[House Hearing, 113 Congress] [From the U.S. Government Publishing Office] FINANCIAL SERVICES AND GENERAL GOVERNMENT APPROPRIATIONS FOR 2015 _______________________________________________________________________ HEARINGS BEFORE A SUBCOMMITTEE OF THE COMMITTEE ON APPROPRIATIONS HOUSE OF REPRESENTATIVES ONE HUNDRED THIRTEENTH CONGRESS SECOND SESSION ________ U.S. GOVERNMENT PRINTING OFFICE 88-211 PDF WASHINGTON : 2014 SUBCOMMITTEE ON FINANCIAL SERVICES AND GENERAL GOVERNMENT APPROPRIATIONS ANDER CRENSHAW, Florida, Chairman MARIO DIAZ-BALART, Florida JOSE E. SERRANO, New York TOM GRAVES, Georgia MIKE QUIGLEY, Illinois KEVIN YODER, Kansas MARCY KAPTUR, Ohio STEVE WOMACK, Arkansas ED PASTOR, Arizona JAIME HERRERA BEUTLER, Washington MARK E. AMODEI, Nevada NOTE: Under Committee Rules, Mr. Rogers, as Chairman of the Full Committee, and Mrs. Lowey, as Ranking Minority Member of the Full Committee, are authorized to sit as Members of all Subcommittees. John Martens, Winnie Chang, Kelly Hitchcock, Ariana Sarar, and Amy Cushing, Subcommittee Staff ________ PART 6 Page Office of National Drug Control Policy........................... 1 The Judiciary Budget............................................. 61 Small Business Administration.................................... 159 General Services Administration.................................. 205 ________ Printed for the use of the Committee on Appropriations U.S. GOVERNMENT PRINTING OFFICE 88-211 WASHINGTON : 2014 COMMITTEE ON APPROPRIATIONS HAROLD ROGERS, Kentucky, Chairman FRANK R. WOLF, Virginia NITA M. LOWEY, New York JACK KINGSTON, Georgia MARCY KAPTUR, Ohio RODNEY P. FRELINGHUYSEN, New Jersey PETER J. VISCLOSKY, Indiana TOM LATHAM, Iowa JOSE E. SERRANO, New York ROBERT B. ADERHOLT, Alabama ROSA L. DeLAURO, Connecticut KAY GRANGER, Texas JAMES P. MORAN, Virginia MICHAEL K. SIMPSON, Idaho ED PASTOR, Arizona JOHN ABNEY CULBERSON, Texas DAVID E. PRICE, North Carolina ANDER CRENSHAW, Florida LUCILLE ROYBAL-ALLARD, California JOHN R. CARTER, Texas SAM FARR, California KEN CALVERT, California CHAKA FATTAH, Pennsylvania TOM COLE, Oklahoma SANFORD D. BISHOP, Jr., Georgia MARIO DIAZ-BALART, Florida BARBARA LEE, California CHARLES W. DENT, Pennsylvania ADAM B. SCHIFF, California TOM GRAVES, Georgia MICHAEL M. HONDA, California KEVIN YODER, Kansas BETTY McCOLLUM, Minnesota STEVE WOMACK, Arkansas TIM RYAN, Ohio ALAN NUNNELEE, Mississippi DEBBIE WASSERMAN SCHULTZ, Florida JEFF FORTENBERRY, Nebraska HENRY CUELLAR, Texas THOMAS J. ROONEY, Florida CHELLIE PINGREE, Maine CHARLES J. FLEISCHMANN, Tennessee MIKE QUIGLEY, Illinois JAIME HERRERA BEUTLER, Washington WILLIAM L. OWENS, New York DAVID P. JOYCE, Ohio DAVID G. VALADAO, California ANDY HARRIS, Maryland MARTHA ROBY, Alabama MARK E. AMODEI, Nevada CHRIS STEWART, Utah William E. Smith, Clerk and Staff Director (ii) FINANCIAL SERVICES AND GENERAL GOVERNMENT APPROPRIATIONS FOR 2015 ---------- Monday, March 24, 2014. OFFICE OF NATIONAL DRUG CONTROL POLICY WITNESS MICHAEL P. BOTTICELLI, ACTING DIRECTOR, OFFICE OF NATIONAL DRUG CONTROL POLICY Mr. Crenshaw. The subcommittee will come to order. I want to welcome our witness Acting Director Botticelli. This is the first time he has appeared before the Appropriations Committee, and I appreciate you coming here to testify, and thank you for your service. The Office of National Drug Control Policy is charged with the extremely difficult task of coordinating multiple Federal agencies' efforts to address many different drug-related issues at home and abroad. In addition, you administer some of the very effective drug-prevention and enforcement grant programs, and today the committee will examine the Office of National Drug Control Policy's fiscal year 2015 budget request, along with your efforts to develop and coordinate our Nation's drug policies. The budget request submitted by the President has some interesting priorities within this subcommittee's jurisdiction. While the administration is requesting an increase of over $1 billion for the IRS and an increase of over $500 million for the GSA, the administration has recommended a decrease below enacted fiscal year 2014 for the High Intensity Drug Trafficking Areas program and the Drug-Free Communities program. Now, both these are drug-prevention and enforcement programs. They are to mobilize communities and increase collaboration among community law enforcement, and I can say that specifically they have a really good impact in my district down in Jacksonville, Florida. And so I would typically applaud proposed reductions in Federal spending, but it makes me wonder why these drug-prevention and enforcement programs are being reduced, because recently the Attorney General announced that heroin overdoses are, he said, quote, ``urgent and growing public health crisis,'' end quote. States are telling our children that marijuana use is okay by decriminalizing recreational marijuana. Our Nation's problems with cocaine, meth and prescription drugs certainly haven't gone down any. And so I find it a little hard to believe that the administration feels that efforts to keep drugs away from our children and out of our communities should be reduced, while proposing increases for the bureaucracy of the IRS and deciding to build new Federal buildings. As the agency that is charged with developing our nation's drug policies, you have the difficult assignment of ensuring that not only do the Department of State, the Department of Defense, the Department of Justice, the Department of Homeland Security, the Department of Health and Human Services and numerous other agencies are all working in a coordinated manner to address our highest-priority drug concerns, and I look forward to your testimony today on how the Office of National Drug Control Policy is leading these efforts on this coordinated role. More specifically, we have heard concerns that the Food and Drug Administration doesn't always take law enforcement's concerns with prescription drug abuse into account when approving new prescription pain medication. We have also heard concerns that reductions in military spending could significantly reduce counternarcotics activities in Latin America, and that increases the availability of illegal drugs in the United States. And I hope to hear in your testimony today what you all are doing about some of these major concerns. Our Nation continues to fight a drug problem that takes lives, brings about violence, and harms our communities and families, and I know that you and your staff are working hard to keep our country safe and healthy. So once again, Acting Director Botticelli, welcome. I look forward to your testimony. And with that, I would like to turn the microphone over to my colleague Ranking Member Serrano. Mr. Serrano. Thank you, Mr. Chairman. I also would like to join you in welcoming the Acting Director of National Drug Control Policy, Michael Botticelli. I love that name. He used to be a second baseman for the Boston Red Sox. The Office of National Drug Control Policy's mission places it at the forefront of Federal drug policy and the intersection of several of Federal agencies, such as the Department of Justice, Transportation, State and the Treasury. The fiscal year 2015 budget request for ONDCP is approximately $311 million, a decrease of $55 million from the fiscal year 2014 funding level. This will hopefully be targeted towards improved coordination and oversight of interagency drug control programs and policies, something I continue to be concerned about with regards to the agency. This issue is particularly relevant in light of the Attorney General Eric Holder's recent proposal for reduced drug sentencing. I hope we will be able to discuss this issue so I can better understand your role in these efforts and learn what you are doing to reform some of our criminal justice policies with regard to drugs. I also continue to be interested in the development of a Caribbean Border Counternarcotics Strategy. The fiscal year 2014 Consolidated Appropriations Act included language requiring your agency to develop a comprehensive Caribbean Border Counternarcotics Strategy, just as you have done for other U.S. borders. I believe this is not only an issue of parity, but extremely critical because of increased drug trafficking in the region. It is essential that Puerto Rico and the Virgin Islands are integrated into Federal counternarcotics strategy. I look forward to discussing these and other issues with you in detail. Thank you for your service and for appearing before us today. Mr. Crenshaw. Thank you. Chairman Rogers wanted to be here today, but he could not be here, and he send his regards. And so without objection, I will make his statement part of the record. [The information follows:] [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] Mr. Crenshaw. And so now, Acting Director Botticelli, I think about art when I think of Botticelli. Mr. Serrano. Art? Mr. Crenshaw. Art. Mr. Serrano. Okay. Okay. So he is an opera singer for the Boston Red Sox. Mr. Crenshaw. Okay. But anyway, if you could keep your remarks to about 5 minutes or so, that will give us time for questions, and then your entire statement will be submitted for the record. So Mr. Botticelli. Mr. Botticelli. Thank you. Chairman Crenshaw, Ranking Member Serrano, Members of the Subcommittee, as indicated, my name is Michael Botticelli. I am the Acting Director of the White House Office of National Drug Control Policy. I am pleased to appear before you today to discuss the Administration's Fiscal Year 2015 budget request for ONDCP, part of the Executive Office of the President. ONDCP was created by statute in 1988, and November 2013 marked our Office's 25th anniversary. ONDCP establishes policies, priorities and objectives for the Nation's drug control program. The goals of the program are to coordinate the Federal Government's efforts to reduce illicit drug use and its consequences, including drug manufacturing and trafficking, drug-related crime and violence, and drug-related health consequences. To achieve these goals, the Director of ONDCP is charged with producing the Administration's National Drug Control Strategy and ensuring Executive Branch agency drug control budget spending supports this strategy. The Administration's strategy, first released in 2010, is based upon input from public health and public safety professionals across the country and on decades of research from the Nation's top scientists that demonstrates that addiction is a brain disease, one that can be prevented, treated and from which one can recover. ONDCP also has responsibility for working with our national and international partners to develop the National Southwest Border Counternarcotics Strategy, the National Northern Border Counternarcotics Strategy, and the Fiscal Year 2014 enacted budget also contained a directive for ONDCP to develop a Caribbean Border Counternarcotics Strategy, which is now in process. Our Nation faces a number of substance use challenges. For instance, there is an epidemic of opioid drug abuse in this country. Drug overdose deaths, driven by prescription painkillers, surpassed homicides and traffic crashes in the number of injury deaths in America. Heroin use remains relatively low in the United States as compared to other drugs, but there has been a troubling increase in the number of people using heroin. Evidence suggests that some users, specifically those with chronic opioid addictions, will substitute heroin for prescription opioids since heroin is often cheaper than prescription drugs. A recent report from the Substance Abuse and Mental Health Services Administration found that while only 3.6 percent of people who had started using prescription drugs nonmedically ever initiated heroin use in the following 5-year period, four- fifths of recent heroin initiatives had previously used prescription pain relievers nonmedically. These findings demonstrate that we need to take a comprehensive approach to addressing opioid drugs, including more widespread use by first responders of naloxone, an emergency opioid overdose reversal medication, as well as expanded access to medication-assisted treatment. Further, multiple studies show that young people's attitudes towards marijuana use and nonmedical use of prescription drugs are softening. Each day an estimated 4,400 young people under the age of 18 initiate drug use for the first time. This can have a profound effect in the future, since research shows us that the earlier a person begins to use drugs, the more likely they are to develop a substance use disorder. To enable ONDCP to accomplish the Administration's goals to address these and other numerous challenges from substance use disorders, the President is requesting $311 million for Fiscal Year 2015. This request represents a decrease of $55 million from ONDCP's Fiscal Year 2014 enacted budget; however, it has been developed to ensure that we have the resources to meet the Strategy's goals while reducing spending. ONDCP's budget request includes funding for two grant programs that support efforts throughout the Nation to reduce drug use and its consequences. The Drug-Free Communities, or DFC, Support Program provides grants to local drug-free community coalitions to prevent and reduce youth substance use. Directed by ONDCP in partnership with SAMHSA, the DFC program provides grants to local drug-free community coalitions, enabling them to increase collaboration among community partners and to prevent and reduce youth substance use. During 2014, a total of 643 DFC grants were awarded. The President's request for the DFC grants program is $85.6 million, a decrease of $6.3 million from the Fiscal Year 2014 enacted budget. The High Intensity Drug Trafficking Areas, or HIDTA, program helps improve the efficiency and effectiveness of drug- control efforts by facilitating cooperation among Federal, State, local and tribal law enforcement as well as other drug- control organizations. The President's request of $193.4 million for the HIDTA program is a decrease of $45 million from the Fiscal Year 2014 enacted budget; however, this request maintains the HIDTA's program focus and mission of reducing drug trafficking and production. Core functions will be maintained. In addition to ONDCP's responsibilities to develop and implement the Strategy and administer its grants programs, the office is responsible for coordinating, overseeing and evaluating the effectiveness of agencies comprising the National Drug Control Program throughout the Federal Government, as well as overseeing the consolidated National Drug Control Budget to ensure that drug control funding proposed by these agencies is adequate to carry out the Strategy. The President's Fiscal Year 2015 National Drug Control Budget request is $25.4 billion Government-wide. This represents an increase of $151 million over the Fiscal Year 2014 enacted level. Reflecting the need to address both public health and public safety, the portion of the budget requested for drug treatment and prevention efforts, 43 percent, has grown to its highest level in over 12 years. I would like to thank you for the opportunity to testify, and I am happy to answer any questions that you might have. Mr. Crenshaw. Well, thank you very much. [The information follows:] [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] Mr. Crenshaw. Let me start by asking, you mentioned HIDTA was going to be reduced by $45 million, and I mentioned in my opening remarks that it seems like kind of a strange sense of priorities when you ask for a billion dollars for the IRS and half a billion dollars to the General Services Administration, and yet the last couple of years, the funding for HIDTA has been reduced in the proposed budgets, but Congress each year has restored that funding. And, again, in today's world when States are legalizing marijuana; poppy production is up in Afghanistan; cocaine, heroin use, all that is up, what do you think the impact would be if you were to reduce it by $45 million? Mr. Botticelli. Clearly, Chairman, the HIDTA program is really essential at the Federal, State and local levels in terms of being able to enhance efficiency and information sharing among law enforcement entities. We consider that an incredibly valuable program. As you know, our challenge was within restrained resources making sure that we maintained core functions and core services with our HIDTA program. So to that extent this will not result in any elimination of any of our HIDTA programs. It will maintain its core mission and core functions. The biggest, I think, impact will be on the HIDTA's ability to address emerging drug threats that we see in the community. So it will preserve the core functions and preserve our core HIDTA infrastructure. Mr. Crenshaw. So in your opinion, it is still effective the things that you are doing, it is just a matter of not as much money to go around. But as you know, the last couple years the Congress has restored that funding, and so you wouldn't be upset if that happened again. Mr. Botticelli. We see our HIDTA programs as incredibly valuable programs. And one of the things that--over the past year that I have seen with our HIDTA programs is their ability to be flexible and nimble at the State and local level in terms of really responding, I think, to local threats and local emergencies. Mr. Crenshaw. Gotcha. Another question just briefly that you have this drug free community program, and I think there are like 600 coalitions across the United States. They work on mobilizing communities and increased collaboration, things like that. How do you measure the progress that is being made by those community groups that are--those are grants, they receive your funds. I mean, how do you go about deciding who is effective, how effective, things like that? Mr. Botticelli. Sure. So one of the things that I think we know is that local drug use patterns are different among localities, and so what it requires to really reduce substance use at a local level is really looking at those community factors, but also convening all of the local stakeholders, law enforcement, health and human service agencies, schools, to really look at implementing evidence-based prevention programs at the local level. As you indicated, for Fiscal Year 2014, we are estimating that we are going to have 672 of those local coalitions. They have been nationally evaluated, and it has been shown that those communities that have Drug-Free Communities programs are able to substantially reduce drug use in their communities. So these are programs that are implementing evidence-based prevention programs that are also nationally evaluated and have been shown to reduce substance use among youth at the local level. Mr. Crenshaw. Well, those funds are being reduced, or proposed to be reduced. How would that impact your ability? Would you give less grants, or would the grants be smaller? How would you handle that reduction? Mr. Botticelli. Sure. So at this point, it doesn't mean that we would take back any existing grants, so those grants would exist through the grant cycle. What it would mean is that we would probably be able to award 50 less grants in Fiscal Year 2015 compared to what we are estimating for Fiscal Year 2014. Mr. Crenshaw. How much do you think it would take to continue to fund the number of grants that you have funded in the past? Mr. Botticelli. So in terms of looking at kind of level funding in terms of Fiscal Year 2014 enacted, that is approximately $92 million for the program. It is $92 million. Mr. Crenshaw. Gotcha. Well, thank you. Mr. Serrano. Mr. Serrano. Thank you, Mr. Chairman. That was going to be my first question, also, that you asked, so let me just--I don't know if you have got the number the right--the same way as I see it. It was--not you, but Mr. Botticelli. You said 672, but that is what it is now. It will be reduced to 614; am I correct? Mr. Botticelli. That is correct. Mr. Serrano. Okay. And you spoke about spreading the money around more. You see, that is a program that seems to be working, so we are wondering why the administration would want to cut or propose a cut? And I think you are hearing something, unless I heard it wrong, something that usually you don't hear from all members of a committee, and that is asking the question, you know, how can you continue to function at a level that does credit to a program that obviously works and that has the support of many members of this committee? Mr. Botticelli. You know, clearly our Drug-Free Communities program is one of the backbones of our prevention infrastructure in the United States. It is an incredibly valuable program to us. Obviously, you know, we had to look at how do we have restraint in spending in Fiscal Year 2015. Again, I think the proposal, if enacted, would be that we wouldn't eliminate any of the existing grantees; it just would mean that we would have about 50 less new grants in Fiscal Year 2015. Mr. Serrano. So you don't think it would be a result of reducing from 672 to 614, because we went by those numbers? There would be a reduction to 614 or not? Mr. Botticelli. So it would be an overall reduction, but it does not mean that we would eliminate any existing grantees. So that money would continue. It just means that we would have less money, about--we would be able to award 50 less grants, new grants, in Fiscal Year 2015. Mr. Serrano. Okay. Let me ask you about the Caribbean Border Counternarcotics Strategy. Now, that was, as you had mentioned, language that was put in the bill at the request of many of us, including the Resident Commissioner from Puerto Rico Mr. Pierluisi. And, you know, this issue speaks to two situations, and a lot of the Florida Members can speak to it, and that is that, first, the territories get less attention than the States, but, most importantly in this case, that we are, shooting ourselves in the foot by allowing one border, if you will, to be totally open, not only to enter the territory, but then to make it to the mainland, as we say. So it is both setting this one up--and I want to hear your thoughts on how quickly that could be set up--setting this one up not only helps those two territories from having the drugs come into their area, but then it helps the States, especially Florida, with the drugs coming into the States. Mr. Botticelli. Correct. You know, clearly our ability to interdict drugs, particularly in the Caribbean, is really core to the Strategy. And as you indicated, you know, the more drugs that we can intercept and interdict, the less that we have coming to our local communities. And clearly having a Caribbean strategy, I think, that supports the work that we are trying to do domestically is particularly important. So we have made progress in terms of the development of that Caribbean strategy. So we have already convened meetings across our interagency looking at how each of our relevant Federal interagency partners can support the priority action items of the Caribbean strategy, and we continue to work with them. And so that strategy is in progress, and we hope to have that to you shortly. Mr. Serrano. Well, I hope so. And I know we have other Members, Mr. Chairman. I just want to make a statement for the record, and that is something I have said over and over and over again in my 24 years in Congress, that any time drugs enters one of our territories, it has, in fact, entered into the United States. And a lot of people see it as it didn't enter the United States until it gets to Florida or to Texas or to New Mexico. Not true. If it enters any territory under the American flag, it entered the United States, and it should be fought in the same way it is fought when it enters one of the States. And I thank you for your reply. Mr. Botticelli. Great. Thank you. And I was just handed a note. We actually have staff who will be meeting with your staff on Friday to be updating you on our progress to the strategy. Mr. Serrano. Thank you. Mr. Botticelli. You are welcome. Mr. Crenshaw. Thank you. Mr. Womack. Mr. Womack. Thank you, Mr. Chairman. Thank you, Mr. Botticelli, for your testimony here today. I want to confine my remarks initially and my questions on weed, because there has certainly been a lot of discussion about it from the medical side of the equation to just the outright legalization for recreational use. And I have my own pretty hard-core philosophical objections to what is going on around our country, but my question is as far as the ONDCP is concerned, help me understand what involvement your office has had with States like Colorado, et alia, that have gone in this direction in helping educate people on what the true effects of this increased use happens to be. Mr. Botticelli. Sure. I think you know that the Office of National Drug Control Policy and the Administration has remained opposed to drug legalization, and I think we come at this from a public health standpoint, particularly as it relates to what we think the impact will be on our youth. You have raised, I think, some pretty important concerns. You know, we now have more 12th graders who are using marijuana than are smoking cigarettes, and their perception of risk is at the lowest level than it has been since the 1970s. And we know that generally when youth perceive something as less risky, they are more likely to try a substance. Clearly we have been concerned in terms of what the impact will be, particularly in Colorado; but not only that, what is the message that that sends our youth nationally in terms of what it means to use marijuana? We have been engaged, following on the Department of Justice criteria, with both Colorado and Washington as well as with our Federal partners to really monitor both the public safety and public health impact that legalization will have in Colorado and Washington, in terms of the transportation of marijuana from one State to another, [and] are we going to see increased prevalence in use among our youth. We have been engaged with Governor's offices in both Colorado and Washington as well as the health departments in Colorado and Washington to basically see how they are going to implement regulatory schemes to ensure that they are doing everything possible to mitigate both the public's health safety and public health impact of legalization efforts. Mr. Womack. So you have weighed in; your office has helped try to educate the country on this particular subject. And do you anticipate that there might be a more--a bigger or higher response, a larger response, a more weighted response toward what we see going on around the country? Mr. Botticelli. You know, again, I think what we have generally tried to do is, with our existing resources that we have had, both within our Drug-Free Communities and our other resources, to how do we continue to highlight prevention efforts particularly as it relates to things like alcohol and marijuana. And our Drug-Free Communities have really been important resources that we have had to really heighten the prevention messaging that we need to really counteract some of the messages that youth are getting in terms of the perceived safety, if you will, of marijuana. Mr. Womack. Now, there is no way we can put a crystal ball in front of you to kind of look into the future. If there was a crystal ball in front of you, do you anticipate having to reach back to, say, Colorado as an example, since I have already mentioned them, and have one of these I-told-you-so moments? Mr. Botticelli. What the Department of Justice has laid out in terms of their Federal law enforcement priorities was a clear indication that they reserve the right to take subsequent action if Colorado and Washington haven't demonstrated their ability to meet those criteria as it relates to public health and public safety. As a public health person, I think we have every reason to think that we are going to see some problems in Colorado and Washington. And, again, usually the data and science suggest that as youth see something as less harmful, that there will be a correlational increase in terms of their use, and I think that is what we are seeing nationally. So I do think that we have some concerns both in terms of Colorado and nationally in terms of looking at the data that we have now, but also what that means going forward. Mr. Womack. Finally, Mr. Chairman, if I may, you know, a subject that is near and dear to my heart, we have talked about in previous hearings on this particular subject matter, but, you know, I have experienced this in my own family, so I think I am not a subject matter expert by any means, but I am a parent and now a grandparent, and it scares me the message that we are sending to future generations out here--and I am not saying the office is sending, I am just saying the message the country is sending--that some of these things that we know with empirical data are putting our kids on a bad path that we are now saying it is really okay. Look at what is going on in Colorado and Washington, legalization; that we are basically promoting almost in some remark--in some categories, we are almost promoting the fact that this is something you can do without any known consequences down the road, and I am deeply worried about that as a parent, and now as a grandparent, and certainly as a Member of Congress whose job it is to look out for the welfare of this country. It doesn't require a response, I just wanted to say that and let you know that it has my attention. I yield back my time. Mr. Crenshaw. Thank you. Mr. Diaz-Balart. Mr. Diaz-Balart. Thank you very much, Mr. Chairman. Thanks for being here, sir. You were very clear about your statement about, you know, your concerns, right, of use and expanding use of marijuana. And going to the statement that my colleague just mentioned, that mixed message, by the way, is not only heard in the country, it is also heard from our allies. I get it all the time when I travel abroad to Latin America. You know, our allies, those who are putting the resources and the blood to try to stop drug production, Congressman, they are asking me, you know, why are we doing this if in the United States there is this kind of this mixed message? So your message today was very clear. Let me ask you a simple question: Isn't marijuana outlawed by Federal law? I mean, I think it is. Mr. Botticelli. Correct. Mr. Diaz-Balart. Okay. So here is the question: Have you asked the Attorney General or the President to just enforce Federal law? In other words, I understand you have serious concerns. Your job is to protect the people from drugs, including marijuana that you have serious concerns about. Have you asked the administration to just enforce Federal law? Because if it is so problematic, which you have said it is, and we all have our opinions on that, but clearly, you know, you are an expert on this, and you speak for the administration on this, have you asked the President to enforce Federal law? Have you asked the Attorney General to not just sit back and wait to see what happens in Colorado, but to enforce current Federal law? Mr. Botticelli. I think what the Department of Justice has stated is that, given limited Federal law enforcement priorities, that they are going to reserve their Federal law enforcement actions at the most significant crimes associated with marijuana and not go after people who are using it for personal use. But, again, I think that they have reserved the right to go back---- Mr. Diaz-Balart. Well, have you asked? Have you asked the Attorney General or the President, have you said, this is a big issue, this is an important issue you see as a health hazard, you see it as a problem? You know, clearly we are spending a lot of money, as we should, to try to make sure that kids don't smoke tobacco--I don't want my kid to smoke tobacco--and yet have you asked--has that been one of your priorities? Have you said to the Attorney General and the President, I think this is a bad idea, I think is dangerous, I think this is harmful, and I think we should enforce Federal law? Mr. Botticelli. During the course of the development process, obviously we had the opportunity to talk to the Department of Justice in terms of those issues. I think what we have agreed to going forward is, again, given what the Department of Justice has issued, an engagement with the Department of Justice to monitor the data at the Federal, local and State levels to see what the impact is, give that information to the Department of Justice with their opportunity to look at taking subsequent action should we see enhanced public safety and public health effects as it relates to Colorado and Washington. Mr. Diaz-Balart. So it was kind of an end-around question, and, you know, I am not going to further press you, because I don't want to put you at odds with the administration. However, it seems to me that part of the mixed message is coming, frankly, not from you, sir, but from the administration, because we have you saying this is a bad deal, this is bad for public policy and public health, and then you have, frankly, the Attorney General and others saying, you know, we are going to monitor, we are going to see how it goes, it is not that dangerous. I saw the President saying, yeah, it is probably not healthy, but it is not that bad. And I am paraphrasing; please don't quote me on that one. It is not a direct quote nor an accurate, because I was paraphrasing it. So, again, those are the mixed messages, by the way, that our allies are constantly complaining about, that we are giving mixed messages to our allies. We are also giving mixed messages, I think, to the American people. And I think I would like for one, sir, to have what is the policy of--what is our policy? Is marijuana illegal? Is it harmful? And if it is, what serious concrete steps--and to the point where we should continue to press our allies around the world, particularly in this hemisphere, to do what they are doing in this very painful battle against it, and if not, what should the policy be? And I think that mixed message is something that I hope you all kind of take back and realize that it is there not only for the American people, for our allies. Second point, if I have any time, Mr. Chairman, going back to Mr. Serrano's question, and I commend him for always bringing that up. You know, recently, for example, I mentioned how our allies are confused at best as to the mixed messages that are coming from the administration and from the States; and it is not only the administration, from the country. But then you have others who do not have mixed messages. You have the head of the Ecuadorean Government Mr. Correa that kicked the DEA out of the country. In Bolivia, Evo Morales has said, you know, that clearly their country is better off without the DEA. General Kelly, who is the Commander of the SOUTHCOM, by the way, located in the congressional district that I represent, he recently testified in front of the Senate Armed Services Committee that--and he was very blunt--that he believes that we are currently only stopping--and I know that Mr. Serrano, this is not going to shock him, but it is not going to please him-- only catching about 20 percent of the drugs being trafficked into the United States, and it is an issue there of resources. Do you have coordination with SOUTHCOM? And as far as on the budgetary aspect of it, how much coordination is there? Are you consulted at all? What is that role? Mr. Botticelli. Sure. As part of our statutory authority in terms of looking at the totality of the drug control budget, clearly we work with DOD, the Coast Guard and others in terms of our interdiction, part of our ongoing supply-reduction strategy. I actually had the opportunity to go down to SOUTHCOM and to talk to General Kelly and to see some of the work that he has been doing and to hear some of his concerns. Again, interdiction is part of our core supply reduction strategy, and we consider it very important. And we--has been a significant amount of discussion both with General Kelly as well as the interdiction community through our Interdiction Committee work to look at available resources, to look at operational efficiencies that we can achieve in terms of meeting our goals of interdicting as many drugs as possible. So clearly, we have been taking a leading role with the military and with all of our interagency partners to look at, in light of the fiscal issues that we have here, how do we continue to meet our goals around supply reduction and interdiction. Mr. Diaz-Balart. And that is one that we can get a big bang for the buck. Mr. Botticelli. I would agree. You know, I think that when we see large-scale removal of drugs that don't come into our country--we know, again, from a prevention perspective, that the more drugs that are available in the community, the more likely that we have people that are likely to use them. So clearly these are complementary strategies both in terms of our supply-reduction and demand-reduction strategy. Mr. Diaz-Balart. Thank you. Mr. Botticelli. So they are important goals. Mr. Diaz-Balart. Thank you. Thank you, Mr. Chairman, for you allowing me. Mr. Crenshaw. Certainly. Mr. Diaz-Balart. And just very briefly also, Director, again, that mixed message is really intense, and it is real deep. And I don't want to bust your chops, but I think we have heard it here today. Mr. Botticelli. Okay. Mr. Diaz-Balart. I mean, we really have. I mean, you have been clear about the effects and what your concerns are. On the other side of the same administration, you know, there is the lack of willingness to enforce current Federal law. Now, if the Federal law is wrong, and if marijuana is not a big deal, then we should have that discussion, and the President should be upfront and say, let's debate that. But right now all we are getting is mixed messages, and I think our allies hear that, those who are fighting narcotrafficking drugs are hearing that, and our kids are hearing that, and that is probably the most dangerous part of it. Mr. Botticelli. To be fair, Congressman, I think both the President and the Department of Justice have indicated their significant concern around the public health impact. So I think we have to clarify law enforcement issues versus public health and public safety, but thank you for your comments. Mr. Diaz-Balart. Thank you, sir. Thank you, Mr. Chairman. Mr. Crenshaw. Thank you. Mr. Graves. Mr. Graves. Thank you, Mr. Chairman. Mr. Director, thank you for being here, and thank you for what you do. I couldn't imagine the burden that you carry each day on your shoulders, and it is a very noble, noble cause, and I know that we have our questions and concerns and such. And I didn't really intend to speak on the topic that the two gentlemen before me had, but I was shocked at the statistic that you shared momentarily, and it is in your statement, you said it here as well, that more 12th graders today now smoke marijuana than cigarettes, and I think we were all shocked to hear that. And I heard about mixed messages and you suggesting that it is because they sense that marijuana has less consequences, fewer consequences than cigarettes. And it was just less than 60 days ago the President, I think, sent some confusing messages to the youth across the country. And, you know, his quote was well documented, and he even says, as it has been well documented, I smoked pot as a kid, and I view it as a bad habit and a vice, not very different from cigarettes that I smoked as a young person up through a big chunk of my adult life. This was in the New Yorker. And you thought he would stop there, but then he said, I don't think it is more dangerous than alcohol. And, I mean, that probably bothered you, I would imagine, because I know you take your job very seriously. Did that make your job easier or more difficult? And did you just, with some sort of internal frustration, go into the President's office and say, what are you doing here? You are making my job extremely more difficult and challenging. And what was your response to that? Could you share that with the committee? Mr. Botticelli. I think if you look at the totality of the President's comments and subsequent comments that he made, I think that a lot of what he was referring to is some of the inequity and disparities in sentencing that we see for marijuana, particularly among people of color, which is an issue, obviously, not just for our Office, but for him and the Attorney General's Office as well. So, you know, I think the President has repeatedly raised---- Mr. Graves. Do you suspect that is how the youth interpreted his comments? And maybe you are right in totality that is what he was thinking and suggesting, but the youth of our country, I think they probably heard, I don't think marijuana is more dangerous than alcohol. And almost it is just a, I don't know, an odd statement and such. Mr. Botticelli. You know, again, I go back to looking at some comments that he made subsequent to those in terms of really understanding the significant public health consequences both for alcohol and for marijuana, and not necessarily endorsing what was happening in Colorado and Washington, and saying that we really have to be vigilant in terms of keeping this as a public health priority. So---- Mr. Graves. Well, and I don't mean to interrupt, but, I mean, I took it as a little flippant in how he--you know, off the cuff, and maybe he was caught off guard with that question and he wasn't prepared. But he is the President of the United States, and I know that he gets difficult questions all the time, and this one couldn't have been all that difficult, but has he since then come forward and with remorse said, you know, I made a mistake; I shouldn't have done that as a youth? And, you know, just as all of us at some point have done things that we regret, has he ever expressed any regrets for that, or did he just allow the comments to hang and dangle, and everybody hoped it was about sentencing? Mr. Botticelli. No. I think that he made some subsequent comments after that relative to understanding that this was a significant public health and public safety issue. You know, the President is not unlike many parents who used substances in their youth to great regret. And I think the best thing we can do is be honest and candid about it and say that we don't support that for our kids, as he talked about in not supporting it for his daughters. Mr. Graves. Right. Mr. Botticelli. So, you know, I think that if you look at successful prevention strategies, we need to have those conversations, and we need to be candid as parents, and we need to say to our kids, look, I may have done this, and I may have done okay, but it is--I don't advise it for my kids. And I---- Mr. Graves. And I appreciate his candidness and such, and I hope he has taken a statement and suggesting his regret and not encouraging others to do that, and not a statement in which he was saying, I did that, and look at me at what I have been able to accomplish in life, but instead take another position that it was a mistake. If I could change gears real quick. I met with some sheriffs last week while I was in the district, and we were talking about methamphetamines. And obviously, it has been a very difficult problem in our region in northwest Georgia. They were suggesting that with all the steps we have all taken to try to prevent it, that things have changed, the ingredients are changing, obviously others are finding easier ways to do it, but there is still that lingering problem with drugs coming across the southern border. Do you sense that our border security is adequate when it comes to not only from the illegal immigration perspective, not asking you to speak on that, but from an illegal drug perspective crossing our borders? What can be done? Is it adequate, and what more can be done? Mr. Botticelli. I think you have raised two critical issues here, one in terms of drugs coming in from Mexico and domestic production as well, as well as domestic use. And so I think, you know, we have had significantly enhanced the resources at the border. Part of our concern has been both good and bad in the sense that they have been able to actually seize a tremendous amount of more drugs at the border. Unfortunately, we have seen about a 500 percent increase in methamphetamine seizures at the border. And I think you are absolutely right that as Mexico has changed in terms of looking at putting controls on precursor chemicals, as the Combat Meth Act in States have enacted, we see different patterns emerging in terms of both production internationally as well as domestically. So previously where we saw large lapses here in the United States, I think some of our laws have made it much, much harder to get large amounts of chemicals, and we are seeing the increase in terms of these very small one-pot labs. Particularly here in the District we have all heard news around that. So it has been clear that this is a public safety and public health issue that we have to look at. You know, one of the areas that we are examining is we have made some pretty good progress over the past few years in terms of the reduction in methamphetamine use here in the United States, I think largely through our drug prevention and local law enforcement efforts. So we do have a number of programs through our Office that help support reducing the distribution in trafficking largely through a component of our HIDTA programs as well as through our Drug-Free Communities. So meth is an issue that we have to continue to look at both internationally as well in terms of what we seize from the borders, but also work on domestic production and domestic trafficking, as well as reducing demand for methamphetamine here in the States. Mr. Graves. And I know it is outside of your scope, but from the trafficking, drug trafficking across the border, do you--I mean, are you suggesting that adequate protections are in place now? Is there more that can be done? Any thoughts on that? Are you pleased with the effort there? Because ultimately it impacts your role and what you are going to have to handle. Mr. Botticelli. I think we have done a significant job in terms of looking at increasing our technology, increasing our information sharing, as well as increasing some of our prevention efforts on both sides of the border. So I think we actually have done a really good job in terms of looking at that. There is always more work to be done. My former boss is now the Commissioner of Customs and Border Protection, so I am sure that we will have a very good relationship in terms of Customs and Border Patrol, and particularly as it relates to our Southwest border. Mr. Graves. Thank you. Thank you, Mr. Chairman. Mr. Crenshaw. Thank you. And, you know, I share your concern, as well as, I think, everybody on this subcommittee probably is concerned about marijuana and to hear the things that you mentioned. But I guess the good news is that we can refer everyone to Governor Jerry Brown out in California, who I think said it very succinctly when he said it is hard to have a great State or great Nation when you have got too many people getting stoned, which surprised me to hear him say that, but that is the other side of the coin that probably people need to talk about. I think he talked about you shouldn't have too many potheads. So he is trying to spread the message, I guess, from the other side of the coin. We have got time for a couple more questions if Members have, but I wanted to ask you on the international scale and then more domestic, but people have talked about Latin America, the Caribbean, the fact that 75 percent of everything comes through. On the other side of the world, there is a place called Afghanistan where they grow poppies. And I remember the first time I went to Afghanistan, there was all the conversation about how are we going to get people to quit growing poppies and grow something else. And that kind of died down, and there was a lot of discussion about that. I was there about 6 weeks ago, and the military was talking about all the great things that have happened in Afghanistan in terms of education, in terms of universities being created, women's rights, women's voting. We didn't really talk much about the whole poppy situation. And then as we prepared for this hearing, it was called to my attention that the poppy production is just ever increasing. Now it is, you know, 5 percent of the GDP. And I wonder, because you see the impact when these drugs, whether they are from Latin America or the Caribbean, or whether they are from Afghanistan, when they kind of hit the ground here, the terrible impact they have. Do you work with them, and are those things that are still being talked about in terms of maybe how you slow down that production there? And do you coordinate with the Department of Defense at all? Could you touch a little bit on the whole poppy situation? Mr. Botticelli. Sure. You know, clearly the situation in terms of poppy cultivation in Afghanistan has been a significant concern, and I think you are right that we have seen year after year increases in terms of poppy cultivation and, you know, have some significant concern in terms of what that might mean. We are not seeing kind of widespread heroin trafficking into the United States from Afghanistan, but clearly as it relates to the instability within the country and the money that it generates in terms of the insurgency, I think that is a particular problem. We work with the Department of Defense as well as the Department of State in terms of looking at how do we continue to aid counternarcotics efforts in Afghanistan. Clearly the next few months in terms of the election there as well as what are going to be resources after troop pullout is of particular concern in terms of looking at those issues of both poppy eradication, but as well as alternative development to take the place of those poppies. You know, with that said, it doesn't diminish in terms of what we are anticipating for our counternarcotics efforts. We are looking to continue priorities that provide training and technical assistance to the counternarcotics police of Afghanistan as well as vetted units within the Afghan drug law enforcement, as well as investing in institutional sustainability and capacity building within the ministry of counternarcotics. So these are largely efforts through our Department of State and their international law enforcement division. So clearly this is an issue that is of significant concern for us now and going forward. Mr. Crenshaw. Well, thank you. And let me now ask you about a more domestic problem; that is, methamphetamines. And as I understand it, you know, it is very addictive, it is cheap, it is kind of becoming the drug of choice. And maybe you could tell us what you see the trends are in terms of the use and abuse of that, talk about what you all are doing to try to counter the production and the use of that, and then do you need anything more in terms of tools that you can use, because, as I understand it, that is really one of the most serious things we are facing today. Mr. Botticelli. Great. Thank you. And I appreciate the offer. So, as we indicated, we have seen significant increase in seizures of methamphetamine at our southern border as well as an increase in domestic production, and some of the programs that we have from the law enforcement that we have talked about previously through our High Intensity Drug Trafficking Areas. We also have a national program under our HIDTA program, and that is the National Methamphetamine and Pharmaceuticals Initiative, and that provides regional support through our HIDTAs to look at how do we diminish drug trafficking and production issues particularly for methamphetamine. You know, again, on the prevention side, you know, we see a variety of resources, our Drug-Free Communities, to look at doing that. You know, I would be happy to have subsequent conversation with you in terms of what additional things might we have in place beyond just the Combating Meth Act that might hold promise in terms of reducing the availability of some of the precursor chemicals that go into the production. As Congressman Graves pointed out, as we have made changes at both the Federal and State level, there has been, I think, an evolution in both chemicals and production that warrant, additional consideration in terms of how do we continue to do everything that we can, from both a supply reduction and a demand reduction standpoint, to reduce those issues. I also think, too, that when we look at methamphetamine, that we have some significant parts of the country that are more affected than others. Mr. Crenshaw. Yeah. I was going to ask you about that. You know, these meth labs that you read about that kind of come and go, where are they going, where are they concentrated today? Mr. Botticelli. You know, I think that the biggest impact that we see in terms of methamphetamine, and this is not to say that we don't see it in rural pockets around other areas, but when you look at kind of the regional impact, I think that is particularly in the South--or particularly in the South and the West is where we see significant impact from methamphetamine. I came from the Northeast, where we had a big heroin problem and very little meth problem. So we have different parts of the country that I think are differentially impacted by methamphetamine both in terms of production and use. Mr. Crenshaw. Is it hard to set up a meth lab? I mean, like, you go to Colombia and see it is pretty--you go out in the jungle and make cocaine. I mean, is it something somebody can set up, make meth, and if somebody comes, they go somewhere else? I mean, how complicated is it? Mr. Botticelli. In the spirit of full disclosure, I don't think I am really fluent other than watching ``Breaking Bad.'' I don't think I really know the technical capabilities to do it. My understanding is that it is not tremendously complicated, and that is why we are seeing the development of some of these one-pot labs in terms of both the chemicals that are available as well as the process. That said, people who are doing production are not necessarily tremendously skilled at it, and we see some devastating environmental impact, drug-endangered children as it relates to it. So, I don't think that it is technically tremendously difficult to do. And, again, I think as we have put certain controls on certain of the chemicals, precursors, that we have seen an evolution in terms of---- Mr. Crenshaw. Would you say is it the fastest growing? I mean, it used to be crack cocaine. I mean, how does meth rank in terms of abuse and potential for abuse? Because I always understood it was just so cheap and so, you know, available that it was one of the fastest-growing problems you are facing. Mr. Botticelli. Again, I think we have to continue to monitor the impact of the production, because what we have seen, quite honestly, over the past several years has been a reduction in meth use. And, again, that is probably differential in different parts of the country, but we have seen some decline in methamphetamine use. I think we would be well advised in terms of looking at both the production and the interdiction around our meth use, as well as some early indications that we are seeing more emergency department mentions, an uptick in emergency department mentions, for methamphetamine. So I think we have to pay close attention on both the regional and the national level in terms of those issues. You know, one of the issues that we talked about before, in terms of magnitude of order, has been the prescription drug abuse and the opioid epidemic that we are seeing nationally. That is clearly an issue that is a high priority for us, as well as continuing to monitor what is happening with other drug-use trends. Mr. Crenshaw. Gotcha. Mr. Serrano. Mr. Serrano. I am not doing well today. Either you are asking my questions, or he is answering my questions before I ask them. Mr. Botticelli. I hope it is the latter, Congressman. Mr. Serrano. It is both. It is both. So I want to talk to you about the prescription drug abuse. What are you specifically proposing to do to reduce the misuse of the prescription drugs? And also, how have past efforts-- what have they shown, and how do we integrate them into what we want to do now? And, lastly, I know that 49 States that have laws authorizing prescription drug monitoring programs, or PDMPs. Are they all functioning or just some of them? Mr. Botticelli. Sure. So in 2011, ONDCP coordinated an interagency effort among our Federal partners and released a plan to reduce prescription drug abuse, and that has four main pillars. One is education, educating prescribers. And what we have seen is as the number of prescriptions for prescription painkillers has increased, so has the consequence of doing that. It entails proper monitoring, as you alluded to, making sure that we have good prescription drug monitoring programs. It requires and focuses on safe disposal. One of the things that we see is, particularly for occasional users, about 70 percent of people who use those medications occasionally are getting them free from friends and family. So how do we get those drugs out of the supply chain? And so we are working on safe disposal. And then the last one is around good laws to make sure that we eliminating pill mills and doctor shopping. As you talked about, one of the central components of what we have been proposing is making sure that we have good prescription drug monitoring programs. And we have 49 States that now have prescription drug monitoring programs and have been working to make sure that all of them are implementing best practices in terms of those. And I think there is probably no better example than what happened in Florida that had--the Congressman and I were talking about this in terms of implementing strong prescription drug monitoring programs and enacting strong legislation. And what we have seen in Florida is a significant decrease in the number of prescriptions, prescription painkillers, and I think probably most importantly a significant reduction in drug overdose deaths associated with those. So clearly having vibrant programs are important to us, as well as having programs that share information across State borders to make sure that as Florida implements good and sound policies, that people are not just moving to Georgia to focus on it. So it has clearly been one of the top priorities of our office in terms of this whole-of-government effort across our Federal partners to minimize the impact of prescription drug abuse. Mr. Serrano. Yeah. I should tell you that on social media this afternoon, after announcing that I would be attending this hearing, the number one question asked by about six, seven people, which is usually an indication of many others who want to ask the same question, was about the overdose issue. And so with that in mind, I would like to get you on the record just for clarification. When we talk about prescription drug abuse, are we talking about all prescription drugs, or are we basically saying that the problem is painkillers? Mr. Botticelli. We are chiefly talking about prescription pain medication. That is really---- Mr. Serrano. Okay. Mr. Botticelli. That is really the issue. You know, as---- Mr. Serrano. Because, I mean, for people who are on, for instance, cholesterol medication or high blood pressure, they are on for the rest of their lives. Mr. Botticelli. And I think we want them to probably stay on those medications. Mr. Serrano. Exactly. Mr. Botticelli. You know, I think the concern is particularly that physicians get very, very little training around the risks associated with these very powerful pain medications, as well as little training on how to identify substance use disorders in their population. So that is why prescribing, and particularly mandatory education on prescribing, for physicians is really important to the work that we do. As you indicated, the magnitude of the drug overdose deaths is really astounding to our office. And in 2010, we had over 16,600 prescription-pain-related overdose deaths in the United States. That is 100 people a day who are dying from prescription pain medication overdoses. And our Office has been working with Federal, State and local folks to implement naloxone distribution programs. And naloxone is a very safe, effective, nontoxic substance that emergency responders have been using for decades to reverse an overdose. And we have been very heartened in terms of the number of States that have enacted naloxone distribution programs throughout the country. It is really remarkable. It is a really miraculous drug in terms of its ability to save lives. Mr. Serrano. Let me ask you one more question. And then, Mr. Chairman, if we don't have another round or anything, I will just submit a couple questions for the record. We know we don't have diplomatic relations with the island of Cuba, but in the past we have done immigration work with them. In fact, we do immigration work ongoing. We have done transportation issues in terms of airplanes flying over or not flying certain parts of the Caribbean. We have done hurricane issues, preventing tsunamis--or warning of tsunamis or so on. Do we have any kind of relationship when it comes to drug issues with the Cuban Government? Mr. Botticelli. To my knowledge, sir, I don't think we have any ongoing discussions or work with Cuba, but we are happy to discuss with you and your staff kind of what you might be thinking. Mr. Serrano. Okay. Because I know a couple of years ago, to my shock, they were willing to accept DEA agents on their turf, if you will, and political pressure from this country stopped that from happening. And I said I was shocked because, you know, basically saying send me agents from your country of any kind of agents, you know, to Cuba was quite a statement. And I know it is not in their best interests to have drugs coming into Cuba, and it is not in our best interests to have drugs coming here. So I would like to know if, you know, later on, if you could find out, if there has been any talk about that, in the near future. It is probably one of the areas where I think both parties could agree would be of benefit to this country. Mr. Botticelli. Happy to look into it, sir. Mr. Serrano. Thank you. Thank you, Mr. Chairman. Mr. Crenshaw. Mr. Womack. Mr. Womack. Thank you, Mr. Chairman. Mr. Botticelli, your predecessor, I think, was confirmed at CBP earlier this month; is that right? Mr. Botticelli. Correct. Mr. Womack. So you have been in your current capacity now as Acting Director---- Mr. Botticelli. Two weeks now. Mr. Womack. For 2 weeks. Okay. Is it fair to say that you didn't have a lot of input with the President face to face on this particular budget? Mr. Botticelli. You know, clearly we work with the Administration and through their---- Mr. Womack. But you personally. You personally were not face to face with the President on this budget? Mr. Botticelli. Correct. Mr. Womack. Okay. Have you been invited into the White House, into the Oval Office to talk about the growing problems with substance abuse and the effects, the cascading effects, across society? Have you had an opportunity? Have you been invited? Have you had the opportunity? Can you kind of take me inside the White House and tell me how that conversation is going? Mr. Botticelli. As part of the Executive Office of the President, we obviously work with the President and the President's advisers in terms of what our policy has been. And---- Mr. Womack. I am talking about specifically the President. Mr. Botticelli. I have not, sir. Mr. Womack. Have not. Have you been invited? Mr. Botticelli. I have not, sir. Mr. Womack. Okay. Three hundred eleven million is the budget, the President's budget, for your office? Mr. Botticelli. For our Office. Mr. Womack. Down from 370? 360? Was it 55 million? Was that the difference? Mr. Botticelli. Correct. Mr. Womack. Okay. That is about a little less than a 20 percent cut. I am going to guess about 17.5, 18 percent cut in your budget. Do you think that is an adequate reflection of the importance of your office given the fact that you are taking the better part of the 20 percent cut in the President's proposed budget? Do you think that is a reflection of the priorities? Mr. Botticelli. I think, not just looking at our budget, but if you look at the totality of the National Drug Control Budget, right, so not just ONDCP---- Mr. Womack. Which is 20-some billion. I mean, it is a lot of money. Mr. Botticelli. Right. So if you look at kind of the totality of the resources that the Federal Government has in terms of looking at this issue, we have seen that money increase. And I think what is particularly important in terms of the overall National Drug Control Budget is that we have seen a significant increase in terms of our drug prevention and drug treatment services. And, again, you know, that if you think about priorities that we are looking at, how do we deal with this as a public health-related issue. And so those dollars have continued to increase in terms of our overall Federal budget for this priority. So I think, Congressman, when you look at the entire National Drug Control Budget, you see that it is a priority within the Administration. Mr. Womack. Well, I was reading in your statement that--and these numbers just kind of shocked me to my conscience on the fact that drug overdose deaths now number greater than motor vehicle crashes and greater than gunshot wounds. And so pertaining to the latter, I have sat in a lot of meetings, including the State of the Union Address, where the President talks about pulling out his phone or his pin to do things that Congress is unwilling to do, and he did spend some time talking about school shootings and large-scale casualty operations resulting from guns and this immediate desire to want to do something about gun violence, and yet we are going to cut this particular budget, even though it is the office's budget, by almost 20 percent, and the number of deaths related to drug overdoses in this country is greater than the gunshot wounds. Mr. Botticelli. Uh-huh. Mr. Womack. So I want to ask again, is this a reflection of where this fits in the national priority as it concerns the administration? And what are you doing, and what do you plan to do, because I am going to give you a break here. You have been there 2 weeks. You have been there since 2012, but in your capacity for 2 weeks. What are you going to say to the President when you have that face-to-face meeting on the policies of this administration as it concerns something that now outnumbers--drug overdoses--now outnumbers gunshot victims? Mr. Botticelli. I think, again, when you look at some of the new additions in the proposed 2015 budget items, that there are some additional items included in that budget that are specifically focusing on the opioid abuse and the overdose epidemic. So our Substance Abuse and Mental Health Services Administration has an additional $15 million to get out to States and local communities to particularly focus on prescription drug abuse issues and opioid and overdose issues. Contained in that budget is also an additional $10 million for the Centers for Disease Control and Prevention, again, to support State-level actions as it relates to overdose prevention. You know, it has clearly been a priority for our office in terms of promoting overdose education. We worked with a number of Federal partners and nongovernmental partners in terms of continuing to raise awareness around the magnitude of the opioid overdose issue. So, again, I think that, one of the areas that we see that leads to overdose is untreated addiction. And one of the biggest causes of why people don't get treatment is a lack of insurance. And one of the areas I think that the Affordable Care Act contains is a provision to make sure insurers have to include a benefit for substance use disorder treatment, and that is reflected in the President's budget. So I think if you look at, again, the commitment to not only expanding access to treatment, but specific vehicles to enhance State-level efforts to reduce the magnitude of the burden, I think that we see some promising proposals. Mr. Womack. I thank the gentleman. Mr. Crenshaw. Thank you. Mr. Diaz-Balart. Mr. Diaz-Balart. I was listening to you before, sir, and you were talking about Florida. You know, we would be remiss without thanking Chairman Rogers for--remember how he was so aggressive about the pill mills, and Florida had, frankly, a huge issue there, and so we have seen some good results of that. Let me just throw out another issue which I know very little about, which is this issue of synthetic marijuana. You know, I saw some things in newscasts recently; I guess there have been some deaths. And I know that our attorney general in the State of Florida has been very aggressive, and as the formula has changed, he is constantly looking at just trying to update that legislation, which is obviously much quicker on the State level than it is here on the Federal level. Tell me a little bit about your thoughts about that; how big of an issue is it, and, you know, what are your thoughts on that? And then the second question--well, let me just go for that one first, and then we will---- Mr. Botticelli. Sure. So the issue of synthetics has also been a significant concern for us in terms of a number of different areas. So one is often people don't know what they are taking or what they are getting when they take these chemical substances. There is certainly not a consistency in terms of products, in terms of how they are using it. So we have seen some significant issues around those areas. And so it has really been an issue that we have been trying to kind of focus on. And clearly we have been working with our partners in the DEA in terms of trying to stay on top of scheduling some of these substances. But Congressman, quite honestly, that has been really difficult, because as we continue to schedule more and more of these substances, the chemists always seem to be one step ahead of us in terms of making kind of small tweaks to some of these chemicals to elude some of these scheduling processes. So we have been actually working with the DEA and with the Senate Drug Caucus in terms of are there things that we can continue to do to stay ahead of some of these scheduling issues as it relates to some of these synthetic drugs. We have also seen and have been having conversations--you know, as States and as Federal Government have implemented strategies--to reduce the sale of these. We see the Internet playing a larger and larger role in terms of where people are getting the substances from. So we have been actually engaged with payment processors, some of the large credit card companies as well as PayPal, to see to what extent can they share information with us as it relates to some of these Internet sites. And they have been, to this point, I think, concerned about the issue and willing to work with us in terms of some of those sites. So it has been an issue, again, that we continue to look at in terms of those priorities and look at how we can continue to stay on top of some of the emerging issues. Mr. Diaz-Balart. I am assuming, because the States do have, I guess, an advantage as far as at least quickness, right---- Mr. Botticelli. Yes. Mr. Diaz-Balart [continuing]. Of dealing with some of this, so I am assuming you are--how good is your cooperation with States? And I guess that is kind of a general question. I am sure some are better than others, I would assume. Mr. Botticelli. You know, part of--one of our components in ONDCP is our Office of State, Local and Tribal Affairs, and they work pretty closely with our State counterparts both in terms of law enforcement and public health to look at things like model legislation, and model work, and sharing best practices among States. So we actually have, I think, a very good relationship with many of our State counterparts on both the law enforcement and public health sides. Mr. Diaz-Balart. If I may, Mr. Chairman, you have been very patient with me, I will be quick on this one. Going back to the issue of how the Attorney General and the administration is going to be kind of monitoring what is going on in Colorado and elsewhere, as far as you know, is that an informal monitoring? Is there a metrics? In other words, is there a system set up so that they can look at, you know, compare data, et cetera; or is it more of an informal monitoring that they are going to--and if it is a system that is already set up, the metrics, it would be good if some of us--I would be interested in seeing it, and also, you know, how long it is going to be, et cetera. What can you tell me about that? Mr. Botticelli. Sure. So our Office actually took the lead in convening some of our Federal partners, and we looked at each of the eight Department of Justice criteria as they were laid out, and looked at what are our data sources. And most of these are publicly available data sources that speak to things like diversion to youth and treatment admissions, things like drugged driving and arrests. So we will continue to monitor with our Federal partners those data to look at the picture of what happens with Colorado and Washington. Mr. Diaz-Balart. Thank you, Mr. Chairman. Mr. Crenshaw. Thank you. Well, I have some questions that I will submit for the record. I know Serrano does, as well. So let me just say in closing, thank you and your staff for what you do. You know, we talk about this fight against drugs, and we refer to it often as a war against drugs. And some people say we are winning, some people say we are not winning, but we are certainly fighting the war. And drugs, as we all know, have such a terrible impact on our country, whether it is destroying lives, breaking up communities and families, so we want to work with you and your staff to try to win this war, to keep America safe, to keep it healthy. And thank you again for being here today, and we look forward to working with you. So this meeting is adjourned. Mr. Botticelli. Thank you. [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] Wednesday, March 26, 2014. THE JUDICIARY BUDGET WITNESSES HON. JOHN BATES, DIRECTOR, ADMINISTRATIVE OFFICE OF THE UNITED STATES COURTS HON. JULIA S. GIBBONS, CHAIR, COMMITTEE ON THE BUDGET OF THE JUDICIAL CONFERENCE OF THE UNITED STATES Chairman Crenshaw's Opening Remarks Mr. Crenshaw. Okay. This meeting will come to order. It is 2 o'clock. They are ringing the bells. Why don't we start, and we will go as far as we can. There are only two votes, so we will excuse ourselves and come right back, but let's just get started. We want to welcome you all. I think that this, Judge Gibbons, is the tenth time that you have been before our subcommittee, and we appreciate your service and your willingness to meet with us. Judge Bates, I believe this is your first appearance before the subcommittee, but we look forward to working with you. Both of you also, thanks for being here today. The work of the judiciary is critical to the preservation of our Nation's system of government, where each of the three branches have different responsibilities and checks on the other branches. Americans depend on an open, accessible and well funded Federal court system to resolve criminal, civil and bankruptcy disputes. The courts must have the trust and respect of our citizens to do the function that the Founding Fathers intended. So, in addition to the judiciary's probation and pretrial service, officers perform critical public safety missions by supervising more than 200,000 offenders and defendants who live and work in our communities. And as you know, the Federal Government continues to operate in an environment of scarce resources, however, we will try to ensure that you have the resources that you need to accomplish your important mission. Over the past few years, you and your staff have worked closely with us to ensure that the judiciary receives increases to address only your most critical needs, and I thank you for your efforts to try to reduce costs during these challenging times. The judiciary's budget request proposes a discretionary spending increase of about $220 million. That is about 3.4 percent above the fiscal year 2014. And I am very appreciative of the fact that your request is a modest increase, but remember, funding remains scarce. So I want to work with you, I want to work with Ranking Member, Serrano, to identify any savings that we can find in the judiciary's cost, but we still want to provide the courts with the resources that you need to fulfill your constitutional responsibilities. So I appreciate the important work that you do, and look forward to your testimony. And now I would like to recognize my friend, Ranking Member Serrano. Ranking Member Serrano's Opening Remarks Mr. Serrano. Thank you, Mr. Chairman. I would also like to welcome Judge Gibbons back for her 10th time. If there was a baseball contract, I think you would have a pension by now. That is the best pension in the world, I hear. Back to the subcommittee, and Judge Bates, you are the rookie, but you will quickly find out that this is a very friendly Committee, especially last year, to this particular branch. There have been some significant challenges for the Federal judiciary over the past year. Sequestration had an extremely negative impact on the ability of the Federal judiciary to function and for the various parts of the third branch to conduct its important constitutional duties. And although the Federal judiciary was able to operate during last fall's government shutdown, there were delays in trials and other pressing matters. Thankfully, there has been some good news of late. In part because of your testimony here last year, I think many Members of Congress were persuaded of the vital need for additional funding for the judiciary, and the final fiscal year 2014 bill substantially reflected that need. We were able to increase funding for the Federal judiciary by $316 million above the sequester level, which helped restore most, but not all, of the funding cuts that affected the judiciary through sequestration. I hope we will get a chance to discuss the impact of sequestration on the Federal court system and whether this additional funding has been able to restore services. Your fiscal year 2015 budget request indicates that there is more work to be done in order to restore the ability of the judiciary to conduct fair and speedy trials, to help recently incarcerated individuals transition back into society, and to provide numerous pretrial services, among other things. One area that is of particular concern to me is our Federal defenders. Cuts both prior to and during sequestration resulted in both layoffs and significant furloughs during sequestration. Our Federal defenders play a vital role in upholding the Sixth Amendment's right to counsel, and I hope we get a chance to discuss how their work has been impacted by the sequester. As I said last year, the role of the Federal judiciary extends beyond the courtroom and into all of our communities. This means that your funding is not just relevant for litigants, but for this Nation as a whole. We all, perhaps, take for granted in this country that every person can have a fair and speedy trial, but it is up to Congress to ensure that you have the funding to make these constitutional promises a reality. Once again, welcome, and I look forward to your testimony. Thank you, Mr. Chairman. Mr. Crenshaw. Thank you. I think we will have time to hear an opening statement from Judge Gibbons. And Judge Gibbons, let me say that your written statement will be made part of the record, so take in the neighborhood of 5 minutes to summarize that. The floor is yours. Judge Gibbon's Opening Remarks Judge Gibbons. Chairman Crenshaw, Representative Serrano, Judge Bates and I appreciate the opportunity you have given us. I am going to move as fast as somebody with a drawl can. When I appeared before this committee last year, sequestration cuts were just going into effect, and I predicted dire consequences for the judiciary. Our fears were realized. Sequestration resulted in delays in case processing, reduced services at courthouses nationwide, caused large staffing losses in clerks of court offices and probation and pretrial services offices. We reduced funding for court security equipment, and court security officers worked fewer hours, thus creating security vulnerabilities. Perhaps the most significant impact was in our Defender Services Program, which provides court-appointed counsel for indigent defendants. Federal defender organizations lost 400 staff during 2013, an 11 percent loss, and widespread furloughs were implemented. In addition, a $15 per hour temporary rate cut to panel attorney hourly rates was implemented on September 1, 2013, on an emergency basis, an unprecedented action. This subcommittee, and the overall Appropriations Committee, responded with help through the funding you provided us in fiscal year 2014 in the omnibus appropriations bill. We are very appreciative of the 5.1 percent increase in discretionary appropriations, which essentially restored us to a pre-sequestration funding level. This funding stabilizes our financial position and allows us to reverse most of the emergency measures put in place due to sequestration. We will be able to backfill some of the more than 3,200 staff lost in recent years in clerks offices and probation and pretrial services offices, and we have sufficient funding to meet operational expenses. We are particularly appreciative of the funding you provided for the Defender Services Program. We have been able to restore, effective March 1, the $15 cut to panel attorney hourly rates and to begin backfilling the 400 staff lost in defender organizations. We anticipate this will take at least 2 years to accomplish, but we are committed to restoring the program to its former strength, and with your help, we can do that. We continue our decade-long effort to reduce growth in the judiciary's budget in order to position ourselves for future fiscal realities. We have some real cost containment successes, but we realize there is more work to do. My written testimony discusses in detail our efforts to reduce the judiciary's space footprint. We take your concerns about that seriously. We are pursuing a multifaceted approach to space reduction, including reducing the judiciary's space 3 percent by the end of fiscal year 2018. We will work hard to meet this goal. There are several chief district judges in town for their annual meeting who have joined us today. They are on the front lines in the courts implementing cost-saving practices, some of which are national programs and some of which are locally grown. I want to recognize each of them briefly. Judge Gloria Navarro of Nevada. Her court has developed the e-voucher system that is being enhanced to implement it as a national system. This system will automate the current paper voucher process for paying CJA panel attorneys. Judge Ricardo Hinojosa of the Southern District of Texas. His court is a national leader in judicial administration and, over 25 years ago, was the first in the country to consolidate bankruptcy and district clerks offices. We have with us Judge Kathryn Vratil of the District of Kansas and Judge Raner Collins of Arizona, both leaders in the area of shared administrative services, which will enable us to streamline operations by having courts within a judicial district share HR, IT and other resources. Thirty percent of courts nationally have adopted such arrangements. Judge Jerry Simandle of New Jersey has been at the forefront of efforts to reduce space. His district has reduced space needs of probation offices, in one case moving probation from leased space into a courthouse and, in another, releasing excess probation space to GSA. We also have some bankruptcy judges who are here in town for their conference. Judge Bill Glenn of the Middle District of Florida, whom I know you know well, Chairman Crenshaw, and Judge Ron Pearson of the Southern District of West Virginia. The bankruptcy courts were pioneers in many of the automation efforts that are now used by all courts. For fiscal year 2015, we seek $6.7 billion in discretionary appropriations, a 3.4 percent increase. This is the minimum amount required to meet our constitutional and statutory responsibilities. This is a current services budget that would simply maintain 2014 operations and allow continued recovery post-sequestration. There are $216 million for adjustments to base for standard pay and nonpay changes, and a total of $3 million for two small program increases. We are not requesting any new staff beyond that funded for 2014. In closing, both of you have been tremendous supporters of the judiciary, and I hope we will earn that support in the future. As you make decisions for the agencies under your committee's jurisdiction, we ask that you take into account our unique constitutional role in our system of government. In return, we commit to you that we will continue to be good fiscal stewards, cutting costs where possible, spending the dollars wisely, and making smart investments to achieve long- term savings. I ask that my statement be placed in the record, along with those of the other court entities whom we represent. Thank you. Mr. Crenshaw. Thank you, Judge Gibbons. [The information follows:] [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] BRIEF HEARING RECESS Mr. Crenshaw. Judge Bates, I think we will save your remarks for when we come back. There is a little less than 2 minutes left. There are three votes, actually, so it will take about 15 minutes, but we will come back, and some of the other members that are in other subcommittee meetings, we will see how all that goes, but if you don't mind, I apologize, but we don't plan the floor schedule around here. So we will be back as quick as we can. So the hearing will be in recess. Thanks. Judge Bates. That is fine. We appreciate it. [Recess.] Mr. Crenshaw. The meeting will come back to order. There will probably be some members straggling in, in or out, but let's continue. And, Judge Bates, the floor is yours. Judge Bates' Opening Statement Judge Bates. Chairman Crenshaw, Representative Serrano, I am pleased to appear before you to present the fiscal year 2015 budget request for the Administrative Office of the U.S. Courts and support the overall request for the judicial branch. And I join Judge Gibbons in thanking you and the other members of the committee for the support that you have provided to the judiciary during these difficult economic times, which has enabled us now to address critical funding shortfalls in the Defender Services Program and in the courts nationwide. Last summer, the Chief Justice appointed me as Director of the Administrative Office. I have been a Federal judge since 2001, serving on the United States District Court for the District of Columbia and as the presiding judge of the Foreign Intelligence Surveillance Court until early last year. I continue to carry a reduced caseload on the D.C. District Court, but my primary focus now is the management of the Administrative Office. I would like to thank the committee as well for its past support of the judiciary's Capital Security Program, funded within the General Services Administration appropriation in both fiscal years 2012 and 2013. The Capital Security Program was designed to address the most serious security deficiencies in existing courthouses where renovation is a viable alternative to new construction. Unfortunately, the program was not funded in fiscal year 2014. To give you some background, this program was an outgrowth of the judiciary's long-range facilities planning process and one of our first cost-containment initiatives begun back in 2008. Under the new process, greater emphasis is placed on space, rather than security, when determining the need for a new courthouse. As a result, the Capital Security Program provides a way for districts to address immediate security deficiencies in a timely and significantly less costly manner than constructing a new courthouse. We were pleased to see that the President's budget includes $20 million for this program in fiscal year 2015, and we urge the committee to support the GSA request in its appropriations bill. Funding for the judiciary's Capital Security Program should not, however, be a substitute for new courthouse construction. While that program may address a court's immediate security deficiencies, it does nothing to address those courts that combine both security deficiencies and an extreme lack of space. In these circumstances, the only resolution is to build a new courthouse or an annex to meet the operational needs of the court. The judiciary does not itself request funding for the construction of new courthouses. Because GSA builds our facilities, these monies come under the jurisdiction of the executive branch and are included in GSA's budget. Unfortunately, in 4 of the last 5 years, the President's budget has included no funding for courthouse construction. This year, the President's budget request for GSA includes $745 million for new executive branch construction projects, but no funding for any new courthouse projects. This is particularly troublesome, given the efforts that the judiciary has taken to improve its courthouse planning with a focus on cost containment. Attached to my written testimony is the judiciary's interim 5-year plan for courthouse projects for the next 5 fiscal years that I ask be included in the official hearing record. That plan lists the same construction priorities as the 2014 plan, except that the funding for Mobile, Alabama, provided through the Consolidated Appropriations Act has been eliminated from the list. Nashville, Tennessee, is now the judiciary's top courthouse priority in fiscal year 2015. We are very pleased that the President's budget includes funding for the Capital Security Program, but it is imperative that the judiciary also be able to move its courthouse construction program forward. We respectfully ask, therefore, that you include funding for a new Nashville courthouse in the GSA's Federal Buildings Fund in your fiscal year 2015 appropriations bill. The Administrative Office was created by Congress back in 1939 to assist the Federal courts in fulfilling their mission to provide equal justice under law. The AO does not operate as a headquarters for the courts but rather provides administrative support to the Judicial Conference, its 25 committees, over 2,300 judicial officers and more than 28,000 court employees. Service to the courts has been and remains our basic mission. In January 2011, a task force began looking at ways that the AO could ensure that it would be able to meet its core responsibilities during this era of fiscal constraint and reduced resources. Last summer, a significant restructuring and consolidation was announced to be implemented by the end of the fiscal year, and our new organizational structure is now in place and functioning smoothly. The goals of the AO restructuring were to reduce operating costs and duplication of effort, simplify the agency's administrative structure, create opportunities for greater efficiencies, and enhanced service to the courts, the Judicial Conference and the public. That new structure is leaner and more integrated. The fiscal year 2015 appropriations request for the AO is $84,399,000. That is a $3.2 million increase, which supports a current services budget. There are no additional staff or program increases included in this request. Over the last few years, the AO has downsized its workforce by 8 percent through attrition, buy-outs and early outs, imposing hiring caps and leaving positions vacant, and through cost-containment efforts. More recently, the AO's reorganization provides us with the flexibility to better align our existing staff in order to carry out the AO's statutory responsibilities. I recognize that fiscal year 2015 will be another difficult year as the committee attempts to meet the funding needs of the agencies and programs under your purview. In making your funding decisions, I hope you will consider the significant role that the AO plays in supporting the courts and the mission of the judiciary. Thank you again for the opportunity to be here today, and I would be pleased to answer any questions. [The information follows:] [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] Mr. Crenshaw. Well, thank you all very much. We are going to observe our 5-minute rule for the members, and so you all, as you give your answers, kind of bear that in mind. I will recognize folks based on seniority that were here when the meeting started, and the latecomers will be recognized in the order in which they came. Who came in first, Mr. Graves, you or Mr. Yoder? Mr. Graves. I sat first. I know that. JUDICIARY SPACE REDUCTION Mr. Crenshaw. Okay. Sitting down is important. Let me start by thanking you all for your testimony. I know last year, we talked some about the fact that rental space is a big part of your budget, and I think this year it is around a billion dollars. I wanted to find out if you are continuing to work on that. I think last year, there was $50 million for cost-containment initiatives. This year, I think you have asked for $10 million to continue that. So tell us how all that is working out. How did the--money from last year, how is that being spent? What do you plan to do for next year? And big picture, how are we doing on reducing our footprint? Judge Gibbons. I am going to start with the big picture. As you know, we have been doing a lot for a long time in the space area. Presently our focus is on two national policies that were approved by the Judicial Conference in September of 2013. The first is our 3 percent national space reduction target, which we hope to achieve by the end of fiscal year 2018. The second is a policy we are calling ``no net new,'' and the principles behind that are that any space increase must be offset by an equivalent space reduction in the same year. Excepted from these two policy initiatives are space that is congressionally approved. Circuit councils will be submitting their plans for achieving the space reduction goal by May. We are employing a number of different strategies to get to these goals. First would be our Integrated Workplace Initiative, IWI. And the principle there is that the growth of technology and the possibility of telework have made a different and cheaper workplace appropriate in some settings. IWIs require money to modify the workplace, but over time, they save money. To give you just one example, Chicago is moving its probation office from leased space back to the courthouse for a 50 percent reduction in occupied space, but it costs $3.4 million to install phone lines, cables, move walls, partitions, create cubicles. That cost is going to be $3.4 million. The $10 million figure you refer to is a part of all the math we go through to get to the point that we have to have some money to save money in the long run. This construction in Chicago will cost $3.4 million, but overall, the savings to us will be substantial. [Clerk's note.--Subsequent to the hearing, Judge Gibbons provided the following additional information:] The project costs associated with moving the Chicago probation office from leased space to the courthouse are $3.4 million as I cited; however, vacating the commercial leased space for the probation office will result in annual rent savings of at least $1.4 million. Thus, the $3.4 million in project costs will be recouped in about two and a half years. Another strategy we are employing is releasing nonresident courthouse space. Six of those facilities were released in 2012, four more in 2013. We have already garnered a savings of about $1 million a year, and we expect to proceed along those lines in other areas. We are looking at reducing library space and we have provided some incentives to the courts for giving up space. Coupled with these new initiatives, we are still continuing to emphasize our longstanding efforts to validate the rent we are charged and to hold GSA accountable for the bills it sends us to make sure we are getting billed for what we in fact occupy. And we are continuing programs like the circuit rent budget that enable us to prioritize the money we receive appropriately. Mr. Crenshaw. That is great. Thank you very much. Mr. Serrano. IMPACT OF FY 2014 FUNDING ON FEDERAL DEFENDERS Mr. Serrano. Thank you, Mr. Chairman. And, again, welcome to both of you. As you know, I have been greatly concerned about the impact of sequestration in our Federal Defender Program, which performs an important constitutional role in upholding the Sixth Amendment's right to counsel for indigent defendants. My understanding is that our Federal defenders lost more than 400 employees last year because of sequestration. Because of these concerns, this subcommittee provided an overall funding level of $1.044 billion for defender services in 2014. With this additional funding, what steps is the judiciary taking to rebuild Federal defenders offices to pre- sequestration levels? Judge Gibbons. The funds that were provided for 2014 will enable the defender offices to replace about 350 of the 400 employees lost, so most of the losses can be replaced. We have been able with the panel attorneys to restore the rate that they had prior to the September 1, 2013, temporary reduction, and so that, too, has been done, plus the panel attorneys received a small cost-of-living increase. The defenders have had trouble--are having trouble backfilling all of these vacancies. It is a very uncertain time still budgetarily, but we believe that carrying forward the funds over 2 years, that they will be able to make substantial progress in restoring the defender offices to their prior strength. We are committed to that, and we are committed to working with this committee to do that. Mr. Serrano. Okay. And so you say you work jointly with the defenders to make sure that you can get them up to the level that they should be at? Judge Gibbons. Well, they have to take the steps to hire, obviously. Mr. Serrano. Right. Judge Gibbons. But, you know, that is not as easy a task as it seems, and that is why the damage to the program was really very unfortunate---- Mr. Serrano. Right. Judge Gibbons [continuing]. Because you have to identify able attorneys. You have to bring them up to speed. It is not just--it is not the same thing as hiring just somebody who is more readily available. But they will get it done, and they are working on it. And we are encouraging them to move to hire, even though the future is not entirely clear. Mr. Serrano. Right. Any comments? Judge Bates. No. I think Judge Gibbons has handled it. SECURITY CONCERNS AT ATTORNEY COURTHOUSE Mr. Serrano. Okay. That is fine. Let me ask you. As you know, I have always had a special interest in issues affecting Puerto Rico. Maybe it has something to do with the fact that I was born there. Lately I have heard some troubling reports about the Federal courthouse complex in San Juan in the Hato Rey section. My understanding is that there have been some serious security breaches at the complex. Are you all aware of this issue, and are there plans in place to better secure the complex? Also, I know this is more of an issue for GSA, but has the judiciary discussed construction of a new courthouse in San Juan? Judge Bates. We are aware of the security issues, and indeed they are being worked on. At this time, there is staff from the Administrative Office, including the head of our space office, which deals with facilities and security, down in San Juan, assessing the situation, and working with GSA and the local court officials to address those security concerns. There also is a project ongoing, a Capital Security Program project going on there in San Juan that is helping to address the security deficiencies that have been identified in Hato Rey. And so we are working very diligently on that. There is a security study that is being done and will be completed in a few months, and I would expect that improvements can be made. With respect to a new courthouse, I think that that is something that GSA has agreed to begin a feasibility study of, and we will work with them and, again, with all of the court officials down in San Juan to assess that situation and see if the answer is a new courthouse. Mr. Serrano. So you have both security concerns being discussed now? You are working with folks down there to see if you could come up with a better idea of securing the existing facility, and GSA is leading a study to see if there is a need for a new courthouse? Judge Bates. They have agreed to begin the feasibility study of the courthouse, looking at all the Federal real estate holdings, and determine whether a new building or an annex or some new construction is necessary. Mr. Serrano. Right. Judge Bates. On the security side, we know what the security issues are, and those are being addressed both through the Capital Security Program project that is underway there, it is one of our lead projects, through funding from fiscal year 2012 and through the assessment that is ongoing at this time. Mr. Serrano. Thank you. Thank you both. Mr. Crenshaw. Thank you. Mr. Graves. IMMIGRATION REFORM LEGISLATION Mr. Graves. Thank you, Mr. Chairman. Thank you all for being here today. And, Judge, I just-- Judge Bates, wanted to see if you could elaborate a little bit on a part of your, and I guess it was submitted for the record, your statement as it related to the immigration proposal that was passed in the Senate. And in your comments, you indicate that it would take a tremendous amount of additional resources if the law was in fact enacted, and while the law as it was proposed provided some resources, it wasn't adequate. Would it be possible to elaborate on what you would foresee if that law or other forms of immigration reform were adopted, what kind of resources, and really, why--you know, I guess what would be the reasoning for additional resources, to help us navigate that as we think and move ahead? Judge Bates. I would be happy to. The impact of immigration reform legislation on the courts could be substantial, but it does depend on the specifics of any bill that eventually passes. The judiciary has no position on the substantive policy issues that are for the political branches to resolve, although we have provided some specific comments both to the Senate Judiciary Committee prior to that bill coming out of the Senate, and to Chairman Goodlatte and the House Judiciary Committee. The cost to the judiciary really results from increased cases coming into the court system. That workload could be great, depending on how many new cases. There could be new crimes. Some of the proposals have included new crimes being established and also enhanced penalties, and those could result in additional needs, particularly in the border courts, and those needs would include possibly additional judges, court staff, probation and pretrial services officers, and the Federal public defenders, who are representing these individuals, as well as the panel attorneys, who are paid for through our appropriations. The Senate bill does include billions of dollars for the executive branch, it is through a trust fund that has been set up, that will result in expanded enforcement of existing provisions and new provisions in that bill, but there are virtually no resources for the judiciary, which would be involved in that enforcement effort through cases brought into court, except for a small piece that goes to a specific area in Arizona, the Tucson sector. Even now, the Judicial Conference has included a request for additional judges in the border courts, but this immigration legislation could make that need much more acute. And we simply feel that it is important to point out that the judiciary has resource needs in all these areas that could result from whatever the specifics of the bill might be. Mr. Graves. When you reference new cases, is it because the law creates new crimes, or is it because there is additional resources being provided that provide for more enforcement, which therefore leads to more cases? I guess, ultimately, the question being, given the current law as we have it today, the laws that are governing us now, do you have adequate resources to--or are those--are the resources that are there necessary-- the necessary resources there to enforce the current laws, or do you see that it is inadequate at this point and that these proposals that are out there, whether in the House or the Senate, are creating additional laws or enforcement mechanisms that create the need for additional resources? Judge Bates. The answer to the current situation is the judiciary absolutely does its best to handle the work that comes into the courts. The border courts are strapped. They are working very, very hard, all sectors, the judges, the staff, the probation offices, the Federal defenders, but they are meeting the needs. Do they need more resources? Yes, but not as acutely as would be true if new legislation both creates additional enforcement by the Department of Justice and perhaps even adds new crimes and enhanced penalties that would lead to more cases. Mr. Graves. Okay. Thank you. Thank you, Mr. Chair. Mr. Crenshaw. Mr. Quigley. HIRING IN FEDERAL DEFENDER OFFICES Mr. Quigley. Thank you, Mr. Chairman. Good afternoon, Judges. I, too, have, since I got here last year, tried to do what I can for the Defender Program. As I mentioned, I was a criminal defense attorney for 10 years, 26 in California; highest conviction rate in the county. That was funnier last year, I guess. I understand a couple things. First, on the rehiring, is it the first practice to rehire those that we lost before in the cuts? Judge Gibbons. I don't know. I think that would be dependent on each particular Federal defender's or community defender's decisionmaking processes, and that is not something that would be centrally determined in any way. Mr. Quigley. It would sort of make sense, though, since they have done the job before and had the experience. Judge Gibbons. Well, yes, but you know, uncertainty makes it difficult to rehire those--if those people have moved on to other opportunities. Mr. Quigley. You mean uncertainty that they are not sure we are going to do this again or not? Judge Gibbons. Well, they might be uncertain but there are no guarantees. They could be reasonably assured probably of remaining employed for a period of 2 years, but they may have learned a hard lesson, and they may not want to be here and sit there in 2016. RESOURCE ALLOCATION TO FEDERAL DEFENDER OFFICES Mr. Quigley. I understand. I also hear that the Executive and Budget Committees of the Judicial Conference have talked about a one-size-fits-all program for defenders and that they are going to be asked to create--all carry the same number of cases. I don't know if you have heard this or not. Judge Gibbons. I think---- Mr. Quigley. Regardless of the type of case that they handle or---- Judge Gibbons. Well, no. Your information is, first, I will say, inaccurate. There are a couple of things that you might be referring to that are ongoing. Taken into account, into determine---- Mr. Quigley. Not the first time a judge has told me I am wrong, just so you know. Used to happen on a daily basis. Judge Gibbons. Well---- Mr. Quigley. And I always said, Okay. Judge Gibbons. Well, you are---- Judge Bates. We are just hoping not to get the same today from you. Judge Gibbons. You know, there are probably--I can understand it. There are a lot of fears out there, but that particular one is not one for a defender to be concerned about. Allocation---- Mr. Quigley. What would the---- Judge Gibbons. I don't know, but I can tell you--I think in the course of this answer, I will tell you what you might have heard about. Mr. Quigley. Okay. Judge Gibbons. Currently, allocations to individual defender offices in individual districts are based on case weights. That is not a one-size-fits-all method, because the whole idea is that different cases are different. For example, under a case weight system, as you might expect, a murder is an 8.6 under their numerical system; a bank robbery is 2.6; possession of marijuana is .34; illegal entry, .15. There is a concern--and this, I imagine, is what you heard. There is a concern about apparent disparities in workload among defender offices. And we have defender offices where the individual lawyers carry workloads far below a national average and offices where they carry a caseload that is far above. And there might be reasons for those, but they are not reasons that are accounted for by case weights. One of the efforts that is ongoing, not in an effort to have every defender office look exactly the same, but in an effort to more accurately assess staffing needs is the development of work measurement formulas. The case weights, which do differentiate, will be a part of the work measurement formula. This is a staffing assessment methodology that we have used successfully in clerks offices and probation and pretrial services offices for years. It is not perfect. When you get it, it has to be taken with a grain of salt, but it is still the best, most objective method we know for trying to assess staffing needs. But in the defender world, they have not had a work measurement formula before, so there is concern and some degree of angst probably about that, but I think when you look at how they are developed more closely, that particular fear that you articulated is not one that ought to exist. A further part of that, further thing that goes to mitigate the fear is that there is precedent within the formulas for the use of subsets of formulas. So you might have different offices treated differently but treated the same as other offices that are similarly situated. So there are a lot of nuances here that sometimes get lost in the shuffle. Mr. Quigley. And I will yield back. I just want you to know, Judge, obviously we don't pull this out of thin air. It is percolating from something. Judge Gibbons. I understand that. And I am sure you heard it, but believe me, we have heard it, too. Mr. Quigley. Very good. Thank you. Mr. Crenshaw. Thank you. Mr. Yoder. TEMPORARY DISTRICT JUDGESHIPS Mr. Yoder. Thank you, Mr. Chairman. Thank you both for coming to testify today. It is certainly one of our more important tasks as we determine how we make sure that resources are available for the judicial branch. And I think many of us look at our work here as not just another Federal agency, certainly, but an entire branch of government, and in all cases, the work you do is brought to you, not work you seek or cases that you have gone out and found. In fact, you can't do that. And so you have got the burdens that are put before you. Regardless of whether you have the resources, they are there. And so we want to make sure that we have the resources properly allocated, we want to make sure that we are, you know, resolving disputes in a timely fashion and making sure the laws are enforced properly in this country. A couple questions related to just how we have appropriated dollars. I want to thank Judge Bates for at least I think in your written testimony discussing the temporary judgeships issue. And I think it is an important one, it needs to be acknowledged before the committee that we have a number of temporary judgeships; one of them happens to be in Kansas, and then certainly in a number of other states. We have extended those temporary judgeships every year. My hope, of course, my strong wish would be this committee would continue that practice to ensure that those judgeships are available. I wonder what our long-term solution is for this issue. Every year, it comes up. Every year, we work on it to fix it, and this committee does their work. Certainly, we would, I think, all appreciate if the authorizing committee, the Judiciary Committee, you know, maybe permanently made these positions available. But what are your thoughts on how we move forward and what does the future look like? And thanks for your support on those. Judge Bates. Let me start by thanking you and the other members of the committee for including language in the fiscal year 2014 Consolidated Appropriations Act that extended the temporary judgeships in nine courts, including Kansas. You have identified the long-term solution, and that is for the authorizers to convert some of these temporary judgeships to permanent judgeships. And indeed, that is the hope of the Judicial Conference. That is what the Judicial Conference has requested with respect to eight of the nine temporary judgeships which were extended this last fiscal year. And that is what the long-term solution has to be. Those courts need that assistance from those judgeships, and it would be really a crucial injury if those judgeships lapsed and were not continued, but barring that authorization, I think that we will be back here year after year with a list of temporary judgeships that are very, very important to continue, asking the appropriators to extend those temporary judgeships, as you have done and as, again, we really thank you very, very seriously for. WORKLOAD OF JUDGES Mr. Yoder. Well, it is an issue we are going to have to continue to work on, but I think this committee hopefully will continue to support those judgeships. And unfortunately, it creates uncertainty in our courts when we don't know whether those positions will continue every year. And so far this committee's done their work and will hopefully continue to do so, but certainly I think we all want to find a long-term solution. In terms of your judicial caseloads and the burdens that some of our judges are working through, what is optimal in terms of caseloads? How many do we have? Is it higher than optimal, I am guessing, in many cases? What is the typical caseload for a judge? And how many more judges would we need, what would they cost? And, I guess, what are the ramifications that we see in the court system by not having enough judges to cover the caseloads that are available? Judge Gibbons. Well, I will start, and I have a feeling Judge Bates may well want to add something on this, too. That varies greatly by district and part of the country how high a caseload individual judges carry. And we use a weighted case system in order to determine judgeship needs, too, similar to the one I discussed with Representative Quigley for the defenders. And we have worked in the past on ways of alleviating this imbalance. We have an intra-circuit assignment process. There is a lot that is done within circuits to try to relieve this imbalance. We do have a judgeship bill pending, which Judge Bates may want to address. I am drawing--we will probably supplement this answer, because what I am about to say draws on some very old knowledge on my part, so it is rough; it is from memory. Back in the 1990s, I chaired the committee that is responsible for assessing judgeship needs, and the formula that is used for judgeships starts at about--you know, if you have a caseload per district of over--around 450 per judge, that is the point at which you start looking at whether another judge is needed, taking into account other factors, like the availability of senior judge help and some other things. For appellate judges, my memory, subject to being corrected later, is that it is around 500 cases per panel. And there is, you know, there is a biennial survey. We have an elaborate process for determining judgeship needs. [Clerk's note.--Subsequent to the hearing, Judge Gibbons and Judge Bates provided the following additional information:] The Judicial Conference uses a threshold of 430 weighted filings per authorized judgeship in a judicial district as a starting point for considering an additional judgeship. For circuit judgeships, the threshold is 500 filings as I indicated in my response. The 430 and 500 thresholds for new district and circuit judgeships, respectively, applies to what filings per judgeship in a district or circuit would be after a new judgeship is created, unless certain circumstances apply. For this reason, judicial districts and circuits that are candidates for new judgeships currently have filings well above the 430 and 500 thresholds. As background, the Judicial Conference considers judgeship needs on a biennial basis and transmits its judgeship recommendations to Congress for consideration. On April 5, 2013, the Judicial Conference's new judgeship recommendations to Congress included adding 5 permanent judgeships and 1 temporary judgeship to the courts of appeals, and 65 permanent judgeships and 20 temporary judgeships to the district courts, as well as converting 8 temporary district court judgeships to permanent status. In addition, the Judicial Conference recommended the creation of 29 bankruptcy judgeships, 2 temporary bankruptcy judgeships, and the conversion of 20 temporary bankruptcy judgeships to permanent status. Judgeship recommendations are the product of formal studies and survey processes, based on caseload standards and workload factors among other considerations, tailored to meet the needs of the United States Article III and bankruptcy courts. The Judicial Conference will next transmit new judgeship recommendations to Congress in Spring 2015. Judge Bates. I will only supplement that very slightly. There is a very elaborate and careful process for determining judgeship needs, and each year, the Judicial Conference for each Congress makes an assessment and a recommendation of any new judgeships. One way to describe the figures that Judge Gibbons just gave, which are, I think, approximately correct, is that the Judicial Conference standard, to pull this back into the temporary judgeships arena, the standard for considering whether to recommend a temporary judgeship be converted to a permanent judgeship is weighted filings per authorized judgeship that would rise above 430 if that temporary position was lost. And that is on the district court level. In terms of costs, I don't know the figures. I have heard some throw around figures, when you combine staff as well as the judge and the build-out for chambers, of something around $1 million for a judgeship, but I don't know that that is right. We would have to supplement to give you a more accurate answer to that. [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] COURT SECURITY PRIORITIES Mr. Crenshaw. Thank you very much. We have got time, maybe, for a couple more questions if other members have them. Let me ask you a couple questions about security, both court security and then courthouse security. I think this year, you asked for an additional $33 million for court security. How do you go about making sure that is the most cost-effective, most efficient way to use money? Tell me a little bit about how you decide what you need in terms of court security. Judge Gibbons. The security account is one in which it is pretty hard to control the costs, but we are committed to our obligation to do so. And we want to make sure, though, that we don't create security vulnerabilities when we cut costs. As you know, we are in a situation within the security account where part of the funds that are appropriated to the judiciary go to the United States Marshals Service that is responsible for providing our courthouse security, and then we also pay the Federal Protective Service to provide some additional security. This creates a little bit of a, I wouldn't call it a problem, but just a situation for us on both sides of that. We have worked, though, very successfully with the Marshals Service to maintain oversight of our funds. Recent initiatives have been new CSO contracts that save some dollars through competitive bidding. We went to fewer part-time CSO's. While still retaining the flexibility that goes with the part-timers, we were able to eliminate some costs that recur through numbers, like uniforms, medical evaluations and such. We have eliminated 68 court security officer positions in overstaffed courts. We have some ongoing concerns about the FPS situation that is a little similar to our relationship with GSA, and we have not been as successful in validating--getting our bills from the FPS validated. We took a 30 percent cut in security and equipment during sequestration, and the CSO's had to work fewer hours. Those have been restored. But going forward, we have a real need for both new equipment that is just necessary to keep up to date on a recurring basis, and we have some deferred needs. It is time for cyclical replacements. That is just an overall problem. The $33 million you referred to is the full appropriations increase requested in the account, but obligations would actually go up only $18 million, and that is based on an assumption that there will be no carry-forward into 2015. We, of course, hope that that assumption proves not to be correct. And we will be updating you, as we always do, in May and September, and we hope to have some carry-forward that will reduce the amount that is being sought from you all. JUDICIARY CAPITAL SECURITY PROGRAM Mr. Crenshaw. I think you did that last year. On the other side, regarding court security, I know a couple years ago we gave the GSA $20 million so rather than build a brand new courthouse, the Judiciary can renovate it and bring it up to security standards. How has that worked out? Is that money all gone? Judge Gibbons. That has been done largely through the capital security project that Judge Bates referred to previously. And he can elaborate on that further, but that is exactly what that was intended for and has been used for. Judge Bates. And very successfully. And we are grateful to the committee for its support of the program, and hope that it will be reinstated for 2015 since it was not included in 2014. Those Capital Security Program projects have been very successful. It is a way to spend a little less to address security needs only where there really aren't space needs that go along with the security needs that would warrant new courthouse construction. There are many projects, including the one in San Juan that I referred to earlier, that are underway with fiscal year 2012 and 2013 funds. We didn't get 2014 funds. Hopefully we will get 2015 funds, and that is included in the President's budget submission, $20 million. We have several projects ready to go that have been approved already by the circuit judicial councils in Columbus, Georgia; Monroe, Louisiana; and Texarkana, Texas and Arkansas. And they are all in the $5 million to $7 million range, and they address security concerns in the space, some of which are the Marshals Service's space concerns for prisoner security and the like. And it is important that it be recognized that it includes both judiciary and Marshals Service's concerns and security needs, because without the capital security project, we can't really address the Marshals Service's end of it, because with our appropriated money, we couldn't do anything with their space. Mr. Crenshaw. Thank you. Mr. Serrano. PROBATION AND PRETRIAL SERVICES USE OF TECHNOLOGY Mr. Serrano. Thank you. I just told the world that GSA was looking at the possibility of building a courthouse in Puerto Rico. Judge Bates. They will be happy. Mr. Serrano. Offender supervision technologies. We always kind of leave that to the side because we seem to know about ankle bracelets and all that. But can you discuss how probation officers use technology to improve the supervision of offenders? Judge Gibbons. There has really been a transformation of the way supervision is carried out as a result of all the technological advancements. You referred to electronic monitoring. We now use new technologies for drug detection and abuse of prescription drugs detection. Probation officers are able to use data mining computer services to better keep up with offenders. We have a PACTS system, which is an internal system--I won't try to tell you what that stands for--in which officers are able to record their own notes and case events. We have an electronic data warehouse for probation and pretrial services officers to record workload activity, release data. We have another program called LENS that enables us to give electronic notice to local law enforcement if an offender is moving into an area. Offenders can report electronically, either online at home or at a kiosk. And, of course, all the probation and pretrial services officers have all these devices that they can use in the field or in the office, you know, the same ones that all the rest of us use, the phones, the iPads. One really interesting thing about this is how much the extent to which this revolution in technology of supervision goes hand in hand with our space reduction efforts, because one of the reasons we are able to reduce space for probation and pretrial services offices is because of what technology has done for supervision. ECONOMY'S IMPACT ON RE-ENTRY INITIATIVES Mr. Serrano. Mr. Chairman, I have one last question. I am not a lawyer, but I am told that a lawyer never asks a question that he or she doesn't know the answer to, so I will take a chance that I am wrong on this one. How has the economy affected the reentry initiatives to help people come back and find jobs? Judge Gibbons. Well, as I am sure you can imagine, it has had an impact. It is always not the easiest thing to place offenders in gainful employment, and, of course, the economy makes that harder. Another problem has been the lack of availability during sequestration of Second Chance Act funding, and that was, as you may recall, the funding that enabled probation officers to undertake so many of these initiatives that helped reintegrate offenders into the community, things like transitional housing, job training, educational training, cognitive behavior therapy, all those kinds of things. For 2014, courts can use their decentralized funds if they have them available for Second Chance Act funding, but for 2015, we have requested $2.9 million in dedicated Second Chance Act funding, and that will help very much with the reintegration of offenders in good times and bad. Mr. Serrano. Thank you. As you know, Mr. Chairman, I am not a lawyer, but I did play a judge on Law and Order once. Mr. Crenshaw. Yeah, we know that. Mr. Serrano. I told the DA to behave, and he didn't, so I threw out the case momentarily and never got it back. Mr. Crenshaw. Boy. Good thing this guy doesn't have a law degree. Mr. Yoder. Mr. Serrano. He is just saying that because he didn't get the part. AVERAGE CASELOAD PER JUDGE Mr. Yoder. I was right. Okay, a little bit of follow up on our last conversation regarding the amount of caseloads per judge. I think you said the optimal was 450 and that is when it means it is time to request a new judge or there is a need for a new judge at least. I don't know that I ever got an answer what is the typical, what is the average caseload? Judge Gibbons. I don't have that figure. I mean, we would have to do some--we would have to answer that supplementally; 450 for a district judge is the figure that I recall as being the figure at which you start looking for need. But to look at the typical caseload across the country or average, we would have to give you that figure. You know, it is so--it differs so much, and the raw figures that we would give you would not be the weighted figures that are much more meaningful in terms of evaluating what the workload of a court is. Also the average figures wouldn't give you the caseload mix between criminal and civil. [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] Mr. Yoder. How many judge also are over a 450 caseload? Judge Gibbons. I don't know. We would have to provide that in a supplemental answer. [Clerk's note.--Subsequent to the hearing, Judge Gibbons and Judge Bates provided the following additional information:] The Judicial Conference uses a threshold of 430 weighted filings per authorized judgeship in a judicial district as a starting point for considering an additional judgeship. This threshold applies to what filings per judgeship in a district would be after a new judgeship is created, unless certain circumstances apply. Of the 94 federal judicial districts, there are currently 38 districts that would have average weighted filings above 430 with an additional judgeship, thus making each of those districts candidates for at least one new judgeship based on the weighted filings threshold. Some of the 38 districts would be candidates for more than one additional judgeship. Mr. Yoder. Okay. Judge, do you have anything on that. Judge Bates. No, I don't know that specifically. The only figures I have in my head or in front of me relate to those temporary judgeships, and those courts have pretty high average weighted caseloads, even including that temporary judge. It goes all the way up to over 1,200 in the Eastern District of Texas and over 600 in Arizona, over 600 in Florida Southern. So some courts have very, very high---- Mr. Yoder. What is the net effect on the public when our caseloads get to that amount per judge? Judge Bates. I think the primary effect on the public is delay. Mr. Yoder. Judicial delay. Judge Bates. Delay in dispensation of justice. Mr. Yoder. Where do you see the highest demand for new cases right now? Where is the increase coming from or where are the greatest demands on the court right now, what types of cases? Judge Gibbons. You know, this is not a period in which the courts' caseloads are rocketing up in any particular area. In fact, even the border courts which, of course, have seen dramatic caseload increases since the early, very early 2000s, have seen a very modest diminishment lately, although we do not expect any dramatic decline. And, of course, immigration reform could affect that greatly, probably on the upswing. But we do expect civil cases to increase somewhat. We expect--criminal cases have declined a bit, and we think we may see that. Bankruptcy filings have been down somewhat, but we expect them to level off in 2015. Appeals Court, I think those cases are pretty flat right now. So you never know exactly what is going to happen next in the courts, and things that happen in the country generally very much affect that. This is kind of a stable period. IMPACT OF LEGISLATION ON THE FEDERAL COURTS Mr. Yoder. Well, the economy was brought up earlier in terms of reentry programs. Those are things outside of your control that might affect the amount of folks that are coming back through the system, which will increase demand on the court system. You mentioned immigration, which is something that I don't know that Congress has really had much of a debate about regarding the impact on the court system, so I am actually really glad that you raised that as an issue because that will have to be taken into account. I think, in previous years, you mentioned when we pass significant reforms to enact, like redoing the Bankruptcy Code or if we were to do tax reform or things like that, just kick up dust in terms of they are new issues that have never been resolved just because they are new laws the courts will have to weigh in on as there are portions of the laws that, for better or worse, this congressional process hasn't tied up every loose end, and the courts have come in and weigh in. Are there things beyond immigration, or the economy was mentioned earlier, are there other bills that are pending? The bill that relates to mandatory minimum sentences that is in the Senate that Attorney General Holder is supporting, the idea we would eliminate mandatory minimum sentences, particularly for drug crimes, does that affect the court system in terms of caseloads? Judge Bates. It does, but not in terms of caseload, per se. The place where those kinds of sentencing reforms affect the judiciary is more in the release of people. But there are also some effects from caseload. If some of the sentencing reforms were put into place, it might mean some additional cases because some of the reforms relate to changes in the sentences under the sentencing guidelines for certain drug offenses. Mr. Yoder. So they would have to come back through. Judge Bates. So they would come back through the system, and that could be quite an additional workload for the courts. Early release programs have an effect, but it is on the courts more through the probation and pretrial services end of our resources than through new cases occurring. Mr. Yoder. I appreciate it. Thank you, Mr. Chairman. Mr. Crenshaw. Thank you. Mr. Quigley. And I would say if you are going to start your next round of questions with a joke, you might preface by the remark, ``Here is another one you might not like.'' PRODUCTIVITY OF JUDGES Mr. Quigley. The story of my life. I am beginning to feel like Rodney Dangerfield. There is some humor in all of this because it is better to laugh than cry about some of it, I guess. But following up on Mr. Yoder's questions about judicial productivity, and I preface it by saying some of my best friends are judges, in watching them for 10 years, obviously some of them are more productive than others, much more productive than others. The difference at the Federal level, it is not exactly like you can fire them if they are really unproductive, and I recognize that most are very conscientious and work hard. But how exactly do the courts handle this in trying to get judges to be more productive and move their caseload along faster and take more cases? Judge Gibbons. You know, it sort of depends on the situation. As you can imagine, this raises sensitive questions. I have been a chief judge of a district court and if you are the chief judge of a court, whether a district court or an appellate court, you try as best you can to deal with the case of the unproductive colleague or the less productive colleague and you try also to deal with what the underlying cause for that might be if it is something other than simply just differing work styles. On the one hand, you do have to appreciate that judges have different ways of doing things, and they are entitled to make reasonable decisions about how to do things. On the other hand, if the productivity of a court as a whole is threatened, you have got some difficult decisions to make. You might have to figure out whether we can get the judge help or whether there is something that you can do to encourage the judge to change his or her ways. And you hopefully do it in such a way that the judge won't simply resist it. If there is an underlying cause, then, obviously, that is another very delicate situation, and you have to try to address that. The courts really have tried as best they can to address all of those situations and to do it with the best judgment as possible to exercise in a given situation. Judge Bates. Let me add to that. Judge Gibbons has addressed it from the primary place that it needs to be addressed, which is locally, where the chief judge and the other members of a court can really grapple with any particular instance that may occur. But there are some national efforts to address it. We have committees of the Judicial Conference that do look at the productivity of courts, how far behind courts are in terms of the average time a civil case may take to get through the system, the time to get to trial, things of that sort. Our Committee on Case Management and other administrative matters spends a lot of time looking at that and then reaching out to those courts and trying to give those courts additional help, guidance, expertise, to try to make them more efficient. Congress has also done things that help. The Civil Justice Reform Act is basically a reporting system for district courts where judges wind up reporting cases where they have pending motions--again this is on the civil side, not the criminal side, which sort of has a timeline of its own that is statutory--but the civil cases, the Civil Justice Reform Act requires reporting of motions that are more than 6 months old, cases that are more than 3 years old, and those are mechanisms to prod judges to be more timely where there is a need to do so. Judge Gibbons. And I might say that appellate courts have internal reporting requirements so that the embarrassment factor figures there, too. Mr. Quigley. I appreciate that. Thanks for your service. I yield back. Chairman Crenshaw's Closing Remarks Mr. Crenshaw. Well, thank you both, Judge Gibbons, Judge Bates, for your testimony this afternoon. We look forward to working with you so that you can meet the constitutional needs that need to be met, and we appreciate the fact that you have been willing to work with us in these difficult economic times to try to do things more efficiently and more effectively, and that doesn't go unnoticed. So, again, thank you for being here today. The meeting stands adjourned. Judge Gibbons. We appreciate very much the opportunity to work with you all and the staff. Thank you. Judge Bates. Thank you all. [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] Thursday, April 3, 2014. SMALL BUSINESS ADMINISTRATION WITNESS MARIANNE O'BRIEN MARKOWITZ, ACTING ADMINISTRATOR, SMALL BUSINESS ADMINISTRATION Mr. Crenshaw. The hearing will come to order. I would like to welcome to our subcommittee our witness today, Acting Administrator Marianne Markowitz from the Small Business Administration. Thank you for being here to testify. Although the new SBA administrator has been confirmed, we felt we might give her a chance to get settled before we asked her to come over and testify. The SBA plays a critical role in assisting small businesses by providing them with access to capital, opportunities to compete for government contracts, counseling, and technical assistance. In addition, the SBA helps businesses and homeowners affected by disasters through the disaster loan program. I would like to highlight a few SBA-related successes in my district. Heavy Equipment Resources of Florida is a company in Jacksonville and it has been named the Florida Small Business Exporter of the Year by the SBA. This Florida small business specializes in exporting components and heavy machinery to mining and earthwork companies all over the world. In additional, the Jacksonville Women's Business Center won the SBA's women's business center excellence award for Florida. I am proud of all the work that the small businesses in my district do and I appreciate that the SBA does a great deal to help them get started, to grow, and to succeed. The Fiscal Year 2015 request for the Small Business Administration totals $865 million. That is a $64 million decrease from the fiscal year 2014 levels. This decrease is primarily due to the decrease in the business loan subsidy program. Since the financial crisis has wound down, the cost of subsidizing small business loans has gone down, and this is good news for U.S. small businesses and it also shows that the economy is growing stronger and businesses are thriving. While there is bipartisan support for helping small businesses, we need to make sure that your programs are administered efficiently and effectively and that we are not wasting taxpayers funding on ineffective programs. With that in mind we want to hear about areas where the SBA can do more with less. The SBA Fiscal Year 2015 request asks for $155 million for Stafford Act disaster loan administration and $32 million for the non-Stafford Act disaster administration. In 2013 the Congress passed the disaster relief appropriations act, to support the SBA's efforts and to help in the northeast region after Hurricane Sandy. The SBA has continued to carry over large amounts of no-year funding for the disaster subsidy. As of your last monthly report, the SBA has $736 million in subsidy funding supporting 8.7 billion in available disaster loan program funds, and yet the SBA has spent $82 million in administration, but only $15 million on subsidy funds. So I am interested to hear how the SBA justifies spending more on administration than it does on program costs. Whether it is counseling small businesses that are just starting or helping businesses scale up, the SBA has a very important role to play in helping the U.S. economy grow. It is critical that the funding this committee appropriates to the SBA, is used thoughtfully and judiciously. This committee is very interested in hearing exactly what the SBA is doing to further promote small businesses and their access to capital. So thank you for being here today. We look forward to your testimony. And now I would like to recognize the ranking member, Mr. Serrano. Mr. Serrano. Thank you, Mr. Chairman. I would also like to join you in welcoming Ms. O'Brien Markowitz, acting administrator of the Small Business Administration to the hearing today. Small businesses are invaluable engines of economic growth, job creation, and innovation, and I am pleased to be able to discuss these important issues today. The SBA represents the Federal Government's investment in this critical part of our economy. You have the important job of nurturing and facilitating entrepreneurship while also making sure that people who have been historically underserved by bank loans, like women, minorities and veterans, have opportunities to grow their businesses. When these individuals have good ideas and firm foundations for their new businesses, they deserve help to succeed. As our economy improves we need to make sure that we can are taking fostering and supporting new ideas and new businesses in every segment of our society. As I examine your fiscal year 2015 budget request, I am concerned that you are again proposing to cut funding to the PRIME program. These grants fund technical assistance, capacity building and research and development for organizations that help low income entrepreneurs. This program is crucial to helping small businesses get off the ground. So I hope that this subcommittee will once again reject this proposed cut. I am encouraged, however, by the continued funding for the Micro Loan program. This critical program funds the start-up and expansion of small businesses that only need small amounts of money to succeed. I hope that this commitment can be maintained and extended to other programming. I thank you for your service and for appearing before us today. I look forward to discussing the important work of the SBA with you in more detail, and once again, thank you for your service. Mr. Crenshaw. I would like to recognize the Acting Administrator. Your written statement will be made a part of the record, and the floor is yours to give us your testimony. Ms. Markowitz. Thank you, Chairman Crenshaw. Thank you, Ranking Member Serrano, and distinguished members of the subcommittee for this opportunity to testify today. We appreciate your ongoing support for the SBA as we work to assist the entrepreneurs who are creating the majority of new jobs in this country. We know you share our commitment to America's small businesses. We remain focused on our core mission. We call it Three Cs and a D. Helping small businesses access capital, contracts, counseling, and disaster assistance. The SBA is pursuing programs to help small businesses export for the first time, to help early stage start-ups get the capital they need, and to help existing companies scale up, create more jobs to grow our economy. Last year was the third straight year that the SBA supported over $29 billion in lending to more than 47,000 small businesses. We also assisted more than 46,000 businesses and individuals through $2.8 billion in disaster lending. For fiscal year 2015, the SBA is requesting an appropriation of $710 million. This funding would enable us to support loans totaling $36.5 billion over the next year. Our budget request would allow us to deploy nearly 4 billion in long term investment capital. It would facilitate access to $80 billion in Federal contracts for small businesses who are too often shortchanged in our procurement processes. Additionally, it would enable us to work with our resource partners to counsel and train more than 1 million small business owners over the next year so they can grow their companies and create more middle class jobs. We are seeking full funding for our Small Business Development Centers, our Women's Business Centers, our Veteran's Business Outreach Centers and our national network of SCORE mentors and volunteers. Notably, our fiscal year 2015 budget request represents a $64 million reduction in our business loan subsidy. We have dramatically reduced our subsidy for the 504 loan program down to $45 million, and I am proud to report that for the second consecutive year the SBA is requesting no credit subsidy for the 7a loan program. We are making good loans to responsible borrowers and we are managing our risk under these programs that we are good stewards of taxpayer dollars. Our borrowers report that these programs, the 7a and 504 programs together, support over 650,000 jobs in this country. We are requesting authority to continue 504 refinancing lending. This program allows business owners to refinance existing debt and lower their monthly business costs. 504 Refi was a successful program that expired at the end of fiscal year 2012. It supported $5.5 billion in lending over just 2 years. We are requesting zero subsidy, meaning that we can project no taxpayer cost to extend this program. We are focusing on helping our innovators take new products and services to market. Our request for $4 billion in lending authority for Small Business Investment Companies will ensure that our most cutting edge small businesses, including advanced manufacturers, have the capital that they need. We are helping start-ups through our growth accelerators program. We are working with nonprofits, universities, and other partners with a demonstrated expertise in turning promising new ideas into successful new businesses. Our budget ensures that our transitioning military veterans come home with new opportunities to grow the American economy. Each year, more than 250,000 service members transition home. We know these heroes have the leadership skills to grow successful civilian enterprises as small business owners. Our Boots to Business program allows them to continue to serve their country as job creators. We are requesting $7 million to meet Department of Defense's request for SBA to train transitioning service members at more than 200 installations. We are also making it easier for veterans to access capital by reducing or eliminating fees on SBA loans. We are prioritizing entrepreneurial education so successful small businesses can become medium and large businesses that create more jobs. This initiative builds on the success of our Emerging Leaders program. To date, two out of three companies that have been through this program have increased their revenue, three out of four have hired new employees, and nearly half have secured government contracts. We are requesting 15 million to expand a program with proven results. We are also asking for full funding for disaster loan assistance as we continue to make process reforms to ensure that homeowners, renters, and businesses have access to rapid SBA assistance when they need us the most. I would like to close by addressing SBA's ongoing commitment to root out waste, fraud and abuse in our contracting and lending programs to ensure that Federal dollars go to deserving small businesses. We have a zero tolerance policy for these types of abuses. Since 2008, we suspended and debarred more companies and individuals for abusing SBA programs than in the previous 10 years combined. At the same time we have tightened our belts within our own operations at the SBA. We are saving $600,000 in rent by moving our DC office into our SBA national headquarters. We have reduced our fleet management expenses by 9 percent through reductions in our fleet. We have invested in new equipment that will save us a half million dollars in copying expenses over the next 5 years, and we have reduced SBA travel expense 25 percent compared to fiscal year 2012 levels. We are committed to fiscal discipline at the SBA, and we hope that this subcommittee will factor that in as it weighs its support of a critical programs that serve America's small businesses. Thank you. Mr. Crenshaw. Well, thank you very much. And I think you know this committee has been very supportive of the SBA over the years, and rightly so. We appreciate the good work that you have been doing. [The information follows:] [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] Mr. Crenshaw. One of the things I want to ask about is in terms of the dollars we appropriated for disaster administration and disaster loan subsidy funding over the years. I think it was in 2013, it was $800 million for Hurricane Sandy, and then for fiscal year 2015, the total request for disaster loan administration is $187 million. As I said in my opening statement, you tend to carry over large amounts of funding for disaster subsidy. And I guess the question is if you look at last month's report, you had $736 million in subsidy and $296 million in administrative funding through February of this year. But, you had only spent $15 million on disaster subsidy and $82 million on the administration of these funds, and we want to be sure that the disaster victims get all the resources they need and we appreciate the work that you do, but it seems like that might be out of balance; and so can you tell us how you justify that funding imbalance? Ms. Markowitz. Sure, thank you Chairman Crenshaw. And before I start with my answer, I want to thank you and your subcommittee for all your hard work that enabled us to have the 2014 budget and allowed us to enact the programs that we need to support our mission and our small businesses. Around the funding for disasters, our actual request for 187 in administrative Stafford, non-Stafford funds is actually a reduction from the year before, which was 192, and that reduction was because we made process improvements in our administrative functions. The way the disaster loan program works is actually quite efficient. It is flexible. So in between catastrophic disasters, we have a core level employment and we scale up very quickly after a disaster. Going into Sandy, we had about 1,100 employees; just after Sandy we had 2400 on staff because we keep a stable of on-call employees at the ready who are fully trained. We have been able to reduce our funding request because we were able to take a hard look at that core employment number that we keep in place to manage floods and droughts and ongoing disasters and we were able to reduce it because of process improvements we made around our queueing systems, but also because we rely more heavily on innovations in technology. So we rely more heavily on electronic loan application processes. So we saw that adoption go up quite a bit after Sandy. About 33 percent before Sandy and 55 percent after Sandy. So we continue to make improvements in our administrative areas in disaster. And regarding the amount that we requested for Sandy, we acknowledge there was a mismatch in terms what we requested and what we ultimately needed. But the reason for this is we go off past history in our disasters. The scope and the scale of this disaster was quite large and looking at our past disasters, we made some estimates. But what we didn't anticipate was that in this disaster the demographic was very different. They had access to insurance, or they had insurance. They had access to quite a bit of equity in their homes. They also had access to commercial programs that were more competitive than the programs that we can offered. So the demand didn't ultimately happen in the way that we thought it would and that is the reason there was a bit of a mismatch. So we continue to look at this. There is always lessons learned from disasters. We continue to refine not only the way that we estimate our need, but also our administrative functions. Mr. Crenshaw. Well you have $297 million carried over and then ask for 187 for next year--is that normal? Do you always have that kind of carryover balance? Ms. Markowitz. I can honestly say that in my 2 months as acting administrator I haven't familiarized myself with that level of detail as to how they managed that. Mr. Crenshaw. Okay. That might be something to look into because if you have got almost $300 million in the bank, that is for administrative expenses, to ask for more on top of that there might be a better way to deal with that. Ms. Markowitz. Yes, we will continue to look into that. Thank you. Mr. Crenshaw. Thank you very much. Mr. Serrano. Mr. Serrano. Thank you, Mr. Chairman. So you have been acting SBA administrator since February 8th of this year? Ms. Markowitz. That is correct. Mr. Serrano. And have served as the administrator for the SBA midwest region, Region 5, since August of 2009? How has serving as Acting Administrator changed your impression of the SBA and its ability to assist small businesses around the country? Because, you know, we speak a lot in Congress about small businesses. In fact there are many of us who feel that that is the engine that drives the economy, and yet the SBA takes both a lot of support and a lot of criticism; how do you see it now in this new role that you have? Ms. Markowitz. Thank you, Ranking Member Serrano. That is an interesting question. I mean, I loved my role as regional administrator and it has been really interesting to be on the ground working with small businesses face-to-face in understanding their needs and also seeing how we address their needs, you know in many cases very well. Being the head of the agency for a short time, you know, I have seen how it all comes together. So I mean, I think I don't know if it has changed my perspective. I guess I have a fuller understanding of how the agency works together and all the programs that work to support us in the field. And I have a better appreciation for all the work that goes on at headquarters to ultimately support the field. Mr. Serrano. Um-hmm, and let me ask you a question, one of the issues that always comes up all the time that I have been on this subcommittee, both as chairman and as ranking member; is whether or not the disaster fund is in good shape, and notwithstanding a lot of discussions we have had in this country about global warming, or now it is called climate change. You know it is the same with liberals. We used to be called liberals. Now we are called progressives. Ms. Markowitz. Um-hmm. Mr. Serrano. So we have climate change now. It looks like this is not going to end for a while. There will be need for assistance. And what shape are we in? Or is that something where SBA feels that as the issues come up, they will come to Congress to ask for help? Ms. Markowitz. You know, I don't---- Mr. Serrano. I mean, because unfortunately the next Sandy we can't predict it. But everything indicates, that there will be the next Sandy somewhere, and the devastation that is left behind is something that certainly in New York, where we are used to a couple of inches of snow and people get upset about that, but this was a devastation that we had seen only in videos from other parts of the south and the midwest and had not experienced. You wonder what shape are we in to meet those disasters in the future. Ms. Markowitz. Thank you, Ranking Member Serrano. I can tell you that in my time here I have gotten to know more about disaster. I haven't familiarized myself with how they estimate and move forward with how they decide how well funded they are. But I can tell you we have a lot of experience in that area. We have a 20-plus-year employee that runs disaster, we continue to have lessons learned, both administratively and also on the you know, on the funding side from every disaster. We take those on-board and we continue to reengineer, we continue to make process improvements in that area. Mr. Serrano. Another question. You are asking a 60.3 million decrease from fiscal year 2014 level for SBA. This seems to be largely due to the decrease in loan subsidies. What does this say about the state of the economy, how many loans will you be able to support with the requested amount? Do you think you will hit the authorized cap for 7a loans this year and has that happened before? You know any time we see a decrease being asked for, you wonder if it is a budget issue or in fact people see fewer problems coming down the road, which I have just spoken about. So the Request, is the statement more about the economy or about the agency, or both? Ms. Markowitz. So thank you, Ranking Member Serrano. Let me take your question apart a little bit. The decrease in funding is around if the 504 subsidy, and the cap for the 504 subsidy is 7 billion, and the decrease in subsidy is really because of the improving economy. This is a real estate program, the improving state of our real estate in our country. So that is the reason for that decrease in funding. The 7a program, the cap is 17.5 billion. This year we had very spiky sort of volume in that program and we are continuing to monitor it. If we feel that we are coming close to the cap in 7a, which we have come close to before, we will come to you for more authority. For next year we are asking for 17.5, again, because--the way our programs work, they essentially are inversely related to the recovering economy. As the economy recovers the conventional loan market recovers, the gaps in credit shrink and that is where our program lives. We live in the gaps in credit. So as the gaps expand, our programs expand, our loan volume goes up. And as they shrink our loan volume goes down. So we feel pretty confident about not reaching those caps next year. Mr. Serrano. Well, I think for your testimony so far and I can tell you one thing and I say this in support of your agency. You are not one of the agencies that gets mentioned every day on the Floor of the House. But yet when something hits hard you are the first one we go to for help and so do the American people. So, you certainly have the support of this committee. And I know if I speak for the Chairman, anything we can do to make your work easier and your services better, we will be there. Thank you. Ms. Markowitz. Thank you. Mr. Crenshaw. Thank you. Mr. Womack. Mr. Womack. Thank you, Mr. Chairman. And thank you. Madam Acting Administrator O'Brien Markowitz. I can't believe that Mr. Serrano would ask you questions and that you wouldn't have the answers for. You have been there all of 2 months and you don't know all of this stuff? I am kidding, obviously. But welcome aboard, and it is a delight to have you before our committee. May I start out by throwing a shoutout to a gentleman in your organization. You probably don't know this guy, and I have never met him but my staff has worked with him. Nick Coutsos--I see a couple of heads nodding over there-- worked with one of my constituents on a matter that was critically important, and let me just tell you, when any of us up here, regardless of party affiliation, have an experience that is worth bragging about--I mean, we beat you guys up enough on other things, but when something good happens it is important for people to recognize them, and I sure hope that down the chain Mr. Coutsos will know that his work didn't go unnoticed. But again, I thank you for your time here today. And I admit that I have another competing subcommittee, Defense, that Mr. Crenshaw and I share, and I am going to have to escape. Thankfully, Mr. Yoder has come in so that you won't have to just look at Serrano and Crenshaw this whole time. I realize that is a problem. In my district we had an issue with the SBA being sued after they guaranteed a loan for the C&H hog farm, when environmental questions arose after the fact. This, my office was told, created a new review process for Ag loans through the SBA. Now another group of constituents sought help from my office on an Ag loan that they submitted in August, throughout which the SBA kept coming back and kept asking for additional documentation that I guess had not previously been part of the process. So it is frustrating from a staff perspective for my constituents to try to navigate this. So, is there an average timeline for SBA applications? Ms. Markowitz. Thank you, Congressman Womack. I wish I could give you an average time, but the reality is we have different loan programs that have different averages and every loan is different. In the best case scenario, say in an SBA express loan, it can be approved in the matter of hours. It depends on the lender that you are going through and whether they have preapproved authority to approve the loans and whether it is a lender that does fewer loans and they have to go back to our service centers. So it really it depends on those factors to some degree. But also remember that we are coming to you asking for a zero subsidy in the 7a program and is there is a reason for that. We are managing this program well, we are managing the risks in this program and much of that is done in this process that we are talking about right now, the underwriting process and evaluating the loan applications, and the risks that are inherent and the environmental and other issues. So I know it can be frustrating, but that is the reason for this. Mr. Womack. So in the example I just gave that prompted at least to our understanding a new review process on these Ag loans, what would be the protocol that goes into reestablishing a process that would be influenced by a case like our case that drew so much attention after the fact? Ms. Markowitz. Sure. I wish I could have Karen--I wish she was here to come and testify. Thank you for that question, Congresswoman Womack. I can't give you full details on that, but I can give you a just a brief--my understanding of the issue. And that is---- Mr. Womack. Give me your understanding. And if there is a more technical explanation, just provide that to my office would be great. Ms. Markowitz. Okay. Mr. Womack. We would love to be able to see that so that my staff members can have a better understanding and can explain it to our constituency better and maybe prepare them for what might lie ahead. Ms. Markowitz. Sure. So, our loan processing revolves around the lender puts in an application, it goes through the service center. If everything is normal and it can be handled at the service center, it is. If there is an question or something that comes up it goes to Sarah's office, she is the general counsel, and they work out the legal issues, and if there is something that they see that could be a reoccurring issue or something that we can use as a lessons learned issue, they work closely with our risk management area and they continue to reengineer the processes around this. So I think that is what we are talking about here. Mr. Womack. Do these changes create a backlog for your agency that might complicate a budget as an example? Ms. Markowitz. I think what we are talking about are loans that go straight through and they are not held up by the exception items that go off to the side. So there are exception items, like the one I think we are talking about right now, that go off into a side process and are managed thoroughly and thoughtfully by the legal staff. So I don't think it causes a full backlog of the whole process, but it may cause a little bit of a delay on that particular loan that has a particular issue. Mr. Womack. One other question about technology and your budget. Flexibility, as you know, is a key to success when we are dealing with time frame and resources are strained. So I would like to just a basic overview of how leveraging of technology within the SBA is helping during these critical resource constrained times. Ms. Markowitz. Sure. Well, thank you, Congressman Womack. That depends on the different areas. We are constantly working to reengineer the technology. Again as I mentioned in disaster we are relying much more heavily on the electronic loan application process which has caused a decrease in our funding request. We are rolling out SBA One, which is a new heavily streamlined technology-based application process in the rest of our lending programs and that is a huge improvement that is coming later this year. So there is that. There is some technology projects that are on ongoing in our GCBD area. We are continually changing our technology. We just brought on a highly competent brand new CIO who is ramping up her staff and looking at all the ways that we can continue to advance in this area. Mr. Womack. Before I leave and before I close out this--my portion of the hearing, I would just like to be on record as saying congratulations to this agency, Mr. Chairman. You know when I look in here and see that they have made some changes in their travel budget that saved 25 percent, that they have consolidated some office space that is saving $600,000 and reduced the fleet management expenses by more than 9 percent, it demonstrates to me that the SBA is behaving more like the small businesses that they support, that they recognize that we do live in constrained resource times and that they have got to do their part to root out these kinds of excesses. So I want to congratulate you for that and thank you for your testimony here this morning. And I yield back. Ms. Markowitz. Thank you, Congressman. Mr. Crenshaw. Thank you. Mr. Yoder has joined us and he is collecting his thoughts and preparing an exciting question. So, while he does it that, let me ask a question. We all talk about how half the folks in our country are employed by small businesses and two-thirds of the new jobs that are created and you all do a tremendous job of helping in that. But one of the concerns that I hear from time to time talking to the small business folks is that sometimes maybe you focus on the high growth small businesses that are doing pretty well, and sometimes the true, true small businesses that are just getting started don't always get the same attention; and it would seem that if you are a growing small business, you have I guess easier access to capital than you might when you are just a brand-new start-up. So can you tell us in your view are we giving enough priority to the true brand new start-ups? Ms. Markowitz. Thank you, Chairman Crenshaw. We absolutely are and we help a lot of different businesses in all different areas of their life cycle and start-ups is definitely a focus for us. Outside of access to capital, in this budget we have requested $5 million for growth accelerators and that is directly targeting, strengthening the start-up ecosystem. Essentially these accelerators employ experienced entrepreneurs to serve as facilitators to bring together a group of highly vetted, high potential start-ups and they help them access networks of you know, mentors and other forms of capital, even outside of our programs, venture capital, angel capital, et cetera. That is one area that we are focusing on start-ups. But in another important way that we are focusing on the access to capital programs is that we have asked to set zero level of fees for loans under 150,000 just for that reason. To spur sort of demand in the lower level, the lower dollar loans. And those are the loans that start-ups are looking for. They are not asking for a million dollars. And then on the supply study to also spur demand in that area we have introduced the Small Loan Advantage program along with its partner program, the Community Advantage program, and these are just for that reason. We streamlined the platform that our 7a loan program is offered on in the Small Loan Advantage to help encourage banks to make these less profitable loans. A smaller loan is less profitable, has higher risk for the startup and with other industries in certain communities, and to make it more profitable and less time consuming, encouraging the bank to make more loans at that level. And then the Community Advantage program is for the same reason. To work through mission driven, not-for-profit lenders, with the scaled down streamlined version of our 7a program to help encourage them--give them another tool to make access to capital available to higher risk industries, higher risk communities, and start-ups. Mr. Crenshaw. That is great, because one of the things I read is that micro loans, $50,000 to $350,000, actually have been on the decline. But it sounds to me like you have recognized that. I was going to ask you about incentives and things, but it sounds like you recognized that and are working to make those loans available. Because, as you point out, sometimes is takes the same amount of work to make a $100,000 loan as a million dollar loan. And so banks may say they would rather make the million dollar loan. But I think when we look at small businesses it is important to let our focus be on some of the true start-ups. So thank you for recognizing that. Ms. Markowitz. Thank you, Chairman. Mr. Crenshaw. Mr. Yoder. Mr. Yoder. Thank you, Mr. Chairman. Thank you for joining us today, and appreciate your service at the SBA, and consistent with the Chairman's remarks, I think we all know that job creation, job growth comes from our small businesses, our entrepreneurs. The Federal Government is not going to grow the jobs that is going to create a rejuvenation of our economy. It is not going to come from big businesses; it is going to come from small businesses, and so we thank you for your work. We know that you are sort of the tip of the spear when it comes to the economy. We spend a lot of time on both sides of the aisle talking to constituents and talking particularly to small businesses, local companies, whether they be a high-tech start-up or a mom and pop shop that has been on Main Street for 30 years, and spend a lot of time trying to figure out how to help them grow; I know you do the same thing. I thought you might give us some insight on what you and some of your staff have heard and feedback we should be hearing regarding what holds small businesses from going out and taking risk and maybe adding another employer or employee and expanding. And I wondered if you could just shed some light on what you hear. And as I have been out in my district, I hear concerns about Federal policy, uncertainty created in Washington policy. Whether it be policies or past, in previous years or policies we are looking at now as we change the rules, it creates I think uncertainties for businesses. That they want to know what the cost of doing business is they wait on us. I hear concerns about the Dodd-Frank rules being implemented and their impact on community banks and how that might affect local lending. I hear concerns about the Federal tax burden and small businesses concerned about taxes that have gone up in the past few years. We all hear concerns about the Affordable Care Act and whether businesses can accurately determine what their costs of health care are going to be. We hear concerns about regulatory costs. That as a new regulation comes down it might have been affect a business and the lack of predictability in that. Immigration concerns come up a lot. Folks having trouble getting access to labor or the rules being difficult for them to follow through. Job training, being one. Whether there is a well prepared labor pool in the region. Maybe businesses say we may go overseas because we don't have access to the engineers that we need locally. Depending on the businesses, there are a variety of concerns. I just wanted to share with you some of the concerns that I hear and in general I hear that all of these policies together make it difficult for small businesses to calculate the cost of hiring a new person, when they are not sure what their health care costs are going to be, their tax burden is going to be, their regulatory burden is. And so what do you hear out there and what can we do collaboratively to try to improve the climate to encourage our small businesses to feel comfortable to take risks and hire new people and help get our economy moving again? Ms. Markowitz. Sure. Thank you Congressman. We hear a lot of different things from different businesses. Some businesses are more focused on that and some businesses are focused on access to capital and how we can help them with more fundamental counseling around, you know, business decisions. We help businesses with all of this, and we certainly, you know, do a lot to get out and message around changes in our regulatory environment. We spent a lot of time out on the Small Business Jobs Act, which was the largest piece of legislation to impact small businesses in the last 10 years. It was very positive legislation, so we were out talking about the 17 tax cuts that the President put forward for small businesses. We went out and did a lot of messaging around the Affordable Care Act, because this a huge law that businesses had to learn about and understand how to respond to, and you know, what I encountered in that outreach--I did about 30 seminars on the Affordable Care Act, so I heard a lot from small businesses about this. I first and foremost encountered an awful lot of confusion and that was holding businesses back from doing their detailed analysis about how they could and should respond to this law. So we did a lot of work to clear that up and we continue to work in that area. And, you know, you would be surprised by how fundamental issues are for businesses when--depends on if you are talking about a startup or a larger business or whether they are focused on regulatory issues or not. We do everything we can through our counseling resources through our field office and structures to meet their needs on these questions. Mr. Yoder. You brought up some of your seminars that you did on the Affordable Care Act. How much new staff time has been devoted towards just the implementation of that? We are kind of at a real hot point right now as the penalties and mandates are going into effect for certain segments of the economy. There have been some delays, which causes you know additional, probably some confusion. Folks don't know what is being implemented and what is not. And both sides have advocated for certain delays. I think that is part of the challenge. How much time has your staff spent on that? Is there a spike right now? Has it sort of subsided? What sort of traffic are you getting on implementation of that, questions from businesses? Ms. Markowitz. Sure, Thank you Congressman. Just to be clear that our field staff is primarily an outreach organization and what we do in our normal operating business is outreach. So we haven't spent any additional time, I mean that is what we do, outreach. And responding to questions about this new law falls in the scope of our duties. So one really happy by-product that happened as a result of this outreach, there is so much general interest in understanding this law and learning how to respond to it that we reached whole new groups of small businesses. And we often will do a side-by-side seminar, ACA seminar, SBA seminar. So we reached whole new groups with our message, which deepened and broadened our levels of businesses that we touched with our services. So there was no new money or time being it spent. It is just part of our normal activity in the field. Mr. Yoder. And in terms of interest level, is it higher now or are folks sort of getting a good understanding of it? Because, obviously our offices get lots of calls, lots of concerns, lots of just uncertainty. Whether you are for the law or against the law, we can continue to debate that and we do in this town. But your job obviously is not to render a decision on whether it is a good law or bad law, but just to get out and to make sure that whatever laws are the books that people have the information so that they can move forward. And, I think what we all want is a growing robust, economy and that means that Republicans and Democrats have to work together and ensure that you have the tools necessary when you are out there to answer all the questions that you need and have the resources to help these small businesses. Because I think, as we started, that is the key to our economy, and so we want to encourage and support your efforts and ensure that we are not doing anything with some of these policies that we have brought forward to make it harder. And so if you will let us know thing things at least that you are hearing that might allow us to modify policies, make things more effective or at least easier for these businesses to grow and expand, I think we are looking for opportunities for everybody to work together to do that. I appreciate your efforts. Ms. Markowitz. Thank you. Mr. Yoder. Thank you. Mr. Crenshaw. Thank you. Mr. Serrano. Mr. Serrano. Thank you, Mr. Chairman. You know throughout the years that I have been on this committee, from its start-up actually, it existed in the past as the Postal Subcommittee then it came back as the Financial Services Committee, but both as chairman and ranking member there is always something that happens and it is happening again, and that is the disconnect between the support that the PRIME technical assistance program has from Members of Congress and the continued desire by the Administration to get rid of it. And we see it happening again. First of all, and again it is unfair to ask you questions you know, 2 months in, but is there something about that program that the administration has looked at to see why it is so popular with Members of Congress and why it is so unpopular with you folks? Because it gets restored every year, every year it is almost like a done deal. You propose to get rid of it, you and your predecessors, and then we restore it. And restoring around here is not something that we take lightly, especially in this climate. You know, people saw things that they really want to restore, and I suspect it is going to happen again this year, or at least there will be a big push to do it. So what do you think is the disconnect? Ms. Markowitz. Thank you, Mr. Serrano. Mr. Serrano. And I am not assuming Members of Congress know best. Ms. Markowitz. Sure. Well, this sort of links back to your question earlier about how has my perspective changed now that I have had this experience as the acting administrator. As the regional administrator, I know the organizations in my area that benefit from PRIME and who really want PRIME to be restored and I understand the good that it does. Being in this seat, I also understand that as an agency we have to make hard choices and PRIME is one of those hard choices we have to make. While we fully support the good that it does, you know when you are looking at a whole organization and the funding structure, we also know that we have some overlap and we have some duplication with PRIME and some of our other programs. And so sitting in this seat we have to make choices around that duplication. That is why we don't always go back and ask for funding in PRIME. We have, as you mentioned, funding in the micro loan technical assistance area which provides technical assistance to people seeking micro loans by a large and low income areas. This is the same population, the same assistance that PRIME seeks to give. And then outside of micro lending we have also requested full funding of our resource partner network then which would then give us access to all the counselors through this. SCORE, the SBDC and the Women's Business Center, who also provide technical assistance and counseling in these low income areas. So that is the main reason. We have nothing against PRIME, we fully applaud the mission. It is really just about making the hard choices that we have to make around the budgeting process. Mr. Serrano. So what you are basically saying is that the information that the agency has, which Members of Congress may not have, is that PRIME, while it serves a purpose is a duplication in many cases and that is the reason why year after year people try to get rid of it. Because I have seen a lot of programs where you have support for it and you have support for it in Congress. But I have never seen one where it is almost like universal the support for it and almost understood that you know, when you are going to look at a budget to put together this bill you almost kind of put that aside and say, well that is going to get funded so let's move on to item two. If you are saying it is a duplication, if that is a case even from a fan like myself, maybe it is time the administration--the Small Business Administration lets Members of Congress know where the duplication is so that we stop this yearly occurrence. Ms. Markowitz. We can give you more details about how the determination was made to not include PRIME and you can make your own determination about that. But I understand. It is a good program. We really just can't fit everything into our budget. So thank you. Mr. Serrano. Okay. But here is my last point on that. I don't want to drive that to death. You say it doesn't fit into the budget so you make that cut. But that is the one that always keeps getting cut. So there must be something more than a budget issue every year. Somebody, somewhere or some folks somewhere in the administration, must feel that this program is not worth a penny, because it just doesn't get reduced, it gets cut every year. Ms. Markowitz. I can honestly say I don't have the details on that. I only understand it as a budget item and an issue in terms of duplication. Mr. Serrano. Well, we would appreciate it if you could get us more information on that. Ms. Markowitz. Okay. Mr. Serrano. For Women owned and minority owned businesses, the Small Business Act sets a government wide goal of 23 percent of Federal procurement contracts going to small businesses with specific goals for different categories of small businesses. Can you tell the subcommittee how the Federal Government is doing on meeting these contracting targets? Ms. Markowitz. Thank you, Ranking Member Serrano. We are still analyzing the data from fiscal year 2013, so I can't comment on that today. But we can talk about fiscal year 2012 still and we had some great successes. We exceeded the 3 percent goal for service disabled veteran-owned businesses for the first time ever, and around our socially disadvantaged or 8a goals, which is 5 percent, we hit an 8 percent target in 2012. So we are excited about that and we are excited about the successes we had that year and we are looking forward to hopefully even more in the future. Mr. Serrano. Well, it would help us as a Committee, and I know that the Chairman would agree with this, that when we begin to dissect what this budget will look like, and this bill will look like, we need to know the success stories, and again this is one that always gets looked at because it is minority and women owned businesses. So we need to know to what extent it is succeeding and to what extent it is exceeding our goals. Ms. Markowitz. Ranking Member Serrano, I can't comment on 2013, but as I said we hit an 8 percent metric around socially disadvantaged in 8a programs in 2012. We have enacted women's contracting rule to make traction in that area and my understanding is we have made significant progress. We have rolled out some outreach efforts to help that new rule take hold. We are currently involved in a very aggressive Challenge Her campaign around the country, making sure that women understand the benefits that are available to them under this new women's contracting rule, that there are now contracts set aside in over 300 industries, for women to compete against women, so that they have a more level playing field. We are making progress and hopefully we can share those numbers for fiscal year 2013 soon. Mr. Serrano. Well, we appreciate that. Mr. Chairman, I would make a request which is a mantra with me as you know. That is if at some time, not necessarily for our budget but for our understanding, they could give us a report on how the Small Business Administration is dealing with the territories and what is being done there or not being done or what needs to be done. Mr. Crenshaw. I am sure that they will take that under advisement. I think that is a great idea and gives us a little focus. Mr. Serrano. Thank you. Notice he didn't say you should give us a report. He said he will take it under advisement. A very smart Chairman. Mr. Crenshaw. They are going to take it under advisement. Do you have any more questions, Mr. Yoder? Mr. Yoder. Thank you, Mr. Chairman. I had one quick question related to veterans programs. And I know you have spoken about that and that is in your testimony. I wanted to follow up. You know, one of the most troubling statistics that I think bothers a lot of us is that 22 veterans die by suicide each day, according to Federal Government statistics. It is a staggering, heartbreaking number. It is much higher than the general population and it speaks to a lot of larger issues that we are working on here. But I wanted to maybe tie it into some of the work you are doing. The 2014 NDAA act established a study in which the DOD would examine the ties between the veterans' economic situation and homelessness and suicide. One of the key aspects, in addition to proper mental health treatment, to help veterans succeed and to keep them from being homeless or committing suicide is economic success. Can you discuss some of the efforts the SBA is making to collaborate with veterans groups, particularly at the Veterans' Business Outreach Center, and are there sufficient resources to assist veterans in the four key areas that the SBA works on, the capital, contracts, counseling, disaster assistance? Thank you. Ms. Markowitz. Thank you, Congressman. I would like to highlight Boots to Business, which is a program that we are requesting $7 million in funding, and it is directly targeting this issue. We know that there are 250,000 veterans returning each year transitioning. They all need an opportunity. That opportunity can take many forms. It can be going out finding a job or can be creating a job, and we are stepping forward to help with that process. We know that these veterans have leadership skills that we can help them port into success into the private enterprises. We also know that these veterans over index in entrepreneurship already. So the Boots to Business program is in partnership with the Department of Defense. We go out and meet these veterans at 200 installations around the world during their transition process and we begin by showing them a short video on entrepreneurship. And if that is something they are interested in, we take them further. We do 2-day face-to-face training and then an 8-week training course. We are very excited about this, we know that it gives them confidence and skills that they need to pursue entrepreneurship as an option. We have also gone down the access to capital route and made our loans more available to them. We have a patriot pledge that we have asked banks to enter into to increase their lending to veterans, and then we have also set the fee at zero or reduced the fees to veterans on our loan programs to encourage them to seek access to capital through our program. So we are very focused on assisting the veterans transitioning to a successful life back home. Mr. Yoder. Well, I just wanted to highlight the efforts you are making there and continue to encourage you and to support anything we can do to really connect these veterans as they come back home. We have job fairs in my district where we link up businesses with folks who are looking for work every so often. We have the first hour just for veterans. So we want to make sure these folks on are the front lines for us overseas; they ought to be first in line when it comes to getting a job when they come home. So I appreciate your efforts in that regard. Ms. Markowitz. Thank you, Congressman. Mr. Yoder. Thank you. Mr. Crenshaw. Just to follow up on that, this Boots to Business program. I think it was started in 2012, and I think it is important to highlight. Can you tell us, for instance, do you know how many veterans have been through that program? How many you expect to go though it this year? How do you gauge the success of that program? Do you try to follow through? Not only do they come through your program, but is there a way to keep track of how many actually go out and actually start a business? Talk a little bit about who goes through it, how they go through it, and how you follow up and measure the success of the program. Ms. Markowitz. Okay. Thank you, Chairman Crenshaw. I know that we essentially show the video around entrepreneurship to everybody. And then there is a subset you know, that take it further. I don't have the details on those numbers and I don't have the details on the processes around tracking outcome data, but we can certainly get that to you. Mr. Crenshaw. I would be interested to see if we could really track the follow through. I think it is a tremendous program and we ought to emphasize it, and if we can point to success, we could make it grow even stronger. Ms. Markowitz. Thank you. Mr. Crenshaw. Anybody else have another question? We are joined by Mr. Diaz-Balart. I thank him for being here. I know that there are many different subcommittee hearings going on at one time, and it is hard to get everybody in the same room at the same time. But I thank the members for being here. Thank you very much for your service. It is pleasant every now and then to have some agency testify and talk about the good things that are going on and we appreciate the work that you do. So thank you very much, and this meeting is adjourned. Ms. Markowitz. Thank you. [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] Tuesday, April 8, 2014. GENERAL SERVICES ADMINISTRATION WITNESS DAN TANGHERLINI, ADMINISTRATOR Mr. Crenshaw. This meeting will come to order. They are expecting votes around 3:00. We will proceed. I think that there are so many different subcommittees meetings at this time that people may be wandering out. I know I have been to three subcommittee meetings already in this hour. So let's proceed and then we will see what happens. But we want to thank the Administrator Tangherlini. Welcome to the hearing today. Mr. Tangherlini. Thank you. Mr. Crenshaw. The General Services Administration is often referred to as the landlord of the federal government, but GSA's mission goes beyond providing office space and managing property. Agencies across the federal government rely on GSA to assist in their procurement and acquisition needs and to deliver effective economical technological solutions. In a time when the budgets are shrinking and resources are scarce, GSA's role is all the more important and we on this committee expect you to be a leader to find savings and drive efficiencies in your own budget. Only a few years ago, Congress and the American people learned of the terrible abuses and excesses that took place during a time when the General Services Administration was flush with money but short on integrity. You have worked and we appreciate the reforms that you have attempted to implement since joining the agency, but we here in the committee and the American taxpayers need to be convinced that the culture has really changed. For that reason, the committee included several reporting requirements in the 2014 Omnibus Bill regarding training, spending, and bonuses, and we look forward to reviewing those reports. This subcommittee has pressed GSA to make better use of its existing portfolio of buildings and shrink the federal footprint through reduction in GSA's inventory in leased and owned office space. In the last years, we have seen a reduction in staffing across the federal government, and so you would think that we would see reductions in space requirements as well. GSA's 2015 request proposes something called zero Net Budget Authority, which would allow GSA to spend up to the level of rent collections that you take from agencies across the federal government. We are a little skeptical of this approach and we want to talk about it. Maybe you should budget for the highest priority projects and not simply match the budget to the level of rent you are collecting because the federal government is your customer and your job is to be a good steward of tax dollars. If you are collecting more than is needed then maybe you should charge agencies less. You inherited a mess and I appreciate your efforts to instill a culture of transparency and accountability at GSA and restore the public's trust in the agency. So welcome again, and I appreciate your service and look forward to your testimony. I would like now to recognize the ranking member, Mr. Serrano. Mr. Serrano. Thank you, Mr. Chairman. I would like also to join you in welcoming the GSA administrator to this very I was going to say warm setting, but actually, the room is cold. I am going to have call GSA. General Services Administration provides a spectrum of services to the federal government. It is our government's landlord, architect, facilities manager, procurer, and supplier. GSA's work is incredibly important and I hope that today we can discuss how this subcommittee can best equip the agency to fulfill its mission. As the nation's landlord, GSA both owns and leases property. I have always been concerned about excess rental properties. Over a period of years, it is less expensive to own property than to lease it. I look forward to discussing with you about the potential to invest in and pursue federal property ownership as a more uniform policy and how your budget seeks to do that. Another issue of concern for me is a process by which the agency, the size on construction of the Federal Judiciary courthouses. This year's budget request once again includes no funds for courthouse construction. I am sure that this is not what the Federal Judiciary requested, but I will be interested in understanding how you interact with the Judiciary in making these decisions. I encourage a greater level of transparency between GSA and the Judiciary as well as between GSA and the Congress. Over the last three years, the GSA has been under increased scrutiny. This has resulted in organizational changes as initiated by Congress, specifically restructuring the agency so that administrative costs are separated from program funds. Hopefully your agency is getting acquainted with these changes and what results they are yielding. GSA's a major actor in ensuring federal efficiency. This is increasingly critical now post-sequester. I look forward to discussing the agency's many responsibilities and how we can work together to accomplish the General Services Administration's goal. I thank you for your service and for appearing before us today. Again, thank you. Thank you, Mr. Chairman. Mr. Crenshaw. Thank you, and now I would like to recognize Mr. Tangherlini. If you would make your written statement part of the record and if you would limit your oral statement to about five minutes, we would appreciate it. But the floor is yours. Mr. Tangherlini. Yes, sir. Thank you, and good afternoon Chairman Crenshaw, Ranking Member Serrano, members of the subcommittee, and staff. Thank you for inviting me to appear before you today. My name is Dan Tangherlini and I am the administrator of the U.S. General Services Administration or GSA. GSA's mission is to deliver the best value in real estate, acquisition, and technology services to the government and the American people. Before I go any further, I would like to thank the chairman and the ranking member and the committee and the committee staff for their hard work on the Fiscal Year 2014 Consolidated Appropriations Act, especially in the current funding environment. I also want to take a moment to introduce new leadership at GSA. Denise Turner Roth is GSA's new deputy administrator and Norman Dong is GSA's new commissioner for public buildings. Denise is unable to join us today, but Norman is here and is seated right behind me; they both are dedicated public servants and will help us as we continue on the path to improve the efficiency of GSA. GSA's Fiscal Year 2015 budget request seeks to build on the progress made in the Fiscal Year 2014 budget. While we have started to address years of backlog repairs, there is still significant work to do. We need to ensure that our buildings can support the work of the government in the 21st century. This budget provides essential funds to support our public infrastructure while also growing our economy, creating jobs, and saving money for the American taxpayer. Perhaps most importantly for the federal government's real estate inventory, the president's budget requests that the rent agencies pay into the Federal Buildings Fund be reinvested back into our publicly owned buildings. These investments will meet the urgent needs of our partner federal agencies and preserve these public assets for future generations. Every dollar GSA can spend on repairs can save $4 in potential costs later. In order to provide much-needed investments in our nation's public infrastructure, GSA's Fiscal Year 2015 budget requests include more than $1 billion in repair projects. These range from crucial life safety upgrades to full-scale modernizations. In addition, the budget looks to continue critical investments along the border by providing $420 million for three border crossings: the Alexandria Bay land port of entry in New York State, the Calexico land port of entry in California, and the San Ysidro land port of entry in southern California. These facilities are vital to our country's security and economy. San Ysidro is a perfect example of this. Every day, 50,000 vehicles and 25,000 pedestrians enter the United States at San Ysidro, making this the busiest border crossing in the world. Using these funds, we would finally complete our work on this important project after 10 years. These improvements would ease traffic throughout the region, promote economic growth, and better equip the Department of Homeland Security to ensure our nation's safety. Another national security priority in this budget is a $250 million request to continue our consolidation of DHS at the Saint Elizabeth campus. Consolidations such as this are essential to operating an efficient and effective government. Building on the progress from last year, GSA has again requested $100 million to continue our work to support our partner agency's efforts to streamline their space. The Fiscal Year 2015 budget request also includes more than $240 million in much-needed funds for critical programs at GSA. By supporting the Office of Government-wide Policy and the Office of Citizen Services and Innovation, Innovative Technologies, GSA will continue to provide our partner agencies in the American public with tools and services that increase the efficiency, effectiveness, and transparency of the federal government. As I reported to the committee last year, when I came to GSA, we undertook a top to bottom review of the agency. Through that effort, we consolidated major functions of the agency to eliminate redundancy and improve oversight and accountability. GSA continues to consolidate and streamline key administrative service functions to improve efficiency and better align our own internal operations. These reforms are already reducing costs. GSA has reduced the Working Capital Fund by $39 million or 5.6 percent. We saved more than $310 million through efficient spending on printing, advisory services, and IT devices, including $68 million over two years in travel costs. We have more than 380 full time positions and we have reduced indirect costs by more than $130 million. GSA has also seen significant savings through our ongoing programs. We have helped agencies save more than $300 million through our Strategic Sourcing Initiative, we have cut our lease inventory by 5 million square feet, and we have saved $193 million in avoided energy costs by improving energy efficiency. We expect further reductions in savings as we move forward and we will continue to keep the committee updated. The president's budget provides the investment we need to help rebuild our nation's public building infrastructure, ensure that federal agencies can support economic and job growth in communities across the country, and provide vital services to the public. I appreciate all your work on the Fiscal Year 2014 Consolidated Appropriations Act and I want to continue our partnership to make sure this is not an isolated investment, but a foundation for long-term, sound management of our government's infrastructure. Thank you again for the opportunity to testify before you today and I look forward to any questions you might have. [The information follows:] [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] Mr. Crenshaw. Well, thank you very much. We will start with questions now and we will try to observe the five-minute rule or the lights will go on. That will give everybody a chance to ask a question or two before we have our votes sometime around 3:00. Let me start by saying that I think between Fiscal Year 2011 and 2013, our allocation was reduced and so we chose to reduce the funding for building projects so we could live within our allocation instead of dramatically reducing staffing for some of the other agencies that we oversee. As you know, in 2014 the Building Fund received an increase of more than $1 billion, and when you talk about zero Net Budget Authority, I guess that means you spend all the rent that you collect from the federal agencies. We understand you have a long list of projects, both construction and repair, that you think are necessary. For 2015, you are requesting even more funds than you received in the Omnibus so that your spending matches your rent collections. We understand you want to provide a good level of service for your customers, but when I looked at it, I looked at the long list of projects included for Fiscal Year 2015, and if I am not mistaken, I see that the number one priority for major repairs and alterations is $7 million for an IRS parking lot. So I just wonder how you prioritize the projects on your list. How did you determine that the parking lot was the highest priority? Can you talk about that? Mr. Tangherlini. No, I appreciate that question because I think it is an incredibly important one. First, very quickly a little bit about the idea of this zero Net Budget Authority. Congress, when it set up the Federal Buildings Fund, tried to bring commercial discipline into the way we manage federal real estate, and so they required that we charge agencies the commercial equivalent of rent so that we actually do a market- based assessment of what the cost of rent is in any jurisdiction. We then received the money as a deposit into the Federal Buildings Fund and then that amount is appropriated out for specific projects. And the idea is like any other real estate business, we would take that money that we collected in rent and we would reinvest it back in the assets. Now, how we determine the reinvestment, after three years of getting very constrained funding where the rents we were collecting were not going back into the assets, we have actually accrued a number of pretty serious projects. The particular project, the one in Chambliss, Georgia for the parking garage, which was a project that when we asked for the original funding I think about three years ago was something closer to $3 million. What has happened is it is a great example of if you do not make that initial investment when the problem first crops up, and if you get a little hole in your roof and you do not patch it, more of the roof begins to collapse in. We have gotten to the point where half of the garage is roped off and if we do not make this $7 million investment, we think we will lose the entire garage. So that is essentially the way we prioritize, and really in this instance, it became an issue of how do we maintain what is left of the asset that we have? That having been said, there is a long list of projects out there that need to be done. We have worked very closely with each of our regions to try to prioritize the projects and then we have our central office folks really test and stress test the ability of the region to actually get the project done, can we contract for it, can it happen quickly, and we try to apply some test of our ability to do the project to the priority that the components of the agency assign to it. We would be happy to walk your staff through the process we use, the systems we use, and the way we have gone back and forth with the regions. We have even held some money in reserve so that they have to, at some level, demonstrate that they can actually deliver great outcomes in order to compete successfully for the funds. Mr. Crenshaw. Like for instance, has that parking lot been like that for three years? Mr. Tangherlini. Yes, it has. Mr. Crenshaw. Is this the first time it became the number one priority? Mr. Tangherlini. It has been in prior budget requests. I think it got to the top of the list, and I do not know if it was alphabetical or what. I would say that it is a high priority as well as all the other RNA projects are. It is an example of where, if we were able to meet the priority as it develops, we could have probably done it cheaper. Mr. Crenshaw. Well, another quick one. The budget requests $12 million to buy an IRS annex building in Austin, Texas, and you are paying $1 million rent for it every year. So if you pay $12 million for it today, then that means it will take you 12 years to recoup your investment. So I just wonder do you look at the function of the building. Do you think it is important to own it as opposed to lease it for now? What goes into that decision to make that a priority? Mr. Tangherlini. No, that also is an excellent point. I think striking the right balance between leasing and owning is incredibly important. I will tell you that that balance may have gotten skewed over the last several years. Our average length of tenancy on a leased building is about 27 years now growing. So if we were to retain our kind of locational position in that place in Austin, Texas, which, in working closely with IRS, we believe that there will be a continued ongoing need for that facility in Austin, Texas. It really makes sense to recognize that even a 12-year payback is not bad. Some of the projects we have and really in the relocation and consolidation activity, we have projects that pay back virtually instantaneously in less than two years. So we are constantly looking at what is the right payback, really whether we think there is a continuing need for the agency to stay there, and what is our exposure? What will happen to that rent when we go back if we are going to renew our tenancy there? Mr. Crenshaw. Thank you. Mr. Serrano. Mr. Serrano. Thank you, Mr. Chairman. Mr. Administrator, since GSA provides so many products and services to so many other agencies, you are in a unique position to talk about the effects of sequestration and the government shutdown. Can you speak to how both affected GSA and how it affected other agencies you work with from your perspective? Mr. Tangherlini. I appreciate the question, Ranking Member Serrano. For GSA directly, the impact was in many ways indirect because our services are provided to other agencies and then agencies, depending on who they were or what they did and what their mission was, they had a different impact from things like the shutdown. Although almost uniformly, people have had some impact of the across the board cuts associated with sequestration. We have seen two things happen as a result of it. One is that just in general business volumes and things like the Federal Acquisition Service are reduced. Agencies are scrambling to figure out how they are going to close the gaps. Sometimes the choices are not based on outcomes; they are just made on that bottom line number. At the same time, we have seen then agencies really get increasingly creative and emphatic about finding ways to save money; and so suddenly there are a lot of people who want to talk about consolidating space and are there better ways that they can do acquisition. That having been said, we felt the impact in terms of the arguments over the right level of funding most acutely in our Federal Buildings Fund where for about three years, we were not getting full access to the rents that we were collecting from the federal agencies. And so we were collecting their rent and so agencies are already constrained from resources. We were collecting the rent, but we were not making the reinvestment back in the facilities. And so that was not doing a lot of great stuff for my relationship with those agencies as we were trying to work with them and figure out how we could address their specific facility needs as well as help them manage through the implications of sequestration and the certainly the shutdowns. Mr. Serrano. In dealing with their facility needs, are you still able to help other agencies find savings in their own budgets, whether that be through travel, leases, or commodities purchased through GSA? Mr. Tangherlini. That is really what we have decided should be the main focus of our agency. There are a couple of services we provide directly like facilities. There are some that we provide based on agency choice like acquisition, technology, and fleet management. What we think our job is is to really be the experts in administrative services and come to agencies and give them ideas about how they can save money either working with GSA or doing it themselves. As a result, we have seen agencies increasingly get interested in ways that they can shrink their footprint, that they can reduce their lease cost. We have seen a lot of interest around reducing fleets, a lot of interest in some of the work that we have done around travel and conference management, alternative means of training, and implementing of the latest technology like cloud computing which can save agencies money. So we are working every day trying to figure out how to get agencies to gain access to some of these best practices that will reduce their cost. Mr. Serrano. Coming back a second to the issue which you know I am very much interested in, leasing versus purchasing. Are all federal purchased buildings yours, owned buildings, or is it The Department of the Army, for instance or other people own their own buildings. Mr. Tangherlini. Nothing is easy in this business, right? So we manage about 10 percent of the federal real property. Now, we manage closer to 70 to 75 percent. Mr. Serrano. You say you manage or you own? Mr. Tangherlini. Well, of the property we manage, it is about 50 percent leased and 50 percent owned. Mr. Serrano. I see. Mr. Tangherlini. We are responsible for about 70, 75 percent of the commercial real estate, the traditional office space. So we are a large player in office space but we are just one of many players in space in general because you have big players like the Department of Agriculture, the Department of Interior, the Department of Energy with their labs, and certainly the Department of Defense is really the big property manager and property owner. Mr. Serrano. Right. One last part of that, Mr. Chairman. Why the argument throughout the years, why do people like me have to continuously say let's own our buildings; let's not rent them. It is cheaper to own them than it is to rent them. Why do you think there was always a movement for renting or leasing? Mr. Tangherlini. I think there is a lot to be said about the flexibility that a lease offers and the ability to very quickly go into the market and meet the space needs of an agency. I will say though over time, because of the difficulty of getting the resources together, and in order to buy something or build something you need to get all the resources together necessary to make that investment, because of the difficulty getting all the resources together at the time that you wanted to buy or build it, it has become easier and easier for agencies frankly to get into operating leases to meet whatever space need they have. We have some interesting long-term data that shows that our ownership trends have been holding constant for the last 20 years but our leasing square footage has been going up. Now, in the last two or three years and I think in a large part because of the work of this committee and a huge focus on this issue on the part of the administration, we have begun to bend the cost curve if you will of leasing and we have reduced the amount of lease space that you will see in the Fiscal Year 2015 budget by about 5 million square feet off of a high of about 200 million square feet of leased space about three years ago. Mr. Serrano. Thank you. Thank you, Mr. Chairman. Mr. Crenshaw. Mr. Graves. Mr. Graves. Thank you, Mr. Chairman. Mr. Administrator, good to see you again. Mr. Tangherlini. Nice to see you. Mr. Graves. A few questions about the LEED program and such and I think we have had this conversation before. I would like to get some updates. I know there has been some changes since we last spoke. First, can you maybe share with us how much each year on average is spent by federal agencies to adhere to the lead standards? Is it a measurable amount at this point that you can put your finger on? Mr. Tangherlini. I am going to have to get back to you with specifics about what that is. If it is measurable, we will figure it out and we can get back to you. Mr. Graves. Is it a voluntary or is it required to abide by the standards? Mr. Tangherlini. We have said that as part of a requirement that the Department of Energy has about having energy standards for buildings, we have just issued, as you pointed out, a recommendation to the Secretary of Energy that agencies be able to choose from two competing offerings of certifications. Mr. Graves. Do you see some of the agencies going to another to Green Globes? Mr. Tangherlini. I have already heard indications that a number of agencies are looking at potentially adopting Green Globes as an alternative to LEED because it better matches the way they perform their mission. The way these certification systems work that some are frankly better for certain types of buildings and efforts and some are better for others. Mr. Graves. It seems like with those two, and I appreciate the fact that you are recommending multiple applications. I think that is good. That is very helpful. Do you sense that LEED is the predominant program as to your recommendations? Are most agencies sort of pushed in that direction or is it an open platform in which they really can choose between alternative methods? Mr. Tangherlini. We would hope it is an open platform and we have proposed instructions for how agencies could understand how they might pick one versus another and we encourage agencies to be very thoughtful in choosing. In terms of whether one is more predominant than another is, there was only really one for a good long time, and so there is some incumbency there. We have personally looked at it at GSA and given our long track record with LEED, we think that it makes sense for us to continue using for at least this period, but we want to look at the emerging competition within this marketplace; we think it is good. We think third party standards in general are good. They are useful for helping people have some way of evaluating whether the investment they are making was actually worthwhile and whether they are getting the results they claim they are going to get from the investment they make. Mr. Graves. Right, and I appreciate that. And that sort of leaves my last question. So it is been just over five years since I guess the voluntary, which is now sort of a requirement I suppose with most of the agencies. Has there been any analysis, cost-benefit analysis, as to the costs they incurred to adhere to these standards versus maybe energy savings? Mr. Tangherlini. I know that is one thing we are very interested in is looking at making sure that the investments we make and in the LEED certification part of the investments we make in making a building more sustainable is actually very small. I would be happy to talk to you or your staff about what that actual relative cost is. We are very interested in making sure that the investments we make actually yield meaningful life cycle cost benefits and it really gets back to the chairman's point earlier. Look, if we are going to have access to this money, we want to make sure you are spending it in the most productive way possible or else maybe we should not collect it from the agencies to begin with. Mr. Graves. Okay. No, that is good. I would look forward to seeing some of that analysis, and maybe it is just folklore, but that it is much more expensive to adhere to these policies when maybe it is new construction or renovation or upgrading. It would be fascinating to see, in the event that it is more, that there is a savings over time that offsets that additional expense. Mr. Tangherlini. If I could add one more point to that, and this gets a little bit to the conversation I was having with the ranking member. This issue of life cycle cost is incredibly important for us; it is not just the initial expenditure, but what is it going to cost over the period of time that we occupy the asset? Mr. Graves. Great. Thank you, Administrator. Thank you. Mr. Crenshaw. Thank you. Mr. Quigley. Mr. Quigley. Thank you, Mr. Chairman. Welcome. Mr. Tangherlini. Thank you. Mr. Quigley. There have been national analysis of LEED certification and other certifications by the private sector that show energy savings, cost savings that you are well aware of, correct? Mr. Tangherlini. Yes, and in fact, in our evaluation of alternative certification methods, which we are required to do as part of the Department of Energy, it was based on the understanding that there was benefit to these certifications. As I said before, we find third party certifications to be incredibly useful in actually proving whether we are getting what we are paying for or not. Mr. Quigley. Sure, and we welcome whatever works best and I note that you talk about the fact that different certifications matter for different types of use for buildings and we understand that as well, but there is also an evolving world from when LEED certification started. Mr. Tangherlini. Yes. Mr. Quigley. There are other things about water savings and, you know, what comes off the rough and so forth in flood areas that really makes a difference as well. They are also cleaner buildings, healthier buildings, buildings that reduce the environmental footprint in the region as well, correct? Mr. Tangherlini. That is true, and I think it is actually some of the evolution of the certifications that has caused some of the controversy over the last year or two, and I think we just need to be aware that this is an evolving science, it is an evolving approach to making sure that we are being as smart as we possibly can and building buildings that will be around for a long time. Mr. Quigley. I agree. Let's talk about buildings that should not be around anymore. I think your inventory is over 900,000? Mr. Tangherlini. Our inventory at GSA, including leases, is only about 10,000, but the broader federal building inventory reaches your bigger number. Mr. Quigley. 900,000. It adds up after a while. Mr. Tangherlini. Yes, it does. Mr. Quigley. We got something from the Congressional Research Service that their latest estimates are about 77,000 buildings were identified as either not utilized or underutilized. Does that also comport with numbers you are familiar with? Mr. Tangherlini. Those numbers come out of the Federal Real Property Profile. Those numbers are a couple years old at this point, but the rough order of magnitude costs the federal government there roughly, right? Mr. Quigley. Well, bonus points for telling Mr. Chaffetz and I what a great bill we have on a pilot program to get rid of the ones that we do not need. If you want to touch on that, fine, but your best plan to help us drive this because it is not just the cost of not selling them and the money, and I do not know how much there would actually be there, but it is the extraordinary cost of maintaining them and sometimes the risk involved with those buildings being abandoned. What is your fast track way to help us get rid of the buildings we do not need anymore? Mr. Tangherlini. Well, we appreciate actually, as you pointed out, the fact that both the House and the Senate have proposed bills to speed disposal of underutilized or vacant property. The president, once again, in his Fiscal Year 2015 budget request, also includes a proposal. I have said that those are the three ingredients you need to get anything done in Washington: a House proposal, a president's proposal, and a Senate proposal. Hopefully this year will be a year where we could maybe move something forward. In the meantime, frankly we see it as one of our core responsibilities to make sure that we are delivering the best quality asset, which means getting rid of assets that no longer serve the American people. I will tell you GSA has only 23 locations on that list of vacant or underutilized properties and in each one of those cases, I am working very closely with Norman in the Public Building Service to have a plan to dispose of those assets that are repurposed. Mr. Quigley. Not to interrupt, but do you play a role in helping other agencies get rid of all the other ones that we talked about as well? Mr. Tangherlini. Well, we play a role if the agency wants us to play a role, and so we have been working very closely with agencies such as the National Aeronautics and Space Administration, NASA. We have helped NASA broker a deal with a private sector operator for Moffett National Airfield and we are in the final negotiations with a very prominent local business partner who is going to actually operate that field, take it off the rolls of the books of NASA; NASA will no longer have to pay to operate and maintain it, and as an extra benefit to the federal taxpayers, the Hangar One, the historic, iconic Hangar One will be reclad by the operator of that airfield. Mr. Quigley. What do we best on for getting rid of these? Is it saving money for lack of maintenance and so forth or is it the additional revenue we are going to get in actually selling these? Mr. Tangherlini. I actually think the real benefit is the long term benefit to the agency of not having to worry about what it is going to do with that asset, how they are going to maintain it, how they are going to fund additional resources. The other long-term benefit is a benefit to the national account. Returning these assets to productive use within the economy of the localities in which they occupy is an unwritten part of the benefit of this story. By auctioning the West Heating Plant just over here in Georgetown, we have got $19 million towards reduction of the cost of federal government, but more importantly, there is now a private sector developer who is going to turn that building into something employing hundreds of people in the process and providing tax revenue and benefits to the economy as a result. Mr. Quigley. Thank you. Thank you, Mr. Chairman. Mr. Crenshaw. There are four votes. There is eight minutes left. We have three folks that have questions. So I think we can finish up and I am sure there are questions for the record, but let's go to Mr. Amodei. Mr. Amodei. Okay. Thank you, Mr. Chairman and in view of that, I will just abbreviate my comments. Mr. Administrator, I want to sensitize you to an issue that we have seen in other executive branch agencies. I want to revisit the stuff that happened in conferences four years ago. What I do want to revisit or do want to visit with your staff offline is to check to make sure that as a result of those things that there are not any internal administrative policies within GSA that say, ``Stay away from these locations,'' as it is our belief, and as you said in your statement, your priority is continue to improve efficiency of our own operations so that we utilize resources in the most effective manner possible. All I am concerned about is to the extent when you folks go to have a meeting, a training, a conference, whatever somewhere that you are picking the place with the best value for the taxpayer and not being afraid of the fact that perhaps, as for instance Department of Justice has done, says, ``For God's sake, stay away from New Jersey and Nevada because gambling is legal.'' I am sure you are not going to say, ``We want to stay away from Washington State or Colorado because some of their recreational smoking activities might be dangerous,'' or, ``God forbid, stay with the coastline because you might drown.'' So you get the gist. We will go ahead and visit with you offline just to make sure that there are not any, because I know there are no statutes or regulations on the requiring that, and make sure there are not any administrative policies doing that and I yield back. Thank you, Mr. Chairman. Mr. Tangherlini. Thank you. Mr. Crenshaw. Thank you. Mr. Yoder. Mr. Yoder. Thank you, Mr. Chairman. Thanks for coming back to our hearing again this year Mr. Administrator. Last year when we were here, we had a conversation about the same topic that Mr. Quigley just raised, which is a very important one, which is all of the property the federal government owns and how we can dispose of portions of it that are unneeded, unused, and are not benefiting taxpayers. One critical component to that is being able to know where all the property is. I thought you might update us on what the GSA has done since our hearing last year. My question was then, and it still is now, does the GSA have an ability to pinpoint every piece of property owned by the GSA and does the federal government have the ability to pinpoint every piece of property, real property owned by the federal government? Can we geolocate that property, can we point to it on a map very easily, and can we search in a way in which I could tell my constituents how many golf courses the federal government owns? Can we answer that? Can we answer how many parking garages the federal government owns, how many hotels the federal government owns, how many grocery stores, and what has changed over the last year? I know we had this dialogue. You were working on it. Where are we now and how can we get to a point that we need to be? Mr. Tangherlini. No, I really appreciate you asking the question because I took your last set of questions last year really as a challenge to the organization and our staff to make substantial progress. I can tell you for GSA, we actually do have a website where you can go and it shows a map of the United States and you can click on any state and you get the congressional districts and it will tell you every property and it will tell you the specifics of the property, whether it is leased, whether it is owned, what the terms of the lease are, and we are working to actually make that much more graphically interactive and simple for people to use. We want to use the progress we have made at GSA, because those are the assets we control and, frankly, we think we are the best at this or among the best in the federal government. We would like to take the progress we have made at GSA and then export that across the federal government to other agency landowners. In the meantime, we are working very closely with OMB, and there has been great leadership there with Director Burwell and Deputy Director Cobert, to get the Federal Real Property Council to really push up the quality of the data it is putting in to the Federal Real Property Profile so that we can be much better about answering what is the status and the nature and the quality of assets. I can tell you we are not quite there yet where there is one website where people can click and ask those questions, but we have taken a substantial step in that direction over the last year, particularly starting at GSA, and we want to export that progress to other agencies. Mr. Yoder. Well, I was looking at your website earlier. It does seem like you have made some significant progress in that. We are going to kind of work through it and see where we can even make it more user friendly because the idea is to let the public and everyone in this country know what they own and be able to find it. That will hopefully have all of us looking to root out waste and find efficiencies and hopefully what you are doing here as a model that we can push to other parts of the federal government. Mr. Tangherlini. We agree, and we would love your ideas and suggestions. Mr. Yoder. Right. Thank you for your work. I appreciate it. Mr. Tangherlini. Thank you. Mr. Yoder. Thank you, Mr. Chairman. Mr. Crenshaw. Well, I think those are all the questions and we appreciate the work that you are doing. Mr. Tangherlini. Thank you. Mr. Crenshaw. I think having a list of all the property that the federal government owns would be a great idea and I know you are working on that. Thank you for the work you do. I thank the members for their understanding. We have got about a minute and a half left to vote and they are four votes. So, again, this meeting will stand adjourned. [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] W I T N E S S E S ---------- Page Bates, John...................................................... 61 Botticelli, M. P................................................. 1 Gibbons, J. S.................................................... 61 Markowitz, M. O'B................................................ 159 Tangherlini, Dan................................................. 205