest, and many local institutions and the nation, itself.
Residents of several of their subgroupings--chapters, as they
refer to it inside the nation--created an environment in which
people could talk, work, and come to local solutions
themselves.
rural housing concerns
Senator Bond. Outside of the native American Nation, I am
very much concerned about some of the problems we have in rural
areas, and Missouri has a lot of these. I do not know if you
have the same problems in Maryland.
Senator Mikulski. Yes.
Senator Bond. But rural housing needs are very challenging
in many parts of Missouri. What is Neighborhood Reinvestment's
experience in rural areas? Do you see the problems and the
solutions differing, and any special approaches for addressing
unique needs of affordable housing and community development?
The chicken and egg problem, do you need the jobs first or the
housing? Can you get the jobs without the housing, can you get
the housing without the jobs? That is something that community
and the town I live in is facing, and it has been a tough one.
Mr. Knight. Sometimes it's a chicken and egg problem--and
some of our responsibility, I believe--is to step forward and
take the risk. In Colorado, in the intermountain area, we are
affiliated with an organization called Colorado Rural Housing
Development Corp., that works in smaller towns to basically
create subdivisions.
Now, that may be a glorified term for a group of 10 houses
that are built, but someone has to assemble the land, get the
infrastructure in, and at that point, with either local or
statewide is financial backing, a contractor will come in and
build those 10 homes, particularly if that organization is
working with individuals who will purchase the homes. Once this
process starts it gives confidence to smaller industries and/or
employers to say now that there is housing, we will invest in
this community.
I just returned from Dimmit County, TX, which is about as
rural as one can get. It is one of the poorest counties in the
Nation, and they are doing exactly this and meeting with great
success. Frankly, it may help one of their last private
employers there, because now they will be able to purchase--
this is not a giveaway--purchase a home that would meet the
contemporary living standards of Eagle Pass, the next nearest
town.
Senator Bond. We will be interested to find out about that
experience.
CDFI
I will address a question to you and Mr. D'Amours. Just
before you testified, we heard about a new idea, the CDFI, and
based on your experience, what kind of direction, guidance
would you give to CDFI? What kind of pitfalls do you think they
ought to be aware of?
Mr. Knight. Our experience is in working with
NeighborWorks' organizations which make basically
the nonconventional, uneconomic loan. Our tandem lending
approach and small rehabilitation loans allow the private-
sector loan to work. The NeighborWorks' loan gets
paid back, but its small size and low return makes it not
feasible for a financial institution.
We think there is a great need for these niche kinds of
lending efforts. There is really at this point insufficient
capital to do them. We do as much as we can.
I think the ability of a secondary market like NHSA is
frankly part of the genius in helping a local rural area. Rural
organizations may be able to raise a pot of money once, but it
is awfully hard the second time. If they can make loans and
sell those loans, then they have funds to keep lending and
reselling. Frankly, the innovation of the secondary market, has
made a great deal of our success possible.
Senator Bond. Thank you, Mr. Knight.
Mr. D'Amours, I know that the NCUA administers a $7 million
community development revolving loan program not unlike the
CDFI. I wonder if you have any words of wisdom or suggestions
on how the CDFI can be achieved, and how is the program working
in your area?
Mr. D'Amours. Thank you, Senator. As a matter of fact, the
community development revolving loan program was passed in
1979. I was on the House Banking Committee when we approved
that.
The CDFI bill, or the Riegle bill, so-called at the time,
when he was chair of the Senate Banking Committee----
Senator Bond. And that is a good way to get your name on a
bill.
Mr. D'Amours [continuing]. Passed in 1994. Right. That is a
good way to become internalized.
The recommendations I would have, frankly, without having
any real authority to make them, but since you have asked,
would be to simplify the application procedure. We know, for
instance, out of the 268, I believe Mr. Hawke testified,
transactions last year, 50 of them were credit unions and only
a small handful received anything.
At NCUA, we operate the community development revolving
loan program very simply. The application is simple. It is only
available to the low-income credit unions. These are credit
unions 60 percent of which are below $10 million, a near
majority of which are below $2 million.
Our administrative costs at NCUA are nil. We administer
this program as an agency program. We absorb whatever
administrative costs, which are not very high, are connected
with it. In the credit union situation the money gets right
down to the people who need it most. It is done as a loan, not
as a grant. Money of the CDFI programs are grants for credit
unions rather than loans. Our money is repaid. We use the
interest of that money for technical assistance aid to credit
unions.
I think probably in my experience, I know that a lot of the
credit unions which could really make use, small, low-income
credit unions which are in the inner city or in that isolated
rural area that you are concerned about, Senator, are not
applying for CDFI moneys because the application process is a
little too complex, a little too complicated for their very,
very limited resources.
SUPREME COURT DECISION ON CREDIT UNIONS
Senator Bond. I appreciate your views on that.
As I indicated, we congratulate you on the situation you
find yourself in, that the insurance fund had its best
operating year in its 26-year history, and the number of
problem credit unions has continued to decline, and they show
strong capital growth.
As we noted, the Supreme Court granted certiorari yesterday
on the U.S. Court of Appeals decision. What do you see the
impact on credit unions being should the Supreme Court uphold
the court of appeals decision?
Mr. D'Amours. The impact over the long term would be very,
very serious, if not devastating, depending upon how the
district court ultimately would implement the court's decision.
There is a partial stay in existence as to the district
courts, Judge Jackson's injunction, which allows credit unions
to continue serving those members they now have even though
those members may share a single common bond.
That injunction could conceivably and logically under the
original court decision of the U.S. Circuit Court of Appeals be
expanded so that they cannot serve even extant members. That
would be absolutely devastating.
But even if that does not occur, Senator, over the long
period of time, what I think most people forget when they look
at credit unions is that whatever their size, whatever their
location, there are people in that credit union serving
disconnected groups, perhaps, in terms of common bond, each of
these groups being unable on their own to form sufficient mass
to operate a separate and distinct credit union.
These can be very low-income people, minimum-wage people,
janitors, secretaries, part-time workers and the like, who
would be deprived of credit union services, which are the only
alternative these people have to the loan shark, the pawn shop,
the rent-to-own store, and in some cases check-cashing
operations.
So we are very hopeful that we will prevail in the Supreme
Court, and if we do not, or even while we are in that process,
that both the House and Senate would look very seriously at the
financial empowerment that credit unions provide that will be
lost unless this challenge to the credit union common bond
system is handled properly.
Senator Bond. So you are saying the justification is that
this is a necessary service that can be provided, this ability
to go beyond what has traditionally been called a common
association. I am a little sensitive of the term, common bond.
[Laughter.]
But a common association is for low-income, disadvantaged
individuals. This is a strong justification for that.
Mr. D'Amours. Absolutely. Common bond is nothing endemic to
the definition of credit unions. It is something that happened
topsy-ish as credit unions developed. It is not a part of the
credit union definition. It is not necessary to achieve their
purposes.
It is being used by some, trying to be used by some as a
limiting factor. It was never intended in our view to be a
limiting factor, and if this effort succeeds, the effort of
credit unions and their ability to bring people into the
American economic free enterprise system would be lost, because
the banks are not going to do it unless they are required to
under CRA, and only to the extent they are required to under
CRA.
It would be shameful. It would be sad for America if this
ability of the credit union financial system to reach out and
empower people in isolated rural areas or in the inner city
were lost.
MODERNIZATION OF FINANCIAL SERVICES
Senator Bond. As Congress and the banking leaders work
toward a modernization of financial services, and they are
going to address the Glass-Stiegle fire walls that is going to
be in for revision, what do you see as the future role of
credit unions?
Mr. D'Amours. I do not think the two are related
whatsoever.
Senator Bond. There will not be any impact on the members
you serve?
Mr. D'Amours. No, sir.
Senator Bond. If there are broadening and consolidating
financial services through permitting securities firms to own
banks and banks to own securities firms, if that comes about,
there will not be any area in which the credit unions would
wish to participate?
Mr. D'Amours. No, sir; credit unions are prohibited from
investment in these kinds of areas from commercial investments,
for the most part, from securities investments. Credit unions
operate in an investment perspective within a narrow niche.
Their job is to make loans, and we have been stressing that at
NCUA.
Senator Bond. So you would not, from a credit union
standpoint, if a larger financial institution wanted to set up
a credit union to serve a target area of need, you would not
see any justification for expanding existing authority to make
that service available?
Mr. D'Amours. We would not want credit unions to start to
get into the banking business, if that is what the question
implies. Absolutely. Credit unions have their niche. They have
filled that niche. They have been doing the job they were
supposed to do very, very well. We do not want to be banks.
We would welcome banks if they wanted a credit union
charter to do what credit unions do, but we have no ambition to
take over their work.
Additional committee questions
Senator Bond. Thank you very much, Mr. D'Amours.
Mr. Knight, we appreciate your testimony. We will leave the
record open in case there are additional questions that members
of the committee want to ask. Your full statements will be made
a matter of record.
[The following questions were not asked at the hearing, but
were submitted to the Administration for response subsequent to
the hearing:]
Questions Submitted by Senator Mikulski
Question. What is the status of the Baltimore Progressive Federal
Credit Union situation?
Answer. Baltimore Progressive Federal Credit Union was liquidated
on January 30, 1997. Its members are now eligible to receive services
from Citadel Federal Credit Union, which offers services less than one
mile from Baltimore Progressive's location.
Question. What is the National Credit Union Administration doing in
low income communities today?
Answer. I enclose our 1996 Yearend Report on Low-Income Credit
Unions, which describes our efforts to expand financial services to
low-income Americans, and respectfully request its inclusion in the
hearing record.
Question.What is the potential impact of the pending case between
the NCUA and the banking industry?
Answer. As you know, the Supreme Court is hearing arguments on
October 6, 1997, on the case challenging NCUA's interpretation of the
Federal Credit Union Act's field of membership provision. After the
banks suffered a number of losses at various U.S. District Courts, the
U.S. Court of Appeals for the District of Columbia, in July, 1996,
reversed the District Court and determined that all members of an
occupational credit union must share a single common bond. The Appeals
Court remanded the case for implementation to the District Court. That
Court enjoined NCUA and all federally chartered credit unions in the
U.S. from enrolling new groups and new members from existing groups
that did not share a common bond with the credit union's core
(original) membership.
In December, the Appeals Court stayed an important part of the
District Court's injunction. Federal credit unions, for now, can
continue enrolling new members from existing membership groups with
differing common bonds so long as those groups were affiliated prior to
the District Court's October 25, 1996, injunction. However, federal
credit unions remain barred from adding to their charters any new
groups which do not share a common bond with their core group.
This (in our opinion) erroneous interpretation of the common bond
provisions of the Federal Credit Union Act could severely limit the
viability of a federal credit union whose membership includes the
employees of one sponsor organization, if that organization downsizes,
relocates or goes out of business. The limitation places these credit
unions at an unnecessary risk occasioned by a downturn in a single
industry or sector of the economy. The NCUA Board believes that
Congress should act now to clarify the Federal Credit Union Act on the
question of common bond and to obviate the negative safety and
soundness implications of court actions crippling the ability of credit
unions to serve different groups that each have a common bond.
Should the courts ultimately decide to force a complete roll-back
of our 1982 policy by ordering credit unions to divest existing members
from unrelated groups, the potential for substantial losses would be
significant and immediate for some 3,586 federally insured credit
unions serving 157,000 groups.
Many of these groups have fewer than the 500 potential members
needed, as a minimum, to organize and maintain a viable credit union.
Thus, millions of Americans would lose or be deprived of the financial
services they have chosen or desire, financial services Congress has
for 63 years directed NCUA and its predecessors to make available to
them.
There are limited regulatory steps NCUA may be able to take in
order to alleviate the problem for some credit unions. However, if the
court's decision stands, only Congress can completely fix the problem.
Since small businesses, which are usually defined as having fewer
than 500 employees (the critical mass needed for credit union
viability), represent the largest and fastest growing segment of the
United States economy, a significant portion of the workforce could be
denied access to credit union services if the Court of Appeals decision
is not reversed. Prohibiting small business employees from joining
existing credit unions would hamper credit unions' efforts to meet
their statutory mandate to provide financial services to low- and
moderate-income workers.
According to Commerce Department data, the 6.18 million businesses
in 1990 employed 93.48 million people. Of these 6.18 million
businesses, 99 percent employed fewer than 500 employees (a total of 75
million people).
As we enter the 21st century, the changing nature of our national
and world economies make it reasonable to expect continuous
downsizings, mergers, and the complete elimination of companies and
whole industries. Occupational credit unions remain extremely
susceptible to these economic changes.
Federal credit unions have remained healthy and have grown because
they invested substantial capital in achieving economic strength and
diversity through the addition of select groups. Deprived of this
option, even without the draconian order to divest existing groups,
many credit unions over time will suffer unbearable losses and their
members will lose needed services. Their liquidation or merger would
significantly affect the federal insurance fund and the health of the
entire industry.
The assets, shares and loans of the 3,586 multiple-group federal
credit unions at year-end 1995 comprised a substantial portion of the
industry's total:
Assets.--$150 billion (approximately 78 percent of $190 billion in
total assets held by federal credit unions.)
Loans.--$94.6 billion (approximately 78 percent of $120.5 billion
in total loans held by federal credit unions.)
Shares.--$132.8 billion (approximately 79 percent of $170.3 billion
in total shares held by federal credit unions.)
These statistics illustrate the potentially devastating impact of
preventing federal credit unions from continuing to add new groups or
new members from existing select groups. As the remaining employees of
existing select groups become older, they borrow less and save more.
Therefore, the inability of a credit union to add sufficient numbers of
new members will dry up the pool of younger members who tend to borrow.
The higher rates of income generated from loans will be reduced, making
it difficult to maintain existing rates paid on savings. The result is
an ultimately fatal asset-liability mismatch.
Moreover, in reliance on NCUA's 15-year multi-group field of
membership policy, many federal credit unions have invested substantial
sums to create an infrastructure to support select group expansion.
Credit unions have spent millions of dollars on branch offices, data
processing, personnel and other enhancements allowing credit unions to
service the additional members of these groups. As people change jobs,
move away, retire and die, and the credit union is prevented from
adding additional members or groups, it will lose its ability to
sustain the cost of these enhancements, adding yet more costs to an
already deteriorating income stream.
We expect to win the Supreme Court case, but if the case comes out
against us, we will continue to work for a legislative solution.
SUBCOMMITTEE RECESS
Senator Bond. We appreciate your patience in waiting for
us, and with that the hearing is recessed. Thank you.
[Whereupon, at 11:50 a.m., Thursday, February 25, the
subcommittee was recessed, to reconvene subject to the call of
the Chair.]
DEPARTMENTS OF VETERANS AFFAIRS AND HOUSING AND URBAN DEVELOPMENT AND
INDEPENDENT AGENCIES APPROPRIATIONS FOR FISCAL YEAR 1998
----------
TUESDAY, MARCH 4, 1997
U.S. Senate,
Subcommittee of the Committee on Appropriations,
Washington, DC.
The subcommittee met at 9:37 a.m., in room SD-138, Dirksen
Senate Office Building, Hon. Christopher S. Bond (chairman)
presiding.
Present: Senators Bond, Burns, Stevens, Shelby, Campbell,
Mikulski, and Boxer.
CORPORATION FOR NATIONAL AND COMMUNITY SERVICE
STATEMENT OF HARRIS WOFFORD, CHIEF EXECUTIVE OFFICER
ACCOMPANIED BY DONNA CUNNINGHAME, CHIEF FINANCIAL OFFICER
OPENING STATEMENT OF CHRISTOPHER S. BOND
Senator Bond. Good morning. The VA, HUD, and Independent
Agencies Subcommittee will come to order. This is the
subcommittee's second hearing on the fiscal year 1998 budget
and I welcome our witnesses and guests this morning. The
Appropriations Committee and the VA-HUD Appropriations
Subcommittee in particular will face another year of very, very
difficult budget decisions as Congress continues to refocus its
priorities and seeks to balance the budget of the Federal
Government by the year 2002.
I emphasize our continuing need to stay focused on
balancing the Federal budget, including the need to continue to
be proactive in consolidating and reforming our many Federal
programs, including many under this subcommittee's
jurisdiction. We have done much over the last several years,
but there is still much to be done.
The President's fiscal year 1998 budget in my view has not
yet set forth a blueprint for fiscal responsibility, and
without meaningful policy changes now the deficit will
skyrocket by the year 2010, when many of the baby boomers begin
to retire.
As it applies to the current year, the President's budget
optimistically proposes some $92 billion in budget authority
for the departments and agencies in the VA, HUD, and
Independent Agencies Subcommittee, of which $72 billion is
discretionary spending. The amount proposed represents an
increase of approximately $8 billion over the current year's
level, and certainly we could spend all of that and more. There
is no question that many of the activities that we have in this
subcommittee are under great pressure.
I would love to have available the kinds of funds the
President proposes. But given the very real problems elsewhere
in the budget, the significant problems faced in the defense
budget with the costs of our ongoing activities and Bosnia,
Kuwait, and elsewhere, the fact that the deficit in the
President's request actually goes up for the coming year, the
fact that our FEMA moneys are proposed to be off budget when we
fought so hard in the past couple of years to be responsible
and include the emergency spending authority and outlays in the
budget and account for them, I would say that it is very, very
optimistic to think that we would have anything like the budget
authority that the President has proposed under the
congressional resolution.
I would say, therefore, absent some compelling reasons, it
is going to be very difficult for this subcommittee as a
practical matter to provide any increases over our 1997 budget
levels. We will work to obtain as much authority as we can
find, but I would have to say that this does not appear
optimistic and does not appear promising at this point.
This morning we take testimony from five of the independent
agencies under the subcommittee's jurisdiction: The Corporation
for National and Community Service, the Court of Veterans
Appeals, the American Battle Monuments Commission, the
cemeterial expenses for the Army, and the Selective Service
System. These are important programs and activities and I look
forward to their testimony.
We will call as our first witness Mr. Harris Wofford, our
former colleague, now Chief Executive Officer of the
Corporation for National and Community Service. The
administration's budget request for the Corporation for fiscal
year 1998 totals some $546.5 million, an increase of $146
million or 36 percent from the Corporation's enacted
appropriation for fiscal year 1997 of $400 million.
As we all know, the Corporation was established by the
National and Community Service Trust Act of 1993 to provide
opportunities for national and community service and to provide
national service education awards. The Corporation makes grants
by formula, competitive, and national direct, to States,
institutions of higher education, public and private nonprofits
and others to create service opportunities for a wide variety
of individuals, such as students, out of school youth, and
adults, through a variety of full time and part time national
and community service programs.
National service participants may receive educational
payment awards for higher education, vocational education, job
training, or school to work programs.
The Corporation has many laudable and important goals, and
certainly no one has been a stronger champion of these goals
than my colleague, friend, and ranking member, the
distinguished Senator from Maryland, Senator Mikulski.
Nevertheless, there remain significant issues concerning the
implementation of the program and the financial management of
the controls that are being exercised.
First, funding of what is essentially still a new and
unproven program at $546 plus million in fiscal year 1998 is
problematic, especially when the Congress, as I said, is
confronting the budget deficit, especially when the
subcommittee may be short of adequate funds for a number of
longstanding funding priorities, such as veterans medical care
and the renewal of section 8 contracts for low-income families,
including the elderly and the disabled.
In addition, there are some significant financial and
management issues facing the Corporation. For example, the
Corporation has submitted only one annual report, including one
financial statement, and that report covered activities for
fiscal year 1994. Moreover, as I understand it, the Corporation
is currently unable to reconcile its financial accounts for
fiscal years 1994, 1995, and 1996, to the degree that as of
December 1996 some $38 million in AmeriCorps funding could not
be accounted for.
If I am wrong in that supposition, I would be pleased to be
corrected.
Finally, I have concerns about the mission of the
Corporation and how it is being carried out. While the
AmeriCorps Program has been touted as a program designed to
help young people who perform public service pay for college,
the program continues to have problems with the dropout rate in
the program, the educational usage, and, most important, the
final cost to the taxpayer of an educational award under the
AmeriCorps Program.
For example, a recent February 1997 GAO study on the role
of State commissions in implementing the AmeriCorps Program has
raised several significant concerns for me. First, the overall
rate for the programs reviewed under the GAO study indicates
that the median dropout rate for the program participants was
39 percent. In other words, almost two out of every five
participants in the program did not complete the program.
In addition, the GAO report identified a number of concerns
in each of the individual programs reviewed. For example, in
the Casa Verde Builders Program in Texas, at a cost of $2.5
million, 38 of the 64 participants, or 59 percent, ended the
program early, with less than one-third of the participants
earning an award and only 4 participants using an award. This
means the program paid over $600,000 per education award.
Using these funds for Pell grants or some other kind of
education assistance obviously could serve a far greater number
of families and young people in paying for education. Moreover,
in the Casa Verde Builders Program, even if all eligible
participants used their educational award, it would still cost
over $106,000 per person plus $4,725 for the educational award,
for a total cost of over $110,000. This means, excluding
private sector contributions, the taxpayer still would end up
paying approximately $102,000 per educational award.
The bottom line is I am very much concerned the AmeriCorps
Program is turning into another expensive jobs program, in
which we are not getting any bang for our buck.
Finally, I know that the Corporation can tell some
impressive success stories, heartwarming stories that are
obviously worthwhile and show laudable achievements.
Nevertheless, there are open issues and concerns that need to
be addressed, and unfortunately the Corporation does not have
the tracking or accounting systems to demonstrate the successes
and the failures of the Corporation.
Without these systems in place to assure the controls and
to assure that there will be successes and that there will be
accountability for taxpayers' dollars, I would find it
difficult to support the increase in the investment requested.
I look forward to hearing the testimony of Mr. Wofford and
I am optimistic that he can allay our concerns in many areas as
we begin to address these questions.
Now it is my pleasure to turn to my ranking member for her
comments. Senator Mikulski.
STATEMENT OF BARBARA MIKULSKI
Senator Mikulski. Thank you very much, Mr. Chairman. Good
morning to both you and also to two members of this
subcommittee, dear colleagues from the House, Senator Ben
Nighthorse Campbell and Senator Barbara Boxer. We welcome them
and their participation.
I want to extend my welcome to our former colleague Senator
Wofford, the Chief Executive of the Corporation for National
Service, and welcome the other witnesses who will be testifying
today.
I know this morning we are going to have three panels to
deal with five agencies, and I will address the agencies
related to the Department of Defense later during their
questioning. But we do want to give a most cordial welcome to
General Herrling of the Battle Monuments Commission, Steve Dola
representing DOD and the cemetery issues, and Gil Coronado, the
Director of Selective Service, and, of course, the Chief Judge
of the Court of Veterans Appeals.
I would like to begin my opening statement, very briefly,
to talk about our first panel. I believe that the chairman has
outlined some yellow flashing lights about national service,
but I would hope that it would not be a red light to the
program. Yellow flashing lights are a metaphor that I use where
we say we have to pause, proceed with caution, and analyze the
risk as we look over the intersection and where we find
ourselves.
I think that national service, like any new program that
focuses primarily in a decentralized approach, State and local,
will have a lot of bumps on the road in terms of management.
What we want to talk about is get back to the mission of the
program, which was to deal with two issues: one, to rekindle a
sense of the civic virtues that we needed around duty,
obligation, and sense of community. But the other was to deal
with the fact that for many young people the American dream was
no longer available and that there was not a real opportunity
ladder to afford higher education.
For those of us who helped create national service, we did
not want another program; we really wanted to launch a social
movement. We did not want another giveaway, but we wanted to
say for every opportunity there was an obligation. We did not
want to talk about an entitlement society; we wanted to talk
and function on an empowerment society.
The whole role of national service is that by performing
community service you earn a voucher to reduce your student
debt, a voucher to pay for higher education. So it was based on
essentially opportunity and obligation linked.
The work that the volunteers do is not glamorous. It does
involve cleanup and it focuses on public safety, the
environment, helping with education, and focusing on many
areas. I know that not only are heartwarming stories told, but
that there are other issues around it.
What I want to be sure is that we have a national service
program. The President has talked about stimulating
voluntarism, and later on in April there will be a bipartisan
and I hope a nonpartisan summit on voluntarism in Philadelphia.
Who will be there? Not only President Clinton, but President
George Bush, who founded the Points of Light concept that our
subcommittee under both stewardships have funded. It will have
Colin Powell, who certainly knows what duty, obligation, a call
to service meant, and how we can translate that into civilian
society.
But I believe we need to have a mechanism to operationalize
good intentions and where there is a Federal role, but not a
federally restrictive set of mandates. So we look forward to
that summit and how we can continue to stimulate voluntarism,
not only through this program but through others.
The GAO report does raise some issues and concerns, but
what they talk about is, though the State commissions vary,
they are meant to vary. What we wanted to have is that each
Governor could decide how to run this program according to
local need. It was to be Federal resources and a State and
locally run program, tailored to local community needs and not
a cookie cutter approach.
So I think that we have gotten off to an uneven start, and
we thank Senator Wofford for ironing out a lot of the wrinkles
that we had: No. 1, acknowledging the validity of the concerns
that the Congress had; No. 2, taking corrective action; No. 3,
to try to put this program on track where it is not a program
only for today, but a program for tomorrow, that the values
learned by participating in the program carry on long after
someone leaves the program.
Last, but not at all least, when we talk about the
attrition rate we are talking about two things. One, that you
have to be fit for duty to stay in this program, and we wanted
the restrictions to be tough, so that if anyone had reasons for
cause to be dismissed for, say, drug abuse, then so be it.
The other is that we are recruiting not only yuppie college
kids to pay off their student debt--a very worthwhile endeavor,
I might add--by creating a sense of obligation, but we were
also recruiting among the poor. In many instances, deep
compelling personal reasons meant that people had to leave the
program. So, therefore, the attrition rate is in many ways to
be expected.
Well, I sound like I am giving the testimony that maybe
Senator Wofford is going to give, but I do think we really need
to, and through this appropriations cycle, to look at where
national service has been and correct the problem and look at
where national service could go, and really in a bipartisan,
nonpartisan way focusing on some clear objectives and strong
management controls.
So with that, I will conclude my statement.
Senator Bond. Thank you very much, Senator Mikulski.
Senator Campbell.
STATEMENT OF BEN NIGHTHORSE CAMPBELL
Senator Campbell. Thank you, Mr. Chairman.
I am pleased to see our former Senate colleague, Senator
Wofford, here, the Chief Executive Officer of the Corporation
for National Service.
In my home State of Colorado I visited the location at our
former Lowry AFB on a couple of occasions and I believe it has
a great deal of potential. I know that there has been some
growing pains with it and I know it has come into some
criticism, but generally this group in our State has helped
low-income communities. It has tutored at-risk youth, for
instance, and it has monitored students, helped with antigang
initiatives, and a number of things. Similarly, I think it has
helped homeless veterans on many occasions and I certainly
support that.
I guess that I have got some concerns that some of the
other committee people have, too, that I guess could be best
described as Senator Mikulski has. There are some yellow lights
going off about how the budget is being handled. But I think
generally it is a new program and generally doing very good.
I just wanted to tell our former Senator that I am
certainly supportive of it and hope we can iron out those
problems and get on with it.
Senator Bond. Thank you very much, Senator Campbell.
Senator Boxer.
STATEMENT OF BARBARA BOXER
Senator Boxer. Thank you so much, Mr. Chairman. It is
certainly a pleasure for me to be here today. As a new member
of this committee and this subcommittee, I am very honored.
I wanted to mention, if I have to get up and leave in the
middle of something, I have got a conflicting hearing on
Superfund sites going on elsewhere in the building. So forgive
me.
But I really wanted to come by to extend a special welcome
to Harris Wofford, our former colleague, who is now CEO of the
Corporation of National Service. He is a hero of mine and his
interest in this goes way back. I remember when I was a junior
at college President Kennedy urged our Nation's young people to
ask not what your country can do for you, but what you can do
for your country, and I remember that resonating with me, and
here we are so many years later with those same words having
tremendous meaning.
Once again, this challenge has been made to our Nation's
young people through this program, and once again I am happy as
well to see young people responding. I hope that we will not
take away this opportunity. I believe that we can get to the
bottom of whatever the problems are and have some strong
bipartisan support for it.
The Corporation for National Service plays a key role in
helping our country and our communities address unmet needs,
while ushering in a renewed commitment to civic responsibility.
In my State we have over 2,300 AmeriCorps members in 48
different sites. Members tutor children K through 12, they
mentor teens at risk of dropping out or becoming teen parents,
they assist local community organizations in reducing juvenile
crime. They support local residents in identifying and
addressing the most critical needs.
Like Senator Campbell, I have had the privilege of visiting
some of these programs and seeing our young people at work.
They have become heroes in many communities, and it is just a
joy to see that. Then they get the opportunity to go to
college.
So I think it is a program that has a vision, and if we are
careful and if we do it right I think it should meet everyone's
expectations.
As a former local elected official, I appreciate the fact
that there is not a cookie cutter approach to this program,
because every community has different needs, and that is what I
like about this program.
So I am pleased to be here today and I look forward to
hearing about the future plans.
Thank you very much, Mr. Chairman, for this time.
Senator Bond. Thank you very much, Senator Boxer.
Senator Burns.
STATEMENT OF CONRAD BURNS
Senator Burns. Move on.
Senator Bond. Thank you very much, Senator Burns. That is
one of your best statements yet. [Laughter.]
Senator Burns. Coming from you, I will accept that as a
compliment.
Senator Bond. That is how it was meant, Senator.
Senator Wofford, we are delighted to have you with us
today. As you will understand, we will make your full statement
a part of the record and would welcome your highlighting those
items which you think ought to be called to special attention
for this subcommittee.
Please begin.
statement of harris wofford
Mr. Wofford. Mr. Chairman, Senator Bond, Senator Mikulski,
Senator Boxer, Senator Campbell, Senator Shelby, Senator Burns:
I look forward to reading Senator Shelby's remarks and anything
Senator Burns has to say now or in the future.
I appreciate this opportunity to discuss the progress and
the plans of the Corporation for the coming year. Our budget
request is for $548 million for the programs authorized under
the National and Community Service Trust Act, and these funds
would support approximately 29,500 AmeriCorps members through
the grant program and 1,600 members in the National Civilian
Community Corps.
The request includes $53 million to support the Learn and
Service America, K through 12, and higher education programs,
and $6 million for the Points of Light Foundation initiated by
President Bush, which has become a special partner of ours both
in the summit and in many other ways.
By the way, Senator Mikulski, I am delighted to introduce
Marilyn Smith of Maryland, who is just taking over as the
director of the Learn and Serve America Program.
Senator Mikulski. I was going to introduce her when I do my
questions.
Mr. Wofford. She was executive director of the State
Commission in Maryland and a pioneer in service learning.
Now, my testimony does not address the VISTA section of
AmeriCorps or the Senior Corps programs funded under the
Domestic Volunteers Service Act. Mr. Chairman, I appreciate
very much your support over the years for VISTA and its 30-year
track record as the first domestic Peace Corps, of helping
people and communities help themselves.
By the way, I hope the VISTA approach is, in fact, going to
be a larger proportion of the overall AmeriCorps scheme.
I want to make three points: First, that national service
works. It is a proven way to leverage volunteers and help to
solve community problems; especially the critical problems of
children and youth.
Second, that we are committed to achieving the highest
levels of integrity and efficiency. We have already taken
important steps to cut costs, increase efficiency, and develop
a sound financial management system.
Third, I want to outline briefly three initiatives--America
Reads, National Service Scholars, and the Presidents'
Philadelphia Summit, Presidents plural, as Senator Mikulski
pointed out, to be chaired by Gen. Colin Powell. Those
initiatives can help unleash a new wave of voluntary citizen
action aimed at solving some of our country's most serious
problems in a decentralized, nonbureaucratic way.
There are very few programs that have received the same
level of scrutiny as AmeriCorps. The conclusion of the
evaluations and reports and the experience of communities
across America, reflected in so many Governors' support for
Corporation programs, is that national service works, helping
to solve the toughest problems of education, crime, drugs,
illiteracy, homelessness, environmental problems.
As I detail in my written testimony, Aguirre International,
an evaluation firm headed by President Ford's Education
Commissioner, found significant accomplishments in every area
in which AmeriCorps members serve. Nowhere is AmeriCorps having
a more profound effect than in education. More than one-half of
all AmeriCorps members work with children and youth. They
teach, tutor, run after school programs, do drug prevention
work, create safe havens and safe corridors, and organize
secondary, middle school, and university students themselves to
serve.
Thousands of AmeriCorps members serve as mentors or are
recruiting mentors to work one on one to help children do
better in school. AmeriCorps members are also in the front
lines in the fight against crime. They organize crime watch
groups, work to reduce gang violence and help crime victims.
Their efforts have won extraordinary praise from police chiefs
and sheriffs around the country.
A key to understanding AmeriCorps is the degree to which it
leverages unpaid volunteers. Originally there was some concern,
and there is still in some people's minds, that there is a
contradiction between full-time service with living allowances
and traditional unpaid volunteering, when exactly the opposite
is the case.
Very often, in most cases you cannot use large numbers of
unpaid volunteers without a cadre of full-time people to make
it possible. Right now today there are two teams of the NCCC,
National Civilian Community Corps, who have gone right away on
the call of FEMA, as they also do on the call of the Red Cross,
to the disaster area in Arkansas. They help organize unpaid
volunteers. They come quickly. They work night and day. They
stay until the job is over.
Because members serve full time every day, they help the
nonprofits in which they serve to multiply the number and
effectiveness of unpaid volunteers. Habitat for Humanity is a
case in point. At the Habitat site in Miami, 2 dozen AmeriCorps
members helped recruit, and worked alongside, thousands of
community volunteers to build 50 new homes.
Aguirre International found that each AmeriCorps member
recruited, trained, and supervised an average of 12 unpaid
volunteers. The hundred projects in our Learn and Serve America
Higher Education Program have generated the service of an
additional 27,000 volunteers. These numbers will continue to
grow as we put extra emphasis on volunteer generation.
National service is cost effective. Three separate
independent evaluations have examined the costs and benefits
and have concluded that it is a wise investment that returns
from $1.54 to $3.90 for every dollar invested. That is one
reason Massachusetts Gov. Bill Weld has said it is the wisest
investment of taxpayers' money he could think of.
On another front, AmeriCorps is living up to its GI bill
promise of expanding educational opportunity for those who
serve, especially those from America's hardworking middle
class. Last year 55 percent of AmeriCorps members came from
households with incomes of from $10,000 to $50,000. Another 21
percent come from homes with less than $10,000 income. The
National Service Trust has already made more than 26,000
payments totaling $44 million to over 6,000 education and loan-
holding entities.
The Corporation is a lean, decentralized, and responsive
public-private partnership that is locally based. Grants go to
local nonprofit groups--schools, colleges, universities, faith-
based groups--more than 430 such through AmeriCorps alone.
These groups decide what service will be performed and they
select and enroll the members.
Two-thirds of these grants are made by Governor-appointed
State commissions. The other one-third go to national
nonprofits, such as Habitat, the Red Cross, and the Boys and
Girls Clubs.
National service is competitive. States compete for
Corporation resources and local programs compete for AmeriCorps
members. Programs that do not perform get eliminated. Since
AmeriCorps started, 70 programs have not been renewed for
additional funding.
National service uses rigorous evaluation to improve
quality. Right now 14 separate studies related to AmeriCorps
are being conducted or planned, most by outside evaluators. In
addition, we require every AmeriCorps program to design annual
objectives based on measurable outcomes--reading scores raised,
children immunized--and check their progress through the year.
This is a cutting edge initiative in the nonprofit sector.
All the programs of the Corporation are nonpartisan in
spirit and in construction. By law, State commissions are
comprised of a balance of Democrats and Republicans.
Commissions are appointed by Governors, three-fifths of whom
are Republican. Bipartisanship is built in.
Perhaps no other issue has generated so much confusion and
misinformation as the issue of costs. AmeriCorps members who
serve their community full time for a year receive a living
allowance that averages about $150 per week or $7,800 per year,
going up under cost-of-living formulas to a little over $8,000
in the coming year--not $18,000, not $27,000, not $50,000, as
some critics have stated.
After the corpsmember completes a year of full-time
service, he or she earns an educational award of $4,725 to be
used at some point over the next 7 years. There is an
additional allotment for health care. The total base support
for the AmeriCorps member amounts to about $13,000 in living
allowance, health insurance, and education award.
The total average cost from the Corporation's
appropriations per AmeriCorps member has been a little over
$18,000 and it is going down. The steps we have taken to cut
costs include eliminating grants to Federal agencies, planning
grants, and member relocation costs. We have raised the local
match from 25 percent to 33 percent, requiring grantees with
above-average costs to cut costs by 10 percent this last year
and expanding the number of education awards only--a good idea
that Senator Grassley has strongly pressed for.
In this program, the Corporation provides education awards
to nonprofits, religious organizations, colleges, and others
who agree to provide the AmeriCorps member's living allowance.
We have already approved 2,000 of these assignments, including
a new partnership with the Boys and Girls Clubs of America to
support 800 AmeriCorps members. The National Council of
Churches will sponsor more than that number.
Furthermore, last May I announced an ambitious plan for
reducing AmeriCorps costs. We are reducing the average cost per
member to $17,000 in program year 1997--that is including
education award and everything--to $16,000 in 1998 and to
$15,000 in 1999.
This includes all of the items that I have listed above
including recruitment, training, and all our program support.
Senator Bond. Mr. Wofford, we turned off the light and let
you go a little longer than the 5 minutes we had forecast. We
do have four others to do. It has been about 15 minutes and I
hate to do this, but we have a heavy schedule today. If you
could wrap up.
Mr. Wofford. I will try to wrap up fast. Thank you, Mr.
Chairman.
The handling of the Corporation's financial management
problems demonstrates our commitment to change and reform. My
top priority, shared actively by our Corporation's Board of
Directors, is getting our financial house in order. Under the
leadership of our new chief financial officer, Donna
Cunninghame, we are making steady progress toward producing
auditable books and correcting deficiencies. Our goal is to
build a sound financial management system and make the
preparation of auditable financial statements a routine
operation.
The $38 million, Mr. Chairman, that you mentioned a little
earlier, in fact, is money that Ms. Cunninghame, tells me has
been brought down to the neighborhood of $28 million. With some
further adjustments it will come down more.
Last, the three initiatives. The America Reads campaign
launched by President Clinton, endorsed by so many Governors
and mayors, is----
Senator Mikulski. Senator Wofford, just to help you out
here and move along with the chairman, and not to interrupt
your testimony, but I have two questions related to America
Reads and also to the Presidents', the multiple Presidents'
summit, the Colin Powell, and perhaps we could come to those
two issues in my question.
Mr. Wofford. Very good.
Senator Mikulski. And you could brief us on that and
through that question.
Mr. Wofford. I will await your question. That help is
welcome, Senator Mikulski.
I might say that the one other initiative other than the
American Reads and the Presidents' summit is the National
Service Scholars Program for which we are asking $10 million.
In his commencement speech at Penn State, the President called
for service to become part of the ethic of every school in
America. To help make this happen in every high school, he
announced the National Service Scholars Program, which will
reward high school juniors and seniors who do outstanding
service with a $1,000 college scholarship, $500 of which will
come from the Corporation and $500 from local sponsors.
The Corporation has contracted with a private foundation to
administer this program, which will begin making its awards
this spring.
PREPARED STATEMENT
I will conclude by saying that national service fits the
era in which big Government is over because the era of big
citizens is beginning. The other side of reinventing Government
is reinventing and reinvigorating citizenship. National service
reduces our reliance on Government by mobilizing citizen
action. It helps communities solve problems in their own
ingenious ways. It strengthens the building blocks of civil
society. It is a smart and wise investment and there are
compelling reasons why it should be continued, not despite
tight budget times but because of them.
Thank you, Mr. Chairman.
[The statement follows:]
Prepared Statement of Harris Wofford
Mr. Chairman and members of the Subcommittee, I appreciate the
opportunity to appear before you today to review the Corporation's
progress over the last year and to report about our plans for the
future.
The total fiscal year 1998 budget request from this Subcommittee
for programs authorized under the National and Community Service Trust
Act is $546,500,000. In addition to this amount, we are seeking a
separate appropriation of $2,500,000 from this Subcommittee for the
Office of the Inspector General.
These funds will provide for approximately 29,500 AmeriCorps
members through grant programs and approximately 1,600 AmeriCorps
members through the National Civilian Community Corps (NCCC) program.
(Participants in the AmeriCorps*VISTA program, funded through the
Subcommittee on Labor, HHS, Education, and Related Agencies, will bring
the total to 35,000 AmeriCorps members.)
The amounts requested represent an increase of $146,500,000, or 36
percent over the fiscal year 1997 funds appropriated by this
Subcommittee for national service. The increase is targeted to the
America Reads initiative, the challenge to Americans to help all
children read well and independently by the end of the third grade.
National service's role will be specifically outlined in legislation to
be presented to the Congress later this month.
The budget request will cover the costs of making the current
District of Columbia NCCC deployment site a permanent campus, expanding
other campuses, and establishing a new campus in a region of the
country not currently served by the NCCC. In addition, these funds
provide an increase in support to service-learning initiatives in K-12
schools, community organizations, and institutions of higher education
through the Learn and Serve America program.
For three years, national service has had proven, positive results
in improving America's communities. National service programs have been
``getting things done'' and expanding educational opportunities,
improving the environment, enhancing public safety and meeting other
human needs. Outside experts have found that representative programs
have achieved positive cost-benefit ratios that merit and justify your
continued support.
GETTING THINGS DONE
In the three years since the program was created, 70,000 AmeriCorps
members have served in over 1,800 non-profit operating sites.
A 1996 independent evaluation of AmeriCorps programs by Aguirre
International--headed by President Ford's Commissioner of Education--
examined the activities of one out of every ten AmeriCorps members then
serving. Aguirre found that this small-but-representative sample of
individuals:
--Taught, tutored, or mentored almost 64,000 students.
--Collected, organized, and distributed 974,000 pounds of food.
--Helped 2,550 homeless people find shelter.
--Developed and distributed 38,500 sets of information about drug
abuse, HIV/AIDS, street safety, health care, and other issues.
--Ran violence-prevention after school programs for 50,000 youth.
--Performed energy audits for more than 18 million square feet of
buildings.
--Planted more than 210,000 trees.
AmeriCorps members have similar achievements in every state over
the last year.
The 78 AmeriCorps sponsored by the Montana Conservation Corps
repair the homes of elderly and low-income residents, restore and
protect natural resources, improve the habitat of wildlife, and
increase the public's access to natural sites. The AmeriCorps members
also mentor at-risk youth while engaging them in service.
The Fort Belknap Community Council's New Vision Youth Serve is a
program supported by a Learn and Serve America K-12 grant, run by and
for this Montana tribe. The Fort Belknap Tribal Education Department,
College Safe Future Program, Housing Authority, Youth Council, and
Tribal Health Department are developing a network of community service
centers on the tribe's reservation to address public safety, human and
environmental needs.
The Blue Hills AmeriCorps program engages 18 AmeriCorps members in
partnership with the Kansas City, Missouri Police Department to help
close drug houses, reduce crime by reporting drug activity, establish
safety corridors, and train youth and adults in conflict resolution.
This year, Blue Hills AmeriCorps members recruited and trained 734
volunteers to serve as school bus stop guards at 62 school bus stops.
Over the last three years, more than 50 drug houses were closed down,
some of which have been taken over by the city and are being
rehabilitated as affordable single-family housing for low income
families.
In Birmingham, Mobile, and Montgomery, Alabama and 17 other cities
in nine southern states--the Alliance for Catholic Education (ACE)
provides teachers and other resources for under-resourced parochial
school systems through a Learn and Serve America: Higher Education
grant. ACE and the University of Notre Dame are matching every
Corporation dollar with 13 dollars for the 1996-97 program year. ACE
Learn and Serve members are graduates of several top college
institutions of higher education, including Notre Dame, Duke,
Georgetown, and Boston College.
The 28 AmeriCorps members sponsored by the American Youth
Foundation's St. Louis Partners for Service Education tutor and assist
teachers in developing projects related to literacy, the environment,
first aid, and substance abuse prevention. The AmeriCorps members have
recruited more than 100 parents to assist in classrooms and other
educational support activities.
Twenty AmeriCorps members sponsored by the Notre Dame Mission
Volunteer Program and the Sisters of Notre Dame are serving at eight
schools, community centers, and soup kitchens across Baltimore,
Maryland. Sharonne Henderson, a Notre Dame--AmeriCorps member who
tutors children at City Springs Elementary School, recognized that one
of her students had significant trouble seeing. The child was tested,
diagnosed as having a cataract, and fitted with glasses. Ms.
Henderson's presence, attention, and concern led to the early detection
and treatment of this very serious condition. The Notre Dame Mission
Volunteer program also sponsors 48 other AmeriCorps members who serve
in Boston, Massachusetts, Cincinnati, Ohio, and Apopka, Florida.
The 173 AmeriCorps members of the United Youth Corps of Maryland
maintain and restore 15 state forests, parks, and wildlife management
areas. Members rehabilitate abandoned houses and construct community
parks in low-income Baltimore neighborhoods, tutor students with
special needs, and serve as teachers' aids.
In Alaska, AmeriCorps members serve in more than 30 communities to
improve environmental education, recycling, sanitary waste management,
early childhood education and tutoring. Members serve in rural areas
such as Hooper Bay and Nulato.
Students at the Cape May County (New Jersey) Technical High School
in New Jersey are working with Habitat for Humanity in a program
sponsored by Learn and Serve America K-12. The students build houses on
the school property which are then transferred to lots throughout the
area. The program was recently named a Best Practice/Star School in the
category of Public Engagement by the New Jersey Department of
Education--the only one of 1,000 programs under consideration to win
that distinction.
Twenty-four AmeriCorps members sponsored by Vermont's Northeast
Kingdom Initiative Program are serving youth, unemployed or under-
employed adults, and the elderly in a three-county area--one of the
poorest and most rural areas in the nation.
Twenty-two Kern County School District AmeriCorps members in
California's Central Valley are tutoring 600 students in the 1996-97
school year. Over half of the students tutored are now reading at or
above the standard for their grade levels.
Twenty-two AmeriCorps members in the Idaho TRIO AmeriCorps program
have leveraged the assistance of 369 volunteers to tutor 1,997 at-risk
K-12 students. Seventy percent of the students tutored showed
improvement of their school performance by at least one grade. The
AmeriCorps members have also advised 863 students regarding career
choices and assisted 338 Idaho teachers through in-class and other
support. AmeriCorps members were able to encourage AmeriCorps host
agencies to contribute more than 2,169 hours to support the service of
members. One student said of the program, ``I can feel good about
myself. I'm proud of myself. I feel even better about my dream to go to
college.''
Now in its third year of operation, twenty AmeriCorps members in
the Iowa Coalition Against Domestic Violence Program, a statewide
AmeriCorps program, have made 12,464 contacts with victims of domestic
abuse (250 percent of their goal), assisted over 1,000 women in
obtaining pro se protective orders (133 percent of their goal), and
provided 371 educational programs for Iowans ranging from elementary
school children to senior citizens (77 percent of their goal). This
program has been very effective in engaging another 400 non-AmeriCorps
volunteers to provide 160,000 hours of additional services to victims
of domestic violence. AmeriCorps members serve in similarly effective
programs across the country, including the New Hampshire Coalition
Against Domestic and Sexual Violence's AmeriCorps Victim Assistance
Program. This program, and others, in New Hampshire prompted former
Governor Stephen Merrill to state that ``the national service program
has been a great success in the state of New Hampshire and I anticipate
it will continue to be in the future * * *. These motivated individuals
make AmeriCorps work for New Hampshire and I am pleased to be a partner
in this process.''
In addition to environmental and disaster relief work across the
region, AmeriCorps National Civilian Community Corps (NCCC) members
based at Colorado's Lowry Air Force Base have achieved significant
results in Denver schools. Over the last year, the 14 corpsmembers who
served at Denver's Capitol Hill Children's Center helped kindergarten
students improve their language-skills test scores by an average of two
years. Thirteen other corpsmembers served as mentors to the first-
through fifth grade students at the Smith Renaissance Academy.
Together, the students and corpsmembers produced a school newspaper,
which allowed the students to develop reading, writing, and research
skills while preparing stories about their community. An additional 14
AmeriCorps*NCCC members served at the Columbine Elementary School,
where they helped set up a new school building designed to house a
program focusing on the first- and second-grade students' literacy
skills. These NCCC members tutored students who needed special
assistance and designed an after-school program for primary students
and their parents.
These examples quantify the immediate effects of national service.
While we can measure the value of the bridge AmeriCorps members helped
repair or estimate the cost to society had AmeriCorps members not
tutored children in need, some benefits of the Corporation's programs
are not immediately measurable. By instilling a sense of pride in a
community, by establishing community volunteer programs, and helping
prepare children for their first days of school, AmeriCorps members
help to crack the atom of civic indifference creating a chain reaction
whose effects transcend quantification and are felt in a myriad of
ways.
DEMOGRAPHICS
The strongest links in this chain are the AmeriCorps members.
AmeriCorps members mirror the diversity of the communities in which
they serve and look like a cross-section of 21st century American
cities. Preliminary demographic information on current participants in
AmeriCorps grants programs and the NCCC are similar to those of the
first and second years of the program. Approximately one in two
AmeriCorps members are white, slightly less than one in three is
African American, and one in six is Hispanic. Initial data shows
approximately four percent of these current AmeriCorps members are of
Native American, Asian or Pacific Islander heritage.
Data about the levels of education already achieved by AmeriCorps
members suggests an important trend: in each of the three years of
AmeriCorps, the percentage of participants who already earned their
bachelor's degree, spent some time in graduate school, or earned a
graduate degree has increased. In the 1994-95 program year, these three
categories comprised 29 percent of AmeriCorps members. The sum grew to
35 percent in 1995-96, and preliminary data for the 1996-97 program
year indicates another increase, to 36 percent.
AmeriCorps expands opportunity in exchange for responsibility for
the broad middle class. In the 1995-96 program year, 56 percent of the
AmeriCorps members came from households with annual incomes of less
than $30,000. (The Corporation receives no information about the
household family income of AmeriCorps members until the end of the
program year.)
The Subcommittee should note that for the current, 1996-97 program
year, all of these figures may reflect a shift in the balance between
urban and rural communities because the Corporation has eliminated
AmeriCorps grants to other federal agencies. Some rural programs that
utilized AmeriCorps members and worked with local offices of the United
States Department of Agriculture or other agencies no longer exist. The
Corporation is making a concerted effort to restore and increase rural
representation in the AmeriCorps program.
EXPANDED OPPORTUNITY
Over the last three years, AmeriCorps has enabled 70,000 Americans
to serve their communities in exchange for expanded opportunity.
Approximately 45,000 of these individuals were participants over the
first two years of AmeriCorps, and are eligible to earn national
service education awards. The remaining 25,000--who are currently in
the midst of their year as AmeriCorps members--will earn education
awards when they complete their terms of service. Those who have
completed their terms of service have seven years within which to use
their education awards.
The National Service Trust has already made over 26,000 payments
totaling approximately $44 million to over 6,000 education and loan-
holding entities. Currently, the Trust is averaging over $600,000 in
payments weekly. This number will increase as more and more members
avail themselves of their education award.
COST--BENEFIT
Independent evaluators have repeatedly proven that national service
yields a positive return on investment. The authors of each study have
cautioned that their findings probably underestimate the benefits of
national service significantly, because the full value of safer
streets, stronger schools, cleaner rivers, and the like are difficult
to quantify and not seen immediately.
--In the ``Cost-and-Benefit Study of Two AmeriCorps Projects in the
State of Washington,'' the Northwest Regional Educational
Laboratory concluded that every dollar invested in these
Washington State projects yielded a return up to $2.40 in
addition to less-easily measured benefits.
--To analyze their significant investments as AmeriCorps private
sponsors, the Charles A. Dana, IBM International, and James
Irvine Foundations commissioned a team of noted conservative
``Chicago School'' economists to examine more than 70
AmeriCorps sites in Austin, Texas; Columbus, Ohio; Atlanta,
Georgia; Charlotte, North Carolina; New York City; and northern
California. In their report called ``The Benefits and Costs of
National Service,'' Kormendi/Gardner Partners predict that for
every dollar AmeriCorps invests, the public will realize up to
$2.60 or more in direct, measurable benefits.
--The University of Minnesota, in the ``Youthworks-AmeriCorps
Evaluation First Year Report'' on projects across Minnesota,
found benefits up to $3.90 for each dollar invested in these
programs.
A study of the Learn and Serve America: K-12 completed by Brandeis
University and Abt Associates concluded that ``on average, the programs
in the intensive study sites produced about $3 in direct community
benefits for every dollar in program costs.''
When Massachusetts Governor Bill Weld swore in his State's
AmeriCorps members this fall, he explained how ``every taxpayers'
dollar we spend on AmeriCorps comes back threefold, when we add up the
value of your innovative ideas, your physical labor, and all of the
skills you'll bring to the workforce when you finish your education.''
That's why he calls AmeriCorps ``one of the most intelligent uses of
taxpayer dollars ever.''
AMERICA READS
These demonstrated successes led President Clinton to give national
service a major role in the America Reads Challenge. The America Reads
Challenge is a national campaign to ensure that every child can read
well and independently by the end of the third grade. The President has
proposed that money from the Corporation's budget be used so members of
AmeriCorps may play a key role in recruiting, training, and organizing
the new army of 1,000,000 volunteers who will tutor young children.
The increasing complexity of today's jobs and society amplifies the
importance of literacy. Research shows that if students cannot read
well by the end of third grade, their chances for later success are
significantly diminished--including a greater likelihood of dropping
out of school and other delinquent behavior.
Poor literacy skills are one of our nation's most serious problems.
Recent testing by National Assessment of Educational Progress found
that 43 percent of America's fourth grade students in public schools
scored below the basic reading level. Education outside the classroom
is essential to improving reading skills. A U.S. Department of
Education study, ``Reading Literacy in the United States'', found that
fourth-grade average reading scores were 46 points below the national
average where principals judged parental involvement to be low, but 28
points above the national average where parental involvement was high--
a difference of 74 points. Reading is a skill that is developed not
only in the classroom, but also outside of school in the home. To this
end, America's Reading Corps will mobilize tutors to work with reading
teachers, principals, libraries and community-based organizations to
provide individualized after-school, weekend and summer reading
tutoring for more than 3 million K-3 students and their parents.
There are several parts to the America Reads Challenge, including:
the Reading Corps, which will tutor children in grades K-3 who need
extra help; the Parents as First Teachers program, which will assist
parents in helping their children; expansion of Head Start programs;
and a challenge to the private sector to work with schools as they have
with the Department of Education's Partnership for Family Involvement
in Education and the READ*WRITE*NOW! initiative. The Reading Corps is,
the heart of the program that is proposed to be funded at almost $2.5
billion over 5 years, will provide reading specialists and tutor
coordinators to train and supervise the tutors.
The President has asked for national service's participation
because we are well equipped to handle this challenge. Many of our
programs have strong track records helping children improve their
reading skills and assist parents in becoming an essential part of
their children's education.
For example, the Home Instruction Program for Preschool Youngsters
(HIPPY) has had a remarkable record of preparing children for success
in school before their first day of kindergarten. AmeriCorps Members in
16 States and 43 HIPPY Sites serve as resources for parents, especially
single mothers on welfare. They make home visits every two weeks to
help young mothers improve their basic parenting skills and provide
their children with an enriched preschool experience. In doing so,
AmeriCorps Members often instill in parents an interest in their
children's education, and this interest spurs them to be more effective
partners with their children's classroom teachers. Programs like HIPPY
that ensure children have basic learning skills before entering the
classroom make it more likely that the children will be able to read
well by the end of third grade.
In another program, Parents and Children Together in Learning
(PACT), Learn and Serve America members through Harcum College, in Bryn
Mawr, Pennsylvania bring parents back to school to teach them how to
help their child read. Working with School District of Philadelphia,
PACT trains inner-city parents to be volunteer tutors in their
children's classrooms. PACT enrolls parents who participate in the
program in Bryn Mawr classes for two weeks to teach them how to be a
tutor. As a result, nearly 450 parents have improved their own skills
while tutoring more than 4,000 children. The parents earn college
credit for participating in the program.
In Simpson County, Kentucky, 25 AmeriCorps members work directly
with elementary school students to boost reading comprehension and
nurture a love of books. The program is called SLICE (``Service
Learning Impacting Children's Education'') and it gets results. By the
end of the first year of the program more than 100 of the 122 tutored
students in the county had improved their reading scores by at least
two grade levels.
The SLICE program exemplifies some less obvious benefits of
AmeriCorps literacy programs. The program has been successful in
improving the reading ability of students, and has helped develop
community involvement in the process. Small business owners, local
members of the American Association of Retired People (AARP), a retired
teachers group, and even the entire staff of the local city hall have
pitched in on the reading effort. Each SLICE AmeriCorps member recruits
an average of 16 unpaid volunteers.
By fostering community support, SLICE has achieved what we strive
for in every national service program--a sustainability that is not
dependent on any one individual or even a core group of original
volunteers. This is how service can take root and grow to become a
natural part of the life of a community.
NATIONAL SERVICE SCHOLARS PROGRAM
The President announced the National Service Scholars Program in
his June, 1996 commencement address at Pennsylvania State University.
To qualify for the National Service Scholars Program, students must be
juniors or seniors in high school who have performed community service
for at least a year and who have been nominated by their principals.
Recipients will receive a check for at least $1,000 for college costs,
of which $500 will come from the National Service Trust and at least
$500 will come from local scholarship sponsors.
The Administration's 1998 suggested appropriations language sets
aside $10 million for the National Service Scholars program. This is
consistent with the mission of the National Service Trust, which was
established as a repository for education awards for participants in
national service programs.
In accord with our commitment to reinventing government, a private
501(c)(3) foundation, the Citizens' Scholarship Foundation of America,
will administer the National Service Scholars Program. A competitive
announcement was made in the Federal Register for this cooperative
agreement, and the Citizens' Scholarship Foundation of America was
chosen from a pool of seven highly qualified applicants. The Foundation
has a 35-year history of encouraging and rewarding community service by
youth through its Dollars for Scholars and other programs. Last year,
the Citizens' Scholarship Foundation of America distributed close to
$40 million in scholarships. The Corporation for National Service is
pleased to rely on the talents of the Citizens' Scholarship Foundation
of America to administer the National Service Scholars program.
THE PRESIDENTS' SUMMIT FOR AMERICA'S FUTURE
The Presidents' Summit for America's Future will, with the
sponsorship of private foundations, bring together people from all over
the nation who are committed to stimulating service and community
volunteerism to ensure our youth have access to the resources that will
help them lead healthy, fulfilling, and productive lives. It is a
bipartisan endeavor convened by President Clinton and former President
Bush as honorary Co-Chairmen, retired General Colin Powell as Chairman,
and former Secretary of Housing and Urban Development Henry Cisneros as
Vice Chairman.
Summit sponsors include the Robert Wood Johnson Foundation, the
Ewing Marion Kauffman Foundation, the W.K. Kellogg Foundation, the
David and Lucille Packard Foundation, and the Pew Charitable Trusts.
Community delegations from more than 100 cities and rural
communities, state delegations led by the nation's governors, and
leading citizens from the public and private sectors will come to this
summit with concrete commitments to increase young people's access to
one or more of five critical resources: An ongoing relationship with a
caring adult: mentor, tutor, or coach; safe places and structured
activities during non-school hours to learn and grow; a healthy start;
a marketable skill through effective education; and an opportunity to
give back through community service.
Commitments that have already been made include:
--Big Brothers/Big Sisters has committed to doubling their mentoring
relationships, reaching 200,000 matches through the year 2000.
More important, service will become an integral part of the
mentoring relationship and a key activity for current and
future ``Bigs and Littles.''
--LensCrafters will provide one million needy people, especially
children, with free vision care by the year 2003.
--AT&T has committed $150 million to connect the country's 110,000
public and private elementary and secondary schools on the
Information Superhighway by the year 2000.
--The United States Army is taking the lead in encouraging a joint
effort among the military services to expand opportunities for
active-duty, reserve, and retired military personnel to
volunteer their time as mentors and tutors in their local
communities.
--The National Association For Equal Opportunity in Higher Education
(NAFEO) has promised that half of the approximately 140,000
students enrolled in 117 Historically and Predominantly Black
Colleges and Universities will volunteer as tutors and mentors.
--The presidents of 21 colleges and universities, including San
Francisco State University, the Vermont State Colleges System,
the University of Montana, the University of Maryland College
Park, the Community College of Denver, and the California State
University System have committed half or more of their
increases in work-study funds to community service initiatives
focusing on youth literacy.
The Corporation for National Service is working alongside the
Points of Light Foundation in initiating and planning the Summit to
promote the goals of the National and Community Service Trust Act, the
mission of the Corporation, and the vision set forth in the
Corporation's Strategic Plan.
The Presidents' Summit for America's Future has already created a
surge of interest from the media, community service organizations, and
corporate sponsors nationwide. We are looking forward to working
alongside those who will participate in the efforts coordinated at this
Summit to increase youth's access to fundamental resources and real
opportunity.
MANAGEMENT CONCERNS
As Chief Executive Officer, my top priority--shared by the
Corporation's Board of Directors--is putting our financial house in
order. We are making steady progress in doing so. Our new Chief
Financial Officer, Donna Cunninghame, and her staff are in the process
of improving business processes and implementing appropriate management
controls.
Ms. Cunninghame is a Certified Public Accountant. She and her staff
have experience in both public and private sector accounting. Ms.
Cunninghame served as the first full-time Chief Financial Officer of
the Resolution Trust Corporation, and achieved three clean financial
audits from the United States General Accounting Office (GAO) during
that time. As Chief Financial Officer of the University of Maryland
System, Ms. Cunninghame was directly responsible for all of its
treasury, accounting, and financial operations. Ms. Cunninghame's staff
also has expertise developing and implementing the type of corrective
action necessary to resolve the Corporation's problems.
The Corporation's Inspector General, based on the work done by two
independent auditing firms, found our fiscal year 1994 financial
statements to be inauditable. The difficulty stemmed from the unusual
creation of the Corporation, which merged existing service programs
with the new service initiatives. The Corporation inherited
organizations that had never before been required to present their
financial data in the manner now required under the Government
Corporation Control Act. The difficulties we had are common to most
federal entities required to produce auditable financial statements in
a corporate style. Though initial inauditability may be common, it is
unacceptable. We are aggressively working to produce auditable books.
Arthur Andersen, hired by the Corporation's Inspector General,
produced an audibility report which identified 99 problems. Arthur
Andersen reviewed our efforts to implement their recommendations--they
looked at our progress on 62 issues and found 28 to be completed.
By the time the written report of the review was issued in December
of 1996, Ms. Cunninghame, based on her experience producing clean audit
reports, determined that 57 items were then corrected or in the process
of implementation. The remaining 5 of the 62 reviewed items were
related to activities that require substantial time and effort to
complete. We are working on correcting those problems.
By March 1, 1997 we expect to have corrected or be in the process
of implementing an additional 31 of the 99 items. Ms. Cunninghame has
expressed to me her expectation that by May 1 of this year, all but two
of the 99 problems will be corrected or in the process of
implementation. One of those two corrections is the implementation of
the new financial management system which we are preparing to do in
1998. The second is a minor item that is difficult to correct now but
will be easy to correct when the new system is in place: a process by
which the budget obligation to pay for a purchase is entered into the
system before a purchase order is entered. When implemented, this will
be an automatic part of the process.
I can report that the Corporation is making steady progress in
establishing financial order. We are eschewing ``quick fixes'' in favor
of systematically cleaning up data integrity problems while
implementing appropriate managerial controls. By the time we install
our new financial management system in 1998, the goal is that the
underlying data will be scrubbed and reliable, business practices will
be improved and effectively controlled, and fully auditable statements
reflecting the Corporation's financial status should become routine.
CUTTING COSTS AND OTHER CHANGES
When I spoke with you last year, I outlined an early version of the
Corporation's agreement with Senator Grassley to reduce costs and
address other issues of concern to our critics. Working together, we
improved AmeriCorps by reducing expenditures and expanding the number
of individuals who will benefit from the opportunity to serve. The
Corporation has committed itself to lowering its cost-per-member in the
AmeriCorps grants programs by $1,000 in each of the next three years,
starting with the programs set to begin this fall. The AmeriCorps
budgeted average cost for programs supported with fiscal year 1998
funds will be $16,000, including the education award. By the fall of
1999, the cost will be down to $15,000 per member.
This figure includes all Corporation costs, including the
Corporation's share of members' living allowance and benefits, the
grant for program support, and the administration directly attributable
to AmeriCorps grants by the Corporation and our support of the
Governors' Commissions on National Service. (These numbers are indexed
for inflation and assume that there will be funds appropriated to
support no fewer than 25,000 AmeriCorps members each year.)
Over the last year, the Corporation has made many other changes to
improve our efficiency. We have made improvements in our grant review
process and increased the control the Governors' Commissions on
National Service have over program decisions.
The Corporation has also increased our collaborations with national
non-profit organizations, particularly by expanding the AmeriCorps
``education-award-only'' program.
In this program, the Corporation provides education awards to
individuals who are serving in traditional non-profits and whose
service qualifies them for education awards. These non-profits include
religious organizations, colleges and universities, and other
institutions which have applied to the Corporation and shown they are
able to provide living allowances and other resources for these
AmeriCorps members.
For example, the Boys and Girls Clubs of America are now supporting
800 AmeriCorps members in this way, using them to engage the youth in
Boys and Girls Clubs in community service. Currently, 2,000 AmeriCorps
members are sponsored through this program, and the Corporation plans
to announce agreements with non-profits which will sponsor up to 3,000
more AmeriCorps members in coming weeks.
THE CAP ON NATIONAL DIRECTS
Currently, 43 national non-profits sponsor 2,500 AmeriCorps members
through National Direct grants. Millard Fuller, founder and President
of Habitat for Humanity International, explained that ``as AmeriCorps
members gain in construction skill, our Affiliates are able to expand
the number of occasional volunteers through increased capacity to
supervise and manage volunteers.'' Fuller later announced at a
Washington, DC press conference that ``I want you to know that we at
Habitat for Humanity feel privileged and honored to have the AmeriCorps
people with us, and we want more of them, as time goes on. We love to
be partners with you in this work, and I salute all the AmeriCorps
people.''
Under the Corporation's authorizing statute, one third of the
AmeriCorps grants funds are directed to National Direct programs. In
fiscal year 1997, this corresponds to $71.7 million; for the proposed
fiscal year 1998 budget, this corresponds to $98.7 million. If the
fiscal year 1997 $40 million cap on national directs is not removed,
the shortfall of funds will prevent as many as 13 of these non-profits
from sponsoring AmeriCorps members this fall. All current national
direct programs--including Habitat for Humanity, the U.S. Catholic
Conference, the National Council on Aging, the I Have a Dream
Foundation, the Enterprise Foundation, and City Year--will have to
compete against each other for the remaining funds. No new AmeriCorps
national direct grants to national non-profits--such as Big Brothers/
Big Sisters--will be possible.
We are requesting that the fiscal year 1997 cap be eliminated and
that no cap be put in place for fiscal year 1998.
REAUTHORIZATION
The Corporation for National Service's authorization expired on
September 30, 1996. We are now operating under the authority of the
General Education Provisions Act (GEPA) that will expire at the end of
September, 1997. I have met with Chairman Goodling and representatives
of the House Committee on Education and the Workforce to begin the
formal reauthorization process, and am scheduled to meet with Chairman
Jeffords and members of the Senate Committee on Labor and Human
Resources in coming weeks.
Though it is too early to outline specific details about
reauthorization, I expect that any plan to improve national service
through this process will build on the key principles of the current
national service network: flexibility, including the ability to
redirect resources to meet new needs using proven techniques; stream-
lining, including the importance of constantly improving efficiency;
coordination, including maximizing cooperation among programs in a
community; and devolution, including significant state-and local-
control.
I look forward to working with the Congress through both
appropriations and reauthorization to make national service a program
in which all Americans can take pride.
I will be happy to answer your questions.
AMERICORPS MEMBERS BY RACE/ETHNICITY, 1994-1997 \1\
[Percent of members]
------------------------------------------------------------------------
Fiscal years
Race/Ethnicity --------------------------------
1994-95 1995-96 1996-97
------------------------------------------------------------------------
African-American....................... 32 27 29
American Indian........................ 2 2 1
Asian/Pacific islander................. 3 3 3
Hispanic............................... 15 18 16
White.................................. 49 48 42
Other.................................. ......... 2 9
------------------------------------------------------------------------
\1\ 1996-97 enrollment is still underway, therefore, those data are
incomplete.
EDUCATIONAL ATTAINMENT BY AMERICORPS MEMBERS 1994-1997 \1\
[Percent of members]
------------------------------------------------------------------------
Fiscal years
Education level --------------------------------
1994-95 1995-96 1996-97
------------------------------------------------------------------------
Less than high school.................. 9 5 8
High school diploma.................... 21 22 20
AA degree/some college................. 41 39 36
Bachelor's degree/some grad school..... 26 30 28
Graduate degree........................ 3 5 8
------------------------------------------------------------------------
\1\ 1996-97 enrollment is still underway, therefore, those data are
incomplete.
HOUSEHOLD FAMILY INCOME OF AMERICORPS MEMBERS, 1994-1996
[Percent of members]
------------------------------------------------------------------------
Fiscal years
Income range ---------------------
1994-95 1995-96
------------------------------------------------------------------------
$5,000 or less.................................... 8 6
$5,001 to $10,000................................. 12 15
$10,001 to $20,000................................ 16 19
$20,001 to $30,000................................ 18 16
$30,001 to $40,000................................ 12 13
$40,001 to $50,000................................ 11 7
$50,001 to $60,000................................ 7 6
$60,001 to $70,000................................ 5 5
Over $70,000...................................... 11 12
------------------------------------------------------------------------
AMERICORPS MEMBERS BY GENDER, 1994-1997 \1\
[Percent of members]
------------------------------------------------------------------------
Fiscal years
Gender --------------------------------
1994-95 1995-96 1996-97
------------------------------------------------------------------------
Female................................. 61 65 68
Male................................... 39 35 32
------------------------------------------------------------------------
\1\ 1996-97 enrollment is still underway, therefore, those data are
incomplete.
AMERICORPS MEMBERS BY AGE, 1994-1997 \1\
[Percent of members]
------------------------------------------------------------------------
Fiscal years
Age --------------------------------
1994-95 1995-96 1996-97
------------------------------------------------------------------------
Under 21............................... 38 27 26
22-29.................................. 42 47 53
30-37.................................. 9 10 10
38-45.................................. 7 9 6
Over 45................................ 4 6 5
------------------------------------------------------------------------
\1\ 1996-97 enrollment is still underway, therefore, those data are
incomplete.
FULL- AND PART-TIME TERMS OF SERVICE, 1994-1997 \1\
[Percent of members]
------------------------------------------------------------------------
Fiscal years
--------------------------------
1994-95 1995-96 1996-97
------------------------------------------------------------------------
Full time.............................. 70 78 78
Part time.............................. 30 23 23
------------------------------------------------------------------------
\1\ 1996-97 enrollment is still underway, therefore, those data are
incomplete.
Chief Financial Officer
Senator Bond. Mr. Wofford, in last year's budget hearings,
you stated you expected to shortly bring on a Chief Financial
Officer and, in fact, you only recently filled the position.
More recently, Arthur Andersen issued a report on December 9,
1996, which raised serious concerns regarding your
Corporation's progress in correcting deficiencies in financial
systems and management controls. The report concluded, better
than 8 months after our hearing last year, that the
Corporation's internal controls were not adequate--I quote from
the report:
The Corporation's internal controls were not adequate for
an independent auditor to perform an effective and efficient
financial statement audit in accordance with generally accepted
auditing standards for fiscal year 1995,
and that
an audit of the Corporation's fiscal year 1996 financial
statements may not be possible because many significant
deficiencies remain uncorrected throughout the year.
At what point do you expect the Corporation to have
established adequate internal controls for the independent
auditor to perform an effective and efficient financial
statement audit of the Corporation's financial statement, and
when do you anticipate having auditable financial statements
for 1995 and 1996?
Mr. Wofford. Ms. Cunninghame came aboard as a consultant in
October.
Ms. Cunninghame. I came on board as a consultant August 5.
Mr. Wofford. And in October you received a----
Ms. Cunninghame. Recess appointment.
Mr. Wofford [continuing]. Recess appointment, because her
nomination did not get through in time, though the Senate
worked hard to try to get her nomination through. She received
a recess appointment in October and has been aggressively
pursuing all 99 items in the Arthur Andersen auditability study
since then.
Her nomination is before the Senate Labor Committee this
very week and we hope very much she will be confirmed very
promptly.
By May 1 we expect to have 97 of the 99 items completed or
in the process of implementation. We expect to have the
remaining two items completed in 1998. One relates to the
implementation of a new financial management system and the
other is an improvement in the procurement process which can
occur simultaneously with the financial management system
implementation.
The inspector general and the Chief Financial Officer have
discussed having an audit performed for the 1997 financial
statements. Statements are going to be prepared for 1996 in
order to provide beginning balances for 1997 and the auditors
will be asked to perform a review of these balances in
connection with their audit.
I am very pleased that the inspector general of our agency
and the Chief Financial Officer have established a professional
working relationship which allows them to work together to
strengthen the Corporation's management controls. I would be
happy to give you a further detailed report.
FINANCIAL STATEMENTS
Senator Bond. My question was when do you anticipate having
auditable financial statements for fiscal year 1995 and 1996.
Given the answer, I gather that you are not expecting one. Do
you have a date when you are expecting to be able to give us
financial statements for those 2 years?
Mr. Wofford. We are hoping to have beginning balances for
1997 that will permit an auditable statement for the 1997 year.
Senator Bond. So you are not going to have one for 1995 and
1996?
Mr. Wofford. We are going to at some point have to have an
agreement on the beginning balance that will permit an
auditable statement.
Senator Bond. Thank you.
Mr. Wofford. We think it will be for 1997.
The problems related to this in our Corporation were like
those of many other Government agencies. They are compounded by
the fact that one of the agencies, the ACTION agency, goes back
over many years. Until very recently, as you know, Government
agencies were not asked to produce auditable financial
statements under the generally accepted accounting principles.
Senator Bond. Mr. Wofford, all I asked was about the 1995
and 1996 statements.
I will submit the rest of my questions for the record.
Senator Mikulski.
Senator Mikulski. Thank you very much here.
Mr. Wofford, could your Chief Financial Officer join you at
the table for a moment, please?
Mr. Wofford. Yes; indeed. Donna Cunninghame.
Senator Mikulski. Ms. Cunninghame, good morning and we
welcome you. We know very much that the Corporation needs a
Chief Financial Officer. What I am going to request is not a
detailed description of the problems that we find ourselves in,
but I think we owe it to the committee and to the taxpayers,
essentially a description of why we have this situation, No. 1;
and No. 2, what is your kind of workout or work plan to resolve
this situation, really, and presenting it to us the way an
accountant would present it.
We know you come from the Resolution Trust. Senator Bond
has had extensive experience in that and we all recall with
great melancholy what a fiasco it was and how much that cost
the taxpayer because the financial institutions, who were
supposed to be financial institutions, were not standing
sentry. So it is a little intense to place the same kind of
criterion on this nonprofit.
Could you then essentially give us a description, not an
excuse, an explanation, a no-fault one, about why this
situation existed? But then, having said that, what is your
work-through or workout plan? Is that possible for you to do?
Ms. Cunninghame. Yes; Senator, it is. And I appreciate
having an opportunity to share it with the committee. The
Corporation, of course, was started October 1----
Senator Mikulski. Remember, I have 5 minutes, so I really
need to move on.
Ms. Cunninghame. The basic problem is taking together a
group of existing companies who had different accounting
records. Whatever financial management systems they had varied.
Senator Mikulski. Ms. Cunninghame, I am not asking you to
describe your plan today. I am asking you to submit your plan
in writing to the committee. I think there was a slight
miscommunication.
Ms. Cunninghame. I am sorry. I misunderstood that. I would
be happy to.
[The information follows:]
Work Plan To Address Auditable Financial Statements
Many concurrent efforts comprise the Corporation for National
Service's plan for producing auditable financial statements. A brief
review of these efforts follows.
1. The auditability survey resulted in 99 recommendations dealing
with five broad categories of concerns: the management control
environment, integrity of financial data, data security, segregation of
duties, and budgetary controls. An aggressive and sustained effort has
been underway at the Corporation to respond to recommendations and to
implement necessary changes that improve the Corporation's
auditability. Arthur Anderson is conducting reviews of the Corporations
efforts. A major phase of that review effort is just being initiated,
and we expect to have positive responses from the auditors.
2. A Management Control Committee has been established at the
Corporation and the first draft of a Management Control Manual has been
prepared and distributed to the Board of Directors for review. Training
has begun for staff including all staff of the CFO's department, and
exposure to the issue of management control is now part of the new
employee orientation program.
3. Cash reconciliation, updated above, proceeds as an important
process for achieving the goal of auditable statements.
4. A recommendation codifying the Corporation's approach to grants
accounting, including issues of advances, expense recording, grant
closeout, and grant liability calculations is being prepared for CFO
review. This work includes a review paper by Price Waterhouse which
offered advice on many of the issues.
5. Information system changes have played a major part in our plan
for auditable statements. With the current efforts to implement a grant
review and award system within the Corporation, we are implementing a
movement away from two separate systems for grant activity. Part of
this effort will be the movement of all Corporation grants to the HHS
Payment Management System (PMS) with which we are also implementing an
electronic interface to our general ledger (GL). This all should
greatly improve the consistency and accuracy of information in the GL
and reduce the reconciliation burdens. At the same time, we have
implemented an electronic interface to the GL for all payment
transactions from the National Trust. We also are improving the process
and the supporting documentation for the calculation of liability in
the National Trust and the subsequent recording of that liability on
the GL.
6. We postponed the effort to implement a new financial management
system, originally intended for implementation with the start of fiscal
year 1998, by one year in order to ensure that we have an opportunity
to improve the underlying business processes which provide a foundation
for what is recorded in the system and because we did not feel the
schedule could be met with the competing demands on the organization's
resources, many of which relate to other issues of auditability and
related system development efforts. In Conference Report H. Report 104-
537 which accompanied H.R. 3019 making appropriations for fiscal year
1996, Congress approved report language suggested by the Senate
committee which ``urges the Corporation to submit a reprogramming
proposal for up to $3,000,000 to carry out financial management system
reforms if the Chief Financial Officer determines such additional
resources are needed.'' We have formally requested the reprogramming of
these funds, and we are planning the implementation of a new financial
system during 1998.
7. We have put a significant effort into improvements of the
process for cost share arrangements that underlie a number of our VISTA
programs. Weaknesses in this area had resulted in understated
receivables in the past. We believe that this will result in
improvement to this important area of the financial statements.
Senator Mikulski. When do you think it would be a
reasonable expectation for you to be able to present this
background brief and work-through plan to the committee?
Ms. Cunninghame. I could do that within 1 week easily,
depending on the necessary requirements.
Senator Mikulski. Well, I think it would be very useful if
we had that as quickly as you could produce it with efficiency
and accuracy for both the chairman and myself, so we can see
this, because part of what is being discussed is not only to
continue the existing program and expand it, but some pretty
new programs. I think the committee will feel that before it
can undertake anything new there has to be confidence on these
workout issues. We thank you for that.
Also, for the record we would need a description also about
why the attrition rate. Again, we are not looking for excuses,
but we are looking for crisp, clear explanations so that we
could have this, because as appropriators we really need to
know is our money being well spent and are we getting the
outcome for which the program was created.
I think if we had those two reports we could among
ourselves discuss next steps. So we thank you and we look
forward to that.
[The information follows:]
Attrition in AmeriCorps
Program Years One, Two, and Three
The rate at which Members complete their term of service, or
conversely, the rate at which they fail to do so, can be a valuable
indicator of program health. The Corporation for National Service is
well aware of the value of attrition rates and systematically analyzes
program attrition and its causes. Low attrition can be indicative of
high Member satisfaction, which in turn, suggests careful recruitment,
good training, meaningful service projects and adequate supervision,
among other strengths. While a high attrition rate does not point to a
specific problem, it may be a symptom of underlying factors that
deserve consideration.
That said, in some cases, Members leave their service program early
for reasons that are not indicative of programmatic problems. In the
data provided here we provide attrition rates adjusted rates to exclude
early exits that are not reflective of program quality.
AmeriCorps programs, at the discretion of the program director, are
permitted to make the determination that a Member is departing early
because he or she faces compelling personal circumstances that make
completing the program an unreasonable hardship.
In addition, some Members leave their program early to take
advantage of significant opportunities for personal development or
growth, for example, educational or professional advancement. Although
AmeriCorps is not a jobs program, persons who leave their service
program to enter school, obtain employment or join the military
constitute a positive outcome for the nation as well as for themselves.
Because individuals in the circumstances described above do not reflect
upon the effectiveness of their programs, we believe it appropriate to
exclude them in determining a meaningful attrition rate.
Overall Attrition in AmeriCorps*State/National
Attrition in Year One (1994-1995).--Attrition in Year One was 20
percent. This rate compares favorably with attrition rates for college
freshmen, the Peace Corps, youth Corps and HUD Youth Apprenticeship
programs.
Attrition in Year Two (1995-1996).--Year Two attrition is currently
about 18 percent, adjusted as described above. Enough Members remain
``on the books'' for 1995-1996 that we cannot yet provide a final
accounting. As the attached chart suggests, the overall pattern of
attrition has remained constant.
Attrition in Year Three (1996-1997).--Year Three attrition is
difficult to estimate because most programs are still in their fourth
quarter and some are in their third. At present, nearly 90 percent of
those who enrolled in Year Three are still serving.
Additional Attrition Issues
The socio-demographic patterns reported last year in our attrition
data remain visible, as demonstrated by the two-year attrition rates by
educational attainment. Beginning in Year Two, we began collecting
Member income data by sample only and cannot make direct comparisons to
the attrition x income data provided last year. However, data from our
sample survey, which included Members who had left early, suggests
strongly that their remains a strong relationship between family income
and attrition, with Members from lower income backgrounds being more
likely to leave early.
ATTRITION RATE BY EDUCATIONAL ATTAINMENT--PROGRAM YEARS ONE AND TWO
[Percent of members]
------------------------------------------------------------------------
Fiscal years
Education attained ---------------------
1994-95 1995-96
------------------------------------------------------------------------
Less than high school............................. 34 36
GED............................................... 31 32
Technical school.................................. 21 19
HS graduate....................................... 18 20
Some college...................................... 18 19
Associate degree.................................. 16 15
College graduate.................................. 9 8
Graduate study.................................... 12 10
Graduate degree................................... 17 12
------------------------------------------------------------------------
Senator Mikulski. Which then takes me, Senator Wofford, to
the America Reads Program and the national summit. Could you
tell me what is the purpose of the national summit and what you
think, what will be the outcomes and what is the purpose and
what role this committee or national service will play in it?
Mr. Wofford. The President's summit was proposed originally
by George Romney as a way to take the idea of national
service--both large scale volunteering and national service of
the AmeriCorps variety--out of the political football field and
move it into a true nonpartisan structure.
The summit is assembling delegations from some 130
communities, cities and rural areas as well as delegations from
all 50 States chosen by their Governors.
Senator Mikulski. What will it do?
Mr. Wofford. The summit is starting a 3-year campaign to
achieve five goals for children and youth in this country that
every parent and every grandparent wants for their children:
one, that there be a caring adult in the life of every child
that needs one, a tutor, a mentor, a coach, including the 1
million tutors needed for the America Reads campaign; two,
structured activities in safe places for every child and young
person in this country in the nonschool hours; third, a healthy
start--immunization and access to health care and incentives
for healthy behaviors; four, effective education, including the
ability to read and marketable skills acquired through school
to work experience; and fifth, that every young person gets
asked and has the opportunities themselves to serve.
The process of the summit is commitments by major
organizations of all the sectors of society and by individuals
and communities for new action--quantum leaps and value added--
toward those five goals.
Senator Mikulski. That is what they are going to do?
Mr. Wofford. Yes.
Senator Mikulski. And then after the summit is over, who
will be in charge or overseeing that all of this happens in
some organized way, so we do not have just volunteer chaos?
Mr. Wofford. We expect the Presidents to continue to work
together. General Powell will be a very active chairman.
Senator Mikulski. What will be the mechanism to
operationalize----
Mr. Wofford. The mechanism will be an organization that
General Powell will lead, with the continuing support, we
trust, of the Presidents. It is an organization that will both
seek to develop large scale resources to apply to local
organizations around the country.
Senator Mikulski. Senator Wofford, will that be an
organization not created by Government?
Mr. Wofford. It will not be created by Government. I am
personally not taking any part in the organization of that
organization.
It will be a new national organization created to be
essentially an umbrella organization to coordinate those
volunteer organizations, and the private sector entities that
are making a substantial commitment.
It will be a campaign based in the private sector, led by
General Powell not trying to compete in offering service but
trying to assemble resources from commitments from corporations
and organizations for local groups. The community delegations
at Philadelphia are coming with a commitment to go back to
their communities to organize local summits to coordinate those
campaigns locally.
Senator Mikulski. Let me just go back to what I was trying
to ask, Mr. Wofford, which is, I have been through good
intention rallies before and we have some of the finest
participants leading this, and so we just do not want it to be
a rally where, I am going to make sure that I deliver 2,000
meals on wheels to the elderly homebound. All of these are good
intentions, and then if we are going to have that, like the
commitment of a Motorola, an IBM, local corporations, scouts,
Boy Scouts, then all I was asking was how that will be followed
up so it is just not a photo op, it is just not a pep rally,
and so on, and that we have a sustained saturation effecting
communities.
So what you are saying is that there will be an
organization created that a very distinguished American,
General Powell, will chair, and this will be an entirely new
entity not created by Government or funded by Government, is
that right?
Mr. Wofford. He is saying that, and he is going to do that.
It requires that same spirit----
Senator Mikulski. But are you not the President's person on
that?
Mr. Wofford [continuing]. Senator Mikulski, that----
Senator Mikulski. Are you not the President's point person
in organizing the summit?
Mr. Wofford. The two organizations that jointly carried the
ball with George Romney's idea are ours, the Corporation and
myself actively, and the Points of Light Foundation.
Senator Mikulski. Excellent.
Mr. Wofford. And the two of us have worked together. Ray
Chambers, founder of the One to One Partnership, is chairman of
our joint board steering committee for this. But General Powell
will be carrying the ball from the summit on.
Senator Mikulski. General Powell is saying that. Are we all
saying that before we go to the summit?
Mr. Wofford. General Powell said it very strongly when he
accepted the chairmanship at the White House. In fact, he now
says it is at least a 5-year campaign, that he will throw a
good part of his life into seeing that we follow through.
Senator Mikulski. And that is his commitment?
Mr. Wofford. That is his commitment.
Senator Mikulski. It is an extraordinary commitment.
Mr. Wofford. And he is driving the commitment process. He
has what he calls the sweat test. When a corporation or
organization makes the commitment required to come to
Philadelphia, he notches it up until he sees sweat on the
forehead of the CEO who has offered for example to adopt 100
schools. He says, well, what about 1,000? And until there is a
little sweat on the forehead of the person, he has not reached
the right notching-up point.
Senator Mikulski. Well, that sounds great. Of course, we
are sweating here about how we are going to fund all the
agencies, and, therefore, we want to then be clear on what is
the role of national service, how we can be a facilitator in
this. I think we are looking forward to this and what will be
the followup.
I see that my time has expired and we will look forward to
other conversation on the America Reads Program. Thank you very
much and this sounds like a very, very exciting opportunity.
Mr. Wofford. Thank you, Senator.
Senator Bond. Thank you, Senator Mikulski.
Senator Boxer.
Senator Boxer. Mr. Chairman, I simply want to highlight
something that Senator Wofford did not get a chance to go into
in detail. As one of the authors of the Violence Against Women
Act, I note that in Iowa 20 AmeriCorps members in the Iowa
Coalition Against Domestic Violence have made 12,464 contacts
with victims of domestic abuse, assisted over 1,000 women in
obtaining protective orders, and provided 371 educational
programs for Iowans ranging from elementary school children to
senior citizens.
I wanted to point out something that Steve Merrill said,
the Governor of New Hampshire, where you took that basic idea
and instituted it there. He said:
The national service program has been a great success in
the State of New Hampshire and I anticipate it will continue to
be in the future. These motivated individuals make AmeriCorps
work for New Hampshire and I am pleased to be a partner in the
process.
I think there are certain issues that just cry out for
attention in our Nation, and with a friend helping you get
through it it means a great deal, because when a woman is
feeling that there is no one to help her through--and it is
usually a woman; sometimes it is a man who is on the other end
of violence, but about 98 percent of the time it is a woman--
and the children are impacted and so on, you do need that
helping hand.
So it sounds to me like you have come up with some idea
here. I was wondering if you had any plans to extend that
program to other States as well.
Mr. Wofford. You can view the whole of national service,
Senator Boxer, as the Corporation's work as a kind of R&D--
research and development program--in which programs are being
tried in all 50 States. One of our jobs is to find what works
and what does not work; to try to spread what works and to
share the state of the art. When there is a pilot program that
really works, such as the 11th and 12th grade kids in
Philadelphia schools being taught to tutor 2d graders three
afternoons a week a couple of hours one on one and it works to
raise the reading level of the second graders and it works to
raise their own reading level, the 11th, 12th graders----
Senator Boxer. Talking about domestic violence, I was just
asking you on that one because my State----
Mr. Wofford. I am with you.
Senator Boxer. There are so many calls from California from
our cities to the hotline, and it seems to me we could really
use this type of program.
Mr. Wofford. New Hampshire is one of the very best
programs. We convened the State executive directors of the
State commissions. We convened, we are about to convene, the
chairmen of those commissions.
We try to spread the programs that work through
publications, E-mail, etc., so that pilots perform the function
of a pilot and you ignite the furnace. The New Hampshire
Program is one of them we would like to spread around the
country.
Senator Boxer. So in our State, so if our State wants to
have this program then they could initiate it?
Mr. Wofford. Indeed. The executive director of your
commission in California, Linda Forsyth, is very aware of that
program. I am sure she has thought about it. She is in town
right today. I know she is very interested in that subject.
California has one of the most inventive and aggressive
commissions, and they are the source of many of the best pilot
programs that we are trying to spread to other parts of the
country.
Senator Boxer. Good, because a couple of our cities had the
most calls to the domestic hot line.
Thank you very much.
Mr. Wofford. It is a major issue, and if we could
contribute more to it, that is good.
Senator Boxer. Thank you, Mr. Chairman.
Senator Bond. Thank you very much, Senator Boxer. Thank you
very much, Senator Wofford.
U.S. COURT OF VETERANS APPEALS
STATEMENT OF HON. FRANK NEBEKER, CHIEF JUDGE
opening statement of christopher s. bond
Senator Bond. Next, panel No. 2. I would like to welcome
the Hon. Frank Q. Nebeker, Chief Judge of the U.S. Court of
Veterans Appeals. Chief Judge Nebeker will be testifying on the
administration's fiscal year 1998 budget request for the Court
of Veterans Appeals, which totals $9.4 million, of which
$850,000 is for the pro bono program to provide legal
representation to veterans without counsel.
The overall increase of $150,000 from fiscal year 1997 is
attributable entirely to the pro bono program. The operational
costs of the court would be held at the fiscal year 1997 level
by cutting costs in such areas as travel and security and
maintenance contracts.
I am most interested in hearing the court's assessment of
actions being taken at the VA to address the backlog of
benefits claims and the court's appraisal of the pro bono
program.
Again, Judge, as I said before, we would appreciate your
submitting a full statement for the record. Unfortunately, we
are growing short of time in a busy day and would welcome your
summary and your comments.
Judge Nebeker. I will be very brief.
Senator Bond. Thank you very much, Judge.
Judge Nebeker. You have obviously summarized this budget
situation for the court and the pro bono program and I will not
repeat it.
CASE BACKLOG
Your question was, I think, with respect to the delay or
the backlog caused in the court's processing of cases, and
indeed the problem has surfaced. The delay is in the area of
getting the record on appeal together and in filing the
Secretary's brief after the appellant has filed his or her
brief.
Group VII of the General Counsel's Office is the one that
represents the Secretary before the court. They have been
decimated by vacancies. They have been troubled by other
personnel problems and their morale is low. They have got to
have help. The resources were not given to them by the general
counsel, but that matter has been brought to her attention and
I am assured that the situation will be remedied as rapidly as
is possible.
Senator Bond. Thank you, sir.
BUDGET SUMMARY
Judge Nebeker. As I observed in my written statement, the
court's budget is flat this year, the same as it was last year.
We have to maintain--though we are cutting back on the FTE's,
we have to maintain good service for the many pro se appellants
who appear before the court. That is somewhat of a labor
intensive, if you will, undertaking.
The only other point I would like to make this morning is,
that again we ask that in your minds as you make the
appropriations decision, keep the court's operating budget
separate and apart from the pro bono program, until such time
as the pro bono program, can be authorized and made
independent.
We understand that must be done before the appropriation
process does not run through the court. But the court can act
as a conduit, provided there is not a conflict in its operating
budget over what the program needs.
I will not address the merits of the pro bono program, as
they are capable of doing that themselves.
That would conclude my comments.
[The statement follows:]
Prepared Statement of Frank Q. Nebeker
Mister Chairman and distinguished members of the committee: On
behalf of the Court, I appreciate the opportunity to present for your
consideration the fiscal year 1998 budget of $9,379,804 for the United
States Court of Veterans Appeals.
The Court's total fiscal year 1998 budget request contains the same
dollar amount for personnel and operations as in the Court's fiscal
year 1997 appropriation. It also includes $850,804 requested by the Pro
Bono Representation Program (Program), which is 121.5 percent of the
$700,000 appropriated for fiscal year 1997. The Program has provided
its own supporting statement for its budget request.
Last year I urged that the Pro Bono Representation Program be
authorized and funded outside the Court's appropriation. I outlined the
reasons for the Court's concerns with the continued inclusion of the
Program's funding in the Court's appropriation. The Court continues to
be of the view that such a funding method impermissibly links the Court
to one class of litigants, and thereby exposes the Court to an
appearance of partiality and a consequent erosion in the public's trust
and confidence in the judicial review of veterans' claims. I ask again
that the funding for the Program be separated from the Court's
appropriation, not only in the budget deliberations in Congress, but in
the actual budget enactment. To that end, I urge the authorization of
the Program and legislation permitting its independent budget.
Notwithstanding these reservations, and consistent with Congress'
direction, the Court is forwarding the Program's fiscal year 1998
request for $850,804 as an appendix to the Court's submission and,
consistent with that direction, is including that amount in the Court's
total fiscal year 1998 budget request. The Legal Services Corporation
administers the grants for the Program and, according to its
evaluations, the Program is working the way it should. The Program has
provided its own supporting statement for its budget request, which, as
noted, represents a 21.5 percent increase over the $700,000
appropriated for fiscal year 1997.
The Court has kept a flat budget by continuing a number of cost-
saving measures, including a 25 percent reduction in the budget
allotted for travel, with no funding requested for Court hearings
outside Washington. Also, as I stated in my testimony last year, the
Court now is holding its judicial conference every other year, rather
than annually. This event focuses on continuing education for the
Court's practitioners and is held locally. Of even more significance,
the Court is requesting funding for only 79 full-time equivalent (FTE)
positions in fiscal year 1998 which is a voluntary reduction of 2 FTE
positions from the fiscal year 1997 authorized FTE level, and matches
the fiscal year 1998 FTE target level recommended by the Office of
Management and Budget in its implementation of the National Performance
Review. The requested 79 FTE positions are required to maintain high-
quality service to litigants seeking judicial review, particularly
those who come to the Court unrepresented.
As the Court's budget statement illustrates, in a chart the Clerk
has compiled, after a drop in the number of appeals in fiscal year
1994, the numbers have continued to climb in fiscal year 1995 and
fiscal year 1996, and the upward trend seems to be continuing. The
number of denials by the Board of Veterans' Appeals, from whose
decisions the Court's appeals derive, increased from 6,400 appeals in
fiscal year 1995 to 10,455 appeals in fiscal year 1996. Furthermore, as
noted in the Court's budget submission, the statistics kept by the
Board of Veterans' Appeals (Board) on ``denials'' do not include Board
decisions that deny some, but not all, of the benefits sought. The
denials in such cases are also appealable to the Court. Thus, the
number of pending cases may continue to increase at an even greater
rate than is predictable as a set percentage of the number of full
Board ``denials.'' The percentage of unrepresented appeals has fallen
from 80 percent in fiscal year 1995 to 72 percent in fiscal year 1996.
However, this rate remains much higher than the 46 percent
unrepresented civil appeal rate in U.S. courts of appeals. While the
Court has, voluntarily, kept pace with the recommendations of the
National Performance Review, which propose an 11.5 percent FTE
reduction over six years, further reductions in staff may need to be
re-evaluated based on the likelihood of an increased caseload and a
percentage of pro se appellants that continues to be relatively high.
It is my understanding that the Independent Budget Veterans Service
Organizations (IBVSO's) have reached similar conclusions as to
increasing caseload in the chapter on the U.S. Court of Veterans
Appeals in their Independent Budget for Fiscal Year 1998. The IBVSO's
document a presently rising caseload and oppose downsizing of the Court
for that reason.
On another matter, I am appending to this testimony a copy of my
letter to Chairman Specter emphasizing the importance of passing Title
II of the legislative proposal submitted last year to make the Court's
retirement/survivor program comparable to the systems of other Article
I Courts. As I point out in my letter, the legislative proposal was
initially submitted in response to Congressional inquiries regarding
the Court's caseload relative to the requisite number of judges on the
Court and regarding the comparability of the Court's judicial
retirement/survivor program.
Following last year's transmittal, there was an increase in the
number of notices of appeal filed with the Court, and a consequent
increase in the number of pending cases. Some veterans service
organizations have either opposed enactment of Title I or, more
cautiously, favored a ``wait and see'' approach to it. Based on the
increase in notices of appeal, the ``wait and see'' approach has been
shown to be the wiser course as to Title I, and the Court recognizes
its merit. Accordingly, the Court does not press consideration of Title
I by the Committee.
I am aware of no negative comments with regard to the provisions of
Title II. I ask for your active support in obtaining enactment of Title
II to make the Court's retirement/survivor program more comparable with
other Article I Court programs. Because of Judge Hart Mankin's death in
May 1996, his widow, Ruth Mankin, is now a survivor under the Court's
survivor annuity program. Survivors under the Court's annuity program
are at a considerable disadvantage, over time, in comparison to the
survivors of other deceased Article I judges covered by the Survivors'
Annuity Systems enacted to provide such benefits to them. I ask that
you take expeditious action to enact Title II, which is estimated to
have an actuarially insignificant cost impact.
In conclusion, I appreciate this opportunity to present the Court's
budget request for fiscal year 1998. On behalf of the judges and staff,
I thank you for your past support and request your continued assistance
and favorable report to the Appropriations Committee on our budget
request.
______
The Veterans Consortium Pro Bono Program
revised fiscal year 1998 budget
The Veterans Consortium Advisory Committee has revised the proposed
fiscal year 1998 budget, to reflect the fact that we have found
ourselves able to fill, through personnel donated by one of the
Consortium's constituent veterans service organizations, a position
that we had expected to have to fund out of fiscal year 1998 grant
funds. We have also adjusted the Program budget to reflect the
additional cost of $5,000 for an audit in compliance with OMB Circular
A-133, required for the first time next year by LSC. The result of
these adjustments is that the overall budgeted expenditures for fiscal
year 1998, set in the original budget at $850,804, are reduced by
$57,487, to a total of $793,317.
A spreadsheet setting out the revised budget in detail is attached
hereto as Exhibit A; a summary of significant statistical information
regarding the Program is attached as Exhibit B. This memorandum will
first provide an overview of the budget as revised, and then address in
some detail the increases contemplated over the current fiscal year
1997 budget and the changes from the fiscal year 1998 budget as
originally proposed.
OVERVIEW
The revised budgeted expenditures of $793,317 represent an increase
of 13.3 percent over the $700,000 appropriation for fiscal year 1997;
but only a 6.65 percent increase over the budget on which the Program
is currently operating, which calls for expenditures of $743,838. That
budget figure was the amount of the appropriation we sought for fiscal
year 1997; and although the appropriation was for a lesser amount, we
have been able to operate on the basis of the original budget because
there were unexpended funds from the previous fiscal year, largely the
result of curtailed operations in fiscal year 1996 resulting from
uncertainties as to whether the Program would be able to continue to
operate at all.
It is pertinent to note that the level of expenditures contemplated
by the revised fiscal year 1998 budget happens to correspond quite
closely to the amount of the appropriations for the Program in fiscal
year 1994 and fiscal year 1995, namely, $790,000--and without any
adjustment for inflation for the four-year interval from fiscal year
1994 to fiscal year 1998. Indeed, that figure was the amount that the
Court of Veterans Appeals contemplated would also be provided for the
Program for fiscal year 1996: the Court requested an appropriation for
the Program for that fiscal year of $678,000, but that lesser figure
took into account $112,000 that had been conserved by the Program in
prior years, and that remained available for Program expenditures in
fiscal year 1996. The Court observed, in submitting the fiscal year
1996 request, that ``this is a nonrecurring reduction [in the requested
appropriation] that could not be maintained in future years without
programmatic changes that the Court does not now anticipate would be
desirable.''
By reason of the overall budget reductions in fiscal year 1996,
however, the Program wound up operating on a revised budget, covering
both the ``A'' and ``B'' grants, of $633,931. This revised budget was
$34,278 less than the amount actually expended in the previous fiscal
year, $44,069 less than the $678,000 in new appropriations for the
Program that had been in the Court's budget submission, and $156,069
less than the $790,000 contemplated by the Court's fiscal year 1996
budget submission. As we pointed out in our fiscal year 1997 budget
submission, the amount on which we were operating in fiscal year 1996
was insufficient for the Program to operate as originally envisioned,
and we needed to make up for that year's shortfall if the Program was
to resume operating at full steam. Mindful of budgetary exigencies,
however, we did not then ask that the Program be restored to its full
prior level of appropriated funding. That is, however, what we are
asking now.
detailed explanation of the revised fiscal year 1998 budget
The proposed increase in expenditures from the fiscal year 1997
budget reflects both the need to deal with the backlog of cases in the
Case Evaluation and Placement Component, resulting from a period when
that component was understaffed, and an anticipated continuing increase
in the number of BVA decisions and consequent appeals to the Court and
a corresponding increase in the Program's caseload. Thus, in the first
six months of fiscal year 1997 we received 294 PRF's (Participation
Request Forms), compared to 217 in the comparable period in fiscal year
1996, and placed 120 cases with volunteer lawyers as compared to 93:
increases of 35 percent and 29 percent, respectively.
Since personnel costs--the salary and benefits of some of the
individuals performing services for the Program that are reimbursed out
of grant funds--account for the major part of the Program budget (they
were 70.2 percent in fiscal year 1997, and are 74.5 percent in the
revised fiscal year 1998 budget), they account for most of the increase
as well. These personnel costs relate to a portion of the time of the
personnel who staff the Outreach and the Education Components, and the
entirety of the time of most of the personnel who staff the Case
Evaluation and Placement Component (the services of the other staff
being provided free of charge to the Program). In all instances the
staff are actually employees of one or the other of two of the
Consortium's four constituent organizations--National Veterans Legal
Services Program (NVLSP) or Paralyzed Veterans of American (PVA)--which
are reimbursed from grant funds for the appropriate portion of their
salary and benefits. Table A shows in summary form the number of
persons providing services for each component, and the number of Full-
Time Equivalent (FTE) positions to be paid out of grant funds in fiscal
year 1997 and fiscal year 1998.
TABLE A.--PRO BONO PROGRAM PERSONNEL AND FTE DISTRIBUTION
----------------------------------------------------------------------------------------------------------------
Total No. of
personnel Total FTE Total FTE to be
Component providing some reimbursed by reimbursed by
service to the grant, fiscal grant, fiscal
program year 1997 year 1998
----------------------------------------------------------------------------------------------------------------
Outreach.................................................. 6 0.17 0.21
Education................................................. 10 0.96 1.05
Case evaluation and placement............................. 10 7.5 8.0
-----------------------------------------------------
Total............................................... 26 8.63 9.26
----------------------------------------------------------------------------------------------------------------
A fuller breakdown by component follows.
I. Case Evaluation and Placement Component--$575,383
The revised fiscal year 1998 budget contemplates an increase of
$39,262 over the fiscal year 1997 budget for the Case Evaluation and
Placement Component (referred to in the budget spreadsheet as the
``Screening'' component). This is in place of the $99,249 increase
reflected in the original fiscal year 1998 budget.
A. Personnel.--There are three categories of personnel staffing
this Component: lawyers, non-lawyer veterans law specialists, and
support staff.
Two lawyers, the Director and the Deputy Director, function full
time as such in the Case Evaluation and Placement Component, and the
entirety of their personnel cost is reimbursed by the Program--in one
instance to PVA and the other to NVLSP. Thus, the lawyer FTE for this
Component reimbursed from grant funds, in both fiscal year 1997 and
fiscal year 1998, is 2.0.
Veterans law specialists review the VA claims file and BVA decision
to determine whether or not each case contains an issue that warrants
referral to a lawyer. Veterans law specialists come from the
constituent Veterans Service Organizations and are among the most
experienced non-lawyer service officers these organizations have to
offer.
It was originally contemplated that there would be four full-time
veterans law specialists, plus part-time help equivalent to half the
time of a fifth, in the Case Evaluation and Placement Component in
fiscal year 1997--two of the full time specialists being supplied, on a
reimbursable basis, by PVA, and the other two donated by Disabled
American Veterans (DAV) and The American Legion, respectively. However,
in late fiscal year 1996, The American Legion recalled its specialist
to the organization's national office and could not furnish a
replacement until midway through the fiscal year. As a result of this
and other personnel difficulties, the Component operated with only 3
FTE veterans law specialists for the first five months of the year.
This fact, combined with increased filings, had created a backlog of
some 141 cases as of May, 1997. At the time the fiscal year 1998 budget
was prepared, this Component had a total of 3.5 FTE veterans law
specialists, 2.5 of them reimbursed by the Program and the other
donated by DAV. The original fiscal year 1998 budget contemplated an
increase of 1.5 FTE, to bring the total number of specialists
(including one donated specialist) to five. Since the restoration of
the American Legion's donated specialist, however, the need for one
additional reimbursed specialist has been eliminated, and the budget
has been reduced accordingly.
There are three full-time administrative support staff in the Case
Evaluation and Placement Component, all employees of NVLSP, and all
reimbursed out of Program funds.
The levels of salaries and benefits paid to the personnel who staff
the Program are of necessity governed by the general personnel policies
of the constituent organizations of which they are employees--i.e., PVA
and NVLSP--and to which they may return in the event of termination of
the Program or rotation of personnel by the organizations involved.
Both of those organizations expect to increase their staff salaries
generally by 5 percent, of which 3 percent will be an across-the-board
cost of living increase and 2 percent will be allocated for merit
raises. The increases are reflected in the personnel costs of all three
Components of the Program in the fiscal year 1998 budget.
B. Travel/Continuing Legal Education.--The revised fiscal year 1998
budget, like the original one, includes an increased allocation of
$1,500 for travel/CLE (to $2,500) to be used for continuing legal
education for lawyer staff of this Component. This is largely offset by
a reduction of $1,000 in the amount allocated for travel/CLE for the
Education Component.
C. Audit.--Audit costs have been increased by an additional $2,500
in the revised fiscal year 1998 budget to reflect the Component's share
of the increased cost of the annual audit by reason of the new LSC
requirement, mentioned above.
D. Property Acquisition and Contract Services.--These will decrease
by $10,000 from the amount budgeted for fiscal year 1997. Major
improvements to the databases will be completed in fiscal year 1997.
II. Outreach Component--$25,157
The revised fiscal year 1998 budget calls for a $6,537 increase
over the fiscal year 1997 budget for the Outreach Component: $500 more
than the original fiscal year 1998 budget. As indicated below, all but
$1,776 of the increase is in personnel costs.
A. Personnel.--These costs are budgeted to increase by $5,349
because we anticipate a continued increase in recruiting needs. We
assume a greater need for volunteer lawyers in fiscal year 1998 because
of the known and anticipated increase in the number of BVA decisions;
the budget also assumes that we will continue outreach efforts outside
the Metropolitan Washington area. Personnel costs include an increase
of 5 percent, as discussed previously under Case Evaluation and
Placement.
Three NVLSP lawyers devote a portion of their time to the Outreach
Component; and that portion of their personnel cost is reimbursed by
the Program. The aggregate lawyer FTE for the Outreach Component
reimbursed from grant funds in fiscal year 1997 is 0.07; the FTE
contemplated for fiscal year 1998 remains at 0.07.
Three NVLSP non-lawyers also function for part of their time in the
Outreach Component; and that portion of their personnel cost is
reimbursed by the Program. The aggregate non-lawyer FTE for the
Outreach Component reimbursed from grant funds in fiscal year 1997 is
0.10; the FTE contemplated by the fiscal year 1998 budget is 0.14.
B. Other.--The only change from the original fiscal year 1998
budget to the revised one is an increase of $500 in the audit line to
reflect the Outreach Component's share of the increased cost of the
annual audit. The remainder of the $1,776 difference in non-personnel
expenses between fiscal year 1997 and fiscal year 1998 reflects line
item adjustments based on past experience.
III. Education Component--$126,545
The revised fiscal year 1998 budget calls for an increase of
$12,998 over the fiscal year 1997 budget: $2,000 more than the original
fiscal year 1998 budget.
A. Personnel.--Personnel costs are budgeted to increase by $8,934.
A total of 6 NVLSP lawyers function in the Education Component, and
a portion of their personnel cost is reimbursed by the Program. We
anticipate an increase in mentoring duties, due to the cumulative
effect from previously assigned but still pending cases. We plan to
contain this cost, however, by assigning more mentoring duties to
personnel with lower personnel costs. The aggregate lawyer FTE for the
Education Component reimbursed from grant funds in fiscal year 1997 is
0.51; the FTE contemplated for fiscal year 1998 is 0.54.
Four NVLSP non-lawyers function in the Education Component, and all
four of them have a portion of their personnel cost reimbursed by the
Program. The cost of grant administration has been increased to 25
percent of the time of both the Grant Administrator and the
Administrative Assistant, based on past experience and an anticipated
increase in the Grant Administrator's time required for audit
preparation and contract reporting. The aggregate non-lawyer FTE for
the Education Component reimbursed from grant funds in fiscal year 1997
is 0.45; for fiscal year 1998 it will be 0.51.
B. Other.--As with the Outreach Component, the only change with
respect to the Education Component, from the original fiscal year 1998
budget, is an increase in the audit costs, by $2,000, to reflect the
Education Component's share of the increased cost of the annual audit
pursuant to the new LSC requirement. The remainder of the difference
from the fiscal year 1997 budget reflects various adjustments based on
past experience.
IV. ``B'' Grant--$44,232
This line assumes a total of 24 cases at a cost of $1,843 per case.
This represents a 3 percent per case increase over the fiscal year 1997
budget figure of $1,785 per case; it also reflects a reduction from the
total number of budgeted cases (30) in both fiscal year 1996 and fiscal
year 1997, as we continue to fine-tune this requirement.
V. LSC Oversight--$20,000
DONATED SERVICES
The vast majority of services rendered to the Pro Bono Program are
donated.
The most impressive contribution is the value of the legal services
provided by volunteer lawyers recruited by the Program. For fiscal year
1996, for example, the value of the pro bono representation provided by
volunteer attorneys under the Program was estimated to be $2,255,618--
providing, when combined with the contributions of the participating
organizations, a return of some 3 to 1 on the appropriated federal
funds.
The American Legion and the DAV receive no reimbursement for the
salary or related expenses for the full-time veterans law specialists
they provide to the Program. Those two organizations have not reported
the cost of providing these specialists, but it is obviously comparable
to that of the two specialists whose costs are reimbursed from grant
funds.
Neither DAV nor PVA receives any reimbursement for the time spent
by its lawyers in providing mentoring services for the Education
Component. Together, these contributions can be conservatively
estimated at $20,000 annually.
None of the participating organizations receives any reimbursement
for time spent by their representatives in connection with the
activities of the Consortium's Advisory Committee. (The fiscal year
1996 estimated value of that time was $101,524.)
The total value of contributions by the participating organizations
(with the exception of the unreported value of the contributions by the
American Legion and DAV, mentioned above) in fiscal year 1996 was
estimated at $202,580.
CONTRIBUTIONS OF EAJA FEE AWARDS BY LAW FIRMS
As previously reported, the Program has on seven occasions since
late 1995 received unsolicited donations from law firms (four of the
donations being from one firm), in each case representing part or all
of an Equal Access to Justice (EAJA) fee award recovered by the
donating firm in a case taken under the Program. (We have also received
a $20 contribution from a grateful veteran.) All four of the
contributing firms are large firms; among such firms it is quite
commonly firm policy to give away to one or another pro bono cause fee
awards recovered in pro bono cases--generally to the organization at
whose behest the matter was taken on. The total of such donations
(including the $20 one) to date is $45,054.08.
The Advisory Committee has established a special account to which
all such contributions will be earmarked, to be used for Program
activities for which grant funds have not hitherto been sought or
applied. It is the Committee's view that the uses made of such donated
funds must be ones that the donating firms would deem appropriate, and
that would tend to elicit other donations by participating firms: thus,
it would be counterproductive to treat the donated funds as an offset
for appropriated funds. The Committee has decided that initially the
earmarked funds will be used for three purposes: to fund outreach
activities in other jurisdictions; to fund presentation of the lawyer
training program in other jurisdictions; and, in selected cases, to pay
expenses incurred by solo practitioners who wish to take cases under
the Program and who would find it more feasible to participate if
certain essential costs are defrayed by the Program.
Exhibit A
[GRAPHIC] [TIFF OMITTED] T05MA04.002
Exhibit B
PRO BONO PROGRAM AT THE U.S. COURT OF VETERANS APPEALS
----------------------------------------------------------------------------------------------------------------
Fiscal years
------------------------------------------
1993 1994 1995 1996 1997 \1\ Program
(9/1/ (10/1/ (10/1/ (10/1/ (10/1/96- total
92-9/ 93-9/ 94-9/ 95-9/ 9/30/97)
30/93) 30/94) 30/95) 30/96)
----------------------------------------------------------------------------------------------------------------
Total appeals filed at CVA \2\............................... 1,265 1,148 1,204 1,561 798 5,976
Appeals filed Pro Se \2\..................................... 1,044 918 957 1,141 547 4,607
Pro Bono Program application forms sent...................... 853 648 812 936 565 3,812
Veterans who filed applications for program consideration.... 580 450 609 493 295 2,427
Veterans who received free attorney.......................... 231 187 201 181 120 920
Veterans who received some form of legal assistance (but no
representation due to program ineligibility)................ 343 262 327 287 186 1,405
Percent of program eligible veterans who received
representation (percent).................................... 100 100 100 100 100 100
Program cases completed during fiscal year \3\............... 52 147 199 156 88 642
Program cases in which VA error found \3\.................... 45 112 158 125 64 504
Percent of cases in which veteran prevailed in litigation
through program efforts (percent)........................... 86.5 76.2 79.4 80.1 72.7 78.5
Recruited attorneys who have received training \4\........... 236 100 121 160 93 710
----------------------------------------------------------------------------------------------------------------
\1\ Figures through 2nd quarter fiscal year 1997 only.
\2\ Figures supplied by the Court (through 2/28/97 only).
\3\ Figures do not include cases where representation was declined by the appellant, nor cases where the
appellant died during pendency of appeal.
\4\ Does not include 43 attorneys for whom training was waived.
Note: Figures subject to minor revision.
______
Letter From Frank Q. Nebeker
U.S. Court of Veterans Appeals,
Washington, DC, February 4, 1997.
Hon. Arlen Specter,
Chairman, Committee on Veterans' Affairs,
U.S. Senate, Washington, DC.
Dear Mr. Chairman: On June 10, 1996, I transmitted to the Chairmen
and Ranking Minority Members of the Senate and House Committees on
Veterans' Affairs a proposal to downsize the number of the Court's
associate judges (Title I of the proposal) and to make the Court's
retirement/survivor program comparable to the systems of other Article
I Courts (Title II of the proposal). The proposal, a duplicate of which
I again transmit with this letter, was submitted in response to
Congressional inquiries regarding the Court's caseload relative to the
requisite number of judges on the Court and regarding the comparability
of the Court's judicial retirement/survivor program. The 104th Congress
took no action on either Title I or Title II.
With respect to Title I, I indicated in my transmittal letter that
case filings during the fiscal year 1990-92 period had averaged 1,942
per year but had dropped in the fiscal year 1993-95 period to an annual
average of 1,224. At the time of my transmittal, case filings for the
first 6 months of fiscal year 1996 were estimated to be 595 which
suggested that fiscal year 1996 filings would be less than average
annual filings for fiscal year 1993-95. During the last 6 months of
fiscal year 1996, filings rose so that total fiscal year 1996 filings
reached 1,620. For the first quarter of fiscal year 1997 the Court
received 457 filings. I further indicated in my transmittal letter that
cases pending at the end of each year of the fiscal year 1990-92 period
had averaged 1,865 but had dropped to an average of 1,182 at the end of
each year of the fiscal year 1993-95 period. At the time of my
transmittal, it is estimated that 1,438 cases were pending. At the end
of the first quarter of fiscal year 1997, 1,707 cases were pending. It
should be further noted that the Board of Veterans Appeals, from which
the Court's appeals derive, denied 6,400 appeals in fiscal year 1995
and 10,455 appeals in fiscal year 1996.
Several veterans service organizations either opposed enactment of
Title I or, more cautiously, favored ``a wait and see'' approach to it.
Enactment of Title I would result in estimated net annual savings of
$660,900.
With respect to Title II, my June 10, 1996, transmittal letter
stated:
In the matter of the retirement/survivor program, I have
received several letters from past chairmen of the Senate
Veteran's Affairs Committee regarding the comparability of the
Court's program with those established for other federal courts
and have twice responded to the invitation to provide comments
on a Congressional Research Service Report (Dennis W. Snook &
Jennifer A. Neisner, ``Congressional Research Service Report
for Congress, Income Protection for Judges of Selected Federal
Courts,'' dated December 29, 1993) (CRS report), that was
prepared on that subject. The Court was asked to continue to
review the matter and to advise the Committee of its findings.
Enclosed also is a copy of the CRS report, annotated so that it
may be used in conjunction with a memorandum dated November 14,
1994 (Memorandum), also enclosed, prepared by the Court's
Committee on Legislative Matters, which addresses certain minor
deficiencies in the CRS report. The Court's review has revealed
that each judicial retirement/survivor program has unique
features and also that the retirement programs of other Article
I federal courts have generally been enhanced over the last 7
years, whereas this Court's program has generally remained
static since its creation in 1989. The Court believes that
certain aspects of this resulting disparity should be addressed
in corrective legislation to make the Court's program more
comparable with other Article I federal court retirement
programs. Accordingly, the Proposal also provides for systemic
reforms in the Court's retirement/survivor system that are
designed to put the Court on a more equal footing with the
systems provided for other Article I courts.
I ask for your active support as Chairman in obtaining enactment of
Title II to make the Court's retirement/survivor program more
comparable with other Article I court programs. Because of the death of
Judge Hart Mankin, on May 28, 1996, his widow, Ruth Mankin, is now a
survivor under the Court's survivor annuity program. Over time, she
will be at considerable disadvantage in comparison to widows of
deceased Article I judges covered by the Joint Survivors' Annuity
System. In this regard, I am hopeful that you will respond with
expeditious action to enact Section 204 of Title II which is estimated
to be without actuarially significant cost impact and without any
appropriations impact. Enactment of all sections of Title II other than
Section 204 is estimated to be without cost or appropriations impact.
I would also ask that you consider enacting legislation that would
change the Court's name to the United States Court of Appeals for
Veterans Claims. Many veterans and attorneys believe that the Court is
an administrative tribunal of the Department of Veterans Affairs rather
than an independent judicial entity. The present name of the Court
appears to add to that belief especially in view of the fact that the
name, ``United States Court of Veterans Appeals'', is often reduced to
the acronym ``CVA'', which is not readily distinguishable from ``BVA,''
the acronym for the Board of Veterans Appeals which is an
administrative tribunal of the Department, or ``DVA,'' the common
acronym for the Department. It is important that the Court be perceived
as both judicial and independent. Adoption of the name ``United States
Court of Appeals for Veterans Claims'' should promote that perception.
Such a change would also be consistent with action in recent years with
respect to the names of other Article I Courts. The United States Court
of Claims became the United States Court of Federal Claims in 1992. The
United States Court of Military Appeals became the United States Court
of Appeals for the Armed Forces in 1994.
Finally, I bring to your attention one additional matter. The Court
was created in 1988 without any antecedent structure and with no judges
in place (Veterans' Judicial Review Act, Public Law No. 100-687, Div.
A., 102 Stat. 4105 (Nov. 18, 1988)). All 6 of the Court's original
associate judges assumed office within a period of approximately 1 year
of each other. Assuming that Title I of the proposal is not enacted,
the 15-year terms of the Court's remaining 5 original associate judges
will expire within a period of approximately 1 year of each other. As a
consequence, and again assuming no downsizing, I recommend that
consideration be given to attempting to eliminate the undesirable
dislocating effect of such a rapid turnover by permitting early
retirement of remaining original associate judges who meet certain age
and service requirements which, in turn, could space the sequencing of
retirements so as to assure continuity of experience in the Court's
judicial component. Implementation may be achievable, pursuant to 38
U.S.C. Sec. 7298(2)(A), within existing appropriations. It should be
noted that several Article I Courts have early retirement programs
applicable to all their judges.
Thank you for your consideration. I am sending the same letter and
enclosures to Chairman Stump, and Ranking Minority Members Rockefeller
and Evans.
Sincerely,
Frank Q. Nebeker,
Chief Judge.
va decision process
Senator Bond. Thank you, Judge.
Senator Mikulski will be rejoining us shortly.
The committee has been concerned for a long time with the
whole process of adjudicating claims at the Department of
Veterans Affairs, both in terms of the time it takes and the
quality of decisions. The VA has undertaken some initiatives to
make improvements, such as business process reengineering.
First, do you see any evidence that the quality of
decisionmaking is improving at the VA?
Judge Nebeker. Not in the cases that come before the court.
The error rate is still approximately 50 percent. That is, 50
percent of the cases that come to issue and are decided by the
judges are remanded because of prejudicial error in the
decision somewhere.
Senator Bond. Well, 2 years ago you said the rate was in
excess of 60 percent, so while 50 percent is not great, I guess
there is progress, going from 60 percent to 50 percent.
What needs to be done?
Judge Nebeker. Well, I wish I knew. Obviously, more
resources at the Board level, but they have got the resources.
They have been augmented tremendously in an austere budget
period. They have cut back to one member panel, that is, single
member decisions, and they are putting out more decisions. As a
matter of fact, the denial rate before the Board has gone from
6,000 last year to 10,000 this year. We can expect that
reverberation to affect the case load of the court in the next
year, 6 months to 1 year.
Senator Bond. In October 1994 at the court's third judicial
conference, you called upon Secretary Brown to make unequivocal
use of the powers invested in his office to ensure that
precedent opinions are followed and the judgments in specific
cases are met with full and prompt compliance.
Has there been any action on that recommendation?
Judge Nebeker. There have been a number of committees
studying it.
Senator Bond. Studying it?
Judge Nebeker. Yes, sir.
Senator Bond. Thanks.
In addition, a commission authorized by Congress, the so-
called Melidosian Commission, recently finalized its report on
improving claims processing. It said the claims adjudication
system was created by the VA to process the benefits legislated
by Congress, but that layer upon layer of changes have been
added to the benefits and, therefore, to the processing system
and that there has never been a wholesale revision to bring all
changes into a harmonious whole. Therefore, the nature of the
product's benefits have helped lead to a system which is
perceived as inefficient, untimely, and inaccurate.
Do you believe Congress needs to legislate an overhaul to
the claims processing system as contemplated, or could it be
achieved by regulation? What is your view on the needed
reforms?
Judge Nebeker. Mr. Chairman, I am not in a position to
offer an opinion respecting the operations of an executive
branch Department, particularly one of the size of the
Department of Veterans Affairs. I note that that Melidosian
report pretty well echoed what I suggested 2 years ago at the
judicial conference, which you just mentioned.
But insofar as a court entering into the political arena of
what ought to be done to make a particular executive branch
program work, I am totally unqualified to do that.
PRO BONO REPRESENTATION PROGRAM
Senator Bond. With respect to the proposed reprogramming of
$950,000 to initiate the pro bono representation program, your
testimony says:
The court's judges continue to believe that this funding
method links the court to one class of litigants and exposes it
to charges of lacking impartiality, thereby degrading the
public's trust and confidence in the judicial review of
veterans' claims.
The court has altered its position on the pro bono
representation program last year after supporting its inclusion
in the budget for several years. Would you explain what the
status is and where this program stands and what the trust and
confidence level may be in the judicial system?
Judge Nebeker. Well, the program is a successful program.
It not only--well, its major purpose is to help the pro se
veterans. To the extent that it thereby helps the court, that
is a windfall and a desirable windfall. We are a conduit for
their funding and as long as we can be assured and the public
can be assured that the court is not funding the program out of
its own operating budget, then I think there is no real
concern.
But if the idea is that the court is funding a particular
side of the litigation that appears before it, it is not unlike
the court funding a public defender service or a prosecutor's
office to the exclusion of the other side. It is that problem
that we think needs to be solved, because there is an
appearance that the court is in a position of being compromised
where it should not be.
CLOSING
Senator Bond. Thank you very much, Judge.
Let me see if Senator Mikulski wants to ask any questions.
In the interest of time, I will submit the remainder of the
questions I have for the record. I think you have covered very
well the things we have discussed and I appreciate your
responsiveness to the questions, as well as to the concerns
that we have expressed.
Senator Mikulski has said that she will submit her
questions for the record. I appreciate very much your
testimony.
Judge Nebeker. Thank you very much, Mr. Chairman. I do try
to be responsive to questions when they are asked.
Senator Bond. It is a very pleasant trait. I certainly
enjoy it.
AMERICAN BATTLE MONUMENTS COMMISSION
STATEMENT OF GEN. JOHN P. HERRLING, U.S. ARMY
(RETIRED), SECRETARY
Senator Bond. I welcome our final panel: Gen. John P.
Herrling, Secretary of the American Battle Monuments
Commission, will be testifying on the administration's budget
request for fiscal year 1998 for the ABMC of $23.9 million, an
increase of $1.6 million over fiscal year 1997's appropriation
of $22.3 million. Mr. Steve Dola, the Deputy Assistant
Secretary for Management and Budget for the Department of the
Army, Cemeterial Expenses, will be testifying on the
administration's budget request for fiscal year 1998 of $11.8
million, a $200,000 increase over to $11.6 million appropriated
for fiscal year 1997. This funding would cover the maintenance,
operation, and improvement of Arlington National Cemetery and
the Soldiers and Airmen's Home National Cemetery. Finally, Mr.
Gil Coronado, Director of the Selective Service System, will
testify on the administration's budget request for fiscal year
1998 of $23.9 million for the Selective Service, an increase of
$1 million over the $22 million appropriated for fiscal year
1997 for the Selective Service.
With that, General Herrling.
General Herrling. Thank you, Mr. Chairman. On behalf of the
Commissioners of the American Battle Monuments Commission, I am
pleased to appear before you today. Let me begin by thanking
you and the members of this committee for the support that you
have provided our Commission over the years.
The special nature of the American Battle Monuments
Commission places it in a unique and highly responsible
position with the American people. The manner in which we care
for our honored war dead is and should remain a reflection of
the high regard in which we as a Nation memorialize their
service and sacrifices.
As you know, the American Battle Monuments Commission was
established by Congress in 1923. It is a small, one-of-a-kind
organization responsible for commemorating the services of the
Armed Forces where they have served since April 6, 1917. We do
this through the construction and maintenance of memorial
shrines, monuments, and military burial grounds on foreign
soil.
The American Battle Monuments Commission operates and
maintains 24 permanent memorial cemeteries and 28 monuments,
memorials, and markers in 15 countries around the world. We
have 8 World War I and 14 World War II cemeteries located in
Europe, the Mediterranean, North Africa, and the Philippines.
All of these cemeteries are closed to burials. In addition, we
are responsible for the American cemeteries in Mexico City and
Panama.
Interred in these cemeteries are approximately 31,000 World
War I dead, 93,000 from World War II, and 750 from the Mexican
war, for a total of 125,000. Also we have approximately 5,000
American veterans and others buried in the cemetery in Panama.
In addition, we have honored another 94,000 service members on
the Walls of the Missing, dedicated to those missing in action
or those lost or buried at sea.
The care of these cemeteries and memorials requires a
significant annual program of maintenance and repair of
facilities, equipment, and grounds. The care and maintenance of
these facilities is labor intensive. Therefore, personnel costs
amount to 72 percent of our budget for fiscal year 1998. The
remaining 28 percent is required to fund our operations which
include engineering maintenance, utilities, horticultural
supplies, equipment, and administrative costs.
Also, because of the permanent nature of our operations, we
do not have the option of closing or consolidating cemeteries
or memorials. In light of this, we have increased our efforts
to achieve greater efficiency and effectiveness through
automation in the operational and financial management areas.
In addition to our overseas mission, we have been mandated
by the Congress to construct two memorials in Washington, DC.
On July 27, 1995, President Clinton and President Kim Young
Sam of the Republic of Korea dedicated the Korean War Veterans
Memorial. Last month, on February 6, we opened the Korean War
Veterans Memorial information kiosk. This kiosk houses the
Korean war veterans honor role, which allows friends and
relatives to query a data base containing the names and
information about those who died during the Korean war. With
the opening of the kiosk, the Korean War Veterans Memorial is
now complete.
In May 1993, Congress authorized the Commission to build a
national World War II memorial. The Rainbow Pool site on The
Mall was dedicated on November 11, 1995, by President Clinton.
Since that time a national design competition for the memorial
was held, with over 400 entries submitted. Six finalists were
selected for the final stage of the competition. On January 17
of this year, President Clinton announced the winner of the
design competition.
As directed by the Congress, the project will be funded
through private contributions. The American Battle Monuments
Commission is currently working with a presidentially appointed
World War II Memorial advisory board to raise the funds for the
memorial.
Our greatest challenge, Mr. Chairman, for fiscal year 1998
will be in dealing with aging facilities and equipment. Our
memorial cemeteries range in age from approximately 50 to 80
years, with the Mexico City cemetery being over 140 years old.
The permanent structures and plantings which make our
facilities among the most beautiful memorials in the world are
aging and require prioritized funding to maintain them at
current standards. Therefore, we are requesting $250,000 more
in fiscal year 1998 for maintenance and minor construction.
In addition, much of our equipment is aging and rapidly
reaching the end of its useful life. In order to resolve this
problem, we are requesting an additional $200,000 to fund our
equipment repair and replacement program. We also have small
increases of $200,000 for supplies, $300,000 to integrate our
financial system in compliance with OMB, GAO, and recent
congressional directions, and $214,000 for rental of office
space previously provided at no cost.
In summary, since 1923 the American Battle Monuments
Commission's cemeteries and memorials have been held to a high
standard in order to reflect America's continuing commitment to
its honored war dead, their families, and the U.S. national
interest.
The Commission intends to continue to fulfill this sacred
trust. Our appropriation request for fiscal year 1998 is
$23,897,000.
PREPARED STATEMENT
Mr. Chairman, this concludes my statement. I will be
pleased to respond to your questions.
[The statement follows:]
Prepared Statement of Gen. John P. Herrling
Mr. Chairman and Members of the Committee: Thank you for the
opportunity to testify on our fiscal year 1998 Appropriation Request.
The special nature of the American Battle Monuments Commission places
it in a unique and highly responsible position with the American
people. The manner in which we care for our Honored War Dead is, and
should remain, a reflection of the high regard in which we, as a
nation, honor their service and sacrifices.
As you know, the American Battle Monuments Commission is a small,
one-of-a-kind organization, that is responsible for commemorating the
services of American Armed Forces where they have served since April 6,
1917 (the date of U.S. entry into World War I) through the erection of
suitable memorial shrines; for designing, constructing, operating, and
maintaining permanent American military burial grounds in foreign
countries; for controlling the design and construction of U.S. military
monuments and markers in foreign countries by other U.S. citizens and
organizations, both public and private; and for encouraging the
maintenance of such monuments and markers by their sponsors. In
performing these functions, the American Battle Monuments Commission
administers, operates, and maintains twenty-four permanent memorial
cemeteries and twenty-eight monuments, memorials, and markers in
fifteen countries around the world.
We have eight World War I and 14 World War II cemeteries located in
Europe, the Mediterranean, North Africa, and the Philippines. All of
these cemeteries are closed to burials except for the remains of the
War Dead who may occasionally be discovered in World War I or World War
II Battlefield areas. In addition, we are responsible for the American
cemeteries in Mexico, established after the Mexican War, and Panama.
Presently 124,914 U.S. War Dead are interred in these cemeteries--
30,921 of World War I, 93,243 of World War II and 750 of the Mexican
War. Additionally, 5,857 American veterans and others are interred in
the Mexico City and Corozal (Panama) American Cemeteries. Commemorated
individually by name on stone tablets at the World War I and II
cemeteries and three memorials on U.S. soil are the 94,120 U.S. service
men and women who were Missing in Action, or lost or buried at sea in
their general regions during the World Wars and the Korean and Vietnam
Wars.
We continue to provide services and information to the public,
friends, and relatives of those interred in, or memorialized, at ABMC
cemeteries and memorials. This includes information about grave and
memorialization sites as well as location, suggested routes, and modes
of travel to the cemeteries or memorials. Immediate family members are
provided letters authorizing fee-free passports for overseas travel to
specifically visit a loved one's grave or memorial site. Photographs of
headstones and sections of the Tablets of the Missing on which the
service person's name is engraved are also available. These photographs
are mounted on large color lithographs of the cemeteries or memorials.
In addition we assist those who wish to purchase floral decorations for
placement at grave or memorial sites in our cemeteries. A photograph of
the in-place floral arrangement is provided to the donor.
The care of these shrines to our War Dead requires a formidable
annual program of maintenance and repair of facilities, equipment, and
grounds. This care includes upkeep of 131,000 graves and headstones; 73
memorial structures; 41 quarters, utilities, and maintenance
facilities; 67 miles of roads and paths; 911 acres of flowering plants,
fine lawns and meadows; nearly 3,000,000 square feet of shrubs and
hedges and over 11,000 ornamental trees. Care and maintenance of these
resources is exceptionally labor intensive, therefore, personnel costs
account for 72 percent of our budget for fiscal year 1998. The
remaining 28 percent is required to fund our operations, including
unprogramed requirements resulting from natural disasters or foreign
currency fluctuations. We do not have the option of closing or
consolidating cemeteries. In light of this, we have increased our
efforts to achieve greater efficiency and effectiveness, through
automation and contracting, in the operational and financial management
areas, where we do have control.
This Commission fully recognizes and supports the efforts of the
President and the Congress to improve efficiency, focus on results, and
streamline the government overall. During fiscal year 1996, we
completed the upgrade to our automation system and offset telephone,
fax, and mail costs while increasing productivity. We have contracted
with the Department of Treasury's Financial Management Services Center
to study our accounting system, provide alternatives and
recommendations, and design a new system, if findings warrant. We
anticipate these recommendations will be implemented during fiscal year
1998. In addition, we have begun development of our Strategic and
Annual Performance Plans in accordance with the Government Performance
and Results Act. We believe, when finalized, our plans will provide a
comprehensive roadmap for accomplishing our mission.
On July 27, 1995, President Clinton and President Kim Young Sam
dedicated the Korean War Veterans Memorial. On February 6, 1997, we
opened the Korean War Memorial Kiosk. This Kiosk houses the Korean War
Veterans Memorial Honor Roll. This Honor Roll allows friends and
relatives to query a data base containing the names and information
about those who died during the Korean War. With the opening of the
Kiosk we are pleased to be able to report to you that the Korean War
Veterans Memorial is now complete.
Our focus for fiscal year 1998 and for the next several years will
be the World War II Memorial. As you know, on May 25, 1993, President
Clinton signed Public Law 103-32 directing the ABMC to build a World
War II Memorial. The World War II Memorial Site at the Rainbow Pool was
dedicated by President Clinton on November 11, 1995. Since that time, a
national design competition was held with over 400 preliminary designs
submitted for evaluation. Six finalists were selected and announced on
August 21, 1996. Final designs were submitted to a design jury on
October 25. Criteria included concept, past performance, specialized
experience and technical competence, professional qualifications and
the capacity to accomplish the work in the required time. The jury
interviewed the finalists and made its recommendation to the Commission
on October 31. The World War II Advisory Board met and provided its
advice to the ABMC on November 18. ABMC Commissioners considered the
advice and recommendations and selected the winning design team/concept
on November 20. On January 17, 1997, at a White House Ceremony,
President Clinton unveiled the winning design by Friedrich St. Florian,
former Dean of the Rhode Island School of Design, and a current
professor at the school. Teaming up with Professor St. Florian are
George E. Hartman, Hartman-Cox Architects, and Oehme van Sweden &
Associates, Inc., both of Washington D.C. Leo Daly will be the
architect--engineer of record.
As directed by the Congress, the $100 Million memorial will be
funded through private donations after expending the $4.7 Million that
Congress authorized from the surcharge proceeds of World War II
Commemorative Coin sales and the $5 Million transferred from Department
of Defense. The American Battle Monuments Commission is working closely
with the World War II Memorial Advisory Board to raise the funds to
meet the planned dedication on Veterans' Day in the year 2000.
While our attention has been focused on management improvements and
the design and construction of the World War II Memorial, we have not
ignored our primary mission of operating and maintaining twenty-four
memorial cemeteries and twenty-eight monuments. The Congress has been
instrumental in our success in maintaining its high standard of
excellence by providing the funds required to accomplish our
objectives, and for that we thank you.
Fiscal year 1998 will present new challenges. For the first time in
nine years we have repriced our foreign currency budget rates. This
repricing, with OMB support, conforms with the Department of Defense's
budget rates for foreign currency. With this repricing, we estimate
that we will require $2,097,000 to satisfy foreign currency fluctuation
requirements. This amount has been included in our budget request. In
addition the fiscal year 1998 request provides for cost of living
increases for our U.S. and foreign national personnel, rental expenses
for space previously provided at no cost, funding to integrate ABMC
financial systems in accordance with OMB, GAO, and recent Congressional
directions, and small increases for maintenance and equipment.
Perhaps our greatest challenge will be in dealing with aging
facilities and equipment. Our cemetery memorials range in age from 50
to 80 years old with Mexico City being over 100 years old. The
permanent structures and plantings which make our facilities among the
most beautiful memorials in the world are aging and require increased
funding to maintain them at the current standards. Our maintenance and
engineering budget is stretched to the limit. Accordingly, we are
prioritizing this spending carefully. In addition, much of our
equipment is aging and rapidly reaching the end of its useful life. We
have requested additional funding for equipment replacement this fiscal
year and will be implementing phased replacement in order to take
advantage of new labor saving technology.
Since 1923, the American Battle Monuments Commission's memorials
and cemeteries have been held to a high standard in order to reflect
America's continuing commitment to its Honored War Dead, their
families, and the U.S. national image. The Commission intends to
continue to fulfill this sacred trust.
The American Battle Monuments Commission appropriation request for
fiscal year 1998 is $23,897,000.
This concludes my prepared statement. I will be pleased to respond
to your questions.
Additional committee questions
Senator Bond. Thank you very much, General.
[The following questions were not asked at the hearing, but
were submitted to the Commission for response subsequent to the
hearing:]
Question Submitted by Senator Stevens
abmc special events and services to the public
Question. Provide to each Committee Chairman a schedule of planned
Memorial Day activities and other special events as well as information
on public services provided by American Battle Monuments Commission
(ABMC).
Answer. As of 26 March 1976, ABMC provided the Chairman of each
Senate and House Committee a listing of ABMC Special Events planned for
1997 and a Fact Sheet on ABMC's mission and services which are provided
to the public. These two documents are as follows:
1997 memorial day and other events at abmc cemeteries and memorials
The following is a list of Memorial Day, Veterans Day, D-Day
Ceremonies, and other activities that are planned for 1997.
Memorial Day.--Memorial Day programs are held at each ABMC
Cemetery. Each grave site is decorated with the flag of the United
States and that of the host country. Programs, usually including
participation by the U.S. Ambassador to the host country, includes
reading of the President's Memorial Day Proclamation, speakers, the
presentation of the National Colors, wreath laying ceremonies, and
military bands and units. The 1997 Memorial Day schedule for our
cemeteries in Europe, Tunisia, Mexico City, Panama and Philippines, is
as follows:
------------------------------------------------------------------------
Cemetery Date Time
------------------------------------------------------------------------
AISNE-MARNE (France) \1\.......... SUNDAY 25 MAY....... 10:15 AM
ARDENNES (Belgium) \2\............ SATURDAY 24 MAY..... 10:00 AM
BRITTANY (France) \2\............. SUNDAY 25 MAY....... 4:30 PM
BROOKWOOD (England) \1\........... SUNDAY 18 MAY....... 3:00 PM
CAMBRIDGE (England) \2\........... MONDAY 26 MAY....... 11:30 AM
COROZAL (Panama).................. MONDAY 26 MAY....... 9:00 AM
EPINAL (France) \2\............... SUNDAY 25 MAY....... 3:00 PM
FLANDERS FIELD (Belgium) \1\...... SUNDAY 25 MAY....... 3:00 PM
FLORENCE (Italy) \2\.............. MONDAY 26 MAY....... 11:00 AM
HENRI-CHAPELLE (Belgium) \2\...... SATURDAY 24 MAY..... 4:00 PM
LORRAINE (France) \2\............. SUNDAY 25 MAY....... 11:00 AM
LUXEMBOURG (Luxembourg) \2\....... To Be Announced..... ..............
MANILA (Philippines) \2\.......... MONDAY 26 MAY....... 4:00 PM
MEXICO CITY (Mexico).............. FRlDAY 30 MAY....... 12:00 PM
MEUSE-ARGONNE (France) \1\........ SUNDAY 25 MAY....... 3:00 PM
NETHERLANDS (The Netherlands) \2\. SUNDAY 25 MAY....... 3:00 PM
NORMANDY (France) \2\............. SUNDAY 25 MAY....... 10:30 AM
NORTH AFRICA (Tunisia) \2\........ SATURDAY 24 MAY..... 10:00 AM
OISE-AISNE (France) \1\........... SUNDAY 25 MAY....... 4:00 PM
RHONE (France) \2\................ SUNDAY 25 MAY....... 10:00 AM
ST. MIHIEL (France) \1\........... SUNDAY 25 MAY....... 4:00 PM
SICILY-ROME (Italy) \2\........... MONDAY 26 MAY....... 11:00 AM
SOMME (France) \1\................ SUNDAY 25 MAY....... 3:00 PM
SURESNES (France) \1\............. SUNDAY 25 MAY....... 2:30 PM
------------------------------------------------------------------------
\1\ World War I American Cemeteries and Memorials.
\2\ World War II American Cemeteries and Memorials.
D-Day Landing Ceremonies--6 June 1997.--A commemorative program is
held each year at a site along the Landing Beaches. The program site is
rotated between the British, French, and American Sectors. The 1997
program will be held in the American Sector of operations on 6 June at
the following locations:
Bayeux.................................... 9:30 AM Liberation Monument--
Wreath Laying.
Omaha Beach............................... 10:15 AM American cemetery--
Religious Service.
11:00 AM D-Day Monument--
Wreath Laying.
11:15 AM National Guard
Monument--Wreath Laying.
Point Du Hoc.............................. 11:30 AM Wreath Laying.
Saint-Mere-Eglise......................... 12:15 PM Wreath Laying.
12:45 PM Official Banquet.
Utah Beach................................ 3:00 PM Leclerc Monument--
Wreath Laying.
3:30 PM Monument of 4th
Division Wreath Laying.
National Ceremony-American
Federal Monument: Raising 8
National Colors; Official
Speeches; Wreath Laying
Ceremony; Military Parade.
Veterans Day.--Annual ceremonies are held at some of the cemeteries
on Veterans Day, which coincides with the French holiday commemorating
the end of World War I. Local community programs frequently include
commemorative events at some of our cemeteries. The location and
magnitude of the programs vary in location and size. We will provide
dates and times for Veterans Day celebrations at a later date.
Other Ceremonial Occasions.--Members of Congress, officials of the
Executive Branch, high ranking diplomatic and senior representatives of
the respective host nations and allied powers, personnel from NATO/
SHAPE, as well as, veterans' remembrance, educational and even local
patriotic groups frequently visit our cemeteries and memorials. These
visits include small wreath laying ceremonies and community sponsored
receptions to honor those Americans who fought in and liberated a
particular town or region.
Special Events.--Our Cemetery Superintendents serve as ambassadors
of goodwill in the country where they are stationed. They frequently
represent the United States at ceremonies and other community based
programs. These include ceremonies commemorating the liberation of
towns and villages by U.S. troops, events that honor the survivors of
Nazi concentration camps and visits by American veterans' remembrance
groups.
AMERICAN BATTLE MONUMENTS COMMISSION
Mission
The American Battle Monuments Commission (ABMC) is a small
independent agency of the Executive Branch established by Congress on
March 4, 1923 (36 U.S.C. 121-128c).
The principal mission of the agency is to commemorate the
sacrifices and achievements of the United States Armed Forces, where
they have served, since April 6, 1917, the date of U.S. entry into
World War I. This is accomplished by:
Designing, constructing, administrating, and maintaining cemetery
and memorial structures outside the United States. ABMC currently has
responsibilities for 24 permanent United States memorial cemeteries,
and 27 memorial monuments and markers.
Controlling the design and construction of U.S. Military memorials,
monuments, and markers on foreign soil which are sponsored by U.S.
citizens or U.S. public or private organizations, and encouraging these
organizations to adequately maintain them.
Establishing memorials in the United States, when legislated by the
Congress, and outside the United States, where U.S. forces have served,
as the Commission determines.
--Congress directed ABMC to establish the Korean War Veterans
Memorial on the Mall in Washington, DC. This Memorial was
completed and dedicated in July 1995 and is now administered by
the National Park Service.
--Public Law 103-94, signed by President Clinton on May 25, 1993,
authorizes ABMC to design, erect and conduct fund raising for
the national World War II Memorial that is to be sited on the
Mall in Washington, DC. This national monument will memorialize
the generation of Americans whose spirit, sacrifice, and unity
reflect the values that have made our nation strong. This
Memorial will also pay tribute to the many Americans who served
in the Armed Forces and to all those who joined the war effort
on the home front. The Commission's goal is to dedicate the
Memorial on Veterans Day 2000. Former Senator Robert Dole, a
World War II veteran, is now serving as Co-Chairman of the
World War II Memorial fund raising effort.
Services Available to the Public
General information concerning name and location of cemetery and
memorial sites.
Specific information on grave and memorialization sites of War
Dead.
General information about travel to the military shrines
administered by the Commission, including best routes, modes of travel,
available accommodations, and information about historical events which
took place in the battlefield areas in the region of the cemetery
memorials.
Authorization to immediate family members for issuance of fee free
U.S. passports when visiting burial or memorialization sites of loved
ones.
Escort of family members to appropriate grave and memorialization
sites when visiting cemetery memorials.
Photographs of grave and memorialization sites, along with large
color lithographs of the cemetery memorials.
Assistance in placing floral decorations at grave and
memorialization sites using funds provided by the donor.
Maintenance of the Honor Roll database of the Korean War Veterans
Memorial on the National Mall in Washington, DC. The Honor Roll
commemorates those members of the United States military who died
world-wide during the Korean War. Honor Roll Certificates may be
obtained at the kiosk located at the Memorial or from ABMC's Washington
office.
______
Question Submitted by Senator Mikulski
Question. Provide a plan to work through the current backlog of
engineering projects and identify a schedule which might allow American
Battle Monuments Commission to ``buy out'' of this backlog dilemma.
Answer. A copy of the current Master Priority Listing for all
identified engineering projects follows below.
There are 550 projects with a total estimated cost of slightly over
$10 million. With considerable attention to detail, this master list
has been carefully reviewed, revised, updated, and prioritized over the
course of the past nine months. Accordingly, our fiscal year 1997,
fiscal year 1998, and outyear engineering plans and programs are now
based on this newly developed master priority list.
Presently, ABMC hopes to apply $2M to engineering projects in
fiscal year 1997. At this time, our President's Budget Request has
$2.2M programmed for engineer projects in fiscal year 1998. If we do
not experience unanticipated foreign currency fluctuations, any
significant natural disasters, or unexpected utility or plant failures,
we project our backlog will be reduced to $6M by the end of fiscal year
1998. Additionally, we estimate that $700,000 in new projects must be
added to the master list each year. Consequently, if we are able to
continue to apply $2M annually toward engineer projects every year, it
could still take an additional five years (fiscal year 1999 through
fiscal year 2003) to eliminate the backlog. In order to support the
current high standards of maintenance and repair of our facilities,
plus improve our position with respect to energy conservation,
productivity, and efficiency, the Commission could effectively apply up
to an additional $1M per year above the President's Budget, for
engineer project backlog reductions. This would allow ABMC to make a
major reduction prior to fiscal year 2001.
ABMC ENGINEERING BACKLOG AT START FISCAL YEAR 1997
------------------------------------------------------------------------
Object Estimated
Cemetery Project class cost
------------------------------------------------------------------------
Meuse Argonne.................. Anchor Loose 25 $2,000
Stones at Church
Ruins at
Montfaucon.
North Africa................... Repair of Interior 32 30,000
Court Cornice.
Aisne Marne.................... Install Automatic 25 1,000
Chlorinator for
Potable Water.
Rhone.......................... Install electrical/ 32 3,000
heating System,
Visitor Center.
Aisne Marne.................... Drill New Deep 25 250,000
Well.
Manila......................... Repair Hemicycle 32 100,000
Roof.
Rhone.......................... Replacement of 25 5,800
Fuel Tank
Visitors/Office
Building.
Aisne Marne.................... Install Water 25 1,500
Softener.
Sicily-Rome.................... Drill New Well 30 32 6,800
mt. Install
Pumping System.
Meuse Argonne.................. Replace 3 ea Fuel 25 50,000
Tanks, and 1 ea
gas tank.
Sicily-Rome.................... Raise and expand 25 2,018
irrigation parts
store room.
Normandy....................... Replace 1 ea gas 25 11,000
tank.
Manila......................... Repair Water 32 30,000
Purification
System (Potable).
Sicily-Rome.................... Improve Drainage 32 3,000
to Soutwest
corner of center
mall.
Netherlands.................... Replace One 25 8,000
Gasoline Tank.
North Africa................... Replace curbstones 25 3,000
along Burial area.
Ardennes....................... Install Heavy 25 750
Security Door on
Side of Garage.
Florence....................... Gradual 25 4,000
replacement of
boundary hedges
(North ent).
Oise-Aisne..................... Construct Weir on 25 1,000
Stream.
Mexico City.................... Replace Water 25 1,000
Tanks.
Florence....................... Replace fire thorn 25 4,000
hedge both
entrance drives.
Flanders Field................. Renovate Oudenarde 25 8,000
Monument.
North Africa................... Replacement of 25 5,750
Thuya Hedges.
Ardennes....................... Sandblast, Repair 25 5,000
and Repaint
Compost Shed.
Florence....................... Replace old Tar 25 3,000
Paper, Reservoir
Roof.
Cambridge...................... Repair Stone Steps 25 15,000
at Flag Pole Base.
Corozal........................ Improve Drainage 32 47,000
System.
Florence....................... Install water pump 25 3,000
to increase
pressure.
Oise-Aisne..................... Replace Gutters on 25 8,000
Garage/Storage
Bldg in Service.
Florence....................... Replace 50 old 25 4,500
Model Sprinklers,
Burial Area.
Epinal......................... Install Lightning 25 1,000
Protection for
Sprinkler System.
Sicily-Rome.................... Replace 50 old 25 4,500
Model Sprinklers,
Burial Area.
Epinal......................... Improve Security 25 2,000
Measures of
Service Area.
Mexico City.................... Replace Four Doors 25 2,000
North Africa................... Maintenance of 25 1,000
Flagpole,
Travertine
Drainage Grill.
Cambridge...................... Repoint Steps 25 1,000
around Flagpole.
Florence....................... Install water 25 3,800
filter in both
quarters.
Aisne Marne.................... Repaint Exterior 25 500
Dormer Window
Frame, Visitors
Bldg.
Manila......................... Repair Asst 25 5,700
Superintendent's
Roof.
Henri Chapelle................. Repair Leak Around 25 500
Dormer in Supt's
Qtrs.
Florence....................... Replace walkpaths 25 3,500
cotto tiles, of
both quarters.
Lorraine....................... Refurbish 25 25,000
Biological Filter.
Cambridge...................... Install handrail 25 2,000
on steps plots E-
F.
Sicily-Rome.................... Resurfacing of 25 2,000
Spillway Canal,
Tinozzi Ditch.
Somme.......................... Repair Hinges on 25 5,000
Chapel Doors.
Manila......................... Caulk Joints of 32 15,000
Western Hemicycle.
Brookwood...................... Replace Gutters on 25 1,600
Superintendent's
Quarters.
North Africa................... Replace Deep Well 25 3,000
Pump.
Meuse Argonne.................. Relocate Compost 25 30,000
Shed.
Ardennes....................... Replace Ladder in 25 1,000
Reservoir.
Sicily-Rome.................... Maintain Facings, 25 2,100
roofs of all svc
area buildings.
Meuse Argonne.................. Build External 32 50,000
Water Reservoir
(Lake).
Garches........................ Construct 25 534
Insulating
Skylight.
Lorraine....................... Replace Sewage 25 1,000
Pump Asst Supt
Qtrs.
Lorraine....................... Replace 25 444
Circulation Pump,
New Service Bldg.
Netherlands.................... Repair Roof of 25 1,633
Transformer Bldg.
Normandy....................... Replace Water 25 899
Heater, Supt's
Qtrs.
Ardennes....................... Replace Drainage 25 285
Pipe Asst Supt
Qtrs.
Meuse Argonne.................. Replace Sprinkler 32 350,000
System.
Netherlands.................... Construct Oil- 25 20,000
Water Separator
at Wash Point.
North Africa................... Replacement of 32 25,000
Border Stone
Terrace.
Normandy....................... Modify Low Voltage 25 6,000
Electrical Panel
in Pump House.
Luxembourg..................... Repair Asst Supt's 25 10,000
Driveway.
Florence....................... Renovation of 32 25,000
Memorial Toilets
W/Handicapped Fct.
Brittany....................... Paint Flag Poles.. 25 3,000
Manila......................... Replace 3 32 47,000
Transformers and
Upgrade Sub-
station.
Flanders Field................. Repoint Base of 25 5,000
Chapel Memorial.
Rhone.......................... Enclose section of 32 8,000
Compost Shed.
Brookwood...................... Repair Chapel 25 15,000
Decorative Grills.
Meuse Argonne.................. Renovate Water 25 40,000
Reservoir.
Rhone.......................... Replace heating 32 8,000
system in
Government
quarters.
Aisne Marne.................... Install all 32 30,000
Utilities at
Chateau Thierry
Monument.
Manila......................... Upgrade Electrical 32 30,300
Panel (Pumphouse).
Cambridge...................... Repair Cracks in 25 5,000
Supt's Qtrs.
Sicily-Rome.................... Renovation of 32 24,000
Visitors Toilets
to include
handicap.
Normandy....................... Construct Path Way 25 2,100
to Debris
Disposal Area.
Brookwood...................... Improve Drainage 25 5,000
Around Chapel.
North Africa................... Install Kitchen 25 1,000
Stovetop Exhaust
Vents, Both Qtrs.
Brittany....................... Renovate Public 25 10,000
Toilets.
Manila......................... Install Automatic 32 75,000
Sprinkler System
(Phase I).
Somme.......................... Repair 25 5,000
Inscriptions at
Bellicourt
Monument.
Florence....................... Closing of Compost 32 6,000
Pit For Needed
Storage Area.
Flanders Field................. Replace Flagpole 25 7,000
Terrace.
Florence....................... Replace 50 old 25 5,000
Model Sprinklers,
Burial Area.
Luxembourg..................... Construct Ramp 25 1,750
Between Memorial
& Plots.
Corozal........................ Secure Fence Line. 25 3,600
Aisne Marne.................... Neutralize/Repair 25 7,500
Exposed Rebar at
Chateau Thierry.
Sicily-Rome.................... Closing of Compost 32 6,000
Pit for Needed
Storage Area.
Flanders Field................. Check Lightning 25 1,500
Protection System
on Chapel.
Henri Chapelle................. Renovate & Clean 25 10,000
Colonnades
Ceiling.
Sicily-Rome.................... Replace 50 old 25 5,000
Model Sprinklers,
Burial Area.
Lorraine....................... Reconstruct 25 120,000
Memorial Stairway.
Corozal........................ Replace Roof, 25 5,000
Superintendent's
Qtrs.
Aisne Marne.................... Install Oil-Water 25 2,000
Separator at Svc
Area Washrack.
North Africa................... Renovation of 32 10,000
Visitors Toilets
to include
handicap.
Cambridge...................... Treatment of Wood 25 2,500
and Stone Work in
Chapel.
Henri Chapelle................. Clean and Repair 25 60,000
Mosaic Stars in
Colonnade Ceiling.
Rhone.......................... Handicapped toilet 32 35,000
building (unisex
facility).
Brittany....................... Improve lightning 25 5,000
arrestors at
Brest Monument.
Mexico City.................... Replace Roof on 25 1,500
Service Building.
Somme.......................... Improve 25 500
Ventilation in
Garage Work Shop.
Florence....................... Renovate Toilets, 32 8,000
Visitors/Office
Building.
Oise-Aisne..................... Paint Exterior of 25 3,000
Garage/Storage
Bldg in Svc Area.
Flanders Field................. Install Electric 25 1,500
Heater in Chapel.
Rhone.......................... New Road Signs 32 19,000
Installation.
Oise-Aisne..................... Paint Exterior of 25 5,000
Visitors/Quarters
Building.
Corozal........................ Install Deep Well 32 60,000
& Reservoir.
Aisne Marne.................... Rebuild entrance 25 50,000
area and Walkways
to Bldgs.
Sicily-Rome.................... Refurbish 25 8,900
Ligustrum hedges,
Bare Spots, w/New
Plan.
Cambridge...................... Replace Damaged 25 2,000
Stones on Court
of Honor.
Brittany....................... Install Filters 25 1,500
for Tours
Monument.
Sicily-Rome.................... Renovation 25 8,700
Pittosporum
Hedgerow
Surrounding
Center.
Oise-Aisne..................... Replace Gutters on 25 5,500
Visitors/Quarters
Building.
Mexico City.................... Replace Roof 25 1,000
Garage Area.
Brittany....................... Install 25 5,000
information panel
at Tours Monument.
Rhone.......................... Remodelling of 25 4,000
Service Bldg
Shower/Toilet
Facility.
Meuse Argonne.................. Replace Roofs on 25 90,000
Garage Buildings.
Brittany....................... Install 25 5,000
Information Panel
at Brest Monument.
North Africa................... Repair sinking 25 5,000
curbstone in
front of Office
area.
Brookwood...................... Relevel Walkways & 25 50,000
Headstone beams.
Manila......................... Upgrade Asst 25 5,000
Superintendent's
Master Bath.
Flanders Field................. Repair Walkway at 25 1,000
Oudenarde
Monument at Plane
Tree.
Sicily-Rome.................... Replacement of 25 2,000
office/visitors
building doors.
Garches........................ Replace Carpeting 25 4,000
in Reception Area.
Lorraine....................... Build Handicap 32 15,000
Toilet Facilities.
Sicily-Rome.................... Replace Rain 25 2,500
Gutters & Down
Spouts Garage/Svc
Area.
Lorraine....................... Install New 25 200,000
Filtration System.
Manila......................... Paint Motor Pool 25 4,000
Buildings.
Meuse Argonne.................. Replace Lion's 25 1,500
Head at Pool.
Florence....................... Replace Rain 25 2,000
Gutters & Down
Spouts Garage/Svc
Area.
Netherlands.................... Connect Qtrs to 25 20,000
City Sewer.
Garches........................ Re-waterproof 25 10,000
Director's Office
Roof.
Lorraine....................... Refurbish Memorial 25 35,000
Bronze Window
Frame.
Meuse Argonne.................. Repaint Flagpoles. 25 4,000
Lorraine....................... Clean and Treat 25 100,000
(Water-resistant)
Memorial.
Netherlands.................... Replace Sprinkler 32 300,000
System and
Renovate Pump
Room.
Florence....................... Drilling of a new 32 40,000
artesian deep
well.
Luxembourg..................... Replace sprinkler, 32 220,000
renovate pumproom.
Luxembourg..................... Install Security 25 8,300
Doors on Compost
Shed.
Somme.......................... Replace sprinkler, 32 180,000
renovate pumproom.
Somme.......................... Repair Water 25 1,000
Softener.
Ardennes....................... Replace Sprinkler 32 200,000
System, renovate
pumproom.
Normandy....................... Install 32 5,000
Information Panel
at Pointe du Hoc.
Saint Mihiel................... Replace sprinkler, 32 200,000
renovate pumproom.
Rhone.......................... Install Drainage 25 8,000
line in Lower
Grave Plots area.
Henri Chapelle................. Replace Sprinkler 32 230,000
System and
Renovate Pump
Room.
Henri Chapelle................. Replace Kitchen 25 23,000
Cabinets, Both
Quarters.
Meuse Argonne.................. Construct an Oil- 25 2,000
Water Separator
at Wash Rack.
Oise Aisne..................... Replace Storage 25 40,000
Bldg & Apron.
Manila......................... Water Purification 32 170,000
System
(Irrigation).
Aisne Marne.................... Replace Roof on 25 15,000
Compost Shed.
Aisne Marne.................... Treat Wood Frame 25 5,000
of Compost Shed.
Henri Chapelle................. Repair Roof of 25 1,000
Transformer Bldg.
North Africa................... Renovation of 32 10,000
Visitors Toilets
to include
handicap.
Meuse Argonne.................. Reset Coping 25 3,000
Stones on
Memorial
Retaining Wall.
Aisne Marne.................... Repaint Flagpoles. 25 3,000
Luxembourg..................... Replace Rusted 25 2,500
Stained Glass
Window Hinges,
Chapel.
Sicily-Rome.................... Replace Bedroom/ 25 6,000
living room
ceiling Supt's
Qtrs.
Lorraine....................... Repaint Memorial 25 3,000
Ceiling.
Somme.......................... Repair Dry Rotted 25 7,000
Doors, Mechanical
Shop & Garage.
Saint Mihiel................... Inspect deep well 25 10,000
(100 meters
depth).
Manila......................... Refinish Pea 25 6,000
Gravel Base
Overlay--Cabanatu
an.
Henri Chapelle................. Renovate water 25 70,000
reservoir.
Ardennes....................... Construct Public 32 15,000
Handicapped
Toilet.
Cambridge...................... Install Handicap 32 10,000
Toilets.
North Africa................... Extension of 32 11,500
Sprinkling System
To Semi-Circular
Dr.
Henri Chapelle................. Reconstruct Public 25 45,000
Toilets/install
handicap facil.
Aisne Marne.................... Build Public 25 30,000
Toilets (include
handicap toilets).
Luxembourg..................... Replace Furnace, 25 8,000
Garage Bldg.
Rhone.......................... Repaint Exterior 25 8,000
of Service Area
Bldg & Qtrs.
Luxembourg..................... Replace 2 ea fuel 25 12,000
tanks (both Qtrs).
Oise Aisne..................... Replace 1 ea fuel 25 25,000
tank (VB/Qtrs), 1
ea Gasoline Ta.
Saint Mihiel................... Replace 2 ea Fuel 25 20,000
tanks, 1 ea Gas
Tank.
Manila......................... Construct an Oil 32 4,000
Storage Building.
Aisne Marne.................... Replace 2 ea 25 15,000
(Visitors Bldg/
Qtrs) fuel tanks.
Henri Chapelle................. Replace 4 ea Fuel 25 30,000
Tanks.
Ardennes....................... Replace 4 ea Fuel 25 36,000
Tanks & 1 ea Gas
Tank.
Sicily-Rome.................... Renovation and 32 3,500
modification of
Pump House roof.
Brittany....................... Replace 4 ea Fuel 25 36,000
Tanks & 1 ea Gas
Tank.
Flanders Field................. Replace heating 25 4,000
system--nursery.
Henri Chapelle................. Rewire Buildings 25 30,000
vic Collonades.
Sicily-Rome.................... Install auto 32 2,000
irrigation system
front of
res'vation.
Aisne Marne.................... Check Lightning 25 500
Arrestor System
at Memorial.
Flanders Field................. Insulate Qtrs 25 500
Attic.
Cambridge...................... Renovate Toilets 25 5,000
in Visitors Bldg.
Corozal........................ Upgrade Sprinkler 32 3,000
System.
Epinal......................... Install Road Signs 25 1,000
Normandy....................... Extend Sprinkler 25 2,000
System to Nursery
Area.
Saint Mihiel................... Remove electric 25 1,000
cable and fuel
tank pipes at
Qtrs.
Florence....................... Rent platform to 25 3,000
paint Flagpole &
clean Pylon.
Aisne Marne.................... Replace Heating in 25 15,000
Garage &
Refectory (Svc
Area).
Flanders Field................. Restructure 32 110,000
Service Area.
Oise Aisne..................... Repaint Entrance 25 500
Gates.
Sicily-Rome.................... Extension of 32 2,500
boiler room
entrance Asst
Supt Qtrs.
Suresnes....................... Repair Perimeter 25 12,000
Fence (5th and
6th phases).
Somme.......................... Reset Stone on 25 1,500
South-West Chapel
Gate.
Henri Chapelle................. Replace High Volt. 25 20,000
Transformer and
Change Amperage.
Corozal........................ Replace Roof, 25 5,000
Chapel.
Somme.......................... Paint the 25 1,000
Lettering on
Entrance Wall &
Chapel.
Flanders Field................. Replace 3 ea Fuel 25 20,000
Tanks.
Henri Chapelle................. Inspect deep well 25 10,000
(100 meters
depth).
Sicily-Rome.................... Install Security 25 5,650
Grilles, Supt's
Qtrs.
Suresnes....................... Repaint iron work 25 6,000
on Fence (5th and
6th phases).
Epinal......................... Replace Roof Tiles 25 45,000
on All Service
Bldgs.
Saint Mihiel................... Repoint Stairs and 25 2,000
Walls at Montsec
Monument.
Sicily-Rome.................... Replace entrance 32 5,000
doors both
residences.
Henri Chapelle................. Construct 32 100,000
Visitor's Room
and Office.
Ardennes....................... Replace Window 25 500
(Insulating) in
Workers Refectory.
Netherlands.................... Engrave MIA name 25 6,750
(J. Howell) on
Wall of Missing.
Manila......................... Upgrade Canteen 25 5,000
(Replace Roof &
Ceiling).
Meuse Argonne.................. Improve Crew 25 2,000
Latrines/
Lunchroom in
Service Area.
Epinal......................... Improve Heating in 25 5,000
Service Area.
Luxembourg..................... Restructure Staff 25 4,000
Area in Service
Area.
Sicily-Rome.................... Install Security 25 5,000
Grilles, Asst.
Supt's Qtrs.
Somme.......................... Install 25 500
Thermostatic
Valves on Pump
Room Radiators.
Meuse Argonne.................. Install Chemical 25 10,000
Toilets at
Sommepy Mounument.
Netherlands.................... Replace Calcified 25 6,000
Water Lines in
Qtrs.
Sicily-Rome.................... Extension of the 32 12,000
Cemetery Office,
renovation of WC.
Meuse Argonne.................. Install all 32 50,000
utilities at
Sommepy Monument.
Somme.......................... Repaint Map at 25 500
Bellicourt
Monument.
Epinal......................... Resurface Roof of 25 15,000
Pump House.
Manila......................... Upgrade 25 5,000
Superintendent's
Guest Bath.
Brittany....................... Clean Tours 25 250
Monument.
Brittany....................... Reset Stones at 25 50,000
Entrance Gate.
Brookwood...................... Construct Toilet 32 40,000
Facilities/
Enlarge Office &
Break.
Sicily-Rome.................... Convert two doors 25 1,700
into windows,
Asst Supt Qtrs.
Ardennes....................... Replace Furnace in 25 5,000
Service Bldg.
Ardennes....................... Modify Fire 25 10,000
Hydrant System/
Sep From
Sprinkler Sys.
Normandy....................... Install Heating 32 9,000
System in #2 Work
Shop.
Rhone.......................... Enclosing of 32 1,000
Garage Annex.
Suresnes....................... Extend Office..... 32 75,000
Suresnes....................... Install Curtain 32 3,000
Rods & Curtains
in Qtrs.
Suresnes....................... Replace Curtains 32 2,000
and Drapes in
Visitors Bldg.
Manila......................... Repave Roads 32 120,000
(Phase I).
Suresnes....................... Repair/Repaint 25 50,000
West Perimeter
Fence (Behind
Cem.).
Normandy....................... Replace Expansion 25 1,000
Joints in
Reflecting Pool.
Saint Mihiel................... Replace Roof of 25 1,500
Green House.
Florence....................... Replace Roses, 25 4,000
Office/Visitors
Bldg/Flagpole
Area.
Cambridge...................... Insulate Attic in 25 3,000
Both Quarters.
Aisne Marne.................... Repaint Reservoir 25 500
Roof.
Flanders Field................. Replace Zinc 25 500
Flashing on Edge
Visitor's Bldg
Roof.
North Africa................... Replace Air 25 6,000
Conditioner
Units, Dual
System (7 ea).
Aisne Marne.................... Repair Leaks in 25 5,000
Structure
Drainage System,
Chapel.
Lorraine....................... Repair Gutters on 25 1,000
Compost Shed.
Henri Chapelle................. Replace roof tiles 25 3,000
on Service
Building.
Corozal........................ Replace Roof, 25 4,000
Public Rest Rooms.
Lorraine....................... Replace Gutters, 25 15,000
Downspouts and
Zinc Flashing.
Oise Aisne..................... Install Wall 25 500
Insulation In
Attic Next to
Master BR.
Oise Aisne..................... Refinish Entrance 25 500
Floors in
Quarters.
Rhone.......................... Replace of Five 32 3,000
Window Shutters,
Supt's Qtrs.
Epinal......................... Repaint Interior 25 1,500
of Supt's Qtrs.
Brittany....................... Install Burglar 25 5,000
Alarms in Both
Qtrs.
Somme.......................... Install Security 25 1,500
Railing in Qtrs
Attic.
Florence....................... Replace Cemetery 25 1,600
Wooden Benches.
Meuse Argonne.................. Modify Lightning 25 9,000
Arrestors at
Sommepy Monument.
Henri Chapelle................. Repaint Reservoir 25 2,000
Domes.
Ardennes....................... Install Security 32 8,000
Alarms.
Corozal........................ Replace Electrical 25 15,000
System, Chapel.
Ardennes....................... Water Proof Pump 32 2,000
House Ceiling.
Normandy....................... Install Security 32 6,500
System in Service
Area.
Oise-Aisne..................... Repair Memorial 25 5,000
Roof to Stop
Water
Infiltration.
Sicily-Rome.................... Put Aggregate 32 11,000
Stone Tiles North
Garden.
Normandy....................... Install Window 25 2,000
Security Bars in
Service Area.
Normandy....................... Replace 25 8,000
Orientation Table
Security Railing.
Brittany....................... Install Rolling 25 11,000
Shutters and
Screens at Both
Qtrs.
Florence....................... Lower, & Level 25 37,000
Turf Below Height
of Cross 1st Pha.
Aisne Marne.................... Renovate 25 2,800
Electrical Wiring
in Compost Shed.
Henri Chapelle................. Insulate Storage 25 7,000
Room/Install
Radiator (Svc.
Area).
Ardennes....................... Replace Two 25 15,000
Rolling Doors and
Enclose Staircase.
Manila......................... Replace Handrails 32 12,300
to Memorial
Public Restrooms.
Suresnes....................... Replace Service 25 500
Building Locking
System.
Cambridge...................... Transform Long- 25 15,000
Step Stairway.
Saint Mihiel................... Replace Heating 25 1,500
Pipes in Boiler
Room.
Sicily-Rome.................... Place Aggregate 32 2,000
Stone Tiles
Memorial Toilet.
Normandy....................... Reforest 32 10,000
Peripheral Areas
(Replace Black
Pines).
Brittany....................... Construct Handicap 32 15,000
Access Ramp for
Chapel.
Oise-Aisne..................... Construct 32 15,000
Handicapped
Facilities
(Modify Toilet).
Florence....................... Motorize 3 Roll-up 25 4,000
Doors, Service
Group Area.
Epinal......................... Replace Fuel 25 500
Gauges (3 ea).
Epinal......................... Replace 110v 25 500
Transformer &
Distribution Box.
Suresnes....................... Relocate Gasoline 25 10,000
Pump/Storage Tank
to Svc. Area.
Manila......................... Replace 32 20,000
Underground Fuel
Storage Tanks.
Suresnes....................... Upgrade Electrical 25 10,000
Power in North
Service Area.
Garches........................ Construct Handicap 25 2,000
Access Ramp.
Garches........................ Modify Toilet for 25 2,000
Handicapped
Access.
Sicily-Rome.................... Renovation and 32 5,000
modification of
Generator Room.
Meuse Argonne.................. Install Water 25 2,000
Softener in
Visitors Building.
Netherlands.................... Replace Stone 25 2,000
Steps Around
Flagpole.
Netherlands.................... Replace Venetian 25 4,000
Blinds in
Visitors Bldg
Office.
Sicily-Rome.................... Build Concrete Bed 25 3,000
for Canal Running
into Reservoi.
Netherlands.................... Replace Roll-up 25 3,500
Door in Mower
Bldg.
Netherlands.................... Paint Floor in 25 1,000
Service Area.
Flanders Field................. Sand/Seal Wooden 25 1,000
Floor in
Visitor's Bldg.
Manila......................... Renovate Guard 25 5,000
House.
Meuse Argonne.................. Rebronze Doors of 25 1,500
Montfaucon
Monument.
Oise Aisne..................... Repoint Rear Wall 25 500
of Memorial (3rd
phase/3.
Aisne Marne.................... Clean and treat 25 1,000
chimneys &
windows
(limestone).
Florence....................... Replace Pebble 32 36,000
Mall Paths with
Pebble Tiles.
Aisne Marne.................... Repair Cracked 25 1,000
Stones on
Flagpole Base.
Aisne Marne.................... Repair South-Side 25 10,000
Bronze Door Frame.
Saint Mihiel................... Repair and Paint 25 1,000
Perimeter Fence.
Sicily-Rome.................... Renovation of 25 8,000
Lathhouse
Building.
Somme.......................... Repaint Perimeter 25 1,000
Fence at Cantigny
Monument.
Somme.......................... Reset or Grind 25 1,000
Stone in Flagpole
Base.
Suresnes....................... Clean the Cornice 25 10,000
of Memorial.
Manila......................... Install Automatic 32 45,000
Sprinklers (Phase
II).
Suresnes....................... Replace 25 1,000
information board.
Ardennes....................... Replace Damaged 25 10,000
Bricks, Exterior
Wall of Vis. Ctr.
Henri Chapelle................. Replace 3 stones 25 2,000
in Wall of
Missing.
Florence....................... Build Retaining 32 90,000
Wall in Front of
Dam.
Lorraine....................... Repair Path to 25 2,000
Overlook.
Henri Chapelle................. Repaint Pump Room. 25 2,500
Saint Mihiel................... Repaint exterior 25 3,000
walls of Qtrs.
Florence....................... Install Alarm 25 2,400
System On
Entrance Cemetery
Bridge.
Somme.......................... Repair stone 25 4,500
damage in
Perimeter Wall.
Aisne Marne.................... Repair and Paint 25 6,000
Perimeter Fence.
Netherlands.................... Retile Floor in 25 2,000
Visitors Bldg
Office.
Manila......................... Drill New Well.... 32 90,000
Lorraine....................... Repair and Paint 25 15,000
Chain-link
Perimeter Fence.
Epinal......................... Repair Perimeter 25 1,000
Fence.
Somme.......................... Repaint 25 750
Transformer
Building.
Florence....................... Install Floor 32 1,500
Tiles Service
Group Building.
Aisne Marne.................... Repair Retaining 25 1,500
Wall of Memorial.
Ardennes....................... Repair Concrete 25 2,000
Pavement Next to
Compost Shed.
Flanders Field................. Repoint Perimeter 25 2,000
Wall.
Sicily-Rome.................... Replace Capstone 25 2,000
on Boundary Walls.
Meuse Argonne.................. Repair and Repoint 25 2,000
Perimeter Wall.
Oise Aisne..................... Repoint and Repair 25 2,000
Perimeter Wall.
Saint Mihiel................... Repoint and Repair 25 7,000
Perimeter Wall.
Manila......................... Repave Roads 32 125,000
(Phase II).
Suresnes....................... Relevel Headstone 25 45,000
Beams.
Saint Mihiel................... Install 32 5,000
information panel
at Montsec
Monument.
Meuse Argonne.................. Construct garage 32 10,000
at Asst Supt Qtrs.
Rhone.......................... Resurface 32 40,000
Visitors' Parking
Lot.
Aisne Marne.................... Repair/Repaint 25 4,000
Basement Windows,
Chateau Thierry.
Henri Chapelle................. Repair Stone Wall 25 3,000
and Gate Near
North Parking
Area.
Brookwood...................... Spread Additional 25 5,000
Gravel on
Walkways.
Manila......................... Install Automatic 32 4,000
Gate Opener (Main
Entrance).
Meuse Argonne.................. Relevel 2 steps at 25 500
Montfaucon
Monument.
Netherlands.................... Clean Copper 25 500
Sulfate Stains
from Statue Stone
Base.
Flanders Field................. Regild Door of 25 1,000
Chapel.
Rhone.......................... Resurface of 32 16,000
Service Road.
Epinal......................... Repair Cemetery 25 10,000
Roads.
Henri Chapelle................. Repair Roads and 25 3,000
Walkways.
Meuse Argonne.................. Repair Chapel 25 20,000
Service Road.
Manila......................... Replace/Install 32 30,000
Electric Aluminum
Garage Bay Door.
Netherlands.................... Resurface 25 35,000
Perimeter Road.
Suresnes....................... Reconstruct 25 100,000
Memorial Terrace/
cracked retain.
wall.
Somme.......................... Install Stone Road 25 500
Sign at
Bellicourt
Monument.
Rhone.......................... Replacement of 32 7,500
Fence from NE to
SW Side of
Cemeter.
Somme.......................... Install Stone Road 25 500
Sign at Cantigny
Monument.
Meuse Argonne.................. Resurface Roads 32 60,000
and Walkways with
Asphalt.
Henri Chapelle................. Replace Remaining 25 1,000
Single-Pane
Window in Attic.
Manila......................... Construct 32 25,000
Perimeter Road.
Luxembourg..................... Replace rug in 25 500
Visitors Bldg.
Brittany....................... Replace Wooden 25 10,000
Gates w/Aluminum.
Meuse Argonne.................. Resurface 25 15,000
Esplanade at
Montfaucon
Monument.
Manila......................... Construct Road to 32 25,000
Compost Area.
Somme.......................... Resurface all 25 70,000
Walkways.
Somme.......................... Resurface Parking 25 100,000
Area at
Bellicourt
Monument.
Lorraine....................... Resurface Roads 25 75,000
and Walkways.
Luxembourg..................... Resurface Cemetery 25 90,000
Walkways.
Aisne Marne.................... Rebuild other 25 40,000
roads (Water
Res'v'r & Compost
Shed).
Epinal......................... Resurface Cemetery 32 150,000
Walkways.
Meuse Argonne.................. Extend Roof of 32 25,000
Memorial to
Eliminate Water
Seepage.
Aisne Marne.................... Resurface Parking 25 50,000
Area/Walkways at
Chateau Thierry.
Aisne Marne.................... Rebuild road in 25 60,000
Belleau Wood.
Netherlands.................... Replace Curtains/ 25 5,000
Reupholster
Furniture in Vis
Ctr.
Aisne Marne.................... Repair Drainage 25 5,000
Problem and
Repoint Memorial
Steps.
Somme.......................... Refinish Floor in 25 2,000
Visitors Center
(Entrance Foyer).
Saint Mihiel................... Clean Montsec 25 150,000
Monument.
Meuse Argonne.................. Repair Terrace in 25 30,000
Front of
Montfaucon
Monument.
Epinal......................... Replace Gravel in 25 500
Front of Chaumont
Tablet.
Epinal......................... Reasphalt Entrance 25 75,000
Road.
Brittany....................... Replace Asphalt 25 6,000
Pavement at Tours
Monument.
Brittany....................... Replace Sidewalk 25 2,000
to Public Toilets.
Oise-Aisne..................... Reasphalt Interior 25 40,000
Walkways.
Ardennes....................... Repoint Memorial 25 40,000
Podium and Steps.
Oise-Aisne..................... Replace Outside 25 1,000
Entrance Lights--
VB & Qtrs.
Netherlands.................... Renovate Pump 25 8,000
System for
Reflecting Pool.
Ardennes....................... Repair and 25 20,000
Maintain Asphalt
Service Roads.
Ardennes....................... Repair Back Wall 25 5,000
of Compost Shed.
Ardennes....................... Rebuild Wash Rack 25 5,000
w/Oil-Water
Separator.
Normandy....................... Resurface 4 25 60,000
Cemetery Walkways.
Normandy....................... Repair Beach Path. 25 25,000
Normandy....................... Replace Cubicle 25 10,000
Partitions in
Public Toilets.
Normandy....................... Engrave 2 Stone 32 1,500
Pillars at Garden
of the Missing.
Normandy....................... Repair Employee 25 2,000
Parking Lot
(Service Area).
Normandy....................... Repair Cemetery 25 12,000
Access Road
Surface.
Normandy....................... Repair 300m of 25 1,000
Access Road's
Shoulders.
Normandy....................... Replace 2 Water 25 6,000
Softeners.
Normandy....................... Repair Roads/ 25 14,000
Parking Lot/
Walkways at Pt du
Hoc.
Netherlands.................... Replace Museum 25 5,000
Glass Shields
with Safety Glass.
Cambridge...................... Replace Curb 25 2,000
Stones at Parking
Lot.
Oise-Aisne..................... Resurface East- 25 10,000
West Axis
Walkways.
Oise-Aisne..................... Repaint Basement 25 1,500
of Visitor's/Qtrs
Bldg.
Oise-Aisne..................... Paint Interior of 25 1,000
Visitors
Reception Room.
Oise-Aisne..................... Renovate Toilets 25 1,500
of Visitors Bldg.
Oise-Aisne..................... Repair Service 25 3,000
Access Road.
Oise-Aisne..................... Install Cabinets 32 2,000
and Sink in
Refectory.
Suresnes....................... Refurbish Bronze 25 1,500
Base of Flagpoles.
Meuse Argonne.................. Paint Interior of 25 1,000
Service Area
Garage.
Meuse Argonne.................. Replace Water 25 750
Softener in
Supt's Qtrs.
Normandy....................... Resurface Gravel 25 1,000
Walkways, Garden
of the Missing.
Cambridge...................... Resurface Cemetery 25 30,000
Roads.
Brittany....................... Paint Exterior of 25 16,000
Five Buildings.
Brittany....................... Install False 25 3,500
Ceiling and
Radiators in
Garage Bay.
Brittany....................... Replace Toilets in 25 6,500
Visitors Bldg.
Brookwood...................... Replace Driveway 25 5,000
at Qtrs.
Cambridge...................... Resurface Parking 25 10,000
Lot Road Near
Visitors Bldg.
Luxembourg..................... Refinish Pews and 25 1,000
Kneelers in
Chapel.
Garches........................ Replace Worn 25 5,000
Carpeting (Phase
2).
Aisne Marne.................... Clean & treat 25 2,000
Stone on Qtrs and
Visitors Bldg.
Normandy....................... Repair Perimeter 25 3,000
Fence.
Luxembourg..................... Replace Visitors 25 8,000
Building Furnace.
Saint Mihiel................... Improve water 25 40,000
supply, clean
deep well.
Somme.......................... Improve Water 25 300,000
Supply (Drill New
Well).
Aisne Marne.................... Replace Gutters on 25 500
Compost Shed.
Ardennes....................... Replace Gutters on 25 1,000
Compost Shed.
Lorraine....................... Repaint Roof of 25 750
Public Toilet
Facility.
Henri Chapelle................. Replace gutters of 25 1,000
Service Building.
Lorraine....................... Repaint Roof of 25 1,000
Visitors Building.
Saint Mihiel................... Seal Asphalt 25 4,000
Parking Area at
Montsec Monument.
Ardennes....................... Replace Memorial 25 50,000
Furnace.
Lorraine....................... Seal Parking Lot 25 1,000
in Service Area.
Netherlands.................... Repair Rain Water 25 2,000
Drains.
Netherlands.................... Inspect and Repair 25 8,000
Service Area
Roofs.
Normandy....................... Replace Roofs Both 25 25,000
Quarters.
Normandy....................... Replace Annex 25 1,000
Building Roof
Gutters.
Lorraine....................... Replace Gutters on 25 10,000
Visitors Bldg and
Public Toilet.
Suresnes....................... Treat Chapel 25 12,000
Ceiling with
Preservative.
Cambridge...................... Improve 25 2,000
Maintenance Shop
in Service Area.
Suresnes....................... Install urinal and 25 2,000
sink in Service
Area.
Aisne Marne.................... Replace gas tank 25 20,000
and pump, Service
Area.
Oise Aisne..................... Extend Roof of 25 3,000
Garage to Create
a Lean-to Storage.
Henri Chapelle................. Improve water 25 40,000
supply, clean
deep well.
Saint Mihiel................... Install Paving 25 2,000
Stones at
Memorial.
Somme.......................... Renovate Perimeter 25 2,000
Fence w/ Post
Lead Anchors.
Netherlands.................... Enclose Compost 32 10,000
Shed.
Cambridge...................... Enclose Compost 32 10,000
Shed.
Epinal......................... Construct Interior 32 5,000
Dividing Walls in
Compost Shed.
Epinal......................... Install 32 15,000
Recirculation
System for Both
Pools.
Normandy....................... Install curbstones 32 45,000
access road.
Oise Aisne..................... Install heating in 32 250
Visitors Bldg
Attic.
Epinal......................... Construct staff 32 50,000
facility area.
Ardennes....................... Paint Mechanic 25 500
Workshop in
Service Bldg.
Epinal......................... Paint Floor in 25 1,000
Workshop.
Normandy....................... Improve Shed 25 15,000
Service Area #2.
Aisne Marne.................... Install New 25 50,000
Service Building.
Cambridge...................... Resurface Walkways 32 150,000
to Eliminate
Gravel.
Aisne Marne.................... Emplace Concrete 32 2,000
Borders Around
Traffic Island.
Somme.......................... Install Fence 32 30,000
Around Grassy
Area at
Bellicourt Mon.
Ardennes....................... Install Thermostat 25 2,000
Valves in Qtrs.
Lorraine....................... Install Hand 32 1,000
Dryers in
Visitor's Toilets.
Aisne Marne.................... Renovate Basement 25 35,000
Rooms for
Caretaker's
Office.
Normandy....................... Improve toilets 32 100,000
facilities,
Pointe du Hoc.
Suresnes....................... Widen and 25 60,000
Resurface
Cemetery Walkways.
Lorraine....................... Repair, Resurface 25 55,000
Memorial Area
Walkways.
Normandy....................... Repair & Install 32 15,000
Automatic Gate
Main Entrance.
Garches........................ Enlarge Parking 25 1,000
Area.
Aisne Marne.................... Relocate Offices 25 3,000
in Visitors
Building.
Saint Mihiel................... Relocate Entrance 25 1,000
Gate at Qtrs.
Saint Mihiel................... Install Gate on 25 3,000
Access Road to
Montsec Monument.
Lorraine....................... Replace Ceiling in 32 1,500
Supt's Office in
Visitors Bldg.
Lorraine....................... Install Sprinkler 32 10,000
System for Meadow
Area.
Epinal......................... Construct Heated 32 5,000
Chemical Storage
Shed.
Normandy....................... Construct 32 50,000
Replacement
Storage Building.
Netherlands.................... Construct 32 30,000
Permanent Stone
Handicapped Ramps.
Ardennes....................... Install 1.5m Chain 32 30,000
Link Fence Around
Perimeter.
Ardennes....................... Construct Truck 32 5,000
Loading Ramp in
Compost Area.
Ardennes....................... Construct 32 10,000
Retaining Wall in
Compost Area.
Normandy....................... Tile Wood Working 32 3,000
and Mechanic Shop
Floors.
Normandy....................... Install 4 Metal 32 5,000
Gates in Overflow
Parking Area.
Suresnes....................... Install Air- 32 3,000
compressor in
North Service
Area.
Ardennes....................... Relocate Youth 25 10,000
Statue.
Meuse Argonne.................. Replace Perimeter 25 5,000
Fence.
Netherlands.................... Install Upstairs 25 1,000
Toilet in Supt's
Qtrs.
Epinal......................... Install second 32 2,500
toilet in Both
Qtrs.
Epinal......................... Renovate Kitchens 25 15,000
in Qtrs.
Netherlands.................... Paint Garage 25 500
Floors in Both
Qtrs.
Normandy....................... Paint Basement 25 500
Walls and Floor
of Memorial.
Aisne Marne.................... Repaint Basement 25 1,000
and Garage Floor,
Visitors Bldg.
Ardennes....................... Replace Sidewalk 25 5,000
in Front of Supt
Qtrs.
Saint Mihiel................... Repaint basement 25 1,000
in Qtrs.
Normandy....................... Replace kitchen 25 20,000
cabinets, both
Quarters.
Meuse Argonne.................. Install 2 Bedrooms 32 10,000
in Asst Supt Qtrs.
Henri Chapelle................. Construct Veranda 32 50,000
both Qrts.
Cambridge...................... Install a Veranda 32 13,000
at Supt's Qtrs.
Brookwood...................... Enlarge and 32 50,000
improve Supt's
Qtrs.
Netherlands.................... Install Rolling 32 1,250
Shutter in Supt
Qtrs vic Veranda.
Epinal......................... Install Two Hand 25 500
Dryers in
Visitors Bldg.
Netherlands.................... Install Hand 25 750
Dryers in Public
Toilets.
Henri Chapelle................. Install Hand 25 500
Dryers in Public
Toilets.
Cambridge...................... Replace carpeting 25 2,000
in Asst Supt Qtrs.
Aisne Marne.................... Sand and Varnish 25 5,000
Floors in Qtrs.
Ardennes....................... Replace Wall to 25 5,000
Wall Carpeting in
Both Qtrs.
Ardennes....................... Renovate bathroom 25 1,000
in Supt Qtrs.
Netherlands.................... Install New 25 3,000
Carpeting in
Asst. Supt's Qtrs.
Brittany....................... Renovate bathrooms 25 5,000
in Qtrs (Bathtub
& Sink).
Netherlands.................... Renovate upstairs 25 1,500
bathroom in
Supt's Qtrs.
Normandy....................... Renovate bathroom 25 1,000
in Asst Supt's
Qtrs.
Aisne Marne.................... Renovate Kitchen 25 2,000
in Qtrs (Tile &
Paint).
Epinal......................... Renovate Bathrooms 25 10,000
in Both Qtrs.
Normandy....................... Install Dormer 25 10,000
Windows, Asst
Supt's Qtrs.
Epinal......................... Construct Veranda 32 50,000
in both Qtrs.
Epinal......................... Construct Front 32 5,000
Porch Overhang
for Supt's Qtrs.
Ardennes....................... Construct Veranda 32 50,000
Both Qtrs.
Ardennes....................... Renovate Attic in 32 35,000
Asst Qtrs &
Construct
Staircase.
Ardennes....................... Tile Basement 32 5,000
Floor in Both
Qtrs.
Ardennes....................... Replace Kitchen 25 1,000
Floor Tiles in
Asst Supt's Qtrs.
Normandy....................... Renovate Attic in 32 15,000
Asst Supt Qtrs.
Normandy....................... Construct Garage 32 15,000
in Supt Qtrs.
Normandy....................... Tile Storage Area 32 3,000
Floors Both Qtrs.
Normandy....................... Extend Garage-- 32 5,000
Asst Supt Qtrs.
Oise-Aisne..................... Renovate Bathrooms 25 4,000
in Supt's Qtrs.
Ardennes....................... Repaint Interior 25 2,000
of Asst Supt Qtrs.
Suresnes....................... Renovate Supt's 25 5,000
Qtrs Bathroom.
Brookwood...................... Construct 32 20,000
Extension of
Entrance to
Supt's Qtrs.
Cambridge...................... Sandblast Chimney 25 152
on Visitors
Building.
Lorraine....................... Repair Furnace in 25 306
Service Area.
Garches........................ Construct Fire 25 2,500
Escape.
Aisne Marne.................... Resurface Road, 25 100,000
Belleau Wood
Towards Lucy (1.1
km).
Aisne Marne.................... Construct 25 5,000
Handicapped Ramp
to Visitors Bldg.
Flanders Field................. Replace Well Head 25 1,500
Hatch.
Flanders Field................. Renovate Oudenarde 25 1,000
Monument Bunker.
Flanders Field................. Improve Drainage 25 2,000
vic Visitors Bldg
Walkway.
Netherlands.................... Replace Damaged 25 12,000
Stones Around
Memorial.
Netherlands.................... Replace Sidewalk 25 1,500
at Supt's Qtrs.
Netherlands.................... Improve Attic 25 3,000
Insulation Both
Qtrs.
Normandy....................... Install Handrail 32 3,000
Utah Beach Fed
Monument
Staircase.
Oise Aisne..................... Sand & Varnish 25 1,500
Hardwood Floors
in Visitors Bldg.
Oise Aisne..................... Paint Small Metal 25 2,000
Storage Bldg,
Pump Rm,
Reservoir.
Somme.......................... Construct Water 32 50,000
Reservoir & Pump
House.
Suresnes....................... Repaint Boulevard 25 3,000
Fence Near Qtrs.
Suresnes....................... Improve Drainage 25 15,000
System (4 Blocked
Drains).
Brittany....................... Install New 25 10,000
Drainage Field
Asst Supt Qtrs.
Normandy....................... Replace Electric 25 1,000
Hand Dryers in
Public Toilets.
Netherlands.................... Clean Back Side of 25 9,000
Wall of Missing.
Brookwood...................... Replace Gas 25 2,500
Furnace, Supt
Qtrs.
Normandy....................... Paint Garage Floor 25 2,000
in Service Bldg.
----------------------------------------
Grand Total.............. .................. ...... 10,191,671
------------------------------------------------------------------------
DEPARTMENT OF DEFENSE--CIVIL
Cemeterial Expenses, Army
STATEMENT OF STEVEN DOLA, DEPUTY ASSISTANT SECRETARY
FOR MANAGEMENT AND BUDGET, OFFICE OF THE
ASSISTANT SECRETARY OF THE ARMY FOR CIVIL
WORKS
Senator Bond. We will now go to Mr. Steve Dola.
Mr. Dola. Thank you very much, Mr. Chairman. I appreciate
the opportunity to appear before the subcommittee today and
testify, as you pointed out, in support of the fiscal year 1998
Cemeterial Expenses, Department of the Army budget request.
Senator Bond. Let me say we have a letter from Secretary
Lancaster, a good friend, who points out that we have managed
to schedule a conflict for him, and we appreciate the fact that
you are able to attend and sorry that we conflicted with a
hearing on the House side. So thank you very much for being
here.
Mr. Dola. Mr. Chairman, Secretary Lancaster very much
wanted to be here in person. As you know, he is defending the
water resources program over in the House this morning.
As you indicated, our budget request is $11,815,000 and it
will finance operations at both Arlington and Soldiers' and
Airmen's Home National Cemeteries. The full-time permanent
positions in 1998 will be 117, down from a total of 121 in 1997
and 128 authorized in 1996. We have three programs: operation
and maintenance, administration, and construction.
The operation and maintenance program, $8,779,000, will
provide for the cost of daily operations necessary to support
an average of 20 services daily and for maintenance of
approximately 630 acres. This program supports 111 of the 117
full-time permanent positions in 1998. We plan to perform the
same amount of work contractually that previously was performed
by civil servants and direct the contractors to take on
additional tasks that need to be accomplished. Grounds
maintenance, tree and shrub maintenance, custodial services,
guide service, and information receptionists and headstone
setting, realignment and cleaning are major functions performed
by contract personnel.
The administration program, $599,000, provides for
essential management and administrative functions, to include
staff supervision of Arlington and Soldiers' and Airmen's Home
National Cemetery.
The construction program funded--requested at $2,437,000,
provides $1,175,000 to replace the Custis Walk, $810,000 to
construct Columbarium access roads, and $350,000 to continue
the graveliner program and other minor items.
Finally, with regard to the Columbarium, the 11,286 niche
capacity of Columbarium phase 3, currently under construction,
will bring the total niches in the Columbarium complex to
31,286. Phase 1, completed in 1984, phase 2, completed in 1991,
each provided 10,000 niches. The North Court will be completed
in October 1997 and the South Court will be completed in June
1998.
At this time there remain only about 2,000 niches in phase
2, so we are right on time with the additional capacity.
For that, Mr. Chairman, and for the subcommittee's support
of past appropriations for the Columbarium, Arlington National
Cemetery and the Army are very grateful. We have a sound budget
request for 1998 and we again ask for your support and
approval.
PREPARED STATEMENT
That completes my summary, Mr. Chairman.
Senator Bond. Thank you very much Mr. Dola.
[The statement follows:]
Prepared Statement of Steven Dola
INTRODUCTION
Mr. Chairman and members of the subcommittee: I appreciate the
opportunity to appear before the subcommittee in support of the fiscal
year 1998 appropriation request for Cemeterial Expenses, Department of
the Army. With me today are Mr. John C. Metzler, Jr., Superintendent of
Arlington National Cemetery, and Mr. Rory D. Smith, Budget Officer,
also from Arlington National Cemetery. We are appearing on behalf of
the Secretary of the Army, who is responsible for the operation and
maintenance of Arlington and Soldiers' and Airmen's Home National
Cemeteries.
FISCAL YEAR 1998 BUDGET OVERVIEW
The request for fiscal year 1998 is $11,815,000; $215,000 more than
the fiscal year 1997 appropriation. The funds requested are sufficient
to support the work force, to assure adequate maintenance of the
buildings, to acquire necessary supplies and equipment, and to provide
maintenance standards expected at Arlington and Soldiers' and Airmen's
Home National Cemeteries and include:
--$1,175,000 for replacement of the historic Custis Walk;
--$810,000 for construction of access roads associated with
Columbarium Phase III; and
--$200,000 to further expand contracts for enhancing the appearance
of the cemetery while implementing government-wide streamlining
plans.
The first item is a significant commitment to complete a capital
improvement project, which, when completed, will eliminate the heaving
and cracks which affect 75 percent of the walkway.
The second item will allow the cemetery to make full utilization of
Columbarium Phase III.
The third item continues the initiative begun in fiscal year 1996.
In fiscal year 1996 these contractual services were increased by
$230,000, in fiscal year 1997 they were increased by an additional
$165,000, and in fiscal year 1998 they will be increased by $200,000.
Additional work will be performed by these contractors that was not
done before and total personnel are being reduced from 128, to 121 and
117, respectively.
The funds requested are divided into three programs, Operation and
Maintenance, Administration, and Construction. The principal items in
each program are as follows:
The Operation and Maintenance Program, $8,779,000, will provide for
the cost of daily operations necessary to support an average of 20
interments and inurnments daily and for maintenance of approximately
630 acres. This program supports 111 of the cemetery's total 117 FTE's.
Contractual services, including estimated costs associated with the
million dollar grounds maintenance contract, the $775,000 information
and guide service contract, $410,000 of contract tree and shrub
maintenance, and a $210,000 custodial contract, are estimated to cost
$2,947,000.
The Administration Program, $599,000, provides for essential
management and administrative functions to include staff supervision of
Arlington and Soldiers' and Airmen's Home National Cemeteries. Funds
requested will provide for personnel compensation, benefits and the
reimbursable administrative support costs of the cemeteries.
The Construction Program, $2,437,000, provides funds as follows:
$1,175,000 to replace the historic Custis Walk, $810,000 to construct
roads that originally were included as part of Phase III of the
Columbarium, $50,000 of minor road repair, $350,000 for the graveliner
program, and $45,000 to prepare the final design for the Wash Stand/
Fuel Island project.
FUNERALS
In fiscal year 1996, there were 3,325 interments and 1,733
inurnments; 3,500 interments and 1,900 inurnments are estimated in
fiscal year 1997; and 3,500 interments and 1,900 inurnments are
estimated in fiscal year 1998.
CEREMONIES
Arlington National Cemetery is this Nation's principal shrine to
honor the men and women who served in the Armed Forces. It is a visible
reflection of America's appreciation for those who have made the
ultimate sacrifice to maintain our freedom. In addition to the
thousands of funerals, with military honors, held there each year,
hundreds of other ceremonies are conducted to honor those who rest in
the cemetery. Thousands of visitors, both foreign and American, visit
Arlington to participate in these events. During fiscal year 1996,
about 2,700 ceremonies were conducted and the President of the United
States attended the ceremony on Veterans Day and Memorial Day.
During fiscal year 1996, Arlington National Cemetery accommodated
approximately 4 million visitors, making Arlington one of the most
visited historic sites in the National Capital Region. This budget
includes $35,000 for a study to develop an estimating procedure and
reliable estimates of the kinds of visitors that Arlington National
Cemetery serves. This increased orientation to our ``customers'' is
consistent with the Government and Performance Results Act and the
National Performance Review.
CONSTRUCTION PROJECTS
New projects in fiscal year 1998
Custis Walk.--The Custis Walkway was constructed in 1879 and is
2,500 feet long. Approximately 75 percent of the walkway is affected by
heaving and cracks, requiring visitors to exercise additional care
while using the walkway. The design for restoration/replacement has now
been completed using fiscal year 1995 appropriations in the amount of
$250,000. Construction funding of $1,175,000 is included in the fiscal
year 1998 budget submission.
Columbarium.--Columbarium roads associated with the Phase III
increment are planned in fiscal year 1998 costing an estimated
$810,000.
Construction project underway
Columbarium Phase III.--On July 1, 1996, construction of one of two
courts comprising Phase III of the Columbarium began, the contract for
construction of the second court was awarded on February 7, 1997, and
the construction cost is estimated to be $3,227,100. Construction funds
were appropriated in fiscal year 1996 and 1997, respectively. The
11,286 niche combined capacity of the Phase III increment will bring
the total niches in the Columbarium Complex to 31,286. Phase I,
completed in 1984, and Phase II, completed in 1991, each provided
10,000 niches. The additional 1,286 niche capacity of Phase III was
achieved by increasing the square footage or ``foot print'' of each of
the Phase III courts by 10 percent. In addition to providing more
niches, the larger ``foot print'' permits inclusion of a needed rest
room and mechanical/storage area into the North court of Phase III, and
makes more efficient use of the site.
RECENTLY COMPLETED CONSTRUCTION PROJECTS
Amphitheater.--The repair of damage done by rainwater leaks at the
Amphitheater and restoration of deteriorated marble there which were
begun in July 1994 are now complete. The work included replacing
waterproofing membranes; cleaning, patching and repointing stonework;
replacing deteriorated marble and balusters; replacing benches,
railings, drinking fountains, trash receptacles, signage and flagstone
paving. The Memorial Amphitheater Restoration Project now provides a
fitting place for ceremonies where public honor and recognition are
accorded national heros.
Facility Maintenance Complex.--A new facility maintenance complex
was constructed to replace buildings constructed in the 1930's. The
facility maintenance complex consists of work and storage areas for
three divisions (Facility Maintenance, Horticulture, and Field
Operations), in three separate buildings. There is another building for
warehouse operations and a building for the administrative functions
associated with all of these operations.
McClellan Gate.--The work associated with restoration of the
McClellan Gate has been recently completed. Work included removal and
resetting of stone including some stone replacement, structural
repairs, repointing, patching and cleaning of the entire arch, a new
concrete ring foundation, new copper roofing and flashing, repair and
painting of the iron gate, and new granite cobblestone paving around
the arch.
CLAIMS AND SETTLEMENTS
The status and disposition of claims associated with projects and
contracts at Arlington National Cemetery is summarized in the following
paragraphs.
In our letter of December 5, 1996, we informed the Subcommittee of
our plan to make final payment to the construction contractor on the
Facility Maintenance Complex under the terms of a settlement agreement
reached with the contractor and final payment to the contractor was
made on January 14, 1997.
Last year, we reported that a claim for differing site conditions,
submitted by the construction contractor for the demolition of the old
temporary Visitors Center and development of that land (Sections 54 and
55) into gravesites, was formally denied. The contractor appealed the
decision to the U.S. Court of Federal Claims on December 19, 1996.
Two claims from a previous grounds maintenance contractor have been
received. Settlement of a claim related to a defective contract option
in a previous grounds maintenance contract was reached in the amount of
$98,000. A claim alleging defective specifications in an interim
grounds maintenance contract is expected to be litigated in June or
July 1997.
MASTER PLAN
The new Master Plan, which currently is undergoing review within
the Army Secretariat, will identify projects and policies to respond to
the challenges confronting Arlington National Cemetery. These
challenges include an aging infrastructure, declining availability of
space for initial interment, and the need to preserve the dignity of
the cemetery while accommodating substantial public visitation. The
future projects envisioned in the Master Plan will not begin to be
implemented until we are into the next century. Projects and policies
must be measured against funding to be made available in the budget and
appropriations processes. Detailed planning and engineering studies
necessary to establish the cost, feasibility, and responsiveness of
individual capital projects to the Master Plan challenges would be
programmed and proposed to Congress, after review and consideration by
the Administration, at the appropriate times.
ARMY--INTERIOR LAND TRANSFERS
Public Law 104-201, the National Defense Authorization Act for
Fiscal Year 1997 (``1997 Authorization Act''), which was enacted on
September 23, 1996, includes two land transfer provisions in Section
2821 relating to Arlington National Cemetery.
Section 29 Land Transfer.--The first part of Section 2821 of the
1997 Authorization Act instructs the Secretary of the Interior to
transfer to the Secretary of the Army certain lands found in Section 29
of Arlington National Cemetery. The land found in Section 29 is
currently divided into two zones: the 12 acre Arlington National
Cemetery Interment Zone and 12.5 acre Robert E. Lee Memorial
Preservation Zone. The transfer encompasses the Arlington National
Cemetery Interment Zone and the portions of the Robert E. Lee Memorial
Preservation Zone that do not have historical significance and are not
needed for the maintenance of nearby lands and facilities.
The Secretary of the Interior is to base his or her determination
of which portion of the Preservation Zone will be transferred primarily
on a cultural resources study that will consider whether archeological
resources are likely to be located on the land, whether portions of the
property are eligible for inclusion in the National Register of
Historic Places, and whether property has forest cover that contributes
to the setting of the Preservation Zone. The cost of the study,
estimated at $85,000, will be split evenly between the Department of
Interior and Department of the Army. In addition, the Secretary of the
Interior will provide the Committee on Armed Services of the Senate and
the Committee on National Security of the House of Representatives with
environmental and cultural resource information and analysis.
The transfer, which is to be carried out under the Interagency
Agreement Between the Department of the Interior, the National Park
Service, and the Department of the Army, dated February 22, 1995, is to
occur not sooner than 60 days after the Secretary of the Interior has
submitted the information and analysis to the Committees. The Secretary
of the Interior must provide the information and analysis to the
Committees no later than October 31, 1997.
Visitors Center/Old Administration Building.--The second part of
Section 2821 of the 1997 Authorization Act instructs the Secretary of
the Interior to transfer to the Secretary of the Army 2.43 acres of
land and the Visitors Center, which is constructed on the land. In
return, the Secretary of the Army will transfer to the Secretary of the
Interior .17 acres of land and the Old Administration Building, which
is constructed on the site. Section 2821 provides the authority by
which this agreed-upon exchange of lands may take place.
CONCLUSION
The funds included in the fiscal year 1998 budget are necessary to
permit the Department of the Army to continue the high standards of
maintenance Arlington National Cemetery deserves. I urge the
Subcommittee to approve this request.
Mr. Chairman, this concludes my remarks. We will be pleased to
respond to questions from the Subcommittee.
SELECTIVE SERVICE SYSTEM
STATEMENT OF GIL CORONADO, DIRECTOR
Senator Bond. Mr. Coronado, we know you had some conflicts
in your schedule today, we congratulate you on your sense of
timing. It reminds me of the trapeze artist who lets go without
seeing the other bar and it arrives right on time. That
demonstrates excellent planning, and we are delighted to
welcome you today.
Mr. Coronado. Thank you, Mr. Chairman.
Senator Bond. Please proceed.
OPENING REMARKS
Mr. Coronado. Mr. Chairman, I am delighted to appear before
you and the other distinguished members of this subcommittee. I
have a written statement that I would like to submit for the
record.
Senator Bond. We will accept the statement in full, it will
go into the record, and we would invite you to summarize what
you think are the most important parts.
Mr. Coronado. Yes, sir; we are grateful to the subcommittee
and the Congress for continuing to provide us with the funds
necessary to carry out our mission. As you know, in November
1994 the Department of Defense revised its mobilization
timetables and we are now in the process of adjusting to that.
At the same time, we are moving forward with modernization of
our data processing capabilities and we are trying to enhance
service in every area.
SERVICE TO AMERICA INITIATIVE
As you consider our fiscal year 1998 appropriation, I know
that to function in an era of Government downsizing, the
Selective Service System cannot merely dwell on its proud past,
nor depend exclusively on the threat of future crisis. This
agency must demonstrate that America benefits from its work
each and every day. So in the spirit of the national
performance review, we are broadening our agency's direction.
We have enthusiastically embarked upon a new initiative that we
call Service to America, while continuing to meet our statutory
responsibilities.
We have reached out in close cooperation with the
Department of Defense and the Corporation for National Service.
We are informing young men about service opportunities today in
the Armed Forces and in our Nation's communities. With Service
to America, we proudly continue our time-honored purpose in a
new way.
We want to fully implement Service to America, and our
fiscal year 1998 request of $23.9 million is a slight increase
for the very first time in 4 years. Slightly over one-half of
the increase is for the printing, mailing, processing, and
staffing of the Service to America initiative, and the balance
is, of course, to offset pay raise costs.
Service to America, Mr. Chairman, is a solid example of
Federal agencies working together to achieve common goals and
provide better, more efficient service to the public. It is
also relevant to our Nation's new bipartisan emphasis on
voluntarism. We have been in touch with Gen. Colin Powell as he
spearheads with former President Bush the Presidents' Summit
for America's Future. We have suggested ways that our agency's
capabilities can be adapted to support programs and initiatives
sparked by the upcoming Philadelphia summit.
The General responded recently. He was happy to receive our
suggestions and his staff is now considering our proposals.
I strongly urge that you fund this innovative, modest
adjustment to our acknowledgment program, a program that was
born from an original concept in 1993, suggested by Senator
Mikulski. With your support and this 4-percent increase in our
agency's budget, we can move forward with an endeavor that has
great benefits for America and coincides with our Nation's new
bipartisan emphasis on voluntarism.
Mr. Chairman, members of this committee, I am proud of what
Selective Service does for America. I hope you share in this
pride as I answer your questions about our fiscal year 1998
budget request.
Thank you.
[The statement follows:]
Prepared Statement of Gil Coronado
I am delighted to appear before you and the other distinguished
members of this Subcommittee, and to update you on the good things
happening at the Selective Service System (SSS).
The President's Budget requests this Agency be funded at a level of
$23.9 million in fiscal year 1998. This amount represents a slight
increase in Selective Service funding for the first time in four years.
Why the increase? In part, it is related directly to the
Administration's support of our new ``Service to America'' initiative,
an endeavor I hope the members of this Subcommittee will support.
SELECTIVE SERVICE SYSTEM FISCAL HISTORY
[In millions of dollars]
------------------------------------------------------------------------
Obligations/year
---------------------
Fiscal year 1982 Actual
dollars dollars
------------------------------------------------------------------------
1982.............................................. 19.6 19.6
1983.............................................. 22.0 22.8
1984.............................................. 23.0 24.8
1985.............................................. 24.5 27.4
1986.............................................. 22.7 26.0
1987.............................................. 22.2 26.1
1988.............................................. 21.0 25.4
1989.............................................. 20.9 26.2
1990.............................................. 19.6 25.6
1991.............................................. 19.5 26.6
1992.............................................. 19.3 27.4
1993.............................................. 19.4 28.5
1994.............................................. 16.6 24.8
1995.............................................. 14.9 22.8
1996.............................................. 14.4 22.9
Estimated:
1997.......................................... 13.7 22.9
1998.......................................... 13.9 23.9
------------------------------------------------------------------------
In the past year, more than a million-and-a-half men followed the
example of young Jerry Lewis, Jr., of Rankin, Texas. In February 1996,
Jerry was the 35 millionth man to register with Selective Service since
the requirement was reinstated in 1980. As America's young men comply
with the law, they demonstrate to the men and women who serve in the
all-volunteer military that the U.S. population stands behind them,
committed to serve, should the preservation of our national security so
require.
AGENCY CONTINUES TO BE EXAMINED
Much Congressional and media interest has focused on the SSS since
the early 1990's because of: (1) the end of the Cold War; (2)
Department of Defense (DOD) analyses that addressed many intangible
elements associated with maintaining a standby system of conscription;
(3) the Administration's reviews and policy decisions by the President;
and, (4) a 1994 change in DOD's forecast for manpower requirements. DOD
now anticipates that the first draftees will be needed six months after
a crisis begins. In light of this, the SSS adjusted its programs and
streamlined its staffing. The resulting changes enable SSS to work
better and more efficiently, and conform with Administration guidelines
promulgated by the National Performance Review. Simultaneously, the SSS
has had several examinations of its mission and structure. Currently
(since January 1997), the General Accounting Office (GAO) is studying
possible alternative methods of registration at the request of three
Members of Congress who believe that personal registration is no longer
necessary. GAO's review will summarize the merits of the current
program and present the pros and cons of alternatives.
IMPACT OF NEW INDUCTION TIMETABLES
In February 1995, the President forwarded to Congress the
Administration's position emphasizing the need to maintain the SSS and
peacetime registration. It also reaffirmed the Department of Defense's
position to keep the SSS in its present configuration. The DOD revised
its mobilization timetables to reflect post-Cold War scenarios, with
first inductees now required 193 days after mobilization for a national
emergency. We had anticipated the new timetables, and began right-
sizing a few years ago. We reduced several programs and streamlined the
organization. On the other hand, the shift to new mobilization
timetables for inductees increased our operational workload by adding
new planning and training requirements. To conduct a more deliberate
build-up to a draft during a future national emergency, extensive new
plans are being developed and training on them must be accomplished.
Additionally, we must revise our procedures, regulations, and
documentation to reflect a new, graduated or ``time-phased response''
to deliver preexamined draftees for induction 193 days after
Mobilization Day. This work is progressing smoothly.
PLANNING AND PERFORMANCE MEASURES
Working closely with the Office of Management and Budget and
following National Performance Review mandates, the SSS has tailored
its goals and objectives to produce result-oriented performance
measures and improve service to America. This is described in our six-
year draft Strategic Plan.
For example, we continue in our commitment to reinvent the SSS to
improve operations, enhance customer service, and increase efficiency.
Our measures of performance effectiveness are: qualitative improvements
within specific time frames, more accurate and faster turnaround of
data, solid levels of personnel staffing, and total customer
satisfaction. Each of these issues is also outlined in our draft fiscal
year 1997-2002 Strategic Plan, which represents our road map to the
21st Century. Part of the Agency's strategy is to form partnerships
with other Federal government agencies, to work together to achieve
common goals and provide better, more efficient service to the public.
Selective Service provides essential administrative support services,
such as computer matching and automation, especially where there is a
requirement to have access to a data base of more than 36 million young
men. Currently we provide automation services to the Department of
Defense, the Department of Health and Human Services, the Census
Bureau, the Department of Justice, and the Corporation for National
Service. Similarly, at SSS, we obtain some administrative services from
other agencies. As an example, we out source for accounting, employee
assistance, health, payroll and personnel support programs as a means
to enhance internal productivity and limit costs.
In sum, we are committed to reshaping SSS to meet the demands of
the 21st Century. We are actively embracing other creative alternatives
to accomplish our statutory missions, and we continue to investigate
new and better ways to do business.
REGISTRATION IMPROVEMENT
Since public awareness of the requirement that men register
influences registration, and because a high rate of compliance fosters
fairness and equity in any future draft, the SSS has initiated several
programs:
--Radio and television public service announcements (PSA's) in
English and Spanish were developed and distributed to stations
nationally. These high-quality PSA's have received laudatory
comments from viewers around the country.
--Many governors and local officials issued proclamations supporting
SSS registration. Eighteen states have laws which parallel
Federal laws and require men to register with SSS as a
prerequisite for receiving state loans, educational assistance,
or employment. Several other states have similar legislation
pending.
HEALTH CARE PERSONNEL DELIVERY SYSTEM (HCPDS)
HCPDS is the Agency's standby system to conscript health care
personnel during a national emergency. The plans and procedures for the
registration and classification of health care personnel are complete
and have been placed on the shelf as Congress directed. Conscription of
health care personnel can be implemented, should the Congress
authorize, and the President so direct. In 1994, the Department of
Defense extended the time-line for delivery of health care personnel by
six months. Development of plans to comply with this extension will be
complete this fiscal year.
AUTOMATED DATA PROCESSING (ADP) INITIATIVES
Increasing demands for speedy services dictate the need to improve
productivity through advanced ADP technologies. A number of initiatives
were started last year and are making a difference in fiscal year 1997.
A new I-CASE Tools software package, which automates computer program
development, is aiding us in our business process improvement work.
Also, we are making good use of enhanced scanning equipment and an
Intelligent Character Recognition System, which have enabled the Agency
to file registration data faster and without loss of accuracy. In
addition to improving business processes and registration compliance
statistics, the Agency is moving to a more modern computer technology,
new reengineering projects, and revised methods of registrations. For
example, SSS will be looking at shifting from mainframe technology to
small computer technology to reduce operating and maintenance costs.
After an internal cost-benefit analysis, we will validate findings with
the General Service Administration, and work with a contractor to
implement the necessary changes.
SERVICE TO AMERICA INITIATIVE
While continuing to meet our statutory responsibilities, and with
strong Administration support, we have enthusiastically embarked on a
new initiative which we call ``Service to America.'' President Clinton
recently acknowledged it as ``a noble and worthwhile effort sure to
increase civic mindedness and opportunities in our country.'' The idea
is simple. With your support, the SSS registration process will serve
dual functions in American society. In our routine communication with
all new registrants in America, we encourage them to serve America
today. In close cooperation with the Department of Defense and the
Corporation for National Service, we are informing young men about
opportunities today in the U.S. Armed Forces and about community
service through the Corporation for National Service. On the
acknowledgment card they receive from us in the mail, we encourage them
to explore options for voluntary service to the Nation.
This ancillary service is meaningful, appropriate, reinvigorating
and exciting. With ``Service to America,'' this Agency proudly
continues to fulfill its time-honored purpose in a creative way. We
historically focused the attention of America's young men on meeting
national wartime needs, and now we also remind them to volunteer for
other civic opportunities in peacetime. Thus, the Selective Service
System is and will remain ready for tomorrow's national emergency, as
it serves America's needs today.
We want to implement fully the ``Service to America'' initiative.
Our fiscal year 1998 budget submission requests $23.9 million. This is
a slight increase for the first time since fiscal year 1993. About half
of this $1 million increase would fund five additional full-time
equivalents and offset the increased costs of printing, mailing, and
processing a larger acknowledgment card. It would also allow a portion
of the new card to be a detachable mail-back postcard. On it, new
registrants would indicate their interest in military or community
service. In turn, we would process the returning information into
timely, accurate, high quality recruiter leads for the U.S. Armed
Forces and the Corporation for National Service. The balance of the
funding increase would offset 1998 pay raise costs.
The ``Service to America'' initiative is another good example of
interagency cooperation that benefits the public. It is also relevant
to our Nation's new bipartisan emphasis on volunteerism. We have been
in touch with General Colin Powell as he spearheads, with former
President Bush, the President's Summit for America's Future.'' We
suggested ways that this Agency's capabilities can be adapted to
support programs and initiatives sparked by the upcoming Philadelphia
Summit. The General responded recently. He was happy to receive our
suggestions and his staff is now considering our proposals.
The four percent budget increase for Selective Service, requested
by the President for fiscal year 1998, demonstrates the Administration
is in agreement with the ``Service to America'' initiative. I strongly
urge that you fund this innovative and modest adjustment to our
acknowledgment program. With your support, we can move forward with
this endeavor that has great benefits for America, and parallels our
Nation's new, bipartisan emphasis on volunteerism.
Mr. Chairman and members of the Subcommittee, I am proud of what
Selective Service does for America. I hope you share in this pride.
ABMC INFRASTRUCTURE
Senator Bond. Thank you very much, Mr. Coronado.
Let me start with General Herrling. What do you estimate
the future infrastructure needs and costs to be for the AMBC?
General Herrling. Sir, today I estimate our infrastructure
costs as far as repair and maintenance and the backlog thereof
to be in the area of about $10 million. If we do not receive
some help to try to defray some of that cost, I can only see
that growing in future years.
Senator Bond. So this is a one-time cost, or what is the
annual cost? Are we talking about a one-time cost?
General Herrling. Sir, it would average somewhere around
$2.0 million a year for construction, repair and maintenance.
We have tried to make inroads into the backlog. In fact, in
fiscal year 1993 and 1994 Senator Mikulski added $1 million and
$250,000 to our budget and we were able to make serious inroads
into that backlog.
Now, over the last 4 or 5 years it has built up again.
Senator Bond. I know that one of the problems we face in
dealing with overseas responsibilities is the fluctuation in
foreign currency. What is the best approach for meeting the
foreign currency market fluctuations? What are you doing to
deal with that?
General Herrling. Sir, in this, the fiscal year 1998
appropriation, we have asked for $2.1 million to cover foreign
currency fluctuation costs. That seems consistent with the
past. The 1 year that it was not provided for in the budget, in
1996, we got into a deficit position, and were short $700,000.
So I had to go into my operational account to make up the
difference for the foreign currency fluctuation.
We have used our best judgment on what current fluctuation
needs will be for both this year and in 1998.
RESPONSIBILITIES
Senator Bond. Thank you, sir.
Turning to Mr. Dola, what are your primary responsibilities
with regard to the Arlington National Cemetery and the
Soldiers' and Airmen's Home National Cemetery?
Mr. Dola. As Secretary Lancaster's Deputy, my primary
responsibilities with regard to Arlington and Soldiers' and
Airmen's Home National Cemeteries are program formulation and
budget oversight. The budget request is to operate and maintain
both of those cemeteries, the entire works: scheduling,
orchestrating and supporting, the funerals there, operating and
maintaining the grounds, and providing for infrastructure needs
that may occur, such as the Columbarium, the restoration of the
Memorial Amphitheater, and other projects that are coming down
the road.
Senator Bond. The Columbarium. What are the other
infrastructure needs with respect to those? What kind of
funding do you expect to be requiring in the future?
Mr. Dola. As you know from our budget, Mr. Chairman, we are
asking for $2.4 million for construction, and in the next 5
years we would be expecting on the order of $2.5 million per
year. The larger issue will occur after that period, where we
would anticipate that the construction needs could perhaps
double that amount on an annual basis to take care of things
that we see in our master plan down the road.
COSTS OF SERVICE TO AMERICA INITIATIVE
Senator Bond. Mr. Coronado, what costs are you envisioning
in the Selective Service on the Service to America initiative?
Mr. Coronado. For Service to America, Mr. Chairman, it is
$506,000.
FUTURE OF SELECTIVE SERVICE
Senator Bond. There are questions being addressed by the
GAO on the need to maintain the Selective Service in view of
the success of the Volunteer Army. What do you see as the
future of Selective Service, and if you had to forecast the
outcome of this review what would you forecast? What do you
think it should be?
Mr. Coronado. It is my understanding that the GAO is at our
agency, according to them, at the request of three Members of
Congress to look at alternative methods of registration. So I
do not believe the future of this agency is in jeopardy. I
believe that this has been discussed and rediscussed by the
Congress, studied by the National Security Council, the
Department of Defense, and the administration. The majority of
the people involved in these studies and discussions have
decided SSS must remain ready and voted for maintaining a
strong third tier of our Nation's defense. I am optimistic
about the future of this agency inasmuch as it represents
something very important to all of us.
Senator Bond. Thank you very much, Mr. Coronado.
Let me turn to Senator Mikulski for her questions.
Senator Mikulski. Thank you.
Gentlemen, each one of you plays a very important role, one
in registering young people should we need to mobilize; and
then after service a way to pay tribute to that. General
Herrling--I am going to have a question for each one. First of
all, we have been very blessed that the head of the American
Battle Monuments Commission has always been a very
distinguished American, and we thank you for taking on that
responsibility.
ABMC INFRASTRUCTURE AND BACKLOG
I just want to follow upon what Senator Bond raised, which
is I am very concerned about the backlog in terms of
maintenance, and I think we would welcome either a plan or kind
of a work-through schedule. I do not want to call it a workout,
but a work-through schedule, where in an organized and
systematic way, dealing with those that are most at risk, then
through, and how we could bring ourselves up to date so that we
actually are not only funding current operating expenses, but
essentially really having an organized, systematic way of
working this down.
Do you think that is a possibility, to be able to give that
to us?
General Herrling. Yes; I do, Senator. In fact, I am
prepared to provide for the record a priority list of our
maintenance, which includes some 550 projects at this point. As
I mentioned earlier, it totals about $10 million.
Now, through this fiscal year and hopefully if funded at
the requested level for 1998, I will be able to work that
backlog down somewhere in the range of $6 million. We will use
our priority list, which includes some 550 projects, and start
working down it. As you know, each year other projects are
added to it.
But I think with a modest increase each year, over maybe
the next 5 years, I could whittle that down to something that
is very manageable.
Senator Mikulski. Well, this Senator is certainly not going
to suggest a management plan to a U.S. Army General. But we
might want to go to those that are most severely distressed,
like a barbell approach, and then those that are beginning to
be telltale, frayed and tattered, so that by beginning to
intervene now they are not on that cascading slope. Some of
those expenditures are quite low.
So we look forward to working with you on this, and thank
you.
A question then for Mr. Coronado. You spoke about the
Service to America and what I had asked. Do you want to just
very quickly say what that is?
Mr. Coronado. Absolutely. Senator, I want to thank you
personally for having brought this up in 1993. The
opportunities to interface with other agencies. How can we do
something to better serve the American public? Very basically,
we are in contact with 1.9 million young men each year. What we
have done is to redesign the registration acknowledgment card
and are asking men to serve America today as volunteers, either
through the Armed Forces--or through AmeriCorps--and the card
shows 1-800 numbers--for DOD and AmeriCorps. We are promoting
Service to America in close cooperation with these agencies,
who have voiced a very, very strong and very positive reception
to this adjunct effort. We communicate this simple message to
America's youth, at no additional cost, Mr. Chairman.
However, for fiscal year 1998, we are asking for a slight
increase in funding to redesign the whole process.
Senator Mikulski. So what you are saying is that Selective
Service does three things: one, it registers young men for the
draft should they need to be mobilized; but simultaneously, you
alert them to two opportunities for service now. One, if they
are ready to sign up for the U.S. military, here is the number
to call and go for it. The other is if you choose to begin to
manifest a patriotic feeling, you can also do it in your local
community by being a scout leader or big brother, and then that
is the other 800 number that you call.
But it is a way of reaching out to young men to say, we do
have an obligation, but you also have a great opportunity for
immediate service, either in the military or by being a good
citizen in your neighborhood.
Is that what we are talking about?
Mr. Coronado. That is exactly correct, Senator Mikulski. In
my travels throughout the country, we find that there is a lack
of communication with our young people. This is one effort to
get them to think about service to America, either in the
military or in their local communities.
RESULTS OF SERVICE TO AMERICA INITIATIVE
Senator Mikulski. I know my time has expired, but can you
tell, have there been any concrete results that you can talk
about that, because of this methodology, x number of young men
have said military, x number have said local volunteerism?
Mr. Coronado. This new methodology was implemented 2 days
ago, so we have no direct results yet. And, it is doubtful that
with a 1-800 number we would really be able to measure it. It
is our hope, it is our desire, that we will get the additional
funds for fiscal year 1998, and then we could include the
business reply card that would come back to us. It would give
us an accurate listing of the men who volunteered for the
military versus the ones who want to serve in the local
community. At a later date we would be very, very happy to
share that with you.
Senator Mikulski. OK.
Well, Mr. Chairman, I know my time has expired. I want to
thank Mr. Dola. Four million people visit Arlington. Four
million people come to Arlington to, of course, visit the
Kennedy grave and pay our respects to America's heros. I think
that is an extraordinary, just an extraordinary number of
visitors. We do not want to call it tourism. They are not
coming to tour. They are coming to express a feeling, and that
is an exceptional feeling.
We look forward to running this place because, in addition
to providing proper interment and burial services, you have
this other management responsibility which I think is
significant. You probably are visited--and please do not
confuse my vocabulary in any way with demeaning the special
nature, but you are visited more than a national park, many of
the national parks.
I would just hope that we really provide some type of
understanding of the support that you need, so that you do that
and at the same time meet the mission, the very honorable and
sacred mission for which you were established.
Mr. Dola. Senator Mikulski, we appreciate the understanding
of this subcommittee for the sacred trust that we try so very
hard to discharge in a way the subcommittee and Congress and
the American people will be proud of. We thank you for the
support that we have had in the past and hope that we will
merit it in the future.
Senator Mikulski. Thank you, Mr. Chairman.
Senator Bond. Thank you very much, Senator Mikulski.
We are very pleased to be joined by the chairman of the
full committee, Senator Stevens.
STATEMENT OF TED STEVENS
Senator Stevens. Thank you. I just dropped by to say hello,
to see what was occurring in terms of this area of your
jurisdiction, Mr. Chairman.
ABMC INFORMATIONAL SERVICES
I am concerned about the Battle Monuments Commission
activities. What kind of really informational services do you
have to let people know where these monuments and memorials and
cemeteries are overseas?
General Herrling. Senator Stevens, we have quite an
extensive program to keep next of kin, friends, and interested
people informed on just those subjects. Anybody can call or
write to our office and we will provide them with a letter that
gives them information concerning their request. We will also
provide them with general information pamphlets on the
cemetery. We will tell them how to get there from an airport or
railroad station. We will have the superintendent, in some
cases, go to the railroad station or airport to pick up and
bring the next-of-kin to the cemetery.
So we provide all that information through correspondence
daily. We receive probably hundreds of letters every week on
just that sort of request.
ABMC MEMORIAL DAY AND OTHER CEREMONIES
Senator Stevens. And what do you do to organize the various
ceremonies on our national days, like Memorial Day or Veterans
Day, over there?
General Herrling. Sir, each one of our cemeteries has a
ceremony on Memorial Day and also on Veterans' Day. It will
usually involve the U.S. Ambassador to that country as well as
distinguished military and civilians who live and work in that
country. They are formal ceremonies. The military, who are
still stationed throughout Europe, will provide the color
guards, firing squads, the buglers, to make it truly a
remembrance type of a ceremony.
I believe we do this very well and we pretty much mirror
what is done here in the States for those national holidays.
Senator Stevens. Many of us travel abroad about that time.
I remember I was asked to speak in The Netherlands at
Margraten.
General Herrling. Margraten.
Senator Stevens. But I do not remember ever--I have been
here quite a while, but I do not remember ever anyone sending
me a notice of where there would be events. I want to ask that
you undertake the task of sending, at least to the chairman of
the committees of both the House and the Senate, notice of what
type of ceremony is going to take place at the monuments and
memorials under your jurisdiction during the year. I think we
ought to have a little more attention to paying our respects at
those areas when we do go overseas.
I am not asking you for it any more than just once a year,
to say these are the events that will take place and to offer
opportunity to our people to visit these sites. I find them
very rewarding when I visit them, but I do not know how many
people do that.
Would you do that for us?
General Herrling. Senator, we would be delighted. We would
be delighted to provide that information to members of
Congress.
Senator Stevens. Good. Thank you very much. I appreciate
it.
Senator Bond. Thank you very much, Senator Stevens.
Thank you, gentlemen, for joining us today. We will keep
the record open for questions that other members of the
committee may have. We do appreciate the opportunity to work
with you. Our staff will be in contact with you on any further
questions that may arise and we urge you, as always, to feel
free to contact the staff. John Kamarck is our new head of the
staff for this committee and I hope that you will feel free to
call on him and other members of the staff if you have
additional views or comments that may be necessary.
SUBCOMMITTEE RECESS
Thank you, and the hearing is recessed.
[Whereupon, at 11:15 a.m., Tuesday, March 4, the
subcommittee was recessed, to reconvene subject to the call of
the Chair.]
DEPARTMENTS OF VETERANS AFFAIRS AND HOUSING AND URBAN DEVELOPMENT AND
INDEPENDENT AGENCIES APPROPRIATIONS FOR FISCAL YEAR 1998
----------
TUESDAY, MARCH 11, 1997
U.S. Senate,
Subcommittee of the Committee on Appropriations,
Washington, DC.
The subcommittee met at 9:38 a.m., in room SD-138, Dirksen
Senate Office Building, Hon. Christopher S. Bond (chairman)
presiding.
Present: Senators Bond and Mikulski.
CONSUMER PRODUCT SAFETY COMMISSION
STATEMENT OF ANN BROWN, CHAIRMAN
ACCOMPANIED BY:
MARY SHEILA GALL, COMMISSIONER
THOMAS H. MOORE, VICE CHAIRMAN
OPENING STATEMENT OF CHRISTOPHER S. BOND
Senator Bond. The subcommittee will come to order.
This morning we are very pleased to be able to take
testimony from three agencies with responsibilities to the
American consumer, including protecting citizens from injury
and death associated with consumer products and providing them
with important information on subjects as diverse as preparing
a will and eating healthfully.
The Consumer Product Safety Commission, represented by
Chairman Ann Brown, is requesting an appropriation of $45
million, an increase of $2.5 million over the current year. The
Consumer Information Center, represented by Director Teresa
Nasif, is requesting $2.1 million. And the Office of Consumer
Affairs, represented by Director Leslie Byrne, is requesting
$1.8 million.
For the most part, these budget requests would fund current
services without major enhancements in agency operations.
However, even funding marginal increases necessary for normal
inflationary adjustments will be tough in the budgetary
environment in which we are operating.
If you have had representatives at previous hearings, you
will know that this committee is blessed with some very
difficult problems, particularly with respect to the costs of
HUD and the section 8 contracts.
Moreover, it will come as no surprise to some of you that I
continue to have very strong concerns about the redundant role
of the Office of Consumer Affairs and question why the office
should be continued. We tried, unsuccessfully, to fulfill the
President's commitment to streamlining Government activities
and reducing duplication in the last two appropriations cycles
by eliminating the Office of Consumer Affairs. And, while I
received no calls or letters from constituents or consumer
groups in opposition, the administration insisted on funding
the organization in fiscal years 1995 and 1996. This was
disappointing to me.
In my view, OCA's role has become obsolete as most Federal
agencies have consumer affairs officers or individuals
responsible for consumer issues.
In addition, I have been concerned that in attempting to
create a role for itself in the last 2 years, OCA has succeeded
in creating yet another duplicative activity through the
consumer HelpLine.
OCA was without a director for several years. Ms. Byrne,
you are the newly installed director and you will be given the
opportunity to defend your agency. I have worked with you in
the past and have great respect for your abilities. It is the
agency, not the people, that I am concerned about. I will
require a lot of convincing.
Now let me turn to my ranking member, Senator Mikulski.
Good morning, Senator.
STATEMENT OF BARBARA A. MIKULSKI
Senator Mikulski. Thank you, Mr. Chairman and good morning
to you and to all members of the panel.
Each and every one of you have worked closely with me in a
variety of capacities, of course, with both Ms. Brown and Ms.
Nasif in the committee and with Ms. Byrne when she was a
Congresswoman, a cousin from the other side of the Potomac who
knows about the bridges.
PREPARED STATEMENT
Mr. Chairman, in the interest of moving ahead and hearing
the witnesses, I ask unanimous consent that my statement be
placed in the record and I look forward to hearing the
testimony and their answers to our questions.
Senator Bond. Without objection. Thank you.
[The statement follows:]
Prepared Statement of Senator Barbara Mikulski
Thank you, Mr. Chairman. I know that we have a lot to go through
this morning so I will be brief.
We will be hearing testimony from six of the independent agencies
within the jurisdiction of the VA-HUD Subcommittee: The American Battle
Monuments Commission, Cemeterial Expenses of the Army, the Consumer
Information Center, the Consumer Product Safety Commission, the Office
of Consumer Affairs, and the U.S. Court of Veterans Appeals.
Collectively, these agencies are requesting $92,091,000 for fiscal
year 1996 which is an increase of $3.7 million or 4.2 percent above the
fiscal year 1995 enacted level. The fiscal year 1996 budget request for
these agencies represents a mere fraction of the $91.2 billion in total
funding requested by the President for all agencies within this
Subcommittee's jurisdiction. The relative size of their budget
requests, however, should in no way diminish the importance of the
services that these agencies perform.
The witnesses before us are responsible for commemorating the
achievements and sacrifices of United States Armed Forces, operating
and maintaining that sacred area that is Arlington Cemetery, protecting
and informing America's consumers, and helping to ensure that veterans'
benefit claims are appropriately and adequately reviewed. This is
important work, Mr. Chairman.
My time here this morning is limited, so I will not be able to hear
all of the witnesses. Let me welcome all of you before the Subcommittee
as we begin our review of the President's fiscal year 1996 budget
request. Let me also echo what Senator Bond has said regarding our
budgetary situation. A freeze at current levels is probably the best
this Subcommittee can hope for.
One final thought before we turn to the witnesses. You know, Mr.
Chairman, the new majority in Congress seems determined to visit some
version of regulatory reform upon the American people. You are directly
involved in this effort as the co-Chairman of the regulatory Reform
Task Force appointed by the Majority Leader here in the Senate.
I hope that you and many of our colleagues will pay close attention
to the leadership that Ann Brown has brought to the Consumer Product
Safety Commission. As Chairman of the CPSC, Ann Brown has streamlined
and revitalized what had become a dormant agency under previous
administrations. She has made consumer protection more effective--not
by making the Federal government more invasive--but instead, working
cooperatively with consumers and businesses to minimize the risk of
death and injury from consumer products. Under Ann Brown's leadership,
the CPSC seeks voluntary compliance if it is at all possible and takes
mandatory action only when necessary.
As we consider the issue of regulatory reform here in the Congress,
Mr. Chairman, we should be looking to the CPSC to see just how the
Federal government can be made more effective at protecting our
citizens by ensuring that they are better informed and encouraging
businesses to pay more attention to safety in their products.
Thank you, Mr. Chairman. And now, let's here from the witnesses.
STATEMENT OF ANN BROWN
Senator Bond. Now we will turn to the chairman, Ann Brown.
Ms. Brown. Thank you. Mr. Chairman and members of the
subcommittee, I am Ann Brown, Chairman of the Consumer Product
Safety Commission, known as CPSC.
With me today are Commissioner Mary Sheila Gall and Vice
Chairman Thomas H. Moore and members of the commission staff.
I am pleased to have this opportunity to testify in support
of our fiscal year 1998 appropriation request.
For the information of any new members, I want to explain
very briefly who we are and what we do. The Commission was
established in 1973 by Congress as a five, now a three member
independent agency with the mission to protect the public
against unreasonable risks, injury and death from consumer
products.
We enforce five Federal statues--the Consumer Product
Safety Act, the Flammable Fabrics Act, the Poison Prevention
Packaging Act, the Hazardous Substances Act, and the
Refrigerator Safety Act. All told, we have jurisdiction over
15,000 different kinds of consumer products which are found in
and around the home.
These products are involved in more than 21,000 deaths and
over 29 million injuries with a total cost in excess of $200
billion annually to the Nation.
At the outset, I want to express our appreciation for our
fiscal year 1997 appropriation of $42.5 million, the full
amount requested in the President's budget. These funds are
being used effectively to protect the American people against
unreasonable risk of injury or death from dangerous or
defective consumer products.
I am especially proud of our Baby Safety Shower Program and
I want to show a very short tape about it.
[A videotape was shown.]
Senator Mikulski. Ms. Brown, how long is this tape?
Ms. Brown. It goes on for 1 more minute.
Senator Mikulski. This is a busy day and we do have three
witnesses.
Senator Bond. That's all right. It came out of her time.
[Laughter.]
Ms. Brown. Then please let me continue.
In fiscal year 1998, we are requesting an appropriation
increase to $45 million, an increase of $2.5 million to
continue and expand our vital work. In preparing our budget, we
carefully reviewed the needs and contributions of all our three
operating divisions.
As a result, we are proposing important investments above
current service levels in most of these areas. These
investments total $1.1 million. They include funding of a
larger number of product incident investigations, support for
hazard reduction initiatives, including a major effort on fire
hazards, an innovative compliance investigation program, and
certain information technology efforts critical to efficient
agency operations.
These modest programs requested for 1998 are more than
justified by our record of accomplishment.
PREPARED STATEMENTS
CPSC has made vital contributions to the 20-percent decline
in annual deaths and injuries. Past agency work in
electrocutions, children's poisonings, children's cribs, power
mowers, and fire safety helps save the Nation almost $7 billion
annually in health care, property damage, and other societal
costs--more than 100 times CPSC's annual budget, or about $155
million in savings for each $1 million of the agency's 1998
request.
[The statements follow:]
Prepared Statement of Ann Brown
Mr. Chairman, and members of the Subcommittee, I am Ann Brown,
Chairman of the Consumer Product Safety Commission (CPSC). With me
today are Commissioner Mary Sheila Gall, Vice Chairman Thomas H. Moore
and members of the Commission staff.
I am pleased to have this opportunity to testify in support of our
fiscal year 1998 appropriation request.
For the information of the new members of the Subcommittee, I want
to explain briefly who we are and what we do. The Commission was
established in 1973, by Congress as a five, now three, member
independent agency with a mission to protect the public against
unreasonable risk of injury or death from consumer products. We enforce
five federal statutes, the Consumer Product Safety Act, the Flammable
Fabrics Act, the Poison Prevention Packaging Act, the Hazardous
Substances Act and the Refrigerator Safety Act. All told, we have
jurisdiction over 15,000 different kinds of consumer products which are
found in and around the home. These products are involved in more than
21,000 deaths, and over 29 million injuries with a total cost in excess
of $200 billion annually to the nation.
RECENT ACCOMPLISHMENTS
At the outset, I want to express our appreciation for our fiscal
year 1997 appropriation of $42.5 million, the full amount requested in
the President's budget. These funds are being used effectively to
protect the American people against unreasonable risk of injury or
death from dangerous or defective consumer products.
I want to tell you just a few of the ways in which we have used the
taxpayers' hard earned dollars to safeguard their health and safety.
--In fiscal year 1997 we have negotiated 106 voluntary corrective
actions involving 17.2 million consumer product units that
violated mandatory safety standards or presented a substantial
risk of injury to the public.
--Also in fiscal year 1997, in partnership with the Customs Service,
we stopped 2.8 million dangerous product units from reaching
store shelves.
--We recently issued a rule to alleviate the tip-over hazard of
large, multiple tube fireworks. Spectators have been killed
when these devices fell over and fired horizontally. The new
rule becomes effective this month, well before the fireworks
season.
--In fiscal year 1996 we tested several brands of imported, non-
glossy vinyl miniblinds and found they contained amounts of
lead which would be harmful to young children. When we
presented these results to the miniblind industry, the
manufacturers voluntarily agreed to change the composition of
these products to eliminate the lead.
--In cooperation with the Gerber Products Company, we continued our
campaign this year to promote baby safety events across the
country. To demonstrate this program I want to show you a brief
excerpt from the CBS Morning News, which broadcast a segment on
the kickoff of our program.
Mr. Chairman, these are just a few of the ways we have used our
resources to advance consumer product safety in fiscal year 1996 and
97.
FISCAL YEAR 1998 PROGRAMS
In fiscal year 1998, we are requesting an appropriation increase to
$45 million, an increase of $2.5 million, to continue and expand our
vital work. In preparing our budget, we carefully reviewed the needs
and contributions of our three operating divisions, hazard
identification and reduction, compliance, and information and
education. As a result we are proposing important investments above
current service levels in most of these areas to enhance our ability to
prevent and reduce the deaths and injuries related to consumer
products.
These investments total $1.1 million. They include funding of a
larger number of product incident investigations, support for hazard
reduction initiatives (including a major effort on fire hazards), an
innovative compliance investigation program, increased consumer
information outreach, and certain information technology efforts
critical to efficient agency operations.
In the hazard assessment and reduction area, funding would increase
by $443,000, with one-third required to maintain current hazard
reduction activities. The remainder of the increase, $325,000, funds
critical enhancements in two areas: a partial update of the agency's
child anthropometric measurements (measurements of children's physical
dimensions, which are critical to analysis of their injuries); and
several initiatives to address the nation's high fire death rate.
Nationally, there were 470,000 residential structure fires in 1993.
Fire is a leading cause of accidental home deaths among children
younger than five years old.
Even though efforts by the agency and the nation's fire prevention
community have resulted in a steady decline in residential fires, this
nation's fire death rate remains one of the highest among
industrialized nations. Past CPSC actions in this area involving, for
example, cigarette-resistant mattresses and upholstered furniture,
heating equipment, flame resistant children's sleepwear, and smoke
detectors have contributed to the general decline in fires and fire
deaths, and show that the agency can be effective in reducing fire
hazards.
The fire-related hazards project continues our 1997 work on
upholstered furniture, mattresses and bedding, revisions to the apparel
flammability standard, and fire/gas codes and standards. New activities
will be undertaken to evaluate the effectiveness of the Commission's
safety standard on cigarette lighters and to address an emerging
hazard, fires started by children using multi-purpose lighters. Fire
investigation training for certain CPSC staff in our field offices is
also recommended.
In the Compliance program, we are requesting an increase of about
$600,000 to enhance the Special Investigations Unit initiative. This
recently established unit serves to identify and remedy previously
unidentified and/or technically complex hazards. We believe that much
of the agency's future work and effectiveness will involve addressing
more technically complex hazards. The requested funds begin to develop
the necessary tools to address such hazards. This includes a critically
important effort to link and integrate agency and non-agency databases
and the application of rapid product testing and evaluation techniques.
Advances in this effort will benefit safety work throughout the agency.
For fiscal year 1998, the information and education program's
dollars increase by $196,000, with most of the funds necessary to
maintain the current consumer information efforts in support of agency
hazard reduction and compliance efforts. An increase of $22,000 will
allow greater use of cost-effective video news releases to reach the
public with product recall and other safety information.
We know the Subcommittee has been especially concerned about the
level of management expense at the CPSC. Accordingly, I want to inform
you about a change I instituted in all CPSC programs. I have made it a
policy that managers must be working supervisors, sharing the
substantive work with our staff. Recognizing the Subcommittee's desire
to reduce administrative expenses, we have worked to do so, and have
achieved a 21 percent decrease since 1989. Only 19 percent of our
fiscal year 1998 budget funds administrative needs, down from 24
percent in 1989.
The modest program increases requested for fiscal year 1998 are
more than justified by our record of accomplishment. CPSC has made
vital contributions to the 20 percent decline in annual deaths and
injuries related to consumer products that occurred between 1980 and
1993. Past agency work in electrocutions, children's poisonings,
children's cribs, power mowers, and fire safety helps save the nation
almost $7 billion annually in health care, property damage, and other
societal costs--more than 100 times CPSC's annual budget or about $155
million in savings for each $1 million of the agency's 1998 request.
The agency expects its 1993 standard to make cigarette lighters child
resistant to save over $400 million in societal costs and prevent up to
100 deaths annually. Similarly, the agency expects its work in curbing
carbon monoxide (CO) poisoning to reduce societal costs by one billion
dollars annually. CPSC removal of dangerous fireworks from the
marketplace prevents about 14,000 injuries each year.
As you know, Mr. Chairman, I stress a cooperative, non-adversarial
approach to business whenever possible. My first priority is to achieve
voluntary compliance with our laws and rules. For this reason, I am
particularly proud of our record of working cooperatively with
industry. Since I became Chairman in 1994, the CPSC has developed 27
voluntary standards with manufacturers, while issuing only 10 mandatory
regulations, a ratio of almost 3-1 voluntary to mandatory standards.
I have also emphasized my belief in the product safety triangle,
where business, consumers and government each have an equal role to
play. The Commission should not become overly invasive. We cannot and
should not attempt to protect consumers from every possible risk of
injury from consumer products. There are limits to what government can
achieve.
In this connection, Mr. Chairman, I want to tell you what we have
done to implement your bill, S. 942 (Public Law 104-121), the Small
Business Regulatory Enforcement Fairness Act.
First, on October 9, 1996, the Commission adopted a regulation
establishing a CPSC Small Business Ombudsman and a Small Business
Enforcement Policy. The Ombudsman, Clarence Bishop, who is also Deputy
Executive Director, has answered more than 700 calls on a special toll-
free hotline from small businesses seeking product safety information.
Over 80 percent of the callers received a personal response to their
inquiry from our staff within 3 business days. This service helps small
businesses get important information quickly, and, at the same time,
furthers public safety.
Second, we have scrupulously followed the Congressional review
procedures set forth in the law. We have issued four rules since the
Act's effective date--none of which were ``major'' rules. In each
instance, we submitted the required reports to Congress and the General
Accounting Office on a timely basis.
Third, we are near completion of a compliance guide for our
February, 1997, revisions to the fireworks fuse burn time regulation,
which were unanimously supported by industry and safety groups. Our
Economics staff concluded in its regulatory flexibility analysis that
these changes will benefit small businesses by making it easier for
them to comply with the fuse burn time standard.
Finally, consistent with the purpose of your legislation, in June
1996, we co-sponsored a Small Business Conference with the
International Consumer Product Health and Safety Organization. More
than 130 representatives of small businesses participated in panels
designed to assist them in complying with our laws and regulations.
reduced funding limits commission programs
As you know, in a concurrent submission to this Subcommittee and
the OMB in September 1996, the Commission requested a budget of $49.7
million for fiscal year 1998. The OMB reduced our budget request to $45
million. Although this reduction of $4.7 million seems small, it will
have a negative impact on our efforts to protect the health and safety
of American children and families.
For example, we proposed to invest $800,000 to update the
Commission's 20 year old child anthropometry data. This information is
essential for effectively addressing product hazards to children. Due
to the rejection of this request, our effort in this area will have to
be spread over several years, thereby hampering our efforts to protect
one of our most vulnerable populations, children.
Earlier in my testimony I mentioned our program to reduce deaths
and injuries from household fires. We requested $500,000 for this
project, but due to the budget reduction, we will be able to invest
only half that amount in fiscal year 1998. The continuing high cost of
fires justifies a greater investment and more innovative activities.
The increased funds would have provided a mix of research and action
items to address the many complex aspects of the fire problem. These
items could include a cost-benefit evaluation of fire suppression
devices, research to refine our knowledge of the causes of fire deaths
to help identify appropriate prevention strategies, and the
investigation of new product-specific hazards. These efforts would have
provided a broader, more inclusive attack on the nation's fire
problems. Since we were denied these funds, we will not be able to
protect the public as well as we could from death and injury due to
fire hazards.
investment in information technology is needed
In the past, agency funds invested in information technology have
saved many thousands of hours of staff time for the Commission,
improving our effectiveness and efficiency enormously. We have used
these funds to develop discrete databases, to network the agency's
computer system, and to move our data systems from a mainframe computer
located at another federal agency to our own local network.
Unfortunately, our fiscal year 1998 budget request would barely
maintain our capabilities in this area. The proposed funding level
leaves no resources to implement further technological advances, and
only permits minimal investment to meet the new requirements of the
recent Freedom of Information Act amendments (which require that most
requested material be in electronic format and available over the
Internet).
An additional investment of $1,000,000 would allow us to respond
faster and better to product hazards, saving more lives and preventing
more injuries, and would help us implement the new FOIA law. As you
know, CPSC is a data-driven agency that carries out its mission with a
sense of urgency, since quick action by the agency saves lives. To
provide even greater benefits to American consumers, we would like to
establish an integrated information system at the agency that would
give staff access to a much larger universe of product safety data and
would improve the speed with which staff could gain access to that
data.
This system would integrate the agency's databases, and other data
and documents not included in our current databases, allowing CPSC
employees to get all the information the agency has on a particular
product hazard using one quick and easy information request. Currently,
gathering all such information can take weeks.
Let me give you an example. Last year, CPSC's Compliance Office
became aware of the suffocation death of a toddler who had been trapped
in a cedar chest. To discover whether similar incidents had occurred in
the past, the compliance officer searched each database in the agency
individually, which took approximately two hours of staff time. Without
recent improvements in information technology, she would have conducted
these searches manually, which could have taken days, if not weeks.
However, our system only allowed her to search for information that
was available in certain discrete databases, which includes less than
50 percent of all the information that has been developed by the agency
since its establishment. If we had an integrated database, this same
search could have been conducted in a matter of minutes, instead of
hours, and would have represented a complete review of all information
developed by the Commission, not just what is in currently available
databases.
In this particular case, the compliance officer did identify
additional deaths of children who had become entrapped in a cedar chest
manufactured by the same company. This data enabled us to reach
agreement with the company to repair 12 million cedar chests currently
in the hands of consumers. However, if it had been necessary for the
staff to obtain more information before action could be taken, such as
staff reports on toy chest entrapments or product safety assessments
conducted by staff years ago on similar products, it would have taken
weeks or months to locate the information through a manual search of
Commission files and archives. Meanwhile, unrepaired chests would
remain with consumers, threatening the safety of millions of children.
This demonstrates that the benefits of an additional investment in
CPSC information technology will far outweigh the slight increase in
our appropriation.
CONCLUSION
In conclusion, Mr. Chairman, the CPSC is a great value to the
American people. By every rational cost-benefit measure we save the
taxpayer many times our budget in deaths, injuries and property damage
prevented. Accordingly, we urge you to appropriate not only the full
amount requested, we also hope you can find an additional $1 million,
within the Subcommittee's budget allocation, and within the framework
of the President's balanced budget for necessary enhancement of our
information technology.
______
Prepared Statement of Mary Sheila Gall
I support the request of the Commission for $45 million for fiscal
year 1998. Since my vote was against the original request to the Office
of Management and Budget and Congress, I want to explain to the
Subcommittee why I now support the budget request.
In July 1996 I opposed the staff-proposed fiscal year 1998 budget
of $49.9 million. I did so with reluctance, since many of the proposals
to increase funding lay in areas such as additional laboratory
equipment and other infrastructure expenditures that I have
traditionally supported. My opposition to this budget proposal stemmed
mainly from the fact that it proposed to spend 17 percent more in
fiscal year 1998 than the request made by the Commission for fiscal
year 1997. I recognize the importance of the mission and the operations
of the Commission, but that importance must be balanced by the
necessity to keep planning for future expenditures closer to probable
increases.
I supported certain portions of the staff-proposed budget. Current
services needed to be funded and the cuts of fiscal year 1996 had to be
restored. The Commission's accounting system needs modernizing and
additional money for training is essential. But I did not agree that
all of the proposed expenditures were as worthy as others. For example,
I support increased expenditures to reduce fire deaths and injuries,
but did not believe that several of the projects contained in the staff
proposal represented a wise use of Commission resources. Similarly, the
$40,000 proposed project to evaluate recall effectiveness struck me as
less than crucial. Finally, many of the staff-proposed spending
increases could be deferred to subsequent fiscal years.
I am pleased to support the Commission's budget request contained
within the President's budget request. This Commission performs a
valuable public service by seeking to prevent injuries and death
associated with the use of consumer products. I think that this
Committee should note that, while many agencies within its jurisdiction
seek benefits that will accrue in the distant future, the Commission's
activities prevent deaths and injuries in the near term. This
observation does not mean that the activities of those agencies are
unimportant, but the immediacy of the benefits that this Commission's
activities confer upon the American public ought to be a factor when
this Subcommittee considers the appropriation request of this
Commission along with the appropriations requests made by other
agencies.
The details of the Commission's fiscal year 1998 Budget Request
have been set forth in the Chairman's Statement and I have nothing to
add to that portion of her Statement.
Additional committee questions
Senator Bond. Thank you very much, Chairman Brown.
[The following questions were not asked at the hearing, but
were submitted to the Agency for response subsequent to the
hearing:]
Questions Submitted by Senator Bond
cpsc fte's
Question. CPSC currently has on-board approximately 455 staff; your
FTE ceiling is 487 FTE, and your fiscal year 1998 request would fund
480 FTE. How much could we save if you did no hiring, and maintained
staff at the current level of 455?
Answer. First, the agency is no longer at the 455 employee level.
Current employment is 460 and climbing. We have announcements
outstanding to bring us up to 480 employees very shortly. We are
aggressively hiring new employees because our product safety work has
been hurt by staff vacancies caused by 1996 budget uncertainties and
funding delays. Staff has been doing a tremendous job of covering for
the vacant positions but productivity will soon suffer without
additional staff support.
Second, CPSC is already about half the size it was in 1980, and we
have worked very hard to keep productivity up despite reduced staff
resources. Since our specialized and highly skilled workforce is our
chief asset (comprising 75 percent of our entire budget), cutting staff
time further would reduce our product safety work now and for many
years to come. While an FTE cut of 5 percent to 455 would reduce salary
costs by about $1 million, this savings would be more than offset by a
significant erosion in our life-saving safety work. Past work by the
agency shows savings to society of at least $155 million each year for
every $1 million spent on the agency.
Finally, CPSC has already cut down on agency administrative support
as much as we can. Since 1994, due to budget and FTE reductions, we cut
support staff and contracted out such administrative functions as
copier, mail and library services. Any further reductions in
administrative staff would not be prudent given the size of our agency
and our management needs. Therefore, most additional staff cuts would
come from our programmatic work. In short, staff reductions would
translate into fewer investigations, fewer product recalls, and fewer
interceptions of hazardous products entering the country.
1998 PRIORITIES
Question. What would you list as your top three priorities for
fiscal year 1998?
Answer. All of CPSC's efforts make a vital contribution to reducing
the nation's $200 billion annual cost associated with product hazards.
Our top priorities for 1998 are:
1. Maintaining our current safety program in 1998. This requires
funding of approximately $2 million ($1.2 million for salary and space
costs, $300,000 for a Year 2000 compliant accounting system, $300,000
for increased retirement costs and $200,000 to implement new FOIA
requirements).
2. Pursuing new safety initiatives to reduce fires, update the
nation's child measurement database, and expand the Special
Investigations Unit initiative. These initiatives are critical to our
efforts to further reduce the nation's high fire death rate, increase
protections for children from product hazards, and improve our ability
to identify and remedy technically-complex product hazards. These
programs require funding of approximately $1 million.
3. Information technology investment. The agency has increased its
product safety productivity in part by using information technology.
Without further investment, aging information systems jeopardize our
ability to pursue current activities and dim the possibilities of
future gains in productivity. We would need about $1 million to
properly upgrade and improve current systems to meet future workload
and to make greater reductions in deaths and injuries.
MULTI-PURPOSE LIGHTERS
Question. Your budget request proposes several new program
initiatives, including $283,000 to address the nation's high death and
injury rate from fire. Your budget justification indicates in 1998 CPSC
will undertake activities to address fires started by children using
multi-purpose lighters. How did this particular issue emerge as a top
priority for fiscal year 1998? What specifically do you propose to do
with the requested funds, and what particular activities do you
anticipate in fiscal year 1998 to address the issue (such as
regulations or working with industry on a voluntary basis)?
Answer. Multi-purpose lighters are lighters with long nozzles that
are most commonly used to light charcoal or gas grills, fireplaces and
pilot lights on gas appliances. In 1997, the Commission considered a
petition requesting that multi-purpose lighters be child-resistant. The
Commission granted that petition and initiated a new rulemaking
activity by issuing an Advance Notice of Proposed Rulemaking to require
these lighters to be child-resistant. The Commission noted that a
standard may be needed to reduce the fire hazard to children under 5
years of age starting fires while playing with this product.
The Commission is aware of 67 incidents since 1988 involving fires
started by children under age 5 using multi-purpose lighters. These
fires resulted in 10 deaths and 26 injuries. Children under age 5
typically are incapable of dealing with a fire once started. This puts
them and their families at special risk of injury. Almost all of the 10
fatalities were the children who started the fires. For example, a 4-
year-old girl died last September when she set her day bed on fire
while playing with a multi-purpose lighter.
Multi-purpose lighters are relatively new products which were
introduced to the U.S. market in 1985. Since then sales have increased
steadily. One million units were sold in 1985; in 1996, 20 million
units were sold. With increasing sales and the attractiveness of these
lighters to young children, the Commission is acting to address the
fire hazard before the deaths and injuries increase.
In 1998, the Commission will continue working with a contractor to
build surrogate lighters and to test several different multi-purpose
lighters to determine how child-resistant they are for children under
age 5. These results will be used to prepare a cost/benefit analysis
for the proposed regulation.
The Commission will decide whether to issue a proposed standard in
1998 and will participate in the development of a voluntary standard if
the industry decides to initiate action to address this problem
voluntarily.
CIGARETTE LIGHTERS/COST BENEFIT ANALYSIS
Question. I'd like to understand better how the agency does cost-
benefit analyses. In your statement, you say that CPSC's 1993 standard
to make cigarette lighters child resistant saves over $400 million in
societal costs. Please explain the basis for this estimate, and more
generally the process for conducting cost-benefit studies.
Answer.
Cigarette Lighter Standard
Prior to this standard, fires started by children under 5 years of
age playing with cigarette lighters resulted in 150 deaths, 1,200
injuries, and $70 million in property damage annually, for a total
societal cost of about $900 million (about $750 million in fatality
costs, over $60 million in injury costs, and about $70 million in
property damage).
The child resistant features of lighters are expected to reduce
incidents by up to 70 percent, resulting in $500 million dollars of
benefits. Taking into account the estimated $90 million in added costs
to comply with the standard, the estimated net benefits to society are
about $400 million per year.
Cost-Benefit Analysis at CPSC
Under several of the Acts enforced by CPSC, prior to promulgation
of a new regulation, the Commission must find that the benefits
expected from a rule bear a reasonable relationship to the costs. In
developing a safety regulation, CPSC examines the benefits and costs of
alternative ways of addressing consumer product hazards. The process
involves identifying the extent to which specific remedies will reduce
product-related injuries and deaths. It also includes identification
and estimation of the full range of costs to society of each potential
remedial action.
The benefits of a regulation include preventing injuries, deaths,
and (sometimes) property damage from hazardous products. CPSC's Injury
Cost Model estimates direct costs (e.g., medical, foregone earnings)
and indirect costs (e.g., pain and suffering) of injuries reported
through the National Electronic Injury Surveillance System and other
injury data sources.
The costs to society of addressing a product hazard include the
cost of modifying a product design to make it safer or sometimes simply
modifying the product labeling or packaging. Also the Agency takes into
account estimated effects of increased consumer prices and product
utility. In developing a rule, the estimated benefits are compared to
the estimated costs; other economic factors that are not readily
quantifiable are also considered (e.g., small business effects, effects
on competition).
GENERAL SERVICES ADMINISTRATION
Consumer Information Center
STATEMENT OF TERESA NASIF, DIRECTOR
Senator Bond. Now we will hear from Director Nasif.
I apologize if I have mispronounced your name. If you
would, tell us the proper pronunciation and present your
testimony. Thank you.
Ms. Nasif. It's Nasif, yes, as you said it.
Mr. Chairman and members of the subcommittee, thank you for
the opportunity to present the fiscal year 1998 budget request
for the Consumer Information Center.
With me today is Bill Early, Director of Budget of the
General Services Administration.
Established more than a quarter century ago, CIC continues
to successfully carry out its vital mission mandate of helping
Federal departments and agencies inform the public about health
and safety issues, developments in Federal programs, and the
impact and effects of Federal research and regulatory actions.
Today, many elements of the CIC program remain the same: an
essential mission mandate; a commitment to serve the American
public; and the firm support of the administration and this
committee.
However, the CIC Program is going through a time of change
that reflects a new environment in Government and in customer
behavior. Overall, Federal agencies have reduced the scope of
their publishing activities due to budget constraints, and the
American public is placing fewer orders for merchandise,
including information, by mail.
CIC is meeting these challenges in two ways. First, we have
redoubled efforts to identify private sector partners who share
Federal information goals and can provide resources to stretch
limited Federal dollars. Second, CIC has set up telephone
ordering systems for both the consumer information catalog and
its listed publications.
CIC has implemented a toll free number--1-888-8PUEBLO--for
citizens to call to receive a copy of the catalog. Also, I am
pleased to report that, beginning with the spring 1997 edition,
all copies of the catalog will include a telephone number for
placing publication orders at the Pueblo facility.
Citizens pay for these calls, thereby sharing in the
expense of the program. Making access easier and quicker will
encourage more Americans to take advantage of the wealth of
information available from the Federal Government.
CIC remains in the forefront of Federal electronic
dissemination. The public will access the CIC Internet web site
more than 3 million times in fiscal year 1997. This is a
threefold increase since its inception in fiscal year 1995.
While Americans can now access CIC either electronically or
by phone, our address, Pueblo, CO, 81009, remains one of the
best known addresses in the country where Americans order
millions of publications published by more than 40 Federal
departments and agencies.
The Government Printing Office facility in Pueblo provides
order fulfillment services for tens of thousands of orders
received weekly as a result of the promotion that we do. During
fiscal year 1996, consumers ordered 7 million publications from
CIC, and in the years ahead we will continue our efforts to
make helpful information available to all citizens, whether
they are seeking it by computer or by mail.
We are very committed to maintaining a vigorous publication
distribution program in recognition of the fact that most
Americans still continue to receive their information primarily
through traditional print channels.
Our ongoing efforts to identify and obtain valuable Federal
information, our media and marketing programs, our centralized
distribution system, and our widely acclaimed electronic
information activities all combine to make CIC an essential
source for citizens needing vital consumer information from
their Federal Government.
Mr. Chairman, we trust that the committee will agree that
CIC is a valuable Federal program and that you will look
favorably upon our request.
Thank you.
Senator Bond. Thank you very much, Director Nasif.
[The statement follows:]
Prepared Statement of Teresa Nasif
Mr. Chairman and Members of the Subcommittee, thank you for the
opportunity to present the fiscal year 1998 budget request of the
Consumer Information Center (CIC).
Established more than a quarter of a century ago, the Consumer
Information Center continues to successfully carry out its vital
mission mandate: Help federal departments and agencies inform the
public about health and safety issues, developments in federal
programs, and the impact and effects of federal research and regulatory
actions. To ensure that the public is made aware of and has easy access
to this information, CIC promotes the information through a dynamic
media and marketing program and disseminates it through print and
electronic outlets.
Today, many elements of the CIC program remain the same: An
essential mission mandate; a commitment to serve the American public;
and the firm support of the Administration and this Committee. However,
the CIC program is going through a time of change that reflects a new
environment in government and in customer behavior. Overall, federal
agencies have reduced the scope of their publishing activities due to
budget constraints. And the American public is placing fewer and fewer
orders for merchandise, including information, by mail.
CIC is meeting these challenges in two ways: First, we have
redoubled efforts to identify private sector partners who share federal
information goals and can provide resources to stretch limited federal
dollars. For example, CIC has forged an alliance with the Metropolitan
Life Insurance Company's Consumer Education Center to help educate
consumers by developing publications on such diverse topics as starting
a business, planning for college, making a will, and doing your taxes.
And second, CIC has set up telephone ordering systems for both the
Consumer Information Catalog and its listed publications. In
partnership with GSA's Federal Information Center Program, CIC has
implemented a toll-free number (1-888-8 PUEBLO) for citizens to call to
receive a copy of the Catalog. IRS will place the number in a message
on the back of one million tax refund check envelopes and CIC will use
the number in our new television public service ads to be released in
May 1997.
Also, I am pleased to report that, beginning with the spring 1997
edition, all copies of the Catalog will include instructions for
placing publication orders by telephoning the Pueblo facility at 719-
948-4000. Citizens pay for these toll calls, thereby sharing in the
expense of the program. Making access easier and quicker will encourage
more Americans to take advantage of the wealth of information available
from the federal government.
And CIC remains in the forefront of federal electronic
dissemination as more and more schools, libraries, and families are
accessing information through the Internet. The public will access the
CIC website more than 3 million times in fiscal year 1998, a threefold
increase since its inception in fiscal year 1995. In recognition of the
value of CIC's website, plans are underway to display CIC's Home Page
address at the top of the newly revised ``Blue Pages'' listing of
government agencies that will be in thousands of local telephone
directories nationwide. This is part of the Administration's effort to
make government more easily accessible to citizens.
While Americans can now access CIC information electronically and
order publications by phone, ``Pueblo, Colorado 81009'' remains one of
the best known addresses in the country where Americans order millions
of publications published by more than 40 federal departments and
agencies. The Government Printing Office facility in Pueblo provides
warehousing and order fulfillment services for tens of thousands of
orders received weekly as a result of the Catalog, media mentions, and
marketing promotions done by CIC. During fiscal year 1996, consumers
ordered seven million copies of federal publications from CIC. In the
years ahead, CIC will continue its efforts to ensure delivery of
services to all citizens and to make helpful information available to
all citizens whether they are seeking information by computer or mail.
We are very committed to maintaining a vigorous publication
distribution program in recognition of the fact that most Americans
still continue to receive their information through traditional print
channels.
CIC's ongoing efforts to identify and obtain valuable federal
information, its media and marketing programs, its centralized
distribution system based in Pueblo, Colorado, and its widely acclaimed
electronic information activities--all complement each other and
combine to make CIC an essential source for citizens desiring unbiased
and vital consumer information from their federal government. CIC
remains uniquely positioned among federal agencies to perform the
services it has so effectively delivered to the American public since
1970.
Mr. Chairman, again I thank you for the privilege of being here
today on behalf of the Consumer Information Center to present its
budget request for fiscal year 1998. We trust that the Committee will
agree that CIC is a valuable federal program and that it will look
favorably upon our request. At this time, I would be pleased to answer
any questions you may have.
DEPARTMENT OF HEALTH AND HUMAN SERVICES
Office of Consumer Affairs
STATEMENT OF LESLIE L. BYRNE, DIRECTOR AND SPECIAL
ASSISTANT TO THE PRESIDENT
Senator Bond. Now we will hear from Director Byrne.
Ms. Byrne. Thank you, Chairman Bond and Senator Mikulski.
Thank you for giving us this opportunity. We have submitted our
formal statement for the record, but I would like to make some
brief comments.
Senator Bond. Thank you. All of your statements will be
made a part of the record in full. I should have mentioned that
earlier.
Ms. Byrne. Thank you, Mr. Chairman.
Because we have received a generous offer from a group who
purport to be Nigerian Government officials, we will not need
an appropriation for fiscal year 1998 and we will turn money
back to the Treasury. [Laughter.]
They say they find themselves with a somewhat embarrassing
surplus of 28.6 million U.S. dollars as a result of an
intentionally overinvoiced contract. They have graciously
offered us 30 percent if we will bank the entire sum for them
in the United States and supply them with several items of
personal information, including our bank account numbers.
Their letter closes with, ``Let honesty and trust be our
watchwords,'' so it must be legitimate. [Laughter.]
Although this scam is almost laughably transparent, Mr.
Chairman, it is a prime example of the type of fraud based on
illegal use of personal information that we have focused much
of our consumer education, policy development, and coordination
efforts on at OCA in the last year.
We are the only agency with White House responsibility to
coordinate and monitor Federal consumer programs, identify
consumer needs, and educate and advocate for consumers.
Because we are nonregulatory, we have no mixed mission or
restrictions on our role to represent consumers.
Mr. Chairman, you have our budget request before you. It
shows that we understood what this committee was saying last
year about cutting the cost of Government, reducing its size
and making it more efficient. We are reorganizing, using
technology to make us more productive, helping consumers in a
faster, cheaper, and better way, including our HelpLine with
the new database that allows us to track consumer complaints
and developing web links with the Federal Trade Commission and
other agencies.
Our emphasis is on providing consumers the tools to help
themselves because it is far cheaper and more efficient than
fixing problems after the fact.
For every one of these Nigerian frauds or other frauds like
them, even if the authorities can catch the perpetrators, the
likelihood is that they will only retrieve 10 cents on every
dollar lost. So education and information are the key to
protecting consumers and they are the ones who can protect
themselves the best.
Because of the shift in our economy, we are looking at a
White House conference on consumer issues. We have gone from an
industrial based economy to a service and information economy.
Our consumer laws really are there for tangible things, for
products. We have yet to wrestle with the greater questions of
how to protect somebody from a European travel scam as opposed
to a product that is faulty.
So we want a national focus on this new paradigm through
this White House conference.
Our long-term goals are very simple--to create a fair shake
marketplace through disclosure of information, choice, access,
and redress. These are the principles of good consumerism.
We plan to recognize organizations that adopt these
principles.
Finally, Mr. Chairman, we plan to continue working with
members of Congress, this committee, and other agencies on
specific consumer information and education issues, in town
meetings, in joint seminar formats on topics such as privacy,
fraud, financial management--a growing concern--and a new
concern, military families, with these being targeted for
fraudulent efforts.
Thank you, Mr. Chairman for your attention.
[The statement follows:]
Prepared Statement of Leslie L. Byrne
Mr. Chairman and distinguished members of the Subcommittee, I am
pleased to come before you today to present our fiscal year 1998
budget, to review the progress USOCA has made toward addressing the
concerns expressed by this committee, and to share our plans for the
coming year.
Our fiscal year 1998 budget request is for $1,800,000 and 13 Full-
Time Equivalent staff positions.
Our Agency's Mission remains unique. Our charge is to be the
consumer advocate within the Executive Branch, both domestically and in
the international marketplace. Because USOCA is non-regulatory, it is
our singular conviction that we can better protect consumers by giving
them the tools they need to protect themselves, through education and
information. This becomes an even more important concept in an era of
deregulation.
This Committee has rightly expressed its concern about government's
role, outdated and costly regulations, duplication of efforts, and the
need for a smaller but more effective government. We at USOCA have
heard your message loud and clear. In listening to the concerns of the
American people, we have also heard loud and clear that they want
consumer education and protection that must be strengthened, not
endangered.
To meet this committee's and the public's concerns, we continue to
re-tool USOCA's organizational structure. I am in the process of
reorganizing staff and functions to be more responsive. We are
currently developing our performance measurement standards and
indicators to meet GPRA's September 1997 deadline. Through these
initiatives, we are becoming a more results oriented agency whose
progress towards the goal of consumer education and information will be
accurately measured. To further fulfill our mission, USOCA is
reenergizing the Consumer Affairs Council (as mandated by Executive
Orders 11583 and 12160). This will allow government agencies to reduce
duplication and avoid redundancies in consumer policy.
PRIORITIES
USOCA continues to focus its efforts in three primary areas of
consumer concern: privacy; fraud; and the integrity of the marketplace.
We addressed these areas through information and education with special
emphasis on underserved populations. We are also working to improve
responsiveness by both government and industry to consumer complaints
and inquires. Based on these three areas, real accomplishments were
gained during fiscal year 1997 and specific initiatives are identified
for fiscal year 1998.
PRIVACY PROTECTION
The public's desire for protection from intrusiveness grows and
touches every institution. Government agencies, multimillion-dollar
corporations, ``mom and pop'' operations, are being more vigorously
challenged in their information gathering. Consumers want to be told,
in language they can understand, why information is being collected,
what will be done with it, and who will have access to it. People want
to be sure the information they give is pertinent to transactions, and
will not be used or sold for other purposes without their prior
approval. All of us want to be able to see what is being collected
about us and to have an uncomplicated way to correct errors and/or
include explanations.
Because of increased data collection and technology, we are seeing
a national increase in identity theft. USOCA continues its cyber-fraud
prevention efforts by informing the public on ways to protect
themselves from identity theft and securing personal information on the
Internet. Using traditional media such as print articles, press
releases, T.V., speeches, brochures, etc., we have reached hundreds of
thousands of Americans with information they can use to protect their
personal information. We want to expand these efforts in fiscal year
1998 by establishing and maintaining a web-site with this information.
On the international front, the absence of a U.S. privacy policy is
at odds with our European trading partners stance on the issue of
privacy. American companies may face self-imposed trade barriers if
USOCA cannot continue its work in harmonizing global marketplace
privacy protection guidelines.
A major illustration of USOCA's work in this area was as a catalyst
in alerting the nation to the fact that personal information about
consumers was being gathered and often used for purposes other than
those for which the information was volunteered. Our work with industry
improved communication between providers and consumers on this issue.
We have persuaded many corporations to give the public a choice about
how their personal information is used--by permitting consumers to
determine whether or not the information they give a company will be
shared with other companies, (for example, information on credit
applications). At the same time, USOCA organized a working group of
Federal agency representatives to examine the issues and privacy policy
options. During our National Consumers Week Kickoff Conference in
October 1995 at the White House, this group, called the Privacy Task
Force, released the Federal Privacy Principles--guidance for industry,
government, and individuals about how to protect personal privacy.
In 1997-98, USOCA and the Privacy Task Force will continue working
with government agencies and the private sector (both domestic and
international) to refine and adapt the Privacy Principles, for
implementation, particularly by users of the information superhighway.
Increasingly, the World Wide Web and other electronic tools are being
used for consumer purchases of products and services and interactions
with government. The success of electronic commerce and the Internet
depends on consumers belief in the security and integrity of this new
medium. To achieve the full potential of the electronic marketplace,
consumers want to be protected from a loss of control of personal
information and, in the worst case, fraud. With personal, financial,
health and other sensitive information going directly into computer
data bases for storage, retrieval and manipulation, the need for
consumer confidence in the security and control of that information is
critical.
It is USOCA's belief that the need for information by government
and industry can be balanced with consumers' desire to preserve their
privacy and control the use of personal data. Our goal is to protect
consumers while encouraging growth and innovation in the use of
telecommunications and information management technology. We find that
industry shares our belief that a balance can be struck without
unnecessary and burdensome regulation.
We will continue to work with industry, government and consumers to
achieve this goal. To lead by example we are developing a program to
publicly recognize those who contribute to the protection of consumer
privacy. This honor would be an award presented annually to various
business, non-profit, government, and consumer organizations for
outstanding efforts in privacy protection, particularly in areas where
technological advancements encroach on personal privacy.
CONSUMER FRAUD PREVENTION
USOCA continues its efforts to raise consumer awareness about
fraud. Scams and fraud cost consumers over $100 billion annually in
America. A new and growing target of fraud is military families. USOCA
is working with the military personnel and their spouses to reduce the
number of families harmed by these scams.
Additionally, the growing use of credit and debit cards, of
telephone and of Internet for purchasing goods and services, multiplies
opportunities for fraud and increases the need for consumer education.
USOCA is working closely with major credit card companies, media, trade
associations, and consumer organizations to promote extensive consumer
education campaigns. In addition, USOCA will continue to work with the
Department of Treasury and other agencies overseeing electronic
commerce to ensure that consumers know how to protect themselves from
fraud. Again our proposed web site will allow the public to
electronically access USOCA publications and information directly.
Because the problems of consumer fraud require constant attention, we
will publish an updated version of our popular pamphlet, ``Too Good To
Be True.'' This newest edition of the publication will be the
centerpiece of an anti-fraud campaign in 1998.
TELECOMMUNICATIONS AND TELEMARKETING FRAUD
Currently, USOCA's policy development efforts focus primarily on
the profound changes that technological advances in telecommunications
and information management have wrought in the marketplace. These
changes acutely affect consumers, with potential for both good and ill,
and create a need for government and industry to find means to balance
the consumer/provider interests and promote probity and fairness in the
marketplace.
For example, as a result of consumer complaints to USOCA's toll-
free National Consumer HelpLine, our office, in cooperation with the
Federal Trade Commission (FTC) and the Federal Communications
Commission (FCC), convened a series of industry/consumer/government
meeting on abuses in the telephone information services industry. The
initial meeting, held early in fiscal year 1996, alerted the industry
and Federal regulatory agencies to significant problems with ``pay-per-
call'' information services, despite recent legislation. Subsequently,
a second USOCA-convened meeting was held to develop proposals for
voluntary action on these problems. A third meeting produced major
changes in the industries ethical guidelines. With the passage of The
Communications Act of 1996 and the proposed legislation,
``Telemarketing Fraud Punishment and Prevention Act of 1996'', Congress
may further authorize regulatory action that will resolve some of the
problems consumers are experiencing. Prevention still remains the best
antidote to fraud.
outreach and serving the underserved populations
Outreach is a critical element in the success of USOCA's mission,
especially to consumers who have traditionally been underserved: the
disabled, frail, elderly, geographically isolated, ethnically diverse.
Through consumer dialogues we have worked with neighborhood leaders to
discuss the concerns and problems of consumers in their communities.
Most importantly, community leaders have given us their recommendations
on how government and the private sector can improve the delivery of
consumer information to diverse communities.
USOCA is successfully recruiting leaders from ethnic communities to
advise this office on consumer issues that affect diverse communities.
Our goal is to build an ``early warning system'' with these groups to
keep consumer problems from becoming larger, which leads to regulations
or legislation that could be avoided if people can find redress early
on.
USOCA has provided consumer education materials and conducted
workshops at a variety of conferences and seminars sponsored by
organizations representing the elderly and citizens with disabilities.
In the first quarter of fiscal year 1997, USOCA developed a working
group to discuss and formulate an agenda regarding consumer issues of
particular concerns to the 49 million Americans with disabilities.
USOCA is committed to encouraging marketers and employers to recognize
consumers with disabilities as deserving of consumer rights as fully
abled people.
Town meetings and seminars are being planned around the theme,
``Real People--Real Challenges.'' The aim of these fora is to provide
an opportunity for traditionally underserved communities to discuss
their consumer concerns. USOCA also plans to convene consumer education
opportunities for youth in major cities throughout the country .
Outreach to youth will include educational programs and projects to
raise public awareness and to generate support for personal financial
literacy for our children and young adults. By working with
organizations such as the JumpStart Coalition for Personal Financial
Literacy, which includes the National Institute for Consumer Education
of Eastern Michigan University and the American Financial Services
Association, USOCA will expand its mission by encouraging ``responsible
use of credit'' and ``planning for savings, spending and investing to
meet current and future needs'' among America's consumers under the age
of 18.
National Consumers Week (NCW) observed annually during the last
week in October, is a signature event of the United States Office of
Consumer Affairs and the nation. It is a major promotional event that
highlights consumer education by informing consumers about their rights
and responsibilities in the marketplace.
Representatives from business, all levels of government,
educational institutions, consumer organizations and media use this
unique opportunity to encourage dialogue with consumers about a variety
of important issues. With coast-to-coast involvement, planning and
execution of NCW activities is a year-round undertaking. Recruitment of
NCW public/private partnerships, follow-up activities, coordination
with the Executive Branch and the White House, preparation of written
materials and the development of various reports and documents are
crucial to the success of NCW. This year's NCW theme is `` A Fair Shake
Marketplace.''
A White House Conference on Consumer Issues is being planned for
October 1998. Our economy has changed from industrial based to service
and information based. The nation's response to the new challenges this
creates for consumers, has been slow. USOCA is proposing a new look at
consumerism brought about by this profound shift in the economy. The
consumer rights associated with tangible products are more difficult to
ascribe to non-tangibles like services and information. We are using
our resources for a national focus on this new paradigm.
Communications.--USOCA has maintained a moderate communications
operation. Due to the current budget shortfall USOCA has ceased to
publish its newsletter. The newsletter circulation included hundreds of
consumer groups, professional associations and media outlets. Within
the fiscal year 1998 request, we plan to restore the newsletter to
semi-annual publication.
Another trademark event for USOCA has been the Constituent Resource
Exposition (EXPO). Traditionally held for each new Congress, EXPO has
served as an educational event for congressional staff where they meet
representatives of Federal Agencies, discuss agency programs, and
obtain pertinent information which enabled them to better respond to
constituent requests in the Member's districts. This event helped
eliminate Federal waste and red tape caused by misdirection of
constituent complaints and queries.
Again because of budget issues, USOCA has decided to take a
different approach to reaching congressional staff members to
disseminate information--a method which may prove to be more efficient
and cost-effective. USOCA is working to conduct workshops in
partnership with the Congressional Research Service (CRS) for Senators,
Members of Congress and their staffs. At these workshops, USOCA's much
requested publication, the Congressional Liaison Handbook (CLH) will be
distributed. The CLH directs staff to appropriate agency consumer and
congressional liaison officials.
The primary tool with which USOCA has traditionally used to reach a
broad cross-section of the population is the Consumer's Resource
Handbook. This award winning resource is one of the most popular
publications produced by the Federal government. It is filled with
valuable information and ``Buying Smart'' tips for consumers to assist
them in making informed choices and avoiding pitfalls such as fraud in
the marketplace. Just as important are its listings of both private and
public sector resources for consumer information and problem
resolution. Keeping this information relevant to consumer problems in
the marketplace, as well as complete and accurate requires more than
checking addresses and telephone numbers.
USOCA has in place the staff, expertise, knowledge, skills and
interaction with industry, government agencies, consumer organizations
and individual consumers needed to produce this Handbook. Any other
agency handling this would assume research, training, and production
costs well above the costs incurred by this office.
There is a significant amount of work that could be done in 1997 on
the 1998 edition of the Handbook. For example, the inclusion of E-mail
addresses and web sites available for complaint handling. Currently, we
are working with the FTC on a single Web-link to Federal web sites, at
the address, consumer.gov, for which the Handbook's index would serve
to guide consumers through the maze of Federal, state and local
agencies with jurisdiction over consumer problems. To do this
effectively there is considerable work to do to make the index more
user-friendly in the Internet environment.
Funding for the Handbook, as well as other consumer education
publications have been accomplished through public and private
contributions. Gift acceptance authority is extremely important to
ensure that adequate numbers of these publication are updated and
available to consumers. In addition to the Handbook, four significant
publications/studies scheduled for fiscal year 1998, such as,
``Protecting Your Privacy,'' ``Too Good To Be True 2000--A Consumer
Guide to Avoiding Fraud in the New Century,'' and ``Improving Customer
Service'' will require research, editing, design, printing, and
distribution.
RAPID RESPONSE FOR CONSUMER COMPLAINTS
The National Consumer HelpLine is a toll free number available in
every state and U.S. territory offering a rapid response to consumer
complaints through referrals and consumer information. It is staffed
four hours a day by USOCA's professional staff, including its director,
who refer or answer questions on the spot. We call back anyone who
leaves a message during non-staffed hours. HelpLine is serving as the
central federal clearinghouse for consumer complaint handling. Through
the HelpLine, we make our decades of experience with consumer issues
available to all Americans.
Calls are logged into a database to help USOCA keep abreast of new
trends such as fraudulent schemes in telemarketing, sweepstakes, and
pay-per-call and long distance telephone billing. It tracks consumer
complaints on automobile repair, home maintenance, warranties, stock
fraud and returned merchandise. Other areas generating frequent calls
are credit reporting and credit harassment, direct marketing and mail
order complaints, insurance, mobile homes, Social Security and
Medicare, student loans, and airlines.
It provides a window on the public's reaction to developments in
the marketplace long before the media or researchers can identify them.
Dialogues with companies, trade associations, consumers and regulatory
agencies have followed. In some cases, due to the industry being made
aware of consumer problems, action has been taken to eliminate the need
for new regulations. This is in keeping with the President's initiative
to eliminate unnecessary regulations.
DOMESTIC POLICY
USOCA has no regulatory authority but it directly impacts proposed
legislation and regulations being considered by Congress and the
Administration. USOCA is regularly solicited for input or comments on
proposed legislation, regulations and reports. While the demand for
USOCA review has increased over the last decade the number of employees
has dramatically decreased. USOCA has been involved with such complex
issues as privacy, emerging technology, the global marketplace, anti-
terrorism, debt and credit, and fraud.
USOCA is the sounding board on consumer issues for buyers, sellers,
all levels of government, neighborhood groups, and consumer
organizations. We are the consumer's voice in the decisions of
government and the impact of proposed legislation and regulations on
their lives.
INTERNATIONAL POLICY
Representing the interests of U.S. consumers in international
forums, USOCA provides support to the President's consumer advisor as
head of the U.S. delegation to the Committee on Consumer Policy of the
Organization for Economic Cooperation and Development (OECD). The U.S.
has taken a leading role in the areas of product safety, lowering
tariff barriers for services and consumer redress in the international
marketplace. The U.S. has encouraged OECD to adopt the use of new
technology on global warning systems for product safety and consumer
fraud.
The world stands at the doorstep of a great expansion of cross-
border consumer transactions. Interest in the changing global
marketplace and how it affects consumers is widespread among
businesses, consumer advocacy groups, educators and world leaders. As
consumer policy issues are increasingly internationalized, the need for
effective mechanisms for the exchange of critically important consumer
information, product safety, and efforts to counteract fraud and
deception in the marketplace becomes more urgent.
USOCA's role is vital as head of the U.S. Delegation to the
Committee on Consumer Policy of OECD in order to fully represent
America's consumer interests. It is viewed by our OECD partners as a
beacon of leadership particularly for countries just becoming free
market economies. Newly emerging nations from the former Soviet
Republics want to study our governmental and nongovernmental structures
as they seek to develop national consumer policy in a free market
setting. USOCA also assists visiting delegations from other nations
that wish to study our consumer protection system and our unique
network of citizen run consumer organizations.
interagency coordination
USOCA chairs and coordinates the Consumer Affairs Council and
provides staffing. The Consumer Affairs Council was established as a
body of senior consumer policy officials designated by the heads of
Federal departments and agencies to provide leadership, coordination
and effective management to consumer protection and policy initiatives.
It has been used effectively in recent years to coordinate cross-
cutting initiatives, such as National Consumers Week, The Constituent
Resource Exposition (EXPO), and the Consumer Resource Handbook
publications and distribution. We intend to also use the Council as a
means to raise standards of customer service and achieve greater
consistency in consumer policy implementation government-wide.
CONCLUSION
Mr. Chairman, this is a conservative budget. With the support of
this committee, USOCA can fulfill its mission to empower every American
to make the best choices in the marketplace. With our emphasis on
education and information we arm the public with the tools they need to
avoid the frauds, scams, charlatans and con-artists. We can give them
the peace of mind and security to enter into new marketplaces, whether
cross borders or in cyberspace and most importantly assure families
redress if things go wrong. The subcommittee's choice is clear: help
us, help your constituents or rely on after-the-fact remedies like more
laws, more regulation, and more police trying to catch the crooks. Even
when law enforcement is successful, it only recoups a small fraction of
the money lost to our citizens and honest and ethical businesses. Mr.
Chairman, we can do better.
I would like to thank the Subcommittee for allowing me to express
these views and I would be glad to answer any questions you have for
me.
SMALL BUSINESS REGULATORY ENFORCEMENT FAIRNESS ACT [SBREFA]
Senator Bond. Thank you very much, Director Byrne.
Let me turn to some questions. Let me begin, Chairman
Brown, with a question that is near and dear to my heart as
author of the Small Business Red Tape Relief Act, also known by
the mind-numbing, eye-glazing acronym of SBREFA. I appreciate
your attention to that legislation. The law requires agencies
to establish a policy or program to provide for penalty
reductions or waivers where appropriate to accommodate the good
faith efforts of small businesses to comply with agency
regulations.
What steps has your agency taken toward instituting such a
program? When do you see it up and running?
Ms. Brown. We have it up and running now because we have
long been sensitive to the needs of small business. In fact, in
June 1996, the agency sponsored, with the Small Business
Administration, a very well attended conference on small
business and consumer product safety. At that conference, we
announced the designation of a CPSC small business ombudsman,
who will help direct calls from small business operators and
insure appropriate followup.
So far, through direct contact with CPSC staff, we have
helped more than 700 small business persons comply more easily
with our product safety guidelines. We, therefore, helped them
to manufacture safe products.
Requests to our ombudsman for assistance average about 90
calls per month and represent 35 States and foreign countries.
Our goal is to provide expert assistance to every small
business within 48 to 72 hours of when they call CPSC for help.
To date we have been about 80 percent successful in meeting our
goal.
Senator Bond. I appreciate that good work.
Is there a waiver program in place? Do you impose fines for
violations of your regulations?
Ms. Brown. Yes; Clarence Bishop is the small business
ombudsman and perhaps you would like him to answer that.
Mr. Bishop. Good morning, Mr. Chairman.
Senator Bond. Good morning.
Mr. Bishop. Good morning, Senator Mikulski.
Senator Mikulski. Good morning.
Mr. Bishop. Yes, sir; we do have a waiver program in place
through our compliance department, although we have not had to
use it to date.
Senator Bond. What would be the normal range of fines that
you would impose?
Ms. Brown. We are going to pass your question one more
time. This will be David Schmeltzer, head of our Department of
Compliance.
Mr. Schmeltzer. Good morning.
Our statute provides for civil penalties of up to $1.5
million. We are directed to consider the size of the business
when levying the fines, and we always do. We have about 15
fines per year, and when we deal with small businesses, first
we try to explain to them how to meet the regulations. If there
are violations, then we take into consideration the size of the
company and the appropriate figure. All of these cases are
resolved through settlement procedures.
Senator Bond. Rather than carry on the discussion further,
we would appreciate having a report on the fines, what you are
doing and how, and particularly if there are small businesses
involved.
Thank you very much.
[The information follows:]
Penalties for Small Businesses
The Commission staff has authority to pursue civil penalties
against firms who fail to report a product hazard to the Commission
under section 15(b) of the CPSA, 15 U.S.C. Sec. 2064(b). Since 1990, it
may also pursue penalties against firms who knowingly violate the
safety standards of the FHSA, FFA and PPPA.
The Commission has always placed an emphasis on seeking voluntary
compliance with our laws first. When product hazards exist, our first
effort is to obtain corrective action. Some of these violations are
committed out of ignorance, others because the firms choose not to put
time and money into complying with the law. Civil penalties are used
sparingly and generally only pursued against repeat violators.
The purposes of a civil penalty are to deter the firm from future
violations of our safety standards and to deter others from such
violations. Under our laws, the Commission must consider a number of
factors in deciding whether to pursue civil penalties. In determining
whether a civil penalty is appropriate and the amount of the penalty,
the Commission's laws require the agency to consider the risk of injury
presented by the product and ``the size of the business of the person
charged'' along with other factors. (See, section 20(b) of the CPSA, 15
U.S.C. 2069(b)). The staff also examines the level of sophistication
and knowledge of the firm involved and the gravity of the violation.
Reporting Violations
The staff received 239 section 15(b) reports in fiscal year 1996
and investigated many other products. The staff's primary focus was on
corrective action and the vast majority of the cases were resolved by
voluntary corrective action plans with no penalty. In fiscal year 1996,
the agency obtained penalties from 5 firms who failed to report under
section 15(b) of the CPSA. None of these 5 firms were small businesses.
In addition, an agreement was reached with one firm which did not
result in a civil penalty.
Regulated Products
In fiscal year 1996, the staff discovered hundreds of violations of
the Commission's safety standards. When the staff learned of a
violation of a regulation, it advised the firm of the violation,
addressed the hazard, and sought to bring the firm's products into
conformance by working with that firm.
Out of the hundreds of violations found, the staff obtained only 4
(3 were small businesses) penalties and initiated two federal court
actions for penalties against firms for regulated product violations in
fiscal year 1996. (The Commission reduced one of those penalties to
$5,000 from a negotiated penalty of $10,000 because of the small size
of the firm involved.)
The two Federal Court actions initiated in fiscal year 1996 were
against a fireworks importer and a children's products importer. Each
had more than ten violations and had not taken reasonable steps to
correct the violations. U.S. v. Big Save International Corp. (C.D.
Cal., No. 96-5318), and U.S. v. Shelton Fireworks, (W.D. Mo., No. 96-
6131-CV-SJ-1) (23 violations). Both firms are small businesses.
During the last several years, the staff has worked with many small
businesses who are repeat violators to bring them into future
compliance without civil penalties. Toward that end, the staff has used
meetings, inspections, and compliance agreements. It has also put civil
penalty cases ``into abeyance.'' (This means the firm is informed that
we could seek penalties, but do not plan to do so if the firm does not
commit future violations.)
Ability to Pay
Although the Commission's laws refer to the size of the business
charged, as the factor to consider, the staff also takes into account
the firm's ability to pay in determining the appropriate amount of any
civil penalty and the payment terms. In three cases involving smaller
firms, the staff has structured the payment of penalties so the penalty
amount will send a strong message, but the payments are spread over
time to allow the firm to continue as a viable concern.
Civil Penalty Report
[Final orders]
Fiscal Year 1996
Burlington Coat Factory (FFA)........................... $250,000
Cosco, Inc. (Sec. 15(b), CPSA).......................... \1\ 725,000
JBI, Inc. (Sec. 15(b), CPSA)............................ 225,000
National Media (Sec. 15(b), CPSA)....................... 150,000
Premier \2\ (FHSA)...................................... \1\ 75,000
Shrdlu, d.b.a.\2\ (FFA)................................. 5,000
Singer Sewing Co. (Sec. 15(b), CPSA).................... 120,000
SKR Resources, Inc.\2\ (FHSA)........................... \1\ 40,000
Taito America Corp. (Sec. 15(b), CPSA).................. 50,000
--------------------------------------------------------
____________________________________________________
Total............................................. 1,640,000
========================================================
____________________________________________________
Other remedies: McDonalds, Inc. Sec. 15(b), CPSA........ \3\ 5,000,000
Referred to Department of Justice:
Big Save International Corporation \2\
Shelton Fireworks \2\
\1\ Structured Payment Schedule.
\2\ Small Business--CPSC follows 15 U.S.C. 632 which states that the
business must meet the criteria of being independently owned and
operated and not dominant in its field of operation. In addition, the
Small Business Administration sets size standards for various industries
which are published in 13 CFR Part 121. Industries are identified by
their Standard Industrial Classification (SIC) Code and their maximum
size to be considered small is determined by either annual receipts or
number of employees. If the industry is not listed in the CFR, the
default size standard is $5 million in annual receipts.
\3\ Program.
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CPSC BUDGET
Senator Bond. Chairman Brown, you have indicated that the
budget request is modest. But even a 6-percent increase, to $45
million, over the current year when overall funding is likely
to be held flat is difficult. What lower priority items would
you eliminate or reduce if we had to hold you at a level
funding.
Ms. Brown. Level funding meaning the $42.5 million?
Senator Bond. Yes.
Ms. Brown. That would be extremely difficult for us, of
course, because there would be a reduced level of safety, I
think, to the American people. We would have a problem even in
holding level. That does not mean that we would be holding
level. Many of our information technologies, which is very
important, much of that would not be able to be done.
Senator Bond. In the budget process, sometimes you have to
make hard choices. Rather than strangling every program,
sometimes it is better to cut the lower priority program.
Is there a lower priority program?
Ms. Brown. At this point, I will have to get back to you
and think about that because we are on such a bare bones budget
now, as we are, that I just cannot think of any. We have
already reduced. We have put our two laboratories together. I
am thinking that there are so many things we have done. We have
cut down on training of our personnel.
I am not trying to be evasive, Mr. Chairman.
Senator Bond. I understand, but that is something we would
like for you to think about in case the worst happens.
[The information follows:]
Effect of Budget Request Cut
Any cuts to CPSC's budget would simply not be cost-beneficial. CPSC
delivers more than $155 million in savings to the American public for
every $1 million invested in the agency. Furthermore, the work of the
agency has been a major factor in the 20 percent decline in annual
deaths and injuries related to consumer products that occurred between
1980 and 1993. Any cuts to CPSC's budget at this point would reduce
this tremendous return on investment for consumers and would place more
families at risk from dangerous products.
Limiting CPSC's 1998 funding to the 1997 level of $42.5 million is
approximately equivalent to a $2 million budget cut.\1\ But CPSC is
already half the size it was in 1980, while our mission has grown
substantially.\2\ To accommodate these reductions, we cut staff and
trimmed away spending. We are now a lean and efficient operation.
Therefore, any further budget reduction would cut directly into our
safety programs.
---------------------------------------------------------------------------
\1\ The agency needs a minimum of $2 million over 1997 funding if
it is to fund non-discretionary cost increases occurring in 1998. This
includes $1.2 million for increased salary and space costs, $300,000 to
make its accounting system Year 2000 compliant, and $500,000 to fund
proposed increased retirement contributions and carrying out of Freedom
of Information Act amendments.
\2\ CPSC's budget has fared worse than most other health and safety
agencies. For example, from 1981 to 1996, EPA's budget increased 25
percent and FDA's budget increased 56 percent while CPSC's budget
decreased 45 percent.
---------------------------------------------------------------------------
A $2 million budget reduction would force cutbacks in new safety
initiatives planned for 1998 and in current safety work. The very
difficult decisions of exactly which life-saving initiatives to
sacrifice if this were necessary can not be made until we are much
closer to new fiscal year.
We believe that any cut in CPSC's budget at this time would rob the
American public of essential safety benefits. Injuries from consumer
products presently cost this country $200 billion each year. Past
successes by the agency show that we can reduce deaths and injuries
without expensive and intrusive interventions. The additional funds
requested for 1998, $2.5 million, are small. Judging by recent
accomplishments, this modest investment will deliver almost $400
million in benefits to U.S. consumers. This small investment will keep
one of the country's best working assets in good working order and
build a better future for American families.
When the subcommittee receives its budget allocation, if cuts are
indeed necessary, we will certainly work with the subcommittee staff to
identify those that would result in the least damage to our mission.
Senator Bond. Senator Mikulski.
Senator Mikulski. Thank you very much, Mr. Chairman.
I have no questions for Ms. Nasif. But I do want to thank
you for the excellent and continued work that you have done.
We have had these conversations now for many years, and I
must say that all of the literature that comes out of your shop
is really I think remarkably received by the taxpayer. Often
they wonder if they give us $1, we're going to spend $2 and at
the end of the day have nothing to show for it that means
anything in their day to day lives.
The practical information that you disseminate, whether it
is on how to buy a car or how to buy long-term care insurance
is wonderful. I have looked at all of those. The very excellent
check lists were helpful.
I, myself, used your guide in looking for long-term care
insurance because I was ready for purchasing that product. Like
any other consumer, I wanted to know what specifically I could
turn to.
I could go over many issues like that. So I thank you.
I know you face many financial challenges because you must
be ready for the electronic world. But most people still will
get their information through a printed form. So we look
forward to working with you.
Ms. Nasif. Thank you, Senator.
FRAUD PERPETRATED AGAINST ELDERLY
Senator Mikulski. Congresswoman Byrne, I have a question
about HHS consumer affairs.
What does your organization do to protect people against
fraud in those areas that are vulnerable in HHS service
delivery areas? I am thinking about Medicare scams, for
instance. You know, there are so many scams going on now among
senior citizens, whether it is in products, though not the
dangerous ones that Ms. Brown so effectively oversees--that
privacy of information is absolutely important and I understand
that.
But there are a lot of scams going on in the area of
Medicare and health care, et cetera. Are you involved in that?
Ms. Byrne. What we try to do is go out to the communities
of seniors and make them aware of these scams. One of the
things we find is that we hear about them after the fact, after
the widow has been deprived of $70,000, not once over a scam
but once she gets on a sucker list it's again and again and
again. She has been proven vulnerable in one instance. There
are actual lists that are published, shared among the scam
artists that allow them to go back to her.
So what we are trying to do with education and information
is get information out into the hands of seniors.
Senator Mikulski. And how do you do that?
Ms. Byrne. We do it through AARP and all of the other
organizations. We work very closely with senior organizations,
such as the Senior Citizens Council, the AARP, in educating
their members. We do media campaigns in senior citizen areas
that are heavily populated. We send out alerts when we find out
a particular scam is in a neighborhood, for example. That is
all to that effort of getting information to the consumer.
The other, the back end to that is through our HelpLine and
this kind of first alert that we have, we are able to notify
law enforcement agencies when there is a scam going on directed
toward senior citizens or anyone else. So when they call us, we
go after them.
Senator Mikulski. Thank you. I think everybody wonders what
is--not really your personal job--what is the job of your
agency.
Ms. Byrne. Right.
Senator Mikulski. I really think that where there is need
there is greed, and where there is greed there is scam; and
where there is scam, there is scum.
Ms. Byrne. That's right.
Senator Mikulski. That's the way I see it.
Ms. Byrne. You got it.
Senator Bond. Let me jot that down.
Senator Mikulski. It's need/greed, scam/scum.
I would hope that, instead of looking with a broad brush
across agencies, really that agency, particularly with the
senior population that is so vulnerable, is so helpful.
Ms. Brown, regarding your agency, you are now talking about
a new fire prevention, death prevention initiative. Could you
tell us--and I know my time is short----
Senator Bond. Take your time.
CPSC INITIATIVES
Senator Mikulski [continuing]. Where did that come from?
Where did that idea come from? That then takes me to a second
question, which is are you moving the Consumer Product Safety
Commission to what I call a risk based strategy focus. I mean,
in other words, looking at those consumer vulnerabilities that
are most likely to affect most of the American people.
Ms. Brown. The way that we figured out the fire initiative
is because that is where the major deaths, injuries, and
property damage occur. So we are always a data driven agency.
We have a fine data system, a hospital emergency room system.
We are driven by the fact that we must prioritize. We must
prioritize in this era of limited resources and that must be
done based on where the greatest injuries and deaths occur.
We have three new initiatives, to reduce fire deaths and
injuries, consideration of a multipurpose lighter standard,
evaluation of our child resistant cigarette lighter standard,
and investigator training for CPSC investigators. All of those
were arrived at because that is where we see the largest number
of injuries and deaths.
Senator Mikulski. And what are the other top two?
Ms. Brown. The other top two apart from fire?
Senator Mikulski. Uh-huh.
Ms. Brown. Those would be children's injuries and deaths,
which are, of course, always important to us, and sports
injuries. All of those were arrived at when we looked at our
data and we saw where is the greatest need.
Senator Mikulski. Let me say just one word about fire. I
know that it is one of the terrible problems in my communities
in Maryland. Once again we just suffered the death of three
children, and we would hope that you are also going to be
coordinating with FEMA and the national association. FEMA has
the firefighters. I will get back to floods in a minute. We
hope you do work across agency lines in this area.
What we hope and what we tried to get FEMA to do and EPA--
this committee has been around management--is not to go after
individual boutique issues that capture the headlines--and I'm
not saying you do, but we all know how that goes--but to focus
on where most people are at risk, whether it is to scams and
being defrauded, such as buying the hearing aid that is going
to solve all of your problems, all those sorts of things. That
is important.
It is very important to me that we coordinate with other
agencies. The issue of firefighting and fire prevention is an
intensely local, block by block issue. How will you be
coordinating there?
WORKING WITH OTHER AGENCIES
Ms. Brown. We are already working with the Fire
Administration on many of our fire efforts and other efforts as
well. They are funding some work that we are doing on stoves
and burners.
We work very closely with FEMA, as well, as we have during
this flood. They are giving out all of our material about how
people will reenter a house and the dangers that lurk when
people reenter a house that has been flooded.
I have a list of the agencies with which we cooperatively
work. I would be delighted to submit that for the record so
that you can see that one of our major goals is to work
cooperatively across Government, both in Government and outside
of Government with industries and other organizations. It
really is a way to aggrandize your resources. I would like to
submit that for you.
Senator Mikulski. Thank you.
[The information follows:]
Working with Other Agencies and Organizations
CPSC works with many Federal agencies and private organizations in
many ways to advance safety programs and to maximize the effect of CPSC
safety efforts. These relationships have proven very productive to the
agency and the American public because they provide greatly expanded
resources to the problem of hazard reduction at little cost. We are
always careful not to duplicate services of other organizations, but to
complement and augment one another. CPSC offers other agencies unique
abilities to identify hazards and analyze hazards, and at times,
suggest practical ways to reduce hazards. For example, CPSC has the
best system in the world for collecting information about hospital
emergency room visits--The National Electronic Injury Surveillance
System (NEISS). Many agencies purchase services from NEISS to obtain
data about injuries within their jurisdiction. In one example of such
an arrangement, NEISS is providing children's injury data to the
Department of Transportation for its work on children and airbags.
The reduction of fire hazards provides an excellent example of how
CPSC works with other organizations. CPSC has a long and productive
relationship with local and State fire organizations. CPSC depends on
fire data, collected by local fire departments and coordinated at the
State level through the National Fire Incident Reporting System, to
provide essential support for our regulatory mission. In addition,
special in-depth field investigation projects regarding fire incidents
almost always rely on close coordination with local fire departments.
Examples of such projects include cigarette lighters, upholstered
furniture open-flame fires, smoke detectors, and range fires.
CPSC has also worked with local fire departments and community
groups to develop community-based smoke detector programs. Recently,
under a program organized by CPSC, 5,000 smoke detectors were
distributed and installed by firefighters or trained volunteers in 10
cities, targeted to vulnerable populations.
CPSC also works with many national organizations to address fire
hazards:
The U.S. Fire Administration (USFA) collects and provides essential
data on residential fires to CPSC, stimulates new technology, and
conducts public education campaigns relating to fire. USFA has provided
supporting funds for CPSC projects on Range Fires, Smoke Detectors, and
Home Electrical Wiring Systems.
The National Institute of Standards and Technology (NIST) performs
basic and applied research in the fire sciences, provides their
facilities for CPSC special fire testing, and serves as a comprehensive
resource for standards information. NIST is providing fire test
facility support for our current project on Fire Safety Devices.
The Centers for Disease Control and Prevention (CDC) provide
programs and grants to expand community awareness in the field. CPSC
staff participates in the CDC Healthy People 2000 Work Group on Fire
Prevention, and CPSC has provided funding in support of their fire
prevention initiative.
The Congressional Fire Services Institute (CFSI) was a member of
the Steering Committee of our National Smoke Detector Project.
CPSC communicates with other agencies that have regulatory
authority and conduct research in areas beyond CPSC jurisdiction such
as the Federal Aviation Administration (aircraft), the Occupational
Safety and Health Administration (workplace), the National Highway
Traffic Safety Administration (automotive), and the Department of
Housing and Urban Development (manufactured housing).
The private sector organization, the National Fire Protection
Association (NFPA), also collects and provides CPSC residential fire
data in addition to developing and publishing this country's national
fire codes and voluntary standards, investigating major fires, and
conducting public information and education programs.
In October of 1996, the Commission signed a Memorandum of
Understanding with the International Association of Arson Investigators
(IAAI) through the Commission's Special Investigations Unit (SIU). The
IAAI is a non-profit technical and educational organization comprised
of volunteers through various government organizations, such as ATF,
insurance investigators and certified fire investigators. This
cooperative effort allows both organizations to work together toward
the common goals of improving public fire safety, sharing technical
information and training fire investigators. In addition, the IAAI
publishes bi-monthly Commission recalls to notify IAAI members of fire
hazards associated with potentially defective consumer products.
CPSC works cooperatively with many other public and private
organizations on a variety of product safety efforts. Federal agencies
we have worked with include:
--Centers for Disease Control (data collection on a wide-range of
injuries)
--Customs Service (import surveillance to prevent entry of unsafe
products)
--Department of the Army (share information and expertise on injury
prevention, baby safety events, lead in playground equipment)
--Consumer Information Center (distribution of CPSC safety
publications)
--Department of Energy (chemical emissions from consumer products)
--Department of Housing and Urban Development (injury prevention in
housing)
--Department of Health and Human Services (injury prevention, data
collection)
--Department of Interior (playground safety in National Parks)
--Department of Justice (data collection)
--Environmental Protection Agency (indoor air, lead poisoning,
chemicals)
--Federal Emergency Management Agency (injury prevention in disaster
situations)
--Federal Trade Commission (data sharing on consumer protection legal
actions)
--Food and Drug Administration (poison prevention)
--Fire Administration (fire safety and fire education programs)
--Indian Health Service (injury prevention, fire safety)
--National Highway Traffic Safety Administration (bicycle safety)
--National Institutes of Health (toxins and carcinogens in consumer
products)
--National Institutes of Standards and Technology (product safety
testing)
--Office of Consumer Affairs (coordination of numerous safety
matters)
--Occupational Safety and Health Administration (data collection)
--Small Business Administration (small business concerns,
implementation of CPSC Small Business Ombudsman program)
We work cooperatively with a large number of non-Federal groups to
disseminate injury prevention information, gather injury data, develop
safety standards, and ensure compliance with safety regulations,
corrective actions, and recalls. These groups include:
--American Academy of Pediatrics
--American Association of Retired Persons
--American Nurses Association
--American Red Cross
--Association of Food and Drug Officials
--Better Business Bureau
--Businesses (such as Gerber Foods who is co-sponsoring the Baby
Safety Shower effort)
--Coalition for Consumer Health and Safety
--Consumer Federation of America
--Dana Alliance for Brain Initiatives
--Danny Foundation
--Defense Research Institute (Defense attorneys)
--D.C. Bar Association
--International Association of Chiefs of Police
--National Association of Consumer Agency Administrators
--National Consumers League
--National Safety Council
--National Safe Kids Campaign
--National 4-H Council
--Salvation Army
--Snell Foundation (Bicycle Helmets)
--Society of Academic Emergency Medicine
--State Attorneys Generals
--State and local coroners, medical examiners, health departments,
and consumer protection offices
--Trade Associations (Outdoor Power Equipment Institute; Coalition
for Automatic Garage Door Openers, Gas Water Heater
Association, Toy Manufacturers of America, etc.)
--Voluntary product standard setting organizations (ASTM; the
American National Standards Association; Underwriters
Laboratories; National Electrical Code and Building Code
groups)
Senator Bond. I have to step out very briefly to meet with
some constituents. I am going to ask that Senator Mikulski
continue this hearing.
Senator Mikulski. And if I am done?
Senator Bond. I will be back shortly. I have some more
questions. This will be very brief.
If you will forgive me, I will turn the gavel over to you.
Senator Mikulski [presiding]. Ms. Brown, have you had any
involvement in the air bag controversy?
Ms. Brown. No, we have not.
Senator Mikulski. Has anyone called you--let's wait for the
bells to finish ringing.
[Pause.]
AIR BAG SAFETY
Senator Mikulski. Has the Department of Transportation
contacted you on the air bag issue?
Ms. Brown. We have had some directives from them about what
they are doing, just information.
Senator Mikulski. Well, you see, nobody knows what they are
doing. This is a very prickly situation. There is a great deal
of concern about the safety of air bags. You have just
indicated the concern about the special risks to children in
the home. But there is a special risk in that home on wheels,
called an automobile. Given commuters and day care every day,
our little kids spend a lot of time in cars. We are finding
that they are at risk, either from their child seats, et
cetera, and now the air bags. There is the air bags controversy
not only for what it means to children but what it means to,
essentially, people my size, and where that air bag releases,
hits you, and so on.
There is a great deal of confusion, uncertainty, and
apprehension about what the Department of Transportation is
doing. I am not blaming this on you, of course.
Ms. Brown. It is not in our jurisdiction.
Senator Mikulski. But you are the Consumer Product Safety
Commission with incredible expertise and really significant
data. Your database I think should not be minimized because it
contains risk based information and lots of ideas even for the
private sector to improve itself.
My question is this. Given that, do you know anything about
this? Does your agency have any data on the air bag
controversy? Do we know where the risks are?
It would seem to me that you, you meaning your agency,
would play a significant role. First of all, you probably know
more about what happens to children other than pediatricians
and parents. Am I right in that?
Ms. Brown. Absolutely. You are.
Senator Mikulski. We had that marvelous conversation on
playground equipment.
Ms. Brown. It is both my area of expertise, coming into the
agency as a child safety expert, and, of course, what our
agency has concentrated on.
The problem with air bags or with anything in cars is it is
not legally within our jurisdiction. However, our very
excellent data, the NEISS system, which gets reports of
hospital emergency room injuries every day, has done work for
the National Highway Traffic Safety Administration on motor
vehicle injuries. So they do use our data.
But we are not involved in the air bag controversy per se.
Many people call me, Senator Mikulski, because I, too, am
small, and they ask me what are you doing in your own car.
I, therefore, did my own personal, little survey and told
people that you have to be at least 10 inches away from your
air bag in your steering wheel. I also had found out some
information on how to get extenders on pedals. That I just did
as something personal to help my other short friends.
But this is an area that is very serious and I do know that
there is a lot of concern out in the Nation. We specifically do
collect air bag data specifically for NHTSA.
CPSC SHOULD WORK WITH DOT
Senator Mikulski. Ms. Brown, I am going to ask you because
of the confidence I have in your agency and in your
considerable database, to reach out to Secretary Slater. We
have to really deal with this air bag controversy.
I am glad people know that they can call you. I go to
senior citizen meetings and they ask me the same question,
partly because I have the same personal geography, so to speak,
as they do. But it shouldn't be member-to-constituency groups
of 30 people only. I am absolutely convinced that the
Department of Transportation has not brought in the total
expertise that is available within its own Government.
I know that Secretary Slater, I hope, will be moving on
this.
I am going to really recommend that you call Secretary
Slater and that you have a list of all the agencies that have
been involved in the subject of children--and there are also
parallels to frail elderly or the short elderly--that could be
used here, and that you recommend whatever task force they have
that they use the best information. Let's get out there with
this information. It could be a new line of commercial
products, exactly as you said. People may laugh about a pedal
extender, but if you are 5 foot 2 inches and automobiles are
built for people structured like Clint Eastwood, it gets to be
very difficult for us.
I don't want to turn this into an air bag hearing, but I am
deeply concerned about the sluggish way we are moving toward a
relationship with the private sector and the consumers on this
very significant issue, and perhaps even about talking about
additional consumer products that would enable people to be
more safe. Let me include here also the information on where do
you put your baby's car seat--all of those kinds of things.
Right now, if we have a driving grannie, then maybe grannie
needs to be in the back seat.
I could go on and on here.
Ms. Brown. Senator, I did want to mention also that we have
asked for funds to do some anthropometric work. That sounds
exotic. But what it really is is the measurement of children.
More work to upgrade this would be very helpful to NHTSA in
moving forward to do some greater calculations on car seats.
Education is fine, but I think you've hit it on the head. In
every field of products, it is very important to have as much
as possible safety built into the product.
Senator Mikulski. From what I understand from the private
sector, particularly those involved in the automobile industry,
they are waiting for the Department of Transportation to give
them some guidance on the direction in which they want to go.
I will tell you what I fear--the wholesale dismantling of,
in particular, passenger air bags out of fear rather than out
of science and out of technology. I truly believe the genius of
the American private sector for both liability reasons as well
as good citizenship, and ultimately profit, to be able to come
up with solutions. But right now they need the guidance of DOT.
Knowing what you all know about children, I think it would be
enormously important for there to be a task force. It is
disturbing to me that with DOT there is not a relationship on
this issue.
Ms. Brown. I'll call Secretary Slater this afternoon.
Senator Mikulski. Thank you very much and good luck with
that.
Again, many, many thanks.
CONSUMER'S RESOURCE HANDBOOK
Senator Bond [presiding]. Thank you, Senator Mikulski.
Director Nasif, in 1997, the Congress gave the CIC the
responsibility for producing the Consumer's Resource Handbook.
Can you give us an estimate of the resources you might require
to produce the report in fiscal year 1998 if Congress should
decide to maintain responsibility for the handbook at CIC?
Ms. Nasif. The President's budget does provide for the
transferring back to the Office of Consumer Affairs
responsibility for the Consumer's Resource Handbook for fiscal
year 1998. It is my understanding that the resources required,
whether by OCA or by the Consumer Information Center, would be
in the neighborhood of about $1.50 per publication. I believe
the estimate for printing would be under $1. The estimated cost
for CIC distribution is about $.54. So if 250,000 were produced
and distributed, it would be about $400,000 for the total cost.
In the past, OCA has been very successful in leveraging the
support of the consumer community and other Federal agencies as
well as the private sector in helping to cover the costs of the
Consumer's Resource Handbook. Traditionally, what is done is
that the committee provides a foundation of funding for the
Consumer's Resource Handbook and then the Director of the
Office of Consumer Affairs invites other Federal agencies, as
well as corporate and other private sector organizations, to
contribute resources to cover the costs of the publication.
So it really is a very joint effort in coming up with the
funds to successfully print and distribute the handbook.
DISSEMINATING INFORMATION ELECTRONICALLY
Senator Bond. Can consumers order publications from the CIC
web site? Do you see a demand for this? Do you see a day when
you would move to distributing all of CIC's publications
electronically?
Ms. Nasif. Currently we are working toward consumers being
able to order right off our web site, and we are actually
working with the Government Printing Office to make it a
reality. About 50 percent of the publications in the CIC system
are actually GPO sales documents. So it is not something that
CIC can proceed ahead with on our own. But we are working with
them.
GPO is putting into place an interactive system so that the
public can order from their web site. As soon as they have
perfected and debugged that system, we will work to have it
applied to CIC in the Pueblo facility.
Of course, the main concern of all of us interested in
electronic commerce is maintaining the privacy and the
confidentiality of credit card information, which must go
through the Internet web site.
We are fortunate that we are part of the General Services
Administration because the agency is a leader in the emerging
technologies that do safeguard that kind of personal
information. So we will be working within GSA as well.
As far as whether the day will come when all consumers will
be ordering from the web site as opposed to writing to Pueblo,
I don't think so. Given the explosive growth of the Internet
and especially the World Wide Web, it seems that certainly this
country is going down that path. However, we are totally
committed to maintaining our print program because we know that
the majority of Americans depend on printed publications to get
their information.
So we are looking forward to maintaining a dual track and
keeping both programs going.
Senator Bond. Well, as long as this consumer is still
around, there will be demand for the printed material.
Senator Mikulski. And with big print. [Laughter.]
Senator Bond. Yes; maybe the next generation will be all
electronic, but not me.
Ms. Nasif. The day will come we are told.
Senator Bond. I don't believe that.
Ms. Nasif. I know I am not ready for it. I am holding on to
those publications as best I can.
Senator Bond. Thank you very much, Director Nasif.
USOCA HELPLINE DATABASE
Director Byrne, one of the things, obviously, where I have
already indicated my concern is for the duplication of effort.
I previously served as a consumer affairs counsel in the
attorney general's office. It seems that every State has at
least one, if not several, entities that are providing consumer
information and warning. I happen to know of a man who was one
of the unfortunate ones who managed to get burned twice by the
Nigerian scam, a man who had some money that he no longer has,
but he had enough that he was still hit with it, indeed hit
twice.
Obviously we cannot stop all scams. We have not gotten the
message out. To what extent do you work with States and others
who have the same responsibility you do?
Ms. Byrne. Mr. Chairman, last March Money magazine did a
compendium of all the State and local government efforts in
consumer protection and found that there had been, over the
last several years, a 60-percent cut in State and local offices
in their efforts.
One of our jobs is in just taking up the slack. What we
find in the calls that we are getting is that people don't know
where to turn. Their local offices have sometimes been closed
down. Their 800 numbers have been disconnected. We often tell
them to call their attorney general because they don't know
where to turn.
Oftentimes with these 1-800 numbers and the other agencies
that are available, the consumer finds himself in Dante's third
ring of hell. They push from voice-mail to voice-mail without
ever getting a real person on the line. All they needed was a
simple question answered.
We hope that we provide that kind of answer, that kind of
help to consumers because what we are finding is that we are
not getting the kind of coverage that we would hope in State
and local governments.
Senator Bond. I think some of us in Congress are getting
those calls as well.
MEASURING OCA'S EFFECTIVENESS
Is there any measurement or any impact that you can
identify that your agency has that others do not have? When you
are providing information, I know it is difficult to determine
what impact you are having. But have you developed any means of
measuring the impact of your agency?
Ms. Byrne. One of the things we have implemented with the
HelpLine is a database that we can track people and how they
are getting responded to. If we refer them to another agency,
what was the response from that other agency?
As the Special Assistant to the President, besides being
the Director of the Office of Consumer Affairs, I head up the
Consumer Affairs Council for all the Federal agencies and all
their consumer components. I feed that information back to them
so that they'll know if their agency has been doing a good job.
We can measure now the outcomes which we were not able to
do prior to my arrival, the outcomes of these calls that are
being made. How many people actually got their money back? How
many people actually got their question answered? How many
people actually avoided a scam because that is the data that we
are now keeping that we were not keeping 3 months ago.
Senator Bond. We would be interested to see that
information.
But isn't the HelpLine duplicative of the GSA's Federal
Information Center?
Ms. Byrne. Mr. Chairman, when I served in Congress, I
thought that they were the same thing. I really was not clear
in my own mind what each did. But what I find right now is that
the Federal Information Center is referring calls to us because
they don't know what to do with them.
Congressional offices are calling us because they don't
know where else to turn. Also consumers are calling us because
they don't know where else to turn.
It is different to be a vocal yellow pages, if you will,
for Federal agencies than it is to give help. It is my
understanding that the Federal Information Service is a
vocalized yellow pages for Federal agencies. If you know where
you are going, you can get the right number.
But most people, when they call for help, don't know who to
call. They are swimming through the alphabet soup of Government
agencies.
Senator Bond. The FIC I understand has a staff of over 100
personnel who are supposed to assist citizens with consumer
problems utilizing the Consumer Resource Handbook. Are they not
doing the job?
Ms. Byrne. We have in our agency, in the Office of Consumer
Affairs, over 25 to 30 years experience in every imaginable
consumer issue you can think of. To have that kind of expertise
willing to talk to consumers is much different than just trying
to give somebody a phone number.
I don't think the Federal Information Center is as
equipped, just through lack of experience, to deal with these
consumer inquiries. We have a very specific task.
[The information follows:]
U.S. General Services Administration Federal Information Center
PROVIDING SERVICE TO CITIZENS AND GOVERNMENT AGENCIES
INTRODUCTION
Established in 1966, the Federal Information Center (FIC) is a
single point of contact for people who have questions about Federal
agencies, programs, and services. The FIC currently responds to about 2
million calls per year via its nationwide, toll-free number: 800-688-
9889 (800-326-2996 for TTY users). The FIC is open for public inquiries
from 9 a.m. to 8 p.m., eastern time, Monday through Friday, except
Federal holidays.
The FIC program is operated by a contractor that maintains the call
center in Cumberland, Maryland, and uses about 80 staff-years to
accomplish its tasks. The program's annual budget is about $3.2
million, or approximately $1.50 per call: This includes all contractor
expenses, payments to FTS2000 for the `800' service, and Government
support and oversight.
SERVICE TO CITIZENS
The information specialists either answer directly, refer the
caller to the correct office, or research the inquiry to provide a
suitable response.
The most frequent public inquiries have to do with workplace issues
(safety, discrimination, wages, etc.), State-government matters,
immigration and naturalization, Federal taxes, Federal employment,
savings bonds, Government publications, housing-related concerns, FCC
matters, and disaster assistance. Many other inquiries relate to such
consumer matters as product safety and reliability, advertising, food
products, banking, and motor vehicles.
The metropolitan areas from which the largest number of telephone
calls come are Los Angeles, New York, Miami, Chicago, Atlanta, Dallas/
Fort Worth, Houston, San Francisco, San Diego, and Tampa/St.
Petersburg.
The staff responds to 2-3 inquiries a day from Congressional
offices who call for their constituents.
Citizens may discuss their inquiries with senior staff members who
have a combined total of decades of consumer contact and research
ability. Citizens usually start their inquiries by talking to junior
staff members who have been trained to differentiate between calls they
should refer to the senior staff members and those they should answer
themselves.
a sampling of specific services to other agencies
Copyright Office, Library of Congress.--Since about 1975, have
distributed copyright forms to individuals and answered basic questions
about copyrights. In fact, the FIC distributes more forms to
individuals than the Copyright Office itself.
Bureau of Land Management, Department of the Interior.--Since about
1980, have assisted in the dissemination of information about the wild
horse and burro program.
U.S. Marshals Service, Department of Justice.--Started partnership
in July 1995 to inform the public about acquiring property seized by
law enforcement agencies. In December 1996, expanded partnership by
including GSA's Consumer Information Center.
Passport Office, Department of State.--In 1995 and 1996, expanded
existing level of expertise on passport matters and responded to
passport inquiries referred from the New York, Miami, and Seattle
passport offices.
Authentication Office, Department of State.--Beginning in November
1996, expanded the assistance available to persons wanting information
on certifying documents.
Consumer Information Center, General Services Administration.--Have
assisted in the distribution of the Consumer Information Catalog since
1970. Beginning in January 1997, received requests for the Catalog on a
separate toll-free telephone number.
Travel and Transportation Policy, General Services
Administration.--Starting in November 1996, have served as the main
source for print or electronic copies of the per diem rates issued by
GSA.
U.S. Forest Service, Department of Agriculture.--In late summer of
1995, removed excess workload from their campground reservation line by
answering callers who were requesting information instead of wanting to
make reservations.
reference materials in use at the fic
Principal reference tool is the FIC's own electronic data base,
which lists more than 100,000 points of contact (telephone numbers,
addresses, electronic access) by agency and subject. The data base also
includes the Catalog of Federal Domestic Assistance and many agency
fact sheets. GSA and the FIC contractor are working with the Government
Printing Office to place the FIC's data base on CD-ROM, sell it to the
public, and distribute it to all Government Depository Libraries.
Printed periodicals such as the Federal Register and the Code of
Federal Regulations.
Printed agency materials such as the Consumer's Resource Handbook,
the Budget of the United States Government, and agency telephone
directories.
Printed materials from private sources such as the Encyclopedia of
Associations; directories of key officials in Federal, State, and local
governments; and directories that list foreign travel information.
Regular and frequent use of government and private information
accessed through the World Wide Web.
Senator Bond. But you have had this HelpLine for how long,
2 years?
Ms. Byrne. Yes, sir.
CONSUMER RESOURCE HANDBOOK
Senator Bond. You are proposing to expand substantially the
1998 edition of the Consumer Resource Handbook. Why are you
doing that? What precisely do you have in mind? What is the
precise cost and who will pay the additional mailing costs?
Ms. Byrne. We have proposed that we increase the number of
printings for the Consumer Handbook, that we focus more on how
people can get their questions answered through e-mail, through
web sites. We have a whole, new, growing area of complaints,
which is hardware. People's printers, people's computers don't
work right. The help lines that are put up by these companies
are not responsive.
So we need to focus in on what is happening in the
marketplace. That is our job. So we are going to expand those
sections.
Also there is consumer debt, how to avoid bankruptcy, the
difference between a debit card and a credit card--this last is
causing a great deal of confusion in the marketplace right now.
These are areas that we want to highlight and expand in the
handbook.
We do it by asking other agencies who have interests here
to help us with this. We have asked the Securities and Exchange
Commission, through their efforts on decreasing consumer debt,
to help us with those sections.
This is a cooperative effort. But because we have been in
the business for so long we know where to go to get the help
within the Government. We also have a lot of support within
industry and the marketplace in this product.
So they are willing to help with the costs.
Senator Bond. Do you accept corporate contributions for
this?
Ms. Byrne. We have a gift fund, as you know, ordinarily,
and we would accept corporate help in producing and printing
the book.
USOCA TRAVEL FUND FOR FISCAL YEAR 1998
Senator Bond. Your testimony refers to the OCA's role in
representing U.S. consumers in international fora. What
international travel is planned for fiscal year 1997 and fiscal
year 1998 and at what cost?
Ms. Byrne. We have domestic travel to do seminars and town
meetings at the cost of about $10,000 for the entire year. We
have two international fora in which we participate, which is
OECD. Right now we are working on international parameters for
electronic commerce, so that when people step into this brave,
new world of the Internet that we all think is coming, they
will have a sense of security, trust, and safety about it.
Right now, on the world marketplace that is not true. So we
are looking at what we can do through these various mechanisms
to enhance consumer safety in electronic commerce.
Senator Bond. So what would be the cost of that?
Ms. Byrne. That is $10,000 also. We are looking at like
$20,000 in travel.
Senator Bond. OK. Thank you.
Senator Mikulski, have you any further questions?
Senator Mikulski. No, Mr. Chairman. I look forward to
working with our witnesses.
Senator Bond. All right. Thank you very much.
Additional committee questions
Our thanks to each of you for presenting your testimony. We
appreciate it and we look forward to working with you all in
the months to come.
[The following questions were not asked at the hearing, but
were submitted to the Office for response subsequent to the
hearing:]
Questions Submitted by Senator Bond
Question. How much are you spending on the HelpLine? Are the costs
of the calls being paid for by the White House, or OCA?
Answer. Calls to the National Consumer HelpLine through the White
House telephone grid average $1,100 per month or a cost of $0.08 per
minute based on the rate which was negotiated for all national 800
number lines serviced under the carrier Sprint. The HelpLine is
currently staffed four hours daily by full-time staffers on a rotating
basis, for an average total of 2.5 FTE's. All costs associated with the
HelpLine are paid with funds appropriated to USOCA.
Question. OCA plans to expand substantially the 1998 edition of the
Consumer Resource Handbook, Why is an expansion necessary, who has
suggested you do so, what precisely do you have in mind, and what is
the proposed cost? What will be the additional mailing cost? Do you
have plans to reduce mailing costs, for example by using newspaper-
weight paper?
Answer. The next edition of the Consumer Resource Handbook produced
by USOCA will expand its Consumer Tips section to include information
on dealing with child care as a consumer issue, more specific
information on car leasing, home based businesses, investing and
pension protection. Additional directory listings for computer and
computer software companies will be included. E-mail addresses will be
added to all listings when available. We will delete out-of-date-
information. The new listings are the suggestions from consumers,
government agencies, and businesses. We do not anticipate a substantial
increase in weight, therefore, the printing and mailing costs will be
virtually the same as they have been for the last three fiscal years.
Our mailing costs are controlled by CIC, but we continue to ``shop''
for the lowest price. The use of newspaper-weight paper had been tried
in the past. USOCA received negative responses from the public because
the Handbook is used as reference and needs to stand up to continued
use.
Question. Last year, we learned that OCA discontinued using the
Consumer Information Center to mail out the Consumer Resource Handbook,
at a cost of $2.52 per copy more than what it would cost using CIC. In
fiscal year 1998, do you intend to use CIC to mail out the Handbook
should the Congress agree that OCA retain responsibility for producing
the Handbook?
Answer. USOCA does plan to continue to use the Consumer Information
Center in fiscal year 1998, as long as they can provide us with the
lowest audited mailing prices.
USOCA mails a few thousand copies at the first class rate in
response to requests from Congress, Governors and Lt. Governors,
Attorneys General, district offices of Congressmen and Senators and
other officials, and corporate and community offices when they request
rush delivery. This special service has been provided since Mrs.
Virginia Knauer was the USOCA Director under president Reagan.
Question. OCA has the authority to accept corporate contributions
for the Consumer Resource Handbook. How much do you plan to receive in
corporate contributions in fiscal year 1998? What did the contributions
total in fiscal year 1996?
Answer. Last September Congress eliminated USOCA's gift acceptance
authority in the Omnibus Appropriations Bill. Currently, USOCA is in
the process of regaining its gift acceptance authority through the
President's Supplemental Appropriations Bill. When USOCA receives its
gift acceptance authority USOCA anticipates approximately $100,000 from
private sources.
USOCA received $2,000 from private sources for the Consumer
Resource Handbook in fiscal year 1996, before the gift acceptance
authority expired. These monies cannot be spent until the gift
authority is restored. Non-public funds were used to sponsor National
Consumer's Week events around the country totaling approximately
$25,000. USOCA utilizes in-kind contributions from various consumer
organizations and private sources in partnership for consumer education
events and conferences.
Question. Your budget indicated you plan to revive the Consumer
Newsletter. How much will this cost, and why is reviving this
necessary?
Answer. USOCA has over 10,000 names and addresses of grassroots
consumer groups; national, state and local consumer organizations;
businesses; government; and interested parties in its newsletter
database. The Consumer Newsletter fulfills USOCA's mission by
informing, educating and warning interested parties about issues and
events they need to be aware of. In addition, consumers often want to
know how USOCA views an issue, what other Federal agencies are doing
about a particular issue and what's new on the consumer horizon. The
Consumer Newsletter serves this purpose and helps reduce duplication of
effort by other agencies. The estimated cost for a quarterly newsletter
is approximately $30,000 per year.
Should you require additional information please let us know. We
will be more than happy to assist you.
SUBCOMMITTEE RECESS
Senator Bond. This hearing is recessed.
[Whereupon, at 10:30 a.m., Tuesday, March 11, the
subcommittee was recessed, to reconvene subject to the call of
the Chair.]
DEPARTMENTS OF VETERANS AFFAIRS AND HOUSING AND URBAN DEVELOPMENT AND
INDEPENDENT AGENCIES APPROPRIATIONS FOR FISCAL YEAR 1998
----------
TUESDAY, MARCH 18, 1997
U.S. Senate,
Subcommittee of the Committee on Appropriations,
Washington, DC.
The subcommittee met at 9:34 a.m., in room SD-562, Dirksen
Senate Office Building, Hon. Christopher S. Bond (chairman)
presiding.
Present: Senators Bond, Campbell, Mikulski, and Boxer.
FEDERAL EMERGENCY MANAGEMENT AGENCY
STATEMENT OF JAMES L. WITT, DIRECTOR
ACCOMPANIED BY:
GARY D. JOHNSON, CHIEF FINANCIAL OFFICER
GEORGE OPFER, INSPECTOR GENERAL
OPENING STATEMENT OF CHRISTOPHER BOND
Senator Bond. Good morning. The subcommittee hearing will
come to order.
The subcommittee meets today to review the budget request
of the Federal Emergency Management Agency, and we are pleased
to welcome the Director, James Lee Witt, and his team. Welcome,
Mr. Witt. We appreciate all the work that FEMA has done to
respond quickly to the most recent spate of disasters. As we
all know, there were devastating tornadoes, flooding along the
Ohio River, something we know too well just west of the
Mississippi, and in the Northwest. I know that you personally
have visited a number of the disaster areas. Our hearts and our
thoughts go out to the victims of these disasters and we pray
for the speedy recovery of their communities.
FEMA is requesting a 1998 budget of $3.2 billion, of which
$374 million would fund the operating programs, $100 million
would fund the emergency food and shelter program, and $2.7
billion would fund the disaster relief account. The amount
requested for the operating programs represents a slight
reduction below the current year, while the disaster program
would increase $1.4 billion more than the current year
appropriation.
While FEMA's responsiveness is commendable, I do not think
it has been balanced with fiscal responsibility. I continue to
be very troubled by the management of FEMA's multibillion
dollar disaster relief fund, which has never been audited, and
I am very concerned about the request that is pending before
the committee. Currently FEMA has more than 500 open disasters
on the books dating back to 1989 with costs totaling $22
billion. More than $4.5 billion remain to be obligated for
these open disasters and this does not include the costs of the
most recent Ohio flooding disasters and the tornadoes. This is
a very significant amount of expenditures.
The number of major disaster declarations in the 1992-96
period has increased 54 percent above the preceding 5-year
period and FEMA's calculation of 5-year historical average cost
of disaster relief for fiscal year 1998, excluding the
Northridge earthquake, is $2.3 billion, an increase of 28
percent over last year's 5-year average of $1.8 billion.
Now, FEMA has acknowledged that the escalation in cost is
due not only to the increase in large-scale disasters, but also
because ``The scope of Federal disaster assistance has
expanded, the Federal role and response has expanded
considerably, and State and local governments are increasingly
turning to the Federal Government for assistance.''
It seemed to me that FEMA has significant mission creep. It
is no longer simply to come in when States and local
governments are overwhelmed, which was the intent of the
Stafford Act. Indeed, FEMA itself has said, ``The current
system of disaster relief tends to discourage States and local
governments from assuming primary responsibility for initiating
appropriate mitigation, preparedness, response, and recovery
measures before a disaster strikes.''
And FEMA's role seems to be forever expanding, illustrated
by the spate of disaster declarations for snow removal in the
last 5 years. There have been no snow disasters declared from
1979 to 1993, some 14 years, and there have been calls for FEMA
to reimburse the State of New York for costs related to the TWA
disaster.
To my knowledge, the disaster relief program is the only
program in the Federal Government that does not have to
consider fiscal constraints whatsoever. FEMA's other programs
do not compete with this program for funding, so there is no
incentive within the agency to exercise prudent stewardship of
this fund.
When disaster relief funds have fallen short, Congress has
responded quickly time and again to FEMA's request for
additional funds in an effort to meet the needs of disaster
victims expeditiously, and to provide this aid we have slashed
low income housing and other programs to offset the costs. We
have cut other VA-HUD programs totaling $8 billion under my
chairmanship to pay for disaster assistance in the past 2
years. Yet, we have learned that some of these funds have gone
to such questionable projects as golf courses and the planting
of shrubbery.
Recently FEMA was, as we learned from the news media,
considering expending $500,000 to replace a bottle village,
which some have named folk art and others have called an
eyesore, damaged in the Northridge earthquake and eligible for
FEMA funding since it happened to be placed on the Register of
Historic Places. I was glad to learn that Friday you made the
right decision and decided against funding this project.
Following the Northridge earthquake, about $400 million has
gone to one university, UCLA, clearly an institution with
strong revenue generating capabilities. We need to review
whether we can continue to make such expenditures in this era
of belt tightening.
We have learned about some of these expenditures through
inspector general's reports and press accounts since FEMA
budgets do not provide documentation beyond very broad
categories of the specific projects being funded. In fact, FEMA
centrally has no information on the numbers, costs, or status
of the public assistance projects currently underway. There are
literally thousands of such projects underway.
The Agency's responsiveness to disasters is truly laudable,
and I join with others who commend you, Mr. Witt, and the
Agency for moving quickly. But suggestions and even directives
from Congress to submit proposals to reform this program to be
fiscally responsible have gone unheeded or have apparently been
treated someplace in the administration as low priority at
best.
In September 1993, the administration's ``National
Performance Review'' report called for, by March 1995, a
comprehensive plan, including proposed executive orders and
legislation to develop objective disaster declaration criteria
and comprehensive Federal policies to reduce the Federal costs
of disaster assistance. To my knowledge, this commitment has
been ignored.
A series of GAO and inspector general reports have been
issued over the past 2 years at the request of this committee.
They have outlined a number of options for reducing disaster
relief costs, including establishing more explicit and
stringent criteria for providing Federal disaster assistance,
eliminating public assistance grants for revenue producing
private nonprofits, shortening the appeals process from three
levels to one, making marinas, golf courses, trees, and shrubs,
except in parks, ineligible, and clarifying the criteria
related to the standards to which damaged facilities should be
restored. For the most part, these recommendations have not
been acted upon.
Our efforts time and again to get this Agency to propose
plans for implementing those recommendations and reducing
excessive costs have been stonewalled. We discussed these
issues in the hearings for the past 2 years. We have been
through this before. This is not new. This is not a surprise.
We included a requirement in the fiscal year 1997 committee
report for a proposal for reform, including a request for
necessary legislation, if that is required, and we included a
statutory requirement in the fiscal year 1997 VA-HUD bill. To
date, these directives have not been fully met.
Now, we received a draft report on March 12 which was a
about 45 days late in response to the statutory requirement in
the fiscal year 1997 VA-HUD bill for a plan to reduce disaster
expenditure. The report is still in draft form. It falls short
of the mark and it outlines options. That is not what we had in
mind. You knew and we knew what the options were. We do not
need to be told what the options are again. We want specific
suggestions and recommendations.
In response to questions submitted at last year's hearing,
you said:
FEMA is committed to implementing all the inspector
general's recommendations in principle. We believe that our
disaster criteria initiative, which will contain disaster
payment thresholds, as well as declaration thresholds, will
comprise the major portion of reforms called for by both the
GAO and the FEMA inspector general and lay the foundation for
substantial long-term Federal cost share reductions.
Now, the draft report is completely silent on the issue of
disaster criteria. It does not propose an implementation plan
for the inspector general's recommendations. It only repeats
some of the options that the inspector general and the GAO have
proposed in the past.
The report does not address the issue of State cost shares.
While States are required to cost share in the disaster relief
program, I understand FEMA does not enforce its own regulations
and require cost shares to be put forth at the beginning of a
project. Apparently the State of California has not
appropriated one dime--one dime--to match the $5 billion in
FEMA-funded projects. Because the cost share is not required up
front, the State has little incentive to control and reduce
costs.
In addition, last year we received testimony from the GAO
that:
FEMA's criteria for determining the extent of permanent
restoration for public facilities and for determining the
eligibility of certain private nonprofit facilities are
ambiguous. FEMA relies on States to ensure that expenditures
are limited to eligible items.
Regrettably, I have seen absolutely no evidence that these
massive loopholes have been closed.
While some management improvements have been made in such
areas as centralizing processing, reconciling the disaster
relief fund so it can be audited for the first time in fiscal
year 1998, and other administrative reforms which have reduced
costs marginally, the commitments that have been made to us and
that we have directed you to fulfill to address the disaster
criteria have not been met, and the really hard choices have
not been made.
Let me be quite clear. I am a strong supporter of FEMA
getting to a disaster site quickly and dispensing aid to needy
individuals as soon as possible. I am a supporter of helping
communities rebuild so they can get on with their lives. But I
am not a supporter of using the disaster relief fund to gold-
plate revenue generating facilities and to finance golf courses
in wealthy communities. And I cannot condone fiscal
irresponsibility.
Last year, at the suggestion and at the implied request of
FEMA, we did go forward with some of the language that had been
added in the Senate to limit disaster relief. Let me be quite
clear, Mr. Witt. We expect you to come forth with a
comprehensive plan. We want to know where it is, and if we do
not have one in place by the time this bill comes out of
committee, I will strongly consider working with my colleagues
to implement our own system. Something has got to be done. You
all have had a couple of years now since we started requesting
and talking about this to come forward, and if you do not do it
or at least suggest to us how it can be done, we may have to do
it for you because the scope and the amount of these disaster
requests is out of hand.
Now, I am also very concerned about the supplemental
request that we understand the administration will be
submitting. It is my understanding that FEMA currently
anticipates requirements totaling $2.9 billion in fiscal year
1997. Yet, the administration will request about $1 billion,
according to the latest rumors, of which some portion would be
in a contingency fund. How we will pay for the supplemental and
the additional requirements coming due in fiscal year 1998
totaling some $5.9 billion will be an enormous challenge.
There are also very serious problems with the
administration's proposals for funding future disasters through
a contingency fund. Mr. Witt, this is nothing but a gimmick. I
could not take that to the floor with a straight face. My
colleagues rightly would pound me about the head, and we expect
better from OMB and from FEMA. This is a very irresponsible
fiscal gimmick. The proposal to treat these funds off budget is
just not going to work. The Congress has made its position very
clear.
The fiscal year 1998 5-year historical average annual cost
to FEMA disaster relief is $2.3 billion. We know that close to
this level of funds will be needed next year and these funds
need to be budgeted.
In addition, the contingency fund concept gives entirely
too much discretion to the administration to distribute these
funds with virtually no oversight of Congress. I have been in
the executive branch, and I would love to have a honey pot to
go around and hand out money. It makes you feel good. People
love you. You come in town with free money, and it is great.
Love to do that. Nothing is more fun. Unfortunately, that is
not how Government should work. There should be explicit
standards and criteria. We do not have those.
We also have questions about the proposed $50 million
predisaster mitigation fund you have requested. We have seen no
details for this request or any proposal on how we would pay
for it. Moreover, there is $1.4 billion in existing
postdisaster hazard mitigation funds currently unobligated. So,
there are significant questions about why States are not
spending these funds and how the proposed new program would be
more effective.
There are a number of very important issues to be
addressed, including the status of the flood insurance fund,
the level of Treasury borrowing in that program, the future of
chemical stockpile emergency preparedness programs, and FEMA's
progress in developing performance measures for the States
through performance partnership agreements and assessing
States' capabilities in disaster response.
In closing, Mr. Witt, you have earned well deserved
accolades for the many improvements in FEMA's responsiveness in
the last 4 years. You have done an excellent job personally and
made great personal commitments to be there and to have your
people on the ground, but the steps that we must take for
fiscal responsibility are not there. They have got to be put in
place, and I would hope that you would suggest to us and help
us work out how they are put in place rather than have us do it
a cappella because one way or the other, it is going to be
done.
I am now going to turn to my distinguished ranking member,
Senator Mikulski.
STATEMENT OF BARBARA MIKULSKI
Senator Mikulski. Thank you very much, Mr. Chairman.
I want to welcome FEMA Director James Lee Witt. I want to
applaud your work with streamlining FEMA and making it a more
effective and efficient Agency.
The chairman raises some very important fiscal questions,
but I would like to go back to 5 years ago when FEMA itself was
a disaster, when our readiness and our response was a national
embarrassment. We were not ready in most States to respond to
disaster. All 50 States were very uneven in their preparedness,
and those often at most risk were the least prepared. We
remember with great sadness what happened in Florida when the
very nature of what occurred overwhelmed the capacity of even
the Governor to estimate what damage that he had. Thanks to
you, Mr. Witt, you then have made us fit for duty in readiness
and response.
But I recall that there were three R's to what we had
talked about for FEMA. It was called readiness, response, and
rehab. The rehab now is what is being discussed by the
chairman, and I believe that those are very serious concerns.
But I think we also need to note that it was under your
leadership that many of the recommendations of the National
Academy of Public Administration about how to improve FEMA in
its work in saving lives and saving communities were followed.
So, we thank you for implementation of the National Association
of Public Administrators' recommendations about bringing down
the artificial wall between the old cold war, civil defense
approach and the new realities of a risk-based strategy.
I believe that FEMA does do what it was supposed to do,
which is save lives and save communities. Now we are called
upon, because we have now done the first two R's and done them
very well, to focus on the third R which is rehabilitation, or,
in some instances, reengineering. In other words, in
communities that are most at risk for flood or hurricane, what
are the things that could be done beforehand that would prevent
future disaster funds for request.
I believe the chairman's concerns are valid and I think you
would agree with them.
But thank you for the first two R's, readiness and
response, saving lives, saving communities. Now we will move to
the issues related to rehabilitation and reengineering, if you
will, of those disaster-prone areas, and we will come back and
talk about that.
I also want to talk about the issue of mission creep. I
know that they are of concern to you, but I know that every
time a disaster occurs, that FEMA is under tremendous pressure
both from a Governor and its two Senators for you to show up,
to be able to be there to provide disaster assistance.
Everybody likes the photographs, the helicopters landing, going
out there to show where people feel powerless, at least that
our response is not.
I believe that that is where that is coming when we talk
about the lack of matching funds and so on. I believe there
needs to be work done with the National Governors Association
really on what are clear triggers that bring you in and also a
real commitment on their cost sharing.
The chairman's concerns are valid, but I believe you are
placed under extraordinary pressure not only by the White House
to respond with compassion and effectiveness, but by the
Governor and the two Senators in those areas to really be able
to do that. So, I believe that much work needs to be done, but
I do not believe the work to be done is a one-sided effort.
The other is this whole issue of what this committee has
borne because FEMA is in it. We all recall after the tremendous
problems in California, this subcommittee was called upon to
fund the entire disaster relief and out of the HUD account. We
never quite recovered from that in terms of our appropriations.
Again, the chairman's concerns are quite valid, but I think we
need to talk about not a honey pot, but really a specific way
of having the resources that, therefore, are not charged
against this committee.
I like the chairman am very reluctant to put big ticket
items off budget. I would agree that it should not, but I am
not quite sure what is the best thinking because we cannot
appropriate for every disaster that might affect the United
States of America.
I know Senator Glenn, when he chaired Government Ops, was
looking at this. I would hope Government Ops would give us some
recommendations as well as ours.
I believe Senator Bond is quite serious when he says if you
do not come up with the recommendations, we will. I would
prefer we could do it together and that we could do it not only
with OMB but with the Governors because I think now is the time
to say thank you for response, thank you for readiness. Let us
now go on to the rehabilitation aspects, and most of all, the
other R which is called fiscally responsible. I think then we
will really have had a holistic approach to this.
Thank you and I look forward to talking with you about the
national issues as well as some in Maryland.
GETTING GOVERNORS INVOLVED IN DISASTER PROGRAM CHANGES
Senator Bond. Thank you very much, Senator Mikulski.
I would agree with you that the Director and the Agency
come under great pressure not only from the White House but
from Governors and Senators. There is nothing like having a
solid wall behind you to stiffen your back and help you say no
if we can get Congress to act, in cooperation with the
administration and the Governors, on specific criteria. It
takes some of the pressure off of Mr. Witt and the Agency.
Senator Mikulski. That is right. Mr. Chairman, you were a
Governor and by all accounts, a very excellent Governor. That
is one of the reasons the people of Missouri sent you for your
first term, and an excellent Senator why they sent you for your
second term.
I really do think the Governors have to come in on this,
and maybe you and I could actually meet with them as well.
Senator Bond. We will make a decision here that you and I
will request of the National Governors Association their views
on this. I will ask our staff to prepare that.
Senator Mikulski. I think that will be excellent.
Senator Bond. We will start with something, but we are
really awaiting the word from the administration because you
are the people who do it and you know how it works or does not
work.
So, with that, forgive me for taking up some time. Let me
turn to Senator Boxer. Good morning, Senator Boxer.
STATEMENT OF BARBARA BOXER
Senator Boxer. Good morning, Mr. Chairman. Good morning,
Senator Mikulski, and good morning, James Lee Witt.
I want to say that I have come to know James Lee Witt
almost too well and his wonderful staff. It seems that we pick
ourselves up from one disaster and we have got another one in
my magnificent State, having gone through so many of these,
both as a Member of Congress where I had one terrible
earthquake in San Francisco where we are still picking up, if
you will, the pieces because FEMA at that time simply did not
have the ability to respond.
I remember very well that when I came here, Mr. Chairman,
the faith and trust in FEMA was almost nonexistent, and I have
to say to James Lee Witt--and I know that not every single
Senator is going to agree with you on every decision you make.
No two people could agree on everything, and you and I have not
agreed on everything either, of course, as I fight for my
State. This is the natural course of events.
What you have done for your country is just fantastic
because you have taken an Agency that was in the depths and you
have brought it up and you have made people understand that we
can respond with a sense of fairness and a sense of urgency and
a sense of efficiency.
Mr. Chairman, I do not have a statement for you, but what I
would like to do is respond to some of the issues that were
raised, I understand, by you before I came in.
I want to say something about earthquakes in general, Mr.
Chairman. You and I have experienced floods in our States and I
have had that awful experience. Earthquakes are very different
than any other disaster because the damage is not readily seen
at first, and that is the reason why we have moving estimates.
That is the reason why Governor Wilson has not yet made the
match because we still do not have the final answer on the
number. So, these things happen and they look strange, but I
would urge you to realize that it is a very, very different
thing.
If you look at the California Seismic Safety Commission,
what they said about Northridge--and I will quote--``Much of
the damage was hidden under fireproofing and finishes.'' So,
you do not find out. You see a little crack. It does not look
like anything and then you get in there and you realize the
incredible damage.
Also, on UCLA, it is, in fact, a public supported
university and it is a major medical center, so it is a public
institution.
I would agree with you, Mr. Chairman. I voted for the
McCain amendment to end the practice of funding golf courses
and so on. I think we really need reform and I will join with
you in doing that. You and I have gone through enough disasters
to understand that we know who really needs the help and we
want to be able to provide it.
First of all, I am so privileged to be with both of you.
You are such leaders in this area, and I hope that as a result
of my experience I can help you and I can work with you in
making the reforms we need and still be able to respond to
people in need.
With that, I want to say to you that what is very
interesting in California now, people are talking in the flood-
prone areas about ways that they cannot rebuild in flood-prone
areas. I think it is happening in California. People are
realizing you just cannot keep going back and making people
whole. We have to have policies here that recognize there are
certain areas that you are never going to be able to secure
from flooding and so on.
So, I am very pleased and privileged to be on this
subcommittee. I want to work with all of you and James Lee Witt
the best that I can. I want to thank you very much for this
opportunity.
Senator Bond. Thank you very much, Senator Boxer. Certainly
you have had the experience with disasters that exceeds that
which we have had in our State, but we have had quite a bit of
experience with it too. That is why we think the Agency is so
important.
Now we will turn to the leader of that Agency with all the
attention. Mr. Witt, welcome.
STATEMENT OF JAMES L. WITT
Mr. Witt. Mr. Chairman, members of the committee, thank you
very much. I am pleased to be here with you this morning to
discuss FEMA's appropriations. Also with me this morning is
Gary Johnson, our Chief Financial Officer. I hope that together
we can be responsive to your questions. We have a capable team
behind us who can respond to any specific questions.
Each year it seems like we start out at appropriation
hearings discussing where we have been and what we have been
doing. Mr. Chairman, you briefly laid out what we have faced
over the last few weeks. I do not think I have ever seen a
January like the one we had this year. We had floods in the
West, in the States of California, Washington, Oregon, Idaho,
and Nevada. At the same period, we had blizzards in the
Midwest, tornadoes in Alabama and Georgia, preceding the floods
in Ohio, Indiana, West Virginia, Kentucky, and Tennessee, and
tornadoes in Arkansas. We had 59 fatalities in this last round
of disasters.
I will be brief so that we have time to answer your
questions.
I think, Mr. Chairman, that you and the members of this
committee have seen the difference that mitigation makes in a
community that has been hit by a disaster. The reason that FEMA
is requesting $50 million for the predisaster mitigation
program is to try to bring the insurance industry and local and
State governments into the fold to help us to eliminate and
high-risk areas. The fact that every $1 we spend in the area of
predisaster mitigation can save $2 in future taxpayer dollars
is well documented. I think that we need to change the
direction we are going as far as dealing with disaster costs.
I totally agree with your view that the costs of disasters
have escalated and need to be controlled. We need to redefine
what we fund and what we do not fund. We should target our
funding to address the health and safety of individuals and
communities. We will work with you and this committee, Mr.
Chairman, to develop language for legislation in that area.
The idea of reducing risk is very prevalent. I have talked
to many Governors, including Governor Voinovich of Ohio, just
this past week, Governor Underwood of West Virginia, the
Governor of Tennessee, other Governors at press conferences and
those with whom we toured communities. They all support
preventive measures to keep from repeating disaster costs in
communities where we can mitigate that particular risk. I think
that is the direction that we need to head in.
Disaster costs have escalated despite the fact that over
the past 4 years, we have declared only 24 more disasters than
during the previous administration. We have also denied 56
requests for disaster declarations during that time period.
Therefore, it is important that we look at the
implementation of the disaster program and how we work with the
States and local communities on predisaster programs. All of
the staff and I recognize the need for a new direction, and we
are working very diligently to make it happen.
PREPARED STATEMENT
I am very proud of what we have accomplished to date,
including the cost-cutting measures that we have taken. We have
been very, very busy, and I do not apologize for what we have
not been able to do. We are making a difference in communities
as they rebuild and in people's lives. I am very proud that we
have been able to cut costs related to the application process.
I am proud of FEMA and I am proud of the employees. They are
very dedicated and they work very hard, Mr. Chairman.
[The statement follows:]
Prepared Statement of James L. Witt
Good morning Mr. Chairman, members of the subcommittee. I'm pleased
to be with you this morning to discuss the appropriation needs of the
Federal Emergency Management Agency (FEMA) for fiscal year 1998.
I am joined today by Gary Johnson, our Chief Financial Officer, and
together I hope we can be responsive to any questions you might have
regarding our request. Also with me are the rest of our executive
management team who can help me in responding to specific questions, if
needed.
It seems that each year we are talking about incredible events that
we could never forecast. In the past it has been historic flooding in
the Midwest, a huge earthquake in southern California, a tragic bombing
in Oklahoma City, or any number of hurricanes that have devastated
parts of our east coast with troubling frequency.
I mention all these events as ones we could not forecast. But just
because we can't see an event coming doesn't mean we can't lessen its
impact. We can make a difference. And it's my hope that in fiscal year
1997 and fiscal year 1998, we at FEMA will begin to suggest a new path
we can take.
We need to do more, much more, from this day forward, to reduce the
risks facing our communities. We can't stop an earthquake or a
hurricane, but we can build better and stronger. We have to get this
message across. We have to break this cycle.
Disasters are no longer unusual or singular events. Their
frequency, and their degree of devastation, demand that we raise our
own expectations about what we can do. We need to set higher standards
in building our communities. We have to make our mission of protecting
public health and safety a shared goal. We can do better. And we know
that.
Yes, we do a great deal in the area of mitigation right now.
Section 404 of the Stafford Act has been a great success in towns like
Arnold, Missouri, Memphis, Tennessee and Miami, Florida. All of these
places have suffered from devastating natural disasters and have
undertaken mitigation measures to reduce the future risk to their
communities. Actions including moving structures out of the floodplain,
seismic retrofit of critical facilities and floodproofing of
residences.
But we shouldn't have to wait for problems to happen. While some
FEMA programs already have made significant strides in mitigation
ranging from our work on building codes to the U.S. Fire
Administration's leadership on the use of sprinkler systems, much of
our most significant work in reducing risks can only be triggered by a
disaster. Foresight, planning, intelligent preparedness work, cannot be
rewarded under our current disaster assistance program--nature has to
force our hand.
The strong message of what communities can do to strengthen codes,
to make schools and public facilities safer, to lessen the impact of
these events, has to be heard outside of this committee room, outside
of the walls of FEMA, outside of the emergency management community,
and insurance roundtables.
The idea of reducing the risks has to enter the mainstream. No one
knows better than the members of the appropriations subcommittees in
each chamber, that the losses from recent disasters are neither small
nor rare.
That is why we are seeking $50 million in pre-disaster mitigation
funding to begin a program of forging coalitions to create disaster-
resistant communities. And we do mean coalitions where everyone plays
an important part.
If pre-disaster mitigation is considered ``a FEMA program'', then
it's a failure. This has to be a program that leverages the resources
and energy of other Federal agencies, States and local governments, and
especially the private sector, and brings them in as partners. They
have to recognize their stake in this; they too have to provide the
leadership.
We believe many State and local governments are ready and willing
to join us. The business community and the voluntary community are
ready to join in. We think this program will demonstrate their
commitment and resolve. It's my belief that this is the ultimate route
for reducing disaster costs.
We must continue to be good stewards of the funds you provide for
disaster response and recovery. We must continue to re-invent the ways
we deliver assistance that help to save resources and provide better
customer service.
But we also believe that pre-disaster mitigation, along with the
enormous amount of post-disaster mitigation work we accomplish, is the
path to increased safety and reduced costs. I hope you'll provide us
the opportunity to continue these efforts.
The resources you have already provided have allowed us to begin to
provide important tools to State and local governments to assess their
risks and to begin to establish a framework for building, and
retrofitting, smarter and safer:
--Just this month we have completed the initial development of the
first nationally-applicable tool to estimate losses from a
natural hazard (at this point, earthquakes, but we hope to make
this an all-hazard system) and to demonstrate the impact of
mitigation actions.
--This year we will complete and issue nationally-applicable
technical guidelines for the seismic rehabilitation of existing
buildings--this is critical. For example, the replacement cost
for bridges averages about $135 per square foot, while the
retrofitting for seismic strengthening averages about $38 per
square foot.
--This year, in partnership with the U.S. Geological Survey (USGS),
we will be issuing the 1997 update of the NEHRP (national
earthquake hazard reduction program) recommended provisions for
seismic regulations for new buildings. This update is
incorporating information based on new USGS spectral response
maps.
--And this year we will continue our partnership work in developing a
proposed international building code. My visit to Kobe, Japan
following that devastating earthquake in 1995 impressed upon me
the need for international standards. We have much to share and
we also have much to learn.
I have gone on at some length on the matter of mitigation, or risk
reduction, because we at FEMA are not satisfied to pride ourselves on
fast response or long-term recovery programs. We want to do less of
that response and recovery business--and I hope every member of the
committee will take this message back to your States and districts.
You can provide the kind of leadership that will put risk reduction
into the mainstream, to make it a fundamental part of community
development and community life.
This year we are asking for $2.4 billion for the disaster relief
fund (DRF) to ``clean up'' all of our disaster requirements as we move
into fiscal year 1998. That's a large sum, but it represents our
estimate of the remaining costs of years of disaster activity. Such an
appropriation would allow us to meet our commitments to hundreds of
communities who are still recovering and rebuilding from the
devastating impacts of disasters.
Congress has been generous in providing assistance for disaster
relief. But we all realize that being locked in a culture of
supplemental spending is not a prudent approach for any of us who work
in this arena. For this reason the President's budget proposes that
Congress appropriate $5.8 billion as a contingency fund for the
emergency requirements for disasters and designate that amount as an
emergency funding requirement.
These funds would be available only to the extent that the
President designates them as emergency funding requirements and only 15
days after notifying Congress that the funds have been so designated.
This approach is similar to that taken by Congress and the President in
the Emergency Supplemental Appropriations Act of 1994, Public Law 103-
211.
This proposal is designed to avoid the numerous emergency
supplemental appropriations that historically occur each year and would
support the six agencies, including FEMA, involved with significant
disaster responsibilities.
I also want to report to you on the progress we have made in
improving our disaster response and recovery programs. Since we met
last year we have worked to implement the commitments we made to the
committees. And we have taken actions on suggestions the committees
have recommended.
One significant area of improvement has been our ability to manage
more closely disasters from previous years. These are the disaster
events that initially persisted due to their scope and complexity, but
then remained open far too long. You may remember I told the committees
that disaster close-out was a top priority for me because of the
potential cost savings.
This effort is beginning to pay off. During the last year, FEMA
closed out 16 disasters. Since February of 1994, we closed out 415
human services programs, resulting in a reconciliation of more than
$1.8 billion to the disaster relief fund from disasters declared as
long ago as fiscal year 1975. Of the $1.8 billion reconciled, over $400
million were returned to the disaster relief fund. This reduced the
Federal Government's interest obligation accordingly.
Our use of our 1-800 Teleregistration System has greatly reduced
our costs to take an application for assistance. Where our on-site
costs used to average close to $60 per application, teleregistration
has brought that down to $19 per application.
Along with, and as a result of our careful auditing practices, we
have also been pursuing an aggressive debt collection process. Up to
this point, we've collected close to $4 million in debts.
We have taken all of these steps because we are aware of the
obligations that come with the large appropriations that have been
entrusted to FEMA. And the cost savings in these areas are an important
part of the Government-wide effort to achieve the President's goal of a
balanced budget.
The recent draft report we sent to the committees on FEMA's
improvements in financial management details the efforts we have made
in grants management, non-specific disaster spending and additional
steps we have taken to prudently manage disaster funds.
We are streamlining our disaster relief procedures by proposing the
elimination of one appeal level for the public assistance program. We
are also making other procedural adjustments that will reduce costs now
and in the out years.
In fact, this year we are undertaking a complete reengineering of
our infrastructure system. We are looking at it from start to finish to
determine what parts of our program make sense and what parts need to
be changed. This comprehensive approach will result in further
improvements and savings.
One of our logistics management initiatives has been the disaster
information systems clearinghouse (DISC). The DISC deploys standard
equipment packs to disaster field offices within 24 hours, recaptures
the equipment after it is used at the disaster site, refurbishes and
repacks it as necessary, and returns it to the inventory for the next
disaster.
Since August of 1995 through January of this year, the DISC process
has filled orders for more than 4,400 personal computers, 900 printers,
250 fax machines, and 2,800 cellular phones from disaster field
offices. If this equipment had been bought new off the shelf the cost
of just these four items, considered to be staples of the modern
workplace, would have exceeded $10 million.
Concurrent with that work, and in response to the appropriations
conference report, I convened an Agency-wide task force which has been
reviewing all aspects of our work and exploring areas where we can cut
costs. Because of the significance of this project, I wanted to have
our partners at the State and local level play a role in developing
this report.
But we can give you a few examples of some of the options we are
considering with our State and local partners both in terms of
regulatory changes at FEMA and legislative changes to the Stafford Act.
Some of the regulatory options would propose to:
--Eliminate eligibility of publicly owned facilities which are rented
out to private enterprise for revenue generation, including
sports arenas, commercial space, or industrial parks.
--Eliminate funding for tree and shrub replacement. FEMA currently
has an interim policy that prohibits funding replacement of
trees and shrubs on otherwise eligible public properties. A
formal policy will be circulated to the States for review.
--Eliminate building contents or cultural objects. Eliminate
assistance for cultural and decorative objects such as
paintings, statues, antique airplanes or trains or fire trucks,
etc.
The legislative options discussed in our report would:
--Abolish or restructure the community disaster loan (CDL) program.
Although used infrequently, the CDL often becomes a grant
rather than a loan because of the forgiveness feature. In fact,
$4 has been forgiven for every $1 collected.
--Eliminate funding for revenue-producing publicly owned recreational
facilities such as yacht harbors, golf courses, and stadiums.
--Require that all private non-profit (PNP's) applicants go through
the Small Business Administration (SBA) loan program prior to
applying for public assistance. This would encourage PNP's to
mitigate potential disaster losses and equalize the treatment
of private and public utilities.
--Eliminate funding for rural utilities service electrical and
utility cooperatives due to their commercial nature and the
availability of rural utilities service or Small Business
Administration loans. Since the cooperatives are eligible to
obtain loans, they should be required to do so first, rather
than automatically qualifying for a grant.
These are all options that should contribute to an informed public
dialogue on disaster costs. But it should be remembered that the report
has one strong conclusion that harkens back to the mitigation message:
If the only solutions implemented involve shifting the burden
within the society rather than a reduction of actual risk of
loss, everyone--taxpayers, insurance policy holders, municipal
bonds, etc. will lose.
Moving from theory to the all too real world, it has, once again,
been a very difficult year in natural disasters. The hurricane season
was severe once again, with Hurricane Fran being especially widespread
in its impact. And we also experienced more State-wide flooding in
California and an extremely harsh winter in the Northwest that
compounded problems from the flooding of the previous year.
There are other commitments from last year that we have kept that I
would like to review. As promised last year, we have published for
comment a proposed rule addressing eligible costs for snow emergencies.
Based on the comments we have received and the recent experiences in
several States, we will likely publish a new proposed rule in the near
future.
Fortunately, this winter has not been as severe in the East as the
last, but we have had important snow declarations in Minnesota and the
Dakotas that have been, perhaps, even more extreme.
In these snow declarations we have maintained our policy of only
clearing primary routes to protect public health and safety. We have
also worked to hold States more accountable for their work in disaster
preparedness and response and recovery work. The steps they have taken
in self-assessment of their programs is helping to establish a clear
base-line of capabilities at the State level.
Additionally, our new budget will, as in fiscal year 1997, continue
to support State Hazard Mitigation Officers. Again, this consistency
will help to bring the emphasis on risk reduction into the mainstream.
And this work is taking place within the context of the Performance
Partnership Agreement (PPA). The PPA has streamlined our assistance to
States and has simplified our processes and encouraged State
initiatives.
I will also continue to work with EPA and DOT to have all of us
work closer in the area of hazardous materials. The more we can mesh
our efforts, perhaps even consolidating our funding streams, the better
it will be for the States and the front line responders.
My earlier discussion on building hazard-resistant communities
should sound familiar in some respects, because it is building upon
another Governmental success story: the National Flood Insurance
Program.
Both the compliance provisions of the Flood Reform Act of 1994, and
our own ``Cover America'' marketing campaign have moved us up to nearly
3.5 million policies in place.
The coming year will bring forth more information, from studies
that the reform act mandated, to tell us what we can do with rate
structures, and what the impacts of any changes would be to communities
and the program itself.
But even in a time of higher borrowing by the flood fund, it is
important to ask what the Nation's resistance to risks and disasters
would look like without the NFIP? It would mean no flood maps, little
mitigation, weaker codes, bad zoning, more Federal disaster spending,
and more private and public losses of all kinds.
The NFIP is, in microcosm, an example of risk reduction as a
mainstream approach: policies that are sold by local agents, policies
that are required by local lending institutions, and communities that
enforce sound flood plain management in exchange for the availability
of affordable flood insurance.
This budget for fiscal year 1998 also contains a request for $100
million for the Emergency Food and Shelter Program. At a time when
great changes are affecting national social service programs it is
vitally important that a supplemental program such as EFS, that assists
the private non-profits ability to provide emergency help, be
maintained at this level.
As with our other efforts, the EFS program encourages coalitions
within communities and leverages funds to help people in greatest need.
I am also concerned with the health and safety of our employees
nationwide and you will see line items that reflect this concern.
Throughout these constant challenges of hard work and long hours
under the most difficult conditions, FEMA employees performed with
dedication and grace. One of the most pleasant parts of my job is
reading the customer service surveys that disaster applicants fill out.
Their level of satisfaction is extraordinarily high, but it's the
personal touches that grab my attention.
On many of these surveys, people take the time to tell us that not
only was their service swift, but it was sympathetic and courteous.
That people were treated with dignity. FEMA employees put a good and, I
believe, true face on Government service. I'm very proud of that.
In summary, this year's budget is not a wish list, but operates
within budgetary constraints. It is a prudent and sensible spending
plan that looks to the future rather than holding on to the past. It
has one message:
We can't go on as we have; from this day forward we have to start
reducing the risks we face.
During my tenure at FEMA the appropriations committees have not
simply provided us the resources to do our job, but have offered the
encouragement and support that have heightened our morale and
contributed to our success. On behalf of all the employees at FEMA, I
thank you for that support.
I hope that in fiscal year 1998 we can continue that tradition.
Thank you for your time and attention. I'd be pleased to answer any
questions you might have.
STATUS OF DISASTER RELIEF FUND
Senator Bond. Thank you very much, Mr. Witt.
Let me turn to the status of the disaster relief fund
first. What is the current balance in the disaster relief fund
and when do you project the fund will be depleted?
Mr. Johnson. Mr. Chairman, as of last Friday the
unobligated balance in the disaster relief fund was $2.295
billion. Without the assistance that is included in the
supplemental request pending at the White House, we would
project right now that we would be unable to meet obligations
this year by about $442 million. Without the supplemental
appropriation, we will be forced sometime this spring to
revisit how we allocate our moneys for our public assistance
type projects to ensure that we have dollars available to meet
individual victims' needs.
Senator Bond. With almost $2.3 billion you would run out
this spring?
Mr. Johnson. We estimate that by the end of the fiscal
year, Mr. Chairman, we would be short $442 million to meet
obligations against requirements. By spring, we would have to
begin to adjust how we would allocate money to the open
disasters to ensure that we have dollars available for
immediate needs of victims.
Senator Bond. Mr. Witt, why are the current projections
exceeding the projections contained in the congressional budget
justification which showed a yearend carryover of $100 million?
Are the most recent spate of disasters the reason?
Mr. Witt. I think so, yes, Mr. Chairman.
Senator Bond. It's not Northridge?
Mr. Witt. Yes, sir; partly.
Senator Bond. How much has that Northridge estimate gone up
this year?
Mr. Johnson. Mr. Chairman since the budget submission was
forwarded to you, the obligations and projections for
Northridge went up about $200 million.
Senator Bond. What is required to meet the cost of all open
disasters and those projected for the balance of the year? In
other words, to wipe the slate clean, what is your best
estimate of the total amount needed? And will the
administration request this amount in the supplemental?
Mr. Witt. I believe, Mr. Chairman, it was $2.4 billion when
the budget was submitted.
Senator Bond. $2.4 billion?
Mr. Witt. Yes, sir.
Senator Bond. I had heard the current reestimate was $2.9
billion.
Mr. Johnson. That's correct, Mr. Chairman, based on more
current forecasting that we have done since the budget request
was prepared. It has escalated up to about $2.9 billion.
Senator Bond. Since we have not gotten the supplemental
request yet, can we expect that $2.9 billion will be in the
supplemental request?
Mr. Johnson. No, Mr. Chairman. I do not think you will see
that. I think you will probably see a supplemental request on
the order of $979 million. The rationale for that is that they
are looking toward our budget request for fiscal year 1998 of
$2.4 billion to address prior year requirements, along with the
$320 million requested for 1998 requirements.
Senator Bond. Well, there are going to be needs for 1998
too. Why do we not go ahead? We know it is there. It does not
make a lot of sense to me that we put off to another year--
where we are going to have tremendous budget pressures--the
request for the things that you know you are going to need now.
That just does not make any sense.
Mr. Witt. I think OMB had intended that the central fund
would help meet those requirements in 1998.
estimates for recent ohio river flooding and tornado disasters
Senator Bond. Oh, yes; that is the contingency fund? Take
it off budget. Yes; that will work.
What is the status of the most recent Ohio River flooding
and the tornado disasters? Do you have any cost estimates on
this?
Mr. Witt. No, sir; the water has just now receded and we
are following through with the preliminary damage estimates for
public assistance. I do not have the total figure for the
checks that were sent out for individual assistance programs
yet, but we will provide it to you with the estimates on the
public assistance.
COSTS FOR NORTHRIDGE
Senator Bond. Can you give us some idea why the cost
estimates for Northridge have increased from $6.1 billion a
year ago to $7.8 billion? Senator Boxer touched on some of
these. I would appreciate any expansion that you would like to
make on that.
Mr. Witt. The cost has increased because of the findings of
the architectural and engineering studies completed for the
rebuilding of large projects. It has become very evident that
when we gave the early estimates on Northridge the extent of
the damages was hidden. The actual cost of repairing those
buildings that were condemned or red-tagged in California is
much more than we had anticipated.
For example, when I was at Cal State University, workers
removed sheetrock from the wall and it revealed 6-inch steel
torn in half in the foundation of the building. Of course, we
could not know the extent of the damage until it was torn out
and the foundation examined.
Senator Bond. Thank you, Mr. Witt. We will come back later.
I turn to Senator Mikulski.
FUNDING FOR DISASTERS
Senator Mikulski. Thank you very much, Mr. Chairman. I have
a set of questions I would like to ask, one of which, of
course, goes to the Maryland situation.
First, let us talk, though, about some national issues. How
do you best think we need to fund disaster relief? This is not
a general question for a general answer. You focused on this.
You see how OMB is essentially pushing this over for a few
years, but essentially how do you think we should do this? Or
if you do not have a recommendation specifically today, what do
you think you will be able to tell the committee on how we
could be able to do that?
Mr. Witt. In light of the data my staff has put together
regarding historical averages faced over the past years, we
have determined that the 5-year average cost, less Northridge,
has been pretty consistent.
I think it is very important that we not only have the
funds to be able to respond and recover, but as the chairman
said earlier and as we all agree we have to get control of the
cost of disasters. We all need to sit down realistically and
say ``This is what is going to be needed to address future
disasters.''
DISASTER CLOSE-OUTS
Senator Mikulski. But what is the process by which we are
going to arrive at this? Are we going to have clear criteria
for what we get into, specific cost sharing by the States, the
issue related to rehabilitation? I understand there are 500
open disasters currently on the books, some dating back to
1989, some small, but they are not small if you have been hit
by a tornado. Are they open because of the ongoing
rehabilitation efforts?
Mr. Witt. First of all, it has been a top priority of mine,
of our Chief Financial Officer, and of the inspector general to
close out the old disasters. Gary, what is the total to date
for disaster close-outs?
Mr. Johnson. $1.8 billion in human services programs with
recoveries of over $400 million back into the fund.
Senator Mikulski. I did not understand that answer, sir. I
am sorry. The microphones are----
Mr. Witt. We have closed out over 100 old disasters that
were opened back in the 1970's during Hugo, and other
disasters. We have also put a top priority on reconciling the
disaster fund, and Gary has done a really great job on this.
CRITERIA FOR REHABILITATION FROM DISASTERS
Senator Mikulski. Let us then go to the whole issue of
rehabilitation as compared to reengineering. This seems to be a
subject of great dispute about what do you rehab to. Do you
rehab to its former state? Do you say that if a hurricane hit
your very expensive project but not a project necessarily to
declare health, safety, economic viability of a community? What
do you think should be the criteria for the rehabilitation
expenditures, and have you been involved with HUD in this
because I understand that is also one of the dynamics? What is
HUD's criteria for that?
Mr. Witt. FEMA's criteria is if a structure has suffered
more than 50 percent damage, then we do a cost-benefit analysis
to determine whether it is realistic to repair that structure
or to rebuild that structure. In most cases, it has proved to
be better to rebuild it rather than repair it, particularly if
it is a high-risk facility such as one that has never been
retrofitted against earthquakes, or one that is located in a
floodplain.
I have not worked with HUD regarding their criteria, but I
will be happy to talk to Andrew and work with him on this
issue.
FLOOD MITIGATION IN MARYLAND
Senator Mikulski. Well, Mr. Director, I am very proud of
what happened in Maryland after the disaster--first of all,
during the disaster when we were hit by so much floods in which
the Potomac overflooded, businesses were wiped out along the
Potomac. There is one area in Cumberland that was so
heartbreaking in which three automobile dealers that were lined
up one after the other lost their entire business and
inventory, and our readiness and response really did save
lives. And we thank you for your response.
Also, as you know, the Hagerstown water supply went out. We
had to take in water by the National Guard to make sure that
nursing homes, schools, and others at risk had fresh water.
After the flood, at my request Governor Glendening
established a flood mitigation task force, chaired by the
Speaker of the House, cochaired by the Army Corps of Engineers,
and Maryland Emergency Management to look at what could be done
so that we would not be faced with such dire economic impact
again on local communities. I believe that that is a model
where local people, working with Federal resources, came up
with a series of specific recommendations on how their home
would not be flooded out, their business would not be flooded
out, and the community would be safe.
What I would like to know is then what is your response to
even the procedure that we did? Do you think that is a national
model?
And then No. 2, based on that, what do you think you could
do to respond to Maryland and what criteria you would be using
to save lives, save communities, but then ultimately, so that
if we ever have those terrible floods again, we do not have to
turn to FEMA because of the homework and Federal investments we
are making now.
Mr. Witt. The flood task force that Governor Glendening put
together and that we all worked on is a very good example of
what needs to be done nationwide, not only to address floods
but to address whatever risk a particular State is facing. The
ideas works very well in conjunction with what FEMA wants to do
with hazard mitigation in developing disaster-resistant
communities. If we can identify high risks up front and start
eliminating those risks before a disaster happens, then the
cost of a disaster when it happens will be less. This is
something that has been proven time and time again. So, it is
important that we try to cut the cost by cutting the risk.
I have had round table discussions with private industry,
including mortgage lending institutes, and representatives from
the insurance industry. They want to start investing in
communities by helping to eliminate the risks faced by those
communities. It is to their benefit as well as the economy of a
community. We can do a lot working together on these task
forces and I think it will make a significant difference in the
long term.
Senator Mikulski. Well, Mr. Witt, I have met with those
families. I met with the business people and said we would do
all we could not only to get them back on their feet but that
they would not face these terrible risks again.
I met with a mother whose family nearly lost their lives
and promised that mother--and the little boy lost his catcher's
mit, but happy that we did not lose his life--that we would
take specific steps along the Potomac, whether it was related
to the relocation of housing, whether it was also retrofitting
a water plant.
What do you see as your criteria for responding to that? In
Maryland what projects do you think could be pursued to do this
type of reengineering and rehabilitation?
Mr. Witt. My staff met with Dave McMillion this week on the
task force recommendations regarding mitigation activities for
Maryland. The criteria for any mitigation project is whether it
is cost effective to do this. Does the cost analysis support
the activity?
The criteria for establishing the disaster-resistant
community concept is very similar to what we have in the flood
insurance program. We have 18,000 communities that belong to
the flood insurance program, but those communities that belong
to the program have to comply with building standards for
future building in that community. If you can get a community
to build better and safer, complying with standards established
to be a disaster-resistant community, this would make a
difference.
Senator Mikulski. So, we can look forward to help in those
areas related to housing, the issues relating to waterproofing
the wastewater treatment program, and issues like that?
Mr. Witt. The projects that they presented to me in the
report I read were very good projects, and they showed that it
was cost effective to do those projects.
Senator Mikulski. Thank you, Mr. Chairman.
Senator Bond. Thank you very much, Senator Mikulski.
Senator Boxer.
HAZARD MITIGATION
Senator Boxer. Thank you, Mr. Chairman.
Mr. Witt, I understand that the largest single cost to FEMA
has been public building repairs from earthquakes, and we
discussed that a little as to the fact that they're hidden at
first and once you get behind the sheetrock, it's a nightmare.
The President has proposed in your budget a $50 million
program to work with State and local agencies--and this may
dovetail on what Senator Mikulski was talking about--on steps
to lessen the damage in future disasters--this mitigation idea.
Has your experience with Northridge helped shape this program,
and if so, in what way?
Mr. Witt. Absolutely. If you remember, prior to Northridge,
the State had a program that they were working on to retrofit
the bridges in California for seismic resistance. Every single
bridge that they had already retrofitted stood up to the
earthquake. The bridges that had not been retrofitted
collapsed. The cost of rebuilding those bridges--that
infrastructure--was very, very expensive.
Even the public buildings that had been retrofitted and the
private buildings that had been retrofitted to the new
California building code survived that earthquake with very
minimal damage.
Another good example is that house in Hollywood. Every
house on the block had major damage or was almost destroyed
except one. The owner spent $1,000 on that house, doing the
work himself. He never even had a single pane of glass broken
in his house. He did not even have to ask for any assistance.
That is the type of thing that can make a difference.
Senator Boxer. I hope also what we do through these
programs is let the States know that we want them to pay
attention to this and not leave the deadline wide open because
the States have to work with us on this because as Senator
Mikulski has talked about, we have these disasters that we do
not close out. I just do not think it is a message we want to
send. I think the States, even though it is hard, have to come
with a match. Of course, it is small compared to what they are
going to get out of it, but we have to have some reasonable
expectation that by a date certain, they are going to apply for
this program. Do you not agree?
Mr. Witt. Absolutely. California is a good example. The
State of California has not only been hit by earthquakes but
fires and three floods. The State staff has been overwhelmed in
California.
But what we are doing now is important. Last year you
appropriated $3 million to support State hazard mitigation
officers to work on mitigation projects. We are also working
with the States to put in place a statewide mitigation plan
which will prioritize mitigation projects before a disaster
ever happens. That will make a significant difference. Instead
of a State having to establish a hazard mitigation team and
then follow through trying to prioritize projects, we will be
able to help a great deal.
Senator Boxer. Good. One second.
[Pause.]
DISASTER COST-CUTTING PROPOSALS
Senator Boxer. I wanted to just make sure that I remembered
this correctly. A couple of years ago we passed an amendment
that I wrote in EPW that gave States permission to use their
highway funds for retrofit prior to a disaster. So, we are
trying to help. In other words, if we can get those highway
funds on a regular basis used to retrofit highways and bridges,
it is going to be a big help, and we are starting to see that
happen in California.
Well, I understand you will be presenting a number of cost-
cutting proposals as part of your recommended changes to
disaster legislation. Senator Bond and I both serve on the
Environment and Public Works Committee which has jurisdiction
over this legislation. Without telling us all the different
things that you are doing, at what point do you expect to have
this legislation ready for us to take a look at?
Mr. Witt. I am going to have it in the chairman's hands
before this bill goes to the floor.
Senator Boxer. So, you expect soon?
Mr. Witt. Yes; I will see to it myself.
DISASTER ASSISTANCE FOR RECREATIONAL FACILITIES
Senator Boxer. OK.
My last question had to do with the recreational
facilities. As I mentioned in my opening remarks, I feel that
Senator Bond has hit on a very important point. We have so many
things we need to do and then we look at some of the more
frivolous things that we perhaps do.
However, I want to make a point that if something like the
Los Angeles Coliseum which is a publicly owned facility is hit,
that becomes a major economic loss to a community. So, I am
just hoping that as you look at these areas where we can save
funds, we just cannot say all recreation because in many cases
these sports facilities are economic engines for communities
and they are publicly owned. So, I hope that there would be
some discernment when we look at the whole area of recreation.
Mr. Witt. Authorization for types of spending from the
disaster relief fund has changed over the years.
I agree with the chairman that it is time to revisit this
area. I think if it is a revenue-producing entity, such a
publicly owned piece of property that is rented out to a group
that is operating that facility, then that group needs to look
at getting a low-interest SBA loan. I think we seriously should
look at that.
I think we should concentrate on the health and safety of a
community and of individuals. I think that is absolutely
essential and should come first.
Senator Boxer. Thank you.
DISASTER APPEALS
Senator Bond. Thank you very much, Senator Boxer.
Mr. Witt, going back to your discussion with Senator
Mikulski about the open cases, I gather a lot of these are kept
open because there are three levels of appeals for disaster
projects and for disasters. Apparently there is no disincentive
to States to continue to appeal and appeal and appeal. No. 1,
they have three levels. Why is any more than one needed? What
percentage of appeals are sustained? What additional cost?
There has got to be a way we can clean this mess up, is there
not?
Mr. Witt. Mr. Chairman, I totally agree with you and with
the inspector general's report on this. We want to have one
level of appeal. I was astounded to find, Mr. Chairman, that we
pay for the appeals.
Senator Bond. So, it is a free bite at the apple. You can
keep coming back and going and going and going.
Mr. Witt. There is no disincentive at all. If a State loses
an appeal, it should pay for it.
SEISMIC ALGORITHM
Senator Bond. Somewhere along the line, there is the
beginning of some criteria on that.
Let me jump back to one on this seismic algorithm. I am not
sure I understand what a seismic algorithm is, but I gather it
has cost us about $900 million because the program was designed
to expedite disaster aid, and instead of just repairing the
damage, you have said the funds can be used for an improved
project involving construction of a new building on a different
site.
Under what authority did you implement the program? Do you
think that FEMA can create without congressional authority the
opportunity to launch a major new project like this? Does
Congress not have a role to play in establishing a brand new
program like this?
Mr. Witt. Yes, sir; Mr. Chairman. I did not do it to
circumvent anything that Congress had not approved. The
algorithm is basically an outgrowth of what we have in place
with the mitigation program. I did coordinate the concept with
the inspector general and with our General Counsel to make sure
that I did not violate any laws, and they assured me that I was
not doing so.
The algorithm was put in place to evaluate whether it was
more cost effective to do an alternate project than it was to
rebuild the existing project.
DISASTER ASSISTANCE FOR SPORTS FACILITIES
Senator Bond. Let me go to disaster criteria. My colleague
from California mentioned possible damage to the Los Angeles
Coliseum. If that were completely wiped out, I think it would
cost less than what we put in to UCLA by about a factor of
five.
But we have some brand new sports facilities in St. Louis,
marvelous facilities. We even imported a California quarterback
to try to improve the performance there. [Laughter.]
These are revenue-generating facilities, and we live along
the New Madrid fault. You are well aware of the New Madrid
fault.
Before something happens to a sports facility anywhere, do
you think it would be proper if we met with the Governors
administration and said to those local organizations,
governments owning sports facilities, you better have
insurance, you better take some steps to cover them because in
the future if one of these major revenue facilities comes
tumbling down, we are not going to be able to provide the
relief to the otherwise incapable of paying for it? Is this
something that you would recommend?
Mr. Witt. I totally support that, Mr. Chairman.
TIMETABLE FOR DISASTER CRITERIA
Senator Bond. I have a list of all of our discussions. When
we asked about formulating disaster criteria, you said we are
pretty close to having something concrete. In last year's
questions, you said we are--2 years ago, we are going to define
objective criteria. In September 1996, you said that FEMA is in
the process of developing a new approach. We intend to present
options early in the 105th Congress.
Having these things as we go to the floor may not be early
enough. Where are they and will they include criteria to ensure
that States use their own capabilities to handle disasters not
declared by the President?
Mr. Witt. Yes, sir; they will.
Senator Bond. And when do you think we might see those?
Mr. Witt. Mr. Chairman, if you want it before it goes to
the floor, I will do my very best to get it to you.
Senator Bond. We have been asking for this, and seriously,
if we are going to work on this, we ought to work on this at
the committee level. I do not want to write this. I do not want
the committee to have to write this. We have been called on to
do enough legislating, but if we are going to have to do it, I
would like to have that before we go to markup so we can see
your recommendations.
Mr. Witt. OK.
Senator Bond. Thank you, Mr. Witt.
Senator Mikulski.
INSTITUTIONALIZING REFORM
Senator Mikulski. Mr. Chairman, I have only a very few
questions.
What we are trying to get here is a momentum. I will tell
you the objective that I see is, No. 1, I would like to be able
to institutionalize the reforms that came under your
administration. Because this committee is spread out over such
a wide variety of authorizing committees, this might with some
consensus be able to institutionalize those reforms.
The second part of that is I believe is both the disaster
contingency fund, which is a significant issue, and then the
difference between rehabilitation, restoration, and
reengineering for want of another word. After the flood waters
go down, after the hurricane debris is picked up, after the
earthquake and aftershocks are over, what do we do?
I recall when we were dealing with the San Francisco
earthquake, the whole idea of restoration of some historic
buildings was so phenomenal that it would have been difficult
to undertake. Therefore, that is different from rehabilitation
to make sure that housing for ordinary people or small
businesses are helped back in business. So, you see
rehabilitation is an issue.
The second is restoration and then the third is what are
the steps that we could take during rehabilitation that really
prevent some of the risk-prone aspects from--in other words,
where we know there is risk, where we know that a facility is
risk prone, either through engineering, relocation, all those
techniques that the corps and others can tell us that we can
take so in the process of rehabbing, three raindrops later we
are not back in the flood business. I am not being cynical
here.
I think that last part takes a lot of clarification because
what we face is where people want restoration. In many ways,
that is just not fiscally possible.
No. 2, even though some projects are desirable from a local
community's standpoint, they might not be fiscally feasible
from a Federal standpoint.
I know during the last debate, Senator McCain showed great
sensitivity to Maryland when we were talking about marinas.
Some marinas are private yacht clubs, and I am sorry if anybody
loses their yacht. But in Maryland those marinas were small
business, primarily small boats or where watermen keep their
boats and so on. So, you see, part of it is not to describe
something like a marina, but it is: What is the impact on the
local community? What is the real economic impact? If you take
20 of those marinas and knock them out up and down the 3,000
miles of the Chesapeake Bay, that is not a big ticket item, but
that is 20 small businesses.
Anyway, that is the kind of criteria that we are looking
for. One, what brings you in? What do you pay for it once you
do come in? And No. 3, once the emergency is over, what
business is FEMA in? Rehab, restoration, reengineering, all of
the above, none of the above, and so on. This is a great
opportunity to institutionalize reform and lay the groundwork
for others.
I know that you have been out on the road. It has been an
enormously trying time for you and a great sacrifice for your
family too, to just have to be able to pick up and go. I just
want to say thank you.
Do you have any comments you want to make on what I have
just said?
Mr. Witt. I think it is very important to develop the
disaster criteria and that is what we are trying to do. Mr.
Chairman and members of the committee, I blame no one but
myself for not having everything done on time. What Senator
Mikulski is talking about is important, that legislation be put
in place so that whether I am here at FEMA or someone else is
here, that something is institutionalized. I wholeheartedly
agree with you, Senator. We have to do this.
Senator Mikulski. I think you really need to task a group
within your organization to do this for whatever is your own
management mechanism and to work with us, and then we will be
consulting with the House. You have got three of us
particularly with the chairman of the House committee, Mr.
Bond, and myself are in risk areas because of flood or
hurricane, earthquake, and so on.
Mr. Chairman, I have no further questions, but I think we
have got some momentum going here today.
Senator Bond. I think so. How about July 4?
Mr. Witt. Sounds good.
Senator Bond. Let us do that by July 4. OK?
Mr. Witt. Yes, sir.
Senator Mikulski. Even if we do not have campaign finance
reform by that date, maybe we could have FEMA finance reform.
Senator Bond. These are going to be some unpopular
decisions.
Mr. Witt. Yes, sir.
Senator Bond. How do you plan to deal with these? Is that
going to make it difficult for you to come forward with the
recommendations?
Mr. Witt. It will probably be very difficult, but I think
we can deal with this working with organizations such as the
Governors Association, NEMA, and NCCEM. I think they
understand, Mr. Chairman, that dollars are limited and that in
the future, we are going to have to put those dollars to the
best use that we possibly can. I think it is feasible and I
think we can do it.
INSURANCE FOR PUBLIC FACILITIES
Senator Bond. So long as FEMA is willing to cover a
community's disaster losses, it seems to me there is not much
of an incentive for the community to purchase insurance
coverage for public facilities, and in some instances people
say that FEMA is a lot more generous than the insurance company
would be. Does it not make sense to get those priorities in
line and make sure that we are not discouraging the purchase of
private insurance?
Mr. Witt. Yes, sir; it does.
Senator Bond. Do you have any empirical data as to how
insured versus FEMA-covered facilities fare?
Mr. Witt. Public facilities?
Senator Bond. Yes.
Mr. Witt. I do not have the data now but we are looking at
trying to get the States and local governments away from being
self-insured and try to move them toward the direction of
insuring public facilities.
Senator Bond. That would be part of the proposal?
Mr. Witt. Yes, sir.
The important thing is, if we can work with them and give
them some kind of an incentive such as a better cost share
where they do insure public facilities, then it would help
eliminate the long-term disaster cost.
STATE COST SHARE
Senator Bond. I need to go back to this question of project
cost share upfront. We heard earlier today that California has
not come up with its cost share because they do not know what
the total cost is, but if we have already paid out billions of
dollars, they are getting some cost. Is not the failure to have
this upfront cost a bit of a disincentive for States to control
costs if they do not have to come up with the cash in advance?
Mr. Witt. A lot of States--of course, you are very familiar
with this--legislatures meet every 2 years instead of every
year. So, it is difficult sometimes for States to come up with
that upfront cost-share match. The percentage of the cost-share
match they share in with the local subgrantee varies. Some
States pick up the full cost share, while some States pick up
12\1/2\ percent, and then the county or city will pick up the
other 12\1/2\ percent. It varies across the whole country.
A lot of States will hold their cost share until the final
inspection is done and then finish paying the total amount of
the project.
ELIGIBILITY OF PRIVATE, NONPROFIT ENTITIES
Senator Bond. I think that is something we might want to
address.
Last year the GAO issued a report called ``Improvements
Needed in Determining Eligibility for Public Assistance.''
GAO's recommendations include clarifying the criteria for
certain private, nonprofit facilities and in the September 20
letter you told me that policy changes for revenue-generating
private nonprofits were under consideration. Do you have any
recommendations on that yet?
Mr. Witt. Yes, sir, Mr. Chairman. We will include those
recommendations in the report we are preparing for you. If it
is a private entity that is revenue producing then it should
apply for SBA loans instead of grants.
HAZARD MITIGATION
Senator Bond. Let me turn to the hazard mitigation efforts.
Your 404 hazard mitigation grant program is funded through the
disaster relief program. States are entitled to receive funds
equal to 15 percent of FEMA disaster relief assistance in the
State. There is approximately, I understand, $1.4 billion
unobligated.
What is the problem with it and what do you propose to do
about it? Are the funds not needed?
Mr. Witt. Yes, sir; they are very much needed.
We have been working with State directors on a hazard
mitigation task force to identify how we can speed the process
up, what we need to do to be more accountable, and to be less
bureaucratic and get rid of the redtape.
Most States go through an environmental review process
which we then review. The process goes from the State to the
region to FEMA headquarters. We have been pushing the
responsibility to work directly with the State down to the
regional level.
We are also looking at HUD and other agencies to see how
they do environmental assessments and reviews in order to put
in place the best procedures.
We have been working on the States' capability to
prioritize these projects as well. Last year you graciously
gave us money to support a person in each State to work
strictly on these mitigation projects. We are working now with
the States on the 409 mitigation statewide plans that are going
to help a great deal, as will changes in the cost-effectiveness
review process changes.
When a State has a disaster--and they have had many--they
are often bogged down in disaster recovery and response
activities and they do not have time or staff to concentrate on
mitigation at that point. We really need to emphasize
mitigation as a community being rebuilt, not later.
We are looking at the possibility of putting a sunset
clause in the legislation that we are going to provide to you.
If a State cannot obligate funds and get its projects done in 2
years, then it would lose the money. We just cannot continue to
drag projects out year after year.
CRITERIA FOR PERFORMANCE PARTNERSHIP AGREEMENTS
Senator Bond. All right. So, with $1.4 billion remaining
unobligated--it struck me that we are asking for $50 million
more when we have got a great big pot of money that has not
been utilized. Well, I guess we will see your legislative
proposals on that.
FEMA's budget includes $147 million for State grants, the
so-called performance partnership agreements. When you first
proposed them 2 years ago, your Agency indicated there would be
new criteria for awarding State grants. What are those
criteria?
Mr. Witt. Under the PPA, which has been in place for 2
years, States have the flexibility to design programs with FEMA
to meet the risks that they face in their State. We have been
working with the States in developing a self-assessment process
which will be used to establish a baseline of capability in
those States.
We are tying this baseline assessment into FEMA's GPRA
developmental activities.
INCENTIVES FOR STATES
Senator Bond. Are there specific performance measures so
you know whether the State is getting the job done? How do you
hold them accountable? Are there any rewards for States that do
the good jobs or disincentives for the ones that do not get it
done?
Mr. Witt. One incentive to do a better job or to have a
statewide disaster fund set up could be a favorable cost share
should the State have a disaster that warrants a declaration.
Also, if a State has a mitigation program in place with a
mitigation fund established it could be used in State-declared
disasters, not only in the federally declared disasters. Those
are some incentives that we are trying to work into the changes
that we are going to implement.
Senator Bond. That would require statutory authorization to
do that?
Mr. Witt. Yes, sir.
STATUS OF NATIONAL FLOOD INSURANCE FUND
Senator Bond. Again, we would be anxious to see your
recommendation on that because that certainly would seem to
make some sense.
What is the status of the flood insurance fund in light of
the recent flooding? What is the current level of borrowing? Is
there any danger you would exceed the $1.5 billion statutory
limit on borrowing?
Mr. Witt. Mr. Chairman, with the rash of floods that we
have had recently, I am concerned that even with the additional
$500 million in borrowing authority in 1997, the limit has not
kept pace with changes over the years in the flood insurance
program. We have $370 billion in coverage now compared to the
$8 billion in coverage that we had back in 1974, but we will
still only have a $1 billion borrowing authority in October. I
think we are up to $800 million in borrowing now and we are now
assessing how many policies and claims we have to pay in this
recent rash of floods.
Senator Bond. Are we looking at another overhaul of the
flood insurance program? It sounds to me like it would take at
least 2 years of normal operation just to get that back, would
it not?
Mr. Witt. Yes, sir; at least.
REQUIREMENTS FOR DAM SAFETY
Senator Bond. Dam safety is something that is very
important to Missouri and we worked hard to put that in the
water resources development authorization bill last year. Why
does FEMA not request any funds for the requirements of the new
dam safety legislation? Are these a priority for you?
Mr. Witt. Yes, sir; they are. We are planning to spend
$432,000 for the dam safety program from the flood program. We
are developing an implementation plan for a national dam safety
program as well.
Senator Bond. Will you be seeking reprogramming or anything
more on that program? Do you have the money to carry it out?
Mr. Witt. We have the $432,000 to get the implementation
program in place and determine what other moneys we will need
for the national dam safety program.
STATE AND LOCAL ASSISTANCE
Senator Mikulski. Mr. Chairman, I just have two other
things that I wanted to submit to the record. One is a letter
from the Maryland Emergency Management Agency talking about our
need to continue to focus our interest on the SLA, State and
local assistance account, which, of course, is the one that
really enhances our response and readiness.
MARYLAND REPRESENTATION IN FALLEN FIREFIGHTERS FOUNDATION
Another question goes to the fact that we are very proud of
the Fire Academy in Maryland. The Maryland State Firemen's
Association has played a major role in putting the Fallen
Firefighter Memorial Program together which you know is so
touching. We understand that this year you have turned over the
Fallen Firefighters Foundation, and we are asking if you would
ensure that the Maryland Firefighters Association has a seat at
the table in the foundation.
Mr. Witt. Yes, ma'am.
Senator Mikulski. Because they really provide so much of
the core support to the foundation.
Mr. Witt. Yes, ma'am.
Senator Mikulski. I thank you for that.
Thank you very much, Mr. Chairman, and I look forward to
working with you in advance on the solutions to the really
significant issues we have raised today. Thank you.
INSPECTOR GENERAL RECOMMENDATIONS
Senator Bond. Thank you, Senator Mikulski.
Very briefly I understand Mr. George Opfer, the FEMA
inspector general, is here and I would like to invite him
forward since we have been referring to him all morning on the
recommendations that he has made. I gather the FEMA inspector
general requests a slight increase from about $4.67 million to
$4.8 million.
I will just ask you, Mr. Opfer, what problems face FEMA
over the next few years and any recommendations you have for us
that would improve program integrity at FEMA.
Mr. Opfer. I think, Mr. Chairman, that we are working quite
well with the Agency. Shortly after the Northridge earthquake,
there was a change in the philosophy both within the inspector
general's office and the Agency itself when Director Witt
requested the inspector general's office to immediately respond
to disasters.
That was a change that really was not very common in the
inspector general's community, not only in FEMA but in all the
agencies--a change in the atmosphere where you have an
inspector general's office trying to work with the management
and going out to disasters on the scene so you can give upfront
advice and try to become very proactive.
The Agency itself, as you know, is relatively small in
comparison to other Federal agencies as far as the amount of
money that is passed through to States and what is given out in
disasters. Also, the inspector general's office in itself is
very small. So, we try to marshal our resources with the other
Federal communities to establish a task force.
We have been very successful in trying to weed out any sort
of corruption in the disaster programs because we do not want
the people to become victims twice--from the disaster and from
people scheming to take Federal dollars.
In the 2\1/2\ years that I have been in the Agency, I have
seen quite a change as far as program managers and the Director
requesting the inspector general's assistance in looking at
programs. We are trying to provide service similar to a
management consultant, where rather than doing a full audit or
a full inspection, we can look at a program or look at issues
which might be before the Director at the beginning stages, and
provide recommendations that could possibly prevent any future
problems in that area.
Senator Bond. You mentioned fraud possibly perpetrated on
the victims of disaster. Do you find any other general problems
relating to fraud, abuse, or mismanagement?
Mr. Opfer. We find a correlation between the larger
disaster where more Federal money is put into a disaster area
and the potential or increased, chance for different schemes or
questionable activities.
We have been working with the insurance industry to see
what information we can get as they are responding to disasters
and marshal our resources with them. We also work with the
State and local officials, including the Attorneys General, to
get information in areas such as consumer fraud where we do not
have jurisdiction. We want to make sure that we are marshaling
all the resources that are available both at the State and
local level.
Senator Bond. Well, thank you very much for your testimony
and for your good work.
Mr. Witt, any closing comments or thoughts you wish to
share with us?
Mr. Witt. Mr. Chairman, thank you for your support. We will
work very hard with you, Mr. Chairman, and the committee to
institutionalize those changes we discussed by July 4.
Additional committee questions
Senator Bond. We will expect that by July 4 and look
forward to working with you.
[The following questions were not asked at the hearing, but
were submitted to the Agency for response subsequent to the
hearing:]
Questions Submitted by Senator Bond
status of disaster relief fund
Question. What is the current balance in the Disaster Relief Fund,
and when do you project the fund will be depleted?
Answer. As of March 31, $2.1 billion remained unobligated in the
Disaster Relief Fund. Absent a supplemental appropriation, it is
projected that by late spring, as the unobligated balance nears $500
million, FEMA will need to begin adjusting how we allocate money to the
open disasters to ensure that we have dollars available for the
immediate needs of victims and for emergency measures.
Question. Please explain, and provide a break-out for, why your
current projections for the Disaster Relief Fund in fiscal year 1997
exceed the projections contained in the Congressional budget
justification--which showed a year-end carryover of $100 million.
Answer. When the President's budget was prepared in early January,
the projected unobligated balance in the Disaster Relief Fund for the
end of fiscal year 1997 was $107 million. By mid-March, this same
balance showed a deficit of $442 million. During this time period, FEMA
had undertaken a major effort to refine its projected costs and unmet
requirements. The increase of $549 million in projected obligations can
be attributed to the following:
[In millions of dollars]
Northridge:....................................................... 200
1996 declarations................................................. 74
Other prior year disasters........................................ 268
1997 activity..................................................... 7
Question. Why have the cost estimates for the Northridge Earthquake
escalated from $6.1 billion one year ago to $7.8 billion today--an
increase of $1.7 billion? Please describe precisely what accounts for
this increase. To what extent does the increase in Northridge estimates
account for the fund's shortfall in fiscal year 1997?
Answer. The original cost estimate for the Northridge Earthquake
was prepared prior to the development of the detailed cost estimates
for the general acute care hospitals and other structures, the final
estimates for the repair and retrofit of the historic Los Angeles City
Hall, construction cost increases in the Los Angeles area, and the
consequential increase in mitigation funding (which is calculated as a
percentage of the estimated total program costs). These factors raised
the estimated costs for the Northridge earthquake by $1.7 billion as
summarized below:
[In millions of dollars]
Safeguarding hospitals (seismic algorithm)........................ 940
Los Angeles City Hall............................................. 130
Safeguarding other structures..................................... 100
Rebuilding Hospitals to EERI standard............................. 250
Rise in LA construction costs since 1994.......................... 105
Increased Section 404 Mitigation Ceiling.......................... 230
Reduced Administrative Costs...................................... -50
-----------------------------------------------------------------
________________________________________________
Total....................................................... 1,705
The higher estimated cost for the Northridge earthquake is one
factor in FEMA's revised estimated shortfall for fiscal year 1997.
seismic algorithm
Question. How much of the increase in the Northridge estimates is
attributable to the ``seismic algorithm?'' Under what authority did
FEMA implement this program? Do you think it is appropriate that FEMA
has the authority to implement a program of this kind with such sizable
resource implications, with virtually no formal approval process from
the Congress? Do you plan to use this algorithm in other disasters? How
are you measuring the success (or failure) of this pilot program?
Answer. The Seismic Hazard Mitigation Program for Hospitals (SHMPH)
was piloted and implemented under the authority of Sec. 406(c)(2).
FEMA rebuilt the hospitals to a higher safety standard under the
authority of Section 406(e)(1) of the Stafford Act, which defines
eligible costs in rebuilding structures:
``(e) Net Eligible Cost. (1) General rule.--For purposes of
this section, the cost of repairing, restoring, reconstructing,
or replacing a public facility or private nonprofit facility on
the basis of the design of such facility as it existed
immediately prior to the major disaster and in conformity with
current applicable codes, specifications and standards
(including floodplain management and hazard mitigation criteria
required by the President or by the Coastal Barrier Resources
Act (16 U.S.C. 3501 et seq.)) shall, at a minimum, be treated
as the net eligible cost of such repair, restoration,
reconstruction, or replacement.'' Emphasis Added
This higher rebuilding standard for the area hospitals serves two
goals: it reduces the level of damage expected from future earthquakes,
and it helps ensure that acute care hospitals can continue to function
in the aftermath of a future disaster, especially to treat disaster
victims.
The cost increase attributed to the seismic mitigation program for
hospitals was $940 million and included the repair and mitigation of
all 20 affected hospitals. This increase is less than half of the $2
billion requested by two of the hospitals alone.
FEMA believes that mitigation should be integrated into the
rebuilding from disasters. After an event occurs, communities tend to
be more receptive to undertaking mitigation measures, and mitigation
goals can more easily be attained by enhancing reconstruction
standards.
Congress has a vital role to play in implementing a program with
major resource implications. For Northridge specifically, FEMA included
the projected spending for these infrastructure projects in its two
supplemental budget requests for Northridge, both of which were
approved by Congress.
FEMA took into careful consideration the Congress's opinion as
stated in a March 21, 1996 letter to Director Witt signed by
Congressmen Jerry Lewis and Bob Livingston and Senators Kit Bond and
Mark Hatfield. This letter applauded the use of the algorithm and
encouraged FEMA to use the Earthquake Engineering Research Institute
(EERI) to further evaluate these projects.
Because many hospitals were closed due to damage, the algorithm was
specifically designed to address rebuilding after the Northridge
earthquake. When the detailed estimates were first being developed, it
became apparent that reaching closure on hospital repairs would be
extraordinarily time consuming and contentious due to the complexity of
the facilities and differences in professional judgment of architects,
engineers and other technical specialists. To reach a timely solution
at a reasonable cost, a consortium of professional experts developed
the algorithm for calculating the costs of repairing damages and
providing hazard mitigation measures. This algorithm produces a repair
and retrofit program that is consistent with hazard mitigation goals.
The success or failure of this seismic program will be measured by
the ability of the hospitals to withstand a future earthquake (or other
catastrophic event) and continue functioning.
We discussed this program with Members of Congress and their
staffs, particularly those Members chairing or ranking on the relevant
Committees of the House or Senate and in the affected areas. We believe
the SHMPH is a prudent expenditure from the Disaster Relief Fund (DRF)
since it will avoid future DRF expenditures and, more importantly,
provide public health and safety services after the next earthquake.
A central concept of the algorithm, that is the arithmetical
computation of disaster assistance in damaged critical facilities, is
that it expedites recovery and diminishes confrontational exchanges
between the Federal sector and disaster victims. Nevertheless, the
SHMPH is not presently contemplated for use in other earthquake
disasters.
Since mitigation is frequently a long-term investment, declarations
of success (or failure) would be premature at this point. Expenditures
under the SHMPH, however, are being tracked so that avoided costs can
be estimated after the next earthquake.
report to congress on reducing expenditures
Question. The fiscal year 1997 VA-HUD appropriations act required
FEMA to propose a plan to reduce disaster relief expenditures. The
Subcommittee recently received a draft report, about 45 days late and
still not final. The draft report includes only some of the proposed
recommendations of the GAO and the I.G. Why were the other
recommendations--such as eliminating alternate projects, and changing
the so-called 50 percent rule which triggers full-scale replacement of
a damaged facility--taken off the table? Please explain which other
options were considered and rejected, and why, and the cost-savings
associated with the rejected options.
Answer. In developing the Report to Congress on Reducing Disaster
Relief Expenditures, a broad range of options were considered,
including all of the recommendations of the General Accounting Office
and the FEMA Inspector General. Some of the GAO and IG recommendations
were determined not to be feasible at this time. For example,
eliminating alternative projects may provide an incentive for State and
local officials to rebuild facilities even if they no longer serve the
public welfare, in order to receive the grant award. Elimination of the
50 percent rule which triggers replacement would be inconsistent with
the National Flood Insurance Program and may impact negatively on
mitigation.
Two other approaches recommended by the Inspector General--the
disaster tax return system of assistance and block grants--will be
studied for potential applicability in the future.
Specific cost savings for these options have not been identified.
Question. Some of the proposed changes undoubtedly will be
unpopular with certain constituents. Will this impede your ability to
proceed with the changes and how do you plan to deal with these
impediments?
Answer. We are currently in the process of consulting with our
partners on potential policy changes. In general, they recognize that
governmental resources at all levels are becoming more limited, and
there is a need to reduce disaster relief expenditures.
To the extent possible, we have tried to focus on prudent ways of
reducing disaster costs without impeding service delivery. For example,
streamlining the public assistance program will not only save dollars
but will actually improve customer service. We are also trying to
reduce total costs through a pre-disaster mitigation program, rather
than simply shifting the costs to another level of government.
We recognize that there may be some measures, particularly those
which reduce eligibility, which may be unpopular with our constituents.
In those cases, we will work with our constituents and Congress to
develop appropriate legislative solutions.
disaster criteria
Question. Two years after the initial commitment, FEMA has not made
any changes to the disaster criteria. What changes--and when--will you
be proposing to the declaration process?
Answer. In the fall of 1996, FEMA established a Panel on Disaster
Cost Savings to examine, among other things, the issue of declaration
criteria. Upon analysis and consultation with our partners, we have
concluded that the high costs in the disaster program are driven by the
number of large major disasters and broad eligibility criteria, rather
than the number of declarations.
While we believe that the current declaration criteria continue to
be appropriate, we can reduce costs by streamlining activities and
targeting eligibility. However, factors used to judge severity,
magnitude and impact are being updated to reflect current dollars, and
procedures for conducting Preliminary Damage Assessment are being
reengineered.
Question. How will the new criteria ensure that states use their
own capability to handle disasters that should not be declared by the
President?
Answer. The current criteria involve making a judgment on whether
the severity, magnitude, and impact warrant Federal assistance to
supplement the State's capability. FEMA provides grants to State and
local governments through the Performance Partnership Agreement grants
for the purpose of developing the capability to handle disasters.
Question. The number of disaster declarations has increased 54
percent in the last 5 years, compared to the previous 5-year period,
partly due to FEMA's more liberal interpretation of the law. Don't you
believe disaster declaration criteria would bring some much-needed
discipline to this program?
Answer. The increase in total number of declarations is greatly
influenced by the number of fire suppression grants in recent years, as
well as a documented increase in severe weather events. Over the years,
the Congress has changed the statute to be more liberal in its eligible
benefits. Restricting eligible costs would achieve long-term savings in
the disaster program.
state-share
Question. Why isn't FEMA enforcing its own regulation to require
states to demonstrate they have their project cost-share upfront? Isn't
your policy of not requiring this upfront commitment a disincentive for
states to control costs? What is FEMA doing to ensure that recipients
of disaster assistance are satisfying their cost-sharing requirements?
Answer. Current disaster assistance regulations do not require a
specific timing for the payment of the State's portion of the non-
Federal share. A FEMA/State Agreement, which is executed between the
Governor and the FEMA Regional Director immediately following a major
disaster declaration, specifies the portion of the non-Federal share
that will be paid by the affected State. At the end of a disaster
contract, States are required to certify that they have paid their
share of a project's costs as agreed to in the FEMA/State Agreement.
Consistent with the intent of the Robert T. Stafford Disaster
Relief and Emergency Assistance Act (Public Law 93-288, as amended),
current FEMA policy includes in the Agreement a provision for a
Federal/State cost-share arrangement. FEMA believes that States have an
incentive to control costs, because they are making a contribution to
recovery efforts. FEMA only obligates and makes available to the State
the Federal share of the estimated costs of a project (usually 75
percent). Therefore, in order to complete a project, the remainder of
the funds must come from either the grantee or the subgrantee. If a
project is not completed, the Federal share will be deobligated and any
Federal funds that were already disbursed must be repaid by the
grantee.
INSURANCE
Question. What measures is FEMA taking to see that public
facilities are insured against the most probable perils they face?
Should disaster assistance be reduced for public facilities in
vulnerable communities that could have been insured but were not, as is
currently done with flood insurance?
Answer. As a condition for receiving Public Assistance grants,
insurance must be purchased and maintained to cover future damages for
any insurable hazard to any public facility for which FEMA funding is
provided. If the facility is insured at the time of a disaster, FEMA
will fund damages not already covered by insurance.
Establishing the vulnerability of communities for hazards other
than floods is a difficult task. While some areas of the country have
established vulnerability to earthquakes, participation in earthquake
insurance programs has been limited due to the expensive nature of the
program. For example, in California, the State Insurance Commissioner
has ruled that earthquake insurance is not reasonably available because
it is not affordable. FEMA's regulations state that the Agency shall
not require greater types and extent of insurance than are certified by
the State Insurance Commissioner. Consequently, FEMA has been unable to
require the purchase of earthquake insurance in California as a
condition of Public Assistance grant funding.
SNOW DISASTER DECLARATIONS
Question. In your draft report, FEMA said it would, ``publish
revised regulations to ensure that FEMA is consistently only paying for
those snow removal costs that are extraordinary and significantly
beyond the states normal capability and resources.'' When will these
regulations be revised? How do you define costs that are extraordinary
and significantly beyond states normal capability and resources?
Answer. In October 1996, FEMA published a proposed rule that
specified the work and costs that would be eligible for assistance in
the event of a major disaster declaration for a snowstorm. The proposed
rule stated that eligible work would be the clearance of snow from one
lane in each direction on ``snow emergency routes'' or their
equivalent, and from routes to critical facilities. The rule did not
address declaration criteria or the measurement of States'
capabilities.
Based on comments received on the proposed rule and FEMA's
experiences in three snow declarations in January 1997, FEMA has
decided to withdraw the October 1996 rule and publish a new proposed
rule. This new proposed rule will establish declaration criteria and
cost eligibility to ensure that assistance is only granted when the
situation is truly beyond a State's capability and resources. As
published in the Semi-annual Agenda of Rulemaking, the proposed rule
for snow disasters will be published between April and November of
1997.
COMMUNITY CENTERS
Question. Last year, in response to questions for the record, you
stated that FEMA would more precisely define community centers in order
to clarify which of these facilities FEMA considers eligible. Has this
been done? If not, when?
Answer. FEMA has published draft Policy No. 4511.050A, ``Private
Nonprofit Community Center Eligibility.'' The draft policy provides a
more specific definition of community centers than the definition found
at 44 CFR 206.221(e)(6), and includes examples of both eligible and
ineligible community centers. In particular, the policy more
specifically defines criteria such as: (1) open to the general public;
and (2) established and primarily used as a gathering place for a
variety of social, educational enrichment, and community service
activities.
This draft policy is currently in the internal approval process.
Pending its final approval, FEMA considers and rules on eligibility
applications in the Private Nonprofit Community Center category on a
case-by-case basis.
GRANTS MANAGEMENT
Question. When will FEMA have in place the new grants management
system? Will it ensure that FEMA funds are spent effectively,
efficiently, and according to law?
Answer. The Office of Financial Management, assisted by the
Logistics Management Institute (LMI), has recently completed a thorough
assessment of the grants management process for all of the Agency's
disaster and non-disaster grant programs. An Agency-wide Team, reviewed
and documented the current processes, identified issues and made
recommendations for improving the grants management processes used in
each of FEMA's disaster grant programs. A report, summarizing the
reengineering process and the Team's recommended solutions covering the
full cycle of the grants management process will be finalized in the
near future.
In general, the Teams recommendations include instituting
procedures that will enable FEMA to more effectively comply with
federal regulations on grants administration and financial management;
track grants from application through close-out, including timely
financial reports and program performance monitoring. Once FEMA
management formally accepts the recommendations of the Team, the Office
of Financial Management (OFM) will secure a charter for managing the
implementation of appropriate changes and developing an improved grants
management system in the Agency. It is anticipated that the Agency will
begin initiating some recommendations immediately and that a detailed
action plan will be developed this summer. The development of this plan
will include close coordination with other FEMA Directorates to assure
that it is all inclusive and takes into consideration other disaster
program initiatives. It should be noted, however, that it is expected
that FEMA management will consider additional improvements and
alternatives as the Agency begins implementing the recommended changes.
FEMA will realize several benefits by implementing the Team's
recommendations. The Agency can not only expect to more effectively
comply with federal regulations governing grants administration and
financial management, but also to improve the Agency's ability to
provide oversight and manage the disaster grant programs. Including the
other cross-cutting disaster program improvements, along with the need
for external coordination and significant internal training must be
accomplished prior to seeing long term results. Full implementation of
the Agency's improved grants management system is expected to take
between two-three years.
DISASTER CLOSE-OUTS
Question. Why do you have disasters open that go back to 1989? Why
can't you close-out disasters within two years or less? What is the
average length of time to close out a disaster? What does FEMA believe
is a reasonable time to close-out a disaster? Wouldn't a shorter period
enhance fiscal responsibility and accountability? How long does the
insurance industry take to close-out major projects, and why couldn't
FEMA follow an insurance industry model? Couldn't FEMA deobligate
significant amounts of disaster relief funds if it closed out disasters
in a more timely manner?
Answer. FEMA funding is made available to the disaster-affected
State as a grantee and further transferred to the sub-grantee in
accordance with the Office of Management and Budget's requirements for
Grants management. Public Assistance grants are governed by FEMA's
regulations, also known as the common rule. The intent of the rule is
to allow the States more discretion in administering Federal programs
in accordance with their own procedures. Because these grants are for
reimbursable costs, the grantee must make an accounting to FEMA for all
eligible costs on each approved large project. Final payments are made
only after the approved work is completed and certified by the State.
Large, complex projects that require extensive design and
construction phases in addition to compliance with all codes,
regulations, standards and local permitting procedures can be extremely
time-consuming. As a result, disaster close-outs are often delayed by
these large projects. However, FEMA has made significant progress in
closing out disasters. For example: in fiscal year 1993, FEMA closed
out seven (7) disasters; in fiscal year 1994, FEMA closed out 31
disasters; in fiscal year 1995, FEMA closed out 42 disasters; and in
fiscal year 1996, FEMA closed out 16 disasters.
As part of our Business Process Reengineering effort, FEMA is
considering several options--including looking at insurance industry
methods--to determine if we can adopt a more rapid settlement approach,
based on accurate cost and scope estimates, and additional means of
providing incentives to complete work as quickly as possible.
FAST-TRACKING
Question. Following the Northridge Earthquake, FEMA used a system
referred to as ``Fast tracking'' to deliver assistance to individuals,
which involved providing aid to applicants prior to inspecting homes. I
understand a very high proportion of those receiving aid were deemed
ineligible and FEMA is attempting to recover those ineligible costs.
Will you be using this method again? Do you believe it is appropriate
that FEMA has such discretion to dispense federal aid without following
appropriate and prudent procedures? Are you using fast-tracking now?
Answer. The extent of the damage and the densely populated
geographic areas impacted by the Northridge Earthquake indicated that
FEMA would receive an unprecedented number of applications for disaster
assistance. In an effort to help the greatest number of disaster
victims as quickly as possible, FEMA assisted applicants from areas
where the damage was most pervasive on a expedited basis; prior to
inspecting the applicant's home.
To identify the most heavily damaged areas, FEMA used computer
mapping of Modified Mercali Intensity (MMI) readings. ``Fast-track''
checks were then mailed to disaster assistance applicants only if: (1)
the applicants resided in a zip code that corresponded with the four
MMI zones of most intense seismic activity (67 zip codes were
identified); and (2) the applicant indicated that they had experienced
real property damage when they registered with FEMA. Recipients of
``fast-track'' assistance were notified at the time of their
application that a subsequent housing inspection would take place, and
that if they were found to be ineligible for assistance, they would be
required to return their assistance grant to FEMA.
Each home was subsequently inspected, the degree of damage was
assessed, and the determination of eligibility for housing assistance
was evaluated. Recipients found to be ineligible for assistance were
required to return their checks. The rate of confirmed eligibility for
those households assisted before inspection was 90 percent.
The fast-track method of expediting assistance helped thousands of
severely impacted disaster victims significantly more quickly than
standard procedures could accommodate. During the seven-week period the
fast-track system was implemented (from January 21-March 9, 1994) FEMA
issued 152,573 checks totaling $400,486,000 of assistance.
Approximately one-third of these applicants, 48,302, were provided
assistance via the fast-track system. It should be noted, however, that
recipients of ``fast-track'' assistance represent only 7 percent of the
total number of applicants who registered for assistance.
Although the fast-track process resulted in some ineligible
recipients, FEMA believes it was appropriate to implement the fast-
track system, given the unique circumstances of the Northridge
earthquake. FEMA is not currently using the ``fast-track'' system, but
would not rule out its use in the future under appropriate emergency
conditions.
ADMINISTRATIVE COSTS
Question. Last year, in response to questions submitted for the
record, FEMA stated it would propose a rule requiring grantees to
provide a full accounting of their administrative costs associated with
public assistance grants. To date, FEMA has taken no action to clarify
the rules governing administrative costs, or to ensure that grantees
properly account for administrative costs. Why? Also, FEMA stated it is
planning to promulgate a proposed rule that would require small project
expenditures to be accounted for and excess funds returned to FEMA. Why
hasn't this been done?
Answer. Last year, in response to recommendations from the General
Accounting Office (GAO) and the FEMA Inspector General (IG), FEMA
proposed to develop a regulation that would require an accounting of
grantee administrative costs. Prior to drafting such a rule, FEMA
determined that the statutory administrative expenses were also
intertwined with both State disaster management costs, and indirect
costs that may be claimed in connection with Federal grants. Therefore,
FEMA is conducting studies to determine the complete picture of the
costs to States to manage a disaster recovery effort. The goal is to
develop a single cost factor that will cover all administrative
expenses, both direct and indirect.
In response to further recommendations in the subject GAO and IG
reports, FEMA began to examine the impacts of a regulation that would
require refund of overpayments on ``small projects.'' Concurrently,
FEMA embarked on a 12-month process to study existing Public Assistance
procedures, develop new procedures, and implement the procedures in
actual disasters. Because these changes may affect the concept of small
projects as it was originally envisioned in 1988, we have delayed
proposing a rule change.
public assistance/business process reengineering
Question. FEMA has underway a ``BPR'' effort to streamline the
public assistance program. When will this be complete? What specific
changes do you envision at this time? What sort of cost-savings might
we expect?
Answer. A draft report on the proposed reengineered process was
issued on April 7, 1997, to FEMA regional offices, the National
Emergency Management Association (NEMA), and various project
participants for comment and feedback prior to issuing a final report.
The final report on the Public Assistance Reengineering project is
scheduled to be completed on April 30, 1997. The next phase of the
project moves beyond redesign in concept and into actual
implementation. This will include development of a pilot test
implementation plan, a pilot set-up and pilot test and a pilot
evaluation, prior to full-scale implementation. We anticipate
conducting a pilot-test and evaluation within the next six months.
Some of the changes envisioned in the proposed redesign include:
--Pre-identify and pre-educate potential applicants;
--Provide applicants with alternatives for accessing the Public
Assistance application process;
--Use Preliminary Damage Assessment (PDA) data to make initial
obligations to the State for immediate emergency funding needs,
rather than relying on additional site inspections;
--Establish deadline for State reconciliation of emergency work
costs;
--Require a more detailed and deliberate application for permanent
restorative work to include a schedule of damaged sites,
location, damage description, preliminary cost estimate, and
insurance coverage;
--Establish a FEMA single point of coordination for applicants and
States;
--Capture damage information one time, at the source, and
electronically if possible;
--Move decision-making and project review closer to the customer;
--Empower the States to validate small projects (under $46,000)
without always requiring a Federal inspection;
--Process large projects (over $46,000) or complex projects through
inspection and field review by certified FEMA/State inspection
teams;
--Focus on organizing work around the applicant and developing
``projects'' that best meet their recovery needs;
--Institute a settlement approach (based on an accurate scope and
cost estimate) versus actual cost reimbursement to avoid
revisiting cases multiple times;
--Provide incentives to complete permanent work as quickly as
possible and to submit documentation within a reasonable time-
frame; and
--Strictly adhere to and enforce time frames such as project
completion deadlines, deadlines for submittal of documentation,
appeal submittal deadlines, and appeal resolution deadlines.
The expected benefits of the redesign include quantitative
reductions in time and costs that will enhance and strengthen
qualitative aspects of FEMA's relationship with the States and
applicants. Benefits include: Reduced processing time; reduced
administrative costs; more efficient allocation of resources; reduction
in job redundancy; improved tracking; fewer de-obligations; and fewer
appeals.
HAZARD MITIGATION GRANT PROGRAM
Question. FEMA's Sec. 404 hazard mitigation grant program is funded
through the disaster relief program. States are entitled to receive
funds equal to 15 percent of FEMA disaster relief assistance in the
state. Currently, more than $1.4 billion remains unobligated. Has there
been an increase in section 404 mitigation activity since the federal
cost share was raised and the formula was revised to increase the
amount made available?
Answer. There has been a significant increase in Section 404 hazard
mitigation grant program activity since the Federal cost share was
raised and the formula was changed to increase the amount of funding
made available. The reasons for this have been two-fold: First, States
and Territories receive an increased amount of total available dollars
for mitigation. For example, in the Midwest Floods alone, total
available HMGP funds increased by approximately five times. Secondly,
changing the cost share from 50 percent federal to 75 percent federal
funding has made grants more attainable for State and local
participants.
It is essential to note that nearly 67 percent of the remaining
funds (approximately $776 million) stems from three unique disaster
situations:
--The State of California accounts for approximately $642 million of
this figure. In that State, numerous sizable disasters
(including multiple flood events, wildfires, and the most
costly disaster in U.S. history, the Northridge Earthquake)
have occurred in the last several years. This tremendous
workload has greatly strained the State's ability to identify,
review, and process available monies in a timely fashion to
meet mitigation, response and recovery needs.
--Similarly, the Virgin Islands accounts for approximately $50
million of the outstanding HMGP balance, due in large part to
the fact that the islands were struck by two powerful
Hurricanes--Marilyn and Bertha--within a year.
--Finally, Hurricane Fran, which caused Presidentially declared
disasters in seven States, accounts for another $84 million in
unobligated funds. The outstanding balance of HMGP funds for
these disasters is not unusual, in that the event occurred only
recently (last Fall).
These three unique situations account for over $776 million of the
unobligated HMGP funds. They are not due to recurring programmatic
obstacles.
It also should be noted that FEMA has taken substantial action in
recent years to improve the management of the HMGP in order to speed
the obligation of funds. For example, this fiscal year an additional $3
million was made available to States to improve implementation of
Hazard Mitigation Programs. To improve National Environmental Policy
Act (NEPA) compliance reviews, FEMA published an expanded list of NEPA
categorical exclusions which have significantly reduced the time
required for environmental review for approximately 50 percent of the
projects submitted by States for HMGP funding. FEMA has developed a new
process to streamline project cost-effectiveness determinations which
emphasizes quick determination of lower and upper bound estimates to
allow State staff to focus resources on potentially eligible projects.
In addition we have provided substantial new training sessions to both
FEMA Regional staff and State Hazard Mitigation staff. All of these
activities are expected to greatly speed the HMGP process in the
future.
Question. FEMA is proposing a new $50 million pre-disaster
mitigation program. Why would this program be used more by the states
than mitigation activities authorized under sec. 404?
Answer. Section 404 funds are only available if a disaster has been
declared; therefore, mitigation actions are generally limited to
declared area(s).
This means that States must absorb a cost-share associated with
mitigation activities at the very same time that they must identify
resources to pay for the tremendous costs of disaster response, which
is often prohibitive. Through the Pre-Disaster Mitigation Program,
however, communities will be able to thoughtfully plan and budget for
their contribution to eligible risk reduction activities. They will
also have the time to work with other elements of the community,
including the private sector, to leverage additional funding and
resources against their own. These advantages will help ensure that
Pre-Disaster Mitigation Program funds are used effectively to reduce
our nation's risk from natural hazards.
Question. FEMA funds some mitigation work using public assistance
funds (sec. 406) and sometimes in combination with sec. 404 funds. Is
this appropriate and in accordance with the Stafford Act? What is FEMA
doing to clarify whether mitigation should occur under sec. 406 versus
sec. 404?
Answer. When Congress amended Public Law 93-288, the Disaster
Relief Act of 1974, in 1988 (upon enactment of Public Law 100-707) the
legislation was amended to: (1) add new section 404, which authorized
hazard mitigation funding; and (2) revise the authority of what is now
Section 406 to add the reference at subsection 406(e)(1) that
prescribed hazard mitigation criteria.
The use of Section 406 alone or in combination with Section 404 is
both appropriate and consistent with explicit Stafford Act authorities.
Section 406(e)(1) allows for ``hazard mitigation criteria'' to be
included in funding determinations for discrete public assistance
projects. A Section 404 project may affect several Section 406 public
assistance projects, as well as the community at large. If a Section
404 project ties into and augments the mitigation elements of a Section
406 project, it is neither an inconsistent nor an inappropriate use of
Stafford Act funding. There is no indication in the Stafford Act that
these two hazard mitigation authorities cannot be used in conjunction
with each other, and FEMA believes that it has implemented these two
hazard mitigation authorities consistent with the congressional intent
behind their simultaneous enactment.
To clarify the use of these two authorities, FEMA has issued
policies that distinguish between the mitigation scenarios in which
either Section 404 or 406 can be invoked. FEMA has also assembled a
404/406 Mitigation Task Force, which will provide additional
clarification as specific instances require.
Question. When will you submit your legislative proposal for this
new $50 million plan? How many projects do you anticipate will be
funded, and what will be the criteria for participation? How will you
maximize the use of this relatively modest sum for mitigation projects?
Answer. The legislative proposal will be included in the package
containing cost eligibility changes that we are planning to send to you
in July of this year. We will try to fund as many projects as we can in
order to achieve some balances among the geographic spread, the types
of risks and hazards, and the categories of mitigation measures carried
out. We will be testing criteria for participation with the pilot
effort this fiscal year, and proposed criteria will be formalized
through regulations authorized by the legislation being drafted. In
addition to criteria that relates to risk reduction requirements, we
will also be looking at leveraging non-Federal resources in order to
maximize the modest amount of funds requested.
Question. We understand that mitigation saves money, but we have
seen no quantification of the extent to which mitigation reduces future
disaster relief costs. Has an assessment been done to provide some
baseline for cost-savings? If not, when will it be done?
Answer. Over the last several years, the need for an assessment of
mitigation cost savings has become apparent. At this time, we are in
the process of planning a project to perform a macro-economic analysis
of mitigation. We plan to initiate a study of the cost-effectiveness of
a broad spectrum of mitigation measures (such as building codes and
acquisition/relocation projects) before the end of fiscal year 1998.
Because this analysis will take time to complete, we commissioned a
smaller report on the cost-effectiveness of mitigation that is
scheduled for release in the next two weeks. This report includes a
brief explanation of many of the types of mitigation which have
produced useful effects. It also includes 16 ``case studies,'' which
were chosen to provide multi-hazard examples of a variety of mitigation
techniques across a wide geographical distribution. A copy is attached
for your reference.
performance partnership agreements
Question. FEMA's budget includes $147 million for state grants
through the so-called ``performance partnerships'' agreements. Two
years ago, when FEMA first proposed performance partnerships, the
agency indicated there would be new criteria for awarding state grants.
Please explain what those criteria are.
Answer. A driving force behind the Performance Partnership
Agreement (PPA) is to make performance a consideration in the awarding
of annual pre-disaster grants to the states. The PPA is a five-year
agreement designed to implement the strategic planning concepts of
GPRA. A June 1, 1998 deadline has been set for all state PPA's to be
modified to reflect measurable performance indicators.
FEMA Regions continue to consider annual performance as criteria
for annual cooperative agreement grant funding. Risk, need and special
projects also continue to be considerations in how funds are divided
among the states.
Question. What are the specific performance measures states are
held to under these new performance partnership agreements, and how are
states held accountable for meeting these measures? How are high-
performing states rewarded?
Answer. Performance measures under the PPA are jointly developed by
the State and FEMA. The measures vary depending on the unique
circumstances of the state and objectives set as part of that states
strategic planning. Eventually, states will be held accountable by
making long-term PPA performance a criteria for annual CA funds. In
addition, FEMA is exploring options for rewarding states for pre-
disaster performance in mitigation and increasing their disaster
capability through post-disaster grants. Another option under
consideration is a more favorable cost-share on public assistance
disaster grants.
Question. How are performance partnerships used to encourage states
and local governments to undertake mitigation activities to reduce the
risk of losses to public facilities?
Answer. The PPA is developed around the four functions of emergency
management: preparedness, mitigation, response and recovery. Each
function has partnership and state objectives and strategies for
accomplishing the objectives. Mitigation is a major focus of the PPA
objectives and strategies and is an area FEMA is working to encourage
through future incentives.
Question. Other than reducing administrative burdens and providing
a single funding stream, how are the performance partnerships any
different from the old grant process under the comprehensive
cooperative agreements?
Answer. The PPA was developed to replace FEMA's comprehensive
cooperative agreement (CCA) process. Under the PPA, states have more
flexibility in the use of funds in exchange for accountability of
performance; while the states, not FEMA, propose how the funds will be
spent, annual activities must clearly reflect state priorities and
needs and contribute to the achievement of long-term state objectives
in the PPA. Under the old CCA, FEMA determined how the funds were to be
spent and there were no established long-term objectives that annual
CCA activities worked towards accomplishing.
Question. What is the status of FEMA's ability to assess states'
capacities to respond to disasters? What means do you use to make these
assessments? Has the I.G. deemed whether your method is adequate and
appropriate? How can you rely on states' self-assessments to make
determinations on capabilities? In your opinion, how many states
currently have a reliable assessment of their capability to respond to
disasters?
Answer. FEMA is currently developing the capability assessment
process to assess the capabilities of State and local governments to
effectively respond to catastrophic disasters. The Program Elements
Guide (PEG) is the principal tool that FEMA is currently developing to
accomplish this task. This tool categorizes emergency management
activities into the following 13 components: (1) Laws and Authorities;
(2) Hazard Identification and Risk Assessment; (3) Hazard Management;
(4) Resource Management; (5) Planning; (6) Direction, Control and
Coordination; (7) Communications and Warning; (8) Operations and
Procedures; (9) Logistics and Facilities; (10) Training; (11)
Exercises; (12) Public Education and Information; and (13) Finance and
Administration. It was recently favorably reviewed by representatives
from the National Emergency Management Association (NEMA), an
organization of State Directors of Emergency Management. It is
anticipated that the PEG will be finalized by April 21, 1997. The
Inspector General's office has participated in the briefings on
capability assessment and the implementation schedule.
The capability assessments will be completed for all States during
fiscal year 1997, and FEMA will submit a report to the Congress by
October 1, 1997, on the status of State capabilities and the Emergency
Management Partnership to respond to major disasters. FEMA will not be
relying entirely on State self-assessments. It is our intention that
there be substantial Federal involvement in as many of the State
assessments as possible this year, given timing, staffing and funding
restraints. Many of the States have conducted capability assessments
over the course of time, but these have not been developed in a
standardized format; therefore, it is difficult to draw substantive
conclusions on these efforts. The goal of the FEMA capability
assessment process is to create an assessment system that will be
acceptable to all States and will result in a reliable and consistent
national evaluation of the state of readiness in the nation.
GPRA
Question. Under the Government Performance and Results Act (GPRA),
FEMA is required to develop a mission statement and strategic plans.
I'm very concerned with mission creep at FEMA over the last several
years. The mission creep is evident in the fact that there's been a 54
percent increase in the number of major disaster declarations in the 5-
year period fiscal year 1992-96, compared to fiscal year 1987-91. Where
FEMA used to confine itself to responding when state and local
governments were overwhelmed, FEMA's new role seems to be about being
all things to all people. What process are you using to develop your
mission statement and strategic plan, and who are you consulting with
to ensure it meets the intent of Congress?
Answer. FEMA was one of the first federal agencies to develop a
strategic plan back in December 1994. The strategic plan's mission
statement and its goals were developed even earlier and served to guide
the agency's 1993 reorganization. In its June 1996 report, entitled,
``Executive Guide--Effectively Implementing the Government Performance
and Results Act,'' Congress's General Accounting Office (GAO)
highlighted FEMA's reorganization around its mission statement and
strategic goals.
In 1993, FEMA's new Director refocused the agency on meeting its
mission and aligning its activities to better serve the public. As part
of its first agency-wide strategic planning effort, FEMA
comprehensively reviewed its programs and structures and initiated a
major reorganization in November 1993. By more closely aligning its
activities, processes, and resources with its mission, FEMA appears
today to be better positioned to accomplish that mission.
As a result of experience gained through the GPRA pilot phase FEMA
realized that agency-wide training on the concept of GPRA and strategic
planning would be necessary. To date, training has been conducted for
over 400 managers and staff agency-wide. The training effort includes a
two-day workshop in each of the 10 regions for our regional staff and
our State partners.
FEMA is in the process of updating its strategic plan, and making
it more precise, measurable and consistent with GPRA requirements. FEMA
established a GPRA Steering Committee, made-up of representatives from
throughout the agency, to oversee the process. FEMA is not proposing
any changes to its current mission statement (in fact, the
Congressional Institute and National Academy of Public Administration
which trained congressional staff on GPRA used FEMA's mission statement
as a model). Our six strategic goals have been reduced to three draft
goals which we believe represent FEMA's statutory mandates.
A significant part of FEMA's mission is to lead and support the
national emergency management system. Therefore, performance measures
for FEMA's draft new strategic goals will reflect how well the national
system is performing. We believe the information we need to measure our
performance already exists in the public and private sector. We expect
to have draft performance measures identified by May 1997.
FEMA's primary stakeholders are the State governments and the State
emergency managers and the National Emergency Management Association in
particular. We have discussed the direction of our strategic planning
efforts with the States and NEMA and shared draft documents. We will
continue to consult with them throughout the process and ask for final
comments before the plan is finalized. FEMA has also shared its draft
strategic plan with Federal agencies such as EPA, Transportation, SBA,
Army Corps of Engineers, etc., to ensure a complimentary approach to
GPRA.
FEMA has already briefed two congressional committees and will be
making more consultations to discuss all aspects of proposed changes to
the agency's strategic plan, including, options for performance
measures.
The Agency is on track to have the updated plan and new performance
measures, as well as the GPRA required fiscal year 1999 Performance
Plan completed this summer in advance of the September 30 deadline.
CSEPP
Question. In January, GAO presented preliminary findings of a
review conducted on CSEPP, a joint Army/FEMA program to improve
emergency response capabilities in the communities near the chemical
weapons storage sites. GAO found that while $420 million has been
appropriated to date, local communities still lack critical items 9
years after the program's inception and there are long-standing
management weaknesses at the federal level, including unclear roles and
responsibilities.
Why has so little progress been made with the $420 million spent to
date? What is the status of negotiations with the Army over the future
of the CSEPP program. What role does FEMA believe it ought to play in
this program? Who should be held accountable for the lack of progress
in this program?
Answer. FEMA has discussed with GAO the validity of the draft
report's finding that emergency preparedness capability has been unduly
slow in the communities surrounding the eight chemical weapons storage
sites. We anticipate that the final report may differ from the draft
somewhat, since it is demonstrable that considerable progress has been
made in CSEPP emergency preparedness. States are significantly better
prepared to respond to a chemical incident today than even two years
ago. Alert and notification systems have been installed to warn the
public, in-place communications systems will allow on- and off-post
responders to communicate effectively, and, through Federally-funded
public education programs, the public is continually informed of
protective action measures to be taken in case of a chemical accident.
FEMA recognizes that not all anticipated emergency preparedness
equipment has been purchased and/or installed, and, as a result, full
programmatic capability has not yet been attained in all sites.
However, many sites have completed the purchase and installation of
necessary equipment, and are nearing the maintenance phase. While not
all equipment is in place, operational capability has been attained for
most benchmark items at each site. Thus, while capability will
undeniably improve, employable capability exists in nearly every case.
There have been issues requiring resolution between FEMA and the
Department of the Army regarding the day-to-day management of CSEPP.
However, while we recognize that perceptions exist in some quarters
that the issues are affecting program delivery, both FEMA and the Army
have worked very closely to ensure the uninterrupted delivery of
program services. Given the different operating styles of FEMA and the
Army, it is reasonable to expect periodic problems to arise with
program delivery. As they have with previous programmatic or stylistic
differences, both FEMA and the Army have been taking positive steps
toward resolving those issues and believe that they will be resolved
shortly for the maximum benefit of the program. It is worthy of note
that FEMA Director James Lee Witt and Secretary of the Army Togo West
are personally involved in resolving these issues expeditiously.
ARSON INITIATIVE
Question. In the fiscal year 1997 operating plan, FEMA proposed a
reprogramming of $775,000 for participation in the President's National
Arson Prevention Initiative, which was established in response to the
rash of church burnings last year. Can you tell me precisely what
FEMA's role is in this initiative, what has been accomplished so far,
and whether additional funds are requested in fiscal year 1998 to
continue participating in the President's initiative?
Answer. In June 1996, the President asked FEMA Director Witt to
lead a National Arson Prevention Initiative and coordinate available
public and private sector resources to combat arson nationally.
Although prompted by the tragic series of fires at houses of worship,
the Initiative is intended to address the larger problem posed by arson
in this country. FEMA has been joined in this effort by the Departments
of Justice, the Treasury, Housing and Urban Development, Education,
Agriculture, and the Corporation for National Service. Governors in
States most affected by the church burnings have rallied in their
support of arson prevention and they, with local leaders throughout the
country, have been strong partners in the Initiative.
Each of the major law enforcement, crime prevention, education,
church, and voluntary groups and organizations have been tremendous
contributors to the Initiative. In addition, eight national fire
service organizations pledged their memberships in the fight against
arson including the Alliance for Fire and Emergency Management
(International Society of Fire Service Instructors), the International
Association of Arson Investigators, the International Association of
Black Professional Fire Fighters, the International Association of Fire
Chiefs, the International Association of Fire Fighters, the National
Fire Protection Association, the National Association of State Fire
Marshals, and the National Volunteer Fire Council.
Recognizing that arson is a local problem that requires local
solutions, FEMA's role in the Initiative has been to facilitate
community arson prevention efforts and apply public and private
resources to their best effect. Provided for the record is a copy of
``Fire Stops With You--The National Arson Prevention Initiative: Six
Month Report to the President.'' This report details the interagency
and intergovernmental accomplishments of the Initiative from June
through December 1996.
The Initiative entered a new phase in January. FEMA is piloting the
creation of community-based arson prevention coalitions in three cities
in the Southeast and one city in the Northeast. The cities that are
participating include Macon, Georgia, Nashville, Tennessee, Charlotte,
North Carolina, and Utica, New York. The experiences of these
communities in forming a coalition and actively engaging their
residents in arson prevention will serve as models for communities
across the country. Three of the pilot cities will ``launch'' their
coalitions nationally as part of a series of events occurring during
National Arson Awareness Week, May 4-10, 1997. As part of that week,
arson prevention grant awards of $12,000 will be made to every State
($5,000 to each territory and the District) to encourage and support
Statewide arson public education and awareness effort.
Efforts on the full range of arson prevention topics also continue.
In partnership with the Department of Justice, a series of Statewide
arson prevention conferences will be conducted over the next several
months in seventeen States. Additionally, development of training and
public education materials on juvenile firesetters is underway. Between
July 1996 and March 1997, the National Arson Prevention Clearinghouse
received nearly 15,000 telephone calls and distributed approximately
half a million packets of information.
The National Arson Prevention Initiative has resulted in a
framework to support State and local governments that capitalizes on
available resources from a variety of sources and has resulted in
increased understanding and awareness of the problem. Individuals have
begun to recognize the impact that arson has on their lives and have
become involved in preventing it within their communities. This
Initiative will be institutionalized and will serve as the umbrella
strategy for the Agency's overall arson efforts within the U.S. Fire
Administration. Funding requested for fiscal year 1998 will continue to
support vital training, public education, and technical assistance
efforts, as well as the continuance of the National Arson Prevention
Clearinghouse and the coalition-building efforts.
mt. weather emergency assistance center
Question. In the fiscal year 1997 operating plan, FEMA indicated
the need to renovate and expand building 430 at MWEAC to accommodate a
rapidly expanding demand for additional training class rooms and
conference areas, at a cost of $1.67 million. At the time, FEMA said
``we are currently evaluating options to fund this requirement later
this fiscal year. Should sufficient funds be available, we will forward
to you the required reprogramming request.'' What is the status of your
evaluation? Do you anticipate a reprogramming request? Are any funds
requested in fiscal year 1998 for renovations at Mt. Weather? When will
there be a long-term plan for the Mt. Weather facility, and why should
any renovations take place prior to the completion of such a plan?
Answer. The Office of Financial Management is conducting a mid-year
review of all FEMA spending plans. Upon completion of the review, a
final determination will be made as to the distribution of fiscal year
1997 funds held for prior year obligations. The expansion of the Mt.
Weather Training Center has already been determined a high priority
candidate for any funds that may become available. If funds are
determined to be available, a reprogramming request will be forwarded.
Mt. Weather has been selected as the initial participant in FEMA's
Working Capital Fund (WCF) and in fiscal year 1998, will complete the
transition to a fully operational mode, continuing to provide office,
conference, training and billeting accommodations for FEMA and other
Federal agencies. Currently Mount Weather supports seven internal
customers and several external Federal tenants. While an aggressive
marketing plan has been implemented to attract new customers, the
fiscal year 1998 anticipated income will not fund extensive building
renovations. Some building maintenance projects such as roof repair,
road maintenance, painting and concrete repair are planned and will be
funded through the collections of the WCF.
Mt. Weather has become a hub of emergency activity since it was
restructured in 1993 to support the all-hazards mission of the agency.
A population explosion has occurred during the last 4 years, moving
from a daily workforce of about 400 employees to one of more than 900.
The Conference and Training Center (CTC) activity has expanded
dramatically from fewer than 6,000 students/conferees in 1993 to more
than 18,000 in fiscal year 1996.
Much of this growth is attributed to the decision to locate fixed
disaster operations at Mt. Weather. Six major disaster functions have
been established at the Facility that include: the National Processing
Service Center-Virginia; Satellite Teleregistration Center; Disaster
Finance Center; Disaster Information Systems Clearinghouse; Disaster
Personnel Operations Division; and the Agency Logistics Center. On a
day-to-day basis, Mount Weather supports about 250 new disaster CORE
positions that did not exist in 1993.
This changed environment requires careful strategic planning to
support current operations and to accommodate the growth that is likely
to occur with the implementation of an aggressive marketing effort. As
part of the strategic planning, a capital expansion plan, based upon an
assessment of the Agency's operational requirements over the next 5
years, has been prepared. This plan includes six projects that will
provide additional space and capability to include major building
renovations, expansion of training facilities and infrastructure
improvements.
NATIONAL PROCESSING CENTER
Question. What is the status of the new National Processing Center
in Hyattsville, MD? How many staff have been hired at Hyattsville, and
how many additional staff are anticipated?
Answer. The Hyattsville National Processing Services Center build-
out is nearing completion and FEMA and the General Services
Administration (GSA) are entering into final lease negotiations. While
these deliberations are taking place, FEMA has initiated recruitment
actions for 66 of the 112 baseline staffing positions at the facility
and has established a Human Resources Management recruiting office on-
site. The Human Resources Management Office will also be responsible
for the recruitment of surge staff that will provide additional
operational staffing capacity on a disaster by disaster basis.
Occupancy of the facility will occur as soon as the lease between FEMA
and GSA is signed, which is expected to occur sometime during the month
of June.
INEEL
Question. In the fiscal year 1997 operating plan, FEMA proposed
funding for the Idaho Nuclear Engineering Laboratory (INEL) out of
funds set aside by the Congress for pre-disaster mitigation activities,
even while the conference report stipulated that no such funds be spent
until the agency develop a comprehensive pre-disaster mitigation plan.
Even more astounding in the agency's proposal was the fact that in
answers to questions proposed by Congressman Jerry Lewis last year,
FEMA said, ``We advised [INEL] that they should discuss research with
the National Science Foundation. With limited resources for hazard
mitigation, it is our opinion that additional research and testing
facilities are not needed at this time. The money could be better spent
by taking existing research and putting it into application for use by
state and local governments to reduce the damages to life and property
from natural disaster.'' Why did FEMA reverse itself and propose
funding INEL's research proposal? What is the status of the
International Multi-hazard Mitigation Partnership to be created by
INEL, and what is this partnership intending to accomplish?
Answer. FEMA's response to Chairman Lewis' question regarding the
Idaho National Engineering and Environmental Laboratory (INEEL) was
based on an initial proposal presented by INEEL. Later, INEEL changed
the proposal significantly, to emphasize the concept of a private--
public partnership to promote full-scale environmental hazard
simulation. INEEL informed FEMA that many private sector potential
partners were prepared to make significant contributions to this
initiative if FEMA would step forward and provide an initial financial
contribution. FEMA technical staff carefully analyzed the revised
proposal and consulted many of our mitigation partners. The analysis
and discussion with our partners, underscored some of the benefits of a
full-scale wind storm simulation facility.
FEMA recognizes the need to move towards a greater emphasis on
disaster loss mitigation through the development of policies and
procedures that may either prevent future losses or reduce their
magnitude. FEMA has also identified the need for a greater coordinated
effort in the area of Private-Public partnerships. This need is
greatest in the area of windstorm mitigation. The FEMA--Department of
Energy agreement is designed to result in the creation of a new
mitigation partnership called the International Multi-Hazard Mitigation
Partnership (IMMP).
Since the benefits derived under the IMMP will be diffused across a
broad spectrum, FEMA expects INEEL to identify a broad spectrum of
technical and financial support. The Agency's continued involvement in
the IMMP is predicated on a broad coalition being constituted. It
expects that its financial contribution will be leveraged against the
contributions of others, particularly the private sector that will reap
much of the benefit from the testing that will occur at this facility.
FEMA`s future financial contributions should not be the primary source
of funding for the IMMP or the construction and use of any proposed
testing facilities.
In an effort to advance the IMMP, FEMA agreed to provide an initial
financial contribution of $1 million dollars. To date, INEEL has
contributed a similar amount of funds, in both cash and services. To
ensure accountability, FEMA is providing funding in four installments.
Presently, the IMMP has received and spent $731,000. The remaining
funding of $269,000 is proposed to come from the fiscal year 1997 Pre-
disaster Mitigation Program. These funds have recently been obligated
based on Congressional concurrence with FEMA's proposed Predisaster
Mitigation Program spending plan.
MOBILE ASSETS
Question. Last year, FEMA identified 10 actions considered to be of
highest priority for upgrading its mobile response actions. While no
funds were requested by the administration, the Congress appropriated
$3.4 million in fiscal year 1997 for the first of these 10 actions.
What is the total cost associated with the remaining ``high priority''
actions, and are any funds requested in fiscal year 1998, and if not,
why not? How much is requested to maintain the Mobile Emergency
Response System (MERS)? What is the status of the baseline capability
assessment of MERS, which was due at the end of calendar 1996? What did
the baseline assessment reveal? What are the costs in the next 5 years
required to maintain adequately the MERS system?
Answer. The projected cost associated with the remaining high
priority actions is $18.85 million. While the fiscal year 1998 budget
submission was made prior to the initiation of the baseline assessment
of the MERS, the annual budget requested $5.75 million for the
Operation and Maintenance of the MERS. This supports the costs of
electricity, water, heating oil or gas, trash collection, vehicle/
equipment maintenance, spare parts, maintenance contracts for unique
equipment and systems, facility maintenance, and training.
Following completion of the initial phase of the baseline
capability assessment of MERS in December 1996, a summary of the
assessment was provided in the Report to Congress. The second phase of
the baseline assessment will continue in 1997 and the results will be
used to reprioritize any request included in the fiscal year 1999
Budget submission. The baseline assessment determined the priority for
the replacement/upgrade of MERS vehicles and equipment. In addition, a
list of vehicles and systems no longer required to support the FEMA
All-Hazard Mission was developed. These vehicles and systems are to be
declared excess to the needs of MERS and offered to other elements
within FEMA and through GSA to other Federal Departments and Agencies
for their use.
The projected O&M budget of $5.75 million is adequate to maintain
the MERS if limited or no replacement/upgrade of vehicles or systems is
accomplished. To insure the replacement/upgrade of those systems
identified by the baseline assessment is accomplished over the next 5
years, the additional funds estimated are: fiscal year 1998: $5.15M;
fiscal year 1999: $5.45M; fiscal year 2000: $4.75M; fiscal year 2001:
$3.5M. Following these replacements/upgrades, an additional $1.5
million per year should be programmed to allow for the replacement/
upgrade of other vehicles, equipment, or systems that will become non-
maintainable.
______
Questions Submitted by Senator Campbell
fire suppression declaration
Question. I understand that it is FEMA's responsibility to make a
Fire Suppression Declaration to get aid to communities in fighting
wildfires. Is it possible to streamline this process so communities can
get the help they need in a shorter amount of time?
Answer. The Fire Suppression Assistance program provides assistance
to any State for suppression of any fire on publicly or privately owned
forest or grassland which threatens such destruction that would lead to
a major disaster declaration.
The entire process, described below, is accomplished in an
expedited or streamlined manner, normally by telephone, and many times
a FEMA decision is rendered within an hour upon receipt at national
headquarters. FEMA can respond to a State's request for Fire
Suppression Assistance 24 hours a day.
The program is administered on a real time active ``incident fire''
basis, under which the Governor or authorized representative submits a
request for assistance to FEMA's Regional Director at the time a
``threat of a major disaster'' exists. The Region contacts headquarters
with the State's request, the Regional recommendation, and the U.S.
Forest Service's Principal Advisors assessment of the fire situation.
FEMA then evaluates the following factors in order of priority to
determine the approval of a Fire Suppression Assistance grant:
--The location of the fire and continued threat to life and improved
property.
--The existence of high fire danger conditions: humidity, wind speed
and direction.
--The availability of State and local resources.
--The existence of two or more fires in the same area.
To facilitate program delivery, FEMA has updated the Fire
Suppression Assistance manual, which should be ready for distribution
in June of 1997.
PUBLIC-PRIVATE PARTNERSHIPS
Question. Following the Buffalo Creek wildfire and the flooding
that resulted in Colorado, I understand that FEMA produced some
educational materials for homeowners. The JANUS group paid for
production while Rotary Clubs distributed the material. Is FEMA looking
at this excellent model of a public-private partnership in other areas
of its responsibility?
Answer. For the past year and a half, FEMA has been actively
exploring opportunities to partner with the business sector to develop
and distribute educational materials and better coordinate and
communicate with the business sector during and after disasters.
Director Witt has sponsored several roundtable discussions with
business and constituency groups to explore partnership opportunities.
FEMA is currently working with insurance industry representatives on
several task forces seeking ways we can work together to provide better
service to mutual customers, and is in the final stages of developing a
local-based emergency management pilot project designed to include the
business sector in emergency management planning and operational
activities at the local level. FEMA has also worked closely with the
business sector in managing donations of goods and services to
communities and individuals impacted by disasters.
DROUGHT ASSISTANCE
Question. During and after the devastating drought in the
Southwest, it seemed to take a long time to get relief to communities
and individuals in need. Has FEMA considered changing its policy on
dealing with drought problems as rapidly as it already does with higher
profile emergencies such as hurricanes?
Answer. Unlike the immediate devastation usually caused by a
hurricane, droughts develop and inflict damage over an extended period
of time. In response to the Drought of 1996, FEMA formed a task force
to coordinate Federal response to drought affected States by
identifying needs, applicable programs and barriers to programs, and
outlining suggestions of the participants for improved drought
management. At the urging of the Western Governors' Association (WGA)
Drought Task Force, a Memorandum of Understanding was signed early this
year which identifies the United States Department of Agriculture
(USDA) as the lead Federal agency on drought issues. USDA volunteered
to be the lead agency because agriculture is most severely affected by
drought. Currently, a Coordinating Council is being formed by the WGA,
which will include other relevant Federal agencies, including FEMA, to
address drought on an event-by-event basis and to also establish long-
term planning, mitigation and response policies for droughts.
HAZARDOUS MATERIALS
Question. Some of the nation's major highways run through Colorado.
This places our citizens at risk as hazardous materials routinely move
through our state. Do you feel confident that FEMA is prepared to deal
with emergencies resulting from accidents involving these hazardous
materials?
Answer. Initial response to a hazardous materials incident is a
state and local government responsibility. In Colorado, the State
Highway Patrol has responsibility for hazardous materials response.
This organization is well trained and equipped to respond to most
hazardous materials transportation emergencies. In the event that an
incident should be severe enough to require a presidential disaster
declaration, FEMA, in partnership with the Environmental Protection
Agency (EPA) would respond under the Federal Response Plan. The Federal
Response Plan has been successfully used in past disasters and I am
confident that it would save lives and property in the case of a severe
hazardous materials spill.
______
Questions Submitted by Senator Craig
LANDSLIDE POLICY
Question. Please clarify what policy, if any, the federal
government has related to disaster assistance for landslides. Please
differentiate between FEMA assistance during an incident period as it
relates to actual slide damage and FEMA assistance either during or
after the incident period as it relates to potential land slides and
damage.
Answer. The FEMA policy related to assistance when landslides
occur, has remained substantially unchanged since 1984, although it was
recently (November 30, 1995) republished in a format that FEMA has
adopted for all disaster assistance program policies. The policy is
best explained as it relates to two different types of work, emergency
protective measures, and permanent repair of damaged facilities.
Eligible emergency protective measures are defined as work
necessary to alleviate an immediate threat to public health and safety
or improved property that is the result of a slide caused by the
declared disaster. When such a slide results in an immediate threat,
that threat may be reduced by removal of slide material or by temporary
stabilization. Such emergency work may also be completed if the
disaster event causes an immediate potential of a slide that would
damage improved property or endanger public health and safety.
Emergency protective measures could also include work completed during
the incident period to reduce immediate threats. The basic eligibility
question to be answered in both situations is whether the threat is a
result of the disaster and not a condition that existed before the
disaster.
When an eligible facility has been damaged by a landslide, work to
stabilize the slide is only eligible when it is integral to the
eligible repair of the damaged facility and when the site is not
unstable due to a pre-existing condition. The applicant must first
correct any pre-existing condition before the facility repair will be
approved by FEMA.
fema coordination of long term flood recovery plans
Question. As I understand it FEMA is currently responsible for
coordinating the response phase of a disaster. Is any agency
responsible during the recovery phase of federal disaster efforts? In
your opinion, could FEMA be the lead agency in the recovery phase? If
so, how would you direct your agency to handle the responsibility?
Answer. FEMA has been working with the primary Federal departments
and agencies involved in the Federal Response Plan (FRP) to determine
if, and how best to integrate recovery into the FRP. The complexity
arises from the significant difference between response and recovery
operations. Different authorities, Federal agencies and programs are
involved during disaster recovery. The full recovery effort may take a
considerable period of time, and continue long after FEMA field
operations have been concluded. The State and local role in recovery is
much more critical because that is where mitigation priorities are
determined and implemented.
FEMA has the clear responsibility under statute and executive
orders to lead and coordinate the Federal response to an emergency or
major disaster. Normal disaster response includes many of the recovery
efforts we now engage in for the full range of disasters, including
floods. At present, FEMA addresses recovery issues on a case by case
basis with our State and Federal counterparts to determine: (1) what
recovery efforts are appropriate; (2) who should participate; and (3)
what resources are available. FEMA's long-term goals to reduce the
impacts of future disasters can often be implemented by focusing on
increased mitigation efforts during the recovery phase. In addition,
during this year's Midwest floods, FEMA was asked by President Clinton
to establish a Long-Term Recovery Task Force to coordinate the Federal
effort. This approach may serve as a model for our future efforts;
however, to do this effectively additional personnel and financial
resources should be required. Normally, FEMA would transition out of
the recovery process as quickly as possible to free up critical
manpower and resources for other disasters, and to permit State and
local authorities to assert themselves in carrying out their recovery
responsibilities.
We acknowledge that specific Federal programs may continue as an
integral component of the long-term recovery effort. These programs
would operate under their own authorities and program guidelines.
PRE-DISASTER MITIGATION/INTERNATIONAL MULTI-HAZARD MITIGATION
PARTNERSHIP
Question. The President's budget request includes funding for pre-
disaster mitigation. Would you please tell the subcommittee what
specifically that funding is intended to accomplish?
Answer. Specifically, our priority goal is to reduce the impact of
natural hazards on public facilities eligible for disaster assistance
under the Stafford Act.
Question. Do you feel there is a need for additional technical
knowledge to help understand the science of how physical structures
react to disasters?
Answer. FEMA recognizes the need to improve our understanding of
how structures react to natural hazard events. Improved understanding
may either prevent future losses or reduce their magnitude. For this
reason, FEMA's National Mitigation Strategy (NMS) has identified
applied research and technology transfer as one area for further work.
Question. Do you feel there is a role for the national laboratories
in the pre-disaster mitigation program? What is that role?
Answer. The Department of Energy's National Engineering and
Environmental Laboratories have a long history of developing and
transferring state-of-the-art technologies throughout the public and
private sectors. The laboratories have been involved in studying the
effects of natural hazards for many years, such as the effects of high
winds and earthquakes on nuclear facilities. Currently the laboratories
have numerous initiatives underway in the area of natural hazards
mitigation. As examples, the Idaho lab is implementing the
International Multihazard Mitigation Partnership, intended to promote
full-scale simulation of natural hazards on structures and the Oak
Ridge lab has formed a partnership with the Roofing Industry Council On
Wind Impacts (RICOWI) to study the effects of high winds from tornadoes
hurricanes on roofing systems.
Question. Could you explain FEMA's position on the need for full-
scale testing of physical structures against simulated environmental
phenomena?
Answer. There is a broad agreement, both inside and outside
government, that a full scale wind test facility may improve our
understanding of the performance of buildings, structures, and
infrastructure when exposed to high winds associated with hurricanes,
coastal storms, gust fronts, thunderstorm downbursts, and limited
tornado scenarios.
FEMA and the Department of Energy have an inter-agency agreement to
establish a mitigation partnership called the International Multi-
Hazard Mitigation Partnership (IMMP). The IMMP shall work to achieve
relevant goals of the National Mitigation Strategy, specifically the
coordination of applied research and the implementation of research
results and public education. The IMMP will emphasize wind hazard
mitigation and utilize the Idaho National Engineering and Environmental
Laboratory (INEEL) as its applied research instrument.
Since the benefits derived under the IMMP will be diffused across a
broad spectrum, FEMA and INEEL believe there must be a broad coalition
of technical and financial support. FEMA's continued partnership with
INEEL is predicated on such a broad coalition being established.
Therefore, FEMA expects that its financial contribution will be
leveraged against the contributions of others and that the agency's
future financial contributions will not be the primary source of
funding for the IMMP or the construction and use of any proposed test
facilities.
______
Questions Submitted by Senator Mikulski
MARYLAND FLOOD TASK FORCE REPORT
Question. What commitments if any has FEMA made to assist with the
projects recommended in the Task Force Report?
Answer. FEMA has committed to working with the State of Maryland in
order to define statewide mitigation priorities relative to the
projects and measures identified in the Western Maryland flood
mitigation report. Prioritization will be based upon costs, projected
benefits, the effectiveness of the measures, and any other criteria
which the State believes need to be included. This is a critical step
in the process of carrying out the mitigation measures and actions
delineated in the report since the estimated cost of them is, at this
point, well beyond even those resources available nationwide.
Question. What time-line has FEMA committed to providing any
assistance to Maryland for projects outlined in the Flood Task Force
Report?
Answer. Two of the projects have already been approved for hazard
mitigation grant program funds: (1) the floodproofing of the Hancock
waste water pumping station and (2) floodproofing of the Friendsville
water treatment plant.
Question. Will any of the localities be eligible for a greater
match from FEMA than 75 percent?
Answer. Matching for hazard mitigation grants is set at 75 percent
Federal/25 percent State by the Stafford Act.
FLOOD INSURANCE CLAIM PROCESSING
Question. What steps have been taken in the last year by FEMA to
improve flood insurance claim processing?
Answer: While there are no published industry guidelines, the
private insurance industry accepts average claims closure of 60 days.
They expect 90 percent of all claims to be closed in 90 days. The NFIP
processing compares very well with private industry. Our record is
above private industry standards when you consider NFIP's losses are
much more severe and more difficult to adjust than windstorm losses
sustained by private industry in similar events.
In fact, private industry standards for claims check processing is
7 days from receipt of proof of loss. The average claims check
processing time for the NFIP is 3 days. Additionally, the standard for
claims adjustments averages 45 days from receipt of notice of loss. The
NFIP average is 31 days.
Ninety-two percent of the National Flood Insurance Program (NFIP)
policies are written by private insurance companies participating in
the Write Your Own (WYO) Program under an agreement with the Federal
Insurance Administrator. The agreement calls for the WYO Companies to
handle flood insurance as they would any other line of business.
When a claim is presented by the policyholder, the WYO company
handles the claim as if it were any other line of business they write.
Depending on their own rules, they will allow the agent to assign the
claim to an independent adjuster or the company will make the
assignment themselves, either to an independent or staff adjuster.
The other 8 percent of the NFIP policies are handled by the NFIP
Servicing Agent, National Con-Serv Incorporated (NCSI). These flood
policies are written through an insurance agent, but there is no
private company involved. The Federal Insurance Administration (FIA)
has staff on site to oversee the claims and policy operations.
At the time of a disaster, the WYO companies or NFIP Servicing
Agent decide whether to set up a claims office in the area of the
flooding. This generally depends on how many claims each entity expects
from the flooding event. Some of the WYO Companies have contracts with
independent insurance adjusting firms to handle the flood claims;
others rely on the local agents' knowledge of competent local adjusters
to handle the claims; and others assign the claims, or some of them, to
staff adjusters.
It should be remembered that the NFIP is an insurance operation and
must deal with an insurance contract that spells out what is covered
(paid) and under what circumstances. An adjuster is assigned to
determine what coverage is available to the insured, what the true
damages are, and what the values of the damaged items are. In order to
do this, the adjuster must write a building estimate and help the
insured compile a damaged contents list. All of this activity takes
some time and may require several visits to the same structure to
conclude the loss.
When a homeowner reports a fire claim under his homeowners policy,
it is assigned to an adjuster, generally a staff adjuster, who has a
backlog of about 30 claims, assigned to him over a period of a month.
In a flood catastrophe, the adjuster is assigned about 30 claims, or
more, all at once. Some structures are not ready to be inspected,
either because they are not completely dry or actually have flood
waters in them. Some dwellings are secondary dwellings, and the
insureds are not in the area. In hurricane catastrophes, some areas are
inaccessible, either because the roads/bridges are washed out or it is
too dangerous for anyone other than emergency or repair people to
enter.
The FIA has Computer Sciences Corporation under contract to act as
the NFIP Bureau and Statistical Agent. One of their duties is to employ
experienced, knowledgeable property insurance ``general adjusters''
(GA's) to be in the field to help the company and the NFIP Servicing
Agent adjusters with claims handling in general and with specific
coverage questions. The GA's also conduct reinspections of claims to
determine if the rules and regulations of the NFIP are being followed.
Also, the FIA has seven claims professionals who oversee various
aspects of the claims process and are available to give guidance to the
companies, contractors and adjusters. They also handle claims appeals
that deal with technical issues. The FIA staff go into the field to
help in the overall claims process and to give support to the Federal
Coordinating Officer (FCO) at the Disaster Field Office (DFO). The FCO
is also supported by the NFIP Bureau and Statistical Agent staff in the
aftermath of a Presidentially declared disaster.
Finally, to improve NFIP claims processing, the Bureau and
Statistical Agent holds adjuster workshops all over the United States.
The adjuster workshops teach what is expected by the NFIP on claims
handling processes and also claims coverage. Some of these workshops
are done in conjunction with workshops put on by the larger independent
claims adjustment firms or for staff adjusters of individual WYO
Companies. In fiscal year 1996 FEMA conducted 33 workshops.
MITIGATION EFFORTS
Question. Director Witt, like you, I am an advocate for strong
mitigation efforts that take a proactive approach to reducing the
impact from nature's fury. At last year's hearing, you mentioned that
FEMA was working on Memoranda of Understanding (MOU's) with the States
to establish a statewide mitigation plan within each State where they
identify their high-priority mitigation projects. What is the status of
the MOU's? What are the State plans looking like--are the standards
consistent with FEMA's view of what standards States should meet?
Answer. After last year's hearings, a workgroup composed of both
FEMA and State representatives met and determined that there are
several existing FEMA/State documents beyond MOU's that can serve as
tools for resolution and clarification of issues. These documents range
from formal long-term agreements (such as the Performance Partnership
Agreements), to extremely detailed operational documents (such as the
Hazard Mitigation Grant Program Administrative Plan).
Because of the existence of these other tools, FEMA and the
National Emergency Management Association decided to leave it up to
each State whether or not they wish to develop a separate MOU with FEMA
in order to capture high-priority mitigation projects and other
critical pieces of information that could streamline State mitigation
activities. FEMA's Regional Offices are currently working with the
individual States to determine their interest in developing separate
MOU's.
Question. FEMA's budget request for fiscal year 1998 includes $50
million for a pre-disaster mitigation program. Has the program been
authorized? If not, what is the status of FEMA's attempt to get the
program authorized? Will the program take into account lessons learned
in past mitigation work by FEMA and local communities? What are the
eligibility criteria for communities seeking funding? Will communities
that have received post-disaster mitigation money in the past be
eligible for funds? Has FEMA done an analysis of how much money could
be saved by doing needed pre-disaster mitigation?
Answer. There is presently no statutory authority for the pre-
disaster mitigation program for which FEMA has requested $50 million in
fiscal year 1998 appropriations. However, by July 4 we will be
submitting draft legislation to amend the Stafford Act to authorize a
pre-disaster hazard mitigation program.
In designing the Pre-Disaster Mitigation Program (using the $2
million already provided by the Congress in fiscal year 1997), FEMA
considered lessons learned from Federal, State and local mitigation
activities in order to ensure the success of the program. For example:
--Historically, the most successful mitigation actions have been
those which involved persons and organizations from across the
community. That is why the Pre-Disaster Mitigation Program will
encourage communities to bring all the necessary players to the
table from the very beginning to develop a consensus regarding
mitigation needs and priorities.
--In many areas, the support of the private sector has been critical
in gaining the necessary resources and support for mitigation
work, and in ensuring that the subject mitigation actions
protect the economic health and vitality of target communities.
That is why FEMA's Pre-Disaster Mitigation Program will place
such a heavy emphasis on bringing in private sector partners
(such as insurance companies, financial institutions, and area
manufacturers) at an early stage.
--Communities often have difficulty managing unreasonable
administrative requirements associated with Federal programs.
At FEMA, we are committed to reducing paperwork and
bureaucratic red-tape in the delivery of this new mitigation
program.
--Both past experience and research have demonstrated that mitigation
is a ``dollars and cents'' issue (i.e., incentives are
necessary to effectively encourage mitigation at the State and
local levels). This is the reason why the Pre-Disaster
Mitigation Program will leverage State, local and private
sector contributions with Federal project funding.
While these are but a few examples of how we plan to use ``lessons
learned'' from past experience, they demonstrate that we are trying to
avoid past mistakes and maximize our successes in implementing this new
program at FEMA.
The communities selected to participate in the program will be
chosen according to a number of factors, including: their level of
risk; the degree to which the proposed pre-disaster mitigation actions
and processes will reduce that risk; and the ability to transfer the
processes, approaches, or technologies to similar at-risk communities
throughout the United States. In addition, communities will be selected
according to the proposed level of commitment of State, local, and
private sector partners (i.e., time, funding and resources brought to
the table). This should help maximize the ``bang for the buck''
realized for each taxpayer dollar invested through the Pre-Disaster
Mitigation Program. Communities will not be disqualified or lowered on
the priority list simply because they have experienced past disasters
and have received prior mitigation funding from FEMA.
The actual level of cost-savings resulting from this program are
difficult to quantify at this time, since the return on the Federal
investment will be highly project-specific, and will vary upon the
amount of non-Federal contribution to each activity. However, we have
found that mitigation measures return, on average, more than $2 for
every $1 invested. This demonstrates that an investment in pre-disaster
mitigation now will result in real cost-savings over the long-term to
the American taxpayer.
FITNESS FOR DUTY/PREPAREDNESS TRAINING
Question. What is the status of FEMA's work with states on
developing a plan to evaluate state capability that gauges fitness for
duty, and not just written reports?
Answer. FEMA is currently working with our partners to develop a
formal system that will enable us to assess the effectiveness of State
and local capabilities. The goal is to create an assessment system that
will be acceptable to all States and will result in a reliable and
consistent national evaluation of the state of readiness in the nation.
Our intent is to have the capability assessment tool tie into and
complement the States' strategic plans developed as a part of their
performance partnership agreements developed cooperatively by FEMA and
the State and local emergency management departments and agencies. We
expect that we will soon be able to provide an objective appraisal of
their capabilities and progress.
It is intended that States will use these Mitigation Assistance
funds to enhance their capabilities to implement mitigation, and
provide assistance to local governments to implement mitigation. As a
result, these funds should have minimized any impact that reduced SLA
support would have on State mitigation programs.
Question. The budget request asks for $11.3 million less for
Preparedness, Training and Exercises. I understand that some of this is
due to limiting development, revision, and dissemination of field
courses. How will this impact the ability of FEMA to ensure we have
adequate fitness for duty training?
Answer. Nearly 80 percent of the $11.3 million reduction results
from the redistribution of funds that support the Mt. Weather Emergency
Assistance Center from the Preparedness, Training and Exercises
activity to users/customers of the facility. A shift to decentralized
counter-terrorism programs results in the reduction of approximately 17
percent of the total reduction. Lastly, less that a two percent
reduction applied to training activities. This $200,000 reduction will
somewhat reduce centrally-developed materials which support field
delivery of training, and will defer two course development/revision
projects. FEMA has not taken any steps that will reduce fitness for
duty training, either for our State and local partners, or for in-house
personnel.
Question. The Maryland Emergency Management Agency and the National
Emergency Management Association have contacted me about the negative
impact experienced at the local level by reductions in the State and
Local Assistance Grants (SLA). My understanding is that there was a
$2.9 million cut to SLA for deficit reduction purposes, and that FEMA
has requested additional money for the account to bring it back up to
fiscal year 1996 levels. What impact has the cut had on States'
response and recovery and hazard mitigation efforts?
Answer. FEMA's fiscal year 1998 budget request for SLA is at the
same level as the fiscal year 1997 appropriation. This request includes
funding in support of implementing counter-terrorism activities and
improving HAZMAT emergency preparedness. FEMA also has several other
programs that provide assistance, directly or indirectly, to State and
local governments for the development and enhancement of emergency
management capabilities.
The decrease in SLA funds should have had no impact on States'
mitigation efforts. In fiscal year 1997, FEMA provided an additional $3
million to States for the purpose of enhancing their capabilities to
implement hazard mitigation efforts. These Mitigation Assistance funds
were distributed equally among all 56 States and Territories.
Additionally, FEMA provides risk-based funds to States that have an
identified hurricane or earthquake hazard (in fact, during 1997 FEMA
doubled the funding it provides to hurricane-prone States). Both of the
Hurricane and Mitigation Assistance funds are provided to States as
elements of the Mitigation Assistance Program, which is part of the
FEMA/State Performance Partnership Agreement/Cooperative Agreements
(PPA/CA) process.
Our current approach emphasizes development of partnerships with
State and local emergency management departments and agencies that will
allow greater flexibility to better meet their needs. FEMA provides
grants to the States and encourages the locals to work through their
States to ensure a coordinated effort in working towards the objectives
identified in their Performance Partnership Agreements. These
partnerships are based on the expectation, and the confidence, that
giving the States greater control over the process will enable the
States and their subdivisions to perform more effectively and
efficiently. We are developing a nationwide capability assessment
process in fiscal year 1997 which will allow us to provide an objective
appraisal of the level of capability among all pieces of the emergency
management partnership nationwide, and our progress.
DISASTER RELIEF (FEMA REPORT ON REDUCING COSTS)
Question. During consideration of last year's VA-HUD bill, FEMA was
directed to submit a report within 120 days proposing steps to reduce
disaster relief costs. The draft of this report was delivered to staff
last week. What has FEMA done to reduce disaster relief costs? How
effective have these efforts been in reducing costs?
Answer. As indicated in FEMA's March 13, 1997 Report to Congress
entitled ``Improving Management Controls in the Disaster Relief Fund,''
major steps have been taken in the administration of disaster programs
that have not only helped contain costs, but have also resulted in
better and more timely service to our customers. Chief among these
steps is the central processing of our Human Services Programs. We no
longer establish Disaster Application Centers throughout the declared
areas or a separate processing center for each disaster--which can be
very costly in terms of staff and equipment. Rather, disaster victims
are encouraged to call a toll-free number to register for assistance,
and all applications are processed at one of three National Processing
Service Centers. In a similar fashion, a single Disaster Finance Center
has been established to aggregate disaster payments and reduce overhead
costs.
Administrative improvements have been accomplished in many other
areas to streamline our operations and reduce costs. These include the
establishment of a Disaster Resources Board to review and monitor
funding for those support functions needed to support all disasters,
and reinvigorated efforts for disaster debt collection and disaster
close-outs.
FEMA also has a major initiative underway to streamline the Public
Assistance Program, and has proposed measures to reduce program costs
by limiting eligibility for certain types of assistance. These measures
were addressed in a separate March 13, 1997 Draft Report to Congress,
entitled ``Reducing Disaster Relief Expenditures.'' That report has
been transmitted to our State partners in emergency management for
review and comment.
However, a number of the recommendations from that report are
already in the process of being implemented.
--A final report with recommendations to streamline the Public
Assistance Program will be issued by late April, and measures
to streamline the program will be pilot tested by early summer.
--A proposed rule was published in October 1996 to limit appeals from
three to two. FEMA is now in the process of preparing a final
rule to reduce the number of appeals.
--A massive training effort was undertaken in the past year to train
Public Assistance Inspectors to ensure that the program is
implemented efficiently and consistently. Over the past two
years over 1,000 inspectors have been trained.
--On February 20, 1997 FEMA issued an interim policy stating that
trees and shrubs would no longer be an eligible cost under the
Public Assistance Program. On March 10, 1997 a formal policy
disallowing trees and shrubs was sent to all FEMA regions and
to States for review and comment.
--FEMA is in the process of preparing legislative changes that would
implement many of the other recommendations of the draft
report.
It is difficult to calculate the cost savings of many of our
administrative or program improvements, though we do have specific cost
figures on some of these measures. FEMA, in a study two years ago,
calculated that using teleregistration rather than Disaster Application
Centers for the Human Services Programs has reduced the cost per
application from $59 to under $14. FEMA's accelerated disaster close-
out effort has resulted in closing out 415 Human Services Programs,
with a reconciliation of more than $1.8 billion in the Disaster Relief
Fund. Of this amount nearly $403 million in obligation authority was
returned to the Fund.
Measures to streamline the Public Assistance Program, and to
restrict types of assistance, are still in the early stages of
development and implementation so their effectiveness has not yet been
measured. Cost-savings could potentially be great if substantive
measures are taken to refocus this program on essential governmental
facilities and the protection of life and property.
Question. Which of the options for reducing costs outlined in the
FEMA report can realistically be implemented in the next 1-2 years?
Answer. Those recommendations which do not require statutory change
could be implemented in the next 1-2 years.
Question. What is FEMA's time-line for implementing the options
noted in the FEMA report?
Answer. Those recommendations which can be done without statutory
change can be implemented within the next 1-2 years. FEMA will also be
submitting a legislative proposal by July, 1997 to implement those
recommendations which require statutory change.
Question. What is the status of work on clarifying the criteria for
disaster declarations?
Answer. In the Fall of 1996, FEMA established a Panel on Disaster
Cost Savings to examine, among other things, the issue of declaration
criteria. Upon analysis and consultation with our partners, we have
concluded that the high costs in the disaster program are driven by the
number of large major disasters and broad eligibility criteria, rather
than the number of declarations.
We believe that the current declaration criteria continue to be
appropriate, and, in order to reduce costs, have placed major focus on
streamlining activities and targeting eligibility. However, factors
used to judge severity, magnitude and impact are being updated to
reflect current dollars and procedures for conducting Preliminary
Damage Assessment are being reengineered.
CHEMICAL STOCKPILE EMERGENCY PREPAREDNESS PROGRAM
Question. FEMA and the Army have been working jointly on the
Chemical Stockpile Emergency Preparedness Program (CSEPP). I know there
has been some dispute over the management of the program, and the
funding of some programs and activities that didn't necessarily fit the
mission of the program. What is the status of FEMA's involvement with
the CSEPP program?
Answer. There have been issues between FEMA and the Department of
the Army regarding the day-to-day management of CSEPP that require
resolution. However, while we recognize that there is a perception in
some quarters that the issues are affecting program delivery, both FEMA
and the Army have worked very closely to ensure the uninterrupted
delivery of program services. Given the different operating styles of
FEMA and the Army, it is reasonable to expect periodic problems to
arise with program delivery. As they have with previous programmatic or
stylistic differences, both FEMA and the Army have been taking positive
steps towards resolving these issues and believe that they will be
resolved shortly for the maximum benefit of the program. It is
important to note that FEMA Director James Lee Witt and Secretary of
the Army Togo West are personally involved in resolving these issues
expeditiously.
Question. What are some improvements that you think both the Army
and FEMA could make to ensure that we are getting the most bang for the
taxpayers buck, and to make sure we are sticking to the mission of the
program?
Answer. With respect to program funding, of over $536 million
requested to date by the States to support the program, only $240
million has been provided. In many instances, this difference is the
direct result of the Federal government's insistence that only projects
consistent with CSEPP policy be funded. Thus, while in some instances
States and local governments continue to make budgetary requests which
exceed programmatic needs, FEMA is confident that strong program
oversight has minimized the approval of these excess or extravagant
projects.
NATIONAL DAM SAFETY PROGRAM
Question. The National Dam Safety Act was signed by the President
in October. This program to help States prevent dam failures seems like
a prudent investment toward protecting people and property below dams,
especially considering there are over 1,800 unsafe dams in the country.
There are 55 high hazard dams in Maryland alone--many of which don't
have effective emergency warning plans. The issue of effective warning
systems was raised after the flooding at Port Deposit, Maryland last
year. What is FEMA doing to implement the Dam Safety Act Program?
Answer. After the National Dam Safety Act was signed into law, FEMA
developed a work plan, which established a mechanism and process for
implementing the new legislation. The work plan consists of nine
sections:
--Establish an Interagency Committee on Dam Safety (ICODS).--ICODS
was originally established in 1980 under Executive Order 12148
and operated under a Charter published in the Federal Register
on August 28, 1985. Now that the National Dam Safety Act has
codified the ICODS, the group's charter is being revised to
reflect its new status.
--Develop and Complete the Implementation Plan for the Dam Safety
Program.--A task force, including representatives from FEMA,
the Departments of Agriculture, Defense and Interior, the
Federal Energy Regulatory Commission, and the States, has been
formed to accomplish this initiative. To date, the Task Force
has met three times and the assignments made to members have,
to date, progressed on schedule. The Task Force is on course
for completion of the implementation plan by the deadline
established in the National Dam Safety Act.
--Training for State Dam Safety Officials.--An ICODS training
subcommittee has been revived, and members are now working on
developing a list of priorities for new training courses. In
addition, FEMA recently developed two new courses: (1) Dam
Safety Emergency Action Plan Development for Dam Owners; and
(2) Dam Safety Emergency Action Plan Exercise Development for
Dam Owners. If the funds that were authorized for training are
appropriated by the Congress, the dissemination of new training
opportunities will escalate.
--Establish Goals, Objectives, Priorities, Schedules, and Regulations
for Implementing the National Dam Safety Program.--The Task
Force, in a largely parallel effort, is developing information
on goals, objectives, priorities and schedules necessary to
prepare the needed regulations. All activities are on schedule
at this time.
--Provide Recommendations on Establishment of the National Dam Safety
Review Board.--The Act specifies the composition of this Board,
and the Task Force is in the process of developing
recommendations to present to the FEMA Director on the
feasibility, desirability and viability of forming this Board.
--Develop and Implement a Program of Technical and Archival
Research.--This assignment is being accomplished at two levels:
(1) the ICODS Subcommittee on Research has been established and
will identify research needs both at the Federal and non-
Federal level; and (2) the National Performance of Dams Program
(located at the Center on the Performance of Dams at Stanford
University) has been established as an outreach mechanism to
obtain information and data on dams.
--Prepare a Biennial Report to Congress on the Status of the National
Dam Safety Program for Fiscal Year 1996-97.--FEMA has been
providing biennial reports to the President and Congress since
1980. This process will continue. The 1996-97 report will be
ready to transmit to Congress and others by December 31, 1997.
--Report to Congress on the Availability of Dam Insurance.--We have
solicited information from the Federal Insurance Administration
and the Insurance Industry, and are in the process of analyzing
available data. This report should be ready by April 30, 1997.
--Develop a Staffing Plan for Implementing the National Dam Safety
Program.--At this time, two FTE are dedicated to the Program.
No change in the staffing level is anticipated for fiscal year
1998.
Question. I understand that one dam failure last year alone caused
$5.5 million in damages and the death of one woman. What amount of
disaster relief funds have been spent by FEMA as a result of dam
failures over the past five years?
Answer. While dam failures may have resulted from some incidents,
they have not been the principal cause of any recent major disaster
declarations. FEMA's charting of the causes of natural disasters
generally reflects the weather event (hurricane, storms, tornadoes,
etc.) which was the initial cause of the declaration.
COORDINATION EFFORTS WITH COUNCIL ON ENVIRONMENTAL QUALITY (CEQ)
Question. I know that FEMA works in partnership with other
agencies. Working in partnerships with other agencies can help produce
a more effective and efficient government approach to disaster
readiness, response, recovery, and mitigation. What is FEMA doing to
coordinate with the Council on Environmental Quality (CEQ) to make sure
that environmental mandates don't impede relief efforts?
Answer. FEMA has historically coordinated with CEQ as we developed
improved environmental compliance methodologies or as complex and
controversial issues have arisen. Of special note is the fact that CEQ
recently hired an individual to act as primary point of contact with
FEMA. This provides a mechanism to better interact with CEQ as we
continue to improve the process to evaluate and minimize environmental
impacts of our activities while ensuring environmental mandates do not
impede relief efforts.
FEMA, in coordination with CEQ, has undertaken several significant
initiatives recently which have helped reduce potential impediments of
environmental compliance. The most significant initiatives include:
--FEMA has revised its environmental regulations at 44 CFR adding to
its list of Categorical Exclusions activities requiring minimal
environmental review and documentation. This has reduced
environmental review requirements by as much as 50 per cent for
some Agency programs.
--FEMA has provided a National Environmental Policy Act (NEPA)
training course to over 300 FEMA and State Emergency Management
staff Nationwide to enhance the capabilities of individuals
involved in environmental review. This has served to provide
the State Agencies who administer many of FEMA's programs with
the ability to identify and resolve environmental issues early
in the relief effort or project development phase.
--FEMA has hired seven Regional Environmental Officers to coordinate
environmental issues in the field. This is a significant step
in the process of decentralization of environmental review that
will allow for improved coordination between FEMA, other
federal agencies, and State and local officials on
environmental issues related to disaster relief efforts.
Question. I suggested to CEQ Chairman Katie McGinty at their
hearing in February that FEMA, CEQ and other relevant agencies develop
SWAT teams that can rapidly determine emergency provisions in
environmental regulations so that relief efforts won't be unduly
delayed while FEMA is trying to save lives. What can you commit FEMA to
doing regarding this coordination of SWAT teams? What can FEMA do to
involve CEQ in its simulation maneuvers?
Answer. It is very important to note that provisions within the
Stafford Act and FEMA's regulations are in place to ensure that
environmental requirements will never delay FEMA's immediate efforts to
save life or property. The issue of streamlining environmental review
requirements by utilizing emergency provisions and through coordination
with other Federal agencies is an issue which is more relevant in FEMA
undertakings for which there is sufficient time to plan and evaluate an
action.
One of the primary responsibilities of the recently created
position of Regional Environmental Officer is to coordinate
environmental issues immediately following a disaster event. This
includes being located at the Disaster Field Office to coordinate with
relevant agencies such as the Environmental Protection Agency, the Army
Corps of Engineers, and the U.S. Fish and Wildlife Service in order to
streamline implementation of the requirements of the environmental laws
that these agencies administer. FEMA will continue to further define
the roles of the Regional Environmental Officers and work with CEQ to
ensure coordination of relevant agencies, an approach which is
consistent with the ``SWAT'' team concept.
SUBCOMMITTEE RECESS
Senator Bond. The subcommittee stands in recess until April
8, at 9:30 a.m., when we will take testimony from the EPA.
[Whereupon, at 10:58 a.m., Tuesday, March 18, the
subcommittee was recessed, to reconvene at 9:30 a.m., Tuesday,
April 8.]
DEPARTMENTS OF VETERANS AFFAIRS AND HOUSING AND URBAN DEVELOPMENT AND
INDEPENDENT AGENCIES APPROPRIATIONS FOR FISCAL YEAR 1998
----------
TUESDAY, APRIL 8, 1997
U.S. Senate,
Subcommittee of the Committee on Appropriations,
Washington, DC.
The subcommittee met at 9:34 a.m., in room SD-138, Dirksen
Senate Office Building, Hon. Christopher S. Bond (chairman)
presiding.
Present: Senators Bond, Burns, Shelby, Craig, Mikulski,
Leahy, Lautenberg, and Boxer.
ENVIRONMENTAL PROTECTION AGENCY
STATEMENT OF CAROL M. BROWNER, ADMINISTRATOR
ACCOMPANIED BY:
FRED HANSEN, DEPUTY ADMINISTRATOR
SALLYANNE HARPER, ACTING CHIEF FINANCIAL OFFICER
AL PESACHOWITZ, ASSISTANT ADMINISTRATOR, OFFICE OF
ADMINISTRATION AND RESOURCES MANAGEMENT
JONATHAN Z. CANNON, GENERAL COUNSEL
DAVID GARDINER, ASSISTANT ADMINISTRATOR, OFFICE OF POLICY,
PLANNING AND EVALUATION
ROBERT PERCIASEPE, ASSISTANT ADMINISTRATOR, OFFICE OF WATER
TIMOTHY FIELDS, ACTING DEPUTY ASSISTANT ADMINISTRATOR, OFFICE
OF SOLID WASTE AND EMERGENCY RESPONSE
MARY NICHOLS, ASSISTANT ADMINISTRATOR, OFFICE OF AIR AND
RADIATION
STEVE HERMAN, ASSISTANT ADMINISTRATOR, OFFICE OF ENFORCEMENT
AND COMPLIANCE ASSURANCE
LYNN R. GOLDMAN, ASSISTANT ADMINISTRATOR, OFFICE OF PREVENTION,
PESTICIDES AND TOXIC SUBSTANCES
ROBERT J. HUGGETT, ASSISTANT ADMINISTRATOR, OFFICE OF RESEARCH
AND DEVELOPMENT
WILLIAM A. NITZE, ASSISTANT ADMINISTRATOR, OFFICE OF
INTERNATIONAL ACTIVITIES
NIKKI L. TINSLEY, ACTING INSPECTOR GENERAL
JULIE ANDERSON, ACTING ASSOCIATE ADMINISTRATOR, OFFICE OF
CONGRESSIONAL AND LEGISLATIVE AFFAIRS
MARY LOUISE UHLIG, ACTING ASSOCIATE ADMINISTRATOR, OFFICE OF
REGIONAL OPERATIONS AND STATE/LOCAL RELATIONS
PHILIP LANGRIGAN, EPA CONSULTANT, CHILDREN'S OFFICE
J. CHARLES FOX, ASSOCIATE ADMINISTRATOR, OFFICE OF REINVENTION
W. MICHAEL MC CABE, REGIONAL ADMINISTRATOR, EPA REGION, III
KATHRYN S. SCHMOLL, COMPTROLLER
ELIZABETH CRAIG, DIRECTOR, BUDGET DIVISION
OPENING STATEMENT OF CHRISTOPHER S. BOND
Senator Bond. Good morning. The subcommittee will come to
order.
We meet this morning to take testimony from the
Environmental Protection Agency on its fiscal year 1998 budget
request. The request totals $7.6 billion, an increase of $845
million, or 12 percent over the current budget. Today, we are
pleased to welcome EPA Administrator Carol Browner, Deputy
Administrator Fred Hansen, and other EPA officials.
While most agencies in the VA-HUD portfolio have budget
requests which would maintain current services at best, EPA
would enjoy increases in virtually every programmatic area
under the President's proposal with the exception of clean
water State revolving funds. Not surprisingly, I do not believe
EPA's proposal is realistic in the budget environment in which
we are operating.
Overall spending available to this subcommittee for
Veterans Affairs and Housing and Urban Development, EPA, NASA,
and other areas may not be significantly more than a freeze at
the current year's level. Yet to maintain current health care
service for veterans, at last $500 million above last year's
level would be needed. About $5.6 billion would be needed to
maintain existing low-income housing contracts scheduled to
expire next year, and a total of $5 billion will be needed to
meet FEMA disaster assistance requirements this year and next
year. Clearly, we have to be looking closely at all aspects of
EPA's budget requests to ensure that dollars are targeted to
those areas offering the largest opportunity for risk
reduction.
Quite frankly, EPA's budget proposal is disappointing. Last
year, Deputy Administrator Hansen testified that EPA's fiscal
year 1998 budget process would be based on a new system,
bringing together risk-based planning, budgeting, and
accountability. But there is no evidence that such a process
was employed to develop the budget for the coming year. It
seems to me that no hard choices were made to discontinue lower
priority programs or to reduce costs through program
efficiencies.
Despite internal EPA analyses dating back to 1987 that
found that Superfund sites rank relatively low in risk compared
to such problems as air pollution and pesticide residue on
foods, EPA's budget proposes a 50-percent increase, $700
million for the Superfund program. The proposal seems based
entirely on a campaign commitment made by the President in
Kalamazoo, MI, to double the pace of cleanups. If EPA were
truly applying a relative risk methodology to its budget
process, I am convinced this program would not merit a 50-
percent increase.
While the Superfund budget would increase dramatically, the
clean water State revolving fund, a program which works well
and for which tens of billions of dollars are needed, would be
cut by $275 million. Rumor has it that EPA offered up this
program to be cut as an offset to the Superfund increase. If
additional funds are to be found within our allocation, my
highest priority within EPA will be to restore the cut to the
clean water SRF program.
Now, the General Accounting Office has done a little study
in the high-risk series. It has found that Superfund is 1 of 25
Government programs which is high risk, subject to fraud,
waste, abuse, and mismanagement. It is not just the GAO. This
program has been criticized by many, many in this room, I dare
say, over the years because it lines the pockets of lawyers
while sites get studied and studied and studied. Legislative
reforms have been blocked. But until legislative reforms are
enacted, I cannot support any increase in this program. If we
get this program reformed so it cleans up sites, call me
immediately. I can be reached day or night when a proposal to
reform Superfund is adopted.
EPA's fiscal year 1997 budget showed outyear budget
projections of $1.4 billion through the year 2000 for the
Superfund program. Yet now we are told $2.1 billion is
imperative for each of the next 2 years. Indeed, top officials
at EPA have been quoted in the press warning about the dire
consequences of not fully funding the President's request for a
50-percent increase. Why all of a sudden this program became
EPA's highest priority has not been fully explained. How EPA
would manage to spend prudently 50 percent more in the program
has not been explained. Which specific sites will be funded, at
what cost and when has not been explained. It appears that the
methodology used to support the Superfund request is flawed,
and uses inflated cost assumptions, according to the
Congressional Budget Office.
Finally, I note that skepticism abounds over the Superfund
proposal. Senator Chafee, chairman of the authorizing
committee, has stated:
That Superfund remains a fundamentally flawed program.
Cleanups still take too long, many cleanups are still too
costly, and there is still too much litigation. It would be
unwise and irresponsible for Congress to authorize a
significant increase in funding for this program until we
complete the task of reauthorization and can be sure that the
money will be used to accelerate the pace of cleanup and
protect our citizens.
And the Association of State and Territorial Solid Waste
Management Officials, in testimony, states:
We do not know whether there is enough pending work for the
full $700 million in additional funds requested in fiscal year
1998, nor that the infrastructure exists to spend it
effectively.
Other items in EPA's budget request rekindle debates of the
past. For example, $149 million is requested for the climate
change action plan, a 73-percent increase over current spending
even while the global environment management initiative
recently reported that voluntary programs are not affected. In
its recent report, GMI stated programs which depend for their
success on cooperation, voluntariness, and trust still do not
fare well. To date, the Green Lights Program, which would enjoy
the largest proportion of the requested increase, has achieved
a relatively small amount of greenhouse gas reductions and
participants have not upgraded as much floor space as
anticipated.
Also, an earmark of $100 million is requested for Boston
Harbor, more than double what was approved in the VA-HUD bill
last year. While the clean water State revolving funds which go
to every State on a fair share basis would be cut by $275
million. Several new initiatives have been proposed with scant
detail, including an urban livability initiative and a new
right to know initiative announced by the President in
Kalamazoo.
Outside of the budget proposal, we have other concerns.
While this committee has strongly supported efforts to provide
more flexibility and reduce oversight on the States, and the
National Academy of Public Administration recommended 2 years
ago, recent reports raise concerns about EPA's relationship
with the States. While EPA promised there would be a new
partnership, it appears that the marriage is on the rocks. Ms.
Browner, the Environmental Council of States told you after
your interview with the New York Times in December, in which
you criticized State enforcement efforts:
States are very concerned about what appears to be a
retreat on your part from the partnership relationship which
has been carefully, and in some instances painfully built over
the past 4 years. State commissioners are disappointed to be
the objects of your apparent lack of trust.
In addition, there are significant problems with EPA's so-
called reinvention efforts. Ms. Browner, in our hearings 2
years ago you told Senator Mikulski:
We would like nothing better than to see an integration of
our underlying statutes. I believe we can achieve almost exact
same results through programs such as the common sense
initiative. We want to focus our energy on those kind of
concrete on-the-ground changes. Our reinvestment effort CSL
project XL will in the end achieve as important results as the
kind of legislation which you speak of.
Unfortunately, it appears that project XL and the common
sense initiative hardly have lived up to the promises made.
Earlier this year the petroleum industry withdrew from the
common sense initiative, and the auto industry apparently said
it would remain a part of CSI until work it has done is
completed. CSI participants have told us that little has been
accomplished in the way of meaningful reforms, and too much
emphasis has been placed on reaching absolute consensus.
As to project XL, which has been called the centerpiece of
the administration efforts to reinvent environmental
regulations, 2 years ago EPA claimed it would be launching 50
initiatives in 1995. Yet today there have been only three
project approvals. Bill Sugar, senior director of environmental
affairs for Anheuser Busch in St. Louis, one of the eight pilot
XL projects selected in November 1995, has said we could not
seem to get the out of the box thinking we wanted to get out of
them.
EPA recently announced the creation of an Office of
Reinvention. We look forward to hearing about how this new
office will reinvigorate these initiatives and get them on the
track. I would note that the enterprise for the environment
project under Bill Ruckelshaus' stewardship, is nearing
completion. EPA has been an active participant in that project,
and I particularly commend Fred Hansen for the many hours he
has devoted to it. E4E is intended to offer recommendations for
an improved environmental management system, including
legislative recommendations. We are anxiously awaiting the
final report and recommendations of E4E, and hope to see
positive bipartisan recommendations to address some of the
current problems.
In closing, it is my hope that EPA's appropriation can be
resolved in an expeditious nonpartisan manner, and that we can
work together to address some of the problems we are seeing and
achieve the most effective allocation of resources. We look
forward to your testimony, and now it is my pleasure to turn to
my ranking member, Senator Mikulski.
STATEMENT OF BARBARA A. MIKULSKI
Senator Mikulski. Thank you very much, Mr. Chairman, and I
want to welcome Administrator Browner here today, and her team.
I note that this is Ms. Browner's fifth appearance before this
subcommittee, and I want to take this opportunity to thank her
for her efforts and her leadership over the last 5 years.
I also note that Ms. Browner's tenure has not been
uneventful. Budget cuts and Government shutdowns have not made
it easy to do her job or easy for the people who work at EPA to
do their job. In addition, often a climate of hostility toward
environmental protection in the Congress as a whole,
particularly the authorizing committees, has not necessarily
been the most constructive climate to move our agenda. I
believe that EPA has survived these challenges, and has taken
many initiatives to make the long-term changes that are
necessary to keep up with a changing world.
I would agree that we need to do more in better management
and more in better use of technology. I happen to believe that
environmental protection goes hand in hand with economic growth
and job creation. Protecting our environment does create jobs,
and not destroy them. New economic opportunities and markets
flow from environmental protection services and technology
which hopefully generate jobs in our own country, and even give
us an opportunity for global exports with both exporting our
knowledge, our services, and our technology, an area I would
like to pursue in our questions.
Also, Maryland has benefited from the Environmental
Protection Agency in the bipartisan support for the Chesapeake
Bay, going back to Richard Nixon, to Senator Mathias, who
really is the father of the Bay Program, until now. Cleaning up
the Bay is not only good environment, but it is sure very good
for Maryland economy. Watermen, commercial fishermen, economic
development, and a host of other businesses depend upon a clean
bay to earn a living. The Chesapeake Bay Program is an
investment in cleaner environment and a healthier economy.
I also want to talk about two other aspects in our
questioning that I think will generate jobs, and then, also,
another to save lives. Administrator Browner, I look forward to
hearing from you more on the brownfields initiative. The
brownfields legislation was recently passed by my own Maryland
General Assembly. We are now looking forward to how brownfields
could be an absolute tool to helping clean up some of the toxic
areas around Baltimore that would then leave us new land, and,
therefore, new opportunity in the very empowerment zone to
attract jobs.
We also note the President's child's health initiative,
which though might not generate jobs, sure saves lives. We note
again in my own home State of Maryland the rise in lung and
respiratory illness gives me enormous pause, particularly the
rise if asthma among children and the onslaught of adult asthma
among adults is really of concern. This does not seem to have a
genetic base, but it certainly does seem to have an
environmental base. And for the little kids in Baltimore that
we are trying to get in school and having them read by the time
they are in the third grade, we want to make sure that this is
an initiative that we want to hear more about, and is not just
a photo op, just not a press release, and it is not a throw-a-
line at press conference, but a real initiative.
I must say that in the budget, though, I am deeply
concerned about the cut in the State water revolving fund. This
has been a very important tool when I was both the chairman and
now as ranking. We get more requests for special projects from
our colleagues in the Senate around the need to have more water
infrastructure, and as you know, Ms. Browner, infrastructure in
our cities is really aging.
So we look forward to working with you. We want to look at
how we can reduce costs, and we also want to hear more about
project XL, the commonsense initiative, and how you have
continued to implement the NAPA project.
So I welcome you, fellow or sister resident from downtown
Tacoma Park, one of the garden spots in Maryland, and look
forward to your testimony.
Senator Bond. Thank you very much, Senator Mikulski.
Senator Burns.
STATEMENT OF CONRAD BURNS
Senator Burns. Thank you very much, Mr. Chairman. I do not
have much of a statement. It would not make any difference
anyway. There are a couple of areas that I cannot get my hands
on. I got in late last night, and I cannot get my hands on
them, but I am going to look at them very shortly. We had a
list of all this money that goes to foreign countries to do
something that comes out of the EPA. I do not know what it
does, but I know there is a chunk of it. I would rather spend
it in this country, to be honest with you.
I am sensitive to ground water. I want to give you a little
figure here, and I will tell you why. We in the West get very
sensitive about our water. I got a daughter that graduates
medical school in June. Her advice to me right now is very
economical; however, she says after June 7 it goes up sharply.
But she said, you know, the increase in the average life span
of an American has gone up rather sharply since World War II.
The medical profession cannot take but maybe 5 or 10 percent
credit for that advance. The rest of it goes as how we handle
our water, because more life-shortening diseases are waterborne
than any other disease. So we are sensitive to that, and I want
to look at it.
You have also requested 100 more people in each one of your
regions for EPA people, I think, and this is what I read in a
newspaper, I think, the Casper Star. Well, anyway, it is always
a big surprise, but the President has got it in his budget, and
that should be you, I would imagine. I would want to change the
emphasis of enforcement to people who help in compliance rather
than a hammer. I want to carrot people, I do not want hammer
people. And if I heard anything on small business hearings, and
we had two of them in Montana and Wyoming over this last break,
it is that.
There are people who are willing to comply, but will not
say much to anybody for the simple reason the way they have
been treated in the past, and we have got to turn that around
some way or another, and I do not know how we do it, but that
is where I am going to place my emphasis, and I will get a hold
of this other stuff later on.
Thank you very much, Mr. Chairman
Senator Bond. Thank you, Senator Burns.
Senator Lautenberg.
STATEMENT OF FRANK R. LAUTENBERG
Senator Lautenberg. Thank you, Mr. Chairman. I am pleased
to see Administrator Browner here to talk about the EPA budget
for 1998. I believe that the President's budget places the
proper priority on protecting the environment by increasing
funds for several Environmental Protection Agency programs. It
also follows through on his pledge to offer a balanced budget
while advancing the goals that Americans share in continuing
programs to protect our Nation's environment.
In poll after poll you will see that people will say I am
willing to pay more if it goes to environmental cleanup. I want
to know that it goes directly there, but they are willing to do
it because that is the one legacy that all of us agree--that we
ought to be giving our children a better environment in future
generations.
I am particularly impressed by the fact that the
President's budget recognizes the importance of speeding the
cleanup of our Nation's most hazardous wastesites. After 16
years, the Superfund Program is now primarily in the
construction rather than the study phase, and since
construction is generally more expensive than studies, the need
for funding is growing. Level Superfund spending would mean
slower cleanups and a hampered ability to protect our
neighborhoods and ground water from hazardous waste.
The President's budget provides an additional $700 million
for Superfund. It is a 50-percent increase, bring the total
Superfund spending to over $2 billion. This increased spending
is the first phase of funding that will allow an additional 250
Superfund sites to be cleaned up by the year 2000. We will
double the pace of that cleanup. The fact that the President's
budget seeks to spend more on Superfund is a good sign. It
means that we now have a handle on our hazardous waste
problems, and that we are on the verge of making significant
progress in expediting the cleaning of hazardous wastesites.
Some have said that providing additional money to Superfund
would simply be throwing more money at the problem. Well, in
1993, I was one of the leading critics who claimed that
Superfund was severely broken and needed fixing. In fact, in
his first inaugural address President Clinton committed to
changing Superfund so that money would go toward cleanup of
hazardous wastes instead of paying lawyers. Since that time, I
believe the administration's reform efforts have moved
Superfund much closer to the goals of faster, fairer, and more
efficient cleanups.
It bears noting that these reforms do not reflect only the
goals of the present administration; rather, Ms. Browner's
administrative reform efforts were based on studies and task
force recommendations developed under Administrator Bill Riley,
a Bush appointee. And as a result of their reform efforts,
Superfund is no longer in need of drastic overhaul.
At the same time, I am in negotiation with the
administration and Senators Baucus, Smith, and Chafee on
improving Superfund, and I am confident that we can reach
agreement on the issues that separate us and end up with a bill
that will meet the goals of faster, fairer, more efficient
cleanups, and we will receive the support of both parties, the
various stakeholders, and the administration.
Whether we fail or not in this ambitious goal, whether it
takes the Congress one session or two, the President's budget
recognizes a necessary and proper increase in EPA's budget so
that we can speed the cleanup of our Nation's most hazardous
wastesites. Seventy-five percent of the sites have proven
health impacts, and holding funding hostage while we in
Washington referee fights between the insurance industry and
polluters and States and communities is not a position that I
find appealing.
I want to again thank Administrator Browner for her hard
work, her leadership, and I look forward to hearing her
testimony and her continued service.
Senator Bond. Thank you, Senator Lautenberg.
Senator Shelby.
STATEMENT OF RICHARD C. SHELBY
Senator Shelby. I have just got a few remarks.
Ms. Browner, welcome again to the committee.
I believe overall that EPA has changed a lot of things for
the better in this country: clean air, water, you name it, we
can go on and on. But I want to associate myself with the
remarks of Senator Burns that I believe your administration, if
it were guided from the top down, could do a lot of things
maybe with a velvet glove, a softer glove, and get notice to a
lot of people that they have got to comply rather than a
vicious attack on them. I think it would help the Agency and
the image of the Agency.
Having said that, I want to support you where I can. But I
do not believe that everything is money. A lot of it is
management. A lot of it is administration. I know it takes some
money, but we are in some tight money situations up here. The
chairman alluded to that earlier in his opening statement. But
all of us are having to do basically more with less money, and
I think EPA might have to do that.
But I commend you for a lot of good things that I believe
you are doing. I believe you are committed to the health, clean
air, and water for people, and water is very, very important.
Air is very, very important. You do not have to have asthma to
know that. We all know it. But people with asthma or touches of
it realize it more than some of us. But think about how you can
do more with less, how you can be a top-flight administrator
with less dollars, with fewer dollars, and I think you would
hit it off not only here but with the American people, because
overall your purpose is good.
Thank you.
Senator Bond. Thank you very much, Senator Shelby.
Now, Administrator Browner, you have heard all of our
views. We are ready to hear your testimony.
STATEMENT OF CAROL M. BROWNER
Ms. Browner. Thank you, Mr. Chairman and members of the
subcommittee, for this opportunity to testify before you on the
1998 budget request for the Environmental Protection Agency. I
am proud to be joined by colleagues at the Agency, including
the new Associate Administrator for Reinvention, Chuck Fox, and
Dr. Phil Langrigan, who has joined us in our work to create an
Office of Children's Health.
As we approach the 21st century, EPA faces many stiff
challenges in our mission to the public health and the
environment, including the air, the water, the land, the food
they eat. We believe that Americans want us to meet these
challenges, that they want clean, healthy air to breathe, they
want to know their tap water is safe to drink, and that the
food they buy is safe to eat. They want us to rid the Nation of
its toxic waste dumps and to prevent the further pollution of
America's neighborhoods.
Americans want their children protected from environmental
hazards. They want to pass on to their children a safe and
healthy environment. And they have come to expect that we can
do the job of protecting their health, their environment, and
provide for the Nation's economic growth and security. We
firmly believe, as I think all here believe, that environmental
protection goes hand in hand with economic progress, that a
healthy environment is, in fact, vital to the long-term
economic success of the Nation, and vice versa. Indeed, this
has been our history.
EPA celebrates its 27th anniversary this year. Over the
past 27 years, we have made tremendous strides in cleaning up
our environment. While we have taken these efforts to reduce
pollution, America's gross domestic product has nearly doubled.
Over the past 4 years in particular, President Clinton has
shown that it is possible to bring down the deficit, restore
the Nation's economic health, and at the same time strengthen
protection of public health and the environment.
The budget request we make today totaling $7.6 billion
expands on that commitment and that promise. It calls for an
increase of nearly $850 million over this year's appropriated
levels, most of which would be used to fund the President's
call to action to clean up the worst environmental problems
millions of Americans face in their own community. We are
talking about doubling our record pace of cleanups at the
Nation's worst toxic wastesites, and ridding our country of 500
more Superfund sites by the end of the year 2000. We want to
expand on our brownfields initiative, so that we can help the
communities across the country clean up literally thousands of
old, abandoned industrial sites and return them to productive
use.
Additionally, this budget request increases funding for
expansion of the public's right-to-know about toxic pollution
in their neighborhoods, without imposing any new reporting
requirements on anyone. It also means tougher, more aggressive
criminal enforcement against those who actually pollute our
air, our water, and our land.
NEW LEGISLATION
On another front, this requested increase enables EPA to do
its part to implement two major new environmental laws passed
by Congress last year. Both enjoyed broad bipartisan support:
The Safe Drinking Water Act amendments of 1996 and the new Food
Quality Protection Act, are two shining examples of how
Congress and the administration can work together to protect
the public health and our environment.
Under the Safe Drinking Water Act amendments, EPA will
undertake a variety of new efforts to improve the way we set
and enforce drinking water standards, protect drinking water
supplies, help communities upgrade their facilities, and
provide timely and important information to consumers. The new
law is a model for regulatory reform. It gives EPA flexibility
to act on contaminants of greatest risk, and to analyze cost
and benefits while keeping the public health as the paramount
concern.
Under the Food Quality Protection Act, EPA will be adding a
new level of protection from harmful pesticides in our food.
The budget includes funds to set a single health-based child-
first standard for pesticides and all foods.
CHILDREN AS A HIGH PRIORITY
In addition to funding these new, high-priority items, the
EPA budget request for 1998 supports a greater overall emphasis
on protecting children. Since the President came to office we
have tried to put children at the focal point of our mission,
because they are among the most vulnerable to environmental
threats. Their bodies, their brains, are still developing.
Relative to their body weight they consume more of certain
types of foods and fluids, and breathe more air than adults.
When we set public health and environmental standards, we will
do so after taking into account the unique vulnerabilities of
our children.
We believe that by doing all of this we will be ensuring
that everyone is protected. All of these initiatives, Mr.
Chairman, will be enhanced by our efforts to continue
reinventing the way EPA works. We are determined to carry out
our action plan in the most commonsense, cost-effective ways.
We are resolved to strengthening our partnerships with States
and tribes, and to providing them more flexibility in how they
reach the environmental goals we all share.
We intend to improve our success at reducing redtape,
adopting alternative strategies so long as they produce
superior environmental results.
In closing, Mr. Chairman, this budget will take us further
down the road toward our goal of a cleaner, safer, and
healthier environment. It is a budget that says to our citizens
we can put our fiscal house in order without sacrificing our
basic values; we can protect both the health of our economy,
the health of our children; we can have both economic progress
and environmental protection that is second to none.
Thank you, Mr. Chairman, and I am happy to answer any of
your questions.
[The statements follow:]
Prepared Statement of Carol M. Browner
Mr. Chairman, I appreciate the opportunity to be here before you
and the Members of your Subcommittee to present the President's 1998
Budget Request for the U. S. Environmental Protection Agency. This
request is $7.6 billion and 18,283 FTE's. President Clinton showed
during his first term that it is possible to reduce the deficit,
restore the nation's economic health, and protect public health and the
environment, and he believes in continuing on that course. The
President and I believe strongly that a healthy environment and a
strong economy go hand in hand.
This budget focuses on the environmental challenges of the 21st
Century by strategically expanding EPA's resources for protecting the
air we breathe, the water we drink, and the land on which we live. By
protecting the environment we protect the health of millions of
Americans, particularly our children, who are often the most vulnerable
to environmental health risks. Everything we do to clean our air, water
and soil, and to make the environment more healthy, we do for them.
The President is requesting an increase for EPA of nearly $850
million over this year's appropriated levels. When you add the
additional resources that our agency will be redirecting from other
areas, this budget contains a total of more than $900 million in new,
high priority investments for environmental protection and public
health.
Last August, the President presented America with a ``call to
action'' to deal with the most pressing environmental problems faced by
our nation's communities. Of this year's budget increase, $736 million
will fund these high priority initiatives, including an acceleration of
Superfund cleanups, a revitalization of communities through Brownfields
cleanups, a commitment to expand the public's access to information
about toxic pollution in their neighborhoods, and a strengthening of
criminal enforcement against polluters.
This budget proposes $2.1 billion for Superfund, including a $650
million increase over 1997 to meet the President's pledge to nearly
double the pace of toxic waste cleanups. This increase is the first of
two installments of the $1.3 billion planned to accomplish this goal,
which will result in the cleanup of another 500 sites by the end of the
year 2000. Twenty-seven million Americans live near a Superfund site. A
commitment to clean up these sites means that millions of Americans who
live near the nation's worst toxic waste sites will start off their
21st Century in healthier neighborhoods free of toxic impacts. Cleaning
up toxic waste sites will not only ensure the health of our citizens,
but will generate jobs and economic development through returning
damaged areas of our country to productive use.
This budget also proposes a major expansion of the Brownfields
initiative with a $50 million increase to the budget, as part of a
program to ensure cleanup of approximately 5,000 sites by the year
2000. Restoring these areas through a partnership with communities and
the Department of Housing and Urban Development will result in economic
revitalization for communities throughout the country, where scores of
abandoned commercial properties will be re-developed and put back into
commercial use.
Americans have a right to information about toxic pollution in
their neighborhoods. This budget proposes an additional $35 million for
an initiative to expand the information available to people about toxic
threats to their families--without imposing more reporting requirements
on anyone. Informed, involved citizens will always make far better
decisions than some distant bureaucracy. Information on toxics will be
available to American citizens through a comprehensive monitoring
system with computer links to schools, libraries, and home computers.
The President has also made a commitment to a more aggressive
criminal enforcement effort against those who pollute our air, our
water, and our land. This budget requests a modest funding increase to
enhance the training available for state, local, and tribal officials
who work at the grassroots of environmental law enforcement.
On another front, this budget contains a $36 million increase to
enable EPA to implement two major new environmental laws passed by
Congress last year: the Safe Drinking Water Act Amendments and the new
Food Quality Protection Act. Those bipartisan legislative successes
show how the Congress and the Administration can work together to serve
the American people by enhancing the safety of the water we drink and
the food we eat.
Under the Safe Drinking Water Act Amendments, EPA will undertake a
variety of new efforts to improve the way we set and enforce drinking
water standards, protect drinking water supplies, help communities
upgrade their facilities, and provide timely and important information
to consumers. The new law is a model for regulatory reform. It gives
the EPA flexibility to act on contaminants of greatest risk and to
analyze costs and benefits, while keeping the public health as the
paramount concern.
Under the Food Quality Protection Act, EPA will be adding a new
level of protection from harmful pesticides in our food. The budget
includes funds to set a single, health-based, children-first standard
for pesticides in all foods, along with the resources necessary to re-
evaluate some 9,000 different pesticides to assure safety and to
provide better information to the public. By carrying out this act, we
will help families to have the safest possible food on the dinner
table.
In addition to our commitment to helping implement this new
legislation, the President's budget supports the broad goals of
protecting children from environmental health threats, revitalizing the
environmental and economic health of cities, and strengthening
partnerships with state, local and tribal governments.
Because children may face significant, long-term, and unique
threats from environmental toxics, we are taking a comprehensive
approach to providing children with the strongest possible health
protection. Children are more at risk from toxics because their sys