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Congress has long recognized the need for protective legislation for servicemembers whose service to the nation may compromise their ability to meet obligations and protect their legal interests. During the Civil War, Congress enacted an absolute moratorium on civil actions brought against soldiers and sailors. During World War I, Congress passed the Soldiers' and Sailors' Civil Relief Act of 1918, which did not create a moratorium on legal actions against servicemembers, but instead directed trial courts to apply principles of equity to determine the appropriate action to take whenever a servicemember's rights were involved in a controversy. During World War II, Congress essentially reenacted the expired 1918 statute as the Soldiers' and Sailors' Civil Relief Act of 1940, and then amended it substantially in 1942 to take into account the new economic and legal landscape that had developed between the wars. During consideration of the amendments in the 87 th Congress, Congressman Overton Brooks (D-LA) stated, This bill springs from the desire of the people of the United States to make sure as far as possible that men in service are not placed at a civil disadvantage during their absence. It springs from the inability of men who are in service to properly manage their normal business affairs while away. It likewise arises from the differences in pay which a soldier received and what the same man normally earns in civil life. Congress enacted amendments on several occasions during subsequent conflicts, including 2002 when the benefits of the SSCRA were extended to certain members of the National Guard. In 2003, Congress enacted the Servicemembers Civil Relief Act (SCRA) as a modernization and restatement of the SSCRA and its protections. The SCRA is an exercise of Congress's power to raise and support armies (U.S. Const. Art. I, sec. 8, cl. 12) and to declare war (Art. I, sec. 8, cl. 11). The purpose of the act is to provide for, strengthen, and expedite the national defense by protecting servicemembers, enabling them to "devote their entire energy to the defense needs of the Nation" by providing for the temporary suspension of judicial and administrative proceedings and transactions that may adversely affect their legal rights during military service. Forgiving of all debts or the extinguishment of contractual obligations on behalf of servicemembers who have been called up for active duty is not required, nor is absolute immunity from civil lawsuits provided. Instead, the act provides for the suspension of claims and protection from default judgments. In this way, it seeks to balance the interests of servicemembers and their creditors, spreading the burden of national military service to a broader portion of the citizenry. In Engstrom v. National Bank of Eagle Lake , the United States Court of Appeals for the Fifth Circuit acknowledged the balancing required when it stated "[a]lthough the act is to be liberally construed it is not to be used as a sword against persons with legitimate claims." Many of the SCRA provisions are especially beneficial for Reservists activated to respond to a national crisis, but many provisions may be useful for career military personnel. One of the measures that affects many who are called to active duty is the limit on the interest rate that may be charged on debts incurred prior to a person's entry into active duty military service. Other measures protect military families from being evicted from rental or mortgaged property; from cancellation of life insurance; from taxation in multiple jurisdictions; from foreclosure of property to pay taxes that are due; and from losing certain rights to public land. In order to receive protections afforded under the SCRA, servicemembers are generally required to provide notice of their desire to invoke the protection. For example, with respect to the interest rate limitation, the servicemember is required to provide written notification to the creditor with a copy of his/her orders establishing a period of active duty service. Individuals and/or entities that violate specified sections of the SCRA may be subject to penalties. With the exception of the section pertaining to the interest rate limitation in Title II, only the sections in Title III (addressing rent, installment contracts, mortgages, liens, assignments, and leases) include a penalty provision. The provision generally consists of two parts, the first classifying the violation as a misdemeanor and the second preserving other remedies and rights. The section addressing evictions, for example, states that a "person who knowingly takes part in an eviction or distress ... or attempts to do, shall be fined as provided in title 18, United States Code, or imprisoned for not more than one year, or both." The section further states that the "rights and remedies provided ... are in addition to and do not preclude any remedy for wrongful conversion (or wrongful eviction) otherwise available under the law to the person claiming relief ... including any award for consequential and punitive damages." The importance of servicemembers knowing and understanding their rights is evidenced by the requirement in the act that all servicemembers be provided written notice of their rights by the Secretary of each of the armed services. In the event that a servicemember feels that he/she is not receiving the statutory protections, the servicemember may request assistance from military legal assistance officers, civilian lawyers, and in some circumstances the United States Department of Justice (DOJ). The DOJ Civil Rights Division will investigate specific complaints and, if necessary, institute legal proceedings to protect the rights of servicemembers. The DOJ Civil Rights Division filed its first lawsuit under the SCRA on December 10, 2008, alleging a towing company in Norfolk, Virginia participated in unlawful enforcements of storage liens. The act does not specifically state who may bring an application for relief, nor does it specifically exclude private individuals from filing a cause of action. Most courts considering the issue have found that a private cause of action exists under the SCRA. An opinion from the United States District Court for the Western District of Michigan, Hurley v. Deutsche Bank Trust Company , disagreed with decisions from U.S. district courts in Illinois, Louisiana, Oregon, and Texas, and found that a private cause of action did not exist under the act. However, upon reconsideration the court vacated its earlier opinion and held that a private cause of action does exist under various sections of the SCRA. In Moll v. Ford Consumer Finance Company, Inc. , the United States District Court for the Northern District of Illinois held that a private cause of action exists under the provision limiting the amount of interest that may be charged on debt incurred prior to service. Moll, a reservist in the United States Air Force, was ordered to active duty in support of the Persian Gulf War in 1991. Upon activation, he contacted Ford and requested that the interest rate on his car loan be reduced from a variable rate of 10.25% to 6% as provided for under SCRA and provided all documentation requested by Ford. Ford failed to adjust the interest rate and continued to charge 10.25% on the loan. Moll filed an action alleging Ford violated the SCRA and received unlawful interest subject to penalties under the Illinois Interest Act. Ford moved to dismiss the action arguing that Moll failed to state a claim, contending that a private cause of action does not exist under the SCRA, and that because the loan was secured by a mortgage, the loan is exempt from the Illinois Interest Act. The court acknowledged that a private cause of action is not explicit in the act and turned to a four-part test, created by the United States Supreme Court in Cort v. Ash , to determine if a private cause of action exists even though it is not expressly provided for in the statute. The Cort factors are: (1) does the statute create a federal right in favor of the plaintiff; (2) is there any indication of legislative intent, explicit or implicit, to create or deny a private remedy; (3) is it consistent with the underlying purposes of the legislative scheme to imply such a remedy; and (4) is the cause of action one traditionally relegated to state law, so that it would be inappropriate to infer a cause of action based solely on federal law. However, the court further stated the Supreme Court has "retreated from this four-factor approach and has focused primarily on the legislative intent of the statute – the second factor." The court, focusing on the legislative intent of the act, the second Cort factor, stated that the interest limitation was "designed to give relief to military persons called into service." The court determined that the act confers a benefit on a servicemember that is not otherwise available to private citizens and therefore a private cause of action must be intended "because otherwise the relief would [be] of no value at all." Finally, the court addressed the remaining Cort factors and found that the act creates a federal right in favor of Moll; the interest rate limitation is consistent with the purpose of the act to provide servicemembers with relief in meeting their financial obligations; and that it is not an area of law traditionally relegated to state law, rather it is grounded in Congress' right to raise and maintain armed forces of the United States. Finding a private cause of action with respect to the interest rate limitation section of the act, the court denied Ford's motion to dismiss. The United States District Court for the Northern District of Texas, in Marin v. A rmstrong , found an inferred private cause of action in two separate sections of the SCRA. In Marin , the servicemember claimed that as a result of illness from military service he was unable to fulfill his obligations on debt he owed for the purchase of a car. He alleged that he informed TranSouth, the holder of the loan, of his inability to make payments on the obligation and requested that they toll his obligation until his health allowed him to make payments. Marin further alleged that TranSouth not only failed to toll his obligation, but that it continued to violate the SCRA by harassing him, sending collection letters, and taking adverse credit action against him. TranSouth moved to dismiss the action on the basis that the SCRA does not provide for a private cause of action, rather it provides only defensive relief for servicemembers, and that even if it did, Marin is not entitled to relief because the act does not relieve him of his duty to make payments on the obligation. The court agreed that Marin did not have an automatic right to toll his obligation under the installment contract, but that after receiving notice of his inability to meet his obligation, TranSouth was required to seek a judicial remedy in a court of competent jurisdiction and failed to do so as required by the act. The court, citing the rationale of Moll , stated that "Congress must have intended a private cause of action to exist" to enforce these two sections of the act. The court questioned TranSouth's assertion that the act be viewed as a defensive measure, stating that if that were the case, a creditor could "simply ignore" provisions of the act and the servicemember would be unable to bring a cause of action. The court acknowledged that a criminal penalty did exist for violations of the act, but that such penalty provided no relief to the servicemember and that a "result that fails to make the servicemember whole defies the purpose of the statute." The court further stated that "without a private cause of action there would be no way for a servicemember to ensure that his rights were protected under the section. Creditors and insurers could simply ignore the provisions of the section without repercussion." In Cathey v. First Republic Bank , the United States District Court for the Western District of Louisiana found an implied private cause of action under the provision prohibiting a creditor from changing the terms of credit when the act has been invoked by a servicemember and the provision limiting the amount of interest that may be charged on debt incurred prior to service. Cathey, a lieutenant colonel in the United States Army Reserve, alleged that First Republic Bank failed to lower the interest rate on two separate loans after he was ordered to active duty and that the bank modified the terms of the credit agreement after he invoked protections under the act. The loans in question were signed by Cathey and his wife, individually and jointly, to finance the construction of two gasoline/convenience stores. As required by the act, Cathey provided a copy of his military orders to the bank prior to entering active duty. However, the bank continued to charge an interest rate in excess of the 6%. Upon his return from active duty, he demanded a cash refund of the overpaid interest from the bank and alleged that they would only refund the interest with additional concessions on the loans. The bank refused to refund the overpaid interest, despite repeated demands by the Catheys, individually and through the armed services, and proceeded to seize and sell both stores. First Republic Bank argued that the Catheys were not entitled to the interest rate reduction because the loans were signed by each of the Catheys, as well as their corporation, and as such are not covered by the SCRA. The court dismissed this argument and stated: "while it is the serviceman who is provided interest rate protection under the [SCRA] and not his co-makers, the result is the same. Interest on that obligation may not be charged in an amount in excess of the statutory rate of 6% per annum." The defendants also claimed that a private cause of action did not exist and that, in effect, the SCRA is a right without a remedy. The court disagreed with this claim and instead agreed with and adopted the reasoning of Moll . The court, quoting the plaintiff, stated: "[It] would lead to an absurd conclusion to say that Congress enacted a fairly elaborate legislative scheme to protect service members in a variety of ways and then throw their claims out of federal court when they sued to enforce their rights and collect damages when violation of their rights cause them damages." The court declined to determine the proper remedy for the plaintiffs, as the issue was not before the court, and limited its finding to the existence of a private cause of action under the SCRA. In Linscott v. Vector Aerospace , the United States District Court for District of Oregon found an implied private cause of action for a violation of the prohibition against foreclosure or enforcement of liens during any period of military service. Linscott, a major in the Air Force Reserve, alleged that Vector Aerospace, a Canadian company doing business in the United States, violated the SCRA by wrongfully asserting a lien on his property while he was on active duty. Vector performed an overhaul on a helicopter engine, and upon completion of the work, Linscott alleged that the engine work was defective and refused to pay for the work until it was completed correctly. Vector retook possession of the engine and promised a quick turnaround so that a temporary engine would not be needed. However, once Vector had possession of the engine, it claimed that the work was completed satisfactorily and refused to return the property until the outstanding bills were paid. Linscott provided a copy of his orders to Vector and notified the company that they were in violation of the act by asserting a lien on his property, but Vector stated that it was entitled to a lien under Canada's Repairers Lien Act and that the SCRA did not apply in Canada. The court disagreed and found the act applicable to Vector based on its assertion of a lien on the helicopter engine while doing business in the United States. The court then turned its focus to the question of whether a private cause of action exists under the section prohibiting foreclosure or enforcement of a lien while the servicemember is on active duty. The defendant argued that the section does not provide a private cause of action. Linscott argued that in other cases, courts have found an inferred private cause of action in other sections of the act, and that the court should find a private cause of action in the section in question. The court cited the reasoning under Moll , Marin , and Cathey as being applicable to the current dispute. The court reasoned that under the Cort analysis, "the most important inquiry ... is whether Congress intended to create the private remedy sought by the plaintiffs," and that the "legislative intent factor clearly favors plaintiffs. There is no indication that in enacting and renewing the Act, Congress intended to create rights without remedies." The court concluded, after completing the Cort four-part analysis, that a private cause of action exists for a violation of the prohibition against foreclosure or enforcement of a lien. In Batie v. Subway Real Estate Corp. , a servicemember alleged that Subway Corporation violated the SCRA by evicting him from two commercial spaces while he was deployed to Afghanistan. After obtaining declaratory judgments in the State of Texas courts, Subway evicted the servicemember from the spaces under lease. Batie filed suit in the federal district court seeking relief from the declaratory judgments and for compensatory and punitive damages for the alleged violations of the SCRA. The U.S. district court declined to overturn the state declaratory judgments, stating "Congress envisioned that state courts—not federal district courts—would decide claims involving SCRA's tenant protections during eviction proceedings." The court interpreted the act to mean that jurisdiction is not exclusive in federal court and that the act does not compel federal adjudication of all cases implicating the statute's provisions. Denying the claim for compensatory and punitive damages, the court referred to the failure of the servicemember to cite any provisions in the SCRA authorizing damages. Further, the court found that, even if the servicemember maintains the SCRA as a basis for damages, "there is no provision in SCRA that authorizes a private cause of action to remedy violations of the statute." The servicemember's claims were dismissed by the court. However, Batie filed a Motion for Reconsideration citing cases in which courts have interpreted certain sections of the SCRA to create a private cause of action. In light of the precedent cited by Batie's motion, the court vacated its earlier decision and reinstated the complaint for further adjudication. In contrast, the United States District Court for the Western District of Michigan, in Hurley v. Deutsche Bank Trust Company , stated that "the SCRA affords certain rights to servicemembers, but a private cause of action is not among them." Hurley asserted multiple violations of the SCRA and a separate claim of conversion under state law against Deutsche Bank related to the foreclosure, eviction, and subsequent sale of his primary residence while he was deployed to Iraq. The defendants asserted that the SCRA sections cited by Hurley did not expressly create a private cause of action, nor could one be inferred because the penalty provisions provide an adequate means of enforcement. Additionally, the defendant argued that the SCRA merely preserves private causes of action that exist independent of the act. The court found that none of the sections cited by Hurley expressly provided for a private cause of action, and turned to the question whether the SCRA created an implied private cause of action. Relying on Cort , the court utilized the four-part test for determining whether the statute created an implied private cause of action. The court held that the "plain language of the SCRA, coupled with instructive case law, persuades the Court that the SCRA does not imply a private cause of action for damages for foreclosure, redemption, eviction, or sale to a [bona fide purchaser]." The court dismissed Hurley's claim under the SCRA, but allowed the claim of conversion under Michigan state law to proceed. Hurley, shortly after the decision dismissing his claim under the SCRA, filed a Motion for Reconsideration, citing the decision by the U.S. District Court for the Northern District of Texas to vacate its decision in Batie , thereby allowing a private cause of action under the SCRA to proceed. In denying the motion, the court stated that Batie , as an out-of-circuit case, was only instructive and that it was not required to adhere to it. In order to appeal the decision of the district court, Hurley filed a Motion for Certification of Order and Memorandum Opinion and Order for Interlocutory Appeal Pursuant to 28 U.S.C. § 1292(b). In considering the motion, the court reexamined its prior ruling "in light of several cases holding that a private cause of action exists under various sections of the SCRA" and concluded that it had been wrong. Discussing the decisions in Batie, Moll, Marin, and Linscott , the court subsequently held that a private cause of action exists under various sections of the SCRA, and proceeded to vacate its earlier opinion concluding that a private cause of action did not exist, as well as an earlier opinion and order denying reconsideration of that decision. The court granted summary judgment on some of the plaintiff's claims, but left the determination of punitive damages for future litigation in the case. While the majority of U.S. district courts that have ruled on the question have found an implicit private cause of action under the SCRA, the protracted litigation in Hurley illustrates the challenges a servicemember may have to endure to establish a right to sue under the act. The issue has not yet been considered by a U.S. court of appeals and therefore precedent has not been established for the lower courts to follow. In the absence of action by federal courts of appeals, the U.S. Supreme Court has not ruled on whether a private cause of action exists under the SCRA. However, the Court has dealt with the issue of an implied cause of action under other statutes, and that precedent has guided the district courts in their determination of whether a private cause of action exists under the SCRA. In Cort v. Ash, the Court addressed the issue whether private individuals have the right to sue for injunctive relief under 18 U.S.C. § 610, a criminal statute prohibiting corporations from making contributions or expenditures in connection with federal elections. The Court held that individuals did not have a private cause of action under 18 U.S.C. § 610 and that the Federal Election Campaign Act authorized the Federal Election Commission to receive citizen complaints in future disputes. The Court created the four-part test, discussed above. However, in Alexander v. Sandoval, a more recent decision, the Court appears to have abandoned the four-part test in favor of a single factor analysis. The question in Alexander was whether a private citizen may sue to enforce regulations promulgated under Title VI of the Civil Rights Act of 1964. The Court held that a private cause of action does not explicitly exist under the statute and that the statutory intent does not support an implied cause of action. The Court stated that statutory intent to create not just a private right but a private remedy, the second factor of the Cort analysis, is determinative, and that without it, a cause of action does not exist and that courts may not create one, no matter how desirable it might be. The Court focused solely on the statutory intent, and not the three other Cort factors, in its determination that a private cause of action does not exist under Title VI of the Civil Rights Act. However, it does not appear that the precedential weight and persuasiveness of the opinions of the district courts finding that a private cause of action exists under SCRA, based upon the Cort decision, are undermined by the Alexander decision. The district court in Moll , while acknowledging the Cort analysis, focused on the legislative intent factor in its determination that a private cause of action exists under the SCRA. The subsequent district court decisions, discussed above, followed the analysis and rationale of Moll , and thus were arguably following the Alexander analysis. In the 111 th Congress, H.R. 2696 , the Servicemembers' Rights Protection Act, has been introduced containing language that, if enacted, would establish a new title addressing civil liability and enforcement of the SCRA by the U.S. government, as well as explicitly creating a private cause of action. The bill would authorize the U.S. Attorney General to file a civil action in any appropriate U.S. district court when a reasonable belief exists that an individual or group is engaging in, or has engaged in, a pattern or practice of conduct in violation of the SCRA. An action may also be filed if a denial of protections raises an issue of general public importance. The language authorizes judicial relief in the form of monetary damages, including actual and punitive damages, payable to a servicemember, dependent, or any other person protected by the SCRA. The court may also impose a civil penalty to "vindicate the public interest." In addition to the right to intervene in cases filed by the Attorney General, the bill provides that a servicemember, dependent, or other person protected by the SCRA may commence a private action in any U.S. district court or in a state court of competent jurisdiction to enforce rights afforded under the act. Finally, the bill provides that the remedies provided in the new title are in addition to any other remedies available under federal or state law, including any award for consequential and punitive damages. In the 110 th Congress, S. 2787 , The National Defense Authorization Act for Fiscal Year 2009, was introduced containing language that, if enacted, would have established a new title addressing civil liability and enforcement of the SCRA, partially addressing some of the issues raised in the cases discussed. The bill would have authorized the Attorney General to file a civil action when a reasonable belief existed that the SCRA was being, or had been, violated. The language also authorized judicial relief in the form of monetary damages, including actual and punitive damages, to a servicemember, dependent, or any other person protected by the SCRA. The court could also impose a civil penalty to "vindicate the public interest." While the language did provide for intervention by private citizens in cases filed by the Attorney General, the bill did not explicitly state that a private cause of action existed under the SCRA. The split in the U.S. district courts creates uncertainty in how the act may be enforced in the future. In many jurisdictions across the country, it may be unclear whether a servicemember has the right to bring a private cause of action for violations of the SCRA. This ambiguity is likely to persist if the courts continue to reach different conclusions on the right to bring a private cause of action. Congress may provide guidance to the courts by clarifying the purpose and intent of the act, or by amending individual sections of the act, or the act in its entirety, with language that explicitly states whether a private cause of action exists. In the absence of legislative clarification with respect to the right of a private cause of action, the courts will continue to interpret the SCRA, as they have in the past, with the possibility that the issue will be resolved by the U.S. Supreme Court.
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Congress has long recognized the need for protective legislation for servicemembers whose service to the nation may compromise their ability to meet obligations and protect their legal interests. The purpose of the Servicemembers Civil Relief Act (SCRA) is to provide for, strengthen, and expedite the national defense by protecting servicemembers, enabling them to "devote their entire energy to the defense needs of the Nation." The SCRA protects servicemembers by temporarily suspending certain judicial and administrative proceedings and transactions that may adversely affect their legal rights during military service. Various sections of the SCRA include provisions providing for penalties for violations of the afforded protections. However, the act does not specifically state who may bring an application for relief, nor does it specifically exclude private individuals from filing a cause of action. A private cause of action allows an individual, in a personal capacity, to sue in order to enforce a right or to correct a wrong. In the absence of a private cause of action, the right to enforce afforded rights likely rests with the government. Most courts considering the issue have found that a private cause of action exists under the SCRA. An opinion from the United States District Court for the Western District of Michigan, Hurley v. Deutsche Bank Trust Company, disagreed with decisions from U.S. district courts in Illinois, Louisiana, Oregon, and Texas, and found that a private cause of action did not exist under the act. However, upon reconsideration the court vacated its earlier opinion and held that a private cause of action does exist under various sections of the SCRA. While the U.S. Supreme Court has not ruled on whether a private cause of action exists under the SCRA, the Court has dealt with the issue of an implied cause of action under other statutes. In Cort v. Ash, the Court established a four-part test for determining if a private cause of action exists under a particular statute. However, in Alexander v. Sandoval, it appears that the Court has adopted a single-factor test rather than the four-part test. In many jurisdictions across the country, it may be unclear whether a servicemember has the right to bring a private cause of action for violations of the SCRA. This ambiguity is likely to persist if the courts continue to reach different conclusions on the right to bring a private cause of action. Congress may provide guidance to the courts by clarifying the purpose and intent of the act, or by amending individual sections of the act, or the act in its entirety, with language that explicitly states whether a private cause of action exists. H.R. 2696, introduced in the 111th Congress, would, if enacted, explicitly establish a private cause of action. In the absence of legislative clarification with respect to the right of a private cause of action, the courts will continue to interpret the SCRA, as they have in the past, with the possibility that the issue will be resolved by the U.S. Supreme Court.
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A lthough it has national impact, the presidential election is, in essence, 50 state and District of Columbia elections for presidential electors held on the same day throughout the country. Therefore—and consistent with the states' traditional authority over the administration of elections within their jurisdictions—it is an individual state that has the initial responsibility for resolving a challenge, recount, or contest to the results of a presidential election within that jurisdiction. The state rules and procedures for filing election contests generally, and with respect to the selection of presidential electors specifically, may vary greatly from state to state. Candidates or electors who seek to challenge election results must follow the particular rules and meet the specific state deadlines for such actions within that jurisdiction. It should be noted that the Electoral Count Act of 1887, as amended —which governs procedures for Congress to count the electoral votes and certify the presidential winner under Congress' Twelfth Amendment responsibility—contemplates that contests and challenges to the vote for presidential electors are to be initially handled in the states. The electoral count law provides that if a contest or challenge in a state to the election or appointment of presidential electors is resolved in that state by an established procedure before the sixth day prior to the meeting of the electors, that such determination shall be "conclusive" and shall "govern" when Congress counts the electoral votes as directed in the Twelfth Amendment. The Supreme Court has referred to this as the "safe harbor" provision. This year the presidential electors are scheduled to meet on December 19, 2016. Six days prior is December 13, 2016 which, therefore, would be the last day for a state to make a final determination in order for it to be "conclusive" when Congress counts the electoral votes. Under the U.S. Constitution, the states are delegated the initial and principal authority for the administration of elections within their jurisdictions, including elections to federal office. Such election administration in the states would generally include provisions for recounts, challenges, or contests to the results of such elections in the state that may be filed by the appropriate parties within a specific time frame and procedure established by state law. Recounts of election results generally involve a re-canvassing or re-tabulation of votes and/or vote tallies that were given and recorded in the state or in particular election districts. Such recounts may be automatic under state statute for particularly close election results, or may follow a request or petition for a recount made by a candidate under circumstances that allow such recounts. An election contest, however, usually addresses allegations of fraud in voting, or mistake or irregularity in election administration, that has resulted in the wrong candidate having been found to have received the most votes in the election, or which has made the ascertainment of the winner "reasonably uncertain." Courts have been historically cautious in interfering with and overturning the results of a popular election on the basis of allegations of fraud or election irregularities. As is the case in general with civil law suits under American jurisprudence, the burden of proof is upon the challenger, that is, the moving party, not only to prove all of the allegations and charges with specific, credible evidence, but also—in the case of an election contest—to show that any fraud or irregularity proven was to such an extent that it would actually have changed the result of the election or rendered the actual outcome reasonably uncertain. This would mean, for example, that even if a candidate could show that there were, in fact, several hundred fraudulent votes in a particular election, if that candidate lost in the state by several thousand votes, the results of that election would not be affected by such fraud or errors. However, even where the number of illegal, fraudulent, or mistaken votes is shown to exceed the margin of victory, such showing may not, in most states, necessarily invalidate or overturn the results of an election. This is because it may be difficult for a challenger to show for whom those votes were given, or would have been given. In many jurisdictions it must be shown by "direct evidence" (or by some acceptable method of "proportional deduction") that any such illegal, fraudulent, or mistaken votes were for the "winning" candidate in such numbers that he or she would not have won the election. It should be noted that there may be several different types and categories of potential voter or election "fraud" or irregularities that may occur in any particular election. With respect to in-person voting fraud, including voter "impersonation" or multiple voting by one person, such fraud to any extent that would affect the results of a statewide or nationwide election would appear to be unprecedented in recent American history, as several independent studies have shown. An academic analysis of contested federal elections concluded, for example, that "[D]emonstrated cases of actual fraud are relatively uncommon, given the frequency with which Americans vote and the number of races involved." One reported study showed that over the last few decades, out of more than one billion total votes cast in the United States there were credible allegations of 31 fraudulent votes given in person on election day (and these allegations were not necessarily proven). The Government Accountability Office (GAO), in a report to Congress, pointed out both the difficulty in quantifying and the scarcity of examples of voting fraud in the states. In that report GAO quoted the Department of Justice as noting that "... publicly available and related court records indicated that there were no apparent cases of in-person voter impersonation charged by DOJ 's Criminal Division or by U.S. Attorney 's offices anywhere in the United States, from 2004 through July 3, 2014." As noted, the procedures, deadlines, and rules for election contests (as well as for petitions or "triggers" for recounts in the states) may vary greatly from state to state. A candidate and/or electors who seek to challenge the results of an election of presidential electors within a state must, therefore, follow those state statutes, procedures, and deadlines for filing such challenges and contests. Several state procedures are discussed below as examples of those rules: Colorado law provides that the Colorado "supreme court has original jurisdiction for the adjudication of contests concerning presidential electors.... " The Colorado Rules of Civil Procedure state that any "qualified elector" seeking to contest the election of presidential electors must, within 35 days after the canvass of the secretary of state, file in the office of the secretary of state a statement of an intent to contest. Within 35 days after the filing of the statement of intent to contest, the person contesting the election must file a complaint in the office of the clerk of the supreme court. The court will "hear and determine the [case] in a summary manner" without a jury. In Florida , an election may be contested by the filing of a complaint in the circuit court by an unsuccessful candidate, or by an elector or taxpayer, within 10 days after the date that the election has been certified. The complaint must allege one of the four statutory grounds for overturning the results of the election (misconduct, fraud, or corruption of an election official; ineligibility of the successful candidate; receipt of a number of illegal votes or rejection of a number of lawful votes "sufficient to change or place in doubt the result of the election"; or proof of bribery of voters or election officials). Previous case law in Florida has shown that the filing party has the burden of proving the allegations made, and of showing that the proven fraud or illegality was in such numbers that "but for" those irregularities the result of the election would have been different, or that the true result of the election cannot be ascertained with reasonable certainty. Nevada provides that a candidate or any registered voter may contest an election, including election to the office of presidential elector, by filing "with the clerk of the district court" a written "statement of contest" which includes general identifying information as to the contestant, the defendant, the office concerned, as well as an explanation of the "particular grounds of contest." The statement of contest must be filed within five days after a recount is completed or, if there is no recount, no later than 14 days after the election. An election may be contested on following grounds: (a) That the election board or any member thereof was guilty of malfeasance. (b) That a person who has been declared elected to an office was not at the time of election eligible to that office. (c) That illegal votes were cast and counted for the defendant, which, if taken from the defendant, will reduce the number of the defendant's legal votes below the number necessary to elect the defendant. (d) That the election board, in conducting the election or in canvassing the returns, made errors sufficient to change the result of the election as to any person who has been declared elected. (e) That the defendant has given, or offered to give, to any person a bribe for the purpose of procuring his or her election. (f) That there was a possible malfunction of any voting or counting device. The grounds of illegal votes given, or errors in canvassing returns must, therefore, be shown to be of such an extent that illegalities or errors would change the result of the election. New Hampshire law does not appear to provide a specific statutory scheme for election contests relating to federal elections, but rather provides for a process for a recount and an appeal and hearing on such recount results. The New Hampshire statutes provide that "any candidate for whom a vote was cast" may apply for a recount, which application is to be made to the secretary of state no later than the Friday following the election. During the recount process, the candidates and their counsels and representatives may "protest" the counting or failure to count any ballot, and the secretary of state is to rule on such protest. An appeal of the recount results may be made within three days of the declaration of the results of the recount to the state ballot law commission, which may determine which candidate received the greatest number of votes. That determination may then be appealed to the state supreme court within five days of the board's decision. Although there is no specific statutory grounds or cause of action for an election contest to be brought in the case of an election for federal office, the New Hampshire statutes do recognize that nothing in their statutory scheme would necessarily prevent a common law cause of action and recourse "to the superior court on other questions, within the jurisdiction of such court, relating to the legality or regularity of general elections or the results thereof." North Carolina provides that election contests are, as a general matter, to be filed with the county board of elections. However, because the county boards may rule that they cannot resolve the issue if an election is in more than one county, and because a petition may be taken up directly by the State Board of Elections, it would appear reasonable to file a petition directly to the State Board of Elections (or at least concurrently with a filing to the county board) with respect to irregularities or misconduct in the votes for presidential electors. The protest must state whether it concerns "the manner in which votes were counted and results tabulated," or whether it relates to some "other irregularity," and what remedy the protester is seeking. If the protest involves the manner in which votes were counted and results tabulated, then it must be filed before the beginning of the county board of election's canvass meeting (or if good cause for delay is shown, it may be filed up to 5:00 P.M. on the second business day after the county board of elections has completed its canvass and declared the results ). If the protest involves some other irregularity, then it must be filed before 5:00 P.M. on the second business day after the county board of elections has completed its canvass and declared the results. The State Board of Elections ̶ when a known group of voters cast votes that were beyond retrieval or where a known group of voters were given an incorrect ballot style–may authorize a county board to allow those voters to recast their votes during a period of two weeks after the canvass by the State Board of Elections. The State Board of Elections may order a new election if (1) Ineligible voters sufficient in number to change the outcome of the election were allowed to vote in the election, and it is not possible from examination of the official ballots to determine how those ineligible voters voted and to correct the totals. (2) Eligible voters sufficient in number to change the outcome of the election were improperly prevented from voting. (3) Other irregularities affected a sufficient number of votes to change the outcome of the election. (4) Irregularities or improprieties occurred to such an extent that they taint the results of the entire election and cast doubt on its fairness. After a decision by the State Board of Elections, an aggrieved party may appeal the decision to the Superior Court of Wake County within 10 days of the date of service of the final decision. Ohio appears to be an exception as far as election contests with respect to elections for federal office are concerned, including elections of presidential electors. The contested election procedure set out in the Ohio Code expressly states that it does not apply to an election for presidential elector, or for other federal office. Rather, the Ohio law provides that any such contests for presidential electors, as well as for other federal offices, "shall be conducted in accordance with the applicable provisions of federal law." In Pennsylvania , an election contest dealing with the selection of electors for President and Vice President of the United States must be filed within 20 days after the election, regardless of whether a recount of that election is proceeding or not. The contest is initiated by the filing of a petition in the appropriate court of jurisdiction in Pennsylvania by affidavit of at least five petitioners who are registered electors in Pennsylvania and who voted in the election being contested. The complaint must "concisely set forth the cause of the complaint, showing wherein it is claimed that the primary or election is illegal." An "illegal" election refers to allegations of fraud or wrongdoing in the casting, computation, and returns of votes, and must aver facts which, if proven, would definitely change the results of the election. In Virginia a contest to the election of electors for President and Vice President may be filed by a written complaint of one or more of the unsuccessful candidates, and contest proceedings are to be held in the Circuit Court of the City of Richmond before a special judicial panel. Such notice to contest must be filed no later than 5:00 p.m. on the second calendar day after the State Board certifies the result of the election, and a copy of the complaint is to be served on each contestee within five days after the Board has certified the election. Grounds for the complaint are either objections to the eligibility of the contestee, or objections to the conduct or the results of the election "accompanied by specific allegations which, if proven true, would have a probable impact on the outcome of the election.... " The contest is to be heard and determined without a jury, shall be held "promptly," and shall be completed at least six days before the time fixed for the meeting of the electors. The Twelfth Amendment to the U.S. Constitution provides that Congress shall meet in joint session to count and certify the electoral votes for President. Implicit in the express authority of Congress to count the electoral votes and to formally announce the winner of the presidential election, has been the authority (and practical necessity) to determine which electoral votes to count. When Congress meets to count the electoral votes in January following the meeting of the presidential electors in December, objections may be made to the counting of electoral votes from a particular state. Federal law, known as the Electoral Count Act of 1887, sets forth a detailed procedure for making and acting on objections to the counting of one or more of the electoral votes. When the certificate or equivalent paper from each state or the District of Columbia is read, "the President of the Senate shall call for objections, if any." Any such objection must be presented in writing and must be signed by at least one Senator and one Representative. Furthermore, the objection "shall state clearly and concisely, and without argument, the ground thereof," and no debate on the objection is to be made in the joint session itself. When a properly made objection is received, the joint session is temporarily dissolved and each house is to meet to consider the objection separately. For an objection to be sustained, it must be agreed to by each house of Congress meeting separately. By way of example, due to alleged voting irregularities in the state, an objection was made to the Ohio electoral votes during the January 2005 joint session . In accordance with federal law, the chambers withdrew from the joint session to consider the objection, but neither the House nor Senate agreed to accept the objection. When the House and Senate resumed in joint session, "because the two Houses have not sustained the objection," Ohio's electoral votes were counted as cast. Similar to an election contest in the states, it appears that the burden of proof within Congress to overcome the presumption of regularity of an officially certified election may be significant. As noted earlier, the Electoral Count Act indicates the congressional determination that the states are to be the initial arbiter of election contests for presidential electors within their respective jurisdictions. Thus the provision of the Electoral Count Act known as the "safe harbor" provision expressly provides for final and "conclusive" determinations of the election of presidential electors in the states when timely contested under established state procedures. Even where no contest in a state has occurred, the election results and returns from each state that have reached the Congress, under the procedures of the Electoral Count Act, would have been officially certified by state officers. The official "certificates of ascertainment" regarding the election would have already been transmitted by the governor of each state to the National Archives and Records Administration and to the Presiding Officer of the joint session. With reference to contests relating to other federal elections ̶ federal congressional elections ̶ or in other challenges to the credentials of Members-elect, the practice in Congress has been to place a clear burden of proof upon the objecting party to overcome the presumption of validity of an election that has already been officially certified by the proper state officials. Regarding their own congressional elections, the House of Representatives and the Senate have adopted a "but for" test, requiring the contestant to prove that "but for" the alleged fraud or irregularity the result of the election would have b een different. It is likely that a similar standard as that applied in congressional precedents with respect to the burden of proof would at least influence Congress in the case of challenges to the results of a state-certified election of presidential electors.
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Questions occasionally surface regarding potential voting fraud or election irregularities in presidential elections. (See, for example, Sean Sullivan and Philip Rucker, "Trump's Claim of 'Rigged' Vote Stirs Fears of Trouble," Washington Post, October 18, 2016, p. A1; Edward-Isaac Dovere, "Fears Mount on Trump's 'Rigged Election' Rhetoric," Politico, October 16, 2016; Daniel Kurtzleben, "5 Reasons (And Then Some) Not to Worry About A 'Rigged' Election," NPR, October 18, 2016). If legitimate and verifiable allegations of voting fraud, or indications of misconduct by election officials on election day are presented, what legal recourses are available to complainants to litigate and potentially to remedy such wrongs and to contest the result of a presidential election? Presidential elections are conducted in each state and the District of Columbia to select "electors" from that state who will meet and formally vote for a candidate for President on the first Monday following the second Wednesday in December. Under the U.S. Constitution, these elections for presidential electors are administered and regulated in the first instance by the states, and state laws have established the procedures for ballot security, tallying the votes, challenging the vote count, recounts, and election contests within their respective jurisdictions. A candidate or voters challenging the results of a presidential election in a particular state would thus initially seek to contest the results of that election in the state according to the procedures and deadlines set out in the laws of that specific state. After the results of an election for presidential electors are officially certified by the state, the selected presidential electors meet and cast their votes for President in December. The certificates indicating the votes of the electors are then sent to the federal government, and those certificates are opened and the electoral votes formally announced during the first week in January in a joint session of the U.S. Congress, under the directions of the Twelfth Amendment of the Constitution. The counting and the official tabulation of the electoral votes from the states within Congress provides a further opportunity to challenge and protest electoral votes from a state. Under federal law and congressional precedents, an objection may be made to the counting of electoral votes from a state by a formal objection made in writing by at least one Member of the House of Representatives and one Senator. Once made, each house of Congress separately debates and votes on the objection. If both houses of Congress sustain the objection, the electoral votes objected to are not counted; but if only one house, or neither the House nor the Senate, votes to sustain the objection, then the electoral votes from that state are counted.
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Established in 1961, DIA manages the Defense Attache System and other human intelligence (humint) collection efforts. In addition, DIA is responsible for the analysis of information from allsources in response to requirements established by the DNI, by the Office of the Secretary of Defense(OSD), and other DOD officials. DIA provides analytical support to senior defense officials, to theJoint Chiefs of Staff, combatant commanders, and joint task forces worldwide. Established in 1960, the NRO designs, builds, and operates the reconnaissance satellites that collect images of the earth's surface and signals information. While the NRO is a DOD agency, itis staffed by both DOD and CIA personnel. Established in 1952, NSA has two primary missions -- developing codes to protect the security of official U.S. communications and providing signals intelligence (sigint). NSA collects, processes,and analyzes foreign signals in order to support national policymakers and the operational forces. The NGA, established in 1996 and originally known as the National Imagery and Mapping Agency (NIMA), provides geospatial intelligence -- imagery, imagery intelligence, and geospatialdata and information to DOD users and other officials responsible for national security. Geospatialinformation includes topographic, hydrographic, and other data referenced to precise locations onthe earth's surface. The Army, Navy, Air Force, and Marine Corps have their own intelligence components that are, in general, not intelligence collection agencies, but process and analyze data, and disseminateintelligence to their respective operating forces. Three of these agencies -- the NRO, NSA, and the NGA -- have significant responsibilitiesfor collecting intelligence of concern to agencies outside DOD. These three agencies more directlysupport national-level decisionmakers than do the intelligence organizations of the four militaryservices and even DIA. Their efforts are described as "national," as opposed to departmental ortactical. Senior policymakers often have significantly different intelligence needs than militaryconsumers, although there is considerable overlap. For instance, national policymakers are directlyconcerned with implications of nuclear test programs in countries that are of no immediate concernto military commanders, whereas the latter could be focused on tactical threats to operations longunderway that are not the focus of high-level policymakers. "National intelligence" is the term used for intelligence that is of concern to more than one department or agency and provides the basis for national security policymaking. Beginning in the1960's, a generation of arms control agreements between the U.S. and the Soviet Union was basedon satellite imagery that allowed U.S. policymakers to be confident of their estimates of Sovietmilitary capabilities. More recently, national systems have permitted policymakers to monitor suchcrucial developments as transfers of WMDs, ethnic cleansing in various countries, and indicationsof narcotics traffic. Inasmuch as national systems are expensive, and therefore not available in unlimited quantities, procedures have been developed to sort out priorities for coverage. The DCI had statutory authorityto develop collection and analysis priorities in response to National Security Council (NSC)guidance. Generally, priorities have been sorted out by inter-agency committees working throughthe DCI's Community Management Staff of the Intelligence Community and the Assistant DCI forCollection, to be implemented by national-level agencies, including NSA, the NRO, and the NGA. (2) The efforts of NSA, the NRO, and the NGA have been funded as parts of the National Foreign Intelligence Program (NFIP) (3) the annual budget forwhich the DCI annually develops and presentsto the President. (4) The DCI also has had authorityto transfer funds and (for periods up to a year)personnel among NFIP programs with the approval of the Director of the Office of Management andBudget and affected agency heads. The Secretary of Defense was required to obtain the concurrenceof the DCI before recommending individuals for appointment as head of the NRO, NSA, and theNGA. If the DCI did not concur, the Secretary of Defense might still recommend an individual tothe President, but he had to include in the recommendation a statement that the DCI did not concur. (5) The 2004 Intelligence Reform Act provides that the DNI will be responsible for developing and determining the NIP budget and gives him/her authority to manage appropriations by directing theallotment or allocation of such funds with prior notice to agency heads. The DNI also has authorityto reprogram funds under certain conditions and if the transfer out of any one department or agencyis less than $150 million in a single year and is less than 5 percent of the amounts available to theagency or department. The DNI will also have certain limited authorities to transfer intelligencepersonnel from one agency to another. In addition to responding to tasking in support of national policymakers, all defense agenciesare closely involved in directly supporting operating military forces. The Secretary of Defense hasstatutory responsibilities for the effective functioning of national intelligence agencies in DOD. (6) Inaddition, statutes require that the agencies be prepared to participate in joint training exercises, andestablish uniform reporting systems to strengthen their readiness to support operating forces withrespect to a war or threat to national security. (7) The Defense Department's view of the central role of intelligence is evident in its most recent planning document, Joint Vision 2020 : The evolution of information technology will increasingly permit us to integrate the traditional forms of information operations with sophisticatedall-source intelligence, surveillance, and reconnaissance in a fully synchronized informationcampaign. The development of a concept labeled the global information grid will provide thenetwork-centric environment required to achieve this goal. The grid will be the globallyinterconnected, end-to-end set of information capabilities, associated processes, and people tomanage and provide information on demand to warfighters, policy makers, and supportpersonnel. (8) National intelligence is now an essential part of DOD's planning and operational capabilities and, since the Persian Gulf War, has become thoroughly integrated into combat operations. One mediaaccount of the role of national-level agencies during recent hostilities in Iraq concluded: As with imagery and early-warning [satellite] constellations, space-based signals intelligence was far more responsive to tactical users in OperationIraqi Freedom than in earlier campaigns. National Security Agency teams and related Air Forcecryptologic units were forward-deployed to the theater of operations to assist tactical commandersin accessing and interpreting signals intelligence from orbital and air-breathingsources. The need to integrate intelligence resources has also become more important inasmuch as The distinction between strategic and tactical ISR [intelligence, surveillance, and reconnaissance] systems gradually has melted away as militaryrequirements shifted from the nuclear and conventional threat posed by Russia to more diversedangers arising from rogue states and terrorists. (9) Propelled largely by the need for precise locating data to target precision-guided munitions (PGMs), intelligence from national sources has been woven into military operations at all echelons. Senior DOD officials and military leaders emphasize their reliance on this stream of information andargue that the national agencies need to be more responsive to their direction. Some observers have long argued that the focus on support to military operations by national agencies has led to reduced support for national-level policymakers at the State Department and theNSC. For instance, it has been suggested that this emphasis on supporting the military was acontributing factor in the Intelligence Community's failure to provide advance notice of the Indiannuclear test in May1998, at a time when U.S. reconnaissance satellites were primarily tasked withthe support of U.S. military forces operating in the Persian Gulf region. (10) In recent years, DOD's intelligence effort was coordinated, loosely according to some observers, by the Assistant Secretary of Defense for Command, Control, Communications, andIntelligence (ASD C3I). In 2002, Secretary of Defense Donald Rumsfeld sought congressionalauthorization to establish a more senior position, that of Under Secretary of Defense for Intelligence(USD(I)); a provision was included to that effect in the Defense Authorization Act for FY2003 ( P.L.107-314 , section 901). In March 2003, Stephen A. Cambone, who had previously served as Deputy Undersecretary of Defense for Policy, was appointed to the position and his appointment was confirmed by the Senate. His responsibilities include coordinating DOD intelligence, and intelligence-related policy, plans,programs, requirements and resource allocations. He is to "exercise authority, direction, and control"over DIA, NGA, the NRO, NSA, and other agencies. (11) He had served as a single point of contactbetween DOD and the DCI on intelligence resource and policy issues. (12) A significant responsibility of the Secretary of Defense is ensuring that the national intelligence programs of the NIP and the joint military and tactical intelligence programs (known as the JointMilitary Intelligence Program (JMIP) and Tactical Intelligence and Related Activities (TIARA)) aremutually supportive and not duplicative. (13) Inrecent years the various sets of programs have beenbrought into closer alignment to support national policymakers concerned with details of tacticalintelligence and military commanders who need information from national systems such as satellites. In the aftermath of the attacks of September 11, 2001, a number of observers as well as the JointInquiry of the two congressional intelligence committees and the 9/11 Commission, concluded thatthe organization and management of the Intelligence Community was inadequate and that, as aresult, the DCI was unable to ensure that crucial information about the 9/11 plot was shared withanalysts who might have been able to identify the threat in advance. The 9/11 Commission took noteof ... some of the limitations of the DCI's authority over the direction and priorities of the intelligence community, especially its elements within theDepartment of Defense. The DCI has to direct agencies without controlling them. He does notreceive an appropriation for their activities, and therefore does not control their purse strings. Hehas little insight into how they spend their resources. Congress attempted to strengthen the DCI'sauthority in 1996 by creating the positions of deputy DCI for community management and assistantDCIs for collection, analysis and production, and administration. But the authority of these positionsis limited, and the vision of central management clearly has not beenrealized. (14) The Joint Inquiry of the two intelligence committees concluded that the DCI was unable to establish a comprehensive intelligence effort against Al Qaeda even when the extent of the threat hadbecome evident to the DCI at least by 1998. It reported: Following the August 1998 bombings of two U.S. embassies, the DCI placed Bin Ladin's terrorist network among the Intelligence Community'shighest priorities. The DCI raised the status of the threat further still when he announced to CIAsenior managers in December 1998: We are at war [with Bin Ladin].... I want no resources or people spared in this effort, either inside the CIA or the [Intelligence]Community. These were strong words. Rather than having a galvanizing effect, however, the Joint Inquiry record suggests that the Intelligence Community continued to be fragmented without a comprehensivestrategy for combating Bin Ladin. The Joint Inquiry concluded that the DCI was either unable orunwilling to enforce consistent priorities and marshal resources across the Community. (15) Simply put, the Joint Inquiry argued that, although DCI George Tenet put the Intelligence Community on a war footing against Al Qaeda, his writ did not run beyond the CIA to other partsof the Intelligence Community, including the major Pentagon agencies. Accordingly, the JointInquiry and the 9/11 Commission as well as others have urged that there should be a single seniorofficial, having the title Director of National Intelligence or National Intelligence Director,responsible for managing the entire Intelligence Community, including NSA, the NRO, and the NGAalong with the CIA and other intelligence entities. Management and budgetary authority has been seen as needed to control national intelligence agencies of the Community. The Joint Inquiry recommended the creation of a statutory Director ofNational Intelligence with "the full range of management, budgetary and personnel responsibilitiesneeded to make the entire U.S. Intelligence Community operate as a coherent whole." Theseresponsibilities would include "establishment and enforcement of consistent priorities for thecollection, analysis, and dissemination of intelligence throughout the Intelligence Community." TheDNI would have responsibilities for the "review, approval, modification, and primary managementand oversight of the execution of Intelligence Community budgets... ." (16) The 9/11 Commission recommended that a National Intelligence Director "manage the national intelligence program and oversee the agencies that contribute to it." The NID would: submit a unified budget for national intelligence that reflects priorities chosen by the National Security Council.... He or she would receive anappropriation for national intelligence and apportion the funds to the appropriate agencies, in linewith that budget, and with authority to reprogram funds among the national intelligence agencies tomeet any new priority (as counterterrorism was in the 1990s). The National Intelligence Directorshould approve and submit nominations to the president of the individuals who would lead the CIA,DIA, FBI Intelligence Office, NSA, NGA, NRO, Information Analysis and Infrastructure ProtectionDirectorate of the Department of Homeland Security, and other national intelligencecapabilities. (17) A number of bills were introduced designed create to a single director of the Intelligence Community. (18) In some approaches, this individualwould have operational control of all intelligenceagencies, including those in DOD. Other approaches envision the person filling the USD(I) positionsimultaneously serving as a Deputy of the DNI/NID. Other versions do not precisely define theextent of the DNI's authorities. On August 2, 2004 President Bush announced his intention to seek changes in the National Security Act to establish a National Intelligence Director, appointed by the President with the adviceand consent of the Senate, who "will oversee and coordinate the foreign and domestic activities ofthe intelligence [community]." (19) The Presidentindicated that the CIA will be managed by a separatedirector. The Administration plan apparently did not envision the NID having the authority tocontrol the budgets of the various agencies nor would the NID singlehandedly submit nominationsfor agency head positions to the President. (20) Subsequently, congressional attention focused on two bills dealing with intelligence reorganization -- H.R. 10 , introduced by Representative Hastert, and S. 2845 , sponsored by Senators Collins and Lieberman. After extensive floor consideration andamendments, S. 2845 was passed by the Senate on October 6th; H.R. 10 was passed by the House on October 8th. Both bills would have established a NID with authoritiesmore extensive than those assigned to the DCI by current legislation, but there were significantdifferences in the area of budgetary authority as well as in regard to other issues. (21) As is noted below("Recent Developments"), it proved difficult for the resulting Conference Committee to reachagreement on the language adopted by the two chambers. Whereas there appears to be no question that a failure to fully correlate information in the possession of intelligence and law enforcement agencies hindered the effort to uncover the 9/11 plotbefore it occurred, some observers argue that the main obstacle prior to 9/11 was the regulatoryframework that created a "wall" between foreign intelligence and law enforcement analysts -- andnot organizational arrangements per se . From their perspective, the problem in large measureinvolved the CIA and the FBI and, among DOD agencies, primarily NSA which had to work withinthe constraints of the "wall" in regard to surveillance of U.S. persons. The 9/11 Commissioncriticized NSA's "almost obsessive protection of sources and methods, and its focus on foreignintelligence, and its avoidance of anything domestic...." (22) It is noteworthy, nevertheless, that the 9/11Commission's list of ten missed opportunities for stopping the plot does not cite a misstep by NSAor any other DOD agency. (23) Criticisms of proposals to establish a DNI/NID centered on the possibility (or likelihood) that they would undermine the authority of the Secretary of Defense over agencies that are closelyintegrated into the operational capabilities of the military services. Writing in June 2004, formerDCI Robert Gates argued that: More than 80 percent of foreign intelligence dollars are spent by agencies under the control of the secretary of defense. Virtually all of those agencies havetactical, combat-related tasks to perform for the Pentagon and the military services, in addition tothe roles they play under the guidance of the director of central intelligence. In the real world ofWashington bureaucratic and Congressional politics, there is no way the secretary of defense or thearmed services committees of Congress are simply going to hand those agencies over to anintelligence czar sitting in the White House. Indeed, for the last decade, intelligence authority hasbeen quietly leaching from the C.I.A. and to the Pentagon, not the other wayaround. (24) Bruce Berkowitz, who has worked with the Hoover Institution and the RAND Corporation and is currently serving as a DOD consultant, has written: Proposals to yank intelligence organizations out of the Defense Department also overlook the role they play in combat operations today. The ability to feedelectronic data to units on the battlefield through digital pipelines is essential for the kind ofnetwork-style warfare that has proved so effective in Iraq and Afghanistan. Combat forces use moreof this data than anyone else. It seems odd that anyone would want to drag several intelligenceorganizations out of the Defense Department simply to create a new mega-organization whose mainmission would be ... supporting the Defense Department. (25) Another longtime observers of U.S. intelligence agencies, Richard Betts of Columbia University, wrote in mid-2004: "Trying to wrest the National Security Agency and like agenciesfrom the Defense Department ... would leave Capitol Hill and Pennsylvania Avenue awash inblood.... The military services will never accept dependence on other departments for performanceof their core functions, which include tactical intelligence collection, and politicians will not overridemilitary protests that their combat effectiveness is being put at risk." (26) Such views were undoubtedly shared by some current and former DOD officials. In April 2004, months prior to the President's August 2nd announcement, USD(I) Cambone testified that "we earlyconcluded that the relationship between intelligence and operations was growing closer -- so close,in fact, that it was beginning to become increasingly difficult to separate the two...." Expressingskepticism about plans to increase the role of the DCI or create a DNI, Cambone argued that,"...absent the [current] deep and abiding relationship between the DCI and the Secretary of Defense,it is easy to see the ways in which seams would begin to grow up between organizations and inwhich the Department of Defense would not be benefi[t]ted and in fact, the intelligence communityas a whole be hurt by that split. So sustaining the existing relationship, we think, is essential." (27) Cambone's testimony echoed testimony offered in 1996 by John P. White, then the Deputy Secretary of Defense in the Clinton Administration, in regard to earlier legislation to reorganize theIntelligence Community: "Confusing the clear lines of authority that currently exist would make itmore difficult for DOD intelligence elements to perform their most important mission -- supportto the warfighter. In the drive to create a strong Intelligence Community, we must not damage theintegration of military intelligence within the Defense Community." (28) Concerns within DOD persisted. On October 21, 2004 General Richard Myers, the Chairman of the Joint Chiefs of Staff, wrote to the Representative Hunter, Chairman of the House ArmedServices Committee, maintaining that: ... the budgets of the combat support agencies [including NSA, NRO and NGA] should come up from the agencies through the Secretary of Defense to theNational Intelligence Director, ensuring that required warfighting capabilities are accommodated andrationalized and ensuring that the Secretary meets his obligations. For appropriations, it is likewiseimportant that the appropriations are passed from the National Intelligence Director through the[Defense] Department to the combat support agencies. Consideration of legislation to establish a DNI/NID focused on the extent of this official'sauthorities to coordinate all intelligence agencies, but some observers asserted that, separate fromorganizational issues, more significant steps had already been taken to improve sharing ofinformation. Implying that organizational issues were not necessarily the key factor, they assert thatthe Intelligence Community's failure "to connect the dots" before the 9/11 attacks resulted in largemeasure from barriers to communications between foreign intelligence agencies (such as the CIA)and law enforcement agencies (especially the FBI). (29) These barriers were in many cases purposefullyerected in regulations in order to ensure that foreign intelligence agencies would not be used to targetU.S. persons (as had occurred on earlier occasions when intelligence agencies zealously investigatedgroups and individuals opposed to the Vietnam War). After 9/11, Congress adjusted these barriers through provisions in the USA-Patriot Act of 2001 ( P.L. 107-56 ) and other legislation. The USA Patriot Act authorized the sharing of law enforcementand foreign intelligence information. In addition, the Homeland Security Act ( P.L. 107-296 )provided that the Intelligence Analysis and Infrastructure Protection component of the Departmentof Homeland Security (DHS) would receive and analyze foreign intelligence and law enforcementinformation relating to terrorist threats to the U.S. Subsequently, the Bush Administrationestablished the Terrorist Threat Integration Center (TTIC) to perform integrative analyticalfunctions. (30) Such initiatives have arguably torndown (or at least significantly lowered) the "wall"between foreign intelligence and law enforcement that may have contributed to the failure to detectthe 9/11 plot in advance. These developments, according to some observers, affect the need forenhancing the powers of a proposed DNI/NID. Ongoing technological innovations are also, according to some observers, working to remove long-established barriers. The phenomenon of "stovepiping" whereby imagery, humint, or sigintwould be collected by separate agencies in the field and forwarded to respective Washington-areaheadquarters to be processed and analyzed before being made available to users has received muchcriticism. Stovepiping, in essence, means the control of information by collection agencies. Inevitably, processing, transmission and forwarding lead to delays and impede the effort to bring allavailable data to bear on the intelligence needs of all levels of government. The dangers of "stovepiping" are now widely recognized. DIA Director Lowell Jacoby testified to the two intelligence committee's Joint Inquiry: ... the more widely information is shared, the more likely its hidden meaning will be revealed. Information considered irrelevant noise by one set ofanalysts may provide critical clues or reveal significant relationships when subjected to analyticscrutiny by another. This process is critical for the terrorism issue where evidence is particularlyscant, often separated by space and time. (31) Well before 9/11, the Defense Department was taking advantage of new technologies to provide intelligence support to its forces. Real-time intelligence has been especially important in the use ofprecision munitions, allowing targeting of specific targets while minimizing casualties. Defenseintelligence agencies are acquiring capabilities to collect comprehensive data, to provideinstantaneous transmission, data storage, and immediate retrieval at all echelons. In many casesprocessing and analysis is undertaken at sites within the U.S., even Washington-area headquarters(a process known as "reachback"), and can be directly accessed by military units around the worldto support ongoing tactical operations. Observers, such as Berkowitz, have suggested that, rather than undertaking revision of complex statutes, efforts should be focused on generating "the political will needed to make all intelligenceorganizations implement a truly common set of security standards that balance the importance ofkeeping secrets with the importance of sharing information." (32) Berkowitz notes that Executive Order12333, which serves a charter document for the Intelligence Community, is over 20 years old andneeds revision, an effort that, in his view, "would be a faster, more effective vehicle for intelligencereform than a commission report or legislation. Such an order could also resolve the security barriersand other hurdles that currently keep intelligence agencies from working together more effectively." In October 2002 testimony before the Joint Inquiry, DIA Director Jacoby argued that a crucial need is "to create a new paradigm wherein 'ownership' of information belong[s] with the analystsand not the collectors." Jacoby argued that the government should follow industry's practice inadopting a standard for data storage that permit retrieval from multiple users at different agencies: If we are to achieve an end state characterized by the ability to rapidly share and integrate information, we must move toward a common data frameworkand set of standards that will allow interoperability -- at the data, not system, level.... And, thesooner the better, not just for a limited group of intelligence producers and subsets of data; itshouldn't be an elective option. Interoperability at the data level is an absolutely necessary attributeof a transformed intelligence environment because it enables horizontal integration of informationfrom all sources -- not just intelligence -- at all levels ofclassification. (33) Many observers believe that stovepiping can be gradually overcome because of the availability of technology for rapid dissemination of operational data and the press of operational requirementsas occurred during Operation Iraqi Freedom. Outside observers argue that technological capabilitiesnow permit increasing information sharing with reliable security protection. (34) The effort to promote wider sharing of information is widely supported, but there remain obstacles. Singling out NSA, the Senate Intelligence Community warned in 2003 of continuingresistance to such innovations: The Committee has become increasingly concerned in recent years about bureaucratic and cultural obstacles to effective information and data sharing... Cutting-edge analytical tools, many of which are already in use in the private sector, increasingly involve large-scale, multi-database analysis and patternrecognition. Using such approaches within the Intelligence Community, however, cannot proceedfar without a significant revision of current orthodoxy as to information 'ownership' andcontrol. (35) The Intelligence Authorization Act for FY2004 ( P.L. 108-177 , section 317) established a pilot program to assess the feasibility of permitting analysts throughout the Intelligence Community toaccess and analyze intelligence from the databases of other elements of the Community. Inparticular, the provision was intended to permit analysts in CIA and DIA to access sigint containedin NSA databases, but not published in formal NSA reports. The 9/11 Commission, taking note of this ongoing process, urged that it be accelerated. It recommended that the President lead a "government-wide effort to bring the major national securityinstitutions into the information revolution." (36) The Commission indicated a role for the NID and theSecretary of Homeland Security, backed by the Office of Management and Budget, to set commonstandards for information in the Intelligence Community, other public agencies, and relevant partsof the private sector. The Commission did not specifically address the issue within DOD. Provisionswere, however, ultimately included in P.L. 108-458 directing the DNI to establish uniform securitystandards, common information technology standards, and policies and procedures to resolveconflicts between the need to share intelligence and the need to protect intelligence sources andmethods. The role of the NID/DNI received considerable attention during floor consideration ofintelligence reform legislation in September and October 2004. Some Members sought to providegreater authority to the position, others preferred more limited changes to current authorities. OnSeptember 29, the Senate voted to table an amendment (No. 3706) that would give the NIDauthority, "to supervise, direct, and control the operations" of the major DOD intelligence agenciesas well as the CIA, but ultimately the Senate bill sought to create a stronger NID/DNI than wasreflected in the House bill. (37) The ensuingconference reportedly had difficulty in reaching agreementon the issue, but many of the media accounts of discussions did not provide precise treatments of thearguments. After further consideration, the conference version of S. 2845 was passed by the House on December 7and by the Senate the following day. The legislation was approved by thePresident on December 17, 2004. In the signing the bill, President Bush stated: It will be the DNI's responsibility to determine the annual budgets for all national intelligence agencies and offices and to direct how these funds arespent. These authorities vested in a single official who reports directly to me will make all ourintelligence efforts better coordinated, more efficient, and moreeffective..... The new law will preserve the existing chain of command and leave all our intelligence agencies, organizations, and offices in their currentdepartments. Our military commanders will continue to have quick access to the intelligence theyneed to achieve victory on the battlefield. Provisions regarding the budgetary authorities of the DNI and other senior officials were complex and reflected the fact that significantly different views remain. The conference report for S. 2845 authorized the DNI to provide guidance for National Intelligence Program budget to heads of departments containing intelligence organizations; "develop and determine" an annual consolidated National Intelligence Programbudget; present National Intelligence Program budget to the President for approval(together with dissenting comments from heads of departments containing intelligenceorganizations); participate in the development by the Secretary of Defense of the annualbudgets for DOD-wide and tactical military intelligence programs; ensure the "effective execution" of annual intelligencebudgets; direct the allotment or allocation of appropriations through the heads ofdepartments containing intelligence agencies or organization provide "exclusive direction" to the Office of Management and Budget (OMB)regarding apportionment and subsequent allocations of appropriated funds; transfer or reprogram funds from one program in the National IntelligenceProgram to another (with OMB approval and subject to other restrictions); transfer personnel from one intelligence agency to another for up to two years(under certain conditions). (38) Taken together, these authorities will provide the DNI with significantly greater budgetary authorities than possessed by the DCI. In particular, provisions authorizing the DNI to directallocations and allotments of appropriated funds gives the DNI significant leverage in the acquisitionand program management efforts of intelligence agencies in DOD. (39) Some Members believed thatthis leverage would amount to a degree of control inconsistent with the Secretary of Defense'sresponsibilities for managing intelligence agencies in DOD that also support the combat forces. Although the proposed language clearly establishes extensive budgetary authorities for the DNI,other factors such as the role of the personalities of the respective officials, the priorities of theincumbent administration, and the influence of congressional guidance will also have significantinfluences. Moreover, the final version of the legislation includes a provision (Section 1018) that requires the President to issue guidelines to ensure the effective implementation of authorities granted to theDNI, the Director of the OMB, and cabinet heads "in a manner that maintains, consistent with theprovisions of this act, the statutory responsibilities of the head of the departments of the UnitedStates Government with respect to such departments." The guidelines are to be issued within 120days of the appointment of the first DNI. Some observers suggest that this provision provides anopportunity for renewed consideration of the issues that made passage of P.L. 108-458 difficult. (40) Media accounts indicate that another key issue was day-to-day operational control of the collection assets of intelligence agencies in DOD. Some observers suggest, however, that this issueis not clear-cut. The legislation gives the DNI authority to apportion funds and the apportionmentprocess affects the timing and rate of the flow of funds. Nevertheless, the authority to apportion andallocate appropriated funds does not automatically translate into the authority to direct day-to-dayoperations. There are already well-established distinctions between responsibilities for acquisitionprograms on the one hand, and responsibilities for operational command on the other. The militarydepartments (the Departments of the Army, Navy and Air Force) have major responsibilities for theacquisition of systems to be used by the operating forces, but ongoing operations are controlled bythe unified commands (e.g. Central Command, European Command, Pacific Command) at thedirection of the Secretary of Defense and the President. Analogously, the DNI would haveresponsibilities for acquisition of systems that are part of the National Intelligence Program; theheads of defense intelligence agencies would be responsible to the Secretary of Defense for operatingthe systems. Day-to-day tasking of the national systems operated by intelligence agencies in DOD has been coordinated among "consumers" from throughout the Government, including DOD, the StateDepartment, the While House, etc.. The DCI has long had authority to coordinate such tasking inresponse to NSC guidance. (41) For geospatialimagery, for example, the Source Operations andManagement Directorate of NGA routinely meets with representatives of agencies outside DOD tocoordinate production priorities. NGA acknowledges that authority to establish priorities derivesfrom the authorities of the DCI rather than solely from those of the Defense Department. (42) Similararrangements exist in regard to other intelligence disciplines, such as signals intelligence. The Intelligence Reform Act also established a Joint Intelligence Community Council (JICC) composed of the Secretaries of State and Defense and other senior officials, to advise the DNI onestablishing requirements, developing budgets, financial management, and monitoring andevaluating the performance of intelligence agencies. The statute also provides for the submissionof advice or opinion of individual members of the JICC to the President along with therecommendations of the DNI. (43) Past relationships among defense agencies, the Office of the Secretary of Defense, and the Intelligence Community Management Staff have been complex; the new legislation establishes aDNI with stronger budgetary authorities than possessed by the DCI. Nevertheless, the requirementfor close coordination between the DNI and DOD agencies will remain. Given the need for agenciesto meet different needs of different parts of the Government, observers believe that this newrelationship will also be complicated and that considerable time will be required to developcoordinative procedures.
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Although the Central Intelligence Agency (CIA) is the best known member of the Intelligence Community, the bulk of the nation's intelligence effort is undertaken by the intelligence agencies ofthe Department of Defense (DOD). In particular, the National Security Agency (NSA), the NationalReconnaissance Office (NRO), and the National Geospatial-Intelligence Agency (NGA) (formerlyknown as the National Imagery and Mapping Agency (NIMA)) are major collectors of informationfor DOD and non-DOD consumers and absorb a large percentage of the annual intelligence budget. (The Defense Intelligence Agency (DIA), albeit a large and important component of the IntelligenceCommunity, is more directly focused on DOD requirements.) Some Members of Congress and independent commissions, most recently the National Commission on Terrorist Attacks Upon the United States, the 9/11 Commission, have argued thata lack of coordination among intelligence agencies contributed to the failure to provide warning ofthe terrorist attacks of September 2001. In response, in December 2004 Congress passed intelligencereform legislation ( P.L. 108-458 ) that modifies the existing organization of the IntelligenceCommunity and establishes more centralized leadership under a newly created Director of NationalIntelligence (DNI). As the legislation was being debated in the fall of 2004, attention focused on the extent of the budgetary and administrative authorities to be assigned to the DNI. Significant concerns wereexpressed by DOD officials, some Members of Congress, and various outside observers thatproviding the DNI with greater authority and control of intelligence agencies in DOD couldjeopardize the increasingly close relationship between these agencies and the operating militaryforces. The conference committee on intelligence reform legislation ( S. 2845 ) addressed these concerns with language that gave the DNI substantial authorities over intelligence budgets, butnot operational control over their activities. The final version of the legislation also provided thatthe details of budgetary authorities to be exercised by the DNI and other cabinet officers be workedout in accordance with guidelines to be issued by the President after the DNI is appointed. This report will be updated as circumstances warrant.
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Pakistan has long been a leading recipient of U.S. foreign aid despite contentious issues in the bilateral relationship. In May 2013, Pakistan conducted scheduled national elections to seat new National and Provincial Assemblies. The exercise was itself historic as an unprecedented transfer of power from one elected government to another. The right-leaning, conservative Pakistan Muslim League faction led by former Prime Minister Nawaz Sharif (PML-N) won an unexpectedly strong victory that includes a simple majority in the National Assembly as well as continued control of Punjab, where the bulk of Pakistan's citizens reside. The incumbent Pakistan People's Party suffered a major defeat and is relegated to opposition status at the federal level, although it retained control of the Sindh government. The newly formidable Pakistan Tehreek-e-Insaf (Movement for Justice) part—led by Imran Khan, a strident critic of Pakistan's cooperation with the United States—now heads a coalition government in Khyber Pakhtunkhwa. In June, Sharif began his third non-consecutive term as Prime Minister. Although the elections were marked by violence and some reports of rigging, their conduct was welcomed by the U.S. and other international governments as an important step in Pakistan's democratization process. Analysts do not anticipate any major adjustments in the U.S.-Pakistan relationship in the near- or middle-term and Sharif's priorities—resolving Pakistan's energy crisis and reversing its economic decline—track well with the central goals of the U.S. assistance program. Following the May 2011 U.S. commando raid in Pakistan to kill Osama bin Laden, already troubled U.S.-Pakistani relations soured, prompting the 112 th Congress to consider new restrictions on, or even elimination of, the billions of annual assistance dollars currently being provided. Since the raid, U.S.-Pakistani military cooperation has been disrupted and clouded by increased mutual distrust; Islamabad has significantly reduced the number of U.S. military trainers allowed in the country, and the Obama Administration indicated that deliveries of certain security-related financial transfers and other aid are under suspension. A November 2011 incident near the Pakistan-Afghanistan border left two dozen Pakistani soldiers dead after their posts came under fire from NATO forces; the event further disrupted relations. A significant shift in the Obama Administration's public statements on U.S. relations with Pakistan was suggested in September 2011 when Admiral Mike Mullen, the outgoing Chairman of the Joint Chiefs of Staff, and then-Secretary of Defense Leon Panetta testified before the Senate Armed Services Committee. In that hearing, both explicitly accused Pakistan's main intelligence agency, Inter-Services Intelligence (ISI), of supporting Haqqani Network insurgents who engage in attacks on U.S. targets in Afghanistan. When asked by a committee member whether he supported a move in Congress to further condition U.S. aid to Pakistan, Secretary Panetta replied, "Anything that makes clear to them that we cannot tolerate their providing this kind of safe haven to the Haqqanis, and that they have to take action—any signal that we can send to them—I think would be important to do." Weeks later, however, President Barack Obama stated in a press conference, "We could not have been as successful as we have been without the cooperation of the Pakistan government. And so on a whole range of issues, they have been an effective partner with us," adding, "[W]e will constantly evaluate our relationship with Pakistan" in the context of U.S. interests. The Administration's scrutiny of the relationship has continued since, especially in light of increased congressional attention following the tumultuous events of 2011. Yet its fundamental support for a continued large-scale assistance program is unchanged. During an April 2013 House hearing on the Administration's FY2014 foreign affairs budget proposal, newly seated Secretary of State John Kerry was asked about ending all foreign assistance to Pakistan. His reply: "Cutting off aid to Pakistan would—would not be a good move, certainly at this point in time, for a lot of different reasons. We are working with Pakistan with respect to nuclear safety and nonproliferation. We are working with Pakistan to get our supplies both in and out of Afghanistan." At the same time that the Administration expressed serious displeasure with Pakistan, the United States responded in FY2011 and FY2012 with more than $110 million in humanitarian aid to a September 2011 disaster due to flooding there. Previously, the United States had provided about $600 million in disaster and refugee assistance for the widespread summer 2010 Pakistan floods. More recently, in September 2012 and February 2013, the Administration waived certification requirements to allow for continued transfers of major defense equipment. The latter waiver was taken as a signal that the bilateral security relationship was being substantively renewed after a nearly two-year-long period of estrangement. While numerous concerns exist about whether Pakistan can be accountable in how it uses U.S. aid and whether it is capable of being a reliable U.S. partner in combating terrorism, many experts believe that key U.S. strategic interests are inextricably linked with a stable Pakistan and region. They emphasize the importance of maintaining close bilateral engagement with Pakistan, including providing assistance, to promote stability and contribute to U.S. national security. Over past decades Congress has expressed concern with the U.S.-Pakistan relationship and has placed limitations and reporting requirements on U.S. aid to Pakistan in both authorization and appropriation laws. Following, in reverse chronological order, are laws passed by Congress that restrict aid and/or establish certain requirements for the release of such aid. H.R. 4310 was introduced March 29, 2012, and was passed by the full House on May 18, 2012. The bill was referred to the Senate, where it passed on December 21, 2012. The conference report ( H.Rept. 112-705 ) was filed on December 18, 2012. The President signed it into law on January 2, 2013. Section 1227 of the act extends authority of Coalition Support Fund (CSF) reimbursements for FY2013 and limits CSF reimbursements to Pakistan to $1.2 billion for that fiscal year. It prohibits CSF reimbursements for the period between November 2011-July 2012 when Pakistan had barred NATO from transiting along its Ground Lines of Communication (GLOCs) linking Afghanistan with the Arabian Sea. FY2013 CSF reimbursements can only be made after the Secretary of Defense certifies that Pakistan is maintaining security along the GLOCs, is taking demonstrable steps against terrorism, and that it is countering the threat of improvised explosive devices (IEDs). The Secretary may waive these certification requirements for U.S. national security reasons. This measure requires a report from the Secretary of Defense, in consultation with the Secretary of State, within 90 days of enactment, on the reimbursement process, the conditions regarding the GLOCs, and an estimate of transshipment costs for FY2011 through FY2013 supporting the forces in Afghanistan. Section 1228 extends the Pakistan Counterinsurgency Fund (PCF) through FY2013 and extends the limitation of funds until the Secretary of Defense, in consultation with the Secretary of State, certifies to certain congressional committees that the government of Pakistan is demonstrating efforts to counter IEDs, is cooperating on counterterrorism efforts, and is not detaining Pakistani citizens, including Dr. Shakil Afridi, as a result of their cooperation with the U.S. government on counterterrorism efforts. The Secretary of Defense, in consultation with the Secretary of State, may waive these requirements if doing so is deemed to be in the U.S. national security interest. H.R. 1540 was introduced in the House on April 14, 2011. The House passed it on May 26. The bill was referred to the Senate on June 6, when it was referred to the Committee on Armed Services. The Senate passed it with an amendment on December 1, 2011. The conference report ( H.Rept. 112-329 ) was filed on December 12. The conference report was agreed to in the House on December 14 and in the Senate on December 15, 2011. The President signed it into law on December 31, 2011. Section 1220 of the bill stipulates that not more than 40% of FY2012 appropriated amounts for PCF may be obligated or expended until the Secretary of Defense, with the concurrence of the Secretary of State, submits an annual report to the relevant defense committees in the House and Senate, and to the House Committee on Foreign Affairs and the Senate Committee on Foreign Relations that includes a strategy to use PCF and the metrics used to determine progress on use of PCF, and a strategy to enhance Pakistani efforts to counter improvised explosive devices (IEDs). At a minimum, the report shall include (i) a discussion of U.S. strategic objectives in Pakistan; (ii) a list of terrorist organizations in Pakistan opposing U.S. goals in the region and against which the United States encourages Pakistan to take action; (iii) a discussion of the gaps in capabilities of Pakistan security units that hamper the ability of the government of Pakistan to take action against the organizations listed; (iv) a discussion of how assistance provided using PCF will address the gaps in capabilities; (v) a discussion of efforts undertaken by other U.S. government departments and agencies or other activities by the Department of Defense to address gaps in capabilities and how they all are coordinated with activities undertaken by PCF; (vi) a discussion of whether the government of Pakistan is demonstrating a commitment to countering IEDs; and (vii) metrics used to track progress of the government of Pakistan in listing terrorist organizations, address capability gaps, and counter IEDs. The section further requires the Secretary of Defense, in concurrence with the Secretary of State, to include in the quarterly reports mandated under Section 1224(f) of the National Defense Authorization Act for FY2010 a discussion of progress in achieving U.S. strategic objectives in Pakistan during such fiscal quarter, utilizing metrics used to track progress in achieving such strategic objectives; and a discussion of progress made by programs supported from amounts in the PCF during such fiscal quarter. H.R. 2055 was introduced on May 31, 2011 as the Military Construction and Veterans Affairs funding measure. It became the vehicle for the omnibus appropriation legislation in December. The conference report ( H.Rept. 112-331 ) was passed by both House and Senate in December 2011. The President signed in into law ( P.L. 112-74 ) on December 23, 2011. Section 7010 requires the Secretary of State to provide in writing to the congressional appropriations committees before April 1, 2012, and each fiscal quarter thereafter a report on the uses of Foreign Military Financing (FMF), International Military Education and Training (IMET), Peacekeeping Operations (PKO), and Pakistan Counterinsurgency Capability Fund (PCCF). Section 7046(c)(1)(A) (Pakistan Certification) states that none of the funds appropriated by this act may be made available to the government of Pakistan unless the Secretary of State certifies to the House and Senate appropriations committees that the government of Pakistan is (i) cooperating with the United States in counterterrorist efforts against Haqqani Network, the Quetta Shura Taliban, Lashkar-e-Tayyiba, Jaish-e-Mohammed, Al Qaeda, and other domestic and foreign terrorist organizations, including taking steps to end support for them and preventing them from basing and operating in Pakistan and carrying out cross border attacks into neighboring countries; (ii) not supporting terrorist activities against U.S. or coalition forces in Afghanistan, and Pakistan military and intelligence agencies are not intervening extra-judicially into political and judicial processes in Pakistan; (iii) dismantling improvised explosive devices (IED) networks and interdicting precurser chemicals used in manufacture of IEDs; (iv) preventing the proliferation of nuclear-related material and expertise; (v) issuing visas in a timely manner for U.S. visitors engaged in counterterrorism efforts and assistance programs in Pakistan; and (vi) providing humanitarian organizations access to detainees, internally displaced persons, and other Pakistani civilians affected by the conflict. Section 7046(c)(B) authorizes the Secretary of State to waive the above certification requirement if it is in U.S. national security interests. Section 7046(c)(2) (Assistance to Pakistan) states that FMF funds can only be used to support counterterrorism and counterinsurgency capabilities in Pakistan and subject to Sec. 620M of the Foreign Assistance Act of 1961; Economic Support Fund (ESF) should be made available to interdict precursor materials from Pakistan to Afghanistan used to make IEDs, including calcium ammonium nitrates; to support programs to train border and customs officials in Pakistan and Afghanistan; and for agricultural extension programs that encourage alternative fertilizer use among Pakistani farmers; Of ESF funds for Pakistan, $10.0 million shall be made available through the Department of State's Bureau of Democracy, Human Rights, and Labor for human rights and democracy programs in Pakistan, including training of government officials and security forces, and assistance for human rights organizations and the development of democratic political parties; ESF may be made available to the Chief of Mission Fund in Pakistan as authorized by P.L. 111-73 Sec. 101(c)(5). ESF for infrastructure projects must be implemented consistent with implemented in a manner consistent with workers' rights and eliminating the worst forms of child labor laws. Funds may be made available for Pakistan under Titles III – VI of this act if in accordance with the above conditions and Sec. 620M of the Foreign Assistance Act of 1961. Section 7046(c)(3)(A) (Reports) (i) states that the Secretary of State must submit a report to the congressional appropriations committees on the spend plan required by Section 7078 of this act within six months after submission of the spend plan and every six months thereafter until September 30, 2013. The plan shall include achievable and sustainable goals, benchmarks for measuring progress, and expected results regarding further development in Pakistan, countering extremism, and establishing conditions conducive to the rule of law and transparent and accountable governance. The report shall include the status of achieving the goals and benchmarks provided in the spend plan. (ii) urges the Secretary of State to suspend assistance for the government of Pakistan if any report required by (A)(i) indicates that Pakistan is failing to make measurable progress in meeting the stated goals or benchmarks. (B) requires the Secretary of State within 90 days after enactment of this act to submit a report to the congressional appropriations committees with an assessment on costs and objectives regarding U.S.-supported infrastructure projects in Pakistan. Section 7078 (b) (Spend Plans) requires the Secretary of State, in consultation with the Administrator of the U.S. Agency for International Development (USAID), to submit to House and Senate Appropriations Committees a spend plan for assistance to Pakistan, among other countries. Title VIII (Overseas Contingency Operations) requires the Secretary of State to report in writing within 30 days after enactment of this act and each fiscal quarter thereafter to the Committees on Appropriation regarding the uses of PCCF on a project-by-project basis. Section 2121(b) states that ESF appropriated or otherwise made available by this division for assistance for Afghanistan and Pakistan may not be made available for direct government-to-government assistance unless the Secretary of State certifies to the Committees on Appropriations that the relevant implementing agency has been assessed and considered qualified to manage such funds; that the government of the recipient country has agreed, in writing, to clear and achievable goals and objectives for the use of such funds; and that there are mechanisms within each implementing agency to ensure that such funds are used for the purposes for which they were intended. Section 1220 amends P.L. 111-84 (see below) and requires that assistance provided to the security forces of Pakistan from the Pakistan Counterinsurgency Fund (PCF) after FY2010 shall be provided in a manner that promotes "observance of and respect for human rights and fundamental freedoms" and "respect for legitimate civilian authority within Pakistan." Section 1005 stipulates that FMF and the PCCF appropriated in this and prior acts shall be made available in a manner that promotes unimpeded access by humanitarian organizations to detainees, internally displaced persons, and other Pakistani civilians adversely affected by the conflict; and in accordance with Section 620J of the Foreign Assistance Act of 1961 (popularly cited as the Leahy Amendment, relating to human rights standards as a requirement for aid to security forces), the Secretary of State shall inform relevant Pakistani authorities of the requirements of Section 620J, and regularly monitor units of Pakistani security forces that receive United States assistance and their treatment of human rights matters. Title III states that ESF funds appropriated under this heading that are made available for assistance for infrastructure projects in Pakistan shall be implemented in a manner consistent with workers' rights and eliminating the worst forms of child labor laws. Of the funds appropriated under this heading for assistance for Afghanistan and Pakistan, assistance may be provided for cross border stabilization and development programs between Afghanistan and Pakistan; funds appropriated by this act for assistance for Afghanistan and Pakistan may be made available for government-to-government assistance only if the Secretary of State certifies to the Committees on Appropriations that the U.S. government and the government of the recipient country have agreed, in writing, to clear and achievable goals and objectives for the use of such funds, and have established mechanisms within each implementing agency to ensure that such funds are used for the purposes for which they were intended; any such cash transfer assistance shall be subject to prior consultation with the Committees on Appropriations; the Secretary of State should suspend any such cash transfer assistance to an implementing agency if the Secretary has credible evidence of misuse of such funds by any such agency; any decision to significantly modify the scope, objectives, or implementation mechanisms of United States assistance programs in Afghanistan or Pakistan shall be subject to prior consultation with, and the regular notification procedures of, the Committees on Appropriations, except that the prior consultation requirement may be waived if it is determined that failure to do so would pose a substantial risk to human health or welfare; in case of any such waiver, notification to the Committees on Appropriations shall be provided as early as practicable, but in no event later than three days after taking the action to which such consultation requirement was applicable; and of the funds made available under this heading for assistance for Pakistan, $2 million shall be transferred to, and merged with, funds available under the heading "Administration of Foreign Affairs, Office of Inspector General" for oversight of programs in Pakistan. Section 1015 prohibits the use of Department of Defense counternarcotics assistance funds to construct any proposed Border Coordination Center in Pakistan. The Secretary of Defense may waive this for vital U.S. national security interests. Section 1224 requires the Secretary of Defense to submit quarterly reports to Congress summarizing on a project-by-project basis any transfer of funds from the PCF during each fiscal quarter. Section 1225 (22 U.S.C. 2785 note) requires the Secretary of Defense to establish and carry out a program to provide for the registration and end-use monitoring of defense articles and defense services transferred to Pakistan, and prohibits transfer of defense articles or defense services to Pakistan until the Secretary certifies to Congress that such program has been established. Section 102(b)(1)(B)(i) limits economic assistance to $750 million per year unless the President's Special Representative to Afghanistan and Pakistan certifies that assistance to Pakistan is making reasonable progress in achieving the principal U.S. aid objectives as stated in the Pakistan Assistance Strategy Report with reasons justifying the certification. The Secretary of State may waive the limitations if it is in the national security interest of the United States to do so. Section 203 (U.S.C. 8423) limits all security-related assistance and arms transfers to Pakistan during FY2011-FY2014 unless the Secretary of State annually certifies and reports to the Committees on Foreign Affairs, Foreign Relations, Armed Services, Oversight and Government Reform, and Select Committees on Intelligence that the Pakistani government is continuing to cooperate with the United States in efforts to dismantle supplier networks relating to the acquisition of nuclear weapons-related materials, such as providing relevant information from or direct access to Pakistani nationals associated with such networks; the Pakistani government has during the preceding fiscal year demonstrated a sustained commitment to and is making significant efforts towards combating terrorist groups including taking into account the extent to which the government of Pakistan has made progress on matters such as (1) ceasing support, including by any elements within the Pakistan military or its intelligence agency, to extremist and terrorist groups, particularly to any group that has conducted attacks against U.S. or coalition forces in Afghanistan, or against the territory or people of neighboring countries; (2) preventing al Qaeda, the Taliban and associated terrorist groups, such as Lashkar-e-Taiba and Jaish-e-Mohammed, from operating in the territory of Pakistan, including carrying out cross-border attacks into neighboring countries, closing terrorist camps in the Federally Administered Tribal Areas, dismantling terrorist bases of operations in other parts of the country, including Quetta and Muridke, and taking action when provided with intelligence about high-level terrorist targets; and (3) strengthening counterterrorism and anti-money laundering laws; the security forces of Pakistan are not materially and substantially subverting the political or judicial processes of Pakistan. Furthermore, none of the security-related aid for FY2010 through FY2014 or any funds appropriated to the PCCF may be used toward the purchase of F-16 combat aircraft and related munitions and logistics, with the exception of basing construction at Pakistan's Shabaz air base. The Secretary may waive this certification requirement if s/he determines that "it is important to the national security interests of the United States to do so." Title IV stipulates that funds appropriated for FMF to Pakistan "may be made available only for border security, counterterrorism, and law enforcement activities directed against Al Qaeda, the Taliban, and associated terrorist groups." Section 706 (22 U.S.C. 2291j-l) authorizes withholding aid to countries identified by the President as "major drug transit or major illicit drug producing countries" if the country is not adhering to international agreements and is not making substantial efforts to meet certain counternarcotics measures. This restriction can be waived if the President reports annually to Congress that providing such assistance is vital to the national interests of the United States; or that Pakistan has made substantial efforts to adhere to its obligations under international counternarcotics agreements and to take the counternarcotics measures set forth in Section 489(a)(1) of the Foreign Assistance Act of 1961. Section 490 (Annual Certification Procedures, U.S.C. 2291j) requires the President to certify annually that in the previous year a country earlier identified as an illicit drug-producing or drug transit country has fully cooperated with the United States or taken steps on its own to achieve full compliance with the United Nations Convention Against Illicit Traffic in Narcotics and Psychotropic Substances, or that it is of vital U.S. national interests for a country to receive U.S. bilateral economic assistance or for the United States to vote for multilateral development bank assistance for that country. Section 620E (Assistance to Pakistan, U.S.C. 2375) authorizes security assistance to Pakistan to help Pakistan deal with the threat of the Soviet Union presence in Afghanistan. Military assistance is prohibited, however, unless the President certifies in writing to the Speaker of the House of Representatives and the chairman of the Foreign Relations Committee in the Senate that Pakistan does not possess a nuclear explosive device and that the military assistance will reduce significantly the risk that Pakistan will possess a nuclear device. Some Members of the 113 th Congress have concerns about providing billions of dollars of annual aid to a country that appears unwilling or unable to act as a reliable U.S. partner. Numerous legislative proposals before the 113 th Congress go beyond current law. In order of most recent congressional action, following are pending measures proposed to restrict future aid to Pakistan: H.R. 2397 was introduced in the House on June 17, 2013. The House Committee on Appropriations reported an original measure ( H.Rept. 113-113 ) that same day. House floor action left it as unfinished business on July 24, 2013. Section 9014 of this Defense appropriation bill would prohibit any FY2014 Coalition Support Fund payments to Pakistan unless the Secretary of Defense, in coordination with the Secretary of State, certifies that Pakistan is cooperating with U.S. counterterrorism efforts against the Haqqanni Network, the Quetta Shura Taliban, Lashkar-e-Taiba, Jaish-e-Mohammed, Al Qaeda, and other domestic and foreign terrorist organization, including ending support and preventing them from being based and operating in Pakistan and carrying out cross-border attacks; not supporting terrorist activities against the United States or coalition forces in Afghanistan, and Pakistan's military and intelligence agencies are not intervening in the political and judicial processes in Pakistan; dismantling IED networks ad interdicting precursor chemicals used in the manufacture of IEDs; preventing the proliferation of nuclear-related material and expertise; implementing policies to protect judicial independence and due process of law; issuing visas in a timely manner for U.S. visitors engaged in counterterrorism efforts and aid programs in Pakistan; providing humanitarian organizations access to detainees, internally displaced persons, and other Pakistani civilians affected by the conflict. The Secretary of Defense, in coordination with the Secretary of State, may waive the previous restrictions on a case-by-case basis by certifying in writing to the Committees on Appropriations of the House and the Senate that it is in the national security interest to do so. The Secretaries must report to the House and Senate Committees on Appropriations on the justification for the waiver and the specific points listed above that the Government of Pakistan were unable to meet. H.R. 1960 was introduced on May 14, 2013. It was amended and reported by the Committee on Armed Services on June 7, 2013 ( H.Rept. 113-102 and H.Rept. 113-102 , Part II). The House passed the measure (315-108) on June 14, 2013. The Senate received the measure on July 8, 2013. No further action has occurred to date. Sec. 1211of the act would provide a one-year extension of Coalition Support Fund (CSF) reimbursements for Pakistan and limits such reimbursement to $1.5 billion in FY2014. These reimbursements would be prohibited pending certification to congressional defense committees that Pakistan is maintaining security and is not limiting movement of U.S. equipment and supplies along the Ground Lines of Communications (GLOCs) through Pakistan to Afghanistan; taking demonstrable steps to support counterterrorism efforts against al Qaeda, Tehrik-i-Taliban Pakistan, and other militant extremist groups such as the Haqqani Network and the Quetta Shura Taliban in Pakistan; disrupt cross-border attacks against U.S., coalition, and Afghanistan security forces located in Afghanistan by certain groups including the Haqqani Network and Quetta Shura Taliban from bases in Pakistan; counter the threat of IEDs; conduct cross-border coordination and communication with Afghan security forces and U.S. Armed Forces in Afghanistan. not using military or any funds or equipment provided by the United States to persecute minority groups, including Baloch, Sindhi, and Hazara ethnic groups and minority religious groups, including Christian, Hindu, and Ahmadi Muslim. The Secretary of Defense may waive the limitation of reimbursements if the Secretary certifies to congressional defense committees in writing that such waiver is in U.S. national security interests and provides justification for the waiver. H.R. 1922 , referred to as the Foreign Assistance under Limitation and Transparency Act (FAULT Act), was introduced May 9, 2013, and referred to the House Foreign Affairs and Rules Committees. No further action has occurred to date. Sec. 2 finds that Iran, North Korea, Syria, Egypt, and Pakistan have engaged in activities that undermine the security and foreign policy objectives of the United States or compromise regional and international stability. Sec. 101 would prohibit U.S. government funding for foreign assistance to Iran, North Korea, Syria, Egypt, and Pakistan except for up to $50 million in any one fiscal year for agricultural commodities, medicine, or medical devices. The limitation may not be waived unless the President submits a report certifying and identifying specified fundamental changes in the policies of the country in question to the appropriate congressional committees at least 45 days before the proposed waiver would take effect. Congress, however, may enact a joint resolution to prohibit the waiver. The President also may waive the foreign assistance limitations for humanitarian purposes for up to $50 million and 120 days in any fiscal year, and may renew the humanitarian waiver for an additional 90 days by submitting a comprehensive status report to the appropriate congressional committees. Sec. 201(b) requires the President to terminate the designation of Pakistan as a major non-NATO ally and may not reissue a separate designation as a major non-NATO ally. The designation is to be effective upon the enactment of this act and end when the Secretary of State certifies to the appropriate congressional committees that the government of Pakistan has drafted a new constitution and scheduled a date for national democratic elections to elect a new government under the new constitution. H.R. 5857 was introduced on May 25, 2012, and approved by the House Appropriations Committee on the same day. This bill to fund the State Department and foreign operations for FY2013, contains provisions that would provide no funding for PCCF; withhold all funds appropriated for Pakistan under ESF, INCLE, FMF, and PCCF unless the Secretary of State certifies that Pakistan is (1) cooperating with the United States in counterterrorism efforts against the Haqqani Network, the Quetta Shura Taliban, Lashkar-e-Taiba, Jaish-e-Mohammed, Al Qaeda, and other domestic and foreign terrorist organizations; (2) not supporting terrorist activities against United States or coalition forces in Afghanistan, and Pakistan's military and intelligence agencies are not intervening extra-judicially into political and judicial processes in Pakistan; (3) dismantling IED networks; (4) preventing nuclear-related proliferation; (5) issuing visa in a timely manner for official U.S. visitors; and (6) providing humanitarian organizations access to detainees, internally displaced persons, and other Pakistani civilians affected by the conflict (Sec. 7046(c)(1)) (unlike S. 3241 , this provision does not include a national security waiver); require the Secretary of State to submit to Congress a spend plan for assistance to Pakistan to include achievable and sustainable goals, benchmarks for measuring progress, and expected results regarding furthering development in Pakistan, countering extremism, and establishing conditions conducive to the rule of law and transparent and accountable governance; report biannually on the status of achieving that plan's goals and benchmarks; and recommend that the Secretary suspend all assistance to Pakistan if this report finds Pakistan is failing to make measureable progress toward stated goals and benchmarks (Sec. 7046(b)(3)); allow ESF funds, notwithstanding any other provision of law, for cross border stabilization and development programs between Afghanistan and Pakistan or between either country and the central Asian republics (Sec. 7046(c)). allow INCLE and FMF funds to be transferred to PCCF and remain available until September 30, 2014, as long as the Secretary of State notifies Congress 15 days before such action and specifies source of funds and implementation plan. Obligation of such funds are subject to Sec. 7046(b) of this act. S. 3241 was introduced May 24, 2012. The full Senate appropriations committee approved it the same day. As approved by the Senate Appropriations Committee, the bill contains provisions that would provide $50 million for the PCCF (about 6% of both the amount requested by the Administration and the amount appropriated for FY2012), but only if the Secretary of State certifies that Pakistan has reopened the GLOCs to Afghanistan and that the funds can be used efficiently and effectively; if certification is not possible, then all PCCF funds shall be transferred to the Economic Support Fund (ESF), Development Assistance (DA), the Middle East and North Africa Incentive Fund (MENA IF), and Nonproliferation, Antiterrorism, Demining, and Related Programs (NADR). withhold all funds appropriated for Pakistan under ESF, International Narcotics Control and Law Enforcement (INCLE), Foreign Military Financing (FMF), and the Pakistan Counterinsurgency Capability Fund (PCCF) unless the Secretary of State certifies that Pakistan is (1) cooperating with the United States in counterterrorism efforts against the Haqqani Network, the Quetta Shura Taliban, Lashkar-e-Taiba, Jaish-e-Mohammed, Al Qaeda, and other domestic and foreign terrorist organizations; (2) not supporting terrorist activities against United States or coalition forces in Afghanistan, and Pakistan's military and intelligence agencies are not intervening extra-judicially into political and judicial processes in Pakistan; (3) dismantling IED networks; (4) preventing nuclear-related proliferation; (5) implementing policies to protect judicial independence and rule of law; (6) issuing visas in a timely manner for official U.S. visitors; and (7) providing humanitarian organizations access to detainees, internally displaced persons, and other Pakistani civilians affected by the conflict (Sec. 7046(c)(1)) (the Secretary may waive these requirements if doing so is important to U.S. national security interests); limit total State Department aid to Pakistan to about $800 million (roughly 36% of the Administration's request), including no more than $375 million for ESF, $100 million for INCLE, and $250 million for FMF (Sec. 7046(c)(2)); further withhold $33 million of appropriated FMF funds unless the Secretary of State certifies that Dr. Shakil Afridi has been released from prison and cleared of all charged relating to the assistance provided to the United States in locating Osama bin Laden (Sec. 7046(c)(2)(G)); and require the Secretary of State, in consultation with the U.S. Agency for International Development (USAID) Administrator, to submit to Congress a spend plan for assistance to Pakistan to include achievable and sustainable goals, benchmarks for measuring progress, and expected results regarding furthering development in Pakistan, countering extremism, and establishing conditions conducive to the rule of law and transparent and accountable governance; report biannually on the status of achieving that plan's goals and benchmarks; and recommend that the Secretary suspend all assistance to Pakistan if this report finds Pakistan is failing to make measureable progress toward stated goals and benchmarks (Sec. 7046(c)(3)). The bill also provides that $100 million of the ESF funds may be used by the President for Overseas Contingency Operations if so designated by Congress. As passed by the full House on May 18, 2012, the National Defense Authorization Act for FY2013 would prohibit the Secretary of Defense from preferential procurement of goods or services from Pakistan until such time as that country's government reopens the ground lines of communication (GLOCs) to Afghanistan (Sec. 821(d)); limit FY2013 CSF payments to Pakistan to no more than $650 million (Sec. 1211(b)); withhold CSF payments to Pakistan unless the Secretary of Defense reports to Congress on the claims process, any new conditions Pakistan has placed on use of its GLOCs, and estimates any differences in transit costs from FY2011 to FY2013 (Sec. 1211(c)); withhold FY2012 CSF payments to Pakistan unless the Secretary certifies that the Islamabad government is (1) supporting counterterrorism operations against Al Qaeda, its associated movements, the Haqqani Network, and other domestic and foreign terrorist organizations; (2) dismantling IED networks; (3) preventing nuclear-related proliferation; and (4) issuing visas in a timely manner for official U.S. visitors (Sec. 1211(c); and limit the obligation or disbursement of FY2013 PCF funds to 10% of those appropriated or transferred unless the Secretary of Defense, with the concurrence of the Secretary of State, reports to Congress an updated strategy on utilization of the Fund, metrics for determining relevant progress, and a strategy for enhancing Pakistan's efforts to counter IEDs (Sec. 1217). H.R. 3115 was introduced October 6, 2011, and was referred to the House Agriculture and House Foreign Affairs Committees on the same day. It was referred to the House Subcommittee on October 14, 2011. No further action has occurred. Section 2 of the bill would prohibit non-security assistance to Pakistan including development assistance, Economic Support Funds, Global Health and Child Survival assistance, aid from the Democracy Fund, International Disaster Assistance, and any provision of law that authorizes the Secretary of State to provide a contribution to the International Committee of the Red Cross, assistance to refugees, including contributions to the International Organization for Migration and the United Nations High Commissioner for Refugees and other activities to meet refugee and migration needs, certain food aid, the $1.5 billion in annual economic assistance to Pakistan authorized by the EPPA ( P.L. 111-73 ) and any law authorizing contributions to international organizations. Section 3 states that security assistance may be provided to Pakistan under any provision of law other than those in Section 2 above and only during a period for which a certification or recertification is in effect. The certification must be transmitted by the President to Congress. Issues addressed in the certification include a determination by the President that the government of Pakistan is cooperating with the United States in efforts against Al Qaeda, the Taliban, and associated terrorist groups, including prevention of such groups from carrying out cross-border attacks on neighboring countries; does not impede United States counterterrorism efforts; and will use the assistance solely for the purpose of border security, counter-terrorism, and law enforcement activities directed against Al Qaeda, the Taliban, and associated terrorist groups. Recertification must be no later than 90 days after the date on which the President transmits to Congress an initial certification and every six months thereafter. The President shall transmit to Congress a recertification that the original certification conditions are continuing to be met; or if the President is unable to make such a recertification, the President shall transmit to Congress a report that contains the reasons. These measures would take effect on the date of the enactment. The Foreign Relations Authorization Act, 2012, was introduced on July 19, 2011, and amended and reported out of the Committee on Foreign Affairs on September 23, 2011. No further action has occurred. As reported in the House, Section 1025A of the bill would amend the EPPA ( P.L. 111-73 ) by withholding amounts appropriated for assistance to Pakistan unless the Secretary of State annually certifies for Congress that assistance has to date made or is making measurable progress toward achieving the principal objectives of U.S. assistance to Pakistan contained in the Pakistan Assistance Strategy Report and a memorandum explaining the reasons justifying the certification; removing the EPPA's national security waiver; and altering some of the EPPA's Section 203 limitations on security assistance and arms transfers, including adding to required certification criteria that Pakistan (1) is fully assisting the United States with investigating the existence of an official or unofficial support network in Pakistan for Osama bin Laden, including by providing the United States with direct access to Osama bin Laden's relatives in Pakistan and to Osama bin Laden's former compound in Abbottabad and any materials therein; and (2) is facilitating the issuance of entry and exit visas for official U.S. visitors engaged in counterterrorism efforts and training or other cooperative programs and projects in Pakistan. Section 1025B would require that the EPPA's Section 301 Pakistan Assistance Strategy Report be submitted to Congress annually through 2014 rather than one time, and that it further include descriptions of (1) progress toward creating a searchable Internet database and other public communications strategies that will provide American and Pakistan people with updated and accurate information on proposed spending plans, disbursements of assistance, and results achieved using funds authorized; (2) progress toward meeting the recommendations of audits, reviews, and investigations completed by the General Accountability Office and by the Office of Inspector General of the United States Agency for International Development, the Department of State, and the Department of Defense; and (3) a description of how the Administration is incorporating support for private sector development and enhanced trade opportunities as part of the foreign assistance approach to Pakistan. H.R. 3013 was introduced on September 22, 2011, and referred to the House Committee on Foreign Affairs. No further action was taken. Section 2 of the bill would prohibit all U.S. aid to Pakistan except aid that would ensure the security of nuclear weapons. The prohibition would take effect on the date of the enactment of the measure and would prohibit already allocated assistance to Pakistan that is unexpended on or after the date of enactment. S. 1601 was introduced on September 22, 2011, marked up in the Senate Committee on Appropriations, and sent to the Senate the same day. No further action has been taken. Section 7010 would require that the Secretary of State provide to the Appropriations Committee by April 1, 2012, and for every fiscal quarter thereafter, a report on the uses of FMF, IMET, and PCF. The report "shall include a description of the obligation and expenditure of funds ... and the use or purpose of the assistance provided by such funds." Section 7065(c) would require that to release any economic or security assistance funds for Pakistan (including the PCCF) the Secretary of State must certify to Congress that the U.S. and Pakistani governments "have agreed, in writing, to achievable and sustainable goals, benchmarks for measuring progress, and expected results for the use of such funds, and have established mechanisms within each implementing agency to ensure that such funds are used for the purposes for which they were intended;" the Secretary "should suspend any direct government-to-government assistance to an implementing agency if s/he has credible information of misuse of such funds by any such agency;" and that funds made available "shall be subject to prior consultation with, and the regular notification procedures of, the Committees on Appropriations." To meet these requirements, the Secretary of State must certify that the Pakistani government is "cooperating with the United States in efforts against the Haqqani Network, the Quetta Shura Taliban, Lashkar-e-Tayyiba, Al Qaeda and other domestic and foreign terrorist organizations, including taking steps to end support for such groups and prevent them from operating in Pakistan and carrying out cross border attacks into neighboring countries; not impeding the issuance of visas for U.S. visitors engaged in counterterrorism efforts and assistance programs in Pakistan; and providing humanitarian organizations access to detainees, internally displaced persons, and other Pakistani civilians affected by the conflict." The Secretary may waive this certification requirement "if to do so is in the national security interests of the United States." Section 7065(c) further stipulates that ESF for Pakistan "should be made available to stop the flow of precursor materials used to manufacture Improvised Explosive Devices, including calcium ammonium nitrate, from Pakistan to Afghanistan, including programs to train border and customs officials in Pakistan and Afghanistan as well as agricultural extension programs that encourage alternative fertilizers among Pakistani farmers." Section 7082(a) would require that no later than 45 days after the date of enactment any agency providing economic assistance to Pakistan shall submit to the Committees on Appropriations an operating plan that "provides details of the use of such funds at the program, project, and activity level." Section 7082(b) would require that, prior to the initial obligation of funds, the Secretary of State, in consultation with the USAID Administrator, shall submit to Congress a detailed spend plan, which shall include achievable and sustainable goals, benchmarks for measuring progress, and expected results, for funds appropriated under the heading "Democracy Fund;" economic and security assistance funds for Pakistan; and economic assistance funds appropriated for food security and agriculture development programs and for climate change and environment programs. As per Section 7065(c)(4)(B), the spend plan report for Pakistan shall include "achievable and sustainable goals, benchmarks for measuring progress, and expected results regarding furthering the development of Pakistan, countering extremism, and establishing conditions conducive to the rule of law and accountable governance," and it provides that, not later than six months after submission of such spend plan, and each six months thereafter until September 30, 2013, the Secretary of State "shall submit a report on the status of achieving the goals and benchmarks in the spend plan" and "should suspend assistance for the Government of Pakistan if any such report indicates that Pakistan is failing to make measurable progress in meeting any such goal or benchmark." The Department of Defense Appropriations Act for FY2012 was introduced in the House on June 16, 2011, and referred to the House Appropriations Committee on the same day. The House passed the measure on July 8, 2011. The Senate Committee on Appropriations reported it with an amendment in the nature of a substitute on September 15, 2011, and it was placed on the Senate legislative calendar. No further action has occurred. The House version contains restrictions and reporting requirements regarding aid to Pakistan. The Senate Appropriations Committee strikes out those measures, among others, and does not include restrictions on aid to Pakistan. The House measure includes the following: Section 9009 would require that the Secretary of Defense submit to Congress not later than 45 days after the end of each fiscal quarter a report on the proposed use of all appropriated PCF on a project-by-project basis, for which the obligation of funds is anticipated during the three-month period from such date, including estimates of the costs required to complete each such project. The report shall include the use of all funds on a project-by-project basis, including estimates of the costs to complete each project; and an estimated total cost to train and equip Pakistani security forces, disaggregated by major program and sub-elements by force, arrayed by fiscal year. Section 9015 stipulates that not more than 25% of PCF appropriated after FY2011 may be obligated or expended until such time as the Secretary of Defense, with the concurrence of the Secretary of State, reports to Congress on the strategy to utilize such funds and the metrics used to determine progress with respect to those funds. The report shall include, at a minimum, (i) a discussion of U.S. strategic objectives in Pakistan; (ii) a listing of the terrorist or extremist organizations in Pakistan opposing U.S. goals in the region and against which the United States encourages Pakistan to take action; (iii) a discussion of the gaps in capabilities of Pakistani security units that hampers the ability of the Pakistani government to take action against the organizations listed in clause (ii); (iv) a discussion of how assistance provided utilizing the funds will address the gaps in capabilities listed in clause (iii); (v) a discussion of other efforts undertaken by other U.S. government departments and agencies to address the gaps in capabilities listed in clause (iii) or complementary activities of the Department of Defense and how those efforts are coordinated with the activities undertaken to utilize the funds; and (vi) metrics that will be used to track progress in achieving U.S. strategic objectives in Pakistan, to track progress of the Pakistan government in combating the organizations listed in clause (ii), and to address the gaps in capabilities listed in clause (iii). This unnumbered bill was marked up by the House Appropriations Subcommittee on State, Foreign Operations, and Related Programs during the summer of 2011. No further action has occurred. Section 7047 states that none of the funds made available may be obligated for aid to Pakistan until the Secretary of State, in consultation with the Secretary of Defense and the Director of National Intelligence, certifies and reports to Congress that the government of Pakistan is cooperating on nuclear nonproliferation efforts; investigating how Osama bin Laden found refuge in Pakistan for years; and is making demonstrable progress in combating terrorist groups. Funds will be provided only for programs that are in America's national security interest and must foster economic development and decrease the appeal of extremism. The Secretary of State must report to Congress within 45 days of enactment of this act on projects to be funded. Section 7031. The House Appropriations Subcommittee on State Department, Foreign Operations, and Related Programs is concerned about direct government-to-government assistance to Pakistan. This bill would require the Secretary of State to certify that any government-to-government aid will be used as intended; that Pakistan agrees to clear, achievable goals; that the implementing agency and staff are fully qualified; and that there are sufficient monitoring and evaluation systems in place. Section 7006. The bill includes a requirement that the Secretary of State, in consultation with the USAID, provide a spending plan to the congressional appropriations committees prior to obligation of funds. H.R. 1699 was introduced on May 3, 2011, and referred to the House Foreign Affairs Committee. No further actions were taken. Section 2 (Prohibition on Assistance to Pakistan) states the following: (a) Prohibition—Assistance may not be provided to Pakistan under any provision of law unless the Secretary of State certifies to Congress that the Government of Pakistan did not have any information regarding Osama bin Laden's possible whereabouts on or after September 11, 2001; or if the Government of Pakistan did have information regarding Osama bin Laden's possible whereabouts on or after September 11, 2001, it communicated such information to the United States Government in an expedited manner. (b) A certification described shall be submitted in writing and include specific findings and conclusions; and in unclassified form, but may contain a classified annex if necessary. (c) This act shall take effect on the date of the enactment of it and shall apply with respect to amounts allocated for assistance to Pakistan that are unexpended on or after such date. H.R. 1790 was introduced on May 5, 2011, and referred to the House Committee on Foreign Affairs. No further action was taken. Section 3 (Prohibition on Assistance to Pakistan) states, "Assistance may not be provided to Pakistan under any provision of law." The prohibition of aid to Pakistan would be effective upon enactment of the act and would apply to unobligated or unexpended aid to Pakistan as of that date. H.R. 1 was introduced February 11, 2011, agreed to in the House on February 19, and sent to the Senate floor, where it was returned to the calendar on March 9. No further actions were taken. Section 2123(b) states that ESF funds appropriated or otherwise made available by this division for assistance for Afghanistan and Pakistan may not be made available for direct government-to-government assistance unless the Secretary of State certifies to the Committees on Appropriations that the relevant implementing agency has been assessed and considered qualified to manage such funds and the government of the United States and the government of the recipient country have agreed, in writing, to clear and achievable goals and objectives for the use of such funds, and have established mechanisms within each implementing agency to ensure that such funds are used for the purposes for which they were intended.
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The 113th Congress continues to debate levels of U.S. assistance to Pakistan in light of signs that Pakistan may not be a fully willing and effective U.S. partner, and that official Pakistani elements continue to support Islamist militant forces. During a period of economic and budget crises in the United States, Obama Administration officials and some senior Members of Congress have voiced concerns about the efficacy of continuing the flow of billions of U.S. aid dollars into Pakistan, with some in Congress urging more stringent conditions on, or even curtailment of, such aid. At issue is whether Pakistan's civilian government and security services are using the aid as intended domestically while actively supporting U.S. efforts to stabilize Afghanistan and combat regional insurgent and terrorist elements. Existing aid restrictions and the certification process required for greater accountability on the part of Pakistan continue to be under scrutiny. A number of current laws restrict or place conditions on certain aid to Pakistan. Others require the President, the Secretary of Defense, or the Secretary of State to certify that Pakistan meets specific criteria to receive U.S. aid. Criteria include that the implementing agency is qualified to manage the funds; that the Pakistani government has agreed to clear, achievable goals; that it is meeting human rights goals; and that the country is making progress in achieving U.S. aid objectives and is cooperating with the United States in combating terrorist networks and securing its nuclear weapons. Reporting requirements often are included. Current law includes authority for the President to waive certification requirements in the interest of U.S. national security. The National Defense Authorization Act for FY2013 (H.R. 4310), which became P.L. 112-239 in January 2013, limits FY2013 Coalition Support Fund reimbursements to Pakistan to $1.2 billion and prohibits reimbursements for the period (November 2011-July 2012) when Pakistan barred NATO from transiting along its Ground Lines of Communication linking Afghanistan with the Arabian Sea. The act also includes a measure to extend the Pakistan Counterinsurgency Fund (PCF) through FY2013. Disbursement of PCF requires the Secretary of Defense, in consultation with the Secretary of State, to certify that Pakistan is demonstrating efforts to counter improvised explosive devices, is cooperating on counterterrorism efforts, and is not detaining Pakistani citizens, including Dr. Shakil Afridi, as a result of their cooperation with the U.S. government on counterterrorism efforts. The Secretary of Defense may waive this certification requirement in the interest of U.S. national security. Pending bills include measures that would preclude or limit CSF reimbursements and require certification by the Secretary of Defense for disbursement of these funds; another would limit assistance to $50 million in agricultural or medical supplies to five countries that might seek to do harm to Americans or its allies, Pakistan among them. This report provides a list of existing laws and pending legislation containing conditions, limitations, and reporting requirements for U.S. foreign assistance to Pakistan. It will track the debate on this topic and resulting changes. For broader discussion of U.S.-Pakistan relations, see CRS Report R41832, Pakistan-U.S. Relations, by K. A. Kronstadt. See also CRS Report R41856, Pakistan: U.S. Foreign Assistance, by [author name scrubbed] and K. A. Kronstadt.
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The President is responsible for appointing individuals to positions throughout the federal government. In some instances, the President makes these appointments using authorities granted by law to the President alone. Other appointments are made with the advice and consent of the Senate via the nomination and confirmation of appointees. Presidential appointments with Senate confirmation are often referred to with the abbreviation PAS. This report identifies, for the 114 th Congress, all nominations to full-time positions requiring Senate confirmation in 40 organizations in the executive branch (27 independent agencies, 6 agencies in the Executive Office of the President [EOP], and 7 multilateral organizations) and 4 agencies in the legislative branch. It excludes appointments to executive departments and to regulatory and other boards and commissions, which are covered in other Congressional Research Service (CRS) reports. Information for this report was compiled using the Legislative Information System (LIS) Senate nominations database at http://www.lis.gov/nomis , the Congressional Record (daily edition), the Weekly Compilation of Presidential Documents , telephone discussions with agency officials, agency websites, the United States Code , and the 2016 Plum Book ( United States Government Policy and Supporting Positions ). Related CRS reports regarding the presidential appointments process, nomination activity for other executive branch positions, recess appointments, and other appointment-related matters may be found at http://www.crs.gov . During the 114 th Congress, President Barack Obama submitted 43 nominations to the Senate for full-time positions in independent agencies, agencies in the EOP, multilateral agencies, and legislative branch agencies. Of these nominations, 22 were confirmed, 16 were returned to the President, and 5 were withdrawn. Table 1 summarizes the appointment activity. The length of time a given nomination may be pending in the Senate varies widely. Some nominations are confirmed within a few days, others are not confirmed for several months, and some are never confirmed. This report provides, for each agency nomination confirmed in the 114 th Congress, the number of days between nomination and confirmation ("days to confirm"). Under Senate Rules, nominations not acted on by the Senate at the end of a session of Congress (or before a recess of 30 days) are returned to the President. The Senate, by unanimous consent, often waives this rule—although not always. In the case of nominations that are returned to the President and resubmitted, this report measures the days to confirm from the date of receipt of the resubmitted nomination, not the original. For agency nominations confirmed in the 114 th Congress, a mean of 174.1 days elapsed between nomination and confirmation. The median number of days elapsed was 152.0. Agency profiles in this report are organized in two parts. The first table lists the titles and pay levels of all the agency's full-time PAS positions as of the end of the 114 th Congress. For most presidentially appointed positions requiring Senate confirmation, pay levels fall under the Executive Schedule. As of the end of the 114 th Congress, these pay levels range from level I ($205,700) for Cabinet-level offices to level V ($150,200) for lower-ranked positions. The second table lists appointment action for vacant positions during the 114 th Congress in chronological order. This table provides the name of the nominee, position title, date of nomination or appointment, date of confirmation, and number of days between receipt of a nomination and confirmation, and notes relevant actions other than confirmation (e.g., nominations returned to or withdrawn by the President). When more than one nominee has had appointment action, the second table also provides statistics on the length of time between nomination and confirmation. The average days to confirm are provided in two ways: mean and median. The mean is a more familiar measure, though it may be influenced by outliers in the data. The median, by contrast, does not tend to be influenced by outliers. In other words, a nomination that took an extraordinarily long time to be confirmed might cause a significant change in the mean, but the median would be unaffected. Examining both numbers offers more information with which to assess the central tendency of the data. Appendix A provides two tables. Table A-1 relists all appointment action identified in this report and is organized alphabetically by the appointee's last name. Table entries identify the agency to which each individual was appointed, position title, nomination date, date confirmed or other final action, and duration count for confirmed nominations. In the final two rows, the table includes the mean and median values for the "days to confirm" column. Table A-2 provides summary data from the appointments identified in this report and is organized by agency type, including independent executive agencies, agencies in the EOP, multilateral organizations, and agencies in the legislative branch. The table summarizes the number of positions, nominations submitted, individual nominees, confirmations, nominations returned, and nominations withdrawn for each agency grouping. It also includes mean and median values for the number of days taken to confirm nominations in each category. Appendix B provides a list of department abbreviations. Appendix A. Summary of All Nominations and Appointments to Independent and Other Agencies Appendix B. Agency Abbreviations
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The President makes appointments to positions within the federal government, either using the authorities granted by law to the President alone or with the advice and consent of the Senate. This report identifies all nominations during the 114th Congress that were submitted to the Senate for full-time positions in 40 organizations in the executive branch (27 independent agencies, 6 agencies in the Executive Office of the President [EOP], and 7 multilateral organizations) and 4 agencies in the legislative branch. It excludes appointments to executive departments and to regulatory and other boards and commissions, which are covered in other Congressional Research Service (CRS) reports. Information for each agency is presented in tables. The tables include full-time positions confirmed by the Senate, pay levels for these positions, and appointment action within each agency. Additional summary information across all agencies covered in the report appears in an appendix. During the 114th Congress, the President submitted 43 nominations to the Senate for full-time positions in independent agencies, agencies in the EOP, multilateral agencies, and legislative branch agencies. Of these 43 nominations, 22 were confirmed, 5 were withdrawn, and 16 were returned to him in accordance with Senate rules. For those nominations that were confirmed, a mean (average) of 174.1 days elapsed between nomination and confirmation. The median number of days elapsed was 152.0. Information for this report was compiled using the Legislative Information System (LIS) Senate nominations database at http://www.lis.gov/nomis, the Congressional Record (daily edition), the Weekly Compilation of Presidential Documents, telephone discussions with agency officials, agency websites, the United States Code, and the 2016 Plum Book (United States Government Policy and Supporting Positions). This report will not be updated.
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Among the foreign policy questions that the 111 th Congress will face is one that has surfaced repeatedly for over 60 years and has resurfaced during the previous Congress: what is the appropriate role for the Department of Defense (DOD) in foreign assistance? DOD has long played a role in U.S. efforts to assist foreign populations, militaries, and governments. The use of DOD to provide foreign assistance stems in general from the perception that DOD can contribute unique or vital capabilities and resources because it possesses the manpower, materiel, and organizational assets to respond to international needs. Over the years, Congress has shaped the DOD role through a wide variety of authorities contained in the Foreign Relations and Intercourse (Title 22 U.S. Code) and Armed Services (Title 10 U.S. Code) statutes, and through annual legislation. To some analysts, the DOD role has been in effect a product of Congress's willingness to fund defense rather than foreign affairs budgets. In some instances, the activities in which DOD participates serve an institutional purpose for the U.S. military, providing U.S. soldiers and sailors with opportunities for military training, for cultivating military-to-military contacts, and for gathering information on foreign countries where they may someday be called to operate. The historical DOD role in foreign assistance can be regarded roughly as serving three purposes: Responding to humanitarian and basic needs. Since at least the 19 th century, U.S. military forces have provided urgent assistance to foreign populations in time of disasters, such as earthquakes and floods. More recently, U.S. military forces have also provided aid in humanitarian crises such as famines and forced population movements. DOD aids foreign populations under authorities to conduct humanitarian assistance in a variety of other circumstances, including as an adjunct to military training and exercises with and as part of military operations. Building foreign military capacity and capabilities. DOD provides military equipment, weapons, training, and other assistance to build up the military capacity and capabilities of friendly foreign countries. Such support is provided to augment military capacity to perform counternarcotics, counterterrorism, internal defense, border defense, and other missions, and as part of post-conflict state-building. The origins of current programs date to the early years after World War II, when the United States sought to help rebuild Europe. Strengthening foreign governments. Besides building foreign military capacity, DOD plays a role in U.S. efforts to help foreign governments secure their territories against internal and international threats with a variety of non-military tools. These include state-building efforts, such as strengthening police forces, and bolstering the legitimacy of foreign governments by undertaking small-scale economic, health, and social projects (and in the case of conflict zones, political projects), generally in areas outside capital cities. Although such efforts were carried out sporadically as early as the 19 th century, the post-World War II U.S. occupations in Germany and Japan are regarded as state-building models. More recently, DOD support for border protection and nuclear non-proliferation initiatives strengthens foreign governments by curbing international threats. During the past few years, Congress has provided DOD with new, non-combat authorities to prosecute the wars in Afghanistan and Iraq and to conduct counterterrorism activities elsewhere. Congress granted these authorities in response not only to the immediate needs of U.S. military operations in conflict zones, but also to the Bush Administration's efforts, in the wake of the terrorist attacks on the United States of September 11, 2001 (9/11), to redirect and reshape U.S. government capabilities in a new strategic environment. As a result, some analysts believe that DOD is playing too large a role in assisting foreign populations, militaries, and governments. Critics view this role as potentially detrimental to U.S. foreign policy, citing a perceived lack of strategic coordination between DOD and the State Department (and other agencies where applicable), a failure to ensure that DOD programs are sustainable, and a militarization of the United States' image abroad. These analysts call for greater clarity and reforms in defining DOD's foreign assistance role and responsibilities. This report provides Congress with historical context and current information and perspectives regarding DOD's role and responsibilities in a range of foreign assistance activities. In an overview and appendices, this report provides background information on and discusses issues related to the DOD's role in providing U.S. foreign assistance and undertaking foreign assistance-type activities. Topics include the types of assistance DOD provides, the authorities under which DOD conducts its programs, and coordination and cooperation mechanisms between DOD and other agencies. The report begins with a brief introduction to the three areas in which DOD plays a role in foreign assistance and to Congress's part in authorizing that role. Next, the report briefly discusses the general evolution of DOD's role and the Department of State's current perception of that role based on current national security needs. The report then provides an overview of the evolution of the DOD role and current activities in the three areas cited above, with a snapshot of the varying perspectives on the DOD roles in these areas. Finally, the report discusses issues that Congress may wish to consider. The appendices provide more detailed information on the current and most significant foreign assistance programs in which DOD plays a role. This report refers to a Department of Defense role in foreign assistance rather than a U.S. military role because DOD may use either military troops or civilian contractors, or both, to implement programs. The term U.S. military is used only for activities in which U.S. troops are used exclusively. DOD's perception of the appropriate non-combat role for the U.S. military has evolved over time. During the years in which the United States' primary national security threats were posed by other States, there were differing perspectives within DOD on the use of the military in non-combat roles. With the fall of the Soviet Union, these differences sharpened. Within the past few years, the perceptions of DOD officials, military officers, and defense analysts have coalesced around a post-9/11 strategy that calls for the use of the U.S. military in preventive, deterrent, and preemptive activities. This strategy involves DOD in the creation of extensive international (and interagency) "partnerships," as well as an expanded DOD role in foreign assistance activities. The February 2006 Quadrennial Defense Review Report (QDR) is the first key document that reflects the evolution of DOD thinking as it grapples with the implications of 9/11 for U.S. national security and U.S. defense policy. The assertion of top U.S. defense officials and military leaders that DOD needs "new and more flexible" authorities to operate in the current strategic environment forms the rationale for DOD's request for new authorities, especially to advance a new "Partnership Strategy." As outlined in the 2006 QDR, the Partnership Strategy is one of DOD's key tools for the United States' "long war" against a new threat—that is, the decentralized networks of "violent extremists who use terrorism as their weapon of choice," who "will likely attempt to use" weapons of mass destruction "in their conflict with free people everywhere." Countering such networks, as well as the rogue powers that may sponsor them, will require "long-duration, complex operations involving the U.S. military, other government agencies and international partners," which are waged simultaneously in multiple countries. To do so will also require that the United States "assist others in developing the wherewithal to protect their own populations and police their own territories, as well as to project and sustain forces to promote collective security." In the 2006 QDR, as elsewhere, DOD maintains that developing the foreign "wherewithal" to enhance domestic and collective security requires a "whole of government" approach. Through the November 2005 DOD Directive 3000.05, entitled the Directive on Military Support for Stability, Security, Transition, and Reconstruction (SSTR) Operations , defense leaders mandated that DOD "be prepared to conduct and support" civilian agencies in conducting SSTR operations, but also indicated doubt that civilian agencies will create the needed capabilities to carry out state-building tasks. Thus, while DOD acknowledges that state-building tasks may be "best performed by indigenous, foreign, or U.S. civilian professionals," it also sees a need to develop its own capability to perform "all tasks necessary to establish or maintain order when civilians cannot do so." As reflected in the 2006 QDR, DOD is placing a new emphasis on the utility of non-combat foreign assistance activities and expects to continue to play an important, if not a proportionately expanding, role in U.S. foreign assistance in the developing world. DOD subsequently reiterated these points. In October 2007, Defense Secretary Robert Gates referred to this new perception of the DOD role: "And until our government decides to plus up our civilian agencies like the Agency for International Development [USAID], Army soldiers can expect to be tasked with reviving public services, rebuilding infrastructure, and promoting good governance. All these so-called 'nontraditional' capabilities have moved into the mainstream of military thinking, planning, and strategy—where they must stay." This theme was once again repeated in the June 2008 National Defense Strategy, which found that U.S. forces had "stepped up to the task of long-term reconstruction, development, and governance" and that the "U.S. Armed Forces will need to institutionalize and retain these capabilities," while noting that "this is no replacement for civilian involvement and expertise." In a report to Congress in mid-2007, the State Department had argued in favor of new permanent DOD authorities. It viewed such authorities, including several mentioned below, as a means "to provide a flexible, timely, and effective whole-of-government approach to today's security environment that is well coordinated in the interagency [coordination process] both in Washington at the policy level and in the field at the operational level, and with appropriate, relevant oversight by Congress." The following sections discuss DOD's traditional and current responsibilities in disaster assistance and humanitarian activities, assistance to foreign militaries, and assistance in other state-building areas. They also discuss recent proposals for enhanced authorities as spelled out in the QDR and related legislation submitted to Congress. DOD engagement in U.S. government disaster relief and humanitarian assistance activities is longstanding, with U.S. military forces playing an important role in U.S. disaster assistance since at least the 19 th century. DOD also plays a role in other humanitarian emergency situations, such as providing aid and protection for relief workers in cases of famine or forced population movements. More routine humanitarian assistance activities and civic action programs abroad date back at least to the turn of the 20 th century; these usually take place in the context of U.S. training exercises or military operations. Beginning in the mid-1980s, Congress provided specific DOD authorities for humanitarian aid as the Reagan Administration's civilian leadership sought means to support its allies in conflicts in Central America and Afghanistan. During that period, Congress provided specific authority to DOD to (1) provide nonlethal excess property and supplies from the DOD stocks when requested by the State Department and for distribution by the State Department; (2) provide space-available military transportation for private donors to send supplies and food to needy foreign populations; and (3) carry out civic assistance programs that involve small-scale construction, reconstruction, and maintenance projects, and provide limited medical attention to rural populations. (See Appendix A and Appendix C . ) Since then, Congress has somewhat modified and expanded DOD disaster response and humanitarian programs, incorporating aid to mitigate environmental disasters and demining training, and has introduced separate health programs. (See Appendix A , Appendix B , and Appendix C .) Thus, DOD disaster and humanitarian aid now encompasses a broader range of potential assistance than the basic humanitarian relief of food and emergency supplies provided by non-governmental organizations. In 1994, Congress established the Overseas Humanitarian, Disaster and Civic Aid (OHDACA) DOD budget account to fund many of these programs. The DOD role in providing disaster relief to foreign populations when natural and manmade disasters strike serves both foreign affairs and military needs. The lead authority for disaster response is the U.S. Agency for International Development (USAID), and DOD participation is conducted on the direction of the President or at the request of the State Department, through the appropriate U.S. ambassador. Nevertheless, DOD is often the first U.S. agency to respond to foreign disasters and other humanitarian crises because of its readily deployable resources. DOD international emergency responses allow the United States to contribute effectively in alleviating suffering abroad and enhancing the country's international image, as well as the U.S. domestic and foreign image of the U.S. military. (See Appendix A . ) Such activities are also undertaken for strategic or foreign policy reasons. A famous post-World War II example of such motivation was the 1948-1949 Berlin airlift, when U.S. Air Force and [British] Royal Air Force flights of relief supplies to Soviet-blockaded West Berlin demonstrated a U.S. and U.K. commitment to a strategically important area. Humanitarian and civic assistance programs, as currently conducted, usually take place in the context of training exercises and military operations. In that context, they are carried out as much for the U.S. military to gain situational awareness and the support of local populations as to alleviate suffering. When provided under Title 10 U.S. Code (10 U.S.C. 401), the primary purpose of the program must be to train U.S. armed forces. In addition, the assistance must not duplicate any other assistance, and it must meet the security interests of both the United States and the host country. Section 401 authority has been often used for training exercises for the National Guard, and for military reserve personnel and active duty personnel in certain specialties, especially medical personnel. U.S. Special Operations Forces also conduct humanitarian assistance activities as an adjunct to military training exercises with foreign militaries and as an integral part of stability and counterinsurgency operations. The Joint Combined Exchange Training (JCET) exercises with friendly foreign militaries are conducted under 10 U.S.C. 2011, primarily for the benefit of training the Special Operations Forces, but humanitarian assistance programs such as medical and veterinary visits may be added to cultivate goodwill among local populations and as part of the training for foreign troops. U.S. humanitarian and civic assistance activities also can be an integral part of military operations. During the Korean and Vietnam conflict eras, military civic action programs that included medical assistance were an integral part of military efforts. Now, in counterterrorism and counterinsurgency operations, teams of U.S. Special Operations Forces work together with foreign militaries on small-scale humanitarian and civic action projects. The primary purposes of humanitarian and civic assistance in such operations are to extend the reach of the national government, enhance its legitimacy among local populations, and cultivate relationships and trust that may lead to information sharing on terrorists' locations and planned activities. Recently, Congress has added new health programs to the humanitarian assistance portfolio of the U.S. military. Beginning in FY2000, Congress has provided funds through the Defense Health Program to educate foreign military forces in HIV prevention activities in conjunction with U.S. military training exercises and humanitarian assistance activities in Africa. Subsequently, other DOD health programs have been added. (See Appendix B .) Congress provides special funding and authorities for programs with a humanitarian assistance component in the war zones of Afghanistan and Iraq. The DOD-lead Provincial Reconstruction Teams (PRTs) in Afghanistan and State Department-led units in Iraq, for which DOD provides security, are central to U.S. efforts to promote host government authority and stability to areas outside the capitals in those countries. These integrated civilian and military teams count humanitarian assistance among their tools to provide stability in difficult areas, extend the reach of the central government, strengthen local governments in Afghanistan and Iraq, and stimulate local economies. In addition, commanders on the ground in Afghanistan and Iraq use Commander's Emergency Response Program (CERP) funds, which Congress appropriates, to respond to urgent humanitarian relief and reconstruction needs. (See Appendix K ) Funding Accounts For many years, prior to operations in Afghanistan and Iraq, funding for DOD disaster response and humanitarian assistance projects was appropriated annually in the Overseas Humanitarian, Disaster, and Civic Assistance (OHDACA) Account. This account covers disaster response and a variety of other humanitarian assistance programs codified under six Title 10 authorities. Congress gradually increased appropriations for OHDACA from $49.7 million in FY2002 to $63.204 million in FY2007. These funds were available for one fiscal year. For FY2008, Congress appropriated $40 million in that account specifically for disaster relief and response, to be available for two fiscal years (i.e., through FY2009), and an additional $63.3 million to be available for those purposes for three fiscal years (i.e., through FY2010). For FY2009, Congress provided the Administration with the requested $83.273 million in OHDACA funding. For FY2009, the Bush Administration sought monies for humanitarian purposes under a longstanding DOD account, the Combatant Commander Initiative Fund (CCIF), that provides funds to combatant commanders for a variety of purposes. In its FY2009 budget request, the Bush Administration asked for $100 million for the CCIF specifically to meet unanticipated humanitarian relief and reconstruction needs. Over the past decade at least, Congress has appropriated $25 million in annual DOD appropriation bills for the CCIF, and additional amounts in FY2005-FY2007 supplemental appropriations legislation, but, through FY2007 at least, the CCIF does not appear to have been used extensively for humanitarian projects. For FY2009, Congress appropriated $50 million for that account. U.S. officials state that DOD has instructed military commanders to look more broadly than in the past at humanitarian assistance, employing it as a component of U.S. security cooperation with foreign nations. Guidance to U.S. combatant commanders has stated that DOD regards humanitarian assistance as "foremost a tool for achieving U.S. security objectives," which can also serve several "complementary security goals." The "complementary" goals cited are "improving DOD visibility, access, influence, interoperability, and coalition-building with military and civilian host nation counterparts; building/reinforcing security and stability in a host nation or region; generating positive public relations and goodwill for DOD that will enhance our ability to shape the regional security environment; bolstering host nation capacity to respond to disasters ... and promoting specific operational readiness skills of US military personnel." The 2006 QDR places humanitarian assistance and disaster relief operations under the rubric of "humanitarian and early preventive measures" and claims that the use of such measures can "prevent disorder from spiraling into wider conflict or crisis." State Department officials welcome the U.S. military's ability to deliver disaster and humanitarian relief assistance in a timely fashion. They also tend to favor routine humanitarian assistance and civic action projects, albeit as a matter of necessity, because such projects allow the U.S. government to provide supplies and medical services to needy populations, and to construct schools and clinics in underserved areas, where funds are not otherwise available. These projects can create goodwill and personal contact for the United States, often in areas where U.S. diplomats would otherwise not venture. DOD and U.S. military personnel attitudes toward disaster response and humanitarian relief vary. Attitudes tend to be favorable for immediate disaster response and for training exercises, particularly for National Guard and Reserve troops. Attitudes become ambivalent when U.S. military personnel are used for prolonged periods for humanitarian assistance in conventional operations. Over the years, observers have raised a variety of concerns regarding humanitarian and civic assistance in non-emergency situations. Analysts have long faulted such assistance for sometimes being short-sighted and producing ill will when projects are not well selected. In the 1990s, Congress scrutinized U.S. humanitarian and civic action activities in Central America. Critics continue to view some projects as ill-conceived and at odds with sound development policy; for instance, schools built in areas where there are no teachers to staff them undermine the credibility of the United States and the host nation government, or assistance that, albeit inadvertently, benefits one ethnic group over another exacerbates ongoing conflicts. (See Appendix A .) The Bush Administration has recently created new coordination mechanisms that may address such concerns. (See the section on DOD interaction with other agencies, below.) Since the early years after World War II, U.S. military assistance programs to train and equip foreign military forces have been an important component of U.S. foreign assistance, and DOD has played a major role in those programs. Even though the major train and equip efforts are conducted under State Department programs, DOD has long been responsible for carrying out most of the work involved in building foreign military capacity and capabilities. Sizable military assistance programs put in place soon after World War II served the primary purpose of bolstering the defense capabilities of major allies against the Soviet Union, but in subsequent years, military assistance programs also began increasingly to serve political and diplomatic, as well as military, ends. For the past several decades, military assistance—carried out through the State Department's Foreign Military Sales (FMS) and International Military and Education Training (IMET) programs—has become an important tool of bilateral relations, intended to strengthen and cement relations with foreign governments, reward allies, and cultivate new partners. A recently added State Department program to train and equip foreign peacekeepers and a DOD program to train and equip foreign military forces for both counterterrorism missions and stability operations reflect the intention to develop capable international partners in quelling conflict and curbing terrorism. For many years, DOD training of foreign military forces was carried out by Special Operations Forces, but now DOD officials describe it as a key mission for the U.S. military as a whole. The Mutual Defense Assistance Act (MDAA) of 1949 was the legal forerunner to all major post-World War II military assistance programs. Congress passed the MDAA to provide weapons and military equipment to the newly established North Atlantic Treaty Organization (NATO) and to a number of other countries. The MDAA's successors, the Military Security Act (MSA) of 1951 and the MSA of 1954, were the major vehicles for U.S. foreign assistance until the enactment of the Foreign Assistance Act of 1961, which stands today as current law. The MSA of 1951 created the Mutual Security Agency in the Executive Office of the President. The MSA Director was responsible for the "continuous supervision, general direction, and coordination of all foreign aid—military, economic, and technical assistance." Thus, during the early part of the 1950s, DOD administered the military assistance programs under the White House's policy direction and guidance. Congress subsequently moved responsibility for non-military aid to the State Department, whose officials were charged with coordinating with DOD regarding military aid. As described by the forerunner of the Congressional Research Service in 1959, the purpose of the State Department coordination of military aid (identified as "an important instrument of U.S. foreign policy") with other forms of aid was "to help achieve the basic policy goals decided upon by the President with the advice of the National Security Council" (NSC). As economic and development assistance became the U.S. government's preferred tool for countering Soviet influence in the developing world, Congress entrusted the State Department with the leadership role for foreign assistance, including military assistance, when it passed the Foreign Assistance Act (FAA) of 1961. Since then, with the exception of the period inclusive of the Vietnam War in the mid-1960s to the mid-1970s, the major foreign military assistance programs—the Foreign Military Sales (FMS) and Foreign Military Financing (FMF) program, and the International Military Education Training (IMET) program—have been carried out under State Department oversight and guidance. These programs are implemented, however, by a DOD agency: the Defense Security Cooperation Agency (DSCA) under the DOD Under Secretary for Policy, and its predecessor. (See Appendix D and Appendix E .) In 2005, Congress created a third State Department train and equip program, the Global Peace Operations Initiative (GPOI), to provide training in peacekeeping skills and related equipment to foreign militaries. (See Appendix I . ) In addition to the major programs to build foreign military capacity under State Department authority, Congress authorizes and funds DOD to conduct a wide variety of smaller military-to-military education and training programs. These offer foreign military personnel the opportunity to attend U.S. military education and training programs, in addition to those funded under IMET, as well as conferences and meetings. They also provide the U.S. military with important opportunities to cultivate relations with foreign military officers. Congress generally requires all such activities to be conducted with the approval of the Secretary of State. Combatant commanders may also use up to $5 million from the CCIF in any fiscal year "to provide military education and training (including transportation, translation, and administrative expenses) to military and related civilian personnel of foreign countries...." Under Title 10 U.S. Code (10 U.S.C. 124), DOD is the lead U.S. government agency on the detection and monitoring of aerial and maritime transit of illegal narcotics into the United States, but it falls under the oversight of the Secretary of State, who is charged with coordinating counternarcotics assistance (22 U.S.C. 2291). Since the 1990s, DOD has provided training and related support to foreign militaries and law enforcement authorities for counternarcotics purposes under authorities that Congress extends regularly in annual defense authorization legislation. (See Appendix F . ) Under "Section 1004" authority, first established in 1990 to enable DOD to support counterdrug agencies and currently extended through FY2011, DOD may provide training and other support to improve foreign counternarcotics capabilities at the request of any U.S. federal department or agency, or of any U.S. state, local, or foreign law enforcement agency. Under "Section 1033" authority, first established in 1997 and currently extended through FY2009, DOD may provide patrol, boats, vehicles, aircraft, and other equipment to designated foreign governments and maintain and repair those items. Originally provided for Colombia and Peru, this authority now covers 16 more countries. Human rights concerns have figured prominently in congressional consideration of the DOD role in counternarcotics programs. Largely in response to such concerns, in 1998, Congress placed a restriction in the DOD appropriations bill prohibiting U.S. training of foreign military units for which credible evidence exists of gross violations of human rights. This restriction has been extended annually but is less restrictive than the provision in foreign operations appropriations, first enacted in 1997 and codified in 2007, which prohibits the use of State Department funds for any assistance to military units for which credible evidence is found of gross violations of human rights. In 2005, Congress provided DOD with authority and funds for a major DOD-run train and equip program. Established by Section 1206 of the NDAA for Fiscal Year 2006 as a temporary "pilot program," this "Foreign Military Capacity Building" authority allows DOD to transfer funds to train and equip foreign militaries to enable those forces to better conduct counterterrorism operations or to "participate in or support military and stability operations in which the United States Armed Forces" participate. Currently in effect through FY2008, this "Section 1206" authority has provided up to $200 million in FY2006, and up to $300 million in FY2007 and FY2008 to meet needs that emerged after the planning cycle for the regular budget submission. In the Duncan Hunter NDAA for Fiscal Year 2009, Section 1206, Congress increased funding authority to $350 million, extended the authority through FY2011, and broadened the scope of authority to include building the capacity of a foreign country's maritime security forces to conduct counterterrorism operations. Section 1206 authority is subject to strict conditionality. The original FY2006 legislation required a presidential initiative to initiate a program; in FY2007, this was changed to permit the Secretary of Defense to authorize a program with the concurrence of the Secretary of State. Although the legislation does not require the Secretary of State's "approval," DOD and the State Department currently interpret "concurrence" to mean "approval." (See Appendix H .) In 2007, Congress denied a DOD request to significantly expand Section 1206 authority to train and equip foreign military forces, substantially increase the funding, and make it permanent. In May 2007, DOD had proposed legislation for "Building the Partnership Capacity of Foreign Military and Other Security Forces" that would provide a new, permanent DOD authority to spend (or to transfer to the Department of State or other federal agency) up to $750 million per year to train and equip foreign military and security forces to conduct counterterrorism operations or to participate in or support military and stability operations. There would be no requirement, as in Section 1206, that training for military and stability operations be tied to operations in which the U.S. military participated. The extension would permit DOD to train and equip gendarmerie, constabulary, internal defense, infrastructure protection, civil defense, homeland defense, coast guard, border protection, and counterterrorism forces. Rejecting the strict conditionality of Section 1206, DOD proposed that the Secretary of State be permitted to waive any restrictions that might apply. In 2007, the House Armed Services Committee (HASC) expressed skepticism regarding an extension of the program "in the absence of ... an established record of success." In its FY2009 budget request, the Bush Administration asked Congress to codify an expanded version of Section 1206 that would increase the annual authorization to $750 million and include a broad array of security forces in addition to military forces. The House version of the bill would extend current authority through FY2010 (Section 1206, H.R. 5658 , the Duncan Hunter NDAA for FY2009). The Senate version of the NDAA for FY2009 (Section 1204, S. 3001 ) would extend Section 1206 authority through FY2011, increasing the annual authorization to $400 million. It would also authorize the use of funds for security forces whose primary mission is counterterrorism, subject to the police training restrictions of 22 U.S.C. 2420. (See the section below on civilian capabilities for substantive objections to such authority.) DOD views training for foreign military and other security forces as an expanding area, and seeks expanded authorities for DOD programs. The 2006 QDR calls for DOD to "improve and increase IMET-like opportunities targeted at shaping relationships and developing future foreign leaders." More specifically, it recommends the expansion of DOD and State Department authorities "to train and equip foreign security forces best suited to internal counter-terrorism and counter-insurgency operations," noting that these "may be non-military law enforcement or other security forces...." In late 2007, Secretary of Defense Gates identified "the standing up and mentoring of indigenous army and police" as "a key mission for the military as a whole." In the post-9/11 environment, some defense analysts have urged policy makers to develop more expeditious mechanisms for the United States to provide military training and military support. DOD officials argue that the routine planning processes through the traditional State Department "train and equip" authorities are too cumbersome and time-consuming, reflecting political rather than operational military needs, with the planning, budgeting, and implementation cycle taking two to three years. On the other hand, some Members of Congress have faulted Section 1206 for lacking enough added value to justify making permanent a major train and equip program outside the State Department's authority. In a December 2006 report, the Senate Foreign Relations Committee stated its concern that the program was used largely to fund areas where the U.S. military sought to enhance military-to-military relations rather than to meet emerging needs. The committee recommended that all security assistance, including that administered under Section 1206, be placed under State Department control. Similarly, in line with a 2006 QDR recommendation and the desire for more flexibility in providing assistance to allies and friendly states, DOD has also sought broader reimbursement authority for coalition support forces and expanded logistics support to other States "partnering" with the United States. Congress has been more responsive to these requests. (See Appendix L . ) DOD has supported foreign governments' efforts to counter internal and international threats with assistance that goes beyond help to foreign military forces. In many situations, and currently in Afghanistan and Iraq, DOD has played a significant, if not a leading, role in tasks related to nation-building or state-building. Such tasks include helping establish or strengthen rule of law capabilities (police, judicial, and prison institutions and facilities), reinforcing the administrative capacity of central governments, strengthening local governments in rural areas, and bolstering national economies. Such state-building support is now widely perceived as a means to deter or control internal and international threats. Although U.S. military personnel carry out this role most often in combat situations, where the presence of untrained, unarmed civilians may be a liability, they may also carry out this role because of a shortage of trained civilian personnel. Because the circumstances have varied greatly, such assistance has usually been carried out under a mix of authorities and programs. The most notable example of U.S. military involvement in state-building occurred in the post-World War II military occupations of Germany and Japan, although there are earlier examples, such as the U.S. military occupation of the Philippines around the turn of the 20 th century. In the 1990s, DOD personnel provided such assistance in peacekeeping and post-conflict operations as part of military operations in Somalia, Haiti, and Bosnia. Sometimes DOD provides such assistance to foreign governments as part of military counterterrorism, internal defense, and counterinsurgency efforts. Special operations forces teams carry out a variety of state-building activities, to strengthen local leaders and defuse ethnic and other rivalries, as part of their civic assistance projects. Congress also provides DOD with authority to train and otherwise assist foreign law enforcement officials to perform counternarcotics operations, although there is no standard source for determining the degree to which DOD provides such support. In Iraq and Afghanistan, Provincial Reconstruction Teams (PRTs) carry out state-building political and economic activities, in addition to civic assistance and humanitarian activities. Although no data are available on the extent to which state-building activities are directed or conducted by U.S. military personnel, soldiers are involved, particularly when there are not enough civilian members of a PRT. U.S. military field commanders Iraq and Afghanistan carry out reconstruction projects with CERP funds, with each major subordinate commander authorized to approve grants up to $500,000. Originally intended to help military commanders establish stability in hostile areas, CERP has now become a main source of funding for infrastructure development. (See Appendix K on DOD in Iraq and Afghanistan Economic Reconstruction.) Congress has thus far denied Administration requests to extend CERP funding authority for DOD use on a worldwide basis. In Iraq, DOD's large role in infrastructure reconstruction has been unusual. While the State Department and USAID were tapped to manage early economic assistance programs in Iraq, DOD was called on in 2004 to carry out the largest infrastructure projects. Nevertheless, DOD's own Army Corps of Engineers (ACE) also was initially found insufficient to manage the task, and DOD contracted the job directly with private companies. ACE was subsequently tapped for a management role. Although the State Department assumed responsibility in 2005 for setting priorities for most aid programs, DOD developed, and Congress funded, a DOD program to rehabilitate some 200 Iraqi firms that had been state-owned under the Hussein regime, without either State Department or USAID input. (See Appendix K . ) Much of DOD's state-building activities have thus far been carried out within the context of military operations. For many years, DOD and U.S. military leaders rejected a nation-building role, arguing that it was not appropriate for U.S. military forces and detracted from combat readiness. As defense analysts and military personnel began to perceive state-building as essential to the success of peacekeeping and related operations, attitudes began to shift about the desirability of the U.S. military role in state-building. In 2005, DOD Directive 3000.05 identified state-building as key to the success of stability operations and stated that "U.S. military forces shall be prepared to perform all tasks necessary to establish or maintain order when civilians cannot do so." Critics find DOD state-building activities marred by a lack of both strategic planning and application of economic development "best practices," by the absence of civilian input and integration with civilian efforts, and by insufficient oversight. Some critics, however, recognize that the context in which some of these activities are undertaken can justify their ad hoc nature, short-term objectives, and lack of civilian expertise, and note that DOD has made efforts to improve soldiers' ability to carry out such tasks. Concerns focus on the extension of state-building activities to non-conflict situations; for example, extending CERP authority worldwide, as requested by the Administration, without more State Department control, or activities of combatant commands, especially AFRICOM, might lead to perceptions that the United States is "militarizing" its foreign policy. Defense experts implicitly acknowledged a factual basis for at least some criticisms of its state-building role by expressly stating in 2005 DOD Directive 3000.05 that civilians would be better suited to accomplish political, social, and economic tasks in many circumstances. Nevertheless, DOD officials regard the United States as faced with a strategic imperative to undertake such activities in the new global environment, and the U.S. military as charged with performing them where civilians cannot. DOD officials are currently grappling with the many issues and tradeoffs involved in better preparing military forces to carry out a wide variety of political, social, and economic tasks for stabilization and reconstruction, as well as other activities, alone or in conjunction with civilian personnel, in the absence of civilian personnel. An important part of this task for DOD, the State Department, USAID, and other civilian agencies is to determine and prioritize an appropriate civil-military division of labor in non-combat areas. With DOD's renewed request in 2008 to expand Section 1206 to allow training of foreign police and related security forces (including gendarmerie, constabulary, internal defense, and infrastructure) in addition to military forces, Congress is faced with a sensitive issue. Since at least the 1970s, Congress has been concerned with the possible human rights implications of U.S. assistance to foreign police forces in general, and DOD assistance in particular. Nevertheless, many analysts argue that many more foreign police personnel are needed, especially gendarmes trained in both police and military skills, for post-conflict operations, and some might prefer that DOD provide personnel to fill that training gap, especially in major post-conflict zones. DOD is involved in a broad range of foreign assistance activities. U.S. military personnel deploy as first responders to foreign disasters and provide humanitarian relief and basic needs assistance in other urgent situations. U.S. military personnel also provide medical and veterinary assistance and civic support (such as the construction or repair of small educational and medical facilities) as a routine part of their training and as part of military operations. U.S. troops routinely train foreign military forces and are authorized to train police forces for counternarcotics missions. Recently, in the context of military operations in Iraq and Afghanistan, and elsewhere, they have provided humanitarian assistance and taken on state-building tasks related to political and economic development. For the past several years, DOD has worked to enhance its own capabilities to carry out state-building and to draw on civilian advice. It has also urged Congress to enhance the capabilities of civilian agencies to form partnerships with DOD in those activities. DOD stresses a national security imperative for its activities in the foreign assistance area. Critics, however, most often judge DOD involvement in foreign assistance activities in terms of its effect on foreign relations and foreign policy goals. The following sections recapitulate the perceived benefits and liabilities of that involvement. The United States and the U.S. military benefit from DOD foreign assistance activities in several ways. U.S. diplomacy benefits from the U.S. military's capacity to project itself rapidly into extreme situations, such as disasters and other humanitarian emergencies, promoting the image of the United States as an humanitarian actor. Especially in conflict situations, military forces can provide needed security, intelligence and aerial reconnaissance, command and control and communications capabilities, and maritime support. Humanitarian assistance also provides a means to cultivate good relations with foreign populations, militaries, and governments. For U.S. diplomacy, military training and other security assistance can be a potent tool to cultivate or cement relations with foreign governments. U.S. military personnel view humanitarian assistance and military training and education and other opportunities to interact with foreign militaries as part of their professional development. Such opportunities help soldiers enhance their skills to operate in a variety of foreign environments and establish contacts with foreign military personnel that may serve them in future operations. Since 9/11, DOD training of military forces and provision of security assistance have been an important means to enable foreign militaries to conduct peacekeeping operations under the aegis of the United Nations and regional organizations and to participate with the United States in operations in Iraq and Afghanistan. Observers have advanced several critiques of the DOD role. These deal with the effects on humanitarian activities of non-governmental organizations; the implications for foreign policy objectives, including counterterrorism, economic development, and state-building and democracy promotion; and the relative effectiveness of civilian versus military personnel. Non-governmental organizations (NGOs) that carry out humanitarian missions hold mixed views on DOD humanitarian assistance activities. They generally do not criticize the use of the U.S. military in first response disaster relief operations. Some are critical, however, of the use of U.S. military forces in a broad range of "humanitarian and basic needs" activities in conflict areas. Although military forces can provide needed security in unstable environments, in some situations, military involvement in humanitarian assistance can be problematic. Especially when military personnel are directly involved in providing humanitarian assistance and other humanitarian acts, military assistance can be viewed as jeopardizing the lives and work of NGO personnel by stigmatizing them as participants in a military effort. These criticisms were provoked by the U.S. military's humanitarian role in Afghanistan, where non-governmental humanitarian aid workers felt their neutrality was compromised by soldiers in civilian dress who distributed humanitarian aid as part of military operations. Since then, DOD has made an effort to engage non-governmental aid workers and to develop means to work together. While some humanitarian relief NGOs now welcome the security that military forces can provide in hostile areas, others still feel that their lives are endangered by the proximity of soldiers engaged in humanitarian activities. In areas without U.S. military involvement, local populations may also take the use of military personnel for such activities as a prelude to military action or intervention. The use of military forces may also impede the advancement of foreign policy goals. For instance, the December 2006 Senate Foreign Relations Committee report, Embassies as Command Posts in the Anti-Terror Campaign , viewed the use of DOD personnel for counterterrorism programs as an obstacle: "In Latin America, especially, military and intelligence efforts are viewed with suspicion, making it difficult to pursue meaningful cooperation on a counterterrorism agenda." As pointed out in Appendix F on counternarcotics cooperation, Mexico has resisted counternarcotics assistance that would involve the U.S. military. One analyst claims that "African publics and governments have already begun to complain that U.S. engagement is increasingly military." In the area of economic development, some analysts question whether the U.S. military objectives in carrying out small-scale infrastructure projects in conjunction with exercises and operations respond to short-term exigencies rather than abiding by development "best practices" to accomplish long-term structural reforms. In the cases of Iraq and Afghanistan, some analysts point out that "some normal development practices will inevitably take a back seat to operational realities." In the case of humanitarian and civic action activities in non-conflict areas, however, a lack of integration with long-term development plans can raise expectations of economic growth and development that cannot be fulfilled with the limited resources available. The use of U.S. military personnel in state-building activities may convey mixed signals in activities where the objective is to promote democracy and enhance civilian control. While the use of U.S. military forces is seen as appropriate in state-building efforts that involve the training of foreign militaries, some analysts believe that it may undermine that objective when used in other state-building activities by reinforcing stereotypes in underdeveloped nations—such as that military forces are more competent than civilians—or legitimize the use of military forces for civilian governmental responsibilities. Further, some analysts believe that DOD has failed to strengthen institutional mechanisms for civilian control in its dealings with foreign militaries. The lack of expertise within the military to carry out coherent plans for economic and political development in foreign nations is also considered problematic. While the placement of USAID officers within combatant commands may alleviate some of the worst problems, some analysts believe that their presence may not be sufficient to ensure that best practices are routinely applied. Civilians are cited as enjoying an overall advantage in many humanitarian and state-building tasks. Military forces are, however, recognized as possessing a decided advantage in some humanitarian mission tasks, such as providing security and air support, particularly in hostile situations. Despite that military advantage, however, one study judged civilian personnel more effective in carrying out a wide range of humanitarian tasks in conflict situations. These tasks are acquiring the supplies necessary for humanitarian assistance operations, assessing and utilizing local resources, interacting with the local population, providing the most suitable medical response, managing refugee camps, and providing water and sanitation. Another study judged that although most multinational military personnel assisting with the Rwanda crisis in 1994 were "skilled in their own areas, [they] had no unique competence in such matters as refugee camp construction, community health and disease control, or shelter management. Moreover, their security preoccupations—for example, the prohibition against U.S. forces from leaving the Kigali airport, the reluctance of the Japanese to work in refugee camps—also circumscribed what the troops themselves were able to achieve." There is a widespread presumption that using military forces for many humanitarian missions, military support, and state-building activities costs more than using civilian personnel for the same tasks, but analysts note the absence of reliable studies on relative costs. One 1998 study on the use of international military forces for humanitarian assistance in conflict situations judged that the use of the military is "generally more costly than civilian means" and "will far exceed the costs of providing the aid itself." The study attributed the greater costs to the military emphasis on making its activities "fail-safe" rather than cost-effective, building into its procedures "safeguards, redundancies, and limitations that often do not exist with civilian means.... Civilian and commercial means are, in general, leaner and less redundant." The study cautioned, however, that its general conclusions were "presented as hypotheses." Relative costs can vary according to the circumstances. For instance, according to the 1998 study cited above, when "military assets are already deployed (either for humanitarian assistance or for peacekeeping), the marginal cost of using these personnel and resources will be low. In these areas, then, the military can be a cost-effective means of delivering and supporting humanitarian assistance." A variety of other factors can influence relative costs. The military's economies of scale and shared costs may reduce the price tag on the use of military forces; on the other hand, the degree of force protection in the field and the amount of equipment with which the military deploys can raise costs. For some analysts, cost considerations are beside the point, as there are certain situations where military forces are indispensable and certain places where few civilians will go. Decisions on the most appropriate division of labor between military and civilian personnel are better made on the basis of comparative advantage in each situation. A key to ensuring that DOD plays an effective role in foreign assistance may be improving interagency coordination in planning and implementing such activities. DOD and the State Department recently have created new coordination mechanisms, but some analysts believe the imbalance between DOD and State Department resources may be a continuing problem, especially for activities that take place in the context of military operations. In approving legislation governing the DOD role in foreign assistance, Congress can mandate the type and degree of interaction between DOD and civilian agencies. It can maintain or strengthen the leadership role that the State Department has traditionally had in foreign assistance activities. Or it can respond to the concerns of some defense officials and analysts that DOD lacks appropriate authority and flexibility to carry out foreign assistance activities expeditiously, and enhance the DOD role. Since at least the early 1960s, Congress has made the Secretary of State the lead U.S. government official regarding oversight of foreign assistance, including military assistance, and assigned U.S. Ambassadors or other officials carrying out the responsibilities of a chief of a United States diplomatic mission a lead role in coordinating military assistance with foreign policy. Section 622 of the 1961 FAA (22 U.S.C. 2382), entitled Coordination with Foreign Policy, contains these provisions. Section 622(c) of the original version of the 1961 FAA provided that the Secretary of State "shall be responsible for the continuous supervision and general direction of the assistance programs authorized by this Act, including but not limited to determining whether there shall be a military assistance program for a country and the value thereof, to the end that such programs are effectively integrated both at home and abroad and the foreign policy of the United States is best served thereby." (Section 622(c).) In 1976, Congress amended that provision, deleting the limitation that made it applicable solely to programs in the 1961 FAA, as amended. Section 622(c) now charges the Secretary of State with responsibility for "the continuous supervision and general direction of economic assistance, military assistance, and military education and training programs, including but not limited to determining whether there shall be military assistance (including civic action) or a military education and training program for a country and the value thereof, to the end that such programs are effectively integrated both at home and abroad and the foreign policy of the United States is best served thereby." The 1961 FAA, as amended, does not define military assistance or civic action. It does, however, define "military education and training." The Chief of Mission's responsibility was contained in Section 622(b). Under that provision, the Ambassador (or other responsible official) exercises leadership, under procedures prescribed by the President, over ensuring coordination regarding foreign assistance programs among U.S. government representatives in each country. Section 622(b) specifically ties this role to military assistance. The original language reads: "The Chief of the diplomatic mission shall make sure that recommendations of such representatives pertaining to military assistance are coordinated with political and economic considerations, and that his comments shall accompany such recommendations if he so desires." Congress later amended this language to specify that civic action and military education and training programs were covered by this section. Section 623 (22 U.S.C. 2383) charges the Secretary of Defense with several responsibilities regarding the provision of military equipment, as well as "the supervision of the training of foreign military and related civilian personnel." Through legislation, Congress often has required that the Department of State approve an activity. Some of the temporary authorities for Iraq and Afghanistan, for instance, require the concurrence (i.e., the approval) of the Secretary of State. Under pre-9/11 legislation, DOD needs to secure the concurrence of the Secretary of State for programs regarding the educational programs, capacity building, and logistic support for allies. Other Title 10 U.S. Code programs under DOD authority require the Secretary of Defense to secure the approval of the Secretary of State for military to military contacts and the approval of both the Secretary of State and the Attorney General for certain counternarcotics and counterterrorism activities (i.e., support for law enforcement officials outside the United States). In other cases, however, Congress had mandated that DOD coordinate or consult with the State Department and other relevant agencies. DOD must develop certain counternarcotics and counterterrorism activities in consultation with the Secretary of State. DOD and State Department officials report that whatever the statutory language, these departments now develop a consensus about foreign assistance-type activities before proceeding. Despite these legislative mandates, the actual degree and type of interagency coordination and consultation appear to have varied greatly over time, and from program to program. There are established mechanisms for coordinating projects, but at least in the past there have been occasions when they appear to have broken down. Factors identified as causing interagency coordination to lull or lapse include individual personalities, a lack of State Department personnel to perform coordinating tasks, a blurred division of labor, and the routinization of tasks. (See Appendix G , Appendix J , and Appendix K .) For many years, much of the formal coordination has been carried out by the DOD Defense Security Cooperation Agency for established programs. The DSCA receives project proposals from combatant commanders. In many cases, these proposals require the approval of the U.S. ambassador in the country in which programs will be conducted, although ambassadorial approval is not required for regional programs or in war zones. DSCA then coordinates the approval process in Washington, D.C., as required by statute or policy guidance, for both State Department programs (i.e., security assistance, IMET, and GPOI) and DOD humanitarian assistance and other programs. The DSCA Security Affairs Officers (SAOs) located at U.S. embassies worldwide bear a large part of the responsibility for implementing these programs. Within the State Department, the Bureau of Political-Military Affairs coordinates the Department's position on military assistance. The bureau is also the lead State Department office for interagency coordination. It coordinates the interagency response (State Department, USAID, DOD, and NSC) to requests by foreign governments for humanitarian demining and other humanitarian assistance. It also coordinates the State Department response to plans for military exercises in politically sensitive areas, as required by National Security Presidential Determination 42. In addition, it coordinates the vetting of foreign forces that receive counternarcotics training and that participate in JCETs. Over the past few years, DOD and the civilian agencies have created new mechanisms for planning and coordinating DOD foreign assistance activities. These include new arrangements in combatant commands, as well as new offices in USAID and the State Department. DOD has created new interagency groups or new posts for civilian agency representatives in its institutions, particularly at four geographical combatant commands that plan and carry out combat operations and non-combat activities in their "areas of responsibility." Regional combatant commands host a "Joint Interagency Coordinating Group" (JIACG) composed of military personnel from all services and civilian personnel from a variety of agencies that act as an advisory body to the combatant command. Combatant commands also are beginning to integrate personnel from civilian agencies in greater numbers. The U.S. Southern Command reportedly has already incorporated civilians into its structure, as has the Special Operations Command. The newly planned Africa Command (currently being created to handle all of Africa, which is now split between EUCOM and CENTCOM) will also incorporate a significant number of diplomats and development experts. In 2005, USAID established a new USAID Office of the Military Advisor, which provides USAID officials to the regional combatant commands, as well as the Special Operations Command, where they help plan for and oversee all foreign assistance activities. Within the State Department, the Director of Foreign Assistance has instituted new interagency groups to plan and vet DOD foreign assistance activities. Despite the increasing number of mechanisms for civil-military coordination on DOD foreign assistance activities, some analysts are concerned that the State Department lead has eroded, and that the new DOD mechanisms provide an inappropriate subordinate role for the State Department. This can be a disadvantage in planning for, implementing, and overseeing these activities, even when the State Department's approval is required. The answer for some is to increase the DOD role in such activities in general, while others argue for increasing the State Department and USAID ability to plan, oversee, and coordinate activities. One often-mentioned factor impeding the latter option is the lack of adequate numbers of State Department and USAID personnel at U.S. embassies and in Washington, D.C. A recent CSIS report details recommendations to increase civilian staff for counterterrorism, post-conflict, and humanitarian operations. An MIT study recommends establishing a permanent interagency group under the National Security Council, co-chaired by the Office of Management and Budget, to oversee security assistance program integration. A third option would be for Congress to reinforce the role of U.S. ambassadors as the top U.S. government official in all countries by requiring that U.S. ambassadors approve all foreign assistance-type activities of all U.S. military personnel or DOD contractors operating in their countries, regardless of the statutory authorities under which they operate. A fourth possibility for enhancing State Department control, in the view of some analysts, would be to create new regional mechanisms for State Department coordination, both among embassies and with the U.S. military. One of DOD's primary advantages in planning and carrying out foreign assistance activities is its regional organization, with four geographic combatant commands. Some analysts believe that this regional focus combined with a regional field presence allows for better foreign assistance planning, compared with the State Department's traditional bilateral focus, with foreign assistance planning in each country initiated and overseen by U.S. ambassadors reporting to the Department's Washington, D.C.-based regional bureaus. The DOD regional arrangement may also place some DOD foreign assistance activities beyond the purview of U.S. ambassadors, as regional DOD activities may not necessarily be cleared with ambassadors and ambassadors lack sufficient civilian staff to manage all military activities. Congress could provide funding for the State Department to hold regular meetings of regional ambassadors and other senior interagency personnel for discussions of regional issues together with regional combatant commanders and other military personnel, along the lines of the counterterrorism Regional Strategic Initiative. More ambitiously, it could locate abroad the regional Assistant Secretaries or special offices of regional bureaus to provide a venue for such meetings and for daily coordination with the combatant commands, or provide another means for regional coordination. As part of its oversight role, Congress might also urge the executive branch to take steps to ensure that ambassadors exercise greater control over activities in their countries. Some defense officials, on the other hand, argue for greater DOD autonomy in planning and carrying out foreign assistance activities in order to expedite urgent operations. In addition to the new DOD authorities requested in recent years—especially a permanent Title 10 U.S. Code train and equip authority and a permanent fund for field commanders to carry out humanitarian assistance activities—some analysts have argued for other changes that would accomplish those ends. Among the options posited by one analyst are several that could be the subject of congressional action: (1) increase the budgets and discretionary spending authority of the geographic combatant commands to meet emerging political-military needs; (2) expand Section 1206 authority to include state-building activities and activities to develop "future capacity for employment on operations as a U.S. partner"; and (3) expand the scope and authorities of the JIACG by enabling the JIACG to coordinate combatant commands' security cooperation activities, thus facilitating "proactive conflict-prevention tasks" and empowering JIACG members "to make decisions and coordinate regional interagency security cooperation activities." Many consider DOD to have a marked advantage in planning and carrying out a variety of activities in the foreign assistance area because of the greater number of personnel and its large budget. This resource advantage sometimes has created friction between State Department and DOD officials over the use of DOD resources. As DOD begins to implement its "Partnership Strategy," its resource advantages are once again highlighted. DOD officials have made clear, however, that they believe that Congress should provide the State Department and USAID with the resources to build their capacity to carry out foreign assistance duties. In a July 2008 speech, Secretary of Defense Gates urged the United States "to harness 'the full strength of America,'" by strengthening these civilian agencies. "It has become clear," he said, "that America's civilian institutions of diplomacy and development have been chronically undermanned and underfunded for far too long—relative to what we spend on the military, and more important, relative to the responsibilities and challenges our nation has around the world." In addition to its regional advantage, DOD enjoys two other advantages: greater planning and execution capabilities, and substantially greater budgetary resources. DOD can muster more manpower than any other agency. While U.S. military personnel may be stretched in wartime, there still exist substantial reserves of personnel that can be tapped to plan and carry out activities. The combatant commands enjoy considerably more personnel than do individual embassies, and their personnel are oriented toward planning activities, whereas State Department personnel are oriented toward collecting information and furthering U.S. policy through diplomacy, such as person-to-person contact. Despite waging a war in Iraq, CENTCOM created a new Joint Task Force in the Horn of Africa (CJT-HOA) of roughly 2,000 U.S. military personnel (the number fluctuates regularly) to plan and carry out efforts in the Horn of Africa that include much foreign assistance activity. In Iraq, DOD temporarily provided military personnel to fill about 100 State Department PRT posts, until the State Department could contract persons with the needed expertise to fill them. Congress also grants considerable funding to DOD to carry out foreign assistance-type activities. For example, Congress funded DOD's OHDACA appropriation at roughly $60 million a year for FY2005-FY2007 and provided for FY2008 a total of $103.3 million, of which part is multiple year money. These sums represent more funding than the State Department provides annually to many individual countries receiving U.S. foreign assistance. In addition, these amounts are but a small part of the actual cost of the activities undertaken under OHDACA authorities. OHDACA funding does not cover the total cost of an activity, but only its incremental cost (i.e., the amount above the normal peacetime cost of a soldier). In terms of historical spending, Congress's FY2009 OHDACA authorization for $83.3 million in is about the same, in nominal terms, as the $86 million (current dollars) that Congress authorized for OHDACA when the account was created in 1994. However, in constant terms, OHDACA funding has shrunk, as the initial OHDACA authorization would be $131 million in FY2009 dollars. Some analysts believe that Congress has given DOD an advantage by increasing DOD allocations for foreign assistance-type activities, because such funds are more easily included in the defense budget than in the foreign assistance budget. In particular, these funds include the CERP for Afghanistan and Iraq, and an increase in discretionary money in the CCIF, which can be used for a variety of purposes in addition to humanitarian relief. Although DOD enjoys greater resources, these resources do not necessarily provide DOD with the needed competence and expertise to carry out foreign assistance activities. For instance, for many years, some defense analysts have stated that the U.S. military civil affairs speciality does not have an adequate number of personnel to carry out the wide variety of state-building tasks needed; with a recent increase in the number of civil affairs personnel, one analyst's concern now focuses on whether civil affairs personnel are properly organized, trained, educated, and provided the resources to fulfill their mission. In some U.S. embassies, U.S. civilian personnel interviewed criticized some military personnel as "poorly trained in information gathering" and "rarely" possessing regional or linguistic expertise. DOD Directive 3000.05 points to a need to develop personnel qualified to engage in state-building and economic reconstruction activities. DOD is still deliberating whether to devote funding and time to develop a cadre with the necessary range of expertise to plan and carry out such activities on its own. DOD Directive 3000.05 points out that civilians are often better suited to carry out such tasks. DOD officials join many other analysts in urging Congress to augment the ability of civilian federal agencies to carry out the state-building and economic measures that will prevent and deter conflicts, stabilize nations in transitions from conflict, and foster economic recovery and democratic institutions during the post-conflict period. For many analysts, one indication of the urgency of increasing the number of federal civilian personnel to perform such tasks was the State Department's inability to supply when needed more than 100 specialized, skilled personnel to staff the PRTs in Iraq, which DOD had to staff temporarily until the State Department could locate contractors. Many analysts also cite a need for a significant number of USAID permanent staff. They note that USAID permanent staff now number approximately 2,000, down from some 15,000 during the Vietnam war, and that most USAID work is currently carried out by contractors. DOD has strongly supported the development of the State Department Office of the Coordinator for Reconstruction and Stabilization (S/CRS) to plan and coordinate such preventive, transitional, and post-conflict activities. Under authority provided by Congress, DOD has transferred funds during FY2006 and FY2007 to S/CRS for such activities. Nevertheless, some analysts have criticized S/CRS for failing to fully perform its assigned functions. Some fault a lack of top-level State Department commitment to its mission and bureaucratic infighting within the State Department. Others judge that Congress has not provided the State Department with the level of funding necessary to adequately staff and otherwise provide for this office's operations. In February 2008, the Bush Administration presented Congress with a $248.6 million request to fund a Civilian Stabilization Initiative that would strengthen U.S. civilian capabilities to respond to unanticipated conflict in foreign countries. The initiative's centerpiece would be a civilian response corps consisting of civilian federal government employees from several departments (250 members of an active response corps and 2,000 members of a standby response corps) and a reserve component of 2,000 citizens from outside the federal government. This corps would include people with a wide variety of state-building and economic reconstruction capabilities. Congress appropriated $50 million in seed money for the corps in supplemental State Department appropriations for 2007. Congress provided authority to establish a civilian reserve corps in the Duncan Hunter NDAA for FY2009 ( P.L. 110-417 ), Title XVI, Reconstruction and Stabilization Civilian Management. An area of particular interest to DOD is an increase in U.S. government capacity to train and equip foreign military and police forces. Some argue that DOD needs to increase its own training capacity—even if DOD remains in a supporting role. Others argue that Congress should provide the funds and personnel needed to increase the State Department's ability to train and equip such forces worldwide and in the event of future challenges on the scale of Afghanistan or Iraq. (See Appendix L .) Current debate in Congress has centered on the development of U.S. government civilian capabilities. Nevertheless, some analysts urge further examination of the uses and relationships of private sector civilian personnel to DOD missions. While DOD has attempted over the years to improve its ability to work in the field with non-profit NGOS, including publishing guidelines jointly with InterAction and the U.S. Institute of Peace in July 2007, some analysts suggest that further improvements are necessary. Some also point to a need to reexamine the potential role of for-profit contractor personnel in augmenting or replacing U.S. military forces in humanitarian and state-building activities. Appendix A. Disaster Relief and Humanitarian Assistance, Including Civic Action DOD Roles and Responsibility Disaster relief and humanitarian assistance have long been considered traditional, albeit secondary, DOD roles. DOD is one of the three principal U.S. government departments that provides disaster and other humanitarian assistance overseas. DOD humanitarian relief in disasters and other emergency and recovery situations is often carried out in coordination with or under the direction of U.S. government civilian agencies. The U.S. Agency for International Development (USAID) Office of Foreign Disaster Assistance (OFDA) takes the lead in disaster assistance; the State Department takes the lead in assisting refugees. DOD humanitarian assistance also takes place in the context of military operations, some of which are conducted solely for humanitarian purposes and others in which humanitarian activities are carried out as a strategic supplement to combat operations or military training exercises. In many situations, DOD also cooperates and coordinates with international organizations, such as the United Nations and the International Committee of the Red Cross (ICRC), and a wide variety of non-governmental organizations. The following sections discuss DOD authorities for and the specific DOD role in humanitarian assistance. There is a particular emphasis on DOD humanitarian assistance and related civic action under 10 U.S.C. 401. As used by the U.S. government, the term "humanitarian assistance" is vague, and the types of assistance provided under that rubric are broader than the humanitarian assistance provided by non-governmental relief agencies. DOD Disaster and Other Humanitarian Emergency Relief and Recovery Assistance: Activities and Authorities DOD is often the first U.S. government agency to respond in cases of natural or manmade disasters, providing the initial organizational effort for further action by civilian agencies. The DOD role is most often carried out under the President's broad authority to provide emergency assistance for foreign disasters, rather than Title 10 U.S. Code authority to provide disaster relief. DOD provides assistance in coordination with the Administrator of the USAID, who is charged with responsibility for coordinating U.S. government and private sector foreign assistance in cases of disaster. DOD provides assistance in humanitarian emergencies and recovery efforts under several Title 10 U.S. Code authorities added in the 1980s and 1990s. DOD provides transportation and or/funding for humanitarian assistance under 10 U.S.C. 2561 and 402, and humanitarian demining assistance under 10 U.S.C. 407. (The latter is covered separately in Appendix C .) 10 U.S.C. 2561—added in 1992 (with its original section number of 2551) and last amended in 2003—is DOD's primary authority to transport humanitarian supplies. It allows DOD to use appropriated funds for humanitarian assistance "for the purpose of providing transportation of humanitarian relief and for other humanitarian purposes worldwide." The Secretary of State determines that this provision should be used and requests DOD to respond with specific assistance such as helicopter transport, provision of temporary water supplies, or road and bridge repair. If possible, military personnel join the USAID OFDA assessment team to help determine the type of aid DOD can provide. Under this provision, DOD generally limits its activities to those that stabilize the emergency situation, such as road or bridge repair, but generally does not undertake projects that include rebuilding. The law requires an annual report to Congress on the use of funds. Donated goods can also be shipped on commercial vessels using Section 2561 funds. 10 U.S.C. 402—the "Denton Amendment" added in 1987 and last amended in 2003—authorizes shipment of privately donated humanitarian goods, including privately donated disaster assistance, on U.S. military aircraft and ships on a space-available basis. The donated goods must be certified as appropriate for the disaster or other situation by USAID's OFDA and can be bumped from the transport if other U.S. government aid must be transported. 10 U.S.C. 2557—added in 1985 and last amended in 2001—authorizes the Secretary of Defense to make nonlethal excess DOD supplies available for humanitarian relief. DOD also provides substantial emergency humanitarian relief assistance in a wide variety of other circumstances. Sometimes in cooperation with and under the authorities of other agencies, DOD provides humanitarian assistance, including food, shelter and supplies, medical evacuation, refugee assistance, logistical and operational support, and rehabilitation services. DOD supplies can be provided for humanitarian relief under presidential authority. DOD Humanitarian Assistance in the Context of Military Operations and Military Exercises: Activities and Authorities In addition to its emergency relief and recovery efforts, DOD conducts humanitarian activities in the context of military operations and training exercises. The specific purpose of some military operations is to provide humanitarian relief. Examples of this from the early 1990s are Operation Provide Comfort to provide humanitarian assistance to the Kurdish population in northern Iraq, and Operation Provide Relief, to deliver humanitarian supplies to Somalis, as well as the follow-on Operation Provide Hope, to assist and protect humanitarian workers in Somalia. Currently, DOD provides humanitarian assistance as part of military operations in Iraq and Afghanistan. (See Appendix K .) Special Operations Forces (SOF) carry out humanitarian activities as part of their operations, as well as part of their training exercises with foreign forces under 10 U.S.C. 2011, according to the United States Special Operations Command (SOCOM). Section 2011 authorizes the SOCOM commander and the regional combatant commanders to spend money and to deploy SOF teams to train with foreign military forces if the primary purpose is to train U.S. SOF. Recent authoritative published information is not available on an unclassified basis. In 2006, Congress provided DOD with new authority for small-scale humanitarian relief and reconstruction assistance by clarifying and expanding the existing Combatant Commanders Initiative Fund (CCIF). When first authorized in 1991 (10 U.S.C. 166a), the CCIF (then known as the Commanders-in-Chief or CINC Initiative Fund), provided funds for exercises and military education and training of foreign personnel, and for "humanitarian and civil assistance." A 2006 amendment changed civil assistance to "civic assistance, to include urgent and unanticipated humanitarian relief and reconstruction assistance," and made the latter a priority category, "particularly in a foreign country where the armed forces are engaged in a contingency operation." To this point, it appears that the CCIF has not been used extensively to fund humanitarian assistance. In response to a Congressional Research Service request in 2007, DOD stated that just under $1 million had been used for humanitarian purposes from FY2005 through FY2007. In its FY2009 DOD budget request, the Administration is requesting $100 million in CCIF funds for urgent humanitarian relief and reconstruction. Section 401 Humanitarian and Civic Action Activities, Conditions, and Coordination Section 401, added to Title 10 U.S. Code in 1986 and amended several times, authorizes the U.S. military to perform specific humanitarian and civic action assistance projects. These projects are (1) medical, surgical, dental, and veterinary care provided in areas of a country that are rural or are underserved, and related education, training, and technical assistance; (2) construction of rudimentary surface transportation systems; (3) well-drilling and construction of basic sanitation facilities; and (4) rudimentary construction and repair of public facilities. Section 401 establishes several conditions for the projects. They must serve the basic economic and social needs of the people in the recipient country, and must complement, not duplicate, other U.S. social or economic assistance. They cannot benefit any individual, group, or organization engaged in military or paramilitary activity. They must promote the security interests of the United States and the host nation, and contribute to the operational readiness skills of participating members of the U.S. armed forces. Moreover, they must be provided in the context of authorized military operations, exercises, and training deployments. Section 401 activities are largely carried out under the aegis of the combatant commands as part of authorized military overseas operations, readiness exercises, and training deployments. The statute stipulates that the Secretary of State "must specifically approve" providing humanitarian and civic assistance. In addition, DOD instructions regulating this section require prior approval from the Department of State, USAID, and any other relevant civilian agencies for all Section 401 activities. As spelled out in the FY2007 Section 401 report to Congress, a host nation government proposes a project, which the U.S. embassy then endorses and forwards to the combatant commanders for consideration. Combatant commanders file annual proposal lists and proposals to meet emergency requirements with the Defense Security Cooperation Agency (DSCA), which coordinates an interagency review to ensure compliance with U.S. policy and relevant legislation. This review involves representatives from the office of the Under Secretary of Defense for Policy, the DOD General Counsel's office, the Department of State, and USAID. The project must be approved by the U.S. ambassador to the country where the activity will occur and by the Secretary of State. Section 401 Origins and Evolution DOD has long carried out abroad a wide variety of small-scale humanitarian programs, often in the context of military civic action (MCA) programs that also involve construction and reconstruction projects. Experts trace the Army's experience with MCA to 18 th - and 19 th -century engineering and medical activities in the United States and abroad. "By the time of World War II, a propensity toward military civic action was already part of the fabric of the U.S. soldier," according to one study, which then identifies the MCA program in Korea after the Korean War as the "first sustained and concerted U.S. military civic action plan." This program set forth a dominant model in military civic action aimed at small-scale construction and reconstruction projects, in which U.S. military forces assist, but host nation troops do most of the work. MCA gained prestige as part of the U.S. military occupation of the Philippines at the turn of the 20 th century and was later endorsed by President John F. Kennedy, who viewed it as an appropriate nation-building tool. Although military assistance had been carried out as part of security assistance programs prior to the 1960s, in 1965, Congress responded to concerns about its role in international development by placing the first restrictions on the use of such projects "to prevent overlap" with USAID when that agency was established in 1961 and legislating interagency coordination that would involve USAID. MCA became controversial during the 1960s, when, because of its linkage with counterinsurgency in Vietnam, Congress became reluctant to fund it. Nevertheless, Congress did fund some MCA projects abroad after Vietnam that were not linked to counterinsurgency campaigns, in particular an Africa program in the 1980s. That program was funded at almost $5 million in FY1985, but funding dropped to just under $2 million by FY1989. During the 1980s, controversy over MCA in Central America, where the United States was supporting the Salvadoran government's counterinsurgency campaign, led Congress to authorize specific activities through a new statute. When Congress added Section 401 to Title 10 U.S. Code in 1986, it set parameters for humanitarian and civic assistance activities in foreign nations by specifying activities and establishing conditions, but it also provided DOD with greater flexibility by granting Title 10 authority for such assistance. Previously, at least some MCA, in particular the Africa program, was carried out under authorities that put the State Department in the lead, according to one source. The number of countries in which these activities have occurred has remained fairly constant, while the regional balance has shifted somewhat. A comparison of FY1995 and FY2006, two years where humanitarian and civic action activities took place in 43 countries under Section 401 authority, shows that the number of Western Hemisphere, Middle East/Arab, and Asia/Pacific recipient countries decreased, while the number of countries in Africa and Greater Europe grew. Two new African countries and four new European locations were selected for Section 401 activities. In FY2007, when the number of countries rose to 46, three new countries from Europe and the former Soviet Union were selected. The greatest change has been the substantial increase in the number of projects. From the early 1990s to FY2007, the number of projects multiplied almost eightfold. From FY2005 through FY2007, the number more than doubled, from 197 to 480. Section 401 costs over the past 14 years for which data are consecutively available (FY1993-FY2006) has ranged from a low of $4.7 million in FY1998 to a high of $11.03 million in FY2007. Costs have risen over the past two fiscal years, but not at the same pace as the number of projects, that is, from $7.67 million in FY2005 to $11.03 million in FY2007. (These data are taken from the tables at the end of this appendix, which are compiled from the Section 401 annual reports.) Issues DOD humanitarian assistance often draws praise when provided in emergency relief situations, such as natural and manmade disasters, as it is the most flexible operational and policy tool that can be quickly brought to bear to relieve human suffering. Controversy has arisen, however, when U.S. military troops provide humanitarian and civic assistance for the longer term (i.e., in non-emergency or conflict recovery situations). Such longer-term assistance occurs in the course of military operations and deployments, or when training exercises are conducted extensively in an area over a prolonged period of time. Then, humanitarian and civic assistance is often used for political purposes, including maintaining contact with a country, region, or local population; mitigating tensions; cultivating allies; and promoting democracy. In the case of humanitarian infrastructure projects and other civic assistance, there are longstanding concerns about suitability and costs that date back to the 1960s. Critics, and even some proponents, of such assistance have found that projects do not always meet the most urgent needs of the host country or long-term development goals, and are not sustainable, and thus may represent a poor use of U.S. funds. Nevertheless, to some analysts, civic action projects fill a gap where no other U.S. assistance is available. The use of U.S. military forces to carry out large-scale humanitarian interventions in Somalia and the Balkans in the 1990s aroused concern both within the military and among civilian humanitarian aid workers. Many in both camps also were troubled when the military, as the major presence on the ground, became involved in humanitarian and state-building projects, and questioned the suitability and desirability of using U.S. military personnel for such activities. Many asserted that humanitarian and state-building tasks could have been better performed by experienced civilians with subject area expertise and knowledge about local culture. Military leaders themselves questioned whether military personnel were the most appropriate personnel to carry out such activities, particularly as many believed that such activities diverted time and personnel from the military's primary functions. Another concern was a lack of effective coordination. Military culture clashed with the ethos and modes of operations of the civilian personnel involved from a multitude of agencies—the United Nations and other international organizations, national governments, and from non-governmental humanitarian groups—and the resulting distrust and disagreement impeded cooperation. The concerns raised during the interventions of the 1990s have resurfaced in the context of Iraq and Afghanistan, along with new issues regarding the effect of the use of military forces on the work and safety of civilian humanitarian workers in the field. The use of military personnel for humanitarian and civic assistance projects in Iraq and Afghanistan, particularly in the context of the Provincial Reconstruction teams in Afghanistan, has led to fears that the perception of humanitarian assistance as an impartial, neutral tool has been jeopardized and that the lives and safety of civilian humanitarian workers is threatened because they may be perceived as associated with military efforts. In that context, however, attempts to incorporate civilians into PRTs have been hampered by the lack of civilian personnel for such tasks. (See the discussion on PRTs in Appendix K .) At the same time, concerns again arise as to whether DOD activities are effective and properly coordinated with civilian agencies to ensure consistency with U.S. foreign policy objectives. The recent placement of USAID personnel in U.S. regional combatant commands to scrutinize and help develop proposed humanitarian and civic assistance projects is intended, among other things, to synchronize USAID and DOD planning efforts and to produce joint policy documents dealing with linkages between defense and development. A previous concern, which has not surfaced in the current debate, is that the involvement of military forces in humanitarian aid and small-scale economic projects weakens civilian control over the military in developing countries by perpetuating stereotypes that military forces are most effective at meeting basic needs and perhaps by encouraging the use of military forces to perform functions that more properly performed by civilians. On the other hand, some argue that the use of U.S. military forces in such activities provides a democratic role model for local military forces and an opportunity to improve local civil-military relations. Appendix B. DOD Global Health Programs DOD Role and Responsibilities DOD is engaged in a number of efforts to improve global health. Information in this section reflects publicly available information, which is limited. Among the many U.S. government global health programs, DOD sponsors a number of programs that focus primarily on infectious diseases and human immunodeficiency virus/acquired immunodeficiency syndrome (HIV/AIDS). DOD regularly publishes information about the international DOD HIV/AIDS Prevention Program (DHAPP) and the DOD Global Emerging Infections Surveillance and Response System (DOD-GEIS). It also published information about some humanitarian assistance efforts such as certain projects funded by the OHDACA account (see Disaster Relief and Humanitarian Assistance, Including Civic Action for information on OHDACA). However, press accounts and public events and conferences sometimes refer to other DOD programs related to global health, though little or no publicly available documentation about such programs is available. It is unclear which, if any, DOD office has leadership over DOD global health policy. There appears to be no agency-wide implementing strategy to integrate and coordinate global health policy across a range of related DOD programs. Some offices and programs appear to create informal policy within their spheres, but their efforts have not led to institutionalized policy in most cases, according to current and former DOD officials. Origins and Evolution The Global Emerging Infections Surveillance and Response System (GEIS) Through GEIS, DOD supports broad emerging infectious disease prevention programs through extensive partnerships among five DOD overseas laboratories, the military health system, and other U.S. and foreign agencies. In June 1996, President Clinton issued Presidential Decision Directive NSTC-7, which established a national policy to address the threat of emerging infectious diseases through improved domestic and international surveillance, prevention, and response measures. The directive expanded DOD's mission to include support of global surveillance, training, research, and response to emerging infectious disease threats. The DOD Global Emerging Infections Surveillance and Response System (DOD-GEIS), which was developed in response to that directive, facilitates early recognition and control of diseases that threaten national security. DOD-GEIS is designed to strengthen the prevention of, surveillance of, and response to infectious diseases that are a threat to military personnel and families, reduce medical readiness, or present a risk to U.S. national security. The key objectives of DOD-GEIS are to increase DOD's emphasis on the prevention of infectious diseases, strengthen and coordinate DOD's surveillance and response efforts, and create a centralized coordination and communication hub to help organize DOD resources and link them with U.S. and international efforts. For example, DOD-GEIS partners with Navy and Army laboratories, and with the World Health Organization's Global Outbreak Alert and Response Network (GOARN) (described in the "International Response" section), to collect avian influenza isolates from people around the world and share them with the Centers for Disease Control and Prevention and world public health officials for molecular analysis and formulation of influenza vaccines. DOD-GEIS's budget has grown substantially over the past decade, from $2.3 million in FY1997 to $52 million in FY2007, including $40 million for pandemic and avian influenza surveillance. In January 2006, Congress directed DOD-GEIS to administer $39 million in FY2006 supplemental funding for avian and pandemic influenza surveillance. Congress provided an additional $40 million for DOD-GEIS avian influenza activities in FY2007. Throughout 2007, DOD-GEIS claimed significant advances in disease surveillance, including better understanding of naturally occurring biological threats (e.g., avian and pandemic influenza) and to improved vaccination efforts; standardization and improvement of malaria diagnostic resources and strengthening of international efforts to address antimalarial resistance; addressing the reemergence of malaria on the Korean peninsula; utilizing disease morbidity and mortality surveillance data to monitor possible infectious disease deaths in US military forces; and strengthening surveillance systems in resource-constrained or developing countries. DOD HIV/AIDS Prevention Program As an implementing partner of the President's Emergency Plan for AIDS Relief, DOD plays a role in fighting the global spread of HIV/AIDS. DOD HIV prevention programs develop and implement military-specific HIV prevention activities. DOD efforts help foreign militaries establish HIV/AIDS-specific policies for their personnel; assist foreign militaries in adapting and providing HIV prevention programs; train foreign military personnel to implement, maintain, and evaluate HIV prevention programs; assist foreign countries in developing military-specific interventions that address high-risk HIV attitudes and behaviors; and integrate with and make use of foreign military contacts, other U.S. government programs, and those managed by allies and the United Nations. From FY2000 through FY2009, DOD funds total some $73.9 million for HIV/AIDS prevention programs. The Department of State transfers additional funds to DOD through the Global HIV/AIDS Initiative. Issues DOD activities in global health are the subject of increasing public discussion and research. Some argue that DOD's role in global health is ambiguous. Others express concern about the possible "securitization,"of health (i.e., the use of U.S. government resources for health by DOD rather than through more standard civilian channels, such as USAID or non-governmental organizations). The lack of public information about the organization and operation of some DOD global health programs may raise questions about the scope and funding of such programs. It may also raise questions about their coordination and integration with not only other similar programs in civilian agencies, but also with other DOD activities, such as stability operations and capacity-building of foreign militaries. Appendix C. Department of Defense Humanitarian Mine Action Program DOD Role and Responsibilities The Department of State, USAID, and DOD participate in the DOD Humanitarian Mine Action (HMA) Program, through which the United States trains personnel of other nations to deactivate land mines and other explosive remnants of war. The authority for this program is 10 U.S.C. 407. HMA falls under two offices administratively. The Assistant Secretary of Defense for Special Operations and Low-Intensity Conflict is responsible for policy, planning, and oversight. The Defense Security Cooperation Agency (DSCA), which is subordinate to the Under Secretary of Defense for Policy, is responsible for administrative program management. Program funding is from DOD's Overseas Humanitarian, Disaster, and Civic Aid (OHDACA) appropriation. When DOD is designated to conduct the training, the assistance is provided by U.S. Special Operations Forces and supervised by the regional military Combatant Commander. This DOD program complements the efforts of the Department of State's Office of Weapons Removal and Abatement, which provides financial, technical, and educational assistance to a wide range of foreign governmental and non-governmental organizations, and administers federal grants to selected humanitarian land mine-related projects. Generally, a nation will request demining assistance through the U.S. embassy to the State Department. An interagency U.S. Government Policy Coordination Committee (PCC) Sub-group on Humanitarian Mine Action then conducts an in-country evaluation and either approves or disapproves the nation's request to join the HMA program. The Humanitarian Mine Action Sub-group comprises representatives from the National Security Council, Department of State, USAID, Defense Department, and the Central Intelligence Agency. If approved, the PCC Sub-group designs a demining/land mine education program to meet the requesting nation's needs. Origins The National Security Council established the U.S. Humanitarian Demining Program in 1993. In 1995, DOD established its Humanitarian Mine Action Program, and in 1998, the Department of State followed, creating the Office of Humanitarian Demining Programs. In October 2003, Congress established the interagency humanitarian demining program, consolidating previously initiated U.S. demining programs. These administration and congressional actions were responding to several years of increasing international attention to the toll on civilian populations from land mines deployed during military operations and never deactivated or retrieved. To facilitate DOD participation in this program, Congress directed that the Secretary of Defense [c]arry out a program for humanitarian purposes to provide assistance to other nations in the detection and clearance of landmines. Such assistance shall be provided through instruction, education, training, and advising of personnel of those nations in the various procedures that have been determined effective for detecting and clearing landmines. In directing this effort, Congress specified that any funds authorized for the program were to be used for (1) activities to support the clearing of land mines for humanitarian purposes, including education and technical assistance; (2) providing equipment and technology by transfer or lease to a foreign government participating in a land mine-clearing program; and (3) contributions to non-governmental organizations experienced in land mine clearance. To ensure that DOD's humanitarian participation was restricted to training and technical assistance, Congress further directed that the Secretary of Defense ensure that no member of the U.S. armed forces participating in this program engages in the physical detection, lifting, or destroying of landmines unless for the concurrent purpose of supporting a United States military operation ... or a military operation that does not involve the Armed Forces of the United States. Activities and Evolution HMA funds the training of host nation personnel to deactivate mines and also provides a limited amount of "seed" equipment to enable a nation to develop and maintain its own demining/mine education efforts. These HMA activities are seen to benefit DOD objectives by contributing to combatant commanders' regional cooperation strategies and providing U.S. military personnel unique in-country training opportunities. Through HMA funding, DOD also supports the Humanitarian Demining Training Center at Ft. Leonard Wood, MO, and the Mine Action Information Center at James Madison University, Harrisonburg, VA. These facilities provide training and analysis relating to humanitarian demining for both the military and civilian communities. HMA funding also supports the Humanitarian Demining Research and Development Program, which is managed by the Army Research, Development, and Engineering Command. Pursuant to 10 U.S.C. 401, no later than March 1 each calendar year, the DSCA provides a report of activities during the previous fiscal year, including those of the Humanitarian Mine Action program, to the House Committees on Armed Services and Foreign Affairs and the Senate Committees on Armed Services and Foreign Relations. As the figures below indicate, HMA funding is relatively low compared with other assistance programs and has decreased significantly since FY2000, although the number of countries receiving HMA assistance is substantial. Since 2000, HMA has assisted some 30 countries. Issues DOD's HMA program has not been a source of controversy. Appendix D. Foreign Military Sales and Financing Program DOD Role and Responsibilities The U.S. Foreign Military Sales Program (FMS) is the principal vehicle through which the U.S. government makes sales of weapons and associated equipment and training to friendly foreign nations. Most of these sales are made on a cash basis—that is, the purchasing country enters into a contract specifying the price to be paid for specific items of military equipment being obtained. The U.S. government then procures the defense items from the U.S. manufacturer (if not provided from Defense Department stocks), receives the payment from the foreign buyer, and passes it to the manufacturer in accordance with the terms and deadlines specified in the contract. The U.S. government monitors the procurement process from the signing of the contract until the items purchased are all delivered. Purchases through the FMS program can be provided to individual purchasers with funds requested and appropriated in the annual Foreign Operations Appropriations legislation. This element of the FMS program is termed Foreign Military Financing (FMF); it permits loans or forgiven payments to countries that may have difficulty paying for needed weapons, military equipment, and related items. The annual budget justification for Foreign Operations is formulated primarily by the State Department, with input on specific country accounts or prospective arms sales provided by DOD. From its inception, DOD has handled the implementation of the FMS cash and credit and an earlier grant Military Assistance Program (MAP), used essentially before 1976. Determining which nations are to receive military assistance from either program, as a matter of national policy, has been primarily the responsibility of the State Department. The Arms Export Control Act (AECA) specifies which conditions must be met before a country can purchase defense articles from the United States. In essence, a country must be eligible to purchase under existing U.S. law (i.e., if a statute forbids sales to a specific country, that country is ineligible to make a purchase). The President also determines a country's eligibility, taking into consideration U.S. security interests. If a country is eligible, in the contract for sale of the items that it may purchase, the country must give binding commitments to use the articles purchased only for such things as legitimate self-defense and internal security, and not to retransfer items sold to it to third-parties without prior U.S. government consent. The responsibility for implementing FMS programs rests with the Defense Security Cooperation Agency (DSCA). The DSCA Security Assistance Officers (SAOs) who manage the programs on the ground are located in U.S. embassies. Origins and Evolution FMS had its origins in the beginning of the Cold War, primarily as an effort to help war-torn allied countries in Europe build up their military defenses and thus support the new North Atlantic Treaty Organization's (NATO's) ability to help contain Soviet Communist expansion in that region. The Mutual Defense Assistance Act of 1949 (P.L. 81-329) authorized the FMS program, and a grant Military Assistance Program (MAP), as means to provide needed military equipment and training to U.S. allies in need of such military support and aid. Much of the equipment transferred under this original authority was excess stocks of World War II vintage equipment, which was less expensive but still valuable for helping restore the military capabilities of key U.S. allies. The core rationales for military assistance at the inception of the Cold War can be summarized as follows: To enhance the ability of allied and friendly countries to defend themselves against external aggression or internal subversion by Communist or unfriendly forces. To enhance bilateral security relationships to deter aggression against allied and friendly nations. To express tangible U.S. support for political actions of allied and friendly nations that the United States sought to encourage. The first rationale was essentially a military one. The other two were both political and military in nature. Over time, the focus and nature of military assistance was modified somewhat. As their economies grew, industrialized nations allied to the United States gradually stopped receiving grant military aid and began to pay cash for major weapons systems purchased from the United States under the FMS program, and by the 1970s, the grant MAP program was phased out. Nevertheless, using the FMS cash program, as well the FMF financing program, to support the security interests of American friends and allies overseas has remained a constant theme in justifying this form of military aid. The nature of the threat to U.S. allies and friendly states around the globe may have changed, but the goal of using arms sales as an instrument to further U.S. interests through enhancing the military capabilities and security such countries has not. Initially, only the more industrialized allies of the United States participated in the FMS program, while the grant MAP program provided military aid to a much larger number of less developed and less affluent countries friendly to the United States throughout the world. The original nations eligible for military assistance under the 1949 NDAA were NATO members, Turkey, Greece, South Korea, Iran, the Philippines, and Taiwan. Today most of these same nations, excluding Iran, which is ineligible for the program, generally pay cash for military purchases under the FMS program. The principal goals of FMS remain the same, except the number of nations making purchases has increased, with Middle Eastern nations, in particular major oil-producing states, becoming significant buyers from the late 1970s to the present. As noted above, states such as Israel and Egypt, which reached a U.S.-backed peace agreement in 1979, have been and continue to be leading recipients of FMS sales and FMF credits. The primary countries to receive the greatest share of FMF since the late 1970s have been Israel and Egypt. Most recently, in FY2006, for example, Israel received slightly over $2.257 billion in FMF financing, for which repayment was waived. During FY2006, Egypt received $1,287 billion in waived FMF financing. The entire FMF appropriation for FY2006 was about $4.45 billion for all recipients. Issues There have not been any significant controversies over the management of the FMS cash or FMF financing programs between the Defense and State Departments over the years. There is a clear delineation of responsibilities and authorities, and the implementation of the programs has generally worked smoothly. Both departments would generally agree that they would wish more funding to be available to provide defense articles to countries deemed needy but that may have limited financial resources with which to purchase U.S. weaponry. Within the past two years, DOD has argued that traditional State Department security cooperation programs, such as FMS/FMF, lack the flexibility necessary to respond to rapidly changing environments. In a FY2009 budget document, DOD stated that traditional security assistance "takes three to four years from concept to execution," indicating that was too long to meet emerging threats and to take advantage of emerging opportunities. The long lead time led DOD to request its own train and equip authority. (See Appendix I . ) Appendix E. International Military Education and Training Program DOD Role and Responsibilities The International Military Education and Training Program (IMET) falls under the policy authority of the State Department, is funded through the annual Foreign Operations Appropriations legislation, and is implemented by DOD through the Defense Security Cooperation Agency (DSCA). Authorized by 22 U.S.C. 2347, IMET provides opportunities for foreign military personnel to attend a variety of U.S. military educational institutions and training courses. The policy decisions regarding which foreign nations will be permitted to participate in IMET programs, and the funding levels provided to them, are made primarily by the State Department, with input from DOD. Origins and Evolution IMET was an outgrowth of the original Military Assistance Program (MAP) created by the Mutual Defense Assistance Act of 1949 (P.L. 81-329). In 1976, the enactment of the International Security Assistance and Arms Export Control Act of 1976 ( P.L. 94-329 ) created the grant IMET as a program separate from the original MAP program, which was being phased out, to provide exclusively for various forms of military training to friendly foreign nations. The 1976 Act also placed IMET's statutory authority in the Foreign Assistance Act of 1961, as amended. In 1990, the House and Senate Appropriations Committees initiated a statutory change based on their view that changing world political-military circumstances warranted a new direction for the traditional IMET program, one that would bring an increased emphasis on enhancing the skills and professionalism of both civilian and military leaders and managers of foreign military establishments. The Foreign Operations Appropriations Act for FY1991 ( P.L. 101-513 , signed November 5, 1990) directed the Defense Department to establish a program within IMET focused, in particular, on training foreign civilian and military officials in managing and administering military establishments and budgets; creating and maintaining effective military judicial systems and military codes of conduct, including observance of internationally recognized human rights; and fostering greater respect for the principle of civilian control of the military. Congress earmarked $1 million of the FY1991 IMET appropriation to establish this program. This initiative is called Expanded IMET, or E-IMET, and each year the Defense Department has broadened the program. Although Congress did not earmark IMET funds to support this program after FY1991, it has in report language noted an expectation that the financial investment in E-IMET be increased. Congress further broadened the program to include participation by members of national legislatures who are responsible for oversight and management of the military, and "individuals who are not members of a government." Because E-IMET is a sub-element of the overall IMET program, it is funded as part of the annual IMET appropriation, contained in the Foreign Operations Appropriations legislation. Activities The IMET program funds a variety of training programs conducted by the Defense Department at a variety of venues. The Service War Colleges and the National Defense University's (NDU's) National War College programs are attended by U.S. and foreign senior military and civilian equivalents. These programs focus on service/national security policy and the politico-military aspects of Service/Defense policies and programs. The Services and the Joint Staff (for the NDU) annually provide invitations to the governments of foreign friends and allies for foreign student participation. The senior service schools remain a significant element of IMET-sponsored training. The specific schools and their locations are as follows: National Defense University, Fort McNair, Washington, D.C.; Army War College, Carlisle Barracks, PA; Navy War College, Newport, RI; and Air War College, Maxwell Air Force Base, AL. The U.S. military services offer numerous programs and courses categorized as professional military education (PME). Foreign students are assigned to programs based on their military rank and specific responsibilities in their country's military. Programs are conducted at Service Command and Staff Colleges, including basic and advanced officer training in specialized areas such as finance, ordnance, artillery, and medicine. For more senior officers, some training may occur at U.S. senior service schools. A representative listing of the schools involved include the Army Command and Staff College, Fort Leavenworth, KS; Army Logistics Management College, Fort Lee, VA; U.S. Army Infantry School, Fort Benning, GA; and Air Force Institute of Technology, Wright-Patterson Air Force Base, OH. PME programs and the senior service school programs combined account for approximately half of the annual IMET appropriation. The majority of IMET-sponsored training is conducted in the United States at DOD and U.S. military service schools, with U.S. military personnel. Therefore, English language proficiency is required. To help foreign students improve their English language skills, DOD has assigned the English language training mission to the Defense Language Institute English Language Center (DLIELC), located at Lackland Air Force Base, Texas. DLIELC provides resident English language training in state-of-the art facilities. In addition, DLIELC conducts English language training surveys to evaluate foreign government programs and will assign instructors as a "detachment" to the host country to personally assist in the establishment and maintenance of their English language training program. In FY2006, over 110 separate countries were participating in some grant IMET training program. During FY2006, the appropriation for grant IMET was over $81 million. The E-IMET initiative is accomplished through educational programs in the United States offered by DOD and U.S. military service schools, by Mobile Education Teams visiting host countries, and by funding military participation in overseas conferences. Although IMET funding can be used for such an initiative (overseas seminars) under the auspices of the E-IMET program when such activities are deemed appropriate, the emphasis and preference is for a longer training experience in the United States that maximizes the students' exposure to the American way of life. Beginning in FY1991, DOD launched E-IMET by refining some existing programs and initiating new courses through the military departments. Further, new educational programs were established to address the topics of military justice, human rights, and civil-military relations. The bulk of this effort is accomplished through three schools: Defense Resource Management Institute, Naval Postgraduate School (NPS), Monterey, CA; Center for Civil-Military Relations, Naval Postgraduate School, Monterey, CA; and the Naval Justice School, Newport, RI. Issues There have not been any significant controversies over the division of management tasks of the IMET programs between the Defense and State Departments over the years. There is a clear delineation of responsibilities and authorities, and the implementation of the programs has generally worked smoothly. Both departments generally agree that they wish additional funding could be available to facilitate providing training to nations allied or friendly to the United States as a means of broadening military to military contacts between them and the United States. As with the Foreign Military Sales/Foreign Military Financing program, DOD has argued recently that IMET lacks the flexibility necessary to respond to rapidly changing environments. The DOD global train and equip authority that Congress provided in Section 1206 of the National Defense Authorization Act (NDAA) for Fiscal Year 2006 ( P.L. 109-163 ), and extended through FY2008, was intended to provide a quicker response in such circumstances. (See Appendix I . ) Appendix F. Counternarcotics DOD Roles and Responsibilities DOD has multiple roles and responsibilities in the area of counternarcotics (CN). It is the single lead federal agency for the detection and monitoring of aerial and maritime movement of illegal drugs toward the United States and plays a key role in collecting, analyzing, and sharing intelligence on illegal drugs with U.S. law enforcement and international security counterparts. In addition, Congress authorizes DOD to offer CN assistance to train and equip foreign countries in their efforts to build institutional capacity and control ungoverned spaces used by drug traffickers. Although DOD is a provider of international CN assistance, the Foreign Assistance Act of 1961 vests responsibility for coordinating all U.S. counter-drug assistance with the Secretary of State (Section 481, P.L. 87-195, as amended; [22 U.S.C. 2291]). U.S. officials describe interagency coordination between DOD and the State Department on CN assistance as highly varied, ranging from ad hoc coordination based on personal networks across agencies to weekly planning meetings formally chaired by the National Security Council. Differences in interagency coordination are often attributable to differences in priority of certain countries and issues. Origins U.S. concern about the national security implications of narcotics trafficking first emerged in the late 1960s. In a 1971 press conference, President Richard Nixon famously coined the term "war on drugs" and identified illicit drugs as "public enemy number one." As a result of frustration at the perceived failure of federal anti-narcotics measures to date, many policy makers, including some Members of Congress, began to call for the inclusion of the U.S. military in anti-drug efforts in the 1970s. Pressure for U.S. military involvement increased throughout the 1980s, as U.S. officials grew concerned that law enforcement personnel were unprepared and ill-equipped to effectively combat well-armed drug cartels and operate in conflict situations in drug source countries. Such calls and pressure for DOD involvement in CN activities raised particular concern among several top DOD officials in the 1980s, including former Secretaries of Defense Caspar Weinberger and Frank Carlucci, who strongly objected to the U.S. military's continued and increasing involvement in drug-related activities. Both officials, whose objections reflected an attitude pervasive throughout DOD, perceived anti-drug efforts as law enforcement concerns that would be detrimental to the U.S. military's primary mission. In 1985, Weinberger reportedly wrote that "reliance on military forces to accomplish civilian tasks is detrimental to military readiness and democratic processes." In 1988, Carlucci reportedly stated that staffing the front line of the country's drug war "is not the function of the military." Nevertheless, DOD increasingly participated in interdiction operations in the early 1980s and sporadically engaged in training, equipping, and transporting foreign anti-narcotics personnel in the mid-to late 1980s. Evolution In the 1980s, subsequent administrations and Congress greatly expanded DOD's authorities and role in CN assistance. (See Table F -1 .) Under Presidents Ronald Reagan and George H. Bush, DOD emerged as a prominent actor in U.S. CN assistance to Latin America. President Reagan issued National Security Directive 221 (NSD-221), which declared narcotics trafficking a U.S. national security concern, and directed U.S. military forces to "support counter-narcotics efforts more actively." President Bush issued National Security Directive 18 (NSD-18), which explicitly directed the Secretary of Defense to redefine the Pentagon's mission to include CN as one of its main priorities. Congress provided DOD with its first major authority in 1989, identifying DOD as the lead federal agency for the detection and monitoring of aerial and maritime transit of illegal drugs (Sec. 1202, P.L. 101-189 ; 10 U.S.C. 124). As U.S. CN engagement in the Andean region continued through the 1990s, Congress extended DOD's authorities to include a broad range of train and equip assistance. Under the National Defense Authorization Act (NDAA) for Fiscal Year 1991 (Sec. 1004, P.L. 101-510 ), Congress authorized DOD to provide CN-related training and transport of law enforcement personnel to foreign law enforcement agencies; notably, Section 1004 authorities are not limited to specific countries and do not establish spending restrictions for these new authorities. Congress also authorized DOD to equip foreign CN personnel under the NDAA for FY1998 (Sec. 1033, P.L. 105-85 ). Section 1033 currently enables DOD to assist 18 countries' CN efforts by providing non-lethal protective and utility personnel equipment, including navigation equipment, secure and non-secure communications equipment, radar equipment, night vision systems, vehicles, aircraft, and boats. Congress has also supported efforts to restrict DOD's role in CN assistance. Reacting to reports in the 1990s of U.S. CN funds supporting countries with a history of human rights problems, Senator Patrick Leahy sponsored a provision in the Foreign Operations, Export Financing, and Related Appropriations Act, 1997, to prohibit the State Department from providing international narcotics control assistance to countries for which the Secretary of State had credible evidence of committing gross human rights violations. In 1998, Congress approved the Leahy provision to apply to DOD, and both provisions have been attached to all subsequent DOD appropriations vehicles. The State Department and DOD provisions, however, differ notably in the scope of CN assistance covered; whereas the State Department restriction covers training and assistance programs, the DOD restriction covers only training programs. This distinction may allow DOD to provide CN assistance to countries that the State Department may not. Recent Activities Colombia and the Andean Region DOD continues to provide CN assistance to Colombia and the Andean region, primarily under Section 1004 and Section 1033 authorities. Over the years, DOD CN goals in Colombia have evolved to include combating paramilitary and terrorist groups in conjunction with drug trafficking organizations. U.S. military assistance to Colombia and the Andean region, however, has raised several concerns relating to the effectiveness of CN foreign assistance in reducing drug availability in the United States; the potential unintended consequences of strengthening Latin American military capabilities; and the shift, over the years, from a primary focus on halting the flow of drugs to a new focus on counterterrorism. Afghanistan DOD CN support, in the form of training, equipment, intelligence sharing, and transportation, is part of a broader U.S. strategy to combat drugs and terrorism in Afghanistan. The NDAA for FY2004 (Sec. 1021, P.L. 108-136 ) added Afghanistan to the list of countries eligible for transfers of non-lethal DOD CN equipment under Section 1033 authorizations. The NDAA for FY2007 further extended DOD CN assistance authorizations to include the provision of individual and crew-served weapons of .50 caliber or less and ammunition for these weapons for Afghanistan's CN security forces (Sec. 1022, P.L. 109-364 ). According to DOD officials, Afghanistan has benefitted from CN assistance made available by Section 1022, which allows DOD to provide counterterrorism support in conjunction with CN activity. DOD's role in CN in Afghanistan has generated a variety of critics, ranging from those who seek to broaden DOD's CN responsibility to those who view DOD's CN activities as a diversion from the U.S. military's stability and counterterrorism operations in the country. According to the Senate Report for the NDAA for FY2006 ( S.Rept. 109-69 ), DOD requested authorization from Congress "to provide assistance in all aspects of counterdrug activities in Afghanistan, including detection, interdiction, and related criminal justice activities." Legislation enacted, however, has yet to authorize DOD to provide CN assistance beyond the scope authorized in Sections 1004 (1990), 1033 (1997), and 1022 (2003). Further emphasizing congressional resistance to expanding DOD CN authorities, the House Report for the John Warner NDAA for FY2007 ( H.Rept. 109-542 ) states that DOD "must not take on roles in which other countries or other agencies of the U.S. government have core responsibility." Mexico On October 22, 2007, President George W. Bush and President Felipe Calderon of Mexico jointly announced plans to begin the Mérida Initiative—a multi-year, $1.4 billion bilateral commitment to reduce drug trafficking and other criminal activities in Mexico, as well as to contribute toward strengthening the institutional capacity of Mexican security forces. In June 2008, Congress appropriated $400 million of $465 million in FY2008 and FY2009 Merida Initiative funds for Mexico (Supplemental Appropriations Act, 2008, P.L. 110-252 , Section 1406(a)). This funding is in addition to current levels of foreign assistance to Mexico. According to a 2007 U.S. Government Accountability Office (GAO) report, DOD spent a total of $58 million for equipment and training for CN support to the Mexican military from 2000 to 2006. It remains unclear to what extent the new Mérida Initiative will affect current levels of DOD CN assistance to Mexico. Independent of the Administration's supplemental funding request for the Mérida Initiative, Section 1022 of the National Defense Authorization Act for Fiscal Year 2008 ( P.L. 110-181 ) extends Section 1033(b) of the National Defense Authorization Act for Fiscal Year 1998 to make available train and equip authorities to Mexico (and the Dominican Republic). Issues As authorities expand, analysts continue to critique DOD's role in CN assistance. Proponents of DOD's expanded role generally argue that narcotics trafficking poses a national security threat to the United States and that the military is especially equipped with the resources and skills to help foreign governments counter powerful drug trafficking organizations. Many analysts also acknowledge that although DOD and civilian agencies have seemingly overlapping and redundant authorities, the absence of DOD's participation in CN assistance would be detrimental to the effectiveness of U.S. programs. Opponents, by contrast, insist that CN foreign assistance is not a military mission and that the training of military elements in foreign countries may have serious political and diplomatic repercussions abroad. Critics of DOD's role in CN assistance also fear that the balance between military and civilian participation in CN may disproportionately favor the military. For example, longstanding concerns over the perceived reliance on the military to provide CN assistance have resurfaced, with new plans to remodel by 2018 the U.S. Southern Command (SOUTHCOM), DOD's regional combatant command for Central and South America. SOUTHCOM has long played a key role in DOD CN assistance planning in the Andes region, and in DOD's new vision, SOUTHCOM's participation in non-traditional military activity, including CN assistance, will likely expand. DOD planners envision a broader interagency role for SOUTHCOM, akin to the new U.S. Africa Command (AFRICOM), which includes building foreign governments' security capacity and improving accountable governance as part of its core mission. Supporters of the 2018 plan perceive this change as an opportunity to enhance interagency coordination of international programs among military and civilian agencies, rather than a zero-sum game. Other analysts, however, are wary that SOUTHCOM's new strategic direction will further militarize U.S. foreign policy in the region. In addition, an expanded role for DOD in CN assistance may antagonize U.S. foreign partners. This has already been the case with the government of Mexico, which reportedly resisted U.S. efforts to place the country under SOUTHCOM's (or any other combatant command structure) area of responsibility (AOR) in order to make the point that it does not want the U.S. military involved in what it considers to be its internal affairs. Only in 2002 was Mexico incorporated into the newly created NORTHCOM, which also includes the continental United States, Alaska, Canada, and surrounding waters. Even today, Mexico's military CN cooperation under NORTHCOM remains limited; as noted above, the highly publicized Mérida Initiative does not include a role for direct DOD support. In addition to concerns about the balance between military and civilian roles in CN assistance, some analysts have voiced concern over the difficulty in reconciling DOD and State Department CN policy planning. Some observers claim that DOD's CN planning processes differ from the State Department's and may make cross-agency policy coordination and evaluation of assistance programs difficult. For example, unlike the State Department, DOD programming strategies are not developed on a country-by-country basis; instead, planning is based on capabilities, because most of DOD's CN programs (e.g., ROTHRs, CBRNs, and aerial and surface platforms) cover geographic regions that span several countries. This difference in planning strategies is also reflected in the way CN funds are disbursed. DOD funds are allocated by function rather than by country. The State Department annually provides Congress with CN assistance program summaries by country and function; in contrast, no equivalent DOD document is regularly published. Appendix G. Foreign Anti-Terrorism and Counterterrorism Train and Equip Assistance and Education Programs DOD Role and Responsibilities DOD and the Department of State both devote financial and personnel resources to assisting foreign governments' anti-terrorism and counterterrorism activities. The foreign counterterrorism assistance goals of these departments seek to enhance the capability of the host nation to prevent terrorism. The State Department conducts an Anti-Terrorism Assistance (ATA) program, through which it trains, equips, and advises foreign police forces and other security officials. DOD currently plays no role in this program, according to State Department officials. DOD participates in two counterterrorism programs with the State Department and other agencies: the State Department-led, interagency Trans-Sahara Counter-Terrorism Partnership (TSCTP) and the State Department's Regional Strategic Initiatives (RSI). DOD also provides counterterrorism assistance through the DOD Building Global Partnerships Train and Equip Section 1206 authority, which is discussed in a separate appendix. (See Appendix H .) DOD has its own Counterterrorism Fellowship Program. DOD also supports the counterterrorism activities of civilian agencies under 10 U.S.C. 374, which authorizes the Secretary of Defense to provide personnel to operate equipment and provide transportation to federal law enforcement agencies in activities in and with foreign nations. Origins and Evolution Prior to the attacks of September 11, 2001, the United States devoted relatively few resources to U.S. counterterrorism foreign training and equipping activities, and most of the assistance was provided to a country after an incident had occurred. Post-9/11 counterterrorism assistance to foreign governments has significantly increased and is often provided to countries that have not experienced a catastrophic terrorist incident. Although the U.S. government carries out a wide variety of counterterrorism activities to support foreign governments, the major State Department and DOD foreign assistance-type programs focus specifically on various aspects of detecting, deterring, combating, and solving terrorism-related activities by training and equipping foreign military and security forces to deal with terrorist threats. Some of these programs include other components as well. CT programs sometimes include economic and social components, especially when conducted in ungoverned areas or weak states where terrorists may seek safe haven or recruit new members. DOD participates in at least four CT programs. Three are discussed below. The Section 1206 program is covered in a separate appendix because that authority can be used for purposes other than counterterrorism. (See Appendix H .) The U.S. government also has more broadly focused programs that include a train and equip counterterrorism component, but these are not covered here. Trans-Sahara Counter-Terrorism Partnership The Trans-Sahara Counter-Terrorism Partnership (TSCTP) is a State Department-led interagency initiative to deal with the threat of violent extremism and terrorism in the Sahel and Maghreb regions. Its main components include development, military, counterterrorism, and public diplomacy. Many agencies cooperate on the program. These include DOD; the Departments of State, Justice, Homeland Security, and the Treasury; the Federal Bureau of Investigation; and USAID. The TSCTP's goals are to build military and law enforcement capacity, foster regional cooperation, counter radicalization, and enhance public diplomacy. A wide variety of programs are used to achieve these goals, including development programs to, among other objectives, improve health and education and promote good governance. TSCTP is a successor program to the Pan Sahel Initiative (PSI), a U.S. security assistance program that the State Department administered from 2002 to early 2004, and funded at about $7.75 million annually. The PSI's mission was to train and equip at least one rapid-reaction company of approximately 100 armed forces in each of the four Saharan nations of Mali, Mauritania, Niger, and Chad. U.S. Marines and Army Special Forces trained these companies of approximately 100 each in basic marksmanship, planning, communications, land navigation, and patrolling, and the United States provided participating countries with equipment such as night vision goggles and specially equipped sports utility vehicles. The PSI was succeeded in 2005 by the Trans-Sahara Counter-Terrorism Initiative (TSCTI), with substantial DOD support. The TSCTI and, in 2006, the follow-on TSCTP were expanded to include more Sahel countries and to provide strategic advice and support for increased U.S. public diplomacy efforts. The program now also includes Algeria, Nigeria, Morocco, Tunisia, and Senegal. The DOD component of the TSCTP is named Operation Enduring Freedom—Trans-Sahara. DOD continues to provide the basic infantry training offered under the PSI. It has also incorporated "more advanced counterterroism capabilities such as improving communications systems and developing mechanisms for regional intelligence sharing." In addition, since the PSI, "the TSCTP has fielded Military Information Support Teams (MIST) and Civil Military Support Elements (CMSE)" as part of the public diplomacy effort to "generate support for the United States and for moderate Islamic viewpoints while reducing sympathy and support for terrorism...." When TSCTP was established in 2007, plans called for DOD and the State Department to provide an combined estimated budget of $100 million per year. According to the State Department, these two agencies now contribute a combined total of approximately $150 million to support TSCTP activities, with DOD contributing two-thirds and the State Department and USAID contributing the remainder. Plans call for this level to remain constant through FY2011. Regional Strategic Initiative (RSI) The State Department's Office of the Coordinator for Counterterrorism (S/CT) has developed eight regional interagency strategy groups to assess the threats posed by terrorists and to develop strategies, plans, and policy recommendations to counter them. These groups are chaired by ambassadors. Through these groups, networked interagency country teams develop a common understanding of the strategic situation in a region. They then design complementary programs and pool resources to eliminate terrorist safe havens and to address conditions fostering terrorist recruitment. RSI groups exist for the Eastern Mediterranean, the Western Mediterranean, East Africa, the Trans-Sahara, Southeast Asia, Iraq and neighboring states, South Asia, and the Western Hemisphere. DOD contributes to the RSI panoply of programs through Section 1206 authority and the DOD Counterterrorism Fellowship Program (below), according to the State Department. DOD Counterterrorism Fellowship Program In January 2002, DOD established the Regional Defense Counterterrorism Fellowship Program (CTFP) with $17.9 million appropriated by Congress. The initial program was to fund foreign military officers' attendance at U.S. military education institutions and selected regional centers for non-lethal training. In 2003, an authorization for CTFP was codified (10 U.S.C. 2249c), expanding the program to civilians and other venues, and setting an annual authorization limit of $20 million. This authorization permitted DOD to pay costs associated with the attendance of foreign military officers, foreign ministry of defense officials, and foreign security officials at U.S. military educational institutions, regional centers, conferences, seminars, and other training programs. There is no stipulation in the Title 10 U.S. Code statute that such education and training be non-lethal. An amendment to that statute in 2006 raised the authorized limit to $25 million and extended the range of permitted venues to foreign and civilian institutions, centers, and events. The program has four objectives: educating foreign military and civilian personnel who are directly involved in the war on terrorism; creating and maintaining a human counterterrorism network with shared values and common language; providing countries with the intellectual means to create, sustain, and grow counterterrorism capabilities and capacities; and influencing countries to cooperate more fully in U.S. and coalition efforts to combat terrorism. Through this program, DOD supports the TSCTP program and Regional Strategic Initiatives. The changes in the program over time have raised some concerns. Some question whether enhanced program activities may duplicate other U.S. counterterrorism efforts, although some argue that the expansion of the program is a result of the maturation of the mission. Some security analysts question the lack of specific language regarding non-lethal training in the CTFP permanent authority. If lethal training activities are now a part of CTFP objectives, some security observers question how this new focus differs from that of the International Military Education and Training program. (See Appendix E . ) Issues An issue of concern is whether the DOD and the State Department (and other agencies) adequately coordinate their programs. DOD and civilian agencies have over the past few years developed new means, such as the RSI, to coordinate programs. Within the State Department, some view cooperation on counterterrorism as a model for DOD-State Department cooperation. Others believe that there is still considerable room for improvement. Regarding the TSCTP, a recent CSIS report acknowledges progress in interagency cooperation, particularly in the field, but finds that such cooperation is "strongly dependent on individual personalities." Impediments to improved coordination and execution of counterterrorism programs include the separate policy development and implementation by relevant agencies, combatant commands, U.S. embassies, and USAID missions; differences in institutional culture among DOD, the State Department, and USAID; and the differences in perspectives created by the regional focus of the DOD combatant commands and the bilateral focus of the State Department and U.S. country teams, according to that report. Concerns are also raised that DOD and the State Department share an overarching strategic framework and strategic priorities. The CSIS report finds "a lack of coherent strategic vision and authoritative planning" on counterterrorism matters across DOD, the State Department, and USAID. Another report faults the TSCTP for failing to fulfill its "rhetorical commitment to a holistic, integrated response" addressing the economic, social, and political sources of instability. "Although U.S. government players agree that CT strategy should focus eighty percent on development and governance activities, and only twenty percent on military effort, actual budgets have been closer to the reverse, making it difficult for the program to address underlying, chronic sources of underdevelopment and poor governance." If the counterterrorism assistance programs are not coordinated with respect to the overarching strategy of the United States, the departments providing services and advice may inadvertently negatively influence a foreign country's efforts to support U.S. national security policies. Other interagency concerns that may have U.S. policy implications include the commonalities in procedures and training offered by DOD and State Department training personnel, the sharing of useful national security information gleaned from host country training activities, and how U.S. foreign policy goals are conveyed to host country representatives. The training and services offered have a significant impact on a foreign country's tactical and strategic approach to addressing terrorism within its borders and in the surrounding region. If U.S. federal government counterterrorism organizations are not coordinating with the ATA's counterterrorism activities, conflicting U.S. policy signals may be given to the host country and resources may be used in an inefficient manner. A lack of transparency for such interagency programs that draw on multiple authorities and multiple budget accounts may also be a concern. Reporting requirements for each of the component programs vary and there may be no reporting requirement for some components. Thus, no one source presents to Congress a comprehensive account of multiple counterterrorism programs. Appendix H. Foreign Military Capacity Building Section 1206 Authority DOD Role and Responsibility In the FY2006-FY2008 annual DOD authorization bills, Congress provided DOD with authority to train and equip foreign military forces to perform counterterrorism, as well as military and stability operations. This "Section 1206" authority, as it is known, enables DOD to use DOD funds to conduct or support train and equip programs such as those usually provided under State Department security assistance authorities and budgets. As with State Department security assistance programs, activities carried out under Section 1206 authority are administered by the Defense Security Cooperation Agency. During the first two years of Section 1206 funding, DOD appeared to exercise a strong lead in planning and carrying out activities. The State Department has played a larger part since DOD and State Department guidance was issued in 2007. According to DOD officials, for the most recent (FY2008) planning cycle, which began in August 2007, the programs have been coordinated through a joint State Department-DOD review. U.S. embassies and Combatant Commands can offer proposals to each other for concurrence, after which the proposals are disseminated to appropriate offices in DOD and the State Department, including the legal offices. State Department and DOD officials vet the proposed recipients for human rights violations. Proposals selected as priority activities are sent to the appropriate congressional committees for reprogramming approval at least 15 days before beginning an activity. Origins and Evolution In 2005, as part of its FY2006 budget submission, DOD requested this train and equip authority to enhance its ability to meet urgent needs and respond to emerging threats, particularly emerging terrorist threats. Most of the funding thus far has been used for counterterrorism programs. First established in through the National Defense Authorization Act (NDAA) for FY2006 ( P.L. 109-163 ), this authority was amended and extended in 2007. It is now in effect through the end of FY2008. The FY2006 NDAA Section 1206 provided the President with authority to direct the Secretary of Defense to conduct or support programs to build the capacity of foreign military forces to perform counterterrorism operations or to participate in or support military and stability operations in which U.S. armed forces participate. Section 1206 authorized the provision of training, supplies, and equipment for those programs. The Secretary of Defense could transfer monies from the defensewide operations and maintenance account to fund the programs. The Secretaries of State and Defense were required to jointly formulate any program, and the Secretary of Defense to coordinate with the Secretary of State in their implementation. Congress set the original funding limit, for FY2006, at $200 million, although only about half of this was actually obligated. Congress also set strict conditions for these programs. Section 1206 required that these programs observe and respect human rights, fundamental freedoms, and the "legitimate civilian authority" within a country. Section 1206 could not be used to provide any type of assistance otherwise prohibited by any provision of law, nor to provide assistance to any country otherwise prohibited from receiving such assistance under any other provision of law. Through the John Warner NDAA for FY2007 ( P.L. 109-364 ), Congress amended the FY2006 Section 1206 provisions to extend the authority through FY2008, raise the funding limit to $300 million, and permit the Secretary of Defense to draw from all DOD operations and maintenance accounts to fund the program. Congress also changed the manner in which programs are initiated. Although the original FY2006 Section 1206 provisions required a presidential decision to initiate a program, the FY2007 legislation permitted the Secretary of Defense, with the concurrence of the Secretary of State, to authorize the training. Congress also added a requirement for the Secretary of Defense to notify Congress when a decision was reached to initiate a program. Congress denied a May 2007 DOD request to expand and make permanent Section 1206 authority. In this request, DOD asked for authority to train and equip not only foreign military forces, but also foreign security forces. The request proposed raising the limit on annual spending to $750 million. It also proposed authority to waive any restrictions applicable to assistance for military and security forces. DOD funds could be used not only by DOD, but also could be transferred to the Department of State or any other federal agency to conduct or support activities. In its action on FY2007 supplemental appropriations ( P.L. 110-28 ), Congress declined to provide Administration's request for $300 million in additional funding for Section 1206 programs in FY2008. In its FY2009 budget request of February 4, 2008, DOD asked for $500 million for Section 1206 capacity-building purposes. Three days later, as part of its proposed NDAA for FY2009, DOD submitted the Building Global Partnerships Act to make permanent Section 1206 by codifying it at Title 10 U.S. Code, Chapter 20. This proposal is similar to DOD's May 2007 request. DOD again requested a permanent annual authorization of up to $750 million to build foreign national military and other forces. As in the 2007 proposal, these other forces would include "gendarmerie, constabulary, internal defense, infrastructure protection, civil defense, homeland defense, coat guard, border protection, and counterterrorism forces...." In a slight difference from current practice, DOD and the State Department (not the secretaries of Defense and State) would jointly formulate programs, and the Secretaries of Defense and State would jointly coordinate implementation. The February 2008 proposal differed from the earlier request in that it would not in itself waive restrictions elsewhere in law, but would grant waiver authority to the President and the Secretary of State. Activities In FY2006, DOD used Section 1206 authority to carry out nine projects to improve counterterrorism capabilities in 11 countries. DOD obligated a little over $100 million for those programs. In FY2007, DOD used Section 1206 authority to carry out programs in over a score of countries or groups of countries. These programs cost almost $280 million. Most provided equipment, with associated training. Most equipment and virtually all training to date has been provided by contractors, according to DOD officials. In FY2006, DOD assisted Chad and Nigeria in developing an information-sharing system to disrupt and attack terrorist networks in the trans-Saharan region. Nigeria also received assistance, along with Sao Tome and Principe, to establish a regional maritime awareness capability. Other countries that received assistance to build maritime capabilities were Indonesia, Sri Lanka, the Dominican Republic, and Panama. Section 1206 provided funds to enhance the Lebanese Armed Forces' ability to control Lebanon, to enable the Yemeni Armed Forces to prevent cross-border arms trafficking and suppress terrorist activity, and to enhance Pakistan's ability to control its borders and to train and equip Pakistani Marines. In FY2007, new programs included a 15-country African Maritime Security program, as well as maritime programs in Djibouti, Malaysia, Pakistan, and the Philippines, and a multinational maritime program involving various Caribbean Basin countries. Bahrain received assistance to help develop a coastal patrol boat capability. New FY2007 programs also were carried out to enhance intelligence capabilities in eight African countries, and to build counterterrorism and stability operations capabilities in Albania, Georgia, Kazakstan, Macedonia, and Ukraine. Yemen received funds for a new program to enhance border security. Mexico received a small amount of counterterrorism assistance. Section 1206 funds were used to support the East Africa Regional Security Initiative, as well as multinational civil-military operations training conducted under the Trans-Sahara Counter-Terrorism Partnership. Obligations for FY2008 Section 1206 projects are underway. Obligations for projects in Azerbaijan, Bahrain, Georgia, Lebanon, and the Philippines totaled some $24.8 million as of May 20, 2008. Issues Section 1206 funding has been one of the most controversial DOD foreign assistance-type programs. The December 2006 Senate Foreign Relations Committee (SFRC) report "Embassies as the Command Post in the Anti-Terror Campaign" rejected this grant of special authority to DOD and recommended that the Secretary of State "insist that all security assistance, including Section 1206 funding, be included under his/her authority...." Based on visits to embassies in 2006, SFRC staff found that plans for Section 1206 programs "were not receiving the same embassy input as bilateral programs," and that, in some cases, the embassies were not even being informed of plans for Section 1206 activities until well into or after the selection process. In addition, the report stated that, for the most part (except in the cases of Lebanon and Pakistan), Section 1206 activities do not address emergency situations and could be handled, as are other security assistance programs, through the normal budget process. Some sources indicate that there have been some improvements in planning and coordination since the SFRC report was issued. A 2007 GAO report echoed the SFRC finding of a lack of coordination in formulating FY2006 proposals. The GAO stated, however, that the "combatant commands and embassies we contacted reported better coordination in the formulation of fiscal year 2007 proposals," which they attributed to "having more time to develop proposals and more explicit guidance from State and DOD." A 2008 DOD document describes DOD and State Department coordination on Section 1206 programs as "rapidly becoming the gold standard for interagency cooperation to meet emerging threats and opportunities because of the revolutionary way it is managed." Some analysts have questioned the utility of placing Section 1206 programs under DOD when the program relies heavily on private contractors. The new interagency process has expedited the project selection process, which may increase the possibilities for using U.S. military personnel for some Section 1206 training. FY2006 and FY2007 Section 1206 activities were selected toward the very end of the fiscal years, leaving just enough time to obligate the funds through contracts with private companies. These companies could then implement the project in the following fiscal year. Scheduling assignments for U.S. military troops requires that activities be approved well before the end of the fiscal year, according to one DOD official, as military personnel must complete activities in the fiscal year or years for which funds are allocated. The FY2008 selection process is well underway. Provisions in the House and Senate versions of the FY2009 NDAA, which would permit the use of appropriated funds over multiples years, would also facilitate Section 1206 training by U.S. military personnel. The question of whether State Department leadership on foreign policy is challenged by DOD Section 1206 authority remains open for some analysts. According to a December 2007 report by the Center for Strategic and International Studies (CSIS), "the decision to provide the Department of Defense with its own security assistance pipeline carries policy risks...." The report instead recommended building "a larger State Department budget with increased and more flexible counterterrorism funding." CSIS did support, however, the DOD proposal to extend Section 1206 training to foreign security forces. Appendix I. Global Peace Operations Initiative Train and Equip Program DOD Role and Responsibilities The State Department launched its Global Peace Operations Initiative (GPOI) in mid-2004 to train and equip foreign military and security forces to participate in international peacekeeping operations. Officials in the Department of Defense (DOD) Office of Special Operations and Low-Intensity Conflict (SO/LIC) played a major role in promoting the initiative, working with the State Department on the proposal. GPOI's primary purpose is to provide 75,000 soldiers from developing nations with training in peacekeeping skills by the end of the decade. An ancillary purpose is to stimulate a broad international effort to foster an international deployment and logistics support system to transport and maintain them. GPOI also provides some assistance to the Italian Center of Excellence for Stability Police Units (COESPU). Overall responsibility for GPOI rests with the State Department's Bureau of Political-Military Affairs. The Bureau's Office of Policy, Plans, and Analysis (PM/PPA) works closely with the DOD to plan and implement GPOI through the Defense Security Cooperation Agency (DSCA) and the military Combatant Commands. In Africa, training is largely carried out by private sector personnel employed under a State Department contract, but elsewhere, U.S. military personnel provide most of the training. The State Department's Africa Bureau continues to play the major role in developing and overseeing the implementation of programs in Africa. DOD provides a military officer to serve as Deputy Director of COESPU. Origins and Evolution GPOI was established to significantly expand and improve the State Department's special peacekeeping train and equip program in Africa. From 1996 through 2004, the United States provided field and staff training in peacekeeping skills and techniques, and related non-lethal equipment, to potential African peacekeepers, first through the African Crisis Response Initiative (ACRI) and then through its successor program, the African Contingency Operations Training and Assistance (ACOTA). GPOI was designed as a worldwide program, with a continuing emphasis on Africa through ACOTA. The impetus behind GPOI (and its predecessor Africa programs) was the widely perceived need to improve international capabilities to control devastating conflicts. Leaders of the Group of 8 (G8) major industrial countries endorsed the GPOI goal to create 75,000 peacekeepers by 2010 in the June 2004 summit meeting at Sea Island, Georgia. In his September 21, 2004, address to the opening meeting of the 59 th session of the U.N. General Assembly, President George W. Bush stated that the world "must create permanent capabilities to respond to future crises." He pointed, in particular, to a need for "more effective means to stabilize regions in turmoil, and to halt religious violence and ethnic cleansing." The Clinton Administration was prompted to create the ACRI program by a similar perception. In mid-2005, the State Department initiated the "Beyond Africa" GPOI component, providing training and related equipment to militaries in Central America, Europe, and Asia. As of the end of 2007, GPOI had funded the training of some 40,000 potential peacekeepers around the world. The overwhelming majority, some 96%, were from 20 countries and one regional organization in sub-Saharan Africa. The remainder came from 21 countries, primarily in Asia, the Pacific Islands, and Central America. The State Department funds GPOI as a line item in its Peacekeeping (PKO) account. Initial plans called for a five-year budget (FY2005-FY2009) of $660 million. Funding from FY2005-FY2008 totals $374.5 million. If Congress provides the full FY2009 request, FY2005-FY2009 funding will total $487.7 million. Issues Although its purposes are generally supported, GPOI's implementation has been problematic and has drawn criticism from some Members of Congress. In the National Defense Authorization Act for Fiscal Year 2008 ( P.L. 110-181 ), Congress called for a Government Accountability Office (GAO) report that would address continuing concerns. These are (1) the extent to which contributing and participating countries maintain records and databases, (2) the quality and sustainability of the training of individuals and units, (3) the extent to which those trained are equipped and remain equipped to deploy in peace operations, (4) the capacity of participating countries to mobilize those trained, (5) the extent to which trained individuals are deployed, and (6) the extent to which contractors are used and the quality of their work. The report, released in June 2008, judged that the State Department and DOD "have made some progress in achieving GPOI goals in three principal areas: training and equipping peacekeepers, providing equipment and transportation for deployed missions, and building peacekeeping skills and infrastructure, but challenges remain in meeting these goals." It then recommended that the State Department (1) "improve oversight of nonlethal equipment delivery to partner countries," (2) "develop methods to assess the overall outcomes of the training program," (3) "ensure that trainees are properly screened for human rights violations," and (4) in consultation with DOD, "assess the estimated resources and time frames needed to complete activities to help achieve the G8 goals for developing African countries' capabilities to maintain peacekeeping operations on their own." Appendix J. The Department of Defense in Nonproliferation: The Cooperative Threat Reduction Program DOD Role and Responsibilities DOD is one of the three principal U.S. agencies that carries out threat reduction and nonproliferation programs. DOD is responsible for the central program that secures and eliminates weapons: the multiple-part Cooperative Threat Reduction program (CTR). The State Department is responsible for the program that provides research grants to former Soviet scientists and engineers in an effort to keep them from selling their knowledge to other nations. The Department of Energy (DOE) is responsible for developing projects to improve accounting and security at research facilities that house nuclear materials. Origins Congress established the Nunn-Lugar Cooperative Threat Reduction (CTR) Program in November 1991. A failed coup in Moscow in August 1991 and the subsequent disintegration of the Soviet Union had raised concerns about the safety and security of Soviet nuclear weapons. Congress responded by transferring $400 million in FY1992 DOD funds to assist with the safe and secure transportation, storage, and dismantlement of nuclear, chemical, and other weapons. Congress appropriated an additional $300 to $500 million per year for DOD's CTR program between FY1993 and FY2007. The total budget for U.S. nonproliferation and threat reduction programs in the former Soviet Union, which includes programs in DOE and the State Department, has grown to around $1 billion per year. For several years in the early 1990s, virtually all the funding for U.S. threat reduction and nonproliferation assistance to the former Soviet Union came from the DOD budget. Contractors working for DOD implemented most of the projects and received most of the funding. Other agencies, including DOE and State Department, participated in some of the CTR programs, particularly when their experts were needed to design a project, but DOD served as the executive agent for the funding, with contracts let through the DOD contracting process. The State Department played the lead role in negotiating the umbrella agreements between the United States and former Soviet states that were needed before the United States could fund programs in these states. Further, after passage of the FREEDOM Support Act in 1992 ( P.L. 102-511 ), the State Department Coordinator for assistance to the former Soviet Union was supposed to help coordinate planning for CTR projects across the several agencies. For several years, a deputies committee consisting of participants from DOD, DOE, the State Department, and the National Security Council (NSC) met periodically (sometimes as often as once a month) to discuss priorities for U.S. threat reduction assistance, to identify possible projects that might receive funding from the program, and to coordinate efforts by the agencies to support these programs. The frequency of these meetings declined, however, by the middle of the decade, as the process became more routine and many ongoing projects were well-established within the budget process. The organizational structure and funding profile for U.S. nonproliferation and threat reduction assistance changed in FY1996, when financial and administrative responsibility for some of the programs and projects moved to DOE and the State Department. Specifically, the State Department took over responsibility for the Science and Technology centers in Moscow and Kiev, which provided research grants to former Soviet scientists and engineers in an effort to keep them from selling their knowledge to other nations. DOE took over responsibility for the Materials Protection, Control, and Accounting (MPC&A) program, which was developing projects to improve accounting and security at research facilities that housed nuclear materials. This division of labor allowed each agency to take responsibility for those programs that best reflected its expertise: DOD maintained control of programs that sought to secure and eliminate weapons, DOE took control of those that sought to secure nuclear materials that were not in weapons, and State took over those that worked directly with nuclear specialists in the FSU. DOD and DOE both supported this change in funding and administration. For DOD, the change reduced tensions in both Congress and DOD about the use of DOD funds for foreign aid or foreign assistance programs, leaving DOD with responsibility for the core CTR weapons elimination efforts. For DOE, the change allowed the agency to expand the contacts it had established between its own labs and scientists and those in the former Soviet Union, and to move quickly on its priorities without the need to go through cumbersome DOD contracting procedures. On the other hand, some in State and the NSC argued against this division. Some in the State Department questioned whether funding for the Science Centers would come at the expense of other State Department priorities. Some in the NSC argued that the division would undermine efforts to maintain central control over the priorities and funding. The division of programs proved to be a financial boon to the whole threat reduction and nonproliferation effort, with funding increasing to around $1 billion per year across the three agencies by the end of the decade. Much of this increase was due to the expansion of DOE's programs, both at materials facilities and at storage facilities for nuclear warheads. An Evolving Program Initially, many in Congress saw U.S. assistance under the Nunn-Lugar amendment as an emergency response to impending chaos in the former Soviet Union. Even after the sense of immediate crisis passed in 1992 and 1993, many analysts and Members of Congress remained concerned about the potential for diversion or a loss of control of nuclear and other weapons. Russia's economy was extremely weak, and press accounts reported that nuclear materials from Russia were appearing on the black market in Western Europe. Consequently, many began to view CTR as a part of a long-term threat reduction and nonproliferation effort. Former Secretary of Defense William Perry referred to CTR as "defense by other means," as the program helped eliminate Soviet weapons that had threatened the United States and contain weapons and materials that could pose new threats in the hands of other nations. In response to this relatively narrow mission, the initial Nunn-Lugar legislation was tightly focused on the transport, storage, and destruction of weapons of mass destruction. For example, the United States has provided extensive assistance with destruction and dismantlement projects. These were designed to help with the elimination of nuclear, chemical, and other weapons and their delivery vehicles. These projects helped Russia, Ukraine, Belarus, and Kazakhstan remove warheads, deactivate missiles, and eliminate launch facilities for nuclear weapons covered by the START I Treaty. Chain of custody projects were designed to enhance the safety, security, and control over nuclear weapons and fissile materials. These projects provided Russia with bullet-proof Kevlar blankets, secure canisters, and safer rail cars to transport warheads from Ukraine, Belarus, and Kazakhstan to storage and dismantlement facilities in Russia. The CTR program also funded several projects at storage facilities for nuclear weapons and materials, to improve security and accounting systems and to provide storage space, at a new facility at Mayak, for plutonium removed from nuclear warheads when they are dismantled. Demilitarization projects encouraged Russia, Kazakhstan, and Ukraine to convert military efforts to peaceful purposes. The focus of CTR funding has changed over the years. Much of the work on strategic offensive arms reductions has been completed, and the United States has allocated a growing proportion of the funding to projects that focus on securing and eliminating chemical and biological weapons and securing storage sites that house nuclear warheads removed from deployed weapons systems. The DOE programs that seek to improve security and accounting for nuclear materials and some nuclear warheads have also expanded and accelerated. Further, Russia has received most of the funding in recent years, as the participants have completed most projects in the other nations. In recent years, the United States has also increased funding for projects that seek to secure borders and track materials, in an effort to keep weapons of mass destruction away from terrorists. This has included some border security and export control programs funded through the State Department. This shift in funding has occurred, in part, because many observers began to view U.S. assistance to the former Soviet states as a part of the effort to keep weapons of mass destruction away from terrorists. In 1996, experts testified to Congress that Russian nuclear and chemical facilities, with their crumbling security and lack of accounting procedures, could provide a source for terrorists seeking nuclear or chemical materials. In response, Congress expanded the programs that provided security at facilities with nuclear materials and suggested that more attention be paid to security at facilities with materials that could be used in chemical or biological weapons. Since September 11, 2001, virtually all analysts who follow U.S. threat reduction and nonproliferation assistance have made the link between the possible quest for weapons of mass destruction by terrorists and the potential for thwarting them by helping Russia protect its weapons, materials, and knowledge. In early 2003, the Administration stated that it had "expanded the strategic focus of the CTR program" to support the war on terrorism. In its budgets presented from FY2004 through FY2007, it increased funding for several export and border control programs in DOD, State, and DOE; for the State Department programs designed to stem the leaking of knowledge out of the former Soviet Union; and for a DOD effort to find and recover radiological sources—a type of military device that could provide terrorists with nuclear materials for use in a dirty bomb. All of these initiatives focus more on stemming proliferation than on eliminating nuclear weapons in the former Soviet states. However, the Bush Administration has not completely altered the focus of CTR; in February 2005, at a summit meeting in Bratislava, Slovakia, Presidents Bush and Putin agreed to accelerate some of the efforts to secure Soviet-era nuclear weapons. This agreement has led to increased funding for both DOD and DOE efforts to secure nuclear warheads. Issues Many analysts who follow the nonproliferation programs continue to express concerns about the lack of coordination among DOD, DOE, and the State Department in setting priorities and allocating funding. Many have suggested that the White House create a position of nonproliferation czar so that there would be a single individual in the government with the responsibility for setting priorities and coordinating implementation of all threat reduction and nonproliferation programs. Congress has addressed a number of issues over the years as it has reviewed CTR projects and authorized funding for continuing programs. Some of these have focused on specific programs, such as the development of a chemical weapons destruction facility at Shchuch'ye, Russia, one of that country's seven chemical weapons storage sites. Questions about the goals of this effort and Russia's contribution to it led Congress to withhold funding in FY2000 and to restrict it in other years. Congress has also addressed questions about the role that CTR plays in advancing U.S. national security objectives. Some have argued that the United States should increase funding to secure weapons and materials in Russia at a more rapid pace, while others have argued that this funding can actually undermine U.S. security if it frees up funds for Russia to add to its defense budget and weapons acquisition efforts. There have also been some disputes, over the years, about whether certain programs should be funded through DOE or through DOD, although those disputes have waned as the two agencies have worked together to share lessons learned and best practices. Some Members of Congress, particularly in the House, have questioned whether funds should be allocated to the CTR program from the DOD budget as the programs shift away from efforts to eliminate Soviet-era nuclear weapons and toward efforts to secure borders and prevent the loss of WMD materials and knowledge. This controversy has been evident in recent years, as both the President and the Senate have supported efforts to allow the CTR program to allocate a portion of its funds to programs outside the former Soviet Union. For example, in 2003, the Bush Administration requested the authorization to spend up to $50 million in CTR funds outside the former Soviet Union in the FY2004 Defense Authorization Bill. The Senate offered its unqualified support for this measure. The House, in contrast, argued that these types of programs would be better managed by the State Department than the Defense Department. It authorized the transfer of up to $78 million in CTR funds to the State Department Nonproliferation and Disarmament Fund for use in threat reduction efforts outside the former Soviet Union. The Conference Committee, in its report on the FY2004 Defense Authorization Bill ( P.L. 108-136 ), approved the President's request. However, in deference to the House concerns, the committee language indicates that this funding should be used only for short-term projects; it also states that the President should determine whether DOD is the agency that is most capable of implementing the planned project. The conferees stated that they would expect the President to assign the project to the most appropriate agency. The United States has exercised the option of spending CTR funding outside the former Soviet Union only once, in mid-2004, when DOD provided assistance to Albania for the elimination of chemical weapons, but DOD has, in subsequent years, retained the authority to obligate funds outside of the former Soviet Union. Appendix K. DOD in Iraq and Afghanistan Economic Reconstruction and State-Building DOD Roles and Responsibilities In Iraq and Afghanistan, DOD has assumed economic reconstruction and state-building responsibilities not usually associated with its military obligations. Civilian agencies—in particular, the Department of State and the U.S. Agency for International Development (USAID)—have more traditionally taken the lead in providing such assistance. The State Department plays a key role in overseeing democratization programs in developing and crisis countries. State also has had the lead in setting the broad direction of U.S. policy toward these countries. USAID, the agency with the greatest expertise and experience in international development, historically has taken the lead in designing and implementing programs intended to stimulate economic growth and encourage the expansion of democracy. However, in Afghanistan, and particularly in Iraq, the civilian agencies have found themselves at times subordinate to DOD in fulfilling these roles. DOD has the lead role in economic reconstruction of the national infrastructure in Iraq. In Iraq and Afghanistan, DOD also provides assistance for local-level economic reconstruction and state-building through the Commander's Emergency Response Program (CERP) and the Provincial Reconstruction Teams (PRTs). Evolution of DOD's Role in Iraq A January 20, 2003, presidential directive that established the Office of Reconstruction and Humanitarian Affairs (ORHA) in DOD formally put that Department in charge of post-invasion planning and assistance in Iraq. The Coalition Provisional Authority (CPA), established by the President in May 2003 to replace ORHA, was also a DOD entity, its Administrator, Paul Bremer, reporting to the Secretary of Defense. The CPA made all decisions regarding the political and economic aftermath of the invasion and determined the direction of U.S. assistance. The first U.S. foreign assistance efforts to address Iraq's economic, political, and social needs were appropriated through the Office of the President under a new Iraq Relief and Reconstruction Fund (IRRF), which was established by the FY2003 Emergency Supplemental Appropriations Act in March 2003 ( P.L. 108-11 ). Early assistance programs were largely managed by USAID and the Department of State. Of the $2.5 billion in reconstruction funding provided under that Act, DOD was made responsible for 21%, largely to implement oil and electric power infrastructure programs. In the November 2003 FY2004 Emergency Supplemental Appropriations Act ( P.L. 108-106 ), Congress approved a large replenishment of the IRRF ($18.4 billion), of which DOD ultimately was responsible for 75%, or about $13.4 billion. While roughly $4 billion of that sum went to DOD for security-related programs, half of the entire appropriation ($9.2 billion) was placed by the President in DOD hands to implement non-security-related activities. Economic Reconstruction and Assistance in Iraq Most of the DOD economic reconstruction programs involved the design and construction of large-scale economic infrastructure—roads and bridges, oil and pipeline facilities, electrical power plants, railroad and telecommunications networks, water and sanitation plants, and the like. Instead of choosing the Army Corps of Engineers (which did not believe it had sufficient capacity to oversee or staff such a large effort) or USAID (which the CPA believed lacked the organizational capacity), the CPA decided to contract out management and oversight responsibilities for each construction sector's projects to private contracting firms. The CPA established a Program Management Office (PMO) to oversee the managers of these programs. In mid-2004, following the dissolution of the CPA, the President, issuing National Security Policy Directive (NSPD) 36, transformed the PMO into the Project and Contracting Office (PCO), a temporary Army organization. Although the State Department was now in charge of Iraq policy, and a new State-run Iraq Reconstruction Management Office (IRMO) was established to set overall priorities and requirements for most aid programs, the PCO continued to be responsible to DOD as well as State. On December 4, 2005, the PCO merged with the Army Corps of Engineers/Gulf Region Division (ACE-GRD), and the ACE/GRD was formally identified as the successor organization to the PCO in May 2007. Although its role in economic assistance in Iraq has been generally limited to infrastructure construction, in the latter half of 2006, DOD, without State or USAID participation, began to develop a program intended to create employment opportunities for Iraqi citizens and stimulate the economy by rehabilitating some of the roughly 200 state-owned enterprises (SOEs) that composed a large part of the Iraqi economy prior to the U.S. occupation. Despite State Department skepticism, the Administration requested $100 million to fund this endeavor under the Iraq Freedom Fund DOD appropriations account in the FY2007 emergency supplemental ( P.L. 110-28 ). Congress approved $50 million. Although press reports suggested that results were disappointing, another $100 million was requested for this endeavor for the FY2008 Global War on Terrorism supplemental appropriation and $50 million in the FY2009 annual appropriations request. Issues Press and expert accounts suggest that the State Department's views and extensive pre-war research on post-war Iraq planning were ignored by DOD. Many observers believe that the first year of the reconstruction program, during which DOD was largely in charge of policy and program development, was marked by ineptness. According to the Special Inspector General for Iraq Reconstruction (SIGIR), under the CPA, large Iraqi-owned financial resources that might have been turned to valuable use went unaccounted for. In many cases, audits have found that infrastructure programs under CPA/DOD/Army Corps of Engineers management were not appropriately monitored and that a number of programs were poorly constructed and funds were wasted. The post-occupation division of labor between the Army and State Department in the PMO and IRMO may have ensured a continued lack of coordination between assistance entities. Commander's Emergency Response Program (CERP) In both Iraq and Afghanistan, the CERP has provided DOD-appropriated funds to U.S. military commanders on the ground with which to conduct reconstruction activities, mostly in rural areas. At the time it was launched, there was limited or no civilian presence to conduct development programs. The CERP's purpose has been to facilitate the stabilization of an area in the wake of a military operation by gaining the support of local populations. In both countries, the CERP supports a wide range of activities, from school construction to rehabilitation of electrical and water supply to condolence payments. The program is highly flexible and is not weighed down by the bureaucratic encumbrances of other assistance programs. Major subordinate commanders have authority to approve grants up to $500,000. Grants provided have been credited with helping the military better exercise its security missions, while at the same time meeting immediate neighborhood development needs. Roughly $3..6 billion in CERP funding has been made available in Iraq as of the fall of 2008.. Authorities In June 2003, the CPA authorized the operation of the CERP in Iraq, at first using Iraqi resources. In the November 2003, FY2004 emergency supplemental appropriations act, funds were appropriated for the CERP in Iraq and establishment of a similar program was authorized for Afghanistan. Subsequent appropriations and defense authorization bills continued to authorize and appropriate funds for the CERP for both Iraq and Afghanistan. Issues The CERP is a flexible tool meant originally to address security concerns. Therefore, it often was used on an ad hoc basis by military commanders to meet immediate short-term stabilization needs. It has been criticized for not being part of a larger development strategy and not being synchronized with civilian assistance program plans. More recently, CERP projects in Iraq are larger than previously—on average $140,000/project as of 2007 versus $67,000/project in FY2004—and are the main source of U.S. infrastructure assistance in areas such as water and sanitation, and road construction. According to the SIGIR, in many cases, it is being used to perform tasks that should be taken on by local and provincial governments, and, by doing so, it undermines the capacity-building purpose of PRTs. In the Duncan Hunter National Defense Authorization Act for Fiscal Year 2009 ( P.L. 110-417 ), Congress restricted the use of CERP by setting a maximum cost of $2 million per project. Provincial Reconstruction Teams (PRTs) Provincial Reconstruction Teams (PRTs) are civil-military teams located in enclaves throughout Afghanistan and Iraq. The first PRTs were created by a December 2002 U.S. initiative. Some are staffed by the United States, others by coalition partner countries. These teams extend the authority of national governments by accelerating reconstruction and assisting with stabilization efforts. Although there are multiple models of PRTs in both Afghanistan and Iraq, the basic premise for all is the integration of civilian and military organization personnel in order to meet stability objectives in a defined region. The military in both cases provides protection to civilian officials, allowing civilian specialists a degree of outreach to the provincial and local governments, and local non-governmental organizations and Afghans, that otherwise would be impossible. Civilian employees provide expertise on reconstruction and facilitate political solutions to local problems that the military is less able to do well. U.S.-run PRTs in general and most of the PRTs in southern Afghanistan focus mainly on counter-insurgency. In Afghanistan, some PRT stabilization efforts include training Afghan security forces. Afghanistan PRTs The PRTs in Afghanistan have three goals: (1) stability/security, (2) extending the reach of the central government and strengthening local government, and (3) reconstruction. Of the 26 PRTS in Afghanistan, 12 are U.S.-run and 14 are run by coalition partner countries. Virtually all, including those run by the United States, are now part of NATO's International Security Assistance Force (ISAF) in Afghanistan. They vary in size and makeup of personnel. U.S. PRTs are composed of 50 to 100 U.S. military personnel, including DOD civil affairs officers, and representatives from civilian agencies, including USAID, and the State Department, as well as representatives from Afghanistan's Interior Ministry. Many U.S. PRTs in conflicted areas are located on forward operating bases of 300-400 U.S. combat troops. The initial guidance for U.S.-run Afghanistan PRTs, agreed to by senior civilian and military leaders and approved by the U.S. Deputies Committee of the National Security Council in June 2003, assigned DOD responsibility for improving security in areas of operation, logistical support, and force protection for all PRT members. The Department of State was made responsible for political oversight, coordination, and reporting. USAID was appointed the lead agency for reconstruction. However, in certain parts of the country, the military element in Afghanistan PRTs appears to have taken a more forward role in reconstruction efforts than is the case with PRTs in Iraq. According to an interagency assessment of the Afghanistan PRTs, despite the guidance providing leadership to civilians on governance and reconstruction, "PRT culture, people, and resources were predominantly military." Especially where PRTs were co-located with combat units, on occasion the commander would reportedly take on a political as well as military role. Iraq PRTs There are currently 14 PRTs (3 of which are led by other coalition countries) and 13 ePRTs (embedded PRTs) in Iraq. The U.S.-led PRTs are made up of between 35 and 100 members, including representatives from the Embassy, the Project Contract Office (Army Corps of Engineers), USAID, military, and other agency staff. PRTs have been co-located on existing U.S. military bases. The ePRTs, in which civilian teams are embedded in Brigade Combat Teams, are smaller. Most are concentrated in Baghdad or Anbar Province, where significant military action is taking place. Although the PRTs appear to focus efforts on expanding U.S. assistance outreach to the provinces and strengthening local government, the ePRTs envision that, as U.S. and Iraqi military forces secure an area, ePRT staff will work with local Iraqis to further stabilize the area by drawing on all available spigots of U.S. and Iraqi government funding to create jobs and meet other basic needs. DOD's role in the PRTs, therefore, is chiefly to provide security and logistical support. DOD, however, was originally reluctant to divert the necessary manpower from other responsibilities. PRTs in Iraq were authorized by Cable 4045 (October 2005), issued jointly by the U.S. Embassy-Iraq and by the U.S.-led military coalition Multinational Force in Iraq (MNF-I), under which the U.S. Embassy was called upon to support the establishment of PRTs at State Department sites and MNF-1 was called upon to support them at military sites. As the PRTs were being established, the division of responsibilities and obligations between DOS and DOD were not well defined. As a result, according to the SIGIR, "lines of authority and coordination between the U.S. Embassy and military components were never spelled out and agreed upon, and the operational support mechanisms the PRTs are dependent upon at military bases—i.e. facilities, life support, communications, management services, and supplies—were not settled upon." DOD agreed to provide protection to the PRTs in a Memorandum of Agreement (MOA) that took effect in February 2007 and finalized operational requirements and responsibilities. A key determinant of PRT success in the first year was the presence of a brigade commander who supported the PRT mission. Such was the case in Mosul, according to the SIGIR, whereas in Anbar, a lack of support signaled civilian difficulty obtaining transportation and other resources, and civilian exclusion from meetings with government officials. According to the SIGIR, in some PRTs, there was occasionally a difference in views regarding the use of reconstruction assistance, with commanders expressing "frustration" over PRT failure to create employment by funding state-owned enterprises (see above). The February 2007 MOA helped resolve a number of coordination concerns, but the role of DOD in providing assistance has continued to be greater than intended, in part because of shortfalls in civilian staffing at the PRTs. Until civilians with specialist skills in local governance and agriculture, for example, could be provided by the Department of State, over 100 DOD-supplied personnel were made available on a temporary basis. Issues Many refer to the PRTs in Iraq and Afghanistan as a model for DOD-civilian cooperation in foreign aid, and U.S. government officials and others have pointed to successes in stabilizing some areas as at least in part the result of PRT activity. Nonetheless, some have faulted PRTs for a lack of an overarching concept of operations (a common range of services and a unified chain of command), and for failing at times to coordinate with each other and exchange information on best practices. In addition, it appears that DOD maintains a preponderant weight in PRT decision making as the sole supplier of security, which allows civilians to undertake project site visits and meetings with local leaders, and as a significant supplier of assistance through the well-funded CERP program. The interagency assessment found that, in Afghanistan, subordination of PRTs to combat units threatened to dilute a core focus of the PRT—to strengthen the government of Afghanistan's capacity to address issues underlying instability and support for the insurgency. In Iraq, according to the SIGIR, there are reports that CERP use undermines civilian efforts to strengthen local government. Absent a clear set of objectives and performance measures fashioned for each individual PRT, as the SIGIR has repeatedly proposed, the coordinated efforts of disparate agencies composing the PRTs in Iraq are likely to be dependent on the personalities of team members and the level of teamwork they are able to cobble together. Appendix L. Foreign Security Assistance Initiatives for Afghanistan and Iraq DOD Roles and Responsibilities In Afghanistan and Iraq today, based on decisions by the Administration and authorities granted by Congress, DOD plays the lead U.S. government role in providing training assistance to Iraqi and Afghan security forces, including police and other civilian forces, as well as military forces. Both the extent of DOD's role, and funding appropriated for these purposes, have grown over time. Congress has also provided DOD with several categories of funding and authorities to allow international partners to contribute to the coalition efforts in Iraq and Afghanistan—including both providing some partners with resources directly to enable their participation, and reimbursing other partners for support provided. DOD takes the lead in implementing these activities. Origins and Evolution Train and Equip Several key foreign security assistance programs, including Foreign Military Financing and International Military Education and Training, managed by the Department of State and implemented by DOD, provided some forms of "train and equip" assistance to foreign partners. The driving reasons for assigning DOD the lead role in training and equipping Iraqi and Afghan security forces were apparently the sheer size and scope of the tasks at hand, the presence of capable if not specialized DOD personnel on-site, and the urgency that left no time to deliberately develop capabilities in other U.S. government agencies. DOD did not seek expanded train and equip authority until the Administration judged that other approaches were not working. The legislation authorizing DOD to provide "train and equip" support and appropriating funds for that purpose is both specific and limited. The legislation is enacted on an annual basis, and it refers strictly to Iraq and Afghanistan. Specific requests for resources and authorities were initiated by the executive branch, based on input from practitioners in the field. The legislation requires "the concurrence of the Secretary of State." That language is generally understood, by staff at both agencies, to mean that initiatives cannot proceed without State Department approval. Coordination mechanisms for seeking that approval—from the Secretary or her designated representative—are reportedly in place and actively utilized. Initially, train and equip authority was granted for support to "the New Iraqi Army and the Afghan National Army." Subsequent legislation expanded the focus to include the "military and security forces of Iraq and Afghanistan," which could include police and other civilian services. The scope of the assistance initially included "assistance, including equipment, supplies, services, training and funding." Later, the scope was broadened to also include "facility and infrastructure repair, renovation, and construction." Funds appropriated for train and equip missions in Iraq and Afghanistan have grown substantially over time, from $150 million in the FY2004 Emergency Supplemental Appropriations Act, P.L. 108-106 , of November 6, 2003, to $9.7 billion ($5.9 billion for Afghanistan and $3.8 billion for Iraq) in the FY2007 U.S. Troop Readiness, Recovery, and Iraq Accountability Act, P.L. 110-28 , of May 25, 2007. Iraq Security forces training efforts in Iraq were initially spearheaded by the Coalition Provisional Authority (CPA), led by Ambassador L. Paul Bremer, which served from its appointment in May 2003 until June 28, 2004, as the legal executive authority of Iraq. DOD, as CPA's higher headquarters, had overall responsibility for the effort. The military command in Iraq during the formal occupation, the Combined Joint Task Force-7 (CJTF-7), reported to its own higher headquarters, U.S. Central Command (CENTCOM), but served in direct support to CPA. The scope of the challenge has been extensive because none of Iraq's pre-war security forces or structures were left intact or available for duty after major combat operations ceased. Iraq pre-war planning erroneously assumed that at the end of "major combat," Iraqi police would be available, as needed, to help provide security for the Iraqi people. Instead, in the immediate aftermath of major combat, coalition forces found that civilian law enforcement bodies had disappeared. Meanwhile, U.S. military pre-war planning had also assumed that Iraqi military units would be available for recall and reassignment after the war, as needed. Military plans counted on the "capitulation" of Iraqi forces and included options for using some of those forces to guard borders or perform other tasks. Instead, on May 23, 2003, the CPA issued Order Number 2, dissolving all Iraqi military services, including the Army. That decision foreclosed the option of unit recall to support security or reconstruction activities, or to serve as building blocks for a post-Saddam force. In August 2003, CPA directed the creation of the New Iraqi Army, under the authority of the CPA Administrator or "a civilian member of the CPA reporting directly to the Administrator." Iraqi police training, too, was initially a CPA function, under the leadership of former New York Police Commissioner Bernard Kerik, who reported to the CPA Administrator. He was supported by a skeleton staff in Baghdad and by resources from the State Department's Bureau of International Narcotics and Law Enforcement Affairs (INL). That arrangement quickly proved insufficient to the task at hand. In early September 2003, at the recommendation of military commanders and with strong support from DOD, CPA launched the Iraqi Civil Defense Corps (ICDC), a "security and emergency service agency for Iraq," for which the CPA Administrator delegated responsibility to the senior military commander on the ground. The ICDC was essentially a military initiative, designed to leverage the coalition's most copious resource—the "boots on the ground" of CJTF-7—to recruit and train Iraqi units to temporarily fill the security vacuum. By early 2004, it was apparent to senior U.S. civilian and military leaders on the ground in Iraq that the sheer magnitude of the task demanded significantly greater resources. Moreover, under the system of divided responsibilities, there was a lack of consistency across Iraq in the creation of each force, and in strategic-level coordination among the forces. Accordingly, on May 11, 2004, President Bush issued National Security Presidential Directive (NSPD) 36, which, among other matters, assigned the mission of organizing, training, and equipping all Iraqi security forces (ISF) to CENTCOM. This mission included both directing all U.S. efforts and coordinating all supporting international efforts. It explicitly included Iraq's civilian police, as well as its military forces. CENTCOM, in turn, created the Multi-National Security Transition Command-Iraq (MNSTC-I), a new three-star headquarters that would fall under the Multi-National Force-Iraq (MNF-I), to bring together all Iraqi security forces training under a single lead in Iraq. Since December 2004, the MNSTC-I Commander has been dual-hatted as the Commander of the NATO Training Mission-Iraq (NTM-I). With participation by 15 NATO members, including the United States, and one non-NATO country, NTM-I provides training, both inside and outside Iraq, to Iraqi forces; assistance with equipping; and technical assistance. On October 1, 2005, MNSTC-I was given the additional responsibility of mentoring and helping build capacity in the Ministries of Defense and Interior. Afghanistan The organization and focus of train and equip efforts in Afghanistan, too, has evolved over time. Regime removal left both a domestic security vacuum and a complete lack of truly national structures to support national-level governance. The December 2001 Bonn Agreement recognized the need to help the new Afghan authorities "in the establishment and training of new Afghan security and armed forces." Several months later, at a conference in Geneva on Afghanistan security, contributing states agreed to support the rebuilding of Afghan security forces and organized their efforts into five "pillars"—including the Afghan National Army under U.S. lead, and the police sector under German lead. In 2002, the United States created the Office of Military Cooperation-Afghanistan (OMC-A), as part of the military command structure in Afghanistan, with the mandate to train the Afghan army. Germany assumed the lead for its pillar—the police training effort. It soon became apparent, however, that pressing security needs called for greater resources than Germany alone could provide. In 2003, to improve the effort, the State Department's INL, with contractor support, began training serving policemen and new recruits. In 2005, based on input from relevant agencies, the Administration decided to shift U.S. responsibility for police training in Afghanistan to DOD. The OMC-A was renamed the Office of Security Cooperation-Afghanistan, still part of the military command structure in Afghanistan, and it assumed U.S. responsibility for training the entire Afghan security sector, including the Afghan National Police. Responsibility for policy guidance on police training remained with the U.S. Chief of Mission and State's INL retained contract management authority. In April 2006, the modalities for cooperation between State and Defense Department representatives on the ground changed, when the U.S. military command structure in Afghanistan was adjusted. At that time, OSC-A was redesignated the Combined Security Transition Command-Afghanistan (CSTC-A) and assigned directly to U.S. Central Command, rather than to a military command in Afghanistan. The U.S. embassy in Kabul provided CSTC-A with policy guidance. Coalition Partner Assistance Since 9/11, Congress has provided DOD with several categories of funding and authorities in order to enable international partners to contribute, in various ways, to the coalition efforts in Iraq and Afghanistan. The primary impetus for seeking these authorities has been military exigency to support coalition operations: the need for the unique access that some states, by virtue of geography, can provide; the desire for additional troop strength to support the efforts in Iraq and Afghanistan; and the need for some unique capabilities, such as language skills and cultural familiarity, and other niche capabilities, such as Estonia's specialization in explosive ordnance disposal. Some observers stress that a policy imperative—to build coalition forces with as many participants as possible in order to shore up the legitimacy of coalition efforts—has also played a key role. This section addresses two categories, commonly known as "coalition support" and "lift and sustain." "Coalition support" provides funds to DOD to reimburse international partners for their support. "Lift and sustain" allows DOD to provide resources to international partners, without which they would be unable to participate in the coalition effort. The legislation supporting these efforts is enacted annually. Since late 2003, coalition support legislation has required the "concurrence of the Secretary of State." As it is for train and equip, this requirement is understood to mean formal agreement, and inter-agency mechanisms are in place to support coordination. "Lift and sustain" legislation does not include such a requirement. Substantively, the earliest coalition support legislation designated as recipients only Pakistan and Jordan, but more recent legislation has added "... and other key cooperating nations." All of the legislation provides for reimbursing those states for logistical and military support to U.S. military operations. The lift and sustain legislation allows DOD to provide "supplies, services, transportation (including airlift and sealift), and other logistical support to coalition forces supporting military and stability operations in Iraq." Congress has appropriated over $1 billion annually for coalition support efforts. Congress supports "lift and sustain" in turn, by providing that DOD may use funds available for operation and maintenance for lift and sustain efforts. In practice, coalition support has directly supported major border operations by the government of Pakistan, along the Pakistan-Afghanistan border, as well as Jordanian efforts along the Jordan-Iraq border. The assistance has also reportedly supported some states in the region that do not wish their involvement in the coalition efforts to be known. Lift and sustain, in turn, has allowed Poland to bring its forces to Iraq, sustain them throughout their deployment, and lead the Multi-National Division Center South. Lift and sustain has also supported Georgia's deployment to Iraq of a full brigade of 2,000 soldiers, who are currently manning checkpoints between al Kut and the Iraq-Iran border. Issues DOD's role in coalition partner assistance in Iraq and Afghanistan has been relatively uncontroversial. It is possible that DOD's coordination role with international partners in these cases could set precedents for future security partnerships more broadly. It may be more likely, however, that DOD's coalition partner assistance role in these two cases will serve as a precedent only for possible future coalition military operations—not for the routine conduct of security assistance or security cooperation. DOD's role in train and equip assistance in Iraq and Afghanistan has sparked much more debate—within DOD, among U.S. government agencies, and in the broader policy community. Most observers expect that in the future, U.S. efforts to help build the capacity and improve the capabilities of the security forces of various partner states are likely to grow, even if nation-building-style missions on the scale of Iraq are not very likely. There is much less agreement among agencies and observers about who ought to bear what share of the burden. Some argue that the Department of State, and in particular INL, should be much better resourced, in terms of personnel and funding, to meet possible future demands. Current resources simply do not allow INL to tackle training missions on the scale of the recent Iraq or Afghanistan experiences. Building up a greater capacity in the State Department would allow it to assume a greater share of the responsibility in a similar future contingency. Others argue that DOD needs to increase its own training capacity—even if DOD will remain in a supporting role for future training missions. Secretary of Defense Robert Gates identified "the standing up and mentoring of indigenous army and police" as "a key mission for the military as a whole." Some DOD officials and outside defense experts have argued that the training mission is so important that DOD should establish and maintain dedicated training units, to capitalize on recent operational experiences. These two approaches (i.e., increasing training capacity at the Department of State and at DOD) are not mutually exclusive. Both might be considered appropriate by analysts who expect a larger overall future requirement for U.S. train and equip assistance.
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The Department of Defense (DOD) has long played a role in U.S. efforts to assist foreign populations, militaries, and governments. The use of DOD to provide foreign assistance stems in general from the perception that DOD can contribute unique or vital capabilities and resources because it possesses the manpower, materiel, and organizational assets to respond to international needs. Over the years, Congress has helped shape the DOD role by providing DOD with its mandate for such activities through a wide variety of authorities. The historical DOD role in foreign assistance can be regarded as serving three purposes: responding to humanitarian and basic needs, building foreign military capacity and capabilities, and strengthening foreign governments' ability to deal with internal and international threats through state-building measures. The United States and the U.S. military benefit from DOD foreign assistance activities in several ways. U.S. diplomacy benefits from the U.S. military's capacity to project itself rapidly into extreme situations, such as disasters and other humanitarian emergencies, enhancing the U.S. image as a humanitarian actor. Humanitarian assistance, military training, and other forms of assistance also provide opportunities to cultivate good relations with foreign populations, militaries, and governments. U.S. military personnel have long viewed such activities as opportunities to interact with foreign militaries as part of their professional development. Since the terrorist attacks on the United States of September 11, 2001, DOD training of military forces and provision of security assistance have been an important means to enable foreign militaries to conduct peacekeeping operations and to support coalition operations in Iraq and Afghanistan. DOD's perception of the appropriate non-combat role for the U.S. military has evolved over time. Within the past few years, the perceptions of DOD officials, military officers, and defense analysts have coalesced around a post-9/11 strategy that calls for the use of the U.S. military in preventive, deterrent, and preemptive activities. This strategy involves DOD in the creation of extensive international and interagency "partnerships," as well as an expanded DOD role in foreign assistance activities. Critics point to a number of problems with an expanded DOD role in many activities. Indeed, a key DOD document acknowledges that state-building tasks may be "best performed by indigenous, foreign, or U.S. civilian professionals." Nevertheless, although reluctant to divert personnel from combat functions, DOD officials believe that the U.S. military must develop its own capacity to carry out such activities in the absence of appropriate civilian forces. In the second session of the 110th Congress, Members have faced several choices regarding the DOD role in foreign assistance. The Bush Administration has proposed legislation to make permanent two controversial DOD authorities. It has also proposed legislation to enable U.S. government civilian personnel to perform some of the tasks currently carried out by the U.S. military, as well as to form a civilian reserve corps for that purpose. Congress may also consider options to improve DOD coordination with civilian agencies on foreign assistance activities.
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Signed into law on August 2, 2011, the Budget Control Act (P.L. 112-25, hereinafter the BCA) established a set of limits on federal spending, as well as a set of mechanisms to adjust those limits to accommodate spending that has special priority. One of these mechanisms—a limited allowable adjustment to pay for the congressionally designated costs of major disasters under the Robert T. Stafford Disaster Relief and Emergency Assistance Act (hereinafter "the disaster relief allowable adjustment" or "allowable adjustment")—represented a new approach to paying for disaster relief. By providing this flexibility in the budget caps, Congress changed the way it approached funding disaster relief and recovery efforts. The BCA is now halfway through its 10-year term. This report looks at how the adjustment has functioned over the first five years, and what the future of disaster relief (as defined under the BCA) may look like under current law for the next five years and beyond. The BCA defined disaster relief as activities carried out pursuant to a declaration of a major disaster under the Stafford Act. A limited amount of appropriations designated by Congress as being for disaster relief each year can be accommodated by adjusting the BCA's discretionary spending limits. That limitation is based on a modified 10-year rolling average of disaster relief appropriations calculated by the Office of Management and Budget (OMB). The average is calculated disregarding the high and low funding years in the 10-year data set. Unused adjustment can be rolled forward into the next fiscal year—however, this "carryover" expires if unused in the next fiscal year. The first calculations of the allowable adjustment, which applied to FY2012, relied entirely on BCA-mandated OMB calculations of past appropriations pursuant to major disaster declarations. The OMB report on disaster spending used to calculate the initial allowable adjustment noted the parameters of its task: Section 251(b)(2)(D)(i)(I) requires the calculation of "the average funding pro vided for disaster relief over the previous 10 years, excluding the highest and lowest years." "Disaster relief" is defined in section 251(b)(2)(D)(iii) as "activities carried out pursuant to a determination under section 102(2)" of the Robert T. Stafford Disaster Relief and Emergency Assistance Act (Stafford Act). A "determination under section 102(2)" means the Presidential declaration of a "major disaster." OMB itself noted challenges in making the prescribed retroactive assessment, pointing out that "OMB's calculation does not reflect total appropriations that were provided to respond to major disasters, but rather only funding that was provided pursuant to appropriations or authorizing language that specifically referenced the Stafford Act." OMB interprets the language of the BCA as directing them to use annual totals of congressional disaster relief designations as annual totals for disaster relief spending used in calculating the allowable adjustments for FY2013 and later. Reliance on this total of annual congressional disaster relief designations as a measure of major disaster costs is not wholly accurate either. Some major disaster costs are absorbed by federal agencies within their budgets after the completion of the appropriations cycle, when those costs were not anticipated. Congress also has chosen not to designate all costs of major disasters as "disaster relief." The application of this designation has been limited to the allowable size of the disaster relief adjustment in a given year, with costs beyond that limit being designated by Congress as emergency funding. Figure 1 , below, shows the OMB-calculated amounts of disaster relief from FY2001 through FY2011, and the amount designated as disaster relief by Congress from FY2012 through FY2016 as solid bars on the chart. For FY2012 through FY2016, blue data points connected by a line indicate the allowable adjustment for disaster relief available under the BCA. In FY2012 and FY2013, the disaster relief allowable adjustment approached full usage. In FY2014, for the first time, several billion dollars of the adjustment went unused, and was carried over to FY2015. Figure 2 illustrates how the allowable adjustment was calculated for FY2016. Blue bars indicate the ten years of disaster relief from FY2006 through FY2015 that the calculation is based on: black Xs indicate the high and low years that were excluded from the calculation. The average of the eight remaining years, plus the unused portion of the allowable adjustment from FY2015 (excluding carryover from FY2014), is the allowable adjustment for FY2016. The disaster relief provided in FY2005 and FY2006—which was largely driven by hurricanes Katrina, Rita, and Wilma—is in the process of "aging out" of the disaster relief allowable adjustment calculations. Those two fiscal years supported a higher average than otherwise would have been calculated in their absence. Beginning in FY2017, the only other year in the data set with disaster relief spending in excess of $20 billion (FY2008), will be the high year, and therefore be excluded from the calculation for the allowable adjustment. The implications of these changes for the allowable adjustment are discussed in greater detail below. As noted above, the annual total of disaster relief appropriations for years after FY2011 used to calculate the allowable adjustment is based on the congressional designation of appropriations as disaster relief. As years pass, the calculation is becoming less reliant on OMB's somewhat more inclusive annual totals of disaster relief and more reliant on annual congressional designations of disaster relief that have, in practice, been constrained to an extent by the allowable adjustment. The allowable adjustment has been most often used to accommodate budget authority for the Federal Emergency Management Agency's Disaster Relief Fund (DRF)—the primary FEMA account used to fund disaster response activities and pay for ongoing disaster recovery programs. However, the use of the allowable adjustment is not limited to the DRF. It has accommodated funding for several other departments and government agencies, as shown in Figure 3 . In FY2016, three departments received funding in annual appropriations designated as disaster relief—the Departments of Homeland Security (which includes FEMA), Agriculture, and Housing and Urban Development—the broadest use of the designation across agencies since FY2012, the first year of its use. As Congress considers the future of federal disaster relief and budgetary controls, it may choose to consider changes to the disaster relief allowable adjustment. Under the status quo, the disaster relief allowable adjustment will continue to be available through FY2021, after which the limitations on discretionary spending under the BCA expire. As past years roll out of the calculation and new years roll in, it is possible to assess potential future scenarios for the size of the allowable adjustment. Using OMB's methodology for calculating the allowable adjustment, three models of potential future scenarios are presented here: Maximum Usage Scenario : presumes Congress will designate the maximum amount available under the allowable adjustment for disaster relief each year; Medium Usage Scenario : presumes obligations for major disaster activities will follow FEMA's 10-year average of non-catastrophic major disasters, which is less than the total disaster relief allowable adjustment. Minimum Usage Scenario : presumes that no catastrophic disasters occur, no further major disasters are declared, and that the designation is only used to cover ongoing costs anticipated to the DRF from the past major disasters as of November 15, 2015. From FY2013 through FY2016, Congress appropriated almost $31.1 billion under the disaster relief designation, of which the DRF has received almost $30.6 billion—98.3% of the total funds designated. Given this pattern of predominant usage, the medium and minimum usage scenarios are based on projections of DRF spending on major disasters, with those appropriations being designated as disaster relief as has been congressional practice since FY2012. Figure 4 shows what the allowable adjustment would look like for the next five years if it were fully exercised every year, leaving no carryover. The allowable adjustment declines to roughly $6.8 billion as high expenditure years "age out" of the average, before increasing to nearly $7.5 billion in 2021. Figure 5 shows a projected future scenario for the allowable adjustment based on a FEMA projection from November 2015, of anticipated usage of the DRF over the next five fiscal years. According to FEMA, this anticipated usage includes estimates for existing disasters and future non-catastrophic major disasters calculated using a 10-year average of non-catastrophic major disasters adjusted to FY2017 dollars. FEMA's five-year projection provided a data point for FY2017, and a projection for the total cost of major disasters over the full five-year time horizon through FY2021. Due to the unpredictable nature of disasters, FEMA did not make annual projections. For purposes of developing a hypothetical scenario, CRS estimated annual levels by dividing the total projected spending for years two through five (FY2018-FY2021) evenly among those years. As noted above, given that the predominant usage of the allowable adjustment has been for the DRF, the DRF projection is being used as a surrogate for all disaster relief spending in this scenario. In this scenario, like the "maximum usage" scenario, the allowable adjustment declines through FY2018, but then rebounds in FY2019 to almost $9.7 billion due to the impact of carryover of unused adjustment from the prior year. This effect is temporary, as the carryover effect expires after a year. Lower levels of annual usage ultimately begin to impact the average and drive the allowable adjustment back down, falling to just above $8.4 billion in FY2021. Figure 6 shows a projected future scenario for the allowable adjustment based on a FEMA projection from November 2015, of anticipated usage of the DRF over the next five fiscal years, funding only the costs of previously declared disasters. While it is highly unlikely that no further major disaster declarations would be made over the next five years, this projection is intended to serve as a lower bound of possible usage of the allowable adjustment. As noted above, given that the predominant usage of the allowable adjustment has been for the DRF, the DRF projection is being used as a surrogate for all disaster relief spending. In this scenario, the carryover has a greater impact, with the larger carryover from FY2017 boosting the allowable adjustment in FY2018 to a greater extent than in the medium scenario, and a larger-still carryover applied to FY2019 boosting the allowable adjustment to almost $10.8 billion. As in the medium usage scenario, lower levels of expenditure on disaster relief result in further decline in the underlying 10-year average in ensuing years, leading to a decline in the projected allowable adjustment to slightly less than $9.6 billion in FY2021. To facilitate comparison, Figure 7 shows the maximum, medium, and minimum scenarios for the future of the disaster relief allowable adjustment in a single graphic. In the near term, lower usage of the allowable adjustment tends to support higher allowable adjustments due to the impact of carryover. However, those lower spending levels ultimately reduce the level of the adjustment by pulling down the average. As higher-usage years continue to roll out, if the BCA structure and allowable adjustment were continued past 2021 unchanged, the allowable adjustments in medium and minimum usage scenarios would continue to decline, while the allowable adjustment in the maximum usage scenario would remain relatively stable. The allowable adjustment initially was based wholly on OMB calculations of actual disaster relief spending. With each year, the calculation uses less of OMB's historical analysis, and more congressional designations of disaster relief appropriations, in its rolling average. These congressional designations have not been applied to all costs of major disasters, as noted above. One specific year of interest is FY2013. In FY2013, Congress provided $41.6 billion in supplemental disaster assistance in the wake of Hurricane Sandy in excess of the allowable adjustment—assistance that was designated as emergency spending rather than disaster relief—and therefore not included in the annual disaster relief total. This raises the question, what would be allowable adjustment look like if all the disaster assistance provided in FY2013 had been included in that year's disaster relief total? Had OMB's methodology been used to account for disaster relief spending in the 10 years prior to the enactment of the BCA been used in FY2013, virtually all of the funding provided in P.L. 113-2 would have been included in the total disaster relief for FY2013. As a result, the allowable adjustment would have been significantly higher for FY2014-FY2016. Figure 8 illustrates the effect of including Sandy-related supplemental disaster assistance designated as emergency spending in the allowable adjustment calculation. With FY2013 becoming the new "high year," other years with more than $20 billion in disaster relief remain part of the calculation for a longer period. Including Sandy-related supplemental disaster assistance in future allowable adjustment calculations would require a change in law. Options include retroactively designating the Hurricane Sandy funding as disaster spending, or modifying how OMB calculates the adjustment. Figure 9 further illustrates the effects of including disaster relief appropriations from P.L. 113-2 when calculating the allowable adjustment. Specifically, the maximum, medium, and minimum usage scenarios described above are recalculated, assuming inclusion of disaster relief appropriations from P.L. 113-2 . In this scenario, FY2013 becomes the new "high year," making FY2005 disaster relief eligible for inclusion in the average for the first time and keeping FY2006 and FY2008 included in the calculation for more years than they would have otherwise. Larger carryovers are available in FY2015 and FY2016, but as existing levels went unused, and the allowable adjustment in future years still settles below $10 billion per year by FY2020. This exercise suggests that even if an exception was made to include more of the cost of catastrophic disasters, a single high year may have a limited impact on the level of the allowable adjustment over the long term because it is tossed out of the average as the "high year." Higher spending over multiple years—such as the two years of higher disaster relief spending associated with the Gulf Coast hurricanes—has a much greater impact. In the case of Hurricane Katrina, only one of those "high" years was dropped from the calculation before FY2016. The "aging out" of those two years from the calculation results in a significant reduction in the modified 10-year average. One of the more visible impacts of the allowable adjustment for disaster relief is increased funding for the Disaster Relief Fund through the annual appropriations process. By essentially removing the funding for the costs of major disasters from the debate on discretionary spending, the annual appropriation now more closely resembles the annual expenditure. Prior to the enactment of the BCA, there was an incentive to fund the DRF at lower amounts annually in favor of other priorities, with the assumption that any shortages could be made up through a supplemental appropriations bill should the need arise during the fiscal year. By making the majority of the DRF eligible for funding outside discretionary spending limits, the BCA removed that incentive, and it became easier to request and appropriate more budget authority for the DRF on an annual basis. As noted above, the allowable adjustment has largely been used to fund the DRF: yet both FY2015 and FY2016 consolidated appropriations bills funded other disaster accounts using the disaster relief designation. Use of the disaster relief designation and the allowable adjustment to more broadly pre-fund commonly used disaster relief accounts may allow some federal agencies to exercise their disaster response authorities after major disasters without waiting for emergency funding, or relying on transfers from other funded activities. However, removing the urgency from the supplemental appropriations process may have unintended consequences for programs whose agencies may anticipate relying on supplemental appropriations to fund their efforts. When Hurricane Sandy struck, a combination of two timely features ensured that the DRF had adequate resources to deal with the immediate needs presented by the storm: a $6.4 billion supplemental appropriation for the DRF in FY2012 and a continuing resolution for the beginning of FY2013 that provided interim funding for the DRF at a rate based on that large supplemental appropriation. The immediate availability of those resources may have allowed the Administration to move more deliberately in response to the storm than would have been the case had the DRF not been relatively flush—for example, the Administration's request for supplemental appropriations was not sent to Congress until six weeks after the storm had passed. Other programs—even some of those included in the supplemental request—did not have the benefit of those ready resources, and had to rely on transfers or reprogramming of resources if they wished to move ahead, or wait for the passage of a supplemental appropriations bill. As noted earlier, the BCA defined "disaster relief" as activities carried out pursuant to a declaration of a major disaster under the Stafford Act. According to OMB, to be accounted for under the allowable adjustment, and to be included in the calculation of the 10-year rolling average on which the adjustment is based, appropriations must be designated by Congress as disaster relief. Not all costs of major disasters receive the disaster relief designation. As noted above, in the case of FY2013, if all the costs of those combined major disasters paid in P.L. 113-2 had been designated as disaster relief, those designations would have exceeded the allowable adjustment. As a result, the majority of disaster relief was designated as emergency appropriations. Furthermore, the definition of disaster relief in the BCA is a limiting factor—it already excludes some forms of federal disaster assistance by focusing on the major disaster declaration. Two specific types of Stafford Act disaster declarations funded through the DRF are not linked to major disasters, and are therefore not included in the 10-year average of disaster relief spending: Emergency declarations and Fire Management Assistance Grants (FMAG). Emergency declarations at the federal level—made by the President—authorize assistance that helps states and localities carry out essential services during emergency situations. FMAGs authorize various forms of federal assistance such as the provision of equipment, personnel, and grants to state, local, and tribal governments for the control, management, and mitigation of any fire on public or private forest land or grassland that might become a major disaster. Spending levels for emergency declarations and FMAGs are much lower than the spending level for major disaster declarations. From FY1992-FY2015, $155.60 billion was spent pursuant to major disaster declarations, an average of $6.48 billion per year. Over that same period, $4.23 billion was spent pursuant to emergency declarations and fire management grants, an average of $176 million per year—less than 3% of spending on major disaster declarations. Thus, it might be argued that their inclusion would not make an appreciable difference to the 10-year average. Others may argue that emergencies and FMAGs should be included to provide a more precise and complete calculation of federal disaster relief. A similar argument could be made for the inclusion of disaster assistance programs that can be carried out under an authority separate from the Stafford Act. For example, the Secretary of the Department of Health and Human Services (HHS) has general authority under the Public Health Service Act to provide public health assistance to states, upon their request, without a Stafford Act declaration. Another significant example is the U.S. Forest Service (FS) and the U.S. Department of the Interior (DOI) which provide assistance to suppress wildfires and protect lives. These examples of federal disaster assistance would not be part of the annual calculation of the allowable adjustment, specifically because of their lack of a nexus to a major disaster declaration under the Stafford Act. Some might argue that the definition of disaster relief and the calculation of the allowable adjustment should capture all instances of federal disaster relief—not just what is provided under the Stafford Act as a major disaster. Doing so would require much more complete reporting of disaster assistance spending, which in turn could allow for more thorough congressional oversight and policy innovation. It should be noted, however, that historically, obtaining a comprehensive financial picture of federal funding for disaster assistance has proven to be a difficult task for a variety of reasons: It is difficult to identify all of the federal entities that provide disaster assistance because many federal entities provide aid through a wide range of programs, not necessarily through those designated specifically as "disaster assistance" programs. The degree of transparency in reporting funding levels for disaster relief varies tremendously among federal entities. As an example, Congress requires FEMA to submit monthly status reports on the DRF, detailing balances, obligations, allocations, and expenditures for a range of major disasters. This requirement has not been extended to other agencies, and limited data exist, particularly on a state-by-state or disaster-by-disaster basis, on other federal funding for emergencies and major disasters. Scoping what constitutes a disaster is difficult because disaster definitions vary by statute, regulation, and program. Some might argue that all these definitions should be combined to get an accurate measure of federal expenditures for disaster assistance. Others might argue it makes the universe of disaster assistance too broad and may include items such as emergency preparedness and mitigation efforts, livestock losses, economic disasters, and search and rescue missions. Some observers mistakenly believe that the allowable adjustment for disaster relief is a constraint on how much Congress can spend on disaster assistance. This is a misconception. A spokesman for then-Majority Leader Eric Cantor put it thusly: One of the reasons House Republicans insisted on reforming the disaster funding process, which we did as part of the Budget Control Act, was so that we would have a separate dedicated pot of money available based on historical disaster needs.... We also provided that should a disaster exceed that capacity, Congress and the president could provide additional emergency funds. The allowable adjustment is a constraint on the amount Congress can adjust the discretionary spending limits to accommodate designated disaster relief. While the BCA states that designated disaster relief is not eligible for designation as emergency funding, the definition of emergency under the BCA encompasses a range of eventualities that includes disasters: designated new budget authority and outlays are "for the prevention or mitigation of, or response to, loss of life or property, or a threat to national security; and ... is unanticipated." In the wake of Hurricane Sandy, the allowable adjustment was exhausted, and supplemental appropriations were covered largely by emergency designations, as explained above. During the 114 th Congress legislation addressing the allowable adjustment for disasters under the BCA took two different approaches. Several pieces of legislation proposed directly amending the BCA to permit additional forms of disaster spending (e.g., wildfire suppression activities). Legislation passed by the House during the 1 st session of the 114 th Congress ( H.R. 2467 ) used a "work-around" to avoid directly amending the BCA. The measure passed by the House ( H.R. 2647 ) would instead amend the Stafford Act, which is the main disaster relief legislation administered by FEMA following a major disaster declaration. The measure would create new definitions and spending authorities under the Stafford Act. These changes would allow federal agencies to request declarations for disaster impacts on federal lands—currently not within the Stafford Act's jurisdiction—and therefore fund a new set of disaster response activities through DRF. As this report has noted, it appears that the allowable adjustment for disaster relief may settle around $7.5-$9.5 billion as more expensive incidents drop out of the current calculation method. The projected allowable adjustment could change, however, if there are future high-expense incidents. Arguably, the inclusion of an additional category of incidents approved by the President as disasters could eventually increase the rolling average over time, although in initial years, it would reduce the impact of carryover. H.R. 2647 addresses issues related to funding for disaster-related costs incurred in federal efforts to fight wildfires. It could be argued that modifying the Stafford Act addresses a known disaster risk and provides a funding avenue to meet unanticipated needs that is preferable to intra-agency borrowing. However, modifying the Stafford Act could also be viewed as placing wildfire funding for federal agencies in competition with requests from governors for supplemental disaster relief from the DRF. This could be seen as jeopardizing a long-standing federal backstop for states for other perils and hazards that are beyond their capacity to respond to and recover from. As it currently stands, the discretionary spending limits pursuant to the Budget Control Act expire after FY2021. Should Congress choose to continue with annual caps on discretionary spending, it may choose to maintain the existing allowable adjustment for disaster relief, or modify its approach. Should Congress choose to modify its approach, there are several options to consider. Congress may continue to provide mechanisms in its budget process that allow for funding outside the discretionary spending levels outlined in annual budget resolutions in special circumstances, either generically as "emergency" spending, or with more specific ends, such as funding for overseas military operations, disaster relief, or for other specific ends. It may choose unlimited adjustments, limited allowable adjustments, or possibly a combination of such approaches as it has under the Budget Control Act. If Congress chooses to continue to provide an adjustment for disaster relief, linking the definition of disaster relief to major disasters under the Stafford Act and limiting the adjustment available by formula could continue without the prescription of discretionary spending limits in law, or the threat of sequestration. Congress may choose to revisit its definition of disaster relief, or whether the adjustment is limited. If Congress chooses an allowable adjustment model, it may also seek to change the formula for calculating the allowable adjustment, in any number of ways: extending the time period being averaged; including the high and low years; or modifying the scope of disaster assistance included in the calculations. A more fundamental change to how the federal government pays for the costs of disaster relief is also possible. Congress could take steps to shift costs paid by the federal government to states and localities, or provide borrowing authority to agencies responding to disasters rather than discretionary budget authority through the appropriations process. However, these options would require legislative actions traditionally outside the budget process to implement.
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Signed into law on August 2, 2011, the Budget Control Act (P.L. 112-25, or BCA) established a set of limits on federal spending, as well as a set of mechanisms to adjust those limits to accommodate special categories of spending that has special priority. One of these mechanisms—a limited allowable adjustment to pay for the congressionally designated costs of major disasters under the Robert T. Stafford Disaster Relief and Emergency Assistance Act (hereinafter "the disaster relief allowable adjustment" or "allowable adjustment")—represented a new approach to paying for disaster relief. By providing this flexibility in the budget caps, Congress changed the way it approached funding disaster relief and recovery efforts. The disaster relief allowable adjustment is based on a modified rolling average of annual federal government appropriations for the costs of major disasters, pursuant to a methodology laid out in the BCA. Annually, the Office of Management and Budget (OMB) looks back at the past 10 years of disaster relief appropriations. For fiscal years prior to FY2012, OMB has identified appropriations associated with major disaster declarations for use in the calculation. For FY2012 and later years, OMB relies on explicit Congressional designations of appropriations as disaster relief pursuant to the BCA. OMB takes these 10 annual totals of disaster relief appropriations, drops the highest and lowest years, and averages the remaining 8. This modified average is then supplemented by any unused amounts from the average calculated for the previous fiscal year. This calculation generates a limit up to which the discretionary budget caps can be adjusted to accommodate appropriations on major disasters. In practice, this limitation on the size of the disaster relief adjustment has also limited the application of the disaster relief designation. Funds that would meet the definition of disaster relief may not be classified as such. Implementation of the disaster relief allowable adjustment has allowed Congress to fund the Federal Emergency Management Agency's Disaster Relief Fund (DRF) to a greater degree through annual appropriations, rather than through supplemental appropriations as it had before enactment of the BCA. Allowing the discretionary budget limitations to be adjusted to pay for disaster costs has removed, to an extent, the costs of disaster relief from competing with other annual priorities for funding. However, the allowable adjustment is expected to drop significantly in the near future as two of the highest disaster cost years roll out of the calculated average used in setting the adjustment. This report examines how the adjustment has functioned over the first five years, and what the future of disaster relief (as defined by the BCA) may look like for the next five years and beyond. Under current law, the allowable adjustment is expected to decline from a high of almost $18.5 billion in FY2015 to between $7.5 billion and $9.5 billion by the time the BCA discretionary spending limits expire after FY2021. As Congress considers budget planning and potential changes to how it budgets for disaster assistance for a variety of different types of incidents, it may consider whether the allowable adjustment has worked as planned. Congress may also consider changes to how it addresses disaster costs, through changes to the existing structure of the allowable adjustment, or by revisiting other laws.
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Flows of foreign fighters to the current conflicts in Syria and Iraq are recent examples of a broader phenomenon that has seen tens of thousands of individuals travel to various conflict zones in the Middle East, North Africa, and elsewhere over the last three decades. In February 2015, the U.S. intelligence community assessed that more than 20,000 foreign fighters—including at least 3,400 Westerners—had traveled to the Syria-Iraq region since 2011. U.S. National Counterterrorism Center (NCTC) Director Nicholas Rasmussen has asserted that the numbers of those seeking to fight in Syria or Iraq are "unprecedented," that they "are going up," and that the majority of recent recruits are joining the Islamic State terrorist organization (also known as ISIL or ISIS). Among Western citizens who have become foreign fighters in Syria and Iraq in the last few years, the largest contingents are believed to be from countries in Europe. Some European estimates of foreign fighter flows (from official and unofficial sources) are higher than U.S. assessments, and suggest that upward of 4,000 or 5,000 Europeans may have traveled to the conflict zone. Smaller numbers of Americans, Canadians, and Australians have also sought to join the fighting. As of February 2015, U.S. officials estimated that more than 150 U.S. persons had traveled or attempted to travel to Syria to support armed groups there since the start of the Syrian conflict in 2011. There are no unclassified comprehensive figures available on how many Americans have joined the Islamic State organization relative to other armed groups, in part because the affiliation of many individuals is revealed only following their detention or death. While there is limited data that would allow a definitive assessment of the threat posed by individuals who have traveled to Iraq, Syria, or elsewhere as foreign fighters, U.S. officials have noted that there is a risk that "these individuals may eventually return to their home countries battle-hardened, radicalized, and willing to commit violence." Such fears have been heightened considerably by the January 2015 terrorist attacks in France, in which at least 17 people were killed over the course of several days in three related incidents that targeted the Paris headquarters of the French satirical magazine Charlie Hebdo , police officers, and a kosher supermarket. The perpetrators of the attacks were French-born Muslims; at least one suspect reportedly traveled to Yemen in 2011 for terrorist training, while another pledged allegiance to the Islamic State group. Prior to the Paris attacks, the May 2014 murder of four people at the Jewish Museum in Brussels, Belgium—allegedly carried out by a French Muslim who had spent a year with Islamist fighters in Syria—also raised alarm bells in both Europe and the United States about returning fighters. In addition, security services in Western countries are increasingly concerned that some citizens and residents may be inspired by Islamist extremist propaganda to commit attacks at home without ever traveling abroad. Many point to the two separate attacks in Canada in October 2014, which targeted members of the armed forces and the Canadian Parliament, and the hostage-taking incident in Sydney, Australia, in December 2014, as worrisome examples of "lone wolf" attacks carried out by "self-radicalized" Muslims. Fears of "copycat" incidents have also increased following the February 2015 shootings in Copenhagen, Denmark, in which a gunman killed two individuals and wounded several police officers at two separate locations—a cafe hosting a free speech discussion and a synagogue—broadly mirroring the Paris attacks. The suspect, a young Danish-born citizen of Palestinian descent, appears to have been radicalized in prison and may have been interested in traveling to fight in Syria or Iraq. U.S. and European officials further note the potential propaganda value of Western Muslims engaged in fighting in Iraq or Syria. Some analysts have speculated that the Islamic State group may view Americans or other English speakers as particularly useful for targeting potential recruits in Western countries. Western fighters have appeared in several Islamic State propaganda videos. Intelligence services believe that the beheadings of three Americans and two United Kingdom citizens between August and November 2014, videotaped and posted online, were carried out by a British member of the Islamic State organization. Some intelligence officials have also suggested that the Islamic State group recruits Americans and other Westerners specifically for their presumed ability to reenter the United States and Europe with less scrutiny. The United States has close, long-standing bilateral law enforcement and intelligence relations with most European countries. Since the September 11, 2001 terrorist attacks, the United States and the 28-member European Union (EU) have also worked to enhance their counterterrorism and homeland security cooperation. In recent years, U.S. and European policymakers have sought to exchange "best practices" on ways to prevent radicalization, counter violent extremism (CVE), and tackle the potential foreign fighter threat. The United States and European governments also worked together to pass U.N. Security Council Resolution 2178 in September 2014, which seeks to combat the foreign fighter phenomenon worldwide. In the wake of the Paris attacks, the White House convened a "Summit on Countering Violent Extremism" on February 17-19, 2015, in Washington, DC. This three-day event featured discussions with U.S. community leaders, civil society groups, and law enforcement officials on domestic CVE efforts, as well as talks with U.S. business and technology leaders on tackling radicalization online. The summit also included an international component in which representatives from over 60 countries (including the mayor of Paris and other high-ranking European and EU officials) discussed preventive measures and shared "best practices." U.S. officials and analysts contend that the potential foreign fighter threat underscores the importance of close law enforcement ties with key European allies and existing U.S.-EU information-sharing arrangements, including those related to tracking terrorist financing and sharing airline passenger data. Some U.S. policymakers, including several Members of Congress, have expressed particular worries about European fighters in Syria and Iraq because of the U.S. Visa Waiver Program (VWP). The VWP permits short-term visa-free travel to the United States from 38 countries, most of which are in Europe (see Appendix A ). In July 2014, U.S. Attorney General Eric Holder asserted during a speech in Norway, that "We have a mutual and compelling interest in developing shared strategies for confronting the influx of U.S. and European-born violent extremists in Syria. And because our citizens can freely travel, visa-free ... the problem of fighters in Syria returning to any of our countries is a problem for all of our countries." Hearings in the 113 th and 114 th Congresses have addressed the potential foreign fighter threat, and several pieces of legislation have been introduced on the VWP. While some Members of Congress appear to support limiting or suspending the VWP, others indicate a preference for strengthening its existing security controls. The Obama Administration continues to support the VWP as a key facilitator of transatlantic trade and tourism. In November 2014, however, the U.S. Department of Homeland Security announced that VWP travelers would be required to submit additional advanced biographic information to enable more accurate and comprehensive screening because of the possible dangers posed by foreign fighters. This report discusses U.S. and European assessments of and responses to the foreign fighter phenomenon. It focuses on government policies primarily in Western European countries and analyzes EU measures to counter the foreign fighter threat given the EU's largely open internal borders and that 23 EU member states belong to the U.S. Visa Waiver Program. It also briefly evaluates foreign fighter outflows and responses in the Western Balkans and Russia. The report concludes with a discussion of U.S.-European cooperation, primarily in the law enforcement and intelligence areas, and addresses issues of particular concern for Congress, such as the VWP. Conflicts in Syria and Iraq have attracted thousands of individuals from dozens of countries to fight alongside a broad spectrum of armed groups over the last 10 years. In Iraq, the anti-U.S. insurgency and the outbreak of sectarian warfare drew thousands of fighters to the country, particularly during 2003 to 2008, and predominantly from the Arab countries of the Middle East and North Africa. Iran supported Shiite militia groups during this period. While the vast majority of insurgent operations in Iraq were carried out by Iraqis, Sunni foreign fighters actively participated in fighting against U.S. forces, and some sources suggest that foreigners disproportionately were employed by some Sunni insurgent forces—including antecedents of the Islamic State organization—in suicide bombings and other high-profile attacks. In 2008, U.S. military sources estimated that foreigners made up roughly 10% of the personnel of the Islamic State of Iraq (also known as Al Qaeda in Iraq, the predecessor to the Islamic State), who were then estimated to have declined from as many as 10,000 fighters to roughly 2,000 to 3,000 fighters. These sources further reported that, in 2008, foreigners constituted roughly 1% of the 23,000 detainees in U.S. custody in Iraq. U.S. officials accused the Syrian government of President Bashar al Asad of facilitating the flow of foreign fighters through Syria into Iraq during this period, and the U.S. military reportedly took action inside Syria in at least one instance in part to disrupt such flows. An outflow of foreign fighters from Iraq increasingly was reported by the international media from 2008 onward. In subsequent years, some governments in the Middle East and North Africa took steps to prosecute, monitor, and/or rehabilitate foreign fighters and individuals who facilitated their travel to Iraq, with varying outcomes. The unrest and conflict that began in Syria in 2011 reinvigorated the flow of foreign fighters to the area, and transnational networks active in sending fighters to Iraq reportedly reactivated and adapted their operations to send recruits to insurgent groups fighting the Asad government in Syria. By February 2014, U.S. Director of National Intelligence (DNI) James Clapper publicly assessed the overall strength of the insurgency in Syria at "somewhere between 75,000 or 80,000 or up to 110,000 to 115,000 insurgents, who are organized into more than 1,500 groups of widely varying political leanings." According to then-National Counterterrorism Center (NCTC) Deputy Director Nicholas Rasmussen, "Syria remains the preeminent location for independent or Al Qaeda-aligned groups to recruit, train, and equip a growing number of extremists, some of whom we assess may seek to conduct external attacks." NCTC also has acknowledged that Islamic State sympathizers "could conduct a limited, self-directed attack here at home with no warning," but that "any threat to the U.S. homeland from these types of extremists is likely to be limited in scope and scale." Further explication from U.S. government sources of the nature and scale of such a threat is generally unavailable from unclassified sources. As noted previously, U.S. authorities judge that more than 20,000 foreign fighters have traveled to the Syria-Iraq region since the start of the conflict in Syria in 2011; of this figure, at least 3,400 are believed to be Westerners, including roughly 150 Americans. U.S. officials suggest that foreign fighters in Syria and Iraq hail from more than 90 countries. Roughly 10,000 foreign fighters are thought to have joined the Islamic State group, according to U.S. Special Presidential Envoy for the Global Coalition to Counter ISIL, General John Allen. More detailed U.S. government assessments of the national origins and current organizational affiliations of foreign fighters in Syria have not been made publicly available. U.S. officials estimate that a handful of Americans have died fighting in the Syrian conflict since 2012. They also assert that military operations against the Islamic State group since August 2014 have killed thousands of fighters, including an unknown number of foreigners. In general, nongovernment open-source analyses available as of early 2015 are close to U.S. government public estimates of the size, general make-up, and affiliations of foreign fighters in Syria. Figures released in January 2015 by the London-based International Centre for the Study of Radicalisation and Political Violence (ICSR) suggest that more than 20,000 foreign fighters have traveled to Syria and Iraq, with as many as 11,000 from the Middle East, 3,000 from the countries of the former Soviet Union, and up to 4,000 from Western Europe. Such independent assessments also indicate that the flow of foreign fighters to Syria since 2011 has been unprecedented in terms of its scope and speed relative to other comparable conflicts. Echoing these analyses, in September 2014, then-NCTC Deputy Director Rasmussen testified before Congress that, "The rate of travelers into Syria exceeds the rate of travelers who went into Afghanistan/Pakistan, Iraq, Yemen, or Somalia at any point in the last ten years." Information released by insurgent groups in Syria suggests that foreign fighters have affiliated themselves with entities drawn from across the ideological spectrum of opposition groups described by U.S. officials. However, open sources strongly suggest that a plurality if not a majority of foreign fighters active in Syria have affiliated themselves with armed Islamist groups, including U.S.-designated Foreign Terrorist Organizations such as Jabhat al Nusra and the Islamic State. Many groups in Syria, which range from relatively moderate to more extreme in ideology and action, have issued appeals for foreign support and have utilized foreign fighters (see Appendix B for more information on foreign fighter recruitment). Some debate exists regarding the utility of foreign fighters to local groups, however. Foreigners may face language barriers and difficulties integrating with local populations or group members of other nationalities. Like other foreign fighters, the roles that Americans play in these organizations are likely to vary depending on an individual's skills and/or the needs of the group. In a December 2014 interview, General Allen stated that foreign fighters who lack military qualifications often become suicide bombers. Syrian government forces also have been bolstered by support from thousands of Lebanese Hezbollah personnel along with an unknown number of Iraqi Shiite militia members. In addition, U.S. officials have accused the government of Iran of deploying members of its security services to Syria in support of the Asad government. At least one source asserts that some Asad regime air strike missions may be piloted by Russians. Various nongovernmental assessments have analyzed the makeup and activities of foreign fighter contingents in Syria from a number of different countries. These assessments reveal a range of historical and current patterns of recruitment, travel, group dynamics, and engagement in combat. Nevertheless, independent open source analyses of so-called "martyrdom" (death) notices, self-reported insurgent operations material, individuals' social media postings, foreign government estimates, and international press sources provide only limited information on the backgrounds and affiliations of some recent foreign fighters in Syria. Individual accounts of foreign fighters' travel to Syria and Iraq suggest that potential recruits use both direct and circuitous routes to make their way to the conflict zone. While it appears that some individuals seek to mask their intended destinations and means of travel, others do not. Many foreign fighters, especially from Europe, reportedly travel through Turkey en route to opposition-held areas of northern Syria and Iraq. Turkey's multiple air connections and its long border with Syria that spans remote and in some places mountainous terrain have made Turkey a key transit location for fighters bound for Syria and Iraq. U.S. officials from the intelligence community, State Department, and agencies concerned with domestic security assess, monitor, and respond to threats posed by foreign fighters active in Syria and Iraq. Diplomatic and intelligence efforts focus on coordinating with source, transit, and returnee destination countries to strengthen shared responses and preventive measures. In March 2014, the State Department named Ambassador Robert Bradtke as " senior adviser for partner engagement on Syria foreign fighters." According to a department spokesperson, Ambassador Bradtke was charged with leading "a comprehensive effort, including marshalling representatives from a number of U.S. departments and agencies, to encourage key European, North African, and Middle Eastern partners to prioritize the threat, address vulnerabilities, and adapt to—and prevent—foreign fighters." Testifying before the House Foreign Affairs Committee in December 2014, Ambassador Bradtke laid out seven areas in which the United States is engaging with regional partners in order to counter foreign fighters: Information - sharing . The United States is working bilaterally to bolster information sharing on known and suspected terrorists and called on partners to make greater use of multilateral arrangements for sharing information, such as Interpol's Foreign Fighters Fusion Cell. Law enforcement cooperation . The United States is assisting local law enforcement authorities in partner countries to bring suspected terrorists to trial. Capacity- building . The United States is working with partner countries to strengthen their infrastructure, including through stronger counterterrorism legislation and improved interagency coordination. Halting external financing . The Treasury Department is working with regional partners to identify cases in which individuals or organizations are raising funds to support the Islamic State or other terrorist groups. Counter-messaging . The United States has sought to counter the Islamic State's message (and that of other terrorist groups) by using social media, including efforts led by the State Department's Center for Strategic Counterterrorism Communications. Countering violent extremism . The United States is sharing its experience with countering violent extremism programs and working with partners to build their capacity to implement similar programs. Border and aviation security . The United States is implementing measures, including increased screening and preclearance at overseas airports, and enhancements to the Electronic System for Travel Authorization and the Visa Waiver Program (see "Issues for Congress" for more information). The United States has also sought to address the potential foreign fighter threat through the United Nations. In August 2014, the U.S. government supported the adoption of U.N. Security Council Resolution 2170, which strengthened international sanctions designed to combat the Islamic State group, Jabhat al Nusra, and Al Qaeda-affiliated entities. The resolution calls upon all U.N. member states "to take national measures to suppress the flow of foreign terrorist fighters to, and bring to justice, in accordance with applicable international law, foreign terrorist fighters of, ISIL, ANF [Jabhat al Nusra] and all other individuals, groups, undertakings and entities associated with Al Qaeda." Resolution 2170 also reiterates member states' obligation to prevent terrorist travel, limit supplies of weapons and financing, and exchange information on the groups. On September 24, 2014, President Obama led a session of the U.N. Security Council focused on strengthening international responses to the threat posed by foreign fighters traveling to conflict zones, especially in Syria and Iraq. The session concluded with the adoption of U.N. Security Council Resolution 2178, which requires U.N. member states, consistent with international law, to "prevent and suppress the recruiting, organizing, transporting or equipping of individuals who travel to a State other than their States of residence or nationality for the purpose of the perpetration, planning, or preparation of, or participation in, terrorist acts or the providing or receiving of terrorist training, and the financing of their travel and of their activities." In particular, U.N. Security Council Resolution 2178 calls on all U.N. member states to ensure the ability in their domestic laws to prosecute and penalize their nationals and others departing their territories for foreign fighter-related crimes. In December 2014, Ambassador Bradtke asserted to Congress, "Several countries have already enacted or proposed legislation to permit such prosecution; other countries have stepped up their enforcement of existing laws. We continue to urge partners to meet their obligations under UNSCR 2178, and are offering assistance to partners who may need help in doing so." U.N. Security Council Resolution 2199, adopted on February 12, 2015, reaffirms several requirements to restrict flows of arms, combat financing, and prevent trade in Syrian and Iraqi cultural property; it also establishes a reporting mechanism on international implementation of existing related resolutions, including the foreign fighter-related provisions in UNSCR 2178. Like the United States, European governments and the 28-member European Union (EU) have become increasingly alarmed by recent events in Syria and Iraq, especially the threat posed by the Islamic State organization to both regional stability and domestic security. EU leaders have asserted that "the creation of an Islamic Caliphate in Iraq and Syria and the Islamist-extremist export of terrorism on which it is based, is a direct threat to the security of the European countries." Given the growing number of European citizens or residents of Muslim background fighting in the conflict zone, security services have become steadily more concerned about the potential danger such trained militants might pose if and when they return to Europe. Worries also exist about "lone wolf" attacks from those who may not have traveled abroad but have been inspired by Islamist extremist propaganda. Several incidents over the last year have heightened such fears, including The May 24, 2014, murder of four people at the Jewish Museum in Brussels, Belgium. This attack was allegedly carried out by a French Muslim who had spent a year with Islamist fighters in Syria. Security officials assert that the suspect may have been associated with the Islamic State organization. The beheadings of three Americans and two UK citizens between August and November 2014 by a suspected British member of the Islamic State group. The January 7, 2015, attack in Paris, France that targeted the office of French satirical magazine Charlie Hebdo and subsequent related incidents on January 8-9 that targeted a police officer and a kosher market. Seventeen people in total died in the attacks. The three perpetrators were French-born Muslims, with possible ties to Al Qaeda in Yemen and the Islamic State organization. The January 15, 2015, police raids in Belgium against a suspected Islamist terrorist cell believed to be planning an imminent attack, reportedly targeting police officers. Two suspects (both Belgian citizens of Muslim background) were killed during the raids by police in Verviers, near the German border; 13 others were arrested throughout the country as part of the alleged plot. The February 14-15, 2015, shootings in Copenhagen, Denmark, in which a Danish Muslim is believed responsible for killing two individuals, one at a cafe hosting a discussion on free speech with a controversial Swedish cartoonist and another at a synagogue; five police officers were also wounded in the attacks. Although it is difficult to assess the precise number of Muslims from Europe who have joined rebel or extremist groups in Syria and Iraq, European officials believe that their ranks have been increasing, with more European Muslims fighting in the current conflict than in previous ones. As of early January 2015, estimates from Europol, the EU's joint criminal intelligence body, suggest that at least 3,000 and upward of 5,000 EU citizens have left Europe to fight in Syria, Iraq, and other conflict zones. As noted earlier, a January 2015 study by the International Centre for the Study of Radicalisation and Political Violence (ICSR) indicates that up to 4,000 individuals from Western Europe have traveled to Syria and Iraq to join the fighting (roughly double the Centre's December 2013 projections). As seen in Figure 1 , key European countries of origin reportedly include Austria, Belgium, Denmark, France, Germany, the Netherlands, Spain, Sweden, and the United Kingdom. The conflict in the Syria-Iraq region has also attracted fighters from Turkey and countries with majority Muslim populations in the Western Balkans (especially Albania, Bosnia, and Kosovo), as well as from Muslim communities in Russia and other parts of the former Soviet Union. Experts assert that many fighters from Europe have become associated with Islamist extremist groups opposing the Asad regime, including the Islamic State as well as the Al Qaeda-affiliated Jabhat al Nusra. While European Muslims who have gone to fight in Syria or Iraq may already have been radicalized to some extent at home, authorities worry that fighters may return not only with more extremist views but also with enhanced training and weapon skills. Some studies suggest that returned Muslim fighters are more likely to commit acts of violent extremism than Muslims in the general population, and that their attacks are more lethal than those carried out by individuals who lack fighting or training experience abroad. At the same time, analysts question how widespread the threat is, noting that only a small proportion of foreign fighters have actually committed acts of violence upon returning to their home countries. Experts also point out that many Europeans who have gone to fight in countries such as Iraq or Syria may have done so in part because of feelings of disaffection with Western societies and have no plans to return home, while others have been or will be killed. Furthermore, some European fighters may return traumatized and disillusioned by the brutality of the conflict and have no intention of committing violence at home. European governments have been addressing security concerns raised by European fighters with a wide array of measures, including increasing surveillance, combating terrorist recruitment, prohibiting travel, detaining returning fighters, and bolstering counterterrorism legislation. Individuals suspected of having traveled to fight in Syria or Iraq, planning such travel, or recruiting others have been arrested in Belgium, France, Germany, the Netherlands, Spain, and the United Kingdom (among other countries) on a range of different terrorism charges. Some of these governments, such as France, Germany, the Netherlands, and the United Kingdom, have also sought to stop citizens or residents from traveling to the Syria-Iraq region under rules that permit the confiscation of passports or travel identification documents on security grounds. In addition, several European governments are considering strengthening existing anti-terrorism legislation to ensure that their laws permit prosecuting those who travel or attempt to travel abroad for terrorist purposes (often termed informally as "jihadi travel"), as required by U.N. Security Council Resolution 2178 of September 2014. European policymakers are also seeking ways to combat radicalization and extremist propaganda, especially on the Internet and social media. Over the last decade, most European governments have developed counter-radicalization initiatives, although they vary in intensity; Denmark, the Netherlands, Norway, and the United Kingdom are recognized as having some of the most comprehensive programs. European officials and analysts contend that efforts to prevent radicalization and encourage de-radicalization are crucial to the fight against violent extremism, especially in Muslim communities, and must be undertaken at the national and local levels, in partnership with community and civil society groups. Given the role that information technology and the Internet now play in the ability of Islamist extremists to communicate their ideology, particularly among tech-savvy youth, some European governments are increasingly focused on developing online counter-narratives and working with Internet and social media companies to limit or remove radical content. As European countries struggle to address the potential threat posed by returning fighters, a debate has arisen over the proper balance between security measures and "softer" approaches that promote de-radicalization and rehabilitation. Some experts caution against automatically pursuing criminal charges against all returnees, noting that prisons often serve as fertile recruiting grounds for Islamist extremists. Two of the perpetrators in the January 2015 attacks in Paris, as well as the suspect in the February 2015 attacks in Copenhagen, are believed to have been radicalized in prison. EU Counterterrorism Coordinator Gilles de Kerchove has asserted that incarcerating all returning fighters would be an "invitation" to further radicalization; he called for authorities to distinguish between hardened fighters and those who return traumatized or disillusioned, and for rehabilitation programs both inside and outside prisons. Some commentators point to a program in Aarhus, Denmark, which seeks to rehabilitate returning fighters—helping them find jobs or attend school—and more broadly aims to improve Muslim integration, as a possible successful model; local officials also attribute such efforts to significantly decreasing the number of youths from Aarhus leaving to fight in Syria or Iraq. Despite these efforts, finding ways to stem the flow of European fighters to the Syria-Iraq region and keep track of those who go and return remains challenging. European governments face budgetary and personnel resource constraints in seeking to identify and monitor a growing number of potential assailants. Prosecuting individuals preemptively is difficult in many European countries because most existing laws require a high level of proof that a suspect has actually engaged in terrorism abroad or has returned to commit a terrorist act. Certain tools for preventing travel, such as confiscating passports, can entail lengthy legal processes. Analysts also note that while some European countries have laws that restrict so-called "jihadi travel," others do not yet. Consequently, national efforts by some European governments to stop such travel could be impeded by participation in the Schengen area of free movement, to which most European countries belong, and which permits individuals to travel without passport checks among participating states. For example, a French citizen could circumvent French travel restrictions to Syria or Iraq by leaving and reentering Europe from another EU country without such restrictions, and then traveling back to France. Given the Schengen system and the EU's largely open internal borders, many analysts contend that steps must be taken at the EU level to better combat the potential threat posed by European fighters. Those of this view argue that an EU-wide approach is especially necessary to increase intelligence-sharing among the bloc's 28 member states and to harmonize national criminal laws (especially on "jihadi travel"). The EU has been working on a range of measures to address the foreign fighter phenomenon, but reaching agreement among member states and between EU institutions on certain initiatives—such as establishing an EU-wide system for the collection of airline passenger name record (PNR) data—has been difficult. Over the past two years, the 28-member EU has paid significant attention to the possible foreign fighter threat, with the issue figuring prominently at numerous high-level EU ministerial meetings. Although the primary responsibility for countering terrorism lies with individual member states, EU leaders have long recognized that the Union can and should play a supportive role in responding to the cross-border nature of terrorist threats. EU efforts since 2013 have focused broadly on preventing the flow of foreign fighters to Syria and Iraq, improving information exchanges and the detection of foreign fighter travel, ensuring an adequate criminal justice response throughout the EU, enhancing counter-radicalization strategies, and engaging more closely with third countries. Despite the EU's political commitment, however, some experts suggest that concerns about protecting national sovereignty, data privacy, and civil liberties have slowed progress on some measures. The terrorist attacks in Paris and Copenhagen in early 2015 have injected greater urgency and momentum into EU initiatives to combat the foreign fighter phenomenon. At the EU's informal heads of state and government meeting on February 12, 2015, leaders outlined several key goals to guide EU work in the near term. These include the following: enhancing information-sharing among member states and with EU bodies such as Europol (the EU agency that handles criminal intelligence) and Eurojust (the EU agency responsible for prosecutorial coordination in cross-border crimes); finalizing an EU-wide system for the collection of airline Passenger Name Record data to help counter terrorist threats and improve information exchanges among EU member states; strengthening external EU border controls by making full use of existing security tools provided in the framework that governs the Schengen area of free movement; preventing radicalization by detecting and removing Internet content that promotes terrorism or extremism, developing communication strategies to foster tolerance and counter terrorist ideologies, and addressing societal factors and situations in prisons that may contribute to radicalization; implementing strengthened EU rules to prevent money laundering and terrorist financing; increasing cooperation to curb the illicit trafficking of firearms given that the recent terrorist attacks in Paris and Copenhagen appear to have been carried out with military-grade weapons that are illegal in most European countries; and improving cooperation with international partners, especially in the Middle East, North Africa, the Sahel, and the Western Balkans. In March 2015, EU justice and home affairs ministers directed Europol to establish a new EU Internet Referral Unit to help combat radicalization and violent extremism online. This unit is expected to monitor terrorist content on the Internet and social media platforms and work with service providers to flag and remove such content. EU policymakers have been holding discussions with Internet and social media companies, such as Google, Twitter, and Facebook, to explore what more can be done to tackle radicalization and counter jihadist propaganda online. EU leaders called for the new Internet Referral Unit to be operational by July 2015. Beside the work at EU level, a group of EU member states most affected by the foreign fighter phenomenon (the so-called "Group of Nine") have been meeting regularly since 2013 under the leadership of Belgium (and now France) to share information on the nature of the threat, compare policy measures, and discuss intensified European cooperation. In July 2014, most of these countries agreed to an "action plan" broadly aimed at stopping Europeans from going to fight in Syria and Iraq, improving the monitoring of returning European fighters, and increasing information exchanges. European officials assert that many of the initiatives discussed in the "Group of Nine" have since been taken up at EU level. As noted earlier, however, forging common EU policies to counter the potential foreign fighter threat has been challenging. Establishing an EU-wide PNR system has been under discussion for years, but a proposal originally put forward in 2011 has been stalled since 2013 in the European Parliament—a key EU institution—because of data privacy concerns (see text box for more information). Political pressure to adopt an EU PNR system has intensified significantly following the January 2015 attacks in Paris. EU governments assert that an EU-wide PNR system is particularly crucial to helping law enforcement authorities identify previously unknown suspects. EU officials also argue that some member states have already established, or are working on establishing, their own national PNR collection systems and that finalizing the EU PNR proposal is necessary to ensure harmonization across the EU on PNR collection, usage, and data protection practices. In February 2015, the European Parliament passed a resolution on anti-terrorism measures and pledged to work toward finalizing a revised PNR proposal by the end of the year. Nevertheless, observers caution that various Members of the European Parliament (MEPs) believe that a revised PNR proposal—also presented in February 2015—could still infringe too much on the right to privacy and other fundamental rights. Objections focus in particular on the PNR proposal's blanket retention of data and the length of time the data would be retained. Some influential MEPs argue that greater attention instead should be placed on improving intelligence-sharing among European law enforcement authorities and assert that while the PNR proposal mandates the collection and retention of PNR data, it does not go far enough in ensuring that it is meaningfully shared. MEPs may also seek to link approval of the PNR proposal to progress on controversial EU data protection reforms under discussion since 2012. Other potentially key ideas—such as harmonizing national laws to make traveling abroad for terrorist purposes a criminal offense in all 28 EU countries, or increasing intelligence-sharing to track extremists leaving for and returning from the Syria-Iraq region—are among the most difficult for the EU to agree upon and implement. This is largely because such measures relate to police and judicial issues long viewed as central to a nation-state's sovereignty. In December 2014, EU justice and home affairs ministers decided to consider revising the EU's Framework Decision on Combating Terrorism—which sets out a common EU definition of terrorism and common criminal penalties—in light of U.N. Security Council Resolution 2178 that calls on all U.N. member countries to ensure that their laws permit the prosecution of foreign fighter-related offenses. Presently, the EU's common definition does not specifically criminalize traveling or attempting to travel abroad for terrorist purposes, nor the receiving of terrorist training. While some EU member states have created such offenses already in their criminal codes, others have not yet done so. EU officials recognized the need to ensure that all EU member states fully comply with the provisions of UNSCR 2178. However, some EU governments initially appeared hesitant to consider amending the EU's common terrorism definition. They argued that implementing UNSCR 2178 could be done more quickly at the national level given that harmonizing criminal laws across the EU is often arduous because of varying national prerogatives on crime and punishment and concerns that EU-wide measures could infringe on national legal systems. Other member states and some EU policymakers countered that explicitly criminalizing foreign fighter-related offenses in the common definition would help avoid prosecution gaps and facilitate cross-border law enforcement and judicial cooperation in the longer term. Past ideas to enhance EU-wide intelligence capabilities or create a centralized EU intelligence agency have also foundered on sovereignty issues. The EU has a small Intelligence Analysis Center (INTCEN) to provide analysis, early warning, and situational awareness to EU institutions and member states in the fields of security, defense, and counterterrorism, but INTCEN does not have collection capabilities or the ability to conduct clandestine operations. Despite the Paris and Copenhagen attacks, the EU is not expected to pursue any significant changes to INTCEN's mandate. Some member states may view even limited information-sharing measures focused on foreign fighters and returnees as potentially compromising national intelligence sources or methods. EU officials have been encouraging member states to make greater use of existing common databases to help keep better tabs on foreign fighters and returnees. Such databases include the Schengen Information System (SIS)—which contains information on suspected criminals, forged identity documents, and stolen vehicles and property—and Europol's Focal Point Travellers database, established in 2013 to collect and analyze information on suspected European fighters. However, these databases depend on receiving information from member state law enforcement authorities and can only be effective EU-wide tools if national police and intelligence agencies provide them with relevant information. EU Counterterrorism Coordinator Gilles de Kerchove contends that while member states have begun providing more information to Europol's Focal Point Travellers database, the amount of data provided continues to fall short of expectations; reportedly, just four EU members contribute 80% of the data to Focal Point Travellers. Strengthening external EU border controls has also been somewhat controversial as EU leaders seek to balance enhancing security with protecting the fundamental right of European citizens to the freedom of movement. Some press reports indicate that only about 30% of passports presented by travelers entering or leaving the Schengen area are checked electronically to see if they are lost, stolen, or counterfeit. The European Commission (the EU's executive) has been encouraging member states to increase electronic checks at the EU's external borders. EU leaders have also agreed to "systematic" checks against relevant law enforcement databases of EU citizens flagged as possible terrorist suspects or returning fighters at the external borders. However, the EU has stopped short (for now) of heeding the demands of some member states (including France and Spain) to amend the Schengen Borders Code—the detailed set of rules governing both external and internal border controls in the Schengen area—to permit more extensive checks of EU or other Schengen country nationals at the external borders. The European Commission and the European Parliament largely oppose any changes to the Schengen Borders Code. They fear that some European countries and populist politicians would use any possible revision process of the external border control rules as an opportunity to push for re-imposing internal border controls as well. The Commission and the Parliament maintain that Schengen's current rules provide enough flexibility to enhance external EU border controls and better combat the potential foreign fighter threat. Over the last two years, the Belgian government has become increasingly alarmed about the growing number of European citizens or residents of Muslim background fighting in Syria and Iraq and the potential dangers that returning fighters may pose. Fears in Belgium have been especially acute since the May 24, 2014, attack in which four people were shot and killed at the Jewish Museum in Brussels. This attack was allegedly perpetrated by a French Muslim who had spent the past year with Islamist fighters in Syria; French and Belgian officials assert that the suspect may have been associated with the Islamic State organization. On January 15, 2015, Belgian authorities broke up a terrorist cell believed to have been planning an imminent attack, reportedly on Belgian police officers. Two suspects (both Muslims) were killed in Verviers, an eastern town near the German border; one of those killed was a Belgian national, the other held dual Belgian-Moroccan citizenship. Thirteen other individuals were detained throughout Belgium in connection to the plot; several of those arrested may have traveled to and returned from Syria. Following these raids, Belgium also deployed roughly 300 troops in Brussels and Antwerp to guard sensitive locations, including Jewish sites, embassies, and the headquarters of the European Union (which is based in Brussels). Over 600,000 Muslims live in Belgium, comprising 5%-6% of Belgium's total population of roughly 11 million. Many Muslims in Belgium are the children or grandchildren of immigrants from North Africa (especially Morocco, Tunisia, and Algeria) or Turkey. Belgian authorities assert that as of early 2015, about 380 Belgians have tried to leave in order to fight in Syria and Iraq and that 330 have succeeded in doing so; official sources also estimate that 180 individuals from Belgium are in the region or en route, and that approximately 50 have died in the conflict. Some independent studies assess that the number of Belgians who have traveled or attempted to travel to the Syria-Iraq region is slightly higher; recent estimates from the International Centre for the Study of Radicalisation suggest that up to 440 Belgians may have joined the fighting in Syria and Iraq. Both official and unofficial sources indicate that Belgium has one of the highest number of foreign fighters per capita of any European country. Some observers describe Belgium as having a "well-developed underground jihadist pipeline." Belgian law enforcement has focused on Sharia4Belgium, an extremist Islamist group, as a key recruiter of fighters for Syria and Iraq. Now banned, Belgian officials estimate that 10% of Belgians fighting in Syria and Iraq had links to Sharia4Belgium. In February 2015, 45 members of Sharia4Belgium were convicted by a court in Antwerp of terrorism-related offenses. The group's leader, who was found to have radicalized dozens of young men and recruited them to fight abroad, was sentenced to 12 years in prison. Most of those convicted were tried in absentia as they are believed to still be in Syria or Iraq, while several are presumed dead. To combat the potential foreign fighter threat, Belgium has employed a mix of security measures and prevention efforts. In early 2013, Belgium updated its criminal code to include several new terrorism-related offenses, which cover public incitement, recruitment, and providing or receiving terrorist training (in Belgium or abroad). While these measures do not specifically criminalize traveling to participate in foreign conflicts, Belgian officials assert that they may be used to prosecute foreign fighters. Experts note, however, that collecting evidence of such activities in conflict zones such as Syria and Iraq, or proving terrorist intent, may make such prosecutions difficult. A proposal in 2013 from the Belgian Interior Ministry to criminalize leaving Belgium to become a foreign fighter was rejected by the Belgian cabinet for several reasons, including fears that it would discourage families of potential fighters from reporting their concerns, and that it could be mistakenly construed as a sign of Belgian support for the Asad regime in Syria. Belgian authorities have sought to ensure strong coordination between law enforcement and intelligence services, both at the national level and with local levels. A Coordination Unit for Threat Assessment maintains a list of those who may have traveled or are known to have traveled to Syria or Iraq, as well as those who appear to harbor intentions to do so; this list is routinely shared with various federal, regional, and local authorities. The Coordination Unit also systematically investigates and assesses the potential threat posed by each known returning fighter. In cases lacking enough evidence for a criminal prosecution, such returning fighters are referred to local authorities for follow-up and reintegration efforts; they may also be subject to monitoring by the security services. Belgium has also devoted significant attention to prevention and counter-radicalization efforts. In April 2013, the Belgian government adopted a new counter-radicalization strategy aimed at improving knowledge about the radicalization process, promoting social measures to help blunt factors that may lead to radicalization, enhancing the resilience of vulnerable groups, and increasing awareness at the local level. A new anti-radicalization unit has been created within the Belgian Interior Ministry tasked with deterring individuals from becoming foreign fighters and supporting local strategies to counter radicalization. Prevention measures implemented by various municipalities throughout Belgium have included combining police work with community engagement, establishing mentoring programs for at-risk youth, and providing free counseling services for families of aspiring foreign fighters. In addition, Belgian authorities have been active in developing narratives to counter Islamist extremist propaganda and on working with Internet and social media companies to reduce radical content online. In the wake of the January attacks in Paris and the subsequent police raids in Belgium, press reports indicate that the Belgian government plans to pursue additional counterterrorism and counter-radicalization measures. These may include expanding the list of existing offenses for which it would be possible to strip dual nationals of their Belgian citizenship, providing authorities with the ability to take away identity documents (in addition to confiscating passports or other travel documents) to impede travel to Syria or Iraq, making it easier to freeze assets of suspected terrorists or their supporters, and enhancing efforts to tackle radicalization processes in penitentiary facilities. Belgian officials are also reportedly reconsidering a version of the proposal initially rejected in 2013 to criminalize traveling to a conflict zone. The Belgian government has also proposed an extra €300 million (roughly $348 million) for counterterrorism initiatives. Furthermore, Belgium has played a leadership role in seeking to promote a Europe-wide response to the potential dangers posed by foreign fighters. As discussed previously, under Belgium's initiative, the so-called "Group of Nine" EU member states most affected by the foreign fighter phenomenon began meeting regularly in 2013 to exchange information and promote greater Europe-wide cooperation. Belgian officials assert that many of the steps now being considered and undertaken at EU level were initially developed through the "Group of Nine." For at least a decade, France has viewed Al Qaeda and related Islamist terrorist organizations such as Al Qaeda in the Islamic Maghreb (AQIM) as the most pressing threat to French national security. Over the past year, French officials have also become increasingly concerned by the rise of the Islamic State terrorist organization (known in France as Daech after its Arabic acronym). Successive French governments have aggressively sought to combat Islamist terrorism, both through military operations in West Africa's Sahel region, the Middle East, and Afghanistan and by implementing stringent domestic counterterrorism policies. Despite these efforts, the threat appears to have intensified in recent years. Several deadly attacks on French and European soil and a growing number of French citizens training and fighting with terrorist organizations in the Middle East and North Africa have caused particular concern. France, which is home to Europe's largest Muslim population (an estimated 5 million-6 million, or about 8% of the total population), is reportedly the source of the largest number of European fighters in Syria and Iraq, most of whom are thought to be fighting with the Islamic State group. French authorities estimate that about 1,400 of the estimated 3,000 Europeans currently fighting with terrorist groups in those countries are French citizens and underscore that this number more than doubled in 2014. The French government has declared that these citizens' return to France and Europe represents "the biggest threat the country faces in the coming years." The killing of 17 people in three related terrorist attacks in Paris in early January considerably heightened French, European, and U.S. concerns about the threat of Islamist terrorism and returning fighters. On January 7, French-born Muslim brothers Chérif and Saïd Kouachi stormed the headquarters of French satirical magazine Charlie Hebdo and fatally shot 11 Hebdo employees and one police officer. In separate incidents on January 8 and 9, a French-Muslim friend of the Kouachi brothers, Amedy Coulibaly, shot and killed a policewoman and four individuals he had taken hostage in a kosher supermarket. All three suspects were killed in shoot-outs with police on January 9. A full investigation into the attacks is ongoing, but media reports indicate that at least one of the Kouachi brothers had spent time in Yemen cultivating relationships with members of Al Qaeda in the Arabian Pennisula (AQAP). In a video found after the attacks, Coulibaly declared his allegiance to the Islamic State, though the extent of his contact with the group remains unclear. All three perpetrators had been under state surveillance at various times prior to the attacks, and two of the three had spent time in French prisons. The Paris attacks followed other attacks in France and in Europe that had already raised concern about the threat posed by radicalized French Muslims who have received terrorist training and support abroad. In May 2014, French police arrested a French citizen of Algerian descent, Mehdi Nemmouche, on charges that he killed four people during an attack that month at the Jewish Museum in Brussels, Belgium. Nemmouche reportedly spent over a year with Islamist militants in Syria after being radicalized in the French prison system. The Nemmouche arrest came two years after another French citizen of Algerian descent, Mohamed Merah, killed seven people—three soldiers, a rabbi, and three Jewish children—in France's Toulouse region over an eight-day period. Merah also reportedly developed ties to radical Islamists while serving time in prison. The recent attacks and the growing number of combatants training abroad have challenged what has long been considered a highly effective French law enforcement and counterterrorism apparatus. French prosecutors are afforded broad powers to pursue terrorism cases and, over the past decade, have been further emboldened by a series of new anti-terrorism laws. Law enforcement officials also have more authority than most of their European counterparts to monitor and detain terrorism suspects. Nonetheless, the aforementioned attacks have exposed apparent shortcomings. French authorities have been criticized for an apparent inability to prevent individuals under state surveillance with known links to violent extremists from carrying out killings. The suspects in the Paris, Brussels, and Toulouse attacks had all been previously questioned and monitored by French authorities, but surveillance reportedly was lifted in each case. Some analysts speculate that surveillance on the Kouachi brothers was lifted in 2013 and 2014 as France increasingly shifted attention to citizens fighting with the Islamic State; the brothers were thought to have connections in Yemen and possibly to AQAP, but not the Islamic State. Other observers counter that it may be unrealistic to expect any government to effectively monitor every individual identified as a possible threat, noting, for example, that the Kouachi brothers, "were two inactive targets who had been quiet for a long time. They were giving nothing away." Over the past year, and particularly in the aftermath of the Paris attacks, the French government has sought to address these and other perceived shortfalls through a series of new counterterrorism measures. The initiatives are focused both on strengthening law enforcement and on preventing radicalization through social and education programs. In late 2014, the government adopted a new anti-terrorism law, which, among other things, broadened the authority to impose travel bans on individuals suspected of seeking terrorist training abroad, imposed strict penalties for inciting or expressing support for terrorism, and authorized the blocking of websites that encourage terrorism. The French government has moved aggressively to use these new authorities since the Paris attacks, including seizing passports of individuals suspected of planning to travel to Syria and arresting individuals for speech deemed supportive of terrorism. In February 2015, the French Interior Ministry announced that it expected to seize close to 50 passports from individuals suspected of planning terrorist-related travel to Iraq and Syria during the first part of the year. In March 2015, French officials announced that they were blocking five websites accused of promoting terrorism, using new authorities that eliminate a previous requirement for a judge to authorize such decisions. In late January 2015, the French government said it would commit €736 million (about $854 million) in new funding over the next three years to new counterterrorism initiatives, including hiring 2,500 new law enforcement personnel, improving information-sharing between intelligence and police officials, streamlining surveillance authorities, and launching new counter-radicalization programs. The new hires are to include 1,100 new positions in the domestic intelligence apparatus and close to 1,000 new positions in the Justice Ministry, including court officials, prison administration, and youth services. In addition, in March 2015, the government announced that it was proposing a new surveillance law to address the perceived shortcomings of a 1991 law enacted before the Internet had become a primary means of communication. The proposed law, expected to be approved by Parliament, would allow authorities to monitor the digital and mobile communications of anyone linked to an investigation of a terrorist suspect. Prior approval of a judge would not be required, and Internet service providers and phone companies would be legally obliged to comply with government requests for data. Beyond the domestic sphere, the French government has been a vocal proponent of proposals for an EU-wide Passenger Name Record system and for strengthening cooperation between law enforcement authorities in EU member states. France says that it will implement its own PNR system by the end of 2015, regardless of the outcome of the ongoing discussions on the EU PNR proposal. French officials have also at various times advocated measures to strengthen EU border controls. In addition, France has joined Germany and the UK in calling on U.S.-based technology companies to more aggressively remove content from their servers and websites deemed to promote or incite terrorism. A focal point of the French government's new counter-radicalization programs is to be the French prison system. According to some estimates, up to half of France's 68,000 inmates are Muslim. The suspects in the Paris, Brussels, and Toulouse attacks are all thought to have been radicalized while incarcerated. Among other measures, France has pledged to increase the number of Muslim chaplains in its prison system by one-third and to expand an existing program that separates groups of radicalized prisoners from the rest of the prison population in order to prevent recruitment efforts. Muslim advocates have long pointed to the relatively small number of Muslim chaplains in French prisons as one factor that may aid the radicalization process. They say that the French prison system has about 180 Muslim chaplains, compared to 700 Christian ones, with an estimated 80% of Muslim inmates never seeing a chaplain. Some analysts point out that while France has developed a far-reaching law enforcement apparatus to counter terrorism, it has had limited success improving the integration of Muslims into French society. Critics of French integration policy contend that to effectively prevent radicalization, the government must do more to reverse the significant socioeconomic disparities between "native" French citizens and those of North African and/or Muslim descent. In particular, they question the effectiveness of a long-standing French model of assimilation that prohibits granting special consideration or treatment to different ethnic or religious groups. They argue, for example, that many policies adopted in the name of France's secularist values, including restricting the wearing of head scarves and banning the full face veil, may serve to further alienate Muslims who already feel disenfranchised. Some critics could also argue that new laws against speech deemed sympathetic to terrorists unfairly target Muslims. They point out that in the wake of the Paris attacks, French leaders have vehemently defended the rights of Charlie Hebdo to publish cartoons deemed by many to be offensive and inflammatory, while at the same time aggressively prosecuting other forms of offensive speech. Since discovering that three of the September 11 hijackers had lived and plotted in Germany, successive German governments have worked hard to strengthen counterterrorism and anti-radicalization efforts. These efforts have intensified over the past year as officials have become increasingly concerned by the threat posed by German citizens fighting with rebel and terrorist groups in Syria and Iraq. As of April 2015, German authorities estimate that about 680 German fighters had traveled to Syria and Iraq since 2011, the majority of whom have now joined the Islamic State group. About one-third of these fighters reportedly have returned to Germany, and 85 have been killed in combat. German officials express particular concern about the apparently growing numbers of Germans joining extremist Salafist groups in Germany and going on to fight in Syria and Iraq. Between early 2014 and April 2015, estimates of the number of Germans fighting in the region more than doubled, rising from about 270 to 680. German intelligence officials report that fighters often come from Salafist circles that propagate a particularly radical form of Islam aimed at aligning all state and societal structures with the Koran. They estimate that as of April 2015, about 7,300 Germans were members of Salafist groups in Germany, compared to 3,800 in 2011. Germans fighting with the Islamic State reportedly have formed their own brigade within the terrorist organization. A significant number of these fighters are thought to have been previously affiliated with a German militant Islamist group named Millatu Ibrahim (Abraham's Religion). Millatu Ibrahim was banned by German authorities in May 2012 for its involvement in riots protesting the publication of caricatures of the prophet Mohammed in media outlets. Analysts believe that one of the group's German co-founders, a former hip-hop artist named Denis Cuspert (stage name Deso Dogg), is an "integral part of the [Islamic State] propaganda effort," including by overseeing the production of a variety of German language material. The German government takes a multifaceted approach to countering terrorism and violent extremism, including law enforcement measures and social and economic policies aimed at preventing radicalization. On the law enforcement side, the government has sought to strengthen existing laws that criminalize travel with intent to train with a terrorist organization, terrorist recruitment, and providing support to terrorist organizations. In December 2014, a German court for the first time sentenced an individual to a jail term for joining a militant group in Syria. Authorities have confiscated the passports of several German citizens suspected of planning "terrorist travel," and have also banned numerous religious organizations suspected of providing support to or recruiting for Islamist terrorists. Nonetheless, some analysts and policymakers have expressed concern about the difficulty of successfully prosecuting suspected terrorists under existing laws. They note, for example, the high burden of proof to establish terrorist intent behind travel to Syria and Iraq, and the difficulty of proving that individuals have been active with terrorist organizations after they return home. In January 2015, Berlin announced proposals to address perceived shortcomings in existing laws against "terror tourism" and to grant new authority to collect and save communication data from its citizens. Among other things, the newly proposed laws would allow authorities to confiscate identity cards as well as passports from suspected terrorists—residents can currently travel throughout Europe and to Turkey with identity cards, but without passports. The proposed new surveillance authorities could be particularly controversial given long-standing German concerns about privacy rights. In addition, while many law enforcement officials have welcomed the measures, some emphasize that additional resources, including highly qualified investigators, may be more important. They argue, for example, that they do not have the resources necessary to conduct the level of surveillance necessary to enforce existing laws. Law enforcement efforts have met with some success. Since 9/11, Germany has not experienced a major terrorist attack on the scale of those in France, Spain, or the UK. The first and thus far only deadly Islamist-motivated attack on German soil occurred in 2011, when a German resident from predominantly Muslim Kosovo killed two U.S. airmen and seriously wounded two others in a shooting at the Frankfurt airport. Over the past decade, authorities have broken up several terrorist cells they claim were plotting significant attacks on German soil. In 2010, three German citizens and a Turkish resident in Germany were convicted of plotting what German investigators say could have been one of the deadliest attacks in European postwar history. The group, all members of the Islamic Jihad Union (IJU), was arrested in 2007 as it prepared to carry out attacks on Ramstein Airbase and other U.S. military and diplomatic installations. In the weeks following the Paris attacks in early 2015, German police raided several properties linked to radical Islamist groups alleged to be planning terrorist attacks in Syria. The raids resulted in at least four arrests, including of two men suspected of having joined the Islamic State after traveling to Syria in 2013. The German government has also devoted significant resources to preventing radicalization, including through efforts to better integrate German Muslims who may feel alienated from broader society. An estimated 4 million Muslims live in Germany, making up roughly 5% of the general population; of which almost two-thirds are thought to have Turkish roots. Although the vast majority of Muslims living in Germany are seen to be relatively moderate in how religion affects their public conduct, support for more extremist views may be on the rise, especially among some younger Muslims. It is thought that some Muslim youth do not identify with Germany and are increasingly motivated by pan-Islamic notions of Muslim humiliation around the world, the plight of the Palestinians, and perceived U.S. subjugation of Arab countries. Despite advances in some areas, overall Muslim integration into German society has been minimal. Germans and Muslims often blame each other for this. Many "native" Germans see Muslims as refusing to accept German norms and values and as wanting to stay apart from the majority population. German attitudes toward Muslim communities, though rooted in differences in culture and values, also have been exacerbated by persistent social and economic problems facing the country as a whole. Many Muslims view German society as unwilling to fully accept people of different races, regardless of whether they assimilate or not. Some observers say that this reluctance could play into the hands of fundamentalists "by both defining German-ness in opposition to Islam and deepening the Turkish community's sense of being Muslim." Public debate over the role of Muslims in German society has increased over the past year, and especially in the wake of terrorist attacks in Paris and Copenhagen. Tensions have been catalyzed by weekly marches in the eastern city of Dresden organized by a new far-right, anti-Islam organization named PEGIDA (German acronym for Patriotic Europeans Against Islamization of the West). Between October 2014 and January 2015, the PEGIDA marches steadily grew in size, reaching a high of about 17,000 participants. After drawing sharp condemnation from across the political spectrum and spurring large counter-protests throughout Germany, the PEGIDA marches have since dwindled in size. However, the movement's emergence has exposed doubts about Islam's compatibility with the country's democratic values. German leaders have been particularly challenged to balance their desire to support and promote tolerance of Islam with their condemnation of violent Islamist extremism. The International Center for the Study of Radicalisation and Political Violence (ICSR) estimates that 50 to 100 Spanish citizens have joined jihadist groups fighting in Syria and Iraq. Additionally, however, Moroccan authorities have estimated that at least 1,200 Moroccan nationals with Spanish residency cards have joined the Islamic State group. About 70% of the over 1 million Muslims living in Spain have their origins in Morocco. At least 100 fighters from France and Morocco are thought to have transited through Spain in order to reach Turkey and travel on to Syria. Over the past two years, Spanish police have conducted raids to dismantle jihadist recruiting networks active in Ceuta and Melilla, Spanish enclaves located on the coast of Morocco, as well as in Madrid. In December 2014, a joint Spanish-Moroccan operation dismantled a network active in recruiting women to travel and join the Islamic State organization. Studies analyzing 20 individuals known to have traveled from Spain to join the conflict as of early 2014 reveal 11 Spanish citizens and nine Moroccan nationals living in Spain, most in their mid-20s or early 30s, and many married with children. The majority of these individuals came from Ceuta. The group included students, taxi drivers, unskilled workers, and unemployed individuals. One individual, Mouhannad Almallah Dabas, a naturalized Spaniard who was born in Syria, was connected to an Al Qaeda cell that operated in Spain from the mid-1990s to 2001 and was convicted in the 2004 Madrid train bombings, although his sentence was later overturned by the country's Supreme Court. Dabas was killed in Homs, Syria, in October 2013 while allegedly fighting for Jabhat al-Nusra. Most of the others had no previously known jihadist background, although several had criminal pasts, including drug charges. Many are thought to have been recruited and radicalized by experienced agents of a Spain-Morocco jihadi network whose Spanish-territory operations were dismantled by authorities between June and September 2013. Several individuals attended Attauba mosque in Ceuta, which has hosted radical imams in the past. At least three members of the group became suicide bombers in Syria. Spain has extensive experience in confronting domestic terrorism. The Basque separatist group ETA waged a violent campaign for over 40 years before declaring a permanent ceasefire in 2011. As a result of these experiences, Spain has a considerable body of counterterrorism legislation and entrenched procedures within its existing legal codes. Under the Spanish Penal Code, terrorist offenses are treated as an aggravated form of crime. Observers note, however, that this legislation was built largely around combatting organized groups such as ETA. The 2004 Madrid attacks marked a new type of threat, and Spain has sought to reform its penal code in order to adapt to more loosely organized cells, lone wolf actors, and recruitment or incitement activities. Legal reforms in 2010, for example, criminalized offenses such as recruitment or indoctrination, online incitement of terrorism, providing terrorist financing, and providing terrorism-related training. Additionally, following the Madrid attacks, the Spanish government sharply increased resources for national anti-terrorist agencies and sought to better integrate their work. Nevertheless, critics have expressed concern that the overall conviction rate for terrorism-related charges in Spain has remained relatively low. One Spanish newspaper reported in January 2015 that out of 571 arrests related to radical Islam since 2004, Spanish courts have convicted fewer than 100 people. Some observers assert that prosecutions have been hindered by strict evidence requirements, high standards of proof for intent and conspiracy, strong safeguards on civil liberties, and accusations of police misconduct. In relation to the foreign fighter issue, the high burden of proof has made it difficult to preemptively charge individuals with terrorism-related crimes before they were able to leave Spain. In September 2014, the Spanish government announced its intention to strengthen counterterrorism laws and police powers in response to the foreign fighter threat. The governing Popular Party (PP) subsequently proposed the addition of new amendments into a broader project to reform the penal code, including making it a criminal offense to receive terrorist training (past reforms criminalized providing training only) or to participate in an armed conflict abroad, and allowing the government to revoke the citizenship of those participating in terrorist activity. Additional proposals would allow for passport seizures, accelerated expulsion orders, reentry bans of identified extremists, and the introduction of streamlined search and capture warrants for police to arrest fighters attempting to travel to conflict zones. The government also indicated planned reforms to the regulation of evidence collection and standards for witness protection, in order to improve the success rate of terrorism-related prosecutions. Spain is working to introduce a national Passenger Name Record system for commercial air travel by the end of 2015. The terrorist attacks in Paris in early 2015 created a heightened sense of urgency for these efforts. In January 2015, the PP and the main opposition Socialist Party (PSOE) jointly re-drafted the proposals as a separate new counterterrorism bill. Rather than advancing the proposals piecemeal in the context of the wider penal code reform, this move combined the measures into a single piece of legislation submitted to the Spanish Parliament for fast-track approval and adopted on March 30, 2015. Human rights and civil liberties advocates have criticized the government's proposals, arguing that they create a vague and overly broad definition of terrorism that could infringe on the freedoms of expression and movement, the right to privacy, and the presumption of innocence. Among other objections, critics assert that the proposals outlaw planning to travel outside the country to train with a militant group, even if no such travel takes place, and make it illegal to express a statement on social media that could be perceived as inciting terrorism, even if not linked to a specific terrorist act. In January 2015, the Spanish government approved a Strategic National Plan to Fight Violent Radicalization, "a framework plan for the different public authorities to detect and act against potential outbreaks of radicalization, in a timely and coordinated fashion." Under the coordination of the Home Affairs Ministry, the plan establishes a new National Group to Combat Violent Radicalization that includes representatives from national government ministries, the intelligence community, provincial and city governments, and nongovernment institutions and associations. The aim is to create "the necessary structures and work plan to detect and intervene in pockets of potential radicalization ... with the aim of breaking up the chain of transmission of radicalization that makes individuals take the decision to become violent and, in the work-case scenario, become terrorists." Additional priorities of the initiative include generating counter-narratives against the spread of radical messages online and combating radicalization in prisons. The International Centre for the Study of Radicalisation and Political Violence (ICSR) and official British government sources estimate that 500 to 600 people have traveled from the UK to fight in Syria and Iraq. Other sources suggest that this figure represents a minimum estimate, with the actual number as high as 1,000 to 2,000. UK authorities have been actively concerned about this trend since 2011, but the issue has gained a higher profile with the appearance of identified or presumed British fighters in several Islamic State propaganda videos since mid-2014. British fighters in Syria have also reportedly carried out suicide bombings, and researchers have confirmed the deaths of 26 individuals who have traveled from the UK to fight. Given the difficulties of monitoring and verification, the actual total could be higher. Approximately 2.9 million Muslims live in the United Kingdom. About two-thirds of British Muslims have a South Asian background. Although the majority of Muslims in the UK are not involved in extremist activities, a fringe community exists that advocates radical Islamism and, in some cases, supports violent extremism. The UK government believes that up to 250 individuals who trained or fought in Syria or Iraq have already returned home to the UK. Given the potential for returning extremists to plot attacks on domestic targets, the UK's Joint Terrorism Analysis Centre raised the country's terror threat level from "substantial" to "severe" on August 29, 2014, indicating that authorities consider an attack to be highly likely. According to the ICSR, the broad profile for many of the British foreign fighters in Syria and Iraq is of a male in his 20s, of South Asian ethnic origin, with recent connections to higher education and links to individuals or groups who have international connections. Other analysts assert that while there is no single profile, a high proportion of British foreign fighters in Syria and Iraq have criminal pasts, with either a history of petty crime, previous incarceration for extremist Islamist behavior, or are hardened career criminals. Profile analysis of 23 UK fighters known to have been killed indicates that they were all second-generation immigrants from ethnic backgrounds, including Libyan, Palestinian, Eritrean, and Bangladeshi, with an average age of 23. Many had held relatively well-paying jobs and were enrolled in or had completed higher education, although several had significant criminal records and had spent time in prison. The UK's approach to addressing the foreign fighter threat contains three main elements. The first focuses on preventing suspects from traveling to or from the United Kingdom using powers to revoke passports, barring foreign nationals from reentry, and stripping dual nationals or naturalized citizens of their UK citizenship. The government has reportedly revoked the British citizenship of 27 people since 2010, the overwhelming majority due to terrorism-related activities, and has refused or cancelled the passports of 29 individuals planning to engage in terrorist activity abroad. According to Home Secretary Theresa May, as of November 2014, a total of 133 people had been excluded from the UK due to reasons of national security or the "public good," including 84 "hate preachers." The UK is currently the only EU member state that has implemented a national Passenger Name Record system, beginning development under an initiative launched in 2003. Although the system collects advanced passenger information for all commercial flights to the UK originating outside the EU, critics observe that it covers only about two-thirds of total air, rail, and maritime arrivals. Due to restrictions in some EU countries, for example, the system applies to about 70% of intra-EU flights to the UK, and advance data for private airplanes and boats remains difficult to collect. The second element to the UK's approach is managing suspected extremists already in the country. The Home Secretary has the power to impose terrorism prevention and investigation measures (formerly known as "control orders"), such as house arrest and restrictions on telephone and Internet use. Backed by an extensive set of counterterrorism legislation, UK security services and police also have a wide range of powers that can be used in efforts to prevent attacks and prosecute those planning them. Home Secretary May indicated in November 2014 that since 2010, 753 people have been arrested in the UK for terrorism-related offenses, 212 have been charged, and 148 successfully prosecuted. There are 138 individuals in the UK serving prison sentences for terrorism-related offenses, and 13 people have been extradited to face terrorism charges abroad. Third, the UK government's counterterrorism strategy includes a component called Prevent that seeks to combat the ideology of Islamist extremism, including by banning hate preachers and organizations that incite terrorism; attempting to counter radicalization and extremist recruitment in schools, universities, prisons , and mosques; and working with a network of organizations that offer support to those at risk. These efforts also include combating extremist material on the Internet. A Counter Terrorism Internet Referral Unit set up in 2010 has taken down over 65,000 unlawful terrorist-related websites, with over 70% of the unit's current caseload reportedly related to the Islamic State organization. In September 2014, Prime Minister David Cameron announced plans to further enhance the government's powers to counter the growing threat posed by foreign fighters. This initiative developed into the Counter-Terrorism and Security Act that was adopted in February 2015. The new act Broadens the powers of police and border officials to temporarily confiscate the passports of terrorism suspects for up to 30 days, with judicial review of the decision after two weeks. Currently, the Home Secretary must personally authorize the seizure of a passport. The bill also introduces new Temporary Exclusion Orders banning suspected terrorists with British passports from the country for two years, cancelling their passports, and placing them on "no fly lists." Individuals wishing to return may face prosecution or be forced to complete de-radicalization programs and may face two-year renewable orders restricting their movements, requiring them to check in regularly with the police, and notify authorities of contact with other extremists. Attempting to return in secret is defined as a new criminal offense carrying a five-year sentence. Amends the Terrorism Prevention and Investigation Measures Act 2011, reintroducing the power to relocate suspects within the UK and limit the distance they may travel. The bill increases the standard of proof for imposing a measure from "reasonable suspicion" to "balance of probabilities." Amends the Data Retention and Investigatory Powers Act 2014, requiring mobile phone and Internet service providers to retain data allowing relevant authorities to identify the individual or device that was using a particular Internet protocol (IP) address at a given time. Replaces existing "authority to carry" provisions for air, maritime, and rail carriers, requiring the advance provision of additional passenger, crew, and service information, including passenger credit card details. Puts the Prevent strategy on a statutory footing. Relevant institutions (e.g., prisons, universities, schools, and mosques) face a new legal duty to report extremism and develop policies to deal with radicals and extremist speakers. Makes it illegal for insurance companies to cover terrorist ransom payments. Creates a Privacy and Civil Liberties Board to assist the Independent Reviewer of Terrorism Legislation in monitoring the operation and impact of the UK's counterterrorism legislation. Human rights and civil liberties advocates have criticized aspects of the legislation. Some critics maintain that the enhanced powers to seize passports at the border could result in greater ethnic profiling. Others argue that Temporary Exclusion Orders amount to "dumping" citizens and "abdicating ... responsibilities to the international community." Critics additionally assert that the reintroduction of relocation powers under Terrorism Prevention and Investigation Measures are a form of "internal exile." The International Centre for the Study of Radicalisation and Political Violence (ICSR) estimates that 800 to 1,500 individuals have travelled from Russia to join groups involved in the conflict in Syria and Iraq. The majority of these fighters are thought to come from Chechnya and other parts of the North Caucasus, regions of Russia that have predominantly Muslim populations. Other sources estimate the number to be much higher, with as many as 2,500 Chechens and other North Caucasians fighting with the Islamic State group or Jabhat al-Nusra in Syria and Iraq. In recent months, numerous commanders of the proclaimed Caucasus Emirate have reportedly transferred their loyalties to the Islamic State organization. Analysts assert that many Chechen fighters tend to be relatively experienced and combat-ready, based on fighting Russia in a conflict that has been ongoing since the 1990s. Chechen fighters may therefore take on more leadership roles within extremist groups. One of the Islamic State's leading military commanders, for example, is Abu Omar al-Shishani ("Omar the Chechen"), who was born in Georgia to an ethnic Georgian Orthodox Christian father and an ethnic Chechen Muslim mother. Russian authorities have sought to use tight border controls in Chechnya and the North Caucasus to prevent travel to and from the conflict region. In regions such as Chechnya and Dagestan, there have reportedly been efforts by local authorities and media, as well as at mosques and schools, to discourage young men from travelling to Syria or Iraq to join armed groups. Russia has also used police operations to identify potential extremists and sought to prosecute individuals involved in terrorist activities. Russian legislation makes it a criminal offense to participate in an armed group abroad "whose aims are contrary to Russian interests" or to receive training "with the aim of carrying out terrorist activity." Some analysts have pointed out that the recent increase in tensions and mistrust between the United States and Russia over Ukraine has hindered possibilities for intelligence-sharing on the foreign fighter issue. The ICSR estimates that up to 650 individuals have traveled to the conflict from the countries of the Western Balkans (estimates are Albania, 90; Bosnia-Herzegovina, 330; Kosovo, 100 to 150; Macedonia, 12; Serbia, 50 to 70). Studies suggest that over 80% of fighters from the Western Balkans initially joined Jabhat al-Nusra, with a marked shift to the Islamic State group starting in 2013. The number of fighters from the region thought to have been killed in the conflict is approximately 40 to 50, and the number thought to have returned home is approximately 70 to 90. Data patterns for known foreign fighters from the Western Balkans appear to reveal several main clusters, with groups of individuals linked to isolated, radical communities in Bosnia or Serbia or to radical networks based around several informal mosques in Albania. Albania, Bosnia-Herzegovina, Kosovo, Macedonia, and Serbia all introduced foreign fighter-related changes to their criminal codes in 2014. Bosnia-Herzegovina, with the largest number of fighters from the region, notably closed a legal loophole with passage of a law criminalizing facilitation or participation in foreign fighting. In September 2014, Bosnian authorities reportedly arrested 16 individuals under the new law, which carries a sentence of up to 10 years in prison. Authorities in Serbia, Albania, and Kosovo also made a number of arrests in 2014 linked to foreign fighter facilitation or travel to Syria, with 55 individuals reportedly arrested in Kosovo and five charged in Serbia in October 2014 alone. The United States has extensive bilateral law enforcement and intelligence relationships with most European countries. France, Germany, and the United Kingdom are among the closest U.S. partners in this regard. U.S. police and intelligence services have been assisting their French counterparts with the investigation of the January 2015 attacks, and news reports have shed light on the steady U.S.-French exchange of information on the alleged perpetrators, their travel, and other suspected terrorists and foreign fighters. Since 2001, the United States and the European Union have also greatly expanded their law enforcement cooperation, especially against terrorism. U.S.-EU dialogue on police, judicial, and border control matters has increased substantially, and a number of U.S.-EU information-sharing agreements have been concluded over the years. In addition, U.S. and European policymakers have sought to cooperate on preventing radicalization and countering violent extremism. The United States has partnered with many European countries to share information and "best practices" on CVE measures, including social programs, counter-narrative initiatives, and civil society engagement efforts. In 2010, the United States and the EU convened an expert-level dialogue for the first time on preventing violent extremism. European governments and the EU have also worked closely with the United States in the 30-member multilateral Global Counterterrorism Forum (GCTF), founded in 2011. GCTF efforts have included mobilizing CVE resources and expertise, strengthening criminal justice and rule of law capacities, and enhancing international counterterrorism cooperation. Nevertheless, some challenges remain in promoting closer U.S.-European counterterrorism cooperation. Data privacy has long been a key sticking point. U.S. and European officials also continue to grapple with finding the appropriate balance between strengthening transportation and border security and facilitating legitimate transatlantic travel and commerce. Such issues have come to the forefront of U.S.-European discussions again amid the emerging foreign fighter threat. Some U.S. policymakers, including several Members of Congress, have expressed particular worries about European fighters in Syria and Iraq because the U.S. Visa Waiver Program permits short-term visa-free travel for citizens of most European countries (see "Issues for Congress" for more information). Recently, U.S. and European counterterrorism cooperation has focused heavily on ways to combat the foreign fighter phenomenon given increasing concerns that both European and American Muslims are being recruited to fight with Islamist groups in Syria and Iraq. In September 2014, the White House noted that U.S. officials from the Department of Justice and the Department of Homeland Security are "working closely" with European counterparts on "a wide range of measures focused on enhancing counter-radicalization, border security, aviation security, and information sharing" to address potential threats posed by foreign fighters. On January 11, 2015, in the aftermath of the Paris attacks, U.S. Attorney General Eric Holder attended an emergency meeting of European and North American interior ministers to discuss terrorist threats and foreign fighters. High-ranking European officials were also key participants in the February 2015 CVE conference hosted by the United States in Washington, DC. Given the EU's largely open internal borders, U.S. officials have been encouraging the EU to move forward with approving and implementing its own system for collecting airline Passenger Name Record data to help counter the potential threat from returning fighters. U.S. policymakers have also urged the EU to make greater use of the Schengen Information System. U.S. officials and analysts contend that the foreign fighter phenomenon underscores the importance of close bilateral law enforcement ties with European allies and existing U.S.-EU information-sharing arrangements. These include the following: two agreements that allow U.S. law enforcement authorities and Europol to share both strategic information (such as threat tips, crime patterns, and risk assessments) and personal information (names, addresses, phone numbers, and criminal records about suspects in crimes covered by Europol's mandate); the U.S.-EU PNR agreement, which permits airlines flying to and from Europe to share airline passenger data with U.S. authorities; and the U.S.-EU Terrorist Finance Tracking Program (TFTP) agreement (also known as the U.S.-EU SWIFT accord), which allows U.S. authorities access to financial data held by a Belgium-based consortium of international banks. Despite the common commitment on both sides of the Atlantic to bolster efforts against the potential foreign fighter threat, some issues could pose hurdles to greater U.S.-European cooperation. U.S.-European differences on data privacy continue to make information-sharing accords such as SWIFT and PNR controversial in Europe. The EU considers the privacy of personal data a basic right, and EU law prohibits the transfer of such data to countries where legal protections are not deemed "adequate." Many European privacy advocates and some EU policymakers (especially in the European Parliament) have long voiced objections to the SWIFT and PNR agreements due to fears that the United States cannot guarantee a sufficient level of protection for European citizens' personal information. Both the SWIFT and PNR accords will be up for renewal in the near future (SWIFT in mid-2015 and PNR in 2019) and have come under renewed scrutiny following the unauthorized disclosures of classified U.S. surveillance activities since June 2013. Some analysts are concerned that future iterations of the agreements between the United States and the EU may not be able to secure the necessary European Parliament approval. Others suggest that the potential threat posed by returning Islamist fighters may moderate any possible opposition to renewing these accords. Other differences in perspective and policy approaches also exist. For example, U.S. authorities have reportedly questioned plans by some European governments to revoke passports of citizens who have gone to fight in Syria or Iraq to prevent them from returning home. Some U.S. officials suggest it may be more useful to question and monitor such returning fighters to enhance intelligence collection, both about domestic terrorist or extremist networks and about the situation on the ground in the conflict zone. In addition, varying U.S. and European views and laws on freedom of speech, including online, could pose difficulties for U.S.-European cooperation in countering radicalization and extremist propaganda. In the past, for example, U.S.-European frictions have surfaced over racist and anti-Semitic material on U.S. websites—which would be illegal if hosted on Internet servers located in European countries such as Germany or France—but which are largely protected in the United States by the right to free speech enshrined in the First Amendment of the U.S. Constitution. Similarly, many European officials have expressed concerns about terrorist and extremist content online, the vast majority of which is hosted on U.S. servers. Following the attacks in Paris in January 2015, France, Germany, and the UK called on Internet and social media companies to begin preemptively removing terrorist content from their sites. U.S. technology firms largely oppose European demands for preemptive filtering because they worry about becoming the arbiters of acceptable discussion online; they also question to what extent they must comply with local laws limiting online speech that may not violate U.S. laws. U.S. industry leaders assert that they do remove content that incites terrorism or recruits people to join terrorist organizations, but contend that determining where to draw the line can be a difficult issue (especially with respect to sarcasm or hyperbole), and oppose a broad legal overhaul as unworkable. Furthermore, U.S. technology companies suggest that complying with European calls for preemptive filtering could have negative implications for global Internet freedom, setting a bad precedent with respect to countries such as Turkey, Russia, or China. Meanwhile, some U.S. and European law enforcement officials worry that automatically closing down websites with terrorist content could be counterproductive because such sites often serve as useful intelligence and monitoring tools. Several congressional hearings in the 113 th and 114 th Congresses have focused on or addressed the foreign fighter phenomenon, especially as related to Europe. Senate Homeland Security and Governmental Affairs Committee, "Cybersecurity, Terrorism, and Beyond: Addressing Evolving Threats to the Homeland," 113 th Congress, 2 nd Session, September 10, 2014; House Homeland Security Committee, Subcommittee on Border and Maritime Security, "One Flight Away: An Examination of the Threat Posed by ISIS Terrorists with Western Passports," 113 th Congress, 2 nd Session, September 10, 2014; House Homeland Security Committee, "Worldwide Threats to the Homeland," 113 th Congress, 2 nd Session, September 17, 2014; House Foreign Affairs Committee, Subcommittee on Europe, Eurasia, and Emerging Threats, "Islamist Foreign Fighters Returning Home and the Threat to Europe," 113 th Congress, 2 nd Session, September 19, 2014; House Foreign Affairs Committee, Joint Hearing of the Subcommittee on Terrorism, Nonproliferation and Trade, and the Subcommittee on the Middle East and North Africa, "ISIS and the Threat from Foreign Fighters," 113 th Congress, 2 nd Session, December 2, 2014; House Homeland Security Committee, "Countering Violent Islamist Extremism: The Urgent Threat of Foreign Fighters and Homegrown Terror," 114 th Congress, 1 st Session, February 11, 2015; Senate Homeland Security and Governmental Affairs Committee, "Visa Waiver Program: Implications for U.S. National Security," 114 th Congress, 1 st Session, March 12, 2015; House Homeland Security Committee, Subcommittee on Border and Maritime Security, "Combating Terrorist Travel: Does the Visa Waiver Program Keep Our Nation Safe?" 114 th Congress, 1 st Session, March 17, 2015; House Homeland Security Committee, "A Global Battleground: The Fight Against Islamist Extremism at Home and Abroad," 114 th Congress, 1 st Session, March 24, 2015. In many of these hearings, the U.S. Visa Waiver Program figured prominently given that a number of participating countries in Europe have sizeable foreign fighter contingents in Syria and Iraq. As discussed previously, the VWP permits short term visa-free travel (up to 90 days) for business or pleasure to the United States from 38 countries, most of which are in Europe. Congressional concerns about the ability of terrorists to enter the United States under the VWP are not new. Following the September 11, 2001, attacks and the realization that terrorists with European citizenship had traveled to the United States under the VWP (including the "20 th " September 11 hijacker, Zacarias Moussaoui, and airplane "shoe bomber" Richard Reid), Congress sought to strengthen the program's security components in legislation, such as the Enhanced Border Security and Visa Reform Act of 2002 ( P.L. 107-173 ) and the Implementing Recommendations of the 9/11 Commission Act of 2007 ( P.L. 110-53 ). Among other provisions, P.L. 110-53 called on participating VWP countries to meet certain security and passport standards and to sign on to a number of information-sharing agreements. P.L. 110-53 also required visitors entering the United States under the VWP to submit biographical information to U.S. authorities through a new web-based Electronic System for Travel Authorization (ESTA) at least two days before traveling. ESTA became operational in 2009. ESTA checks the biographical information submitted against relevant law enforcement and security databases; those individuals not approved under ESTA must obtain a U.S. visa. Prior to ESTA's implementation, the first time an individual traveling to the United States under the VWP was screened was at the port of departure; information submitted for ESTA is largely the same as that required by the previous I-94W form that individuals arriving under the VWP were required to complete en route to the United States. Amid growing concerns about terrorist threats emanating from the Syria-Iraq region, including the increasing numbers of foreign fighters, several pieces of legislation on the VWP were introduced in the 113 th Congress. Some proposed measures largely aimed to enhance the security of the VWP further (see H.R. 5470 , introduced September 15, 2014 by Representative Candice Miller, and S. 2869 , introduced September 23, 2014, by Senator Dan Coats). Others would have temporarily suspended the VWP or the participation of certain countries (see H.R. 5434 , introduced September 10, 2014, by Representative Doug Collins; and H.R. 5594 , introduced September 18, 2014, by Representative Tulsi Gabbard). At the start of the 114 th Congress, Representative Candice Miller reintroduced legislation to strengthen the VWP's security elements; it would also specify that the Department of Homeland Security can suspend a country's participation in the VWP should the country fail to provide the United States with pertinent traveler information related to security concerns (see H.R. 158 , the Visa Waiver Program Improvement Act of 2015, introduced January 6, 2015). Similarly, Senator Dan Coats has reintroduced legislation that, among other counterterrorism provisions, aims to improve the VWP's existing security controls (see S. 542 , the Counterterrorism Border Security Enhancement Act, introduced February 24, 2015). Regarding the VWP, S. 542 would expand pre-travel clearance procedures and increase information-sharing requirements for VWP participating countries; S. 542 would also specify that DHS may suspend a country from the VWP for not fully cooperating with such information-sharing requirements. The terrorist attacks in Paris and Copenhagen in early 2015 have prompted even more intense congressional scrutiny of the VWP. While some Members of Congress continue to express reservations about the program on security grounds, many recognize its importance in facilitating international trade and tourism of considerable economic significance for the United States. Others note the resource difficulties that the U.S. Department of State would face if the VWP was terminated. In FY2013, about 20 million people arrived in the United States under the VWP, representing more than one-third of all temporary visitors, and spent almost $80 billion while traveling to and within the United States. The Obama Administration continues to support the VWP as a key facilitator of transatlantic commerce and tourism and rejects calls to suspend it because of the potential foreign fighter threat. U.S. officials point out that ESTA's introduction has greatly strengthened the VWP's security controls over the last few years and that the program's information-sharing provisions with participating countries help to enhance U.S. intelligence about known and suspected terrorists and other criminals. In November 2014, the U.S. Department of Homeland Security announced that VWP travelers would be required to submit more biographic information through ESTA to help address growing security concerns about foreign fighters. U.S. officials contend that the additional ESTA requirements will enable more accurate and comprehensive screening of VWP visitors, while preserving legitimate trade and travel. In addition to voicing concerns about the VWP, some Members of Congress have questioned whether current European counterterrorism laws are equipped to combat the emerging foreign fighter threat. As discussed earlier, while some European countries already have laws in place that criminalize traveling abroad for terrorist purposes or the facilitation of such travel, others are in the process of considering or enacting such legislation. The EU may also amend its common definition of terrorism to make so-called "jihadi travel" and other related foreign fighter activities (such as receiving terrorist training) criminal offenses throughout the EU, both to take into account the requirements of UNSCR 2178 and to avoid prosecution gaps among member states. Administration officials assert that the United States is continuing to encourage all partners, including in Europe, to meet their obligations under UNSCR 2178. The United States would likely welcome an EU decision to update its common terrorism definition. However, many experts note that efforts to criminalize foreign fighter-related offenses could be controversial in some European countries seeking to balance security concerns with integration and rehabilitation imperatives. Meanwhile, reaching agreement at EU level on harmonizing member state laws on "jihadi travel" may face hurdles given differences in member states' legal systems, and lag times between when an agreement is reached by EU officials in Brussels and when it is implemented or enforced at the national level. In the wake of the Paris and Copenhagen attacks, several Members of Congress have also noted concerns about the extent and robustness of European information-sharing, both among European countries and with the United States. Many Members of Congress have expressed support for the EU-wide proposal on airline Passenger Name Record data as a way to help improve European capabilities to track potential foreign fighters. Congressional support has been consistently strong for the U.S.-EU PNR accord and the U.S.-EU SWIFT agreement as vital tools in the fight against terrorism. U.S. border control measures and visa policy may continue to be salient issues for Congress as the United States seeks to address the potential foreign fighter threat. Congressional decisions related to intelligence-gathering reforms and data privacy and protection issues may have implications for U.S.-European counterterrorism cooperation and the future of U.S.-EU information-sharing agreements in the years ahead. Members of Congress may be able to help shape European views and responses to the foreign fighter phenomenon through ongoing contacts with European lawmakers in national parliaments and in the European Parliament. Appendix A. Membership in the European Union, Schengen Area, and the U.S. Visa Waiver Program The following chart details participation of European countries in the 28-member European Union, the Schengen area of free movement, and the U.S. Visa Waiver Program (VWP). * Monaco, San Marino, and Vatican City are considered de facto members of the Schengen free movement area; they do not have border controls with the Schengen countries that surround them, but they are not official Schengen members because they have not signed the Schengen Agreement. Appendix B. Foreign Fighter Recruitment Patterns The dynamics of the Syrian conflict are such that the predominantly Sunni Muslim insurgents' requests for material support often make reference to Islamic religious injunctions to defend co-religionists. Such requests appear to have strong appeal in some Muslim communities around the world. Nevertheless, one also could argue that the power of these requests to convince individuals to become foreign fighters may be relatively limited, given that while foreign fighter flows to Syria have been large relative to similar flows to other conflicts in the past, these flows are relatively small when considered as a proportion of the large global Sunni Muslim population (which may exceed one billion people). Groups or individuals sympathetic to Syrian insurgents also have other means of providing support, including political advocacy and financial donations. Imbalances in the relative flow of fighters to Syria from particular countries or communities may suggest important differences in underlying social and political conditions in those areas or differences in the approaches taken by domestic authorities to prevent foreign fighter recruitment and/or restrict foreign fighter travel. In August 2014, the Islamic State organization issued a lengthy appeal to potential foreign recruits in its English-language web magazine (see Figure B-1 ). The appeal described travel to Iraq and Syria by foreign recruits in support of the Islamic State as analogous to the hijrah , a centerpiece of Islam's foundational story in which the prophet Mohammed and his earliest supporters fled persecution in Mecca for the relative safety of Yathrib (Medina) and later used Yathrib as a base for their subsequent military campaign against their detractors in the Arabian Peninsula. Other Salafist-Jihadist groups have used similar analogies in other contexts as a means of associating their appeals for military and financial support with religious and historical imagery intimately familiar to many Muslims. In the words of the Islamic State's appeal: Every Muslim professional who delayed his jihad in the past …should now make his number one priority to repent and answer the call to hijrah, especially after the establishment of the Khilafah [caliphate, announced by the Islamic State in June 2014]. This Khilafah is more in need than ever before for experts, professionals, and specialists, who can help contribute in strengthening its structure and tending to the needs of their Muslim brothers. … So abandoning hijrah–the path to jihad–is a dangerous matter. In effect, one is thereby deserting jihad and willingly accepting his tragic condition of being a hypocritical spectator. The Islamic State organization also warns prospective recruits of potentially difficult conditions and advises individuals to "keep in mind that the Khil a fah is a state whose inhabitants and soldiers are human beings. They are not infallible angels. You may see things that need improvement and that are being improved." In January 2015, Islamic State spokesman Abu Mohammed al Adnani reiterated his call for supporters to join the group's ranks and to carry out attacks in their home countries. In March, the group's English-language magazine featured a lengthy article extolling the virtues of male and female foreign recruits, and provided imagery of a young traveler in a Western airport en route to "the land of Islam" (see Figure B-2 ).
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The rising number of U.S. and European citizens traveling to fight with rebel and terrorist groups in Syria and Iraq has emerged as a growing concern for U.S. and European leaders, including Members of Congress. Several deadly terrorist attacks in Europe over the past year—including the killing of 17 people in Paris in January 2015—have heightened the perception that these individuals could pose a serious security threat. Increasingly, terrorist suspects in Europe appear to have spent time with groups fighting in the Middle East, especially with the Islamic State organization (also known as ISIL or ISIS). Others, like the gunman who murdered two individuals in Copenhagen in February 2015, seem to have been inspired by Islamist extremist propaganda. U.S. intelligence suggests that more than 20,000 foreign fighters have traveled to the Syria-Iraq region, including at least 3,400 Westerners, since 2011. The vast majority of Western fighters are thought to be from Europe, although roughly 150 Americans have traveled or attempted to travel to Syria. U.S. authorities estimate that a handful of Americans have died in the conflict; they also assert that military operations against the Islamic State group since August 2014 have killed thousands of fighters, including an unknown number of foreigners. European governments have employed a mix of security measures and prevention efforts to address the potential foreign fighter threat. These have included increasing surveillance; prohibiting travel; countering terrorist recruitment and incitement to terrorism via the Internet and social media; and strengthening counter-radicalization programs. Steps are also being taken by the 28-member European Union (EU) to better combat the possible threat given the bloc's largely open internal borders (which permit individuals to travel without passport checks among most European countries). EU leaders have emphasized the need to enhance information-sharing among national and EU authorities, strengthen external border controls, and improve existing counter-radicalization efforts, particularly online. Nevertheless, European countries and the EU face a range of challenges in stemming the flow of fighters to Syria and Iraq and keeping track of those who go and return. Prosecuting such individuals is difficult in many European countries because most existing laws require a high level of proof that a suspect has actually engaged in terrorism abroad or has returned to commit a terrorist act. Due to ongoing resource constraints, even those governments with far-reaching legal authority to detain terrorist suspects have found it difficult to identify and monitor a growing number of potential assailants. Furthermore, implementation of several EU-wide measures under discussion could be slowed by national sovereignty concerns, long-standing law enforcement barriers to sharing sensitive information, and strong EU data privacy and protection rights. U.S. officials and analysts contend that the potential foreign fighter threat underscores the importance of close law enforcement ties with key European allies and existing U.S.-EU information-sharing arrangements, including those related to tracking terrorist financing and sharing airline passenger data. Some U.S. policymakers, including several Members of Congress, have expressed particular worries about European fighters in Syria and Iraq because the U.S. Visa Waiver Program (VWP) permits short-term visa-free travel to the United States for citizens of most European countries. At the same time, many point out that the VWP's existing security controls require VWP travelers to provide advanced biographic information to U.S. authorities and may help limit travel by known violent extremists. In the 113th Congress, several pieces of legislation were introduced on the VWP, ranging from proposals to limit or suspend the program to those that sought to strengthen the security of the VWP further. In the 114th Congress, two proposals—H.R. 158 and S. 542—largely aim to enhance the VWP's security components to better guard against potential terrorist threats. For additional information, see CRS Report RS22030, U.S.-EU Cooperation Against Terrorism, by [author name scrubbed], and CRS Report RL32221, Visa Waiver Program, by [author name scrubbed].
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The bilateral economic relationship between the United States and European Union (EU) is shaped by two outstanding trends. On the one hand, the two transatlantic economies share a high degree of commercial interaction, most notably a huge trade and investment relationship and a growing number of corporate mergers. Cooperation between the two partners has been critical to the promotion of world trade. On the other hand, the bilateral economic relationship is subject to limited, but increasingly contentious, trade conflicts that potentially could have adverse political and economic repercussions. These include a weakening of shared interests and bonds as well as an undermining of the credibility of the World Trade Organization. The dimensions of the mutually beneficial side of the economic relationship are well known. The United States and EU are parties to the largest two-way trade and investment relationship in the world. Annual two-way flows of goods, services, and foreign direct investment exceeded $1.3 trillion in 2005. This sum means that over $3 billion is spent every day on transatlantic purchases of goods, services, and direct investments. The European Union as a unit is the second largest (next to Canada) trading partner of the United States in merchandise or goods. In 2005 the EU accounted for 20.6% (or $186 billion) of U.S. exports and 18.5% (or $309 billion) of U.S. imports. The EU is also the largest U.S. trading partner in services. In 2005, the EU purchased slightly over 34% of total U.S. services exports (or $130 billion). But the United States since 1993 has been importing more goods from the EU than it has been exporting. In 2005, the resulting U.S. trade deficit with the EU totaled $122 billion or 16% of the U.S. merchandise trade deficit with the world. This trade deficit is partially offset by U.S. surpluses in services trade which have averaged around $10 billion dollars over the 2002-2005 period. Based on a population of some 457 million citizens and a gross domestic product of about $13.4 trillion (compared to a U.S. population of 298 million and a GDP of $12.5 trillion in 2005), the twenty-five members of the EU combine to form the single largest (in terms of GDP) market in the world. Given the reforms entailed in the introduction of the European single market in the early 1990s, along with the introduction of a single currency, the euro, for twelve members, the EU market is also increasingly open and standardized. The fact that each side has a major ownership stake in the other's market may be the most remarkable aspect of the commercial relationship. At the end of 2004, the total stock of two-way direct investment reached $1.9 trillion (composed of $942 billion in EU investment in the United States and $965 billion in U.S. investment in the EU), making U.S. and European companies the largest investors in each other's market. Roughly 60% of corporate America's foreign investments are located in Europe, while almost 75% of Europe's foreign investments are based in the United States. This massive amount of ownership of companies in each other's markets translates into billions of dollars of sales, production, and expenditures on research and development. In addition, an estimated 6-7 million Americans are employed by European affiliates operating in the United States and almost an equal number of EU citizens work for American companies in Europe. Foreign direct investment also serves to spur international trade flows. This is due to the fact that trade taking place within the same company (imports by U.S. affiliates from their EU parent firms and exports by U.S. companies to their EU affiliates) accounts for around one-third of U.S. total trade with the EU. The trade and employment linkages associated with foreign direct investment engender strong and politically active interest groups that lobby on both sides of the Atlantic in favor of maintaining friendly bilateral ties, reducing regulations, and in opposing protectionist proposals. The United States and the European Union, acting in concert, are the superpowers of the world trading system. As shown in Tables 1 and 2 , together they accounted for 35% of world merchandise trade in 2004 and 60% of the world's production of goods and services in 2003. Cooperation and joint leadership between the two partners have historically been the key to all efforts to liberalize world trade on a multilateral basis, including the creation of the General Agreement on Tariffs and Trade (GATT) in 1948 and the World Trade Organization (WTO) in 1995. Trade tensions, disputes, and rivalry coexist alongside and, in part, result from these cooperative and generally positive currents. Bilateral trade disputes have been an important part of the relationship during the Cold War as well as after. They are nothing new nor unexpected given the huge volume of commercial interactions. Historically, with the possible exception of agriculture, the disputes have been managed without excessive political rancor, perhaps due to the balanced nature of the trade and investment relationship. Policymakers and many academics often emphasize that the U.S. and EU always have more in common than in dispute, and like to point out that trade disputes usually affect a tiny fraction (often estimated at 1-2 percent) of the trade in goods and services. In the middle of this decade, however, Washington and Brussels are still at loggerheads over a number of issues, ranging from bio-engineered food products and aircraft to the treatment of agriculture in the Doha Round of multilateral trade negotiations. The conflicts have not been easy to resolve, and some of the efforts at dispute resolution have led to escalation and tit-for-tat retaliation. Instead of compromising in an effort to find solutions, policymakers on both sides sometimes appear more interested in getting even. Congress has been in the middle of many of the trade disputes. By both crafting and passing legislation, Congress has supported the efforts of U.S. agricultural and industrial interests to gain better access to EU markets. Congress has pressured the executive branch to take a harder line against the EU in resolving a number of disputes, but has also cooperated with the Administration in crafting compromise solutions. Combined with a growing value of trade now being disputed, the political and economic effects of trade discord between Brussels and Washington are important questions. Why are many disputes so difficult to resolve? What can be done to improve dispute resolution efforts? Are the disputes undermining business confidence or efforts at economic policy coordination? Are the disputes weakening the credibility of the WTO dispute settlement system? Do the political disputes reflect differences between the two partners in terms of basic values and orientations? If so, could the disputes force a fundamental re-evaluation of the importance of the bilateral relationship? In short, what is the significance of trade conflict to the bilateral relationship? This report considers these overriding questions in three parts. The first part categorizes and evaluates the trade conflicts according to their underlying causes and characteristics. In light of the causes and dimensions of the disputes, the second section examines the potential for conflict management. A final section assesses the role that trade disputes may be playing in the U.S.-EU economic relationship. Changes in government regulations, laws, or practices that protect or promote domestic commercial interests at the expense of foreign interests are at the heart of most trade conflicts. While governments are the sole providers or suppliers of trade protection, there are a range of parties or interest groups that demand or request measures that result in protection for domestic parties. These include producers and workers, as well as consumer and environmental interest groups. Governments may also be the primary demanders or initiators of actions that have trade protectionist effects. U.S.-EU trade conflicts vary according to the nature of the demand for protection. Many of the major U.S.-EU trade conflicts are classified and discussed below according to the nature of the demand for protective action. While many of the conflicts are spurred by multiple demanders and causes, an attempt is made to classify disputes according to categories that seemingly account for the overriding cause or demand for government action. As most trade conflicts embody a mixture of economic, political, and social dimensions, there is ample room for disagreement over the dominant cause of any particular dispute. By and large, this report classifies most of the conflicts according to American perspectives. U.S.-European disagreements over the cause and nature of the controversy, of course, provides the basis for many of the conflicts. Whether the conflict is propelled by protectionist or other domestic aims remains a key question in some disputes as well. Some conflicts stem primarily from demands from producer or vested interests for protection or state aids. These kinds of disagreements arise when both transatlantic trade partners, in support of vested interests and key industries, craft policies that try to open markets for exports but keep markets protected from imports as much as possible. Trade conflicts involving agriculture, aerospace, steel, and 'contingency protection' fit prominently in this grouping. These are examples of traditional trade conflicts, prompted by trade barriers such as tariffs, subsidies or industrial policy instruments, where the economic dimensions of the conflict predominate. Agricultural trade disputes historically have been major sticking points in transatlantic relations. Accounting for a declining percentage of output and employment in both the EU and United States, the agricultural sector has produced a disproportionate amount of the trade tension between the two sides. In the past, the majority of what can be called traditional conflicts stemmed primarily from government efforts to shield or protect farmers from the full effects of market forces (non-traditional agricultural disputes involving food safety and the application of biotechnology to food production are discussed below under Regulatory Protection ). From the U.S. perspective, the restrictive trade regime set up by the Common Agricultural Policy (CAP) has been the real villain. It has been a longstanding U.S. contention that the CAP is the largest single distortion of global agricultural trade. American farmers and policymakers have complained over the years that U.S. sales and profits are adversely affected by (1) EU restrictions on market access that have protected the European market for European farmers; (2) by EU export subsidies that have deflated U.S. sales to third markets; and (3) by EU domestic income support programs that have kept non-competitive European farmers in business. Agricultural conflict, particularly over the decline in U.S. exports to the EU and growing EU competition for sales in third markets, was intense in the 1980s. During this period, the majority of U.S. Section 301 cases were directed at the CAP and fierce subsidy wars were waged over third country markets. Acrimonious agricultural subsidy disputes over canned fruit, oilseeds, wine, wheat flour, pasta, sugar, and poultry between the two sides tested the GATT dispute settlement system to its limits in the 1980s. Tensions, however, have moderated markedly since the completion of the Uruguay Round in the mid-1990s. The 1994 Uruguay Round Agreement on Agriculture defined more clearly what both partners can do in their agricultural and trade policies, as well as defined more clearly the quantities of agricultural products that countries can export with subsidies and strengthened the procedure for settling disputes involving those rules. The agreement also contained a nine-year "peace clause" whereby WTO members agreed not to challenge other countries' subsidies with domestic cases or WTO challenges. For the most part, the U.S. and EU have honored their Uruguay Round agricultural commitments, including 'due restraint.' Scope for future conflict has been constrained, or perhaps redirected into areas not so clearly covered by the Agreement of Agriculture. These included a number of non-traditional disputes over beef hormones, bio-engineered food products, and geographical indicators—none of which involved domestic subsidies. Negotiations on agriculture in the Doha Round have continued to divide the two economic superpowers. The United States has proposed substantial reductions in domestic subsidies, expanded market access through both tariff reduction and expansion of market access quotas, and the elimination of export subsidies. The EU, for its part, has called on the United States to increase its offer to reduce trade-distorting domestic support but has not been willing to improve its offer to expand market access. Unless these positions can be bridged, the negotiations may remain deadlocked. Claims and counter-claims concerning government support for the aviation industry have been a major source of friction in U.S.-EU relations over the past several decades. The fights have focused primarily on EU member state support for Airbus Industrie, a consortium of four European companies that collectively produce Airbus aircraft. According to the Office of the U.S. Trade Representative (USTR), Airbus member governments (France, U.K., Germany and Spain) have provided massive subsidies since 1967 to their member companies to aid in the development, production, and marketing of the Airbus family of large civil aircraft. The U.S. has also accused the EU of providing other forms of support to gain an unfair advantage in this key sector, including equity infusions, debt forgiveness, debt rollovers, marketing assistance, and favored access to EU airports and airspace. For its part, the EU has long resisted U.S. charges and argued that for strategic and economic purposes it could not cede the entire passenger market to the Americans, particularly in the wake of the 1997 Boeing-McDonnell Douglas merger and the pressing need to maintain sufficient global competition. The Europeans have also counter-charged that their actions are justified because U.S. aircraft producers have benefitted from huge indirect governmental subsidies in the form of military and space contracts and government sponsored aerospace research and development. The most recent round of this longstanding trade dispute stems from a May 30, 2005 WTO filing by the United States alleging that European Community (EC) Member States provided Airbus with illegal subsidies giving the firm an unfair advantage in the world market for large commercial jet aircraft. The following day the EC submitted its own request to the WTO claiming that Boeing had received illegal subsidies from the U.S. government. Two panels were established on October 17, 2005 (one handling the U.S. charges against Airbus and the other handling the EU's counterclaims against Boeing), and both panels have begun hearing the cases. Final panel rulings are not expected to be handed down until October 31, 2007, at the earliest. Much of the ongoing debate about the Airbus/Boeing relationship stems from Airbus's December 2000 launch of a program to construct the world's largest commercial passenger aircraft, the Airbus A380. The A380 is being offered in several passenger versions seating between 500 and 800 passengers, and as a freighter. At the end of 2005, Airbus was listing 159 firm orders for the aircraft from 16 different airlines. The project is believed to have cost about $13 billion, which includes some significant cost overruns identified by Airbus in 2005. Airbus expects that its member firms will provide 60% of this sum, with the remaining 40% coming from subcontractors. State-aid from European governments is also a source of funding for Airbus member firms. State-aid is limited to one-third of the project's total cost by the 1992 Agreement on Government Support for Civil Aircraft between the United States and the European Union (EU) (now repudiated by the United States, but not by the EC). Shortly after the A380 project was announced, Boeing dropped its support of a competing new large aircraft. Boeing believes that the market for A380-size aircraft is limited. It has, therefore, settled on the concept of producing a new technology 250-seat aircraft, the 787, which is viewed as a replacement for 767-size aircraft. The 787 is designed to provide point-to-point service on a wide array of possible international and domestic U.S. routes. The aircraft design incorporates features such as increased use of composite materials in structural elements and new engines, with the goal of producing an aircraft that is significantly more fuel efficient than existing aircraft types. Boeing formally launched the program in 2004 and obtained 56 firm orders during the remainder of 2004. By the end of 2005 the order book for the 787 had expanded dramatically to 291 aircraft. To construct this aircraft Boeing is proposing to greatly expand its use of non-U.S. subcontractors and non-traditional funding. For example, a Japanese group will provide approximately 35% of the funding for the project ($1.6 billion). In return this group will produce a large portion of the aircraft's structure and the wings (this will be the first time that a Boeing commercial product will use a non-U.S. built wing). Alenia of Italy is expected to provide $600 million and produce the rear fuselage of the aircraft. In each of these instances, the subcontractor is expected to receive some form of financial assistance from their respective governments. Other subcontractors are also expected to take large financial stakes in the new aircraft. The project is also expected to benefit from state and local tax and other incentives. Most notable among these is $3.2 billion of such incentives from the state of Washington. Many of these non-traditional funding arrangements are specifically cited by the EC in its WTO complaint as being illegal subsidies. Whether the WTO litigation provides an incentive for the United States and the EU to resolve the dispute bilaterally remains to be seen. To date the two sides have wrangled over a host of procedural issues, but have not been negotiating on a possible settlement to the dispute. Some analysts believe that as long as the dispute is not resolved, Boeing can use Airbus subsidies as an argument for securing a lucrative U.S. Air Force contract for refueling tankers. Other analysts speculate that Airbus' weakened business condition brought on by the delivery delays of its jumbo A380 plane may also be a reason why Boeing may not be pressing the U.S. government to settle the case. Conflict over trade in steel products has occurred sporadically over the past two decades. Although the EU industry has undergone significant consolidation and privatization in the 1990s, the U.S. government in the past has alleged that many EU companies still benefit from earlier state subsidies and/or engage in dumping steel products (selling at "less than fair value") in foreign markets. U.S. steel companies also have aggressively used U.S. trade laws to fight against EU steel imports by filing antidumping and countervailing duty petitions that include imports from EU countries. In return, the EU has countered with numerous challenges in the WTO against the alleged U.S. misuse of its countervailing duty and antidumping laws. In addition to "unfair" trade disputes, President Bush in June 2001 requested the U.S. International Trade Commission (ITC) undertake a new Section 201 trade investigation on the steel industry. The petition had broad support from Congress, the steel industry, and labor unions. The ITC subsequently ruled that much of the industry was being injured by increased imports and recommended relief measures to President Bush. On March 5, 2003, the President decided to impose three-year safeguard tariffs with top rates of 30%. He imposed the restrictions for three years on all major steel exporting countries except U.S. free trade partners such as Canada and Mexico. The U.S. decision raised cries of indignation and protectionism from European leaders, and prompted a quick response. On March 27, 2002, citing a threat of diversion of steel from the U.S. market to Europe, the EU announced provisional tariffs of 15% to 26% on 15 different steel products. The EU and a number of other countries adversely affected by the U.S. tariffs also formally challenged the U.S. action as being inconsistent with WTO rules. In early 2003 a WTO panel determined that the U.S. action had a number of shortcomings. The panel found that the United States had failed to adequately demonstrate that rising imports were injuring the U.S. industry. In September 2003, the ITC issued its mid-term report of the safeguards, and determined that termination of the measures was warranted. This determination, in turn, provided President Bush with leeway to avoid further international conflict by terminating the steel safeguard measures on December 5, 2003. A variety of legal procedures, sanctioned by the WTO, provides domestic producers temporary protection against both "fair" and "unfair" trade practices. These include safeguard or import relief procedures for fair trade and anti-dumping and countervailing procedures for unfair trade practices. While these procedures are sanctioned by the WTO, and often referred to as contingency protection, either side's implementation of these procedures is often controversial. A case in point has been the Continued Dumping and Subsidy Offset Act (CDSOA), or Byrd Amendment. Enacted by the U.S. Congress in October 2000, this provision required that the proceeds from antidumping and countervailing duty cases be paid to the U.S. companies responsible for bringing the cases, instead of to the U.S. Treasury. Soon after enactment, the EU and eight other parties challenged the statute in the WTO on the grounds that the provision constituted a "non-permissible specific action against dumping or a subsidy" contrary to various WTO agreements. Basically, the plaintiffs argued that the action benefitted U.S. companies doubly: first, by the imposition of the antidumping or countervailing duties and, second, by receiving the duties at the expense of their competitors. The WTO in January 2003 concluded that the Byrd Amendment was an impermissible action against dumping or subsidization and gave the United States until December 23, 2003, to comply with the WTO ruling. When the United States did not comply with the ruling, the complaining members requested authorization to impose retaliatory measures. A WTO arbitrator determined in August 2004 that each of the eight complainants could impose countermeasures on an annual basis in an amount equal to 72% of the CDSOA disbursements for the most recent year in which U.S. data are available. Canada and the EU began retaliating on May 2, 2005, by placing a 15% additional duty on selected U.S. exports. Mexico imposed higher tariffs on U.S. milk products, wine, and chewing gum, and Japan placed an additional tariff of 15% on 15 steel and industrial products. Despite strong congressional support for the Byrd Amendment in both chambers, a provision repealing the CDSOA was included in the conference report to S. 1932 , the Deficit Reduction Act of 2005, and approved in February 2006. The repeal however, allowed CDSOA payments on all goods that enter the United States to continue through October 1, 2007. As a result, the EU, Canada, and Mexico indicated their intention to keep the sanctions on U.S. imports in place as long as the disbursements continue. The EU, in particular, elected to increase the amount of retaliation by nearly $9 million (from $27.8 million to $36.9 million) and expand the list of products that will face punitive duties. U.S. trade officials and some Members of Congress have expressed disappointment and frustration that retaliation was not lifted in the wake of the Byrd repeal. This category comprises conflicts where the United States or the European Union has initiated actions or measures to protect or promote their political and economic interests, often in the absence of significant private sector pressures. The underlying causes of these disputes are quite different foreign policy goals and priorities, if not interests. Most of these conflicts have important economic interests at stake, but seldom are the economic stakes viewed as the overriding cause or explanation of the action that ostensibly precipitated the disagreement. From the EU perspective, extraterritorial provisions of U.S. sanctions legislation and unilateralism in U.S. trade legislation are concerns that fit into this category. From a U.S. perspective, the EU's preferential dealings with third countries, the Foreign Sales Corporation (FSC) export tax-rebate dispute, and challenges to varied U.S. trade laws could be said to be driven primarily by EU foreign policy priorities. U.S. legislation which requires the imposition of trade sanctions for foreign policy or non-trade reasons has been a major concern of the EU. While the EU often shares many of the foreign policy goals of the United States that are addressed in such legislation, it has opposed the extraterritorial provisions of certain pieces of U.S. legislation that seek to unilaterally regulate or control trade and investment activities conducted by companies outside the United States. Although these issues have been relatively quiet in recent years, a number of the provisions remain U.S. law, including the Cuban Liberty and Democratic Solidarity Act of 1996 (so-called Helms-Burton Act) and the Iran Libya Sanctions Act (ILSA), which threaten the extraterritorial imposition of U.S. sanctions against European firms doing business in Cuba, Iran, and Libya. Other EU concerns about different instances of U.S. extra-territoriality relate to various environmentally driven embargoes, export control legislation, and sub-federal (states) procurement provisions or boycott activities. The Helms-Burton Act, passed in 1996 after the Cuban military shot down two small U.S. based civilian planes, led to a firestorm of protest in Europe. Perhaps not since the U.S. imposed sanctions against companies doing business on a Russian pipeline in the early 1980s had the European outcry been so vociferous. The bill, which was designed to further isolate Cuba economically, imposed a secondary boycott against foreign nationals and companies that "traffic "in Cuban-expropriated properties formerly owned by U.S. nationals. Maintaining that Helms-Burton is extraterritorial and a violation of WTO rules, the EU passed countervailing legislation against its enforcement and initiated a WTO panel investigation. The U.S. responded by claiming the WTO lacked competence to investigate the matter because Helms-Burton is a "national security" issue and therefore should qualify for a waiver under section 21 of the GATT. After a year of high-level political negotiations, an understanding was reached in April 1997 that charted a longer-term solution through negotiation of international disciplines and principles for greater protection of foreign investment, combined with the proposed amendment of the Helms-Burton Act. At the May 1998 EU-U.S. Summit, the United States agreed to either implement or seek measures that would protect EU companies from any penalties called for in Helms-Burton and Iran-Libya Sanction Act. Formal implementation of the Understanding, however, still awaits legislative action by Congress. Closely related to EU concerns about extraterritoriality are complaints about U.S. trade laws and procedures that allow for the "unilateral" imposition of trade sanctions against offending countries or companies. Most EU complaints relate to the "Section 301" family of trade provisions which authorize the executive branch to impose trade sanctions in an effort to enforce U.S. rights under international trade agreements and to combat foreign unfair trade practices. In addition to general trade barriers which the U.S. government deems discriminate against or burden U.S. commerce, other more specialized provisions dealing with government procurement barriers (often legislated by states) and intellectual property rights violations are also subject to EU charges as examples of U.S. unilateralism. Additionally upsetting to some American interests, the EU during the 1997-2000 period filed a number of mostly technical challenges in the WTO to a variety of U.S. trade statutes, including Section 301, a law (section 337) dealing with the protection of intellectual property rights, and the U.S. antidumping laws. Some Americans view these WTO challenges as part of a systematic and concerted EU strategy to weaken or gut U.S. trade laws, perhaps in an effort to gain negotiating leverage that could be used in future efforts to arrive a transatlantic consensus on the agenda for a new round of multilateral trade negotiations. The United States in the past has expressed concerns about the discriminatory impact of preferential agreements the EU has negotiated with third countries. These include preferential trade agreements with prospective EU members in Eastern and Central Europe and with developing countries in Africa and the Caribbean. As a result of these agreements, only eight countries including the United States, Japan and Canada, now receive MFN treatment for their exports to EU. Some U.S. observers have also worried that enlargement and institutional deepening have become EU policy goals that are limiting its commitment to global trade liberalization. Under this view, the EU's "internal" preoccupation translates into less interest in negotiating any new MFN or WTO obligations because such obligations could intensify adjustment pressures EU firms are experiencing as a result of the drive toward a single market and the heightened import competition resulting from preferential tariff agreements negotiated with various regional trading partners. At the same time, the United States has also supported both enlargement and deepening in the political interest of "European stability," thus raising a question concerning the compatibility of U.S. political and trade goals. For its part, the EU has expressed fears that free trade agreements being pursued by the United States could lead to discrimination against its exports. Specifically, the EU is concerned that U.S. efforts to negotiate free trade agreements with Asia through the Asian Pacific Economic Cooperation (APEC) process and with Latin America through the Free Trade Area of the Americas (FTAA) could lead to discrimination against EU exports. This, in turn, has been a spur for the EU to negotiate its own free trade accords with Mexico, and the Mercosur countries of Latin America. A different U.S. concern relates to the Foreign Sales Corporation (FSC) provisions of the U.S. tax code. This provision allowed U.S. firms to exempt between 15% and 30% of export income from taxation by sheltering some income in offshore foreign sales corporations. General Electric, Boeing, Motorola, Caterpillar, Allied Signal, Cisco, Monsanto, and Archer Daniels Midland were among the top beneficiaries of this arrangement. The FSC was enacted in 1984 to replace the Domestic International Sales Corporation (DISC)—a different tax benefit for exporting that the EU had successfully challenged in the GATT. Both provisions were designed to stimulate the U.S. economy through increased exports. While the European officials may not have been fully satisfied that the FSC was fully GATT legal, they nevertheless waited thirteen years (until November 1997) to take the first steps to challenge the scheme under the WTO dispute settlement system. The EU argued that it challenged the FSC because it violated WTO subsidy obligations, distorted international competition, and provided U.S. exporters unfair advantages. Yet, with the possible exception of Airbus, the Brussels challenge appeared to have very limited backing from European business. A number of European subsidiaries operating in the United States, in fact, benefitted from the FSC. A more common explanation is that the EU challenge had more to do with an attempt to gain negotiating leverage over the United States, as well as with getting even for U.S. pressures over beef and bananas, than to redress a perceived commercial disadvantage. A Financial Times editorial viewed the challenge as "tit-for-tat retaliation for U.S. bullying in trade disputes over bananas and beef. Having won its point, the EU now seems determined—in the name of upholding trade rules—to make the U.S. squirm." The EU challenge was successful, with the requirement that the United States bring the FSC provisions in conformity with the WTO by October 2000. Following the ruling, Congress passed the replacement extraterritorial income (ETI) tax provision, but this law was also found inconsistent with WTO obligations in 2002. Subsequently, the WTO authorized the EU to retaliate in the absence of U.S. compliance, and the EU began imposing escalating retaliatory duties (starting at 5%) on $4 billion of U.S. exports on March 1, 2004. After reaching 14% in December 2004, these sanctions were lifted in January 2005 subsequent to congressional repeal of the FSC/ETI provisions in the American Jobs Creation Act ( P.L. 108-357 ) of October 2004. But a WTO ruling of February 13, 2006, determined that the act perpetuated the illegal subsidies with a two-year phase-out of the tax breaks and a grandfather clause covering exporters that had sales contracts dated before September 17, 2003. In announcing the EU's decision to reimpose sanctions, Peter Mandelson, the EU's top trade official, said that "the EU will not accept a system of tax benefits which give U.S. exporters, including Boeing, unfair advantage against their European competitors." But the reimposition of the tariffs was avoided when President Bush on May 17, 2006, signed a tax bill that among other things repealed the grandfathered FSC/ETI benefits. This category of conflict deals with an array of domestic policies, including regulations and standards, that produce conflict by altering the terms of competition in the name of promoting social, cultural, or environmental objectives. Often domestic producers benefit, either intentionally or inadvertently, at the expense of foreign producers. Many of these clashes have occurred as a result of efforts by both partners to strengthen food safety and environmental standards; others have occurred as a result of the EU's need to harmonize standards in support of its drive towards a single market. Still others have occurred as a result of a drive to maintain or promote cultural values and distinctiveness. These disputes tend to involve complex new issues that have arisen as a result of increased economic interdependence and of significant U.S.-EU differences in regulatory approaches. The EU approach to regulation is based on the notion that every important economic activity should take place under a legal framework, whereas the central premise of the U.S. approach is that government does not need to regulate unless a problem arises. While the impact on trade may be the same as in other disputes, these conflicts are often characterized by delicate considerations of motives. Parties that have initiated the action, often consumer or environmental groups, tend to view the protective impact as an indirect consequence of an attempt to attain some valid domestic objective. Trade barriers motivated by food safety, for example, may be considered more legitimate by the public than barriers motivated by economic protectionism. If food safety is perceived as being sacrificed to free trade, support for free trade would erode. Similarly, if food safety is used as a disguise for protectionism, support for free trade could also erode. The four disputes summarized below are rooted in different regulatory approaches and public preferences. Disputes over beef hormones and genetically engineered crops stem primarily from stronger European societal preferences for high food safety standards. A longstanding dispute over the EU's audio-visual sector has a strong cultural basis, steeped in a perceived need to preserve West European society from U.S. dominance. And a clash over an EU regulation banning airplanes outfitted with "hushkitted" or retooled engines ostensibly was driven by environmental demands to reduce noise pollution surrounding European airports. Numerous other disputes could also be included in the following discussion. For example, a dispute over data privacy reflects very different approaches between the U.S. and EU, as well as popular attitudes, towards the protection of personal information that is transmitted electronically. The issue of "multi-functionality" in agriculture, where the Europeans claim agriculture is more than just another industry, has deep cultural roots that divide the two sides. Disputes involving environmental, wildlife, and animal welfare protection, such as U.S. restrictions on imports of tuna from Europe and EU efforts to ban fur imports from the United States, also reflect competing social and cultural differences. The dispute over the EU ban, implemented in 1989, on the production and importation of meat treated with growth-promoting hormones has been one of the most bitter and intractable trade disputes between the United States and Europe. It is also a dispute that, on its surface, involves a relatively small amount of trade. The ban affected an estimated $100-$200 million in lost U.S. exports—less than one-tenth of one percent of U.S. exports to the EU in 1999. But the dispute has played off each side's sovereign right to regulate the safety of its food against its WTO obligations. The EU justified the ban to protect the health and safety of consumers, but several WTO dispute settlement panels subsequently ruled that the ban was inconsistent with the Uruguay Round Sanitary and Phytosanitary (SPS) Agreement. The SPS Agreement provides criteria that have to be met when a country imposes food safety import regulations more stringent than those agreed upon in international standards. These include a scientific assessment that the hormones pose a health risk, along with a risk assessment. Although the WTO panels concluded that the EU ban lacked a scientific justification, the EU refused to remove the ban primarily out of concern that European consumers were opposed to having this kind of meat in the marketplace. In lieu of lifting the ban, the EU in 1999 offered the United States compensation in the form of an expanded quota for hormone-free beef. The U.S. government, backed by most of the U.S. beef industry, opposed compensation on the grounds that exports of hormone-free meat would not be large enough to compensate for losses of hormone-treated exports. This led the way for the United States to impose 100% retaliatory tariffs on $116 million of EU agricultural products from mostly France, Germany, Italy, and Denmark, countries deemed the biggest supporters of the ban. These tariffs, in turn, sparked protests among French and European farmers, who seized on the beef hormones case as a symbol of the threat pose by Americanization and globalization to European regulations and traditions. The U.S. hard line was buttressed by concerns that other countries might adopt similar measures based on health concerns that lack an objective scientific basis according to U.S. standards. Other U.S. interest groups are concerned that non-compliance by the EU undermines the future ability of the WTO to resolve disputes involving the use of SPS measures. In October 2003, the European Commission notified the WTO that it had changed its hormone ban legislation in a way that it believes complies with international trade rules. The legislation made provisional a previous permanent ban for five growth hormones used to raise beef and keeps in place a permanent ban on the use of oestradiaol 17 on the basis that it is a carcinogen. As a result, the EU argued that it should no longer be subject to punitive trade sanctions by the United States (as well as by Canada), and on November 8, 2004, took the initial step in the WTO to challenge the U.S. and Canadian sanctions still in effect. The U.S. and meat industry, however, argued that making a ban provisional for the long term does not meet WTO obligations. Nevertheless, in February 2005, the EU secured the establishment of a panel to determine whether the United States and Canada were in violation of WTO rules by maintaining punitive tariffs on a number of EU products in the dispute. A WTO dispute panel hearing on this issue was held on August 1, 2005. A second hearing was scheduled for November 2005 but later was postponed to September 2006. Agreement on the selection of scientific experts has been elusive, making process of settling the dispute even more difficult. Thus, so long as th EU refuses to eliminate or modify the ban, U.S. retaliatory tariffs are likely to remain in effect. Differences between the United States and the EU over genetically engineered (GE) crops and food products that contain them pose a potential threat to, and in some cases have already disrupted, U.S. agricultural trade. Underlying the conflicts are pronounced differences between the United States and EU about GE products and their potential health and environmental effects. Widespread farmer adoption of bio-engineered crops in the United States makes consumer acceptance of GE crops and foods at home and abroad critical to producers, processors, and exporters. U.S. farmers use GE crops because they can reduce input costs or make field work more flexible. Supporters of GE crops maintain that the technology also holds promise for enhancing agricultural productivity and improving nutrition in developing countries. U.S. consumers, with some exceptions, have been generally accepting of the health and safety of GE foods and willing to put their trust in a credible regulatory process. In contrast, EU consumers, environmentalists, and some scientists maintain that the long-term effects of GE foods on health and the environment are unknown and not scientifically established. By and large, Europeans are more risk averse to the human health and safety issues associated with bio-engineered food products than U.S. citizens. In 1999 the EU instituted a de facto moratorium on any new approval of GE products. The moratorium halted some $300 million in annual U.S. corn shipments. EU policymakers also moved toward establishing mandatory labeling requirements for products containing GE ingredients. For several years, U.S. trade officials refrained from challenging the EU moratorium in the WTO, partly out of fear that the EU, if it lost the case, would not comply due to public opposition. But in May 2003, facing the potential spread of the EU approach to third countries, the United States (along with Canada, and Argentina) challenged the EU de facto moratorium in the WTO. Although the EU effectively lifted the moratorium in May 2004 by approving a genetically engineered corn variety, the three complainants pursued the case, in part because a number of EU member states continued to block approved biotech products. On February 7, 2006, the WTO, in an interim confidential report, ruled that a moratorium had existed, that bans on EU-approved genetically-engineered crops in six EU member countries violated WTO rules, and that the EU failed to ensure that its approval procedures were conducted without "undue delay." Some other claims by the United States were rejected. With the legal battle likely to continue for several years, this dispute still has considerable potential to adversely affect transatlantic relations. This dispute dates back to 1989 when the EU issued a Broadcast Directive that required that a majority of entertainment broadcast transmission time be reserved for programs of European origin "where practicable" and "by appropriate means." All EU member states, including the ten new Member States, have enacted legislation implementing the Broadcast Directive. Implementation of the directive has varied from country to country. In general, efforts to strengthen European content quotas have failed to materialize, but a number of countries have passed specific laws that hinder the free flow of programming. France, for example, has prime time rules that limit the access of U.S. programs in prime time. Radio broadcast quotas also limit broadcasts of American music. Italy also has a European content prime time rule, as well as requirements that large movie theaters show EU films on a "stable" basis. Within the EU, the Broadcast Directive has been controversial. Efforts to tighten restrictions have been opposed by Germany and Britain and by some elements of the European industry. Moreover, consumer demand for foreign movies, coupled with technological innovation through the introduction of cable and satellite television, have undermined movement in the direction of increased protection. The dispute highlights European concerns, particularly in France and Italy, about creeping "Americanization" threatening to undermine their national identities and cultures. It also underlines a fundamental U.S.-EU divide over the role of cultural and social issues in trade disputes. While the U.S. tends to assign priority weight to maximizing the economic value of efficiency in trade negotiations, the EU, by attitude and law, places more weight on environmental and cultural values. European skies are quite crowded with aircraft, airports tend to be situated in heavily populated areas, and there is a serious noise problem. Public concerns about aircraft noise are combined with environmental policy discussions about emissions and greenhouse gases. To deal with this problem, the EU attempted in 1997 to develop an EU-wide noise standard. When it became clear that any such standard would likely impose high economic costs on European manufactures and airlines, the EU advanced a regulation that would limit the operation of "hushkitted" aircraft in European skies. Hushkitting is a process that involves a combination of strategies, including renovated engine enclosures and replacement engine components, designed to reduce aircraft noise. Under standards adopted by the EU, it did not provide major reductions in noise levels. As formally implemented by the EU on May 4, 2000, the vast majority of aircraft affected by the regulation were of U.S. manufacture. Also adversely affected were mostly U.S. manufacturers of noise reduction technology and new engines for older aircraft. Conversely, all European Airbus aircraft are unaffected and there were no major European hushkit producers. The U.S. aerospace industry estimated that the regulation has cost its airlines and manufacturers $2 billion. On March 14, 2000, the United States filed a motion with the International Civil Aviation Organization (ICAO) seeking relief from the EU's regulation. The U.S. case maintained that the regulation did not comply with ICAO regulations and discriminated against U.S. interests. Proceedings were suspended pending settlement negotiations. In early 2002, a settlement was reached under which the EU repealed the regulation and the U.S. withdrew its complaint. The three categories of trade conflicts—traditional, foreign policy, and regulatory—appear to offer different possibilities for conflict management. This is due not only to the fact that the causes and dimensions of these categories of conflicts differ, but also because the institutional relationships and forces that affect the supply of and demand for protection are operative in varying degrees from category to category. These factors include the presence or absence of bilateral or multilateral agreements and rules that govern the settlement of the disputes, the extent to which the disputes fit into the standard free trade versus protectionism dichotomy, the relevance of underlying economic and political trends, and the effectiveness of other institutional arrangements designed to prevent or resolve the disputes. Bilateral and multilateral trade agreements can dampen the inclination of governments to supply protection and the private sector to demand protection by providing a fairly detailed "road map" of permissible actions and obligations. While often litigated and disputed, the obligations tend to be relatively clear-cut and help resolve disagreements. When new spats arise, built-in procedures of many agreements can facilitate a settlement or help avoid escalation. Conflicts that fall into the standard free trade versus protectionism dichotomy also have a built-in potential for undercutting any rationale governments may have to supply protection or private parties may use in demanding protection. This happens due to an ideological consensus in both the U.S. and EU in favor of resisting protectionism on both economic and political grounds. As a result, most demands for protection from producer interests must be justified as exceptions to the generalized support for freer trade arrangements and policies. Diverse economic and political trends can also suppress the supply and demand for protection. For example, declining support for industrial policy initiatives, as has been the case in both the U.S. and EU, could make industry-specific pleas for government assistance less compelling. High priority political commitments, such as the EU's policy towards enlargement, may also create incentives for reform and liberalization as opposed to protection. Both formal and informal cooperative arrangements have proliferated over the past decade to better manage transatlantic trade disputes. These have included efforts to strengthen regulatory co-operation and the establishment of forums for bilateral consultations. By attempting to incorporate the views of a wider range of domestic interest groups, these efforts have also aimed at preventing disputes from arising. Applying these factors to the three categories of trade disputes, there are grounds for judging that traditional trade conflicts may become less disruptive to the bilateral relationship in the future, but more limited grounds for projecting a diminution of foreign policy induced friction. The prospects for future domestic-policy related trade disputes fall somewhere in between these two extremes, with reasons for foreseeing a reduction in friction associated with some disputes, but not all. The basis for this assessment is presented below. Traditional trade conflicts, involving demands from producer interests for protection or state aids, by definition raise fairly routine commercial questions that have been addressed by governments for decades. As a result, most are governed by some bilateral or multilateral agreement or understanding. The WTO in particular provides a body of multilateral rules governing the use of tariffs and other restrictive trade practices and a forum for consultation and dispute resolution. And in the event of non-compliance with WTO rulings, retaliation can be authorized to provide incentives for compliance with WTO rulings. Disputes involving agriculture, aerospace, steel, and contingency protection have all been tempered by the WTO framework of rules and obligations. The Uruguay Round Agreement on Agriculture significantly dampened trade conflict in the areas of EU home market protection and export subsidy wars for third country markets. The multilateral agreement on subsidies provides the terms of engagement for the current clashes over "launch" aid for the A380. Steel trade conflict in recent years has pivoted around the utilization of anti-dumping and safeguard laws, procedures that both the U.S. and EU employ with considerable frequency and which both sides in the past have considered legitimate. The fact that the steel trade battle in 2002 was so heated may stem from a mutual perception that each side did not adhere to the letter or spirit of the safeguards agreement. Traditional trade conflicts also tend to fit into the standard free trade versus protectionism dichotomy. As in the case of agriculture, aerospace, steel, and the Byrd Amendment, proposals or requests for additional protection or promotion will be subject to full transparency, investigation, and debate. Given that both the United States and European Union have open societies with an ideological consensus in favor of competition and open markets, petitioners for protection will have the burden of arguing that their request merits being excepted from the dominant policy orientation. Several economic and political trends may also serve to limit future disputes involving producer protection. These include a decline of support for industrial policy in both Brussels and Washington, budgetary pressures in the EU, and a rising level of foreign direct investment and corporate mergers. Support for industrial policy initiatives, mostly efforts to use state aids to boost the competitiveness of specific sectors or build up national champions in particular industries, were considerable in the late 1980s and early 1990s in both the EU and United States. Based on new rationales for targeted assistance from states, the support for industrial policies posed new challenges to the maintenance of free trade orthodoxy. For a variety of reasons, such policies today are viewed more skeptically in both Brussels and Washington, thereby lessening pressures for what many observers construed as a new and disguised vehicle for protectionism. The issue of subsidies or state aids is closely related to the industrial policy debate. In Europe, with the movement towards a single market that is deregulated and more competitive, subsidies and state aids to individual companies have been increasingly challenged, scrutinized, and curtailed. This trend, which is reenforced by budgetary constraints associated with fiscal targets required of member states participating in the European Monetary Union, could serve not only as a strong force for reducing conflict in aviation and steel, but in other sectors as well. A rising level of foreign direct investment and a wave of new corporate mergers are also forces for dampening demands for protection. As these trends accelerate, many formerly domestic or nationally-based industries will become increasingly globalized. As transatlantic merger and acquisition activity picks up, the answer to the question of 'who is us?' becomes increasingly blurred. Even in the production of a new Airbus plane, it is estimated that American suppliers will provide a considerable amount of the sourcing of the parts. These developments, in turn, tend to create forces that may moderate demands for protection. A number of cross currents, of course, could create a much different outlook. Historically, many industries have been quite creative and successful in justifying demands for protection based on some unique argument. This has been particularly true in the area of agriculture where both sides have argued that agriculture is not just another industry. The strength of the European agricultural lobby rests in part on public support for it as a means of preserving a way of life and a particular kind of environment perceived as worth preserving. On-going efforts in Brussels to reform the CAP must deal with this challenge. Moreover, fundamental economic conditions can change rapidly. Bumper world crops creating an oversupply of basic agricultural commodities or an economic downturn creating an over-supply of steel could ignite old trade battles in steel and agriculture once again. Unlike traditional trade conflicts, foreign policy inspired trade squabbles tend to lack the same kind of institutional arrangements and pressures that dampen the supply of and demand for protection. Nor are these conflicts easily framed along free trade and protectionism lines. Some of these conflicts, but not all, may be moderated in the future by lobbying efforts of big business on both sides of the Atlantic to maintain stable commercial ties. However, if Brussels or Washington is determined to use trade to achieve foreign policy objectives, lobbying efforts are unlikely to be successful in the absence of a transatlantic agreement to treat these issues in a more consistent fashion. In most U.S.-EU sanctions conflicts, there are no bilateral or multilateral understandings that can help resolve very basic foreign policy differences over how to respond to violations by third countries of international norms affecting human rights or security. Many trade measures taken in a foreign policy context are either exempt from WTO disciplines because they are either mandated by the United Nations or applied against non-WTO countries, or only very loosely regulated by the WTO. The latter arises because the national security provision of GATT (Article 21) provides wide latitude for countries to pursue sanctions if they deem the measures to be in their national security interest. WTO rules also provide little guidance and "rules of the road" concerning preferential regional agreements. While the WTO set up a new Committee on Regional Trade Agreements in 1995 to highlight abuses of Article 24 provisions that allow regional agreements to deviate from the non-discrimination principle of the WTO, few challenges have been launched. A major obstacle has been the difficulty of measuring the value of trade diverted from efficient producers to the beneficiaries of preferences granted. As a result, the drive to cut preferential deals continues to grow (along with mistrust) while the ability to challenge deals that raise new trade barriers remains quite weak. As the U.S. and EU embark on even more aggressive efforts to negotiate preferential trade agreements, increased conflict in this area may develop. While the U.S. pursuit of market opening through unilateral means has declined since passage of the Uruguay Round Agreements in 1995, pressures in the United States to revisit this issue could grow. The EU's refusal to implement WTO panel findings on bananas and beef hormones, coupled with continued attacks on U.S. trade laws, could lead U.S. policymakers to reconsider this Uruguay Round bargain of limits imposed on unilateralism in return for a more binding dispute settlement process. The dispute over the U.S. export tax benefit program raises a different issue. It can be argued that the WTO was not the proper forum in which the dispute should have been pursued. But existing WTO "rules of the road" evidently presented a target of opportunity for achieving other foreign policy goals, namely enhancing the EU's negotiating leverage vis-à-vis Washington. Pressures and temptations to apply sanctions against countries that violate international norms, to cut preferential trade deals, to act unilaterally in the pursuit of national trade interests, and to use the WTO to achieve foreign policy objectives are unlikely to go away. Nor are efforts of big and pro-trade business lobbies to curb future actions along these lines likely to be successful in the absence of a broad diplomatic undertaking or a pledge committing both sides to refrain from such actions. Such a pledge or non-aggression pact has been suggested as a way to bring greater coherence in areas of disagreement and in helping to achieve shared goals in a less contentious atmosphere. But little progress has been made, perhaps due to the high level of mutual suspicions, differences in diplomatic approaches, and foreign policy-making machinery. U.S.-EU trade disputes have focused increasingly on differences in regulation, rather than traditional barriers such as tariffs or subsidies. Regulatory requirements established primarily with legitimate domestic concerns of consumer and environmental protection or public health in mind do not discriminate (at least directly) between domestic and imported goods and services. But they may have the secondary effect of distorting or discriminating against the free flow of international trade, which in turn leads to disputes. For this reason, transatlantic regulatory disputes can be more bitter and difficult to resolve than traditional trade disputes, in so far as both sides feel their actions are justified by democratically derived decisions. In this context, such disputes are often difficult to resolve within the context of the WTO because they require a balancing of domestic concerns with international obligations. In trying to resolve or prevent most regulatory disputes, the United States and the EU have tended to rely more on bilateral cooperation and negotiation than on the WTO dispute resolution system. The two sides have made much progress bilaterally in mitigating divergent standards and certification systems as a source of bilateral trade conflict. Bilateral efforts to promote regulatory cooperation have been a top priority in both governments and private sectors since the signing of the "New Transatlantic Agenda" (NTA) and "Action Plan" in late 1995. The creation of the Transatlantic Business Dialogue (TABD), a multinational corporation-led initiative to lower trade and investment barriers across the Atlantic, spearheaded efforts to focus particular attention on problems posed by divergent standards and certification systems. In addition to promoting convergence in regulatory systems through the principle of "approved once, accepted everywhere," efforts were undertaken to negotiate mutual recognition agreements (MRAs) covering key sectors such as pharmaceuticals and medical devices, and telecommunications equipment. In June 1997, the two sides reached agreement on a package of MRA's affecting six sectors, including electrical equipment, pharmaceutical products, telecommunications and information technology equipment. Each side basically accepted the others' inspection, testing, and certification standards in these sectors. The agreements, which covered around $50 billion in U.S.-EU trade, allowed European companies to sell products directly into the U.S. market after they have been tested and certified to U.S. health and safety standards, and vice versa. Under the 1998 Transatlantic Economic Partnership (TEP), the two sides agreed to begin negotiation of MRA's in other sectors, including regulatory processes connected with biotechnology. But negotiating and implementing these agreements have proven difficult due to very different industry interests and regulatory approaches of the United States and the EU. More recently, German Chancellor Angela Merkel in January 2007 proposed the creation of a Transatlantic Free Trade Area (TAFTA). With Germany having assumed the Presidency of the EU for the first six months of 2007, Merkel's initiative aims to harmonize regulations across the Atlantic and reduce non-tariff barriers that constrain the free flow of capital, goods, and services. There are numerous challenges raised by the application of modern biotechnology to food production. The Uruguay Round Sanitary and Phytosanitary Standards (SPS) Agreement was designed to deal with this issue. It requires countries that impose regulations or trade bans to protect the health of plants, animals, and people to base such decisions on risk assessments on sound scientific evidence. But the SPS requirement of a sound scientific basis is open to varying interpretations. Ambiguities in the SPS agreement are complicated because many European consumers may believe that avoidance of production practices associated with biotechnology is a value in itself. For these consumers, scientific studies showing that such technologies do not result in threats to human or animal health may not be convincing. Given these strong views, many European officials want leeway to impose trade restrictions on a "precautionary basis" and others want to renegotiate the SPS agreement. Both avenues could open up a large loophole for discriminatory trade barriers. More ominously, some analysts are concerned that European agricultural policy makers may be "under pressures to guarantee higher levels of safety than strictly is necessary in order to maintain consumer confidence in the food system." Even if these conflicts are not primarily due to the deliberate use of health, safety, or environmental standards as trade barriers, mistrust grows in terms of how much effort government authorities may have put into managing public concerns through educational efforts. Under these circumstances, one analyst has argued that trade disputes resulting from such differences are unlikely ever to be resolved; at best they can be contained. On the other hand, transatlantic consumer views may be converging in some areas. For example, while U.S. consumers generally have been quite receptive to genetically modified organisms (GMOs), Kraft Foods' nationwide recall in 2000 of taco shells that contained a genetically engineered corn not approved for human consumption indicates some underlying discontent. The recall was initiated by a coalition of environmental and consumer groups critical of bio-engineered food. Others argue that in a number of other areas, including corporate mergers and Internet privacy, the European Union's more active role in protecting consumers will gain growing appreciation and support in the United States. At the same time, the European Commission is seeking actively to recreate an approval process for GMO crops, moving to establish a pan-EU food agency, and proposing action to provide consumers with more information on GM foods. In other disputes, technological progress can be a force for change. The audio-visual dispute is a case in point where EU efforts to increase protection of this sector have faced growing technological obstacles, as well as consumer resistance. Rapid technological innovation in the form of cable and satellite television, innovations strongly supported by consumers, offer new products that are difficult to block or regulate. Regulations in this environment often are too complex to enforce or, if enforced, prove adverse to the interests of European producers. Mark Twain reportedly once said of Wagner's music that "it is not as bad as it sounds." Similarly, U.S.-EU trade conflicts may not be as ominous and threatening as they appear. Despite the rise in trade tensions and episodes of tit-for-tat retaliation over the past few years, the notion that the relationship between the world's two most powerful economic powers is constantly teetering on the brink of a transatlantic trade war seems a stretch. Nor does it appear that the trade conflicts represent or symbolize any kind of fundamental rift that is possibly developing between the United States and Europe. At the same time, the disputes do not appear to be ephemeral distractions or mere consequences of a mass media that tends to sensationalize and define the relationship unfairly. Nor are they products of trade negotiators, who like generals, are often accused of fighting the last war. Nor are they trivial or silly squabbles because they represent a mere 1-2% of transatlantic trade. Trade conflicts rather appear to have real, albeit limited, economic and political consequences for the bilateral relationship. Perhaps more significantly, trade disputes may also pose very real obstacles for the two partners in their efforts to play a leadership role in promoting a more open and prosperous world economy. This is particularly evident in the way bilateral trade disputes may be testing the functioning of the World Trade Organization. The economic and political impacts that result from U.S.-EU trade disputes can be easily identified, but are much harder to quantify. In both cases, a variety of forces effectively contains the economic and political costs from rising or getting out of hand. The $300 million in retaliatory U.S. tariffs levied on European exports over the banana and beef disputes and the over $2 billion in EU tariffs imposed on U.S. exports over the FSC (now suspended) and Byrd Amendment disputes provide the most visible economic costs of trade conflict. The retaliatory tariffs are designed to dramatically increase the costs of selective European and U.S. products, making it much more difficult for those "targeted" foreign producers to sell in the U.S. or EU markets. In theory, foreign exporters denied access to markets are expected to pressure their respective governments to change the policies that are in violation of WTO rules. Retaliation is not, however, cost-free. The process also hurts importers, consumers, and firms dependent on those imports as inputs in their production process. These entities intensively lobby Congress and the European Commission to keep their products off any retaliation list that is drawn up. Domestic political pressures, thus, limit the scope and flexibility trade officials on both sides of the Atlantic have in devising a retaliation list. As a result, most retaliation lists tend to be dominated by luxury items or high value-added agricultural items that are produced by both economic superpowers. Under these conditions, coming up with a list of products whose export value matches the relatively small sum of a few billion dollars is no easy task. Attempts by either Brussels or Washington to retaliate on a much larger value of trade could be expected to ignite a firestorm of political opposition. The huge stake each side has in the other's market through foreign direct investments, merger and acquisition activity, combined with "globalized" patterns of production, would likely serve as major counter-forces to any rise in trade warfare. These trends create extensive overlapping interests among companies and strong incentives to contain disputes. In globally traded sectors, mass production in a single location is becoming rare as companies source inputs, research, design, and marketing strategies from all over the world. This, in turn, shrinks the scope of, as well as complicates, the definition of what is domestic production or a domestic company. In terms of political impacts, trade disputes likely have some effect on public opinion and attitudes, as well as connect in some way to other transatlantic problems. Polls indicate that there is a great deal of fear in Europe that the United States, due to the strength of its economy, has the ability to impose both economic and social changes on the rest of the world. This fear and perhaps frustration may translate into antipathy to the United States, often expressed as anti-Americanism. U.S. retaliation against Europe for not accepting hormone-enhanced beef, for example, may only fuel these generalized anti-American feelings that the United States is a bully. The reaction to U.S. retaliation may be even more acute among some European policymakers. By selectively targeting only those EU members that have clearly benefitted from WTO illegal policies, many European policymakers view retaliation as a frontal assault on European unity—an old-fashioned divide-and-conquer strategy. Commenting on the U.S. proposal to rotate items under trade sanctions from product to product and country to country, French President Chirac complained bitterly that carousel retaliation is "much closer to 19 th Century gunboat diplomacy than to 21 st Century diplomacy." Whether or how these reactions affect cooperation in other problem areas is difficult to know. Clearly, if trade tensions work to undermine the notion that the United States and Europe share common interests or lead to a view that a weaker Europe or a weaker America is in the other's interest, then the consequences could be major. But there is no evidence to suggest that this is happening as the United States and the EU to date have been able to compartmentalize trade problems to a remarkable degree. Trade disputes may have discernible impacts on U.S.-EU efforts to provide leadership of the world economy. The disputes absorb a significant amount of time and energy of key policymakers at the expense of efforts to pursue common interests and objectives, such as completing the Doha round of multilateral trade negotiations. Moreover, the two powers need to set an example of cooperation and adherence to WTO rules if the whole system is not to unravel. The credibility of the WTO depends critically on a prompt, effective, and fair dispute-settlement mechanism. Unfortunately, the EU is seen by U.S. policymakers and interest groups affected by the beef and banana cases as having used every loophole to delay decisions and then refuse to comply with panel decisions. Similarly, U.S. compliance efforts in FSC and Byrd Amendment disputes are found wanting by EU policymakers. While only a handful of U.S.-EU WTO disputes have ended in withdrawal of concessions (i.e. retaliation) since 1995, non-compliance by a key member arguably weakens the authority of the WTO and serves as a poor model for the rest of the world. Why should we comply with WTO panel decisions if the EU does not have to, many countries ask. Non-compliance by one of the two leading economic powers is also said to diminish the perceived value of negotiating new trade agreements. Both the U.S. and EU (bananas in the case of the U.S. and the FSC in the case of the EU) have brought complaints to the WTO that may have been motivated more by a desire to score points with domestic political interests or to rack up negotiating leverage by successfully prosecuting cases than to address serious trade problems. To the extent that a charge of capricious use of the dispute settlement process is valid, the WTO as an institution may also be weakened. Some may argue that no institution can survive for long this kind of treatment by the body's two biggest members. To deal with the problem of non-compliance, the U.S. and EU have legalistic and diplomatic options. In the area of some of the most bitter U.S.-EU disagreements, particularly over GMOs, the WTO may be asked to make decisions on very complex issues that go deep into the domestic social and the environmental life of each side. Binding rulings in areas that have strong domestic roots can raise sovereignty issues and court a public backlash. Under these circumstances, where the formulations of right and wrong are increasingly blurred, it may be legitimate to question whether WTO panels should be asked to clarify vague rules where there is little U.S.-EU consensus, or whether trade officials should attempt to negotiate diplomatic solutions to disagreements that are so difficult to resolve.
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The United States and the European Union (EU) share a huge, dynamic, and mutually beneficial economic partnership. Not only is the U.S.-EU trade and investment relationship the largest in the world, but it is also arguably the most important. Agreement between the two partners in the past has been critical to making the world trading system more open and efficient. Given the high level of U.S.-EU commercial interactions, trade tensions and disputes are not unexpected. In the past, U.S.-EU trade relations have witnessed periodic episodes of rising trade tensions and conflicts, only to be followed by successful efforts at dispute settlement. This ebb and flow of trade tensions occurred again in 2006 with high-profile disputes involving the Doha Round of multilateral trade negotiations and production subsidies for the commercial aircraft sector. Major U.S.-EU trade disputes have varied causes. Some disputes stem from demands from producer interests for support or protection. Trade conflicts involving agriculture, aerospace, steel, and 'contingency protection' fit prominently into this grouping. These conflicts tend to be prompted by traditional trade barriers such as subsidies, tariffs, or industrial policy instruments, where the economic dimensions of the conflict predominate. Other conflicts arise when the U.S. or the EU initiate actions or measures to protect or promote their political and economic interests, often in the absence of significant private sector pressures. The underlying cause of these disputes over such issues as sanctions, unilateral trade actions, and preferential trade agreements are different foreign policy goals and priorities of Brussels and Washington. Still other conflicts stem from an array of domestic regulatory policies that reflect differing social and environmental values and objectives. Conflicts over hormone-treated beef, bio-engineered food products, protection of the audio-visual sector, and aircraft hushkits, for example, are rooted in different U.S.-EU regulatory approaches, as well as social preferences. These three categories of trade conflicts—traditional, foreign policy, and regulatory—possess varied potential for future trade conflict. This is due mostly to the fact that bilateral and multilateral agreements governing the settlement of disputes affect each category of disputes differently. By providing a fairly detailed map of permissible actions and obligations, trade agreements can dampen the inclination of governments to supply protection and private sector parties to demand protection. In sum, U.S.-EU bilateral trade conflicts do not appear to be as ominous and threatening as the media often portray, but they are not ephemeral distractions either. Rather they appear to have real, albeit limited, economic and political consequences for the bilateral relationship. From an economic perspective, the disputes may also be weakening efforts of the two partners to provide strong leadership to the global trading system.
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In February 2012, President Obama signed the FAA Modernization and Reform Act of 2012 (FMRA; P.L. 112-95 ). The legislation mandated that the Federal Aviation Administration (FAA) develop a comprehensive plan to integrate unmanned aircraft systems (UAS) into the national airspace and begin implementing the plan starting in October 2015. FRMA also required FAA to issue regulations pertainin g to small commercial drones and develop standards for the operation and certification of unmanned aircraft operated by federal, state, or local government. Deadlines for completing these actions have passed, but FAA has not yet finalized its UAS regulations and standards. However, FAA is granting approvals to government agencies and commercial operators to operate certain UAS on a case-by-case basis. Under a special rule established by FMRA, model aircraft and hobby drones operated strictly for noncommercial recreational purposes are permitted to fly below 400 feet so long as they remain within sight of the operator, outside of restricted airspace, and away from airports unless appropriate prior notification has been given to airport operators and air traffic control towers. Under this rule, operations of hobby drones have proliferated, creating significant enforcement challenges for FAA. Meanwhile, FAA has proceeded slowly and cautiously in complying with the FMRA mandate related to government and commercial operations. It has allowed government agencies and operators of small commercial drones to obtain permits on a case-by-case basis. In February 2015, FAA proposed regulations allowing for the routine operation of small commercial UAS; these rules are expected to be finalized in April 2016. FAA's integration plan, developed in response to FRMA requirements, indicates that procedures allowing public safety UAS routine access to airspace are forthcoming. FAA's approach to regulation distinguishes between operations conducted within visual line of sight (VLOS) and those involving flight beyond (visual) line of sight (BLOS). This distinction does not depend on aircraft size. Some small UAS can achieve basic BLOS capability using a live feed from an onboard camera presented to the operator on a visual display. Larger UAS operated from dedicated control stations achieve BLOS capability through similar means, but also often include other sensing capabilities such as moving map displays, airborne radar information, and air traffic collision avoidance systems to enhance operator situational awareness. So far, FAA is restricting commercial users and model aircraft operators to VLOS operations. The proposed rule for commercial UAS would maintain this restriction, a limitation that would rule out many potential uses of UAS, such as aerial surveying and inspections and package delivery. Furthermore, FAA requires that each UAS be controlled by a dedicated pilot operating one aircraft at a time, just as occurs with manned aircraft. It has proposed formal training requirements for commercial UAS operators similar to the certification process for pilots of manned aircraft. However, UAS technology is rapidly pushing in the direction of greater autonomy and automation. Operational concepts for potential BLOS applications envision systems that will involve minimal human input and interaction and minimal training to operate. Many of the anticipated uses envisioned for UAS, particularly those involving BLOS operations, will require that unmanned aircraft be integrated with manned aircraft within the national airspace system. At the current level of maturity, however, most UAS are being kept segregated from manned aircraft and controlled airspace through altitude restrictions and the establishment of strict airspace boundaries. In the future, it is anticipated that some UAS will share airspace, and potentially share facilities like airports and helipads, with manned aircraft. Technological innovations, as well as standardized procedures operators must follow, will be needed for full integration. An unmanned aircraft is a vehicle designed for flight that does not have a human operator, a pilot, on board. Most unmanned aircraft are controlled from a ground station. The aircraft, its ground station, and command and control radio linkages between the two are collectively known as an unmanned aircraft system. For small UAS, the ground station may be nothing more than a handheld radio control device with manual inputs. More sophisticated drones have ground control centers that look similar to cockpits of modern airliners. Unmanned aircraft are generally classified based on their size and weight. FAA's initiatives to regulate small unmanned aircraft systems pertain to those weighing less than 55 pounds. FAA has also suggested a possible sub-category called micro-UAS, which would be limited to 4.4 pounds (2 kilograms) and thus might pose fewer safety concerns. Unmanned aircraft 55 pounds and greater are categorized as large insofar as they do not meet the statutory or regulatory requirements to be considered small UAS. FAA has not proposed regulations relating to large UAS. An unmanned aircraft's size and weight are generally correlated with both its operating altitude and its flight endurance. Small UAS operate at the lowest altitudes (typically below 1,000 feet) and have comparatively short endurance, usually 30 minutes or less. Many of the consumer drone products that fall into this category are battery-powered, and include rotary-wing designs, such as multi-copter drones, as well as more traditional fixed-wing airplane designs. Some larger designs are gasoline-powered and can operate up to several thousand feet. More capable gasoline-powered unmanned aircraft originally designed as military systems, like the fixed-wing ScanEagle and Fire Scout helicopter, and larger UAS like the Predator/Guardian and the jet-powered Global Hawk, can be deployed for several hours, have thousands of miles of effective range, and operate at medium and high altitudes (see Figure 1 ). The history of unmanned aircraft goes back about a century, to the latter years of World War I, when prototype fixed-wing unmanned aircraft were developed. This research was important in the development of guided missiles and target drones during World War II and the Cold War era. In the 1980s, spurred by Israeli initiatives, the military developed more sophisticated unmanned systems with extensive ground-based command-and-control capabilities and more advanced onboard imaging sensors. Unmanned aircraft were used by U.S. forces for intelligence missions in Kosovo in the late 1990s, and in Afghanistan and Iraq for reconnaissance and surveillance as well as, more recently, for combat missions. Interest in nonmilitary uses of UAS increased following the 9/11 terrorist attacks in 2001. In FY2004, Customs and Border Protection (CBP) began testing unmanned border surveillance missions, and in FY2005, CBP began operational use of UAS along the southern border. Such uses are allowed under certificates of authorization (COAs) issued on a case-by-case basis by FAA. The Federal Bureau of Investigation (FBI) has deployed small unmanned aircraft on a limited basis to provide targeted aerial surveillance for search and rescue operations, kidnapping investigations, fugitive manhunts, anti-drug trafficking interdictions, and national security missions. However, UAS have so far played a limited role in law enforcement. While there are about 18,000 police agencies in the United States, fewer than 50 have obtained FAA authorization for unmanned flight operations. Many federal, state, and local agencies involved in law enforcement and homeland security appear to be awaiting more specific guidance from FAA regarding the routine operation of public-use unmanned aircraft. Legal issues related to individuals' privacy interests protected under the Fourth Amendment have also slowed the adoption of drones for domestic surveillance and homeland security operations. Use of UAS by fire departments has been even more limited, even though there are about 30,000 fire departments in the United States. To date, fire services have mainly used UAS for wildfire and search and rescue operations in remote areas. Applications in urban and suburban environments are being evaluated by several fire departments. The Fire Department of New York City envisions that a tethered UAS it is currently testing would be deployed at second alarm and greater fires and other emergency incidents to provide aerial surveillance to assess dangers to firefighters and other responders. Section 334 of FMRA directed FAA to address routine access to the national airspace by public safety agencies, and develop standards for operation and certification by such agencies by the end of 2015. However, this deadline has now passed, and it remains unclear what actions FAA may take to meet this mandate. Federal government use of UAS includes other applications such as land management, wildfire monitoring, earth imaging and weather monitoring, and scientific research. Among federal agencies, research use by the National Aeronautics and Space Administration (NASA) currently accounts for almost half of the active UAS authorizations. Department of Homeland Security activities, predominantly CBP surveillance missions along U.S. borders and over territorial waters, comprised about 16% of active UAS authorizations as of January 2015. Other agencies using UAS include the National Oceanic and Atmospheric Administration (NOAA) and the Department of the Interior. A small number of state agencies have obtained approvals to operate UAS for aerial surveying and to monitor the environment, highways, and other infrastructure. State university research programs currently are the largest nonfederal government use of UAS. Many of the near-term applications of unmanned aircraft for both government and business involve data collection using a broad array of devices. Digital cameras are the most common data collection sensors aboard UAS. Additionally, UAS may be equipped with infrared sensors that provide night vision capability, more specialized imaging sensors such as synthetic aperture radar, light detection and ranging (LIDAR) systems that use laser scans to capture high-resolution contour maps and images, or multispectral imaging systems that capture a broad spectral range both within and beyond the limits of human vision. Recreational model aviation using radio-controlled airplanes emerged as an organized hobby activity in the 1930s as enthusiasts sought to emulate some of the feats of the great air races of the time. It has remained a popular pastime ever since. The Academy of Model Aeronautics, the largest community-based national organization of model aircraft enthusiasts in the United States, has a current membership of more than 180,000 and has chartered about 2,400 local model aircraft clubs across the country. Modern-day hobby drones are a more recent development, primarily centered around recreational aerial videography and photography. Hobby drones incorporate a variety of consumer electronics technologies that may not be included in traditional model aircraft, including Wi-Fi communications, rechargeable batteries, small high-resolution digital cameras, global positioning satellite (GPS) receiver chips, accelerometer chips, and other miniaturized electronics advancements that came about in large part by the smartphone and portable electronic device industries that have advanced rapidly over the last decade. The demand to use UAS in domestic airspace has developed differently than many forecasters expected. The original impetus behind anticipated domestic UAS activity was the return of unmanned aircraft used for military and intelligence missions overseas, and the repurposing of those systems for nonmilitary governmental and commercial activities. Industry forecasts assumed that domestic UAS activities would develop as those relatively large aircraft were employed in the United States. Since that time, however, technology allowing smaller, low-cost UAS has developed quickly, leading to a rapid increase in the number of small hobby drones and commercial UAS. The proliferation of these systems has complicated FAA's efforts to develop regulations allowing for the integration of UAS into the national airspace. UAS offer a unique capability to provide aerial surveillance and sensing capabilities at a much lower cost than manned aircraft operations. In addition, small UAS can sometimes provide imaging and sensing from a perspective that is not easily achievable using either manned aircraft or land-based systems such as cranes or poles. Flight missions considered to be "dirty, dull, or dangerous" are regarded as prime candidates for the use of unmanned aircraft. Examples include surveillance for homeland security, border protection, and law enforcement; highway traffic monitoring; forest fire scouting; disaster response; applications of pesticides; pipeline and transmission line inspection; surveying and geospatial imaging; atmospheric and environmental science; wildlife and natural resources management; scientific data collection; and severe storm monitoring. Some industry experts foresee eventual use of unmanned aircraft for cargo transport. At this point, however, passenger-carrying UAS are not on the horizon. Industry analysts anticipate a robust market for unmanned aircraft systems, although the extent to which civilian sales will contribute to this market is highly dependent on how the regulation of civilian drones proceeds. In 2013, FAA forecasted that 7,500 commercial small UAS will be operational within five years after it finalizes proposed regulations on UAS. More recently, FAA has backed away from projecting the potential size of the UAS market, noting only that once routine operations of small UAS are authorized, a surge in commercial uses of UAS is anticipated. Already, more than 3,000 small UAS have been approved for a broad array of commercial uses under a special exemption process called for under the provisions of FMRA. A market study completed by the Department of Transportation's Volpe Center in 2013 concluded that future UAS markets are likely to follow an "S" shaped curve of technology adoption with three distinct phases: technological innovation, market growth, and market saturation (see Figure 2 ). The study projected that public agencies will operate about 58,000 UAS by 2035, with federal agencies accounting for about 10,000 of those vehicles and the rest being operated by state and local entities. This market is likely to be driven primarily by state and local public safety agencies seeking to augment or acquire aerial surveillance and reconnaissance capabilities. Additional demand is anticipated from state universities using UAS for research, as well as from state highway, natural resource, and environmental protection agencies. The Volpe Center study anticipated that market growth for commercial UAS will start to expand exponentially as technology advances and regulations evolve to allow expanded access to the national airspace system. The study estimated that the number of commercial UAS in the United States would grow to about 45,000 by 2029, at which point the number of commercial UAS is expected to surpass the number of UAS operated by the military, federal, and state and local government entities combined. At that point, public-sector market growth is expected to taper off while commercial use continues to grow. The study projected that, by 2035, almost 250,000 UAS will be flying (not including model aircraft), about 170,000 of which would be commercial UAS. The overwhelming majority of these are anticipated to be classified as small or micro-UAS, and would be predominantly used for surveillance and imaging applications. It is widely anticipated that among civilian uses, agriculture, and in particular precision agriculture applications that involve detailed imaging of crops and fields, will be the primary driver for commercial investment in UAS technology in the near term. Aerial spraying of small crop fields using radio-controlled helicopters began in Japan in the late 1980s, and today is commonplace. Given the size of farm fields in the United States, however, widespread use of UAS for pesticide spraying will probably not take off until regulations permit BLOS operations. Similarly, applications related to surveillance, monitoring, and inspection of infrastructure and utilities, such as highway systems, railways, pipelines, and electric lines, will face significant limitations until BLOS operations are approved. Current commercial UAS applications are confined to visual line of sight, such as aerial photography of properties for sale, aerial videography for motion pictures and television, and aerial surveys of construction sites, infrastructure, and buildings. FAA distinguishes between three distinct classes of unmanned aircraft users: Public Operations, comprising federal, state, and local government users; Civil Operations, comprising primarily commercial entities; and Model Aircraft Operations, comprising users that fly unmanned aircraft strictly for hobby or recreational purposes. The regulatory framework for each of these classes of users is unique, reflecting the differing operating characteristics of each of these classes as well as the unique statutory construction of provisions in FMRA. It is notable that this delineation closely parallels distinctions made by FAA for manned aircraft operations, which are subdivided into public aircraft operations, civil aircraft operations, and operations by recreational users of single-seat ultralight vehicles that must obey airspace regulations but do not require aircraft or operator certification or registration. Public UAS operators are granted authority to fly by FAA on a case-by-case basis. The mechanism for obtaining this approval is the certificate of authorization (COA). Operators seeking this authority must provide extensive details regarding the UAS, desired location, flight altitudes, other operational characteristics, and the qualifications of the operator. FAA requires that operators be licensed pilots. UAS flights conducted for business purposes either by commercial entities or by individuals performing operations that are tied directly or indirectly to some form of commerce are fully regulated by FAA. Until comprehensive regulations governing such activities are issued, commercial UAS operations are approved by FAA on a case-by-case basis as an interim measure. All commercial applications approved to date have required unmanned aircraft to operate at low altitudes within the operator's visual line of sight. FAA's proposed regulations would maintain this requirement; regulations to allow operations beyond line of sight on a routine basis are not yet being considered. Section 333 of FMRA required FAA to assess whether certain unmanned aircraft could be safely operated within the national airspace system in advance of completion of the required integration plan, and whether such aircraft would require airworthiness certification or be operated under a waiver and/or authorization. This assessment must be based on factors such as size, weight, speed, and type and location of operation. The law further required FAA to establish requirements for such operations if it determines that certain unmanned aircraft could be operated safely prior to the completion of the integration plan. The process FAA established for reviewing and approving such operations is known as the Section 333 exemption process. Under this process, commercial drone operators may petition FAA for an exemption from FAA regulations. FAA reviews and grants such petition requests on a case-by-case basis. Initially, FAA required petitioners to apply for and obtain a unique COA designating a specific block of airspace within which they will conduct flights. However, in March 2015, FAA streamlined the Section 333 exemption process, allowing Section 333 exemption holders operating drones weighing less than 55 pounds to fly below 200 feet and away from airports under a blanket nationwide COA. A separate COA for the specific flights is not needed unless operators wish to exceed the 200-foot altitude restriction or operate near an airport. Before streamlining the process, FAA had issued fewer than 50 exemptions. By the end of 2015, however, more than 2,600 exemptions had been issued. Recently, exemptions have been approved at an average rate of about 300 per month. FAA also allows certain commercial operations of UAS on a case-by-case basis by issuing special airworthiness certificates in either experimental or restricted categories. These have been issued to unmanned aircraft manufacturers and researchers for the purposes of research and development, flight testing, crew training, market surveys, and product demonstrations, and are not intended for other commercial purposes covered under Section 333 exemptions. Section 332(b) of FMRA required FAA to issue a final rule on civilian small unmanned aircraft systems within 18 months of issuing its integration plan. According to the timeline set by FMRA, the integration plan was to have been submitted to Congress in February 2013 (one year after enactment), and the final rule was to have been issued by August 2014. While FAA has not kept to this schedule, in February 2015 it issued a Notice of Proposed Rulemaking on commercial small UAS operations. FAA anticipates that the final rule will be issued in late April 2016, although the Government Accountability Office (GAO) recently reported that the final rule may not be issued until late 2016 or early 2017. The proposed rule would allow commercial unmanned aircraft operations of vehicles weighing less than 55 pounds. The regulations would restrict operations to those conducted within unaided visual line of sight of the operator or a visual observer. Operations would be allowed only between sunrise and sunset and only when visibility is at least three miles. Unmanned aircraft operated under the proposed rule would be limited to flying below 500 feet above the ground at a maximum airspeed of 100 miles per hour (87 knots). Operations within controlled airspace would require air traffic control permission. Although small UAS would not require FAA airworthiness certification, they would have to be properly registered with FAA, and an operator would be required to maintain and inspect the aircraft before each flight to ensure that it is safe to operate. Each small commercial UAS would have to be operated by an individual who has obtained an unmanned aircraft operating certificate with a small UAS rating after passing an FAA aeronautical knowledge test and undergoing a terrorism threat assessment administered by the Transportation Security Administration (TSA). Additionally, certificated operators would be required to pass a recurrent knowledge exam every 24 months. While operators would not require medical certification, they would not be able to operate UAS with a known physical or mental condition that could affect safety. Operators as well as visual observers, if used, would be restricted to flying or observing only one UAS at a time. Automated operation of small UAS without a human operator would not be allowed. While FAA's formal proposal pertained to all UAS weighing less than 55 pounds, the agency sought comment on a less restrictive "micro UAS" classification for vehicles that weigh less than 4.4 pounds (2 kilograms) and are made of frangible materials that easily break apart on impact. FAA currently envisions that micro UAS, if treated separately in its final regulations, would be limited to flight in uncontrolled airspace, would be required to remain at least five miles away from any airport, would be restricted to airspeeds below 35 miles per hour (30 knots), and would have to remain within 1,500 feet of the operator and below 400 feet in altitude. The regulatory framework for commercial UAS does not apply to operations of small UAS carried out strictly for hobby or recreation. These types of activities were excluded from such regulation under a special rule for model aircraft established in FMRA. Specifically, Section 336 of FMRA generally prohibits FAA from regulating model aircraft that are flown strictly for hobby or recreational use and operated in accordance with safety guidelines set by a community-based organization. Model aircraft weighing less than 55 pounds are generally covered under this special rule, while larger, heavier model aircraft can be covered under it if they are certified through a design, construction, inspection, flight testing, and operational safety program administered by a community-based organization. While most radio-controlled model aircraft are powered by small propeller engines and weigh only a few pounds, model aircraft also encompass larger models, including some jet-powered scale models, some of which exceed the 55-pound maximum weight specified in the special rule for model aircraft and the proposed rule for small UAS. The legal distinction between model aircraft and small UAS is, therefore, largely based on an aircraft's use rather than its size or capabilities: vehicles classified as model aircraft are to be used strictly for recreational purposes. In order to qualify for the Section 336 exemption, model aircraft must be operated in a manner that does not interfere with and gives way to manned aircraft, and cannot be operated within five miles of an airport unless the model aircraft operator gives prior notice to the airport operator and the airport control tower, if there is one. The Academy of Model Aeronautics (AMA), a nationwide organization representing model aircraft enthusiasts headquartered in Muncie, IN, has developed a safety code and other safety publications that address the requirements for "community-based" safety guidelines. Additionally, AMA, in partnership with the Association for Unmanned Vehicle Systems International (AUVSI), the Small UAV Coalition, and FAA, has promoted safety guidelines for recreational small unmanned aircraft systems through the Know before You Fly campaign to educate the public about the safe use of drones. In general the safety guidelines for model aircraft specify that flights should remain below 400 feet above the ground; be operated within visual line of sight of the operator; remain clear of and not interfere with manned aircraft operations; stay at least five miles from an airport unless the airport authority or control tower is notified; and remain clear of people or stadiums. Additionally, FAA issued an updated advisory for model aircraft on September 2, 2015, to reflect the statutory requirements of FMRA. That advisory outlines the requisite criteria to be considered a model aircraft operation as defined in Section 336 of FMRA and also notes that model aircraft that endanger flight safety, particularly those that operate in a careless or reckless manner or interfere with or fail to give way to manned aircraft, may be subject to FAA enforcement action; warns that model aircraft operators must comply with any temporary flight restrictions imposed due to disasters, reasons of national security, or for the management of air traffic around air shows, major sporting events, or other events; states that model aircraft must not operate in prohibited airspace, special flight rules areas, or the flight-restricted zone around Washington, DC, without specific authorization; states that model aircraft operators must be familiar with Notices to Airmen (NOTAMs) addressing operations near military installations and federal facilities, certain stadiums, various critical infrastructure facilities, national parks, and emergency service operations; and advises that model aircraft operators should follow best practices including limiting operations to below 400 feet above ground level. Table 1 compares the FAA's current and proposed rules for various types of UAS. As this table illustrates, the same vehicles may be subject to different requirements and restrictions depending on whether they are being flown strictly for recreation or are being flown for commercial purposes. It is also possible that post-flight activities could retrospectively change the way in which a flight is categorized. For example, a hobbyist is free to take video from a model aircraft that carries a camera. However, should the hobbyist subsequently use that video in a commercial manner, such as by selling it or using it to market or promote a product, the flight may no longer qualify as a model aircraft flight. While Section 336 of FRMA limits FAA regulatory authority over model aircraft, FAA has asserted that it retains enforcement authority against users of the national airspace system, including model aircraft operators who fly in a careless and reckless manner or otherwise endanger the safety of the national airspace system. FRMA provides that the special rule for model aircraft is not to be construed to limit FAA's authority to pursue enforcement action against model aircraft operators who endanger the safety of the national airspace system. FAA has stated that it does not regard FMRA as limiting its ability to apply safety and security rules to operators of model aircraft along with other airspace users. Moreover, FAA has interpreted the special rule for model aircraft as not limiting its ability to rely on its existing safety regulations to carry out enforcement actions against model aircraft operators. These existing rules prohibit careless and reckless operations and govern rights-of-way among converging aircraft, operational requirements in various classes of airspace, and temporary flight restrictions issued for safety or security reasons. For example, FAA has kept the flight-restricted zone within a 15-nautical-mile radius of Ronald Reagan National Airport near Washington, DC, off limits to UAS operators. Additionally, in December 2015, FAA extended that restriction to airspace within 30 nautical miles of Ronald Reagan National Airport. Within that radius, all aircraft are required to broadcast position using transponders and remain in radio contact with air traffic controllers, criteria that small UAS and model aircraft are not equipped to meet. The slow pace of UAS regulation in the United States thus far reflects, in part, many of the uncertainties about the potential risks of unmanned aircraft operations. Since UAS are new and have not been integrated into complex airspace, the potential safety hazards to manned aircraft and to persons and property on the ground have not been thoroughly evaluated and are difficult to evaluate. Consider the possibility of a drone being ingested into the jet engine of a large commercial airliner. The extent to which such an event would render the engine inoperable is uncertain, and would likely depend on the size, materials, and construction of the unmanned aircraft, as well as the size of engine and the phase of flight. The mere presence of drones in congested airspace around major airports raises additional concerns over possible pilot distraction. Numerous airline flight crews have reported sightings of UAS in close proximity to airport approach and departure paths, where they may distract pilots during critical phases of flight. In August 2015, FAA stated that pilots reported 238 sightings of UAS in calendar year 2014 and more than 650 through the first seven months of 2015. Additionally, UAS flights in the vicinity of wildfires disrupted aerial firefighting activities and led to the cancellation of some manned flights conducted in support of firefighting activities in the summer of 2015. Several UAS have been spotted over sporting events, and in some instances drones have crashed at public events such as football games and tennis matches. In some of these instances, operators have faced criminal charges in addition to potential FAA enforcement action. Educating UAS operators regarding the potential hazards of drones has been a major focus of efforts to curtail unsafe practices. In partnership with FAA, leading UAS and model aircraft organizations created a website, KnowBeforeYouFly.org, to disseminate information regarding responsible UAS practices. In November 2015, FAA released an "I Fly Safe" checklist aimed at recreational hobby drone and model aircraft operators (see Figure 3 ). The checklist highlights key safety considerations outlined in the special rule for model aircraft and the set of community-based safety guidelines outlined in the Academy of Model Aeronautics' safety code. The educational campaign was launched in advance of the 2015 holiday season in anticipation that many small hobby drones would be received as gifts. Besides these broader safety campaigns, FAA and others have disseminated targeted messages in an effort to curtail certain unsafe practices. For example, in the summer of 2015, FAA, the U.S. Forest Service, and some state firefighting agencies launched public education campaigns warning UAS operators not to fly in the vicinity of firefighting operations (see Figure 4 ). In addition to concerns about flights in the vicinity of wildfires, UAS activity over sporting events and other outdoor gatherings has been a particular problem. Despite existing security restrictions prohibiting flights over professional sporting events, including professional and college football games, over certain outdoor venues such as Disney theme parks, and over national security-sensitive sites, like the White House, UAS, mostly hobby drones, have been spotted in all of these areas. In response, FAA has released public safety materials to convey that temporary flight restrictions (TFRs) also apply to UAS, and TFR areas are "No Drone Zones." FAA has also launched a public education campaign with the assistance of National Football League teams urging fans to leave their drones at home and not to fly over stadiums or people, or near airports, airplanes, and wildfires. Educating operators, particularly recreational operators covered under the special rule for model aircraft, about operational safety and airspace regulations continues to pose a particular challenge. Another challenge is assuring that these users are able to obtain, understand, and comply with relevant airspace warnings and restrictions. In August 2015, FAA began testing a smartphone application, B4UFLY, designed to help UAS operators determine whether there are any restrictions or special requirements in effect in the area where they want to fly. The app obtains location information to provide users of the current status of airspace and any upcoming restrictions in the current or planned flight location. It also provides links to additional FAA UAS resources and regulatory information. Besides curbing UAS use near airports, in restricted areas, and above crowds of people, steps are being taken to limit their use on public lands, particularly park lands where UAS use could interfere with others' enjoyment. The National Park Service released an interim policy in June 2014 observing that UAS may create noise and visual distractions in natural areas, disturb wildlife, and interfere with rescue operations. Until these impacts can be more fully evaluated, the National Park Service has prohibited launching, landing, or operating unmanned aircraft within park lands and waters unless approved in writing by a park superintendent. Some states and local areas have also restricted UAS operations on public lands. For example, except for pre-designated areas for model aircraft, the state of New Jersey prohibits the use of UAS on its designated state park lands without prior approval, in a manner similar to the interim policy released by the National Park Service. State and local jurisdictions have authority over land use, and can restrict or prohibit certain activities, such as launching, operating, or recovering a UAS, on lands owned by the state or a municipality. However, given FAA jurisdiction over airspace, state and local laws and ordinances generally may not restrict UAS overflights of public lands so long as the UAS is operated from beyond the boundaries of the publicly owned area. Airspace restrictions would have to be coordinated with and disseminated by FAA. In addition, some private entities have worked with FAA to establish flight restrictions over certain lands, usually based on security concerns. Airspace over Disney theme parks, for example, is restricted from the surface to 3,000 feet. This restriction applies to UAS as well as to manned aircraft. Several ski resorts, on the other hand, have established policies restricting UAS without involving FAA. However, such policies, particularly as they pertain to UAS launched or operated from outside resort boundaries, raise unresolved legal issues over whether a private entity has any right or authority to limit the use of low-altitude airspace over its land, or whether such actions are strictly under the purview of FAA. At present, UAS, and small UAS in particular, are largely segregated from manned aircraft operations as a safety measure. This is accomplished through altitude restrictions that keep UAS below controlled airspace and flight restrictions that keep UAS away from airports and other restricted areas. Enforcement of these restrictions is an important tool for FAA to assert its authority over model aircraft and UAS and to promote safe operations. FAA has stated that it has launched a number of investigations of unauthorized UAS operations and has imposed civil penalties in some cases. In October 2015, it announced a proposed fine of $1.9 million against a commercial UAS operator. FAA alleged that the operator conducted unauthorized operations for the purpose of commercial photography in New York, NY, and Chicago, IL, between March 2012 and December 2014. Previously, in November 2014, the National Transportation Safety Board (NTSB) upheld FAA's authority to pursue enforcement action against UAS and model aircraft operators, finding that such vehicles fit the statutory and regulatory definition of an aircraft, and are therefore subject to applicable general flight regulations such as the prohibition on careless and reckless operations. In that case, FAA had fined an individual for careless and reckless operation of a fixed-wing UAS being used for aerial videography of the University of Virginia campus in Charlottesville, VA. The FAA action was upheld by the NTSB on appeal. However, despite its authority to act against unauthorized and unsafe UAS and model aircraft operations, carrying out enforcement actions has proved challenging for FAA. This may be partly due to difficulty in identifying possible violators. Additionally, FAA has limited resources to investigate and pursue regulatory action against violators. It has requested the support of state and local law enforcement agencies, and has developed guidance for them to follow in the investigation of suspected UAS violations. FAA requires operators of all UAS flown under a Section 333 exemption or in authorized test ranges to register their unmanned aircraft. On October 19, 2015, FAA asserted its authority to require all UAS operators, including operators of model aircraft, to register their aircraft. It formed a task force to develop recommendations. In December 2015 FAA announced an Internet-based application process for UAS incorporating several of the task force recommendations. Effective December 21, 2015, all operators of model aircraft and hobby drones weighing between 250 grams and 55 pounds are required to register with FAA. Operators of small UAS to be used exclusively as model aircraft must comply by February 19, 2016. The cost of registration is $5, although those who registered by January 20, 2016, had their registration fee refunded. After March 31, 2016, commercial UAS operators will also be able to use the online registration. Before then, those applying for Section 333 exemptions must use FAA's mail-in paper registration process for aircraft. Among other things, FAA expects that registration will simplify the task of identifying individuals who operate a UAS in an unsafe manner. FAA and UAS manufacturers are examining technologies that could override operators and prevent flights into airspace where UAS are not permitted. The technology, broadly referred to as "geo-fencing," relies on up-to-date onboard geospatial databases that include information about the location of airports, prohibited and restricted areas, and temporary flight restrictions established by FAA. To be fully effective, the operator must assure that the data are current before a launch. Once airborne, the UAS will constantly compare precise location data, usually derived from onboard GPS receivers, against information in the prohibited flight area database. If the operator attempts to fly the UAS into an area designated as off limits in the database, the UAS would override the operator's inputs and keep the aircraft outside of the restricted area. Some major manufacturers of small UAS are already equipping new systems with these capabilities or, in some cases, offering to retrofit current UAS. There has been some interest in Congress in making geo-fencing a mandatory feature for newly manufactured consumer UAS and in requiring that UAS without geo-fencing capabilities be upgraded when it is feasible to do so. There are also efforts under way to use video analytics, acoustic sensors, and other detection technologies to provide warning of drone intrusions into restricted airspace. Such systems could be used to detect and locate airspace violators to carry out regulatory enforcement measures. In addition to safety concerns, UAS pose a potential threat to security. Small UAS can be used by criminals and terrorists for espionage, surveillance, and intelligence gathering at critical government and industrial facilities. Criminals are also using unmanned aircraft to smuggle drugs and contraband across U.S. borders and over prison walls and fences. Somewhat larger UAS could be used to carry out terrorist attacks by serving as platforms to deliver explosives or chemical, biological, radiological, or nuclear weapons. Chemical and biological agents pose a particular concern, as UAS used for aerial pesticide applications could readily serve as platforms to carry out attacks. Small UAS could similarly be used to disperse small amounts of certain agents that may be lethal in minute quantities. Even a hoax attack—for example, releasing a powdery substance and making false claims that it contains anthrax virus—could cause widespread panic. UAS could also be used as platforms for firearms or other weapons. While many attack scenarios involving UAS may sound far-fetched, most are technically feasible with already-available technology, and some have been contemplated in terrorist plots. In September 2011, FBI disrupted a homegrown terrorist plot to attack the Pentagon and the Capitol with large model aircraft filled with explosives. In 2012, the investigation culminated in the sentencing of 27-year-old Rezwan Ferdaus, who had ordered a remote controlled model aircraft from a Florida distributor under a false identity and had sought to acquire explosives from an undercover agent. Ferdaus also sought to acquire assault rifles and grenades to be used in a second phase of his attack plot to target personnel evacuating the buildings hit by the explosives-laden model aircraft. Since 2012, other security incidents have raised concerns over potential security threats posed by UAS. Widely publicized drone incidents include an unauthorized flight at a political rally in Dresden, Germany, in September 2013 that came in close proximity to German Chancellor Angela Merkel; a January 2015 crash of a small drone on the White House lawn in Washington, DC; and a series of unidentified drone flights over landmarks and sensitive locations in Paris, France, in 2015. Conversely, UAS may be vulnerable to attack from the ground. UAS could be targeted by terrorists or cybercriminals seeking to tap into sensor data transmissions or to cause mayhem by hacking or jamming command and control signals. Signal jamming or hacking could result in a crash or hostile takeover, as command and control systems typically use unsecured radio frequencies. Some experts have recommended that unmanned aircraft systems be required to have spoof-resistant navigation systems and not be solely reliant on signals from global positioning system equipment, which can be easily jammed. While TSA has broad statutory authority to address a number of aviation security issues, it has not formally addressed the potential security concerns arising from unmanned aircraft operations in domestic airspace. The persisting security threats of UAS, along with safety concerns about unauthorized operations in restricted areas and near airports, has generated increasing interest in technology solutions to detect and, potentially, to disable unauthorized UAS activity. A number of technology solutions have been developed to address this emerging need. In October 2015, FAA announced that it was working with a private firm to test a system designed to detect radio transmissions between an unmanned aircraft and its operator and pinpoint the operator location. A number of other systems using precision radar combined with analytics are capable of distinguishing small UAS from birds. Some available technologies also offer the potential of destroying, disabling, jamming, or taking over control of an unmanned aircraft to mitigate safety dangers or inhibit security threats. There is interest in deploying these systems near security-sensitive locations and flight-restricted areas, including major commercial airports. The effort to integrate UAS into the national airspace system has highlighted a number of technological challenges. These include developing capabilities to detect, sense, and avoid other air traffic, including both manned and other unmanned flights; mitigating risks to persons and property on the ground; preventing unauthorized use of airspace; providing adequate and adequately secure radiofrequency spectrum for command and control linkages and sensor payloads; and addressing human factors considerations including approaches to system automation, human-system interfaces, and operator training and qualification standards. Much of this research is still in its early stages, and while the research is intended to inform FAA decisionmaking regarding future operation and regulation of UAS in the national airspace, anticipated benefits have not yet been realized. A key requirement for enabling integrated UAS operations is the development of "sense-and-avoid" capabilities to allow unmanned aircraft and unmanned aircraft operators to reliably detect and maneuver around other aircraft, both manned and unmanned. While "sense-and-avoid" technologies are critical for beyond-line-of-sight operations that are not yet being considered in FAA regulations, they may also have application in visual-line-of-sight operations, particularly when the command-and-control links between the aircraft and its ground station are lost. FAA, in partnership with NASA and aerospace companies, has carried out demonstrations of prototype proof-of-concept sense-and-avoid systems. However, the Department of Transportation Office of Inspector General found last year that there is a lack of mature detect-and-avoid technology to avoid collisions, and noted that industry experts consider this "the most pressing technical challenge to integration yet to be mitigated." Even if suitable technologies are developed, their cost is likely to make them impractical for installation on small hobbyist UAS, at least initially. FRMA required FAA to select six test sites to conduct research to inform FAA on integrating UAS into the national airspace system. The test sites are to conduct research addressing the various challenges associated with integrating UAS into the national airspace system. While the test sites must agree to share data and findings with FAA to help develop regulations and procedures for UAS integration, the test sites do not receive funding from FAA. The test site operators are required to manage the sites and give access to authorized research entities interested in using the sites for missions that will help advance UAS integration. Each test site operator must develop and adhere to safety standards and develop privacy policies for UAS operations within the test sites and data collection and retention by test site users. The six test site operators selected by FAA are the University of Alaska in Alaska, which includes additional sites in Hawaii, Oregon, Kansas, and Tennessee; the state of Nevada; Griffiss International Airport in New York, with additional test range locations in Massachusetts and Michigan; the North Dakota Department of Commerce; Texas A&M University—Corpus Christi, TX; and Virginia Tech, which includes additional test ranges in Maryland and New Jersey (see Figure 5 ). FAA has also designated a center of excellence for UAS research, education, and training to support UAS integration into the national airspace system. The center is a consortium of 15 universities led by Mississippi State University, and will focus on various UAS research topics including detect and avoid technologies; safety of low-altitude operations; control and communications; compatibility with air traffic control operations; spectrum management; training and certification of UAS operators; and human factors considerations. Under the Center of Excellence, Mississippi State University has created the Alliance for System Safety of UAS through Research Excellence (ASSURE), and has expanded the scope to include additional affiliate universities and additional research projects. ASSURE participants are using more than 300 UAS for this research. Section 332 of FMRA required FAA to develop and execute a plan establishing permanent areas in the Arctic where small unmanned aircraft may operate around the clock for research and commercial purposes. The act required FAA to include in its plan processes allowing for beyond-line-of-sight operations and over-water flights from the surface to 2,000 feet with ingress and egress routes from selected coastal launch sites. Under the resulting arctic implementation plan, FAA issued restricted category type certificates to two UAS models, the Boeing Insitu ScanEagle and the AeroVironment Puma, and approved two energy companies to use these systems for arctic exploration, aerial surveys, and research, including studies on marine mammals and ice surveys. This marked the first time unmanned aircraft were certified for commercial purposes. Flights were initially limited to over-water operations, but were subsequently permitted over land based on safety assessments. In May 2015, FAA launched a cooperative research and development partnership with industry, called Project Pathfinder, to address more advanced UAS operations beyond those outlined in the proposed rulemaking on commercial UAS. FAA is working with Cable News Network (CNN) to examine UAS news-gathering over populated areas; with a UAS developer to study beyond-line-of-sight operations for crop monitoring in precision agriculture operations; and with BNSF Railroad to explore challenges of using UAS to inspect rail system infrastructure. In October 2015, FAA announced that it was expanding Project Pathfinder to include research on the detection of UAS in the vicinity of airports, addressing growing concerns regarding the operation of UAS in close proximity to landing and departing aircraft. In addition to FAA, NASA has extensive ongoing research examining UAS integration. NASA has divided its UAS integration research into five distinct focus areas: separation assurance, communications, human systems integration, airworthiness certification, and integrated testing and evaluation. Part of NASA's ongoing work is research into an air traffic management system for low-altitude airspace and small UAS operations it refers to as UAS traffic management (UTM). NASA envisions that the system would be semi-autonomous, involving limited numbers of human managers to make strategic decisions while routine functions like dynamic geo-fencing and airspace configuration, route planning, separation management, and sequencing and spacing of low-altitude UAS could be performed with limited human involvement. The system would need to work in tandem with onboard UAS technologies to provide lost link capabilities allowing autonomous vehicle recovery if command and control communications are lost. NASA envisions that prototype technologies capable of maintaining safe spacing between participating and nonparticipating UAS over moderately populated areas will be completed by 2018, and that the technology will be transitioned to FAA around 2019 for further testing and development. Unmanned aircraft operation in domestic airspace is the subject of a number of bills introduced in the 114 th Congress. The Responsible Skies Act of 2015 ( H.R. 798 ) would require that UAS flown under Section 333 exemptions remain below 400 feet and more than five miles from the perimeter of any airport that provides scheduled passenger air transportation. The Safe Skies for Unmanned Aircraft Act of 2015 ( S. 387 ) would require FAA to develop procedures allowing beyond-line-of-sight operations for aeronautical research purposes conducted as public aircraft operations, including atmospheric and natural resources research, meteorological observations, and airborne astronomy. Similar language is contained in H.R. 819 . The Commercial UAS Modernization Act ( S. 1314 ) would establish an interim rule for small commercial UAS that would apply until FAA finalizes its proposed small UAS rulemaking. The interim policy described in the act would require aircraft registration and operator knowledge testing and certification. It would restrict operations to visual line of sight, below 500 feet, and away from towered airport controlled airspace without prior permission from air traffic control. The bill would give FAA explicit enforcement authorities and would require operators to report accidents resulting in injury or property damage other than to the small UAS itself. The act would also establish a position of deputy associate administrator for unmanned aircraft within FAA that would be responsible for overseeing the integration of UAS into the national airspace system, and develop strategies for unmanned aircraft spectrum issues, barriers to operating unmanned aircraft beyond line of sight, barriers to allowing payload carriage, and barriers to utilizing automated UAS. The bill also would direct FAA to expedite processing of exemptions to allow certain beyond-line-of-sight operations, programmatic exemptions based on previous analysis, extended visual-line-of-sight and marginal visual flight rules weather conditions, and heavier UAS. The bill also directs FAA to establish a joint data collection and analysis program at the William J. Hughes Technical Center in New Jersey to analyze test site data, implement an air traffic management pilot program for airspace below 1,200 feet, and create a partnership to test the management of small UAS operated at low altitude. A number of other bills addressing privacy and security concerns of domestic UAS operations have also been introduced. Since multiyear authorization for FAA programs and funding under FMRA expired at the end of FY2015, many anticipate congressional deliberations on a new comprehensive FAA reauthorization measure during the second session of the 114 th Congress. Safety, security, and privacy issues regarding domestic UAS operations and UAS integration are likely to be issues of particular interest in these deliberations.
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Unmanned aircraft systems (UAS), often referred to as "drones," have become commonplace over the past few years. As UAS technology develops rapidly, the United States faces significant challenges in balancing safety requirements, privacy concerns, and economic interests. The FAA Modernization and Reform Act of 2012 (FMRA; P.L. 112-95) required the Federal Aviation Administration (FAA) to develop and implement a comprehensive plan to integrate unmanned aircraft into the national airspace and issue regulations governing the operation of small unmanned aircraft used for commercial purposes. FAA has proposed regulations allowing routine operations of small commercial UAS weighing less than 55 pounds, but is still developing the guidelines and standards for federal, state, and local government agencies required by FMRA. Hundreds of thousands of small UAS are already being operated as recreational model aircraft and hobby drones that are permitted under a special rule for model aircraft established by FMRA. In addition, several hundred public agencies and more than 3,000 businesses have been granted approval to operate UAS on a case-by-case basis. Once regulations and guidelines are put in place, large growth in UAS operations is anticipated. As UAS operations have increased, a number of safety concerns have emerged, particularly with regard to use of model aircraft and hobby drones. UAS flights have interfered with airline crews near busy airports and with aircraft fighting wildfires, and have posed safety and security hazards at outdoor events and in restricted areas. FAA has been addressing these concerns through user education initiatives and in limited cases by using its enforcement authority to sanction unauthorized and unsafe operations. In an effort to better monitor UAS operations and carry out enforcement actions as appropriate, FAA now requires that commercial and recreational UAS operators register all small UAS weighing between 250 grams and 55 pounds. Technology known as "geo-fencing" may play a future role in keeping UAS away from airports and other restricted airspace by overriding operator inputs and keeping UAS out of these areas. UAS could potentially be used by criminals and terrorists for espionage and smuggling, or as a platform to launch a remote attack. To address both safety and security concerns, a number of technology solutions are being examined to detect airborne UAS and pinpoint the location of the operator. Technologies to disable, jam, take control over, or potentially destroy a small UAS are also being developed and tested. Many of the commercial applications envisioned for UAS, such as express package delivery, remote monitoring of utilities and infrastructure, and imagery collection and analysis to support precision agriculture, most likely will not be viable without development of technological capabilities that allow for the complete integration of UAS in the national airspace. These include technologies to enable drones to sense and avoid other air traffic; manage low-altitude airspace and detect and prevent unauthorized use of airspace; mitigate risks to persons and property on the ground; provide secure command and control linkages between drone aircraft and their operators; and enable automated operations. There are also issues related to operator training and operator qualification standards. A number of bills introduced in the 114th Congress address UAS safety, and these topics may be considered in further detail in forthcoming FAA reauthorization debate.
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Congress has had a longstanding interest in Mexico's counter-narcotics efforts. Beginning with legislationoriginally enacted in the mid-1980s, Congress has required the President to certify annually, subject to congressional review, thatdrug producing or drug-transit countries have cooperated fully with the United States in drug control efforts duringtheprevious year to avoid suspension of U.S. aid. (1) Mexico has been fully certified each year, but Congress has closelymonitored these certifications, and resolutions of disapproval to reverse the presidential certifications wereintroduced in1996, 1997, 1998, and 1999. In 1996, no floor action was taken; in 1997, each house passed separate weakenedresolutions; in 1998, a Senate version was defeated in floor action; and in 1999, no action was taken on Houseresolutions. Following the election of opposition candidate Vicente Fox as President of Mexico in July 2000, several Memberscalledfor modification of the certification procedures or exemption of Mexico from the process. President Bush certifiedMexicoas fully cooperative in drug control efforts on March 1, 2001, citing the arrest of key members of the Tijuana-basedArellano Felix Organization, the aggressive eradication programs, and continuing cooperation with the United Statesin anumber of areas. (2) According to estimates by the Department of State's Bureau for International Narcotics and Law EnforcementAffairs,Mexico is the primary transit point for cocaine entering the United States from South America, and is a majorsourcecountry for heroin, marijuana, and methamphetamine. (3) Agency experts agree that Mexico's share of illicit traffic in thevarious areas has remained high over the years, although there are variations in the estimates. The methodology formakingthe estimates (whether derived from seizures or some other means) is not regarded as entirely adequate, and theestimatesmay be affected by changing trafficking patterns and demand as much as enforcement efforts. In many cases,estimateshave not been provided in recent Administration reports and congressional testimony With regard to cocaine, the major drug of concern, the State Department's recent INCSR report covering the year 2000cited DEA estimates that 55% of the cocaine sold in the United States transits Mexico. About the same time, a DEAofficial testified in March 2001 that 65% of South American cocaine reaches American cities via the U.S.-Mexicoborder,while a U.S. Customs official indicated that "more than 50%" entered via the Southwest Border. (4) These uncertain andvarying estimates are similar to the estimates in recent years. With respect to heroin, the recent INCSR report did not estimate the percentage of U.S.-bound heroin produced in Mexico,but it noted that Mexico produces only about two percent of the world's opium, nearly all destined for the UnitedStates,and that production in Mexico plummeted as a result of eradication efforts and a severe drought. A U.S. Customsofficialstated, in March 2001 hearings, that 14% of the heroin seized in the United States comes from Mexico, while anindependent study indicated that Mexico is the source of 29% of the heroin used in the United States. (5) In other areas, the recent INCSR report noted that Mexico-based transnational criminal organizations have become thelargest distributors in the United States of methamphetamine and precursor chemicals like ephedrine, withmethamphetamine seizures in the United States growing from 96 kilograms in 1998 to 358 kilograms in 1999, and638kilograms in 2000. According to DEA, "virtually all the marijuana smuggled into the United States, whether growninMexico or shipped through Mexico from lesser sources such as Central America, is smuggled across theU.S.-MexicoBorder." (6) Mexico continues to be a majormoney-laundering center and in recent years international money launderershave turned increasingly to Mexico for initial placement of drug proceeds into the global financial system, accordingto therecent INSCR. Table 1 shows estimates of Mexican drug control efforts in three areas -- seizures, arrests, and eradication --from 1994to 2000. Table 1. Mexican Counter-Drug Activities, 1994-2000 Sources: Except where indicated by asterisk, data is from the U.S. Department of State, International Narcotics ControlStrategy Report , March 2001, pp. V-26-V-36, using the more up to date data in the text when in conflict withthe statisticschart. Seizures are measured in metric tons (mt), and eradication is measured in hectares (ha), with one hectareequaling2.47 acres. Eradication figures in the INCSR are effective eradication estimates of the actual amount of cropdestroyed,factoring in replanting, repeated spaying in one area, etc, while the larger figures supplied by the MexicanGovernmentshow raw estimates of areas sprayed. Data on ephedrine seizures were provided by the Embassy of Mexico for thereporting period December 1, 1999 to November 30, 2000. Caution should be exercised in considering the changes in the various areas as an indication of Mexico's seriousness incontrolling drug trafficking. The trends may also be affected by the demand for the drugs, the amount of drugsproduced oravailable, the sophistication of the drug traffickers, the intelligence and capabilities of Mexican counter-drugagencies, theeffectiveness of reporting and monitoring methods, the effect of weather conditions on eradication efforts, andcompetitionfrom alternative drug suppliers. With regard to Mexican seizures of drugs in 2000, the results portrayed in the table demonstrate some setbacks as well assuccesses compared to the results in the previous year that were unusually high. (7) Seizures of cocaine, which many consider to be the key test, were down to 23.2 metric tons in 2000, a 31% decline from theseizures in 1999, and a 12% decline from the average seizures in the previous six years (1994-1999), but roughlyequal tothe performance in recent years except for 1997 and 1999. In this case, the decline in seizures might be viewed asa sign oflagging performance, as a sign of success from Mexico's commitment of about $500 million over three years forinterdiction technology to "seal the border" against the transit of drugs, or as a sign of the difficulty of capture astraffickersincreasingly utilize multiple maritime avenues (including small go-fast boats, fishing vessels, and commercialcarriers) anddiverse overland routes. Yearly results may also be skewed by a limited number of large seizures, with some recentmaritime operations resulting in the seizure of 3-8 metric tons of cocaine. Mexican government data for thereportingperiod of December 1, 1999 to November 30, 2000, shows seizures of cocaine at 27.6 metric tons, a 1% increaseoverseizures of 27.3 metric tons in the previous year, and the highest level of seizures in the last six years except for1997. Seizures of opium were also down to 0.41 metric tons, a 49% decline from the unusually high level in 1999, but a 32%increase from average seizures in 1994-1999, and the highest level of seizures in the last seven years except for1999. Seizure results in other areas were more positive. Seizures of heroin were up to 0.302 metric tons in 2000, a 17% increasefrom 1999, a 31% increase over the 1994-1999 average, and the highest rate in the last seven years except for 1996. Seizures of marijuana increased to 2,005 metric tons in 2000, a 37% increase over 1999, and a significant 105%increaseover the average in 1994-1999, and the highest level of seizures within the last seven years. Seizures ofmethamphetamineincreased dramatically in 2000 to 0.638 metric tons, a 78% increase over 1999, a 171% increase over the 1994-1999average, and the highest level by far of seizures ever reported, suggesting the growth in importance of this drug. Seizuresof ephedrine, as reported by Mexican officials, increased to 0.560 metric tons in 2000, a 53% increase over 1999,and a24% increase over the 1997-1999 average, but an 81% decrease from the average for the 1995-1999 period with theextraordinarily large seizures in 1995 and 1996. The seizure of 23 illicit drug labs in 2000 was a dramatic increaseas well,registering a 65% increase over 1999, and a 77% increase over the 1994-1999 period, for the highest number ofseizuresrecorded on the chart. According to new Attorney General Rafael Macedo de la Concha, narcotics seizures have increased significantly in the FoxAdministration. In a report on the first 100 days of the new presidency, the Attorney General claimed that cocaineseizureshad nearly doubled, that marijuana seizures were up 116%, and that heroin seizures climbed more than 500%compared tothe first 100 days of the Zedillo Administration, (8) butthis would be a comparison to six years ago, and it is hard to knowwhether the pattern will be lasting. As indicated in Table 1, the number of people arrested in Mexico on drug-related charges in 2000 increased in allcategories. The numbers of arrests of foreigners were up 15% from 1999, to the highest level on the chart exceptfor 1998,and the numbers of arrests of Mexicans and total arrests were up over 5% to the highest levels in the last sevenyears,except for 1996. Among the key arrests in 2000 were the apprehensions of five members of the Arellano Feliz or Tijuana cartel, with themost important being Ismael "El Mayel" Higuera Guerrero (chief operations officer) and Jesus "Chuy" Labra Aviles(financial manager), and lesser collaborators being Enrique Harari Garduno, Carlos Ariel Charry Guzman, andIsmaelHiguera Avila. Other notable arrests where U.S.-Mexico cooperation was highlighted were the apprehensions ofherointraffickers Isaias and Juan Hernandez Ibarra, and the capture of Agustin Vazquez Mendoza after a six year manhuntoncharges of killing a DEA agent in Phoenix, Arizona. Still other important arrests were the apprehensions of drugcartelcollaborators Hugo Baldomero Medina Garza and Olegario Meraz Gutierrez. Along with the arrests, Mexico oftenseizedimportant assets of drug trafficking and money laundering operations. While noting that none of the leading drugtraffickers were arrested or convicted in 2000, the recent INCSR report states that the arrests and prosecutions weresignificant accomplishments involving "successful operational planning and execution, and a new level ofinteragencycooperation." Critics argue that Mexican authorities have failed to weed out corruption, to arrest major drug traffickers, to extraditeMexican citizens to the United States on drug-related charges, and to enforce the country's anti-money-launderinglegislation (9) . Major instances of drug-relatedcorruption mentioned in the press include the apparent suicide in March 2000of a senior official in Mexico's federal Attorney General's Office, Juan Manuel Izabal Villicana, on the eve ofinvestigationof unexplained funds in his safe deposit boxes; (10) the staged car accident/murder near Tijuana in April 2000 of threeMexican anti-drug agents who were probing the drug activities of the Arellano Felix cartel, and the subsequentimplicationin the murder of four federal police agents and a Commander of the anti-drug agency; (11) and the arrest of Mexican GeneralsFrancisco Quiroz Hermosillo and Mario Arturo Acosta in August 2000 because of links to the Amado CarilloFuentestrafficking organization. (12) The Mexican government extradited a total of 12 persons to the United States in 2000, following the general pattern for theZedillo Administration, with six persons, but no major drug traffickers, being extradited on drug-related charges. Thoseextradited on drug charges included three U.S. citizens, two Argentines, and one Mexican national. While previousMexican policy and court decisions required that Mexican nationals wanted for crimes committed abroad beprosecuted inMexico, the Zedillo Administration broke new ground by extraditing seven Mexican nationals and one dualU.S.-Mexicannational to the United States between 1996 and 2000 on grounds that this was permitted under the U.S.-Mexicoextraditiontreaty and Mexican extradition law in exceptional cases. Despite this stance, Mexican courts continued to bereluctant toapprove extradition of Mexican nationals, even when recommended by the Mexican Foreign Ministry, and theyfreedseveral alleged drug traffickers after raising questions about the constitutionality and appropriateness of extraditions,especially where capital punishment or life sentences might be applied. At the end of 2000, there were 51 personsinMexican custody pending extradition, including Agustin Vasquez Mendoza, Ismael Higuera Guerrero, and thebrothersIsaias and Juan Hernandez Ibarra mentioned above. In January 2001, the Mexican Supreme Court ruled that Mexican citizens may be extradited to the United States forprosecution on drug charges provided that they are sentenced under Mexican guidelines. This seemed to clear onelegalhurdle, but the INCSR report notes that adverse lower court decisions on other issues, particularly the question oflifeimprisonment and capital punishment, continue to impede the extradition process and may do so until resolved bythecountry's highest court. (13) While the favorabledecision by the Mexican Supreme Court was issued during the period of theFox presidency, the Bush Administration's Statement of Explanation for the Mexican Drug Certification noted thatthedecision was the culmination of sustained effort by the Zedillo Administration. In another favorable development,theMexican Senate in December 2000 approved a protocol to the U.S.-Mexico extradition treaty, already approved bythe U.S.Senate, that would permit the temporary surrender for trial of fugitives who are serving sentences in one countrybut arealso wanted on criminal charges in the other country. Following the meeting of Presidents Bush and Fox in Mexicoinmid-February 2001, officials are working to implement this temporary surrender protocol. As the first president to be elected from an opposition party in 71 years, President Fox has promised to strengthendemocracy and the rule of law in Mexico, and to fight corruption and crime. He has proposed theprofessionalization of thepolice under a new Public Security Ministry to deal with widespread public concerns with security and policecorruption,and he has promised vigorous efforts against illicit drug traffickers. Shortly after taking office, he sent additionalfederalpolice to Tijuana and Juarez near the U.S. border and to the state of Sinaloa, three hot spots of drug trafficking andcrime,but the police were subsequently removed without any dramatic accomplishments. Fox has been criticized forfailing to actswiftly against corruption, and has been blamed for recent serious cases of drug-related corruption, including theescapefrom a high security prison in Jalisco in mid-January 2001 of reputed drug lord Joaquin "El Chapo" Guzman, andtheescape from house arrest in Mexico City in mid-February 2001 of Jose Manuel Diaz, a high-ranking anti-drugofficial fromChihuahua being held on charges of selling police posts for up to $1 million. (14) Reacting to these events, President Foxannounced a national crusade against drug trafficking on January 24, 2001, promising to eliminate corruption in thepoliceand prison systems and to enhance law enforcement efforts against drug traffickers. Since then a large number oftheprison officials in Jalisco have been questioned and charged, and many customs officials and anti-drug agents inthe state ofChihuahua were removed from office. With respect to eradication of illicit crops, the results are somewhat complicated by the fact that with continuing declines inthe area under cultivation, the potential area of harvest and the net potential yield may decline in a favorable way,even ifthere are reductions in the effective eradication estimates. The results are also complicated by the fact that Mexicandatashow raw estimates of areas sprayed, while the United States data show effective eradication estimatesof the cropdestroyed, factoring out repeated spraying in the same area and other variables. The U.S. estimate of effective eradication of opium poppy cultivation in 2000 of 7,600 hectares was 4% lower than in1999, and 6% lower than the average effective eradication in the 1994-1999 period. However, with the continuingdeclinein total area under cultivation combined with severe drought, the estimated potential harvest was only 1,900hectares, a47% decline from 1999, and a 61% decline from the average harvest for 1994-1999. This produced a potential yieldin2000 of only 24 metric tons of opium gum, a 55% decline from 1999, and a new record low. The U.S. estimate of effective eradication of Mexican marijuana in 2000 was 13,000 hectares, a 33% decline from theunusually high level in 1999, but a 9% increase over the average for 1994-1999. Given the general decline in theareacultivated, the estimated potential yield of marijuana was up very slightly from 1999 to 7,000 metric tons, but lowerthan allrecent years except 1994 and 1999. According to the Statement of Explanation for Mexico's Drug Certification, "Mexico's eradication program is one of thelargest and most aggressive in the world." In an Administration briefing on the certification decisions on March1, 2001,Robert Brown, the Acting Deputy Director of the Office of National Drug Control Policy (ONDCP) characterizedMexico'sefforts as "extraordinary," record-setting," and "world class." U.S.-Mexico counter-narcotics cooperation increased substantially during the Administration of PresidentZedillo(1994-2000), with the full range of law enforcement, military, and border and drug control agencies being involved. Whilethe flow of drugs from Mexico remains high and incidences of corruption persist, the Clinton Administrationseemed to beconfident that President Zedillo was committed to rooting out corruption and establishing a close workingrelationship withthe United States in this area. At the highest diplomatic level, there is the Binational Commission, established in1977,which brings cabinet-level officials together once a year to discuss the full range of U.S.-Mexico relations,including legaland anti-narcotics affairs. With a specific focus on counter-narcotics issues, the High Level Contact Group(HLCG),established in 1996, provides for cabinet-level coordination twice a year. Subordinate HLCG working groups onmoneylaundering, demand reduction, arms trafficking, and interdiction meet several times per year to coordinate policies,exchange information, and promote conferences, such as the Binational Conferences on Reduction of Drug Demand,heldin 1998, 1999, and 2000. The Mexico-U.S. Senior Law Enforcement Plenary, coordinated by the two AttorneysGeneral,also meets four or five times a year on law enforcement issues. (15) Acting through these groups, the two countries agreed in May 1997 upon an Anti-Drug Alliance during a visit to Mexico byPresident Clinton. The leaders developed a draft joint strategy in November 1997, when President Zedillo visitedWashington, and the two Presidents signed a protocol to permit temporary extradition of cross-border criminalsfor trial,and a hemispheric convention against illegal firearms trafficking. More recently, the two leaders issued the jointanti-drugstrategy in early February 1998, and they agreed on methods for coordinating activities in June 1998 despiteMexicandispleasure with Operation Casablanca, a U.S. undercover operation aimed at money laundering operations. Thepresidentssigned agreements on law enforcement cooperation and implementation of performance measures of effectivenessfor thejoint strategy when President Clinton visited Mexico in mid-February 1999, and the two governments decided inNovember1999 to establish a new interdiction working group under the High Level Contact Group. In cooperative efforts tocontrolmoney laundering, Mexico signed a Memorandum of Understanding with the United States in January 2000 tofacilitate thetracking of large sums of money between the countries, it joined the global Financial Action Task Force and theregionalCaribbean Financial Action Task Force in mid-year 2000, and it passed domestic legislation to strengthen reportingof largevalue domestic currency transactions in January 2001. Leaders of the two countries were also negotiating newagreementson cooperative chemical control efforts and on the reciprocal sharing of seized assets that will supersede a 1995agreement. During the Clinton Administration, the United States government was actively involved in the training and screening ofMexicans involved in several important new law enforcement agencies, including the following: the Mexicananti-drugagency, called the Special Prosecutor for Crimes Against Health (FEADS), the Organized Crime Unit whichimplementsthe new Organized Crime Law; the anti-drug bilateral Border Task Forces (BTFs); and a Financial Intelligence Unitwhichimplements new anti-money laundering legislation. In addition, the two countries conducted exchanges of judgesandprosecutors in recent years. In 1999, to strengthen law enforcement efforts, the Mexican Congress passed legislationcodifying the use of assets seized in counter-narcotics operations, and created a new office in the Ministry of theTreasuryto manage these assets. The Mexican government also issued regulations that specified reporting requirements fortheimportation of precursor chemicals, and shared information regularly with other governments. In the area of military-to-military cooperation, the United States during the Clinton Administration provided unprecedentedcounter-narcotics training to Mexican military personnel, and it provided some military equipment, although the73 Hueyhelicopters provided in 1996 were returned to the United States in 1999 when they proved to be unsatisfactory. In2000,the Interdiction Working Group developed a protocol to facilitate communications between the countries, andcoordinationof maritime interdiction operations has increased significantly, according to the recent INCSR report. Officials of Mexico and the United States have also cooperated extensively on United Nations (U.N.) and Organization ofAmerican States (OAS) anti-drug activities in recent years. They worked together with other governments on theagreement of the Inter-American Drug Control Commission (CICAD) in October 1999 to adopt a multilateralevaluationmechanism (MEM) to assess all member countries' counter-narcotics performance, and they participated in the firsttest ofthis system in 2000. Following the recent elections and inaugurations of new presidents in the United States and Mexico, President Bush, on hisfirst foreign visit, met with President Fox in Guanajuato, Mexico, in mid-February 2001, and the two leaderspledged topursue a "partnership for prosperity." On drug trafficking issues, they agreed to strengthen law enforcementcooperation inaccordance with each country's national jurisdiction, and in the joint press conference, President Bush indicated thathe hadconfidence in President Fox's efforts to control corruption and drug trafficking in Mexico. On March 1, 2001,PresidentBush certified that Mexico had cooperated fully with U.S. counter-narcotics efforts, citing arrests of drug traffickersandimpressive eradication results in 2000. According to the recent INCSR report, the prospects for the future presenthope aswell as danger: "The Fox Administration has pledged its commitment to combating drug traffickers and endingimpunity.... These commitments offer unprecedented opportunities for greater cooperation and mutual assistancewith the[United States]. However, corruption and the ability to implement proposed reforms present significant hurdles forsuccessof the [Government of Mexico's] counterdrug strategy."
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This report provides information on Mexico's counter-narcotics efforts during the six year presidency of Ernesto Zedillo(December 1, 1994 to December 1, 2000) and a short period of the presidency of Vicente Fox (December 1, 2000,to March1, 2001), with special emphasis on calendar year 2000, covered by the State Department's report on internationalnarcoticscontrol. Share of Traffic. Mexico continued to be the transit point for about 50-65% of the cocaine entering the United Statesfrom South America in 2000, with the uncertain and varying estimates being similar to estimates in recent years. Mexicoalso continued to be a major source country for heroin, marijuana, and methamphetamine, and a major center formoneylaundering activities. Control Efforts. Seizures of cocaine by Mexico in 2000 were down 31% from 1999, and down 12% from the 1994-1999average, which might be viewed as lagging performance. Seizures of opium were down from unusually high levelsin1999, but represented a 32% increase over the 1994-1999 average. Seizures of heroin were up slightly, whileseizures ofmarijuana, methamphetamine, and drug labs were up significantly. Arrests were up slightly in2000, to reach the highestlevels in the last seven years except for 1996, but numerous instances of apparent corruption persist. Severalimportantdrug traffickers were arrested in 2000, including key members of the Arellano Feliz or Tijuana cartel, Ismael "ElMayel"Higuera Guerrero (chief operations officer) and Jesus "Chuy" Labra Aviles (financial manager). While only oneMexicannational was extradited to the United States in 2000 on drug-related charges, a January 2001 ruling by the MexicanSupreme Court, and Mexican Senate approval of the temporary surrender protocol are promising developments. Eradication of opium and marijuana declined somewhat in 2000, but with fewer hectares ofcultivation, the potential yieldof opium declined markedly to a new record low, and the potential yield of marijuana was lower than four of theprevioussix years. Cooperative Efforts. U.S.-Mexico counter-narcotics cooperation continued at unprecedented levels during the final yearsof the presidencies of Zedillo and Clinton, with the full range of law enforcement, military, border, and drug controlagencies being involved. In the last two years the countries agreed on measures to gauge the effectiveness of thejointanti-drug strategy, they established a new interdiction working group that led to significantly increased maritimeinterdiction cooperation, and they took various cooperative steps to control money laundering activities. They alsocooperated on U.N. and OAS anti-drug activities, including the development and first application of the multilateralevaluation mechanism (MEM) of the Inter-American Drug Control Commission (CICAD) to assess thecounter-narcoticsperformance of all member countries. Following elections in both countries, Presidents Fox and Bush met inMexico inmid-February 2001, and agreed to strengthen law enforcement and counter-narcotics cooperation between thecountries.
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Established in January 2002 under retired Admiral John Poindexter, USN, the mission of theInformation Awareness Office (IAO) in the Defense Advanced Research Project Agency (DARPA)is to develop new tools to detect, anticipate, train for, and provide warnings about potential terroristattacks. (1) Within three to five years, DARPAenvisions that these tools would be integrated into aprototype Total Information Awareness (TIA) system to provide better intelligence support to seniorgovernment officials. If proven effective, Under Secretary of Defense for Acquisition, Technologyand Logistics Edward C. "Pete" Aldridge has suggested that the TIA technology prototypes will beturned over to "intelligence, counterintelligence and law enforcement communities as a tool to helpthem in their battle against domestic terrorism." (2) In a press conference on November 20, 2002, Under Secretary Aldridge stated that funding for the Total Information Awareness System (TIA) is $10 million in FY2003. (3) On February 7, 2003,he reiterated that funding for the TIA project is $10 million in FY2003 and $20 million in FY2004.The Electronic Privacy Information Center (EPIC), a non-profit organization specializing in privacyissues, calculated that TIA-related programs totaled $112 million in FY2003 and $240 million forthe three-year period, FY2001-FY2003. (4) Pressreports also cited funding of over $200 million overthree years. (5) These alternative funding levels reflect the difference between the $10 million in funding for the R&D specifically labeled the "Total Information Awareness System" that would integratevarious R&D technology efforts, and the $137.5 million in funding for various R&D efforts managedby the Information Awareness Office that could become part of that system. Funding for TIAprograms that are managed by the Information Awareness Office includes R&D efforts to developtechnologies to improve data mining so as to allow DOD to sift through and analyze patterns in vastamounts of information, to translate large volumes of foreign language materials electronically, tostrengthen DOD's information infrastructure, and to devise new tools for high-level decision makerstrying to anticipate, train, and respond to terrorist attacks. (See Appendix below for descriptionsofindividual projects). (6) To proponents, TIA R&D holds out the promise of developing a sophisticated system that would develop new technologies to find patterns from multiple sources of information in order togive decision makers new tools to use to detect, pre-empt and react to potential terrorist attacks. Toopponents, TIA has the potential to violate the privacy of individuals by giving the governmentaccess to vast amounts of information about individuals as well as possibly mis-identifyingindividuals as potential terrorists. Reflecting both these viewpoints, P.L. 108-7 (H.J.Res. 2) the FY2003 Consolidated Appropriations Resolution requires that the Secretary of Defense, the Director of Central Intelligence(DCI), and the Attorney General submit to Congress a detailed report on TIA by May 20, 2003 orface a cutoff in funding (see Restrictions on TIA in FY2003 Consolidated Appropriations Resolution later in this report for more details). In the meantime, TIA programs are continuing. (7) DARPA has,for example, obligated $7.4 million of the $10 million available in FY2003 for TIA systemintegration. (8) On March 13, 2003, Paul McHale, the new Assistant Secretary of Defense for Homeland Security, testified that although he considered it appropriate for DARPA to develop TIAtechnologies, once completed, DOD did not anticipate using the technology because of the desirethat " this kind of intrusive but perhaps essential capability" be operated by civilian rather thanmilitary personnel. (9) Instead, he anticipated that theTIA system would be transferred to civilian lawenforcement agencies and be subject to the judicial and congressional oversight. (10) According to DARPA, technology developed in some or all of the sixteen R&D efforts managed by the Information Awareness Office may be integrated into the TIA system. (11) DARPA'sFY2003 request for the R&D efforts managed by the Information Awareness Office totaled $137.5million in FY2003 (see Table 1 below), including $10 million for the integrative efforts specificallylabeled the Total Information Awareness System, a new start in FY2003. Technology Currently Linked to the TIA System. DARPA's FY2003 budget materials state that TIA will integrate technology and components fromat least 8 of the 16 R&D efforts (including the integration itself) that are managed by the InformationAwareness Office. (12) According to DARPA, TIAis "the assured transition of a system-levelprototype that integrates technology and components developed in other DARPA programs including [italics added] Genoa and Genoa II ... TIDES ..., Genisys, EELD, WAE, HID, and Bio-Surveillance... " (13) (See Table 2 and the Appendix for funding and description of these R&D efforts). Funding for these eight R&D efforts totals $110.6 million in FY2003, $83.8 million in FY2002, and $65.0 million in FY2001 (see Table 1 ). Three follow-on machine translation efforts undertheInformation Awareness Office will probably also be incorporated into the TIA system. Information Awareness Office-Managed R&D. According to DARPA, the TIA system may also exploit the results of other R&D efforts that areunder the Information Awareness office, other DARPA efforts, or R&D conducted outside ofDARPA. (14) Several DARPA R&D effortsunder other offices appear to have similar purposes tothose specifically linked to TIA. (15) DARPA alsohopes to exploit commercial data mining technologyand R&D developed by other agencies like the National Security Agency. According to the Directorof DARPA, all funding managed by the Information Awareness Office is considered to be TotalInformation Awareness programs. (16) Funding for projects managed by the Information Awareness Office totals $137.5 million in FY2003, $99.5 million in FY2002, and $80 million in FY2001. Over the three-year period, FY2001-FY2003, funding totals $317.0 million. The increase in FY2003 reflects several new starts inFY2003 for Genisys, a comprehensive data mining effort, MIDGET, a system designed to preventcontamination of open databases, Rapid Analytic Wargaming, a tool for decision makers, and theTIA integration effort (see Table 2 below and Appendix ). Table 1. Funding for Information Awareness Office and for Total Information Awareness Technology, FY2001-FY2003 (in millions of dollars) Sources and Notes: See DARPA, RDT&E Descriptive Summaries for FY2003 (or the R-2), available at web site, http://www.dtic.mil/comptroller/fy2003budget/budget_justification/pdfs/rdtande/darpa_vol1.pdf a FY2003 level reflects DARPA's request. b TIA is shown by DARPA as a specific R&D effort in Project CCC-01 in Program Element603760E. c Includes the 8 R&D efforts identified in DARPA's FY2003 budget justificationmaterials asspecifically linked to the TIA system, including four data mining efforts (Human Identificationat a Distance, Evident Extraction and Link Discovery, Genisys, Bio-surveillance), machinetranslation of languages (TIDES), and three decision making tools (Wargaming the AsymmetricEnvironment, Project Genoa/Genoa II, and Total Information Awareness); see appendix fordescription of these efforts. Although the TIA system was first proposed as an integrated entity in the FY2003 budget shortly after establishment of the Information Awareness Office, some of the R&D efforts that couldbecome part of that system have been underway for a number of years. In fact, several of the R& Defforts, e.g. Project Genoa and machine translation of languages, first received funds in 1996 and1997 respectively. For comparative purposes, Table 1 above and the more detailed Table 2 belowshow funding from FY2001 through FY2003 for all the elements now managed by the InformationAwareness Office that could become part of the Total Information Awareness system. Authorization and Appropriation of DOD RDT&E Programs. Funding for DARPA, as for the Research, Development, Test &Evaluation (RDT&E) programs of the services, is authorized and appropriated annually at theaccount level. In the case of DARPA, funding is included within the RDT&E, Defensewideaccount. (17) The TIA system, like other R&Defforts, is not specifically identified in statutorylanguage in the FY2003 DOD authorization or appropriation acts. Congressional intent about the funding levels for individual R&D efforts, however, may be included in committee reports, and is considered binding. The FY2003 DOD authorization andappropriation conference reports did not include any specific language about the TIA system, andthe House and Senate appropriators voiced different views about various Total InformationAwareness components. (18) FY2001-FY2003 Funding for Individual R&D Efforts. Based on their primary purpose, the sixteen R&D efforts managed by theInformation Awareness Office have been grouped into the four categories below. Table 2 belowshows the funding for FY2001-FY2003 for the individual R&D efforts managed by the InformationAwareness Office, including those R&D efforts currently designated as part of the TIA system. (19) The Appendix briefly describes each R&D efforts. New Data Mining and Analysis Technologies. These R&D efforts are designed to develop technologies that would be capable of sifting through large databases, e.g. financial, communications, travel, to detect patterns associated with terrorists' activities. Total funding for these efforts was $29.2 million in FY2001, $38.2 million in FY2003 and $53.0million in FY2003. Increases reflect initiation of the Bio-surveillance effort in FY2002 and theGenisys program in FY2003, both of which have raised privacy concerns. New Machine Translation Technologies. These R&D efforts are intended to develop new software technology to translate large volumes of foreignlanguage material, both written and oral, that would be collected from sources ranging fromelectronic sources to battlefield transmissions. At $36 million annually, funding for these efforts wasstable between FY2001 and FY2003. Protection of Critical Information Infrastructure. These R&D efforts are intended to protect DOD's information infrastructure and detectmis-information in open-source data that DOD may collect. Funding in this area grew from zero inFY2001 to $2.0 million in FY2002 with the initiation of DefenseNet, and jumped to $9.5 millionwith the new Mis-Information Detection and Generation effort. Tools for High-Level Decision Makers. These R&D efforts are intended to develop tools, ranging from war-gaming simulations to collaborativereasoning processes, designed to help high-level decision makers anticipate, train for, pre-empt, orreact to terrorist acts. Funding for these efforts increased from $14.4 million to $23.5 million inFY2002 with the doubling in the funding level for Wargaming the Asymmetric Environment. Thatfunding jumped to $39.5 million with the initiation of Total Information Awareness System, theintegrative effort. Table 2. FY2001-FY2003 Funding for Information AwarenessOffice and Total Information Awareness Programs (In millions) Sources and Notes : DARPA and Total Information Awareness Office program: http://www.defenselink.darpa.mil/iao/programs . See DARPA, RDT&E Descriptive Summaries for FY2003 (or the R-2), available at web site, http://www.dtic.mil/comptroller/fy2003budget/budget_justification/pdfs/rdtande/darpa_vol1.pdf . * identifies R&D linked specifically by DARPA to TIA System a Funding for individual components not shown in DARPA's FY2003 budget justification. b DefenseNet transfers from Project ST-28 in FY2002 to Project ST-11 in 2003; seeDARPA's R-2,p. 90; or, http://www.dtic.mil/comptroller/fy2003budget/budget_justification/pdfs/rdtande/darpa_vol1.pdf . c Funding for GenoaII starts in FY2003. d Total Information Awareness is the integrative effort. For FY2004, DARPA is requesting $169.2 million for TIA programs and $170.3 million in FY2005. (20) If DARPA funds theR&D efforts that are managed by theInformation Awareness Office comparably to funding in previous years, annualfunding for TIA programs would average about $145 million annually. (21) The higherlevels requested by DOD in the FY2004 budget suggest additional emphases byDARPA on this program. If past funding trends hold, DARPA could spend about$600 million for TIA-related R&D in the next four years, at which point the projectis slated to be complete. This funding would be in addition to the $317 millionspent from FY2001-FY2003. DARPA's goals for TIA programs call for sharing of information and analysis among DOD, the intelligence community, counter-intelligence, law enforcement andhigh-level policy and operational decision makers who could exploit bothcommercial data mining and analysis systems and new tools being developed in TIAprograms. DARPA has also consulted with other DOD offices, such as StrategicCommand. (22) Thus far, DARPA's collaborationwith agencies outside DOD has beeninformal, including an unsigned memorandum of understanding developed with theFBI and meetings with Office of Homeland Security officials. (23) Within DOD, DARPA has established a site at the Army's Information Dominance Center at Fort Belvoir to test potential elements of the TIA system, suchas Genoa, by applying various tools in an operational environment using data aboutU.S. persons that is available to the intelligence community under existing laws andpolicies. That information includes 13 categories of information ranging frompublicly available data to information about potential intelligence sources. (24) DARPA is also testing other potential TIA components, like Genisys, by using fictitious data and mock "Red" or terrorist teams who create potential terroristscenarios, as well as experimenting with linking its intelligence information with avariety of commercially available data mining systems as and systems developed byother government agencies like the National Security Agency. (25) Through thesevarious experiments, DARPA hopes to test the utility of various data mining toolsin identifying potential terrorists. In addition, DARPA has tried out some of its toolson information obtained from prisoners at the U.S. naval base at Guantanamo, Cuba. The FY2003 Consolidated Appropriations Resolution, P.L. 108-7 (H.J.Res. 2) includes a provision requiring that the Secretary of Defense, the Attorney Generaland the Director of Central Intelligence submit a joint, detailed report to Congress byMay 20, 2003, within ninety days of enactment, or face a cutoff of funding. Theserestrictions on TIA were originally proposed by Senator Wyden. The required reporton TIA programs is to: explain and show planned spending and schedules for each TIA project and activity; identify target dates for deployment of eachcomponent; evaluate the system's likely effectiveness in predicting terroristactivities; assess the likely impact of implementation on privacy and civilliberties; list laws and regulations governing collection efforts andidentify any changes that would be needed with deployment of TIA;and include recommendations from the Attorney General aboutprocedures, regulations or legislation that would eliminate or minimize adverseeffects of any TIA programs on privacy and civil liberties. (26) If no report is submitted, the funding cutoff can be avoided if the President certifies in writing to Congress that submitting the report is not practicable and that endingR& D on Total Information Awareness programs would endanger national security. In addition, the provision requires that DOD notify Congress and receive specific appropriations and authorization for any deployment or transfer to anotherfederal agency of any TIA component unless the component is to be used foroverseas military operations or for foreign intelligence activities conducted againstnon-U.S. persons. (27) Other Members of Congress have also signaled concerns about the TIA system. On January 16, 2003, Senator Feingold and others introduced S. 188, the DataMining Moratorium Act of 2003 that would place restrictions on data miningactivities in DOD and other agencies. In November 2002, Senator Grassley askedthe DOD Inspector General to conduct an audit of TIA programs and asked AttorneyGeneral Ashcroft to provide by February 10, 2003 information about anyinvolvement that the Department of Justice or the FBI have had with the TIAprogram. Senator Grassley has not yet received a reply. (28) In addition to concerns raised by members of Congress and public interestgroups about protecting the privacy of U.S. citizens, Congress may continue toaddress oversight issues, including: developing monitoring mechanisms for TIA programs; and assessing the technical feasibility of the program. DARPA suggests that its role in developing prototype technologies for a TIA system is consistent with both its mission and history of sponsoring basic researchfor the mid and long-term that crosses service lines, and has multiple potential users,both inside and outside DOD. Previous examples of DARPA-developed technologywith wide-ranging implications include stealth technology, Global PositioningSystem (GPS), and development of the Internet. (29) Based on recent testimony byAssistant Secretary of Defense Paul McHale emphasizing that DOD did not expectto use a TIA system but would turn the system over to civilian law enforcementagencies, TIA may not have a defense mission. (30) In describing plans for the TIAsystem, DARPA's Director, Dr. Tony Tether, cited collaboration with potential usersin other federal agencies as a key part of their approach. (31) Yet that collaboration -- between the law enforcement community and the intelligence community, for example -- has raised concerns among some observersabout the roles of different agencies in gathering and sharing intelligence on potentialthreats from terrorists located in the United States. Those concerns reflect theexperiences of the 1960s and 1970s when the FBI's counterintelligence programtargeted civil rights and anti-war organizations as part of its efforts to pursuedomestic terrorists. (32) DARPA's efforts at collaboration reflect the fact that there are potentially many users of any tools that DARPA develops to predict terrorist threats. Currently,several agencies are or will be collecting or analyzing intelligence on potentialterrorist threats, including the Counterterrorist Center under the CIA, the FBI's JointTerrorist Task Forces, the new Department of Homeland Security. Another new userwould be President Bush's proposed new Terrorist Threat Integration Center to beestablished May 1, 2003 with the mission of integrating all of U.S. governmentinformation and analysis about potential terrorist threats. (33) DARPA envisionsworking with potential users in the design of its tools for decision makers, a practice,that could be difficult with restrictions on transfer of TIA components. Sharing information among several users makes it more difficult to protect both intelligence sources and the privacy of individuals. For that reason, DARPA issponsoring some research on developing 'fire walls' that would protect the sourcesof intelligence gatherers and prevent potential leakage among users. The distributedtype of system that DARPA envisions could make those challenges greater. Earlycollaboration with potential users, for which DARPA has been praised, could alsocreate problems with ensuring privacy and preventing misuse of intelligence sourcesand data on individuals, particularly if DARPA tries to exploit multiple data basesand to share data across agencies. (34) Developing tools to ensure that the privacy of both sources and individuals is both a technical challenge and a policy issue. DARPA's Genisys program, a TIAcomponent intended to integrate and query large data bases that has raised privacyconcerns, also includes R&D on tools to ensure privacy. These tools may include"partitioning," which segregates transactions from the identity of the individual,filters to limit access to information and software agents that would delete unrelatedinformation. According to a technical group tasked by DARPA to look intotechnological solutions to privacy issues, the Information Science and Technologypanel (ISAT), there are significant difficulties in developing tools and protocols toprotect privacy. This group called on DARPA to devote significant researchresources in this area, and to establish a citizen advisory board to privacy policystandards. (35) On February 7, 2003, the Department of Defense established two boards to monitor TIA programs. (36) Made up of high-levelDOD officials, the internal TIAoversight board is tasked with setting policies and procedures for use of TIA toolswithin DOD and establishing protocols for transferring TIA capabilities outside ofDOD to ensure consistency with privacy laws and policies. DOD also established anoutside advisory board including experts in privacy issues, to advise the Secretaryof Defense on policy and legal issues raised by using advanced technology to identifyand predict terrorists threats. (37) In separatestatements to reporters, Senator Wydenand a spokesman for the American Civil Liberties Union each suggested that the newboards proposed by the Pentagon did not eliminate the need for Congressionaloversight." (38) P.L. 108-7 , passed by both houses the following week, requires that DOD inform and get Congressional authorization for any transfers between agencies or fordeployment of any TIA components. Under P.L. 108-7 , testing outside of DOD mayalso be subject to rigorous oversight. In its current research, DARPA has beencareful to use 'dummy' or fictitious data on individuals to test the effectiveness ofvarious models for detecting potential terrorists, or to use only data that is currentlylegally permissible for intelligence gathering purposes (see discussion of ongoingDARPA collaboration above). If DARPA's technology efforts - in data mining ormodel development - are to be fully tested, however, real data, with all its flaws, mayneed to be used, and using real data may raise privacy issues. To decrease thepotential for significant errors in the prototype models and systems underdevelopment, extensive testing efforts could be desirable. While some observers see great potential in DARPA's TIA proposals to exploit a wide range of data bases and develop models to identify terrorists, other observersare skeptical even models with sophisticated algorithms could pick terrorists out fromlarge data bases, the proverbial problem of finding a needle in a haystack. DARPA'sdescription suggests that the TIA system will be developed using a variety of datamining techniques coupled with models developed by analysts. Although there doesnot appear to be any simple definition, data mining has been defined as exploiting avariety of tools to extract predictive information from large data bases. (39) Several major technical problems are inherent in data mining and model development that would need to be solved to develop an effective TIA systemincluding: identifying and getting access to appropriate data bases; cleaning up "dirty" or inaccurate data in databases; integrating disparate data bases; developing models or algorithms to identify likely terrorists; mis-identifying suspects because of large numbers of falseleads; and dealing with timing and cost dilemmas. Data Base Problems. Getting access, 'cleaning up,' and integrating large data bases may pose significantchallenges in developing a TIA system. While DARPA is currently looking at linksbetween military intelligence data and other sources at its Army testing site, therecould be complications in linking to other data bases and ensuring that onlypermissible data is included. (40) In addition, anydata base includes a significantnumber of errors -- a problem routinely discussed by data mining experts -- and itis not clear that there are adequate methods for catching errors. Linking large anddisparate data bases is not only a challenging task in itself but could compound thenumber of errors. Searching large data bases with large numbers of errors could both reduce the likelihood that terrorists would be identified and magnify the possibility thatindividuals who are not terrorists would be tagged. Erroneous data may be includedeither inadvertently by those entering the data or intentionally by "identity threat"where individuals deliberately impersonate others, worrisome problems to technicaland privacy experts alike. The quality of the data could be diluted further if disparatedata bases are linked. Developing Ways To Identify Terrorists. DARPA plans to use both quantitative and qualitativedata mining techniques to develop tools to identify terrorists. Data miningtechniques are currently widely used for commercial purposes, ranging from targetedmarketing to detecting credit card fraud, as well as for law-enforcement (e.g., to catchdrug smugglers). In these cases, however, analysts and statisticians develop, test andre-test algorithms or quantitative relationships in order to hone formulas and improvetheir accuracy in detecting patterns. In the case of credit card fraud, for example,statistical algorithms or pattern identifying techniques can be refined with follow-upchecks of billing records. According to DARPA's descriptions, TIA components would develop technologies using both statistically-based algorithms to detect patterns in multipledata sources from a wide range of sources -- financial, telephonic, foreign messages,intelligence traffic -- and models of terrorist behavior based on analysis of historicalexperiences and scenarios developed by analysts. DARPA anticipates that byspeculating, analysts will develop scenarios of particular terrorist attacks and thenback into the types of activities that would be necessary to carry out those attacks. Some observers have suggested that it could be difficult to anticipate terrorist acts,and our success in anticipating previous terrorist attacks has been limited. With theenormous increases in the speed of processing information and the proliferation ofdata mining techniques, DARPA sees new opportunities for exploiting a variety ofinformation sources using quantitative techniques like data mining. Technology experts and others, however, have questioned whether the problem of detecting potential terrorists is susceptible to the data mining techniques routinelydone by commercial companies in light of the difficulty in predicting terroristbehavior. The problem is made all the more difficult by the likelihood that thenumber of Al Qaeda members in the U.S. is small; a widely-quoted FBI estimate of5,000 was later dismissed as too high, a small number compared to the large numberof transactions that are analyzed in commercial data mining applications. (41) In response, DARPA suggests that its research would not simply search data bases for potential terrorists but instead would develop templates, based on studiesof past attacks and captured terrorists documents, that would be used to focussearches of databases more narrowly. In addition, the process would be iterative, inother words, analysts would use a variety of techniques, sequentially, to identifypotential terrorists. (42) The Problem of False Leads. A key element in assessing the viability of the TIA system is whether the technologiesdeveloped will be sufficiently accurate to limit the number of potential suspects andminimize the number of false leads so as to avoid misidentifying individuals assuspects. (43) If the number of potential suspectsor false leads proves to be large, thetimeliness of warnings, as well as the cost of conducting followup checks, could alsomake a TIA system problematic. Some observers are also concerned that if DOD orintelligence agencies identified significant numbers of false leads, the pressures oftime and urgency could lead to violations of the rights of individuals. DARPA contends that concerns about false leads (called false alarms or "false positives" by statisticians) are exaggerated. In credit card fraud, for example, a falsealarm or false positive would mistakenly identify a transaction as fraudulent. Toavoid false alarms, DARPA argues that a TIA system would use multiple means toidentify suspects, ranging from models developed by "Red Teams" envisioningterrorist scenarios to patterns detected by linking intelligence data with commerciallydeveloped data mining techniques. Using such a tiered approach, DARPA contendsthat suspects would only be tagged after multiple checks. Some observers have questioned whether these techniques could successfully cull the number of suspects. But assuming that DARPA's approach could reduce thenumber, capturing a certain number of false leads is inherent in statistical techniques. For example, consider the extensive work of the credit card industry in developingtechniques to identify credit card fraud. In a controlled trial, researchers tested theeffectiveness of combining several statistical tools to identify credit card fraud usinga large, real testing sample of 500,000 transactions, deliberately seeded with 100,000fraudulent transactions in order to refine statistical algorithms. (44) (See Table 3 ). Table 3. Illustrative Credit Card and Terrorist Cases Sources : CRS example developed based on discussions with member of Association of Computing Machinery, and Stolfo, Fan, Prodromidia, and Chan, "Credit CardFraud Detection Using Meta-Learning: Issues and Initial Results;" for paper, seefollowing web site: http://www.cs.fit.edu/~pkc/papers/ . Note: a Examples assume an incidence rate for wrongdoers of 20% for the creditcard example and 1/2% for the terrorist data base. The researchers found that by combining several statistical tools, they could catch about 50% of the actual fraudulent transactions with a false alarm rate of about20%. In other words, while 50,000 of the fraudulent cases were identified, (50% of100,000), another 80,000 cases were mistakenly tagged as fraudulent (20% of400,000 legitimate transactions) at the same time. Investigators therefore would needto investigate 130,000 cases to catch 50,000 wrongdoers, or about 2.6 cases for every1 wrongdoer. In the case of credit card fraud, algorithms have been extensivelyrefined using large amounts of real data, and followup checks on leads are routine asanyone who has received a phone call after making an unusually large charge knows. Even in the case of credit card fraud, however, the incidence of wrongdoers is likely to be below 20%. (The actual fraud rate is a closely-guarded industry secret.) When the incidence of fraud is lower, the chances of identifying wrongdoersdecreases. (45) Press reports last summer cited anFBI estimate of 5,000 Al Qaedaoperatives in the U.S., but that estimate was later dismissed by the government, andexperts suggested that hundreds rather than thousands was the more likely number. (46) In light of the relatively small number of terrorists, the likelihood of catching them,even with targeted data bases, could be far lower. The chance, as well as the cost toindividuals of mis-identifying suspects, could also be far greater. An illustrative case using statistical algorithms to identify terrorists that would increase the chances that a TIA system would work could be based on the followingassumptions: the database would be limited to 1,000,000 transactions because DARPA had successfully culled the number of suspects; and there are 5,000 terrorists in the data base, an incidence rate of1/2 %. The number of terrorists to be identified would then be 5,000 (1/2% of 1,000,000). At the same time, assume optimistically that a combination of data mining and modeling tools could identify 30% or 1,500 of the 5,000 terrorists but that the falsealarm rate was 30% because the difficulty of identifying terrorists is greater thandetecting credit card fraud. In this case, investigators would need to check a total of300,000 cases to catch the 1,500 terrorists (30% of 5,000 terrorists + 30% of 995,000other suspects). For every terrorist identified, some 200 other suspects would haveto be investigated. Some computer experts think that even this case is optimistic. If DARPA's data base was larger, the number of false alarms could be far greater, even with a highaccuracy rate. In examples proposed by computer experts that assumed a highlyaccurate TIA system was applied to the entire U.S. population, the number of falsealarms could be 3 million people annually. (47) Either case would pose considerablechallenges to investigators, particularly in cases where a threat was consideredimminent. If the number of potential suspects identified was significant, the cost ofimplementing the system could also grow, as substantial personnel would be neededto investigate potential leads and ensure that false leads were eliminated. Data Mining Technologies. Human Identification at a Distance (HumanID).* This project aims to use information from sensors about human characteristics such as gaitor face, to identify individuals at any time of the day or night and in all weatherconditions, for instance, within a large crowd. Evidence Extraction and Link Discovery (EELD).* This project is an effort to identify terrorist groups by developing a suite of technologiesto detect patterns between people, organizations, places and things from intelligencemessages and law enforcement records, and then use those patterns or links to gatheradditional information from vast amounts of textual or transactional data including web sites, sensor data, and news reports. Genisys.* This project is a new effort in 2003 to put together old and new databases so that they can be readily queried. This "ultra-large all-sourceinformation repository" could include information about potential terrorists andpossible supporters, purchase of terrorist types of material, training and rehearsalactivities, potential targets, and status of defenses, as well as research into methodsof protecting privacy. (48) Bio-surveillance (re-named Bio-ALIRT IN FY2004):* This project is an effort to collect and analyze information from non-traditional human,agricultural and animal health data bases in order to develop indicators and models,and set up a prototype bio-surveillance system for a citywide area like Norfolk,Virginia to increase DOD's ability to detect a clandestine biological warfare attack. Machine Translation Projects. Translingual Information Detection, Extraction and Summarization (TIDES). * TIDES is designed to get critical information quickly forintelligence analysts and operators by developing tools that can rapidly find,summarize, and translate key information in foreignlanguages. Effective Affordable Reusable Speech-to-Text (EARS): Anticipated to increase the speed of translation from oral sources by ten to 100-fold(including broadcasts and telephone), as well as extract clues about the identity ofspeakers, EARS is intended to serve the military, intelligence and law enforcementcommunities. Multispeaker Environments (MUSE) and Global Autonomous Language Exploitation (GALE): MUSE and GALE are successorprograms to EARS. MUSE is to produce transcripts from command centers andmeeting rooms and GALE is to develop techniques for detecting key intelligence inmassive amounts of foreign language transmissions. Communicator: Designed to enable military personnel to get logistical support and tactical information when in the field, prototypes of this"smart phone" have already been deployed on Navy ships. Babylon: Another battlefield system likely to be deployed in Afghanistan in the next few months, Babylon is intended to aid those in the field bytranslating foreign phrases for the service member. (49) Protection of Critical Information Infrastructure. DefenseNet (DNET): This effort is intended to increase the security and performance of DOD's information infrastructure in handling largevolumes of information. Mis-Information Detection and Generation (MIDGET): A new project in 2003, this effort is designed to detect and reduce DOD's vulnerabilityto mis-information about adversaries that appears in open-sourcedata. Tools for High-Level Decision Makers. Rapid Analytic Wargaming (RAW): This project is intended to develop gaming technologies that simulate asymmetric threats to be used by themajor commands in training and operational settings. War Gaming the Asymmetric Environment (WAE).* This effort is an initiative to develop tools and models to help analysts and decisionmakers predict the behavior and the reactions of terrorists to U.S.actions. GENOA/GENOA II: * Project Genoa attempts to improve collaborative reasoning, estimate plausible futures, and create actionable optionsamong intelligence analysts in various organizations. Genoa II seeks to enhancecollaboration between people and machines in order to improve support provided byintelligence analysts to policy makers at the military command level, to high levelDOD civilian officials, NSA and the Joint Chiefs of Staff for dealing with terroristthreats. Total Information Awareness.* TIA is to integrate some or all of the efforts above into a prototype system or systems that would create andexploit large-scale, counter-terrorist data bases, develop new analytical techniquesand models for mining those data bases so as to improve our ability to detect,anticipate, pre-empt, and respond to terrorist attacks. R&D efforts specifically linkedto the TIA system in FY2003 are Human ID at a Distance, EELD, Genisys,Bio-surveillance, TIDES, WAE, Project Genoa and Genoa II, and the TIA integrativeeffort.
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Late last year controversy erupted about a Department of Defense (DOD) R&D effort called Total Information Awareness (TIA) under an office headed by retired Admiral John D. Poindexterwithin the Defense Advanced Research Projects Agency (DARPA). By integrating various newtools designed to detect, anticipate, train for, and provide warnings about potential terrorist attacks,DARPA hopes to develop a prototype Total Information Awareness system. This system wouldintegrate a number of ongoing R&D efforts, referred to in this paper as Total Information Awarenessprograms. While concern has centered primarily on privacy issues, accounts of the program'sfunding have also differed. This report covers the funding, composition, oversight, and technicalfeasibility of TIA programs. The privacy implications are addressed in CRS Report RL31730 , Privacy: Total Information Awareness Programs and Related Information Access, Collection, andProtection Laws, by Gina Marie Stevens. In a press interview, Under Secretary of Defense for Acquisition, Technology and Logistics, Edward C. "Pete" Aldridge, stated that the Total Information Awareness project is funded at $10million in FY2003 and $20 million in FY2004. Other reports indicated higher funding levels of over$100 million in FY2003 and over $200 million for the three-year period, FY2001 - FY2003. Different accounts of funding levels reflect the fact that DARPA is funding both an integrative effort called the TIA system, as well as 16 individual R&D efforts or TIA programs that could becombined to create that system. In FY2003, DARPA is dedicating $10 million to integrate variousR&D efforts into a prototype TIA system, and $137.5 million for the various R&D programs thatcould make up that system and that are managed by the Information Awareness Office (IAO) headedby Poindexter. Funding for these programs total $137.5 million in FY2003 and $317.0 million forFY2001-FY2003. DOD is requesting $169.2 million for TIA programs in FY2004 and $170.3 inFY2005, and $20 million in FY2004 and $24.5 million in FY2005 for the TIA system integration.These TIA programs are ongoing. In response to concerns about TIA programs, Congress included special oversight provisions -- known as the Wyden amendment -- in the FY2003 Consolidated Appropriations Resolution ( P.L.108-7 ) requiring that the Secretary of Defense, the Director of Central Intelligence and the AttorneyGeneral submit a detailed joint report on TIA programs by May 20, 2003, or face a cutoff in funding.Senator Feingold, Senator Grassley and other Members also proposed restrictions on data miningin the DOD and the new Department of Homeland Security. In light of the report required by P.L. 108-7 , hearings on TIA programs are likely in the 108th Congress. In addition to privacy concerns, Congress may also address several oversight issues forTIA programs including monitoring collaboration between DARPA and potential users in the lawenforcement and intelligence communities and assessing the technical feasibility of the project. Thisreport will be updated as necessary.
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Businesses must have a reliable means of maintaining their accounting records to manage their operations and determine tax liabilities. The two methods of accounting that businesses can use for this purpose are respectively known as cash and accrual basis of accounting. Under cash basis accounting, revenue and expenses generally are recognized and recorded when cash is actually paid or received. Under accrual basis accounting, revenue is recorded when it is earned and expenses are reported when they are incurred, regardless of when payments are actually made or received. Although the cash basis method is simpler and perhaps less administratively burdensome, it may result in a less accurate measure of economic income and allow for a deferral of tax liability. The Joint Committee on Taxation (JCT) considers cash accounting a departure from "normal income tax law." Thus, the ability to use cash accounting for the purposes of determining tax liability is considered a tax expenditure by the JCT . The JCT estimates the five-year revenue loss associated with cash basis accounting to be $10.9 billion between FY2014 and FY2018. Legislation has been proposed that would change the tax accounting requirements for businesses. The changes would affect federal tax revenues and the businesses' tax liabilities. Similar discussions on cash and accrual accounting were held prior to the enactment of the Tax Reform Act of 1986 (TRA86; P.L. 99-514 ). This report provides a brief explanation of cash and accrual accounting, and it reviews relevant legislative history surrounding TRA86. The report then explores the effects of the tax policy if cash basis of accounting is expanded for certain businesses and limited for others. Accounting is the process by which businesses, nonprofits, and government entities record and report their financial transactions. Properly accounting for the timing of income and expenses allows for more accurate predictions of cash flows and better business and investor decisions. Accurate accounting also allows taxpayers and tax authorities to correctly determine a taxpayer's income tax liability. Financial regulators employ certain accounting standards as well to help gauge the financial health of firms. Although a discussion of financial accounting standards and policy considerations is beyond the scope of this report, it is worthwhile mentioning that financial accounting or "accounting per books" may differ in various ways from accounting for tax purposes. Businesses generally use one of two accounting methods for calculating their federal tax liabilities. Under the cash basis method of accounting, income and expenses generally are recorded only when payments are actually received or paid. In contrast, under the accrual method of accounting, income and expenses are recorded when a transaction occurs, regardless of when payments are actually received or paid. An example may assist in better understanding the difference between cash and accrual accounting. Consider a nail supply company that sells $1,000 worth of nails to a roofing company in August, but the roofing company does not make payment until January of the following tax year. Using the cash accounting method, the nail supply company would record $0 in revenue for that sale in August of Year 1 and $1,000 in revenues in January of Year 2, when the payment is actually received. Alternatively, if the nail supply company used the accrual method of accounting, it would record $1,000 in revenue in August of Year 1 and no revenue for that sale in January of Year 2. The nail supply company would treat any business expenses in the same manner as revenues depending on the accounting method used. The accrual method more accurately measures a business's income during a given accounting period. The reason is that the accrual method captures all revenues actually earned during a given period, even if the cash has not actually been received. Similarly, the accrual method also captures all expenses generated in the production of revenue in a given period. The accrual method thus most accurately measures a firm's economic income in the sense that all profits or losses are accounted for when an economic event occurs, regardless of whether they are actually realized. It is this feature of the accrual method of accounting that leads it to be the baseline accounting method underlying the "normal income structure" used by the JCT. Departures from the accrual method in computing tax liability, such as the cash basis method, are therefore considered tax expenditures by the JCT. On the one hand, the cash method of accounting is simpler. Allowing small business taxpayers to file taxes using cash accounting reduces the cost of record keeping for these businesses. In addition, some businesses, particularly smaller ones, may find the cash method beneficial when they are cash or credit constrained and would have trouble meeting their tax obligations under the accrual method. For example, a company may be waiting to receive payment for goods or services provided to a customer. Even if the payment is not expected to arrive until the following year, under the accrual method, the company would be required to incorporate it in its taxable income calculation for the current year. This, in turn, could result in a tax liability that the company may not yet have the cash resources to pay (because they are awaiting a customers' payment). The cash basis method allows the pending payment to be accounted for in the tax year in which it is received. On the other hand, the cash method of accounting might lead to mismatching of income and related expenses to maximize tax deferral and avoidance. Under the cash method, a business could maximize tax deferral by strategically timing when income and expenses are recorded. For example, during a tax period when expenses are lower, a firm could ask a customer to remit the payment the following tax period to reduce income and taxes on the profit in the current tax period. The converse is also possible; a firm could ask a customer to pay early if there were high expenses during the current tax period. By receiving the payment early, the firm is able to record higher income in the current period that is offset by the higher expenses, thus the firm is able to reduce the net tax liability in the subsequent tax period. Continuous management of income and expenses from one period to the next may not be as significant with small transactions but with larger transactions, it has the potential to significantly reduce tax liability. Mismatching of income and expenses is one of the many reasons the cash method of accounting is not considered in accordance with generally accepted accounting principles. Before TRA86, taxpayers were allowed to use any method of accounting that clearly reflected income for tax purposes and that was regularly used for bookkeeping purposes. Taxpayers were required to maintain records to reconcile differences between financial and taxable income. If the taxpayer used an accounting method that failed to clearly reflect income, the Secretary of the Treasury had authority to require the taxpayer to use a method that satisfied the statutory requirements. Accounting methods potentially available to taxpayers before TRA86 included the cash method, the accrual method, certain industry specific methods, and, with limitations, hybrid methods that combined several of these and other methods. TRA86 changed the tax accounting rules governing what types of businesses could use the cash method of accounting. Congress recognized that the simpler cash method is easier for record keeping, entails less paperwork, and requires less computation to file taxes. As a result, TRA86 allowed most businesses with three-year average gross receipts of $5 million or less to use the cash method of accounting. TRA86 also allowed certain businesses to continue to use the cash method of accounting regardless of whether their average gross receipts exceeded the $5 million threshold. These businesses included (1) Personal Service Corporations (PSCs), such as law firms, doctors' offices, and consulting companies; (2) Subchapter S corporations; and (3) farm corporations subject to corporate income tax if their average gross receipts were not greater than $1 million. In addition, partners of a partnership were taxed at the individual level on a cash basis. TRA86 also excluded certain businesses from using the cash method based on the legal structure of the business. As a general rule, the following businesses were prohibited from using the cash method: (1) Subchapter C corporations with average gross receipts over $5 million; (2) partnerships that had a subchapter C corporation with average gross receipts over $5 million as a partner; (3) tax shelters; and (4) businesses that had average gross receipts in excess of $1 million that carried inventory. In the year following enactment of TRA86, Congress passed the Omnibus Reconciliation Act of 1987 ( P.L. 100-203 ), which raised the average gross receipts test for family farm corporations from $1 million to $25 million. Family farm corporations with average gross receipts in excess of $25 million were required to use the accrual method of accounting. The proposals to change the method of accounting for tax purposes predate the 1986 tax reform and continue to be a policy consideration for Congress and the executive branch. For example, the 1984 Treasury report on tax reform contained proposals on changes to method of accounting. Since TRA86, there have been other proposals to modify the tax code as it relates to cash accounting. Over the last decade, at least three executive branch reports have addressed the allowable methods of accounting for tax purposes. In general, all three reports emphasized the ease of recordkeeping and lower costs of compliance for small businesses. The reports recommended expanding the use of cash accounting by small businesses when they file their taxes because cash accounting corresponds with how they pay their bills. Recent proposals to change the allowable methods of accounting have focused on three general options. The first would expand the use of cash accounting for small businesses. Several bills introduced in the 113 th Congress, including the Small Business Accounting and Tax Simplification Act ( H.R. 947 ), the Start-up Jobs and Innovation Act ( S. 1658 ), and the Small Business Tax Certainty and Growth Act ( S. 1085 ), would have expanded the use of cash basis accounting by raising the average gross receipts limit to $10 million from $5 million. Similar legislation was introduced in the 112 th Congress, the Small Business Tax Simplification Act ( H.R. 4643 ). The second option, from the 113 th Congress, the Tax Reform Act of 2014 ( H.R. 1 ), would have changed the cash method of accounting for businesses in two ways. First, similar to the bills previously discussed, it would have expanded the use of the cash method for qualified businesses by raising the average gross receipts threshold from $5 million to $10 million. Second, unlike the previous bills discussed, H.R. 1 would have restricted cash accounting for some businesses. It would have required certain partnerships, S corporations, and PSCs that currently use the cash method to use the accrual method if their average gross receipts exceed $10 million. The JCT estimated that the changes would have increased revenue by $23.6 billion over 10 years. One aspect of the revenue gain is the one-time income adjustments from the cash to accrual method transition. The other aspect of the gain, however, is likely transitory as the proposal would not change taxes due, just the timing. The third proposed option would also expand cash accounting but to a higher threshold. The President's FY2016 budget contains such a proposal. Specifically, the Administration proposes to increase the three-year average gross receipts limit to $25 million. The President's budget proposal differs from the congressional proposals by increasing the average gross receipts limit to $25 million instead of $10 million. The budget proposal also states that more than 99% of all businesses would be able to pay taxes based on the simpler cash method if the limit were increased to $25 million. The JCT estimates the President's proposed expansion of cash basis of accounting will result in 10-year revenue loss of $24.9 billion between FY2015 and FY2025. Policy issues surrounding the use of cash versus accrual accounting involve the tradeoff between accurately capturing the economic activity of businesses to determine tax liability and the potential administrative burden placed on businesses as the result of increased recordkeeping. If Congress chooses to change the allowable methods of accounting for businesses, the availability of cash accounting could be expanded or restricted. One general option is to expand the number of businesses allowed to use cash accounting by either including all businesses regardless of legal structure or increasing the average gross receipts threshold. Alternatively, another general option is to either eliminate cash accounting for all businesses or restrict the use of cash accounting for certain types of businesses. Each of these policy considerations would have a direct effect on certain types of businesses. This section first discusses different ways of allowing more businesses to use cash accounting and then options that would eliminate or restrict cash accounting. Providing targeted assistance to small businesses requires first a definition of "small business." Eligibility for small business preferences often relies on asset, receipt, or employment size metrics or legal structure. Some of the size standards in the tax code use employment or receipts, similar to the U.S. Small Business Administration's (SBA) size standards for most industries. The small business cash accounting tax preference generally uses a receipt-based test, but it also explicitly excludes certain businesses based on legal structure in addition to the receipt-based test. For example, businesses that carry inventory with average gross receipts over $1 million may not use cash accounting, although the majority of businesses that carry inventory would be viewed as "small" under most common measures of firm size. Cash accounting more closely aligns with how small businesses maintain their records and might provide a better picture of companies' cash flows than accrual accounting. Whether these small businesses are C corporations, sole proprietorships, or partnerships, they are often more sensitive to cash flow considerations than are large businesses. Allowing all businesses to file tax returns under the cash method with average gross receipts not exceeding a predetermined threshold would simplify record keeping. The House Small Business Subcommittee on Economic Growth and Tax and Capital Access held a hearing on this issue, "Cash Accounting: A Simpler Method for Small Firms?" One of the witnesses at this hearing, Prof.Williamson, testified that increasing the statutory gross receipts limit to $10 million would benefit small businesses and the overall economy. There are other reasons why cash accounting may be a less burdensome accounting method for small businesses. Many small businesses, regardless of legal structure, are more likely to require payment upon delivery of goods or when services are performed than to sell these items on credit. Payment upon delivery or performance eliminates the need for tracking payments. In addition, unlike publicly traded companies that are required to issue public financial statements under the accrual method, most small businesses have no need to release public financial statements under the accrual or the cash method. As previously discussed, cash accounting is a departure from normal tax law according to the JCT, and thus, a tax expenditure. Cash accounting is a less accurate measure of economic income, as it does not require matching of income and expenses under the standard of "economic performance." Acceleration or deferral of income and expenses under cash accounting might result in deferral of tax liability. The JCT estimates that allowing cash basis accounting results in foregone revenue of $10.9 billion from FY2014 through FY2018. Cash accounting is one tax benefit for small businesses. Various other provisions in the tax code support small business. For example, small businesses organized as pass through entities are subject to a single layer of taxation. Small businesses organized as corporations benefit from a graduated corporate rate structure. In addition, the ability to expense certain otherwise depreciable assets is mainly targeted at small businesses and confers a tax deferral. This is considered a tax preference because expensing allows for full and immediate depreciation while the associated asset may have a useful life of many years. Thus, taxable income is reduced in the year the asset is expensed. Although taxable income will be higher in later years, the earlier deduction will allow the asset's owner to benefit from the time-value of money and realize a higher after-tax return on investment. Another option is to increase the $5 million average gross receipts threshold, while leaving all other current rules in place that exclude certain businesses from using the cash method. Over time, some businesses have been pushed over the $5 million threshold since the enactment of TRA86 because it did not link the $5 million threshold to inflation. Increasing the threshold would allow more small businesses to use the cash method, which would have similar effects to those of the previous proposal. As discussed above, some in Congress have proposed increasing the threshold to $10 million, whereas the President's FY2016 budget proposal would raise the threshold to $25 million. Table 1 below illustrates the percentage and number of firms that would qualify to use cash accounting at $10 million and $50 million thresholds, by legal structure. Increasing the threshold would not generally affect pass through entities, such as S corporations, partnerships, and nonfarm sole proprietorships, because they are typically allowed to use cash accounting regardless of size. The data also shows that if the threshold were increased to either $10 million (or $50 million) that over 95% (98%) of C corporations would be permitted to use cash accounting. However, it is not possible to determine how much higher these percentages would be from the current $5 million threshold because the data used in Table 1 do not reflect the $5 million threshold. According to Table 1 increasing the threshold to $10 million would allow 96% of C corporations to use cash accounting. Two general ways for determining a threshold adjustment could be implemented. First, Congress could choose to simply adjust the current $5 million limit for inflation. If the limit had been adjusted for inflation since 1987, the threshold would be nearly $10.7 million in 2015. Congress could then index the threshold to inflation. Two legislative proposals— H.R. 2 in the 110 th Congress and H.R. 4840 in the 108 th Congress—proposed indexing the $5 million threshold to inflation. Second, Congress could simply increase the threshold to a level deemed appropriate. For example, the President's budget proposal for FY2016 would increase the cash accounting cutoff to $25 million allowing, the Administrations argues, 99% of all businesses to pay taxes based on the simpler cash method in 2015. As proposed, no inflation adjustment would occur. However, one option would be to combine the two methods, increasing the threshold and adjusting for inflation. Alternatively, Congress could eliminate cash accounting for all businesses or restrict the use of cash accounting for certain types of businesses based on legal structure. Excluding the cash method of accounting can be a tool for Congress to increase tax revenue and reduce the scope for tax planning and avoidance. Eliminating cash accounting for all businesses would increase the administrative burden cost of compliance for many businesses. The accounting knowledge required to use the accrual basis may force business owners to hire accountants or the services of accounting firms, increasing the business's expenses. Further, a business paying taxes under the accrual method may not have sufficient cash and may therefore be required to borrow to meet tax obligations. At the same time, it could be argued that a firm that continually required short-term financing to meet its tax liability is poorly managed rather than overly burdened by accounting standards. The second approach is to require accrual accounting for all business types. One provision of the Tax Reform Act of 2014 ( H.R. 1 in the 113 th Congress) sought to require accrual accounting for certain partnerships, S corporations, PSCs, and other pass through entities with over $10 million in average gross receipts that are currently exempt from accrual accounting requirements. Table 1 illustrates that 98% of S corporations and partnerships would qualify for the cash method with a $10 million threshold. Economic theory generally provides no justification for taxing businesses differently based on their legal identity unless it can be shown that one form confers tax advantages that others do not share. If Congress were to eliminate cash accounting, or limit its use for certain firms, it could allow for tax deferral for affected firms with or without a penalty (e.g., accruing interest). Tax deferral allows taxpayers to delay their payments until a future date. A form of tax deferral currently offered by the Internal Revenue Service (IRS) is extended payment plans. There are two main types of extended payment plans, with certain limitations: (1) a payment extension for up to 120 days with interest and penalties and (2) an installment agreement. Although installment agreements are similar to the 120-day extensions, they offer a longer payment period and have their own specific caveats.
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Two methods of accounting are generally available to businesses: cash basis and accrual basis accounting. Under cash basis accounting, revenue and expenses are recognized and recorded when cash is actually paid or received. Under accrual basis accounting, revenue is recorded when it is earned and expenses are reported when they are incurred, regardless of when payment is actually made or received. On the one hand, the cash basis method is simpler and arguably less administratively burdensome on businesses. On the other hand, cash accounting may result in a less accurate measure of economic income and allow for a deferral of tax liability. The Joint Committee on Taxation (JCT) considers cash accounting a departure from "normal income tax law" and thus classifies it as a tax expenditure. Current tax law requires that most companies with average gross receipts in excess of $5 million use the accrual basis of accounting. Some companies are allowed to use either the cash or accrual basis methods of accounting for tax purposes. Examples of companies that may be excepted from using accrual basis tax accounting regardless of total average gross receipts include sole proprietors and certain qualified Personal Service Corporations (PSCs) in such fields as health, law, engineering, accounting, performing arts, and consulting firms, as well as farms that are not corporations or do not have a corporate partner. Some Members of Congress and the Administration have put forth proposals that would expand the number of firms allowed to use cash accounting by increasing the average gross receipts limit test. The Tax Reform Act of 2014 (H.R. 1) introduced in the 113th Congress would have expanded cash accounting by increasing the average gross receipts limit test to $10 million, but it would have also restricted the use of cash accounting for certain other firms. Although allowed to use cash accounting under current law, certain partnerships, subchapter S corporations, and PSCs with average gross receipts in excess of $10 million would not have been allowed to use cash accounting under the provisions of H.R. 1. Also introduced in the 113th Congress, the Small Business Accounting and Tax Simplification Act (H.R. 947), Start-up Jobs and Innovation Act (S. 1658), and Small Business Tax Certainty and Growth Act (S. 1085) would have all allowed certain firms with average gross receipts of $10 million or less to use cash accounting. Similarly, S. 341 introduced in the 114th Congress would raise the average gross receipts test limit to $10 million. The President's FY2016 budget proposal also calls for expansion of cash accounting by changing the threshold from $5 million to $25 million. This report provides a brief explanation of cash and accrual accounting. It then examines the legislative history surrounding the Tax Reform Act of 1986 (P.L. 99-514), which set most of the current policies related to cash accounting for tax purposes. It also discusses recent policy proposals to change accounting requirements for tax purposes. The report concludes by discussing a number of policy considerations Congress may find useful.
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Agricultural conservation began in the 1930s with a focus on soil and water issues associated with production and environmental concerns on the farm. By the 1980s, agricultural conservation policies broadened to include environmental issues beyond soil and water, especially environmental issues related to production (off the farm). Many of the current agricultural conservation programs were enacted as part of the 1985 farm bill ( P.L. 99-198 , Food Security Act of 1985), which also included for the first time a conservation title. These programs have been reauthorized, modified, and expanded, and several new programs have been created, particularly in subsequent omnibus farm bills. While the number of programs has increased and new techniques to address resource problems continue to emerge, the basic approach has remained unchanged—voluntary farmer participation encouraged by providing land rental payments, cost-sharing conservation practice implementation, technical assistance, education, and basic and applied research. The Food, Conservation, and Energy Act of 2008 ( P.L. 110-246 ), the 2008 farm bill, reauthorized almost all existing conservation programs, modified several programs, and created various new ones. Funding authority for most of these programs expired at the end of FY2012, and was extended until the end of FY2013 by the American Taxpayer Relief Act ( P.L. 112-240 ). The 112 th Congress debated reauthorizing legislation in the House-reported ( H.R. 6083 ) and Senate-passed ( S. 3240 ) farm bills. This legislation did not pass before the end of the 112 th Congress, leaving the 113 th Congress to write a new farm bill. Since its first inclusion in the 1985 farm bill, the conservation title has been a significant and visible title in the farm bill. As the title has grown in both size and interest, so too have questions and concerns about program funding, policy objectives, individual program effectiveness, comparative geographic emphasis, and the structure of federal assistance. Congress has continued to debate and address these concerns with each omnibus farm bill. The 2008 farm bill was no exception. While almost all existing conservation programs were reauthorized, several programs were modified to address concerns. The 2008 farm bill also created new programs, expanding the range of USDA conservation activities. Currently, more than 20 agricultural conservation programs are administered by USDA, mostly by the Natural Resources Conservation Service (NRCS). Starting in 1985, each succeeding farm bill has expanded the range of natural resource problems to be addressed as well as the number of conservation programs and level of funding. In some cases, the programs are subsets of overarching programs that apply to a specific place or a specific resource, but with unique provisions and eligibility requirements. Though some similarities among these programs exist, each is administered with slight differences. For a list of most agricultural conservation programs, see CRS Report R40763, Agricultural Conservation: A Guide to Programs . Generally, farm bill conservation programs can be grouped into the following four categories based on similarities: working land programs, land retirement and easement programs, conservation compliance programs, and other programs and overarching provisions. Most of these programs are authorized to receive mandatory funding (i.e., they do not require an annual appropriation) and include authorities that expire with other farm bill programs at the end of FY2013. Other types of conservation programs such as watershed programs, emergency programs, and technical assistance are authorized in other non-farm bill legislation. Most of these programs have permanent authorities and receive appropriations annually through the appropriations process. These programs are not generally discussed in the context of a farm bill and are not covered in detail in this report. Working lands conservation programs are typically classified as programs that allow private land to remain in production, while implementing various conservation practices to address natural resource concerns specific to the area. The largest of these programs is the Environmental Quality Incentives Program (EQIP), currently authorized at a total of $7.3 billion between FY2008 and FY2012. Others, such as the Wildlife Habitat Incentives Program (WHIP), Agricultural Management Assistance (AMA), and Agricultural Water Enhancement Program (AWEP), operate similarly to EQIP; however, they target specific resource concerns or geographic areas. The Conservation Stewardship Program (CSP) replaced the Conservation Security Program in the 2008 farm bill and is designed to encourage producers to address specific resource concerns in a comprehensive manner. CSP operates differently from the other working lands programs in that it employs a "pay-for-performance" approach. This approach pays producers based on their quantifiable level of environmental outcomes. Payments may vary to further incentivize higher levels of performance. Land retirement programs provide federal payments to private agricultural landowners for temporary changes in land use or management to achieve environmental benefits. Conversely, conservation easements impose a permanent land-use restriction that is voluntarily placed on the land in exchange for a government payment. The largest land retirement program is the Conservation Reserve Program (CRP), which reimburses the landowner for removing land from production for up to 10 years at a time and is authorized to enroll up to 32 million acres. Other programs such as the Wetlands Reserve Program (WRP) and the Grasslands Reserve Program (GRP) use a combination of long-term and permanent easements as well as restoration contracts to protect wetlands and grasslands from production. The Farmland Protection Program (FPP) also uses easements; unlike the aforementioned programs, however, it does not remove land from production, but rather restricts productive farmland from being developed for non-farm purposes. USDA also administers highly erodible lands conservation and wetland conservation compliance programs, referred to as Sodbuster, Swampbuster, and Sodsaver. These programs prohibit producers from receiving many farm program benefits when certain compliance requirements are not met. Under Sodbuster, farmers who cultivate highly erodible lands must have fully implemented an approved conservation plan or risk losing eligibility for various farm support programs on all the land the producer cultivates. Similarly, under Swampbuster, producers who convert a wetland, making production of an agricultural commodity possible, after November 28, 1990, are ineligible for program benefits. The 2008 farm bill created a new compliance provision known as Sodsaver. Under Sodsaver, producers that plant an insurable crop (over 5 acres) on native sod are ineligible for crop insurance and the noninsured crop disaster assistance (NAP) program for the first five years of planting. This provision requires states to sign up for participation. To date, no state governors have opted to participate in this program. USDA administers several other farm bill conservation programs, many of which were created in the 2008 farm bill. Some programs are geographically specific, such as the Chesapeake Bay program and the Great Lakes Basin program, which focus on select watershed regions. Other programs, such as the Cooperative Conservation Partnership Initiative (CCPI), use existing conservation program funds as leverage for partnership agreements with non-federal funding. Grant programs are also available, such as the Voluntary Public Access and Habitat Incentives program and the Conservation Innovation Grants (CIG). Other farm bill provisions redirect funding to various priority areas, such as the regional equity provision and additional incentives for beginning, socially disadvantaged, and limited resource producers. For additional information and program descriptions for most conservation programs within the farm bill discussion, see the CRS Report R40763, Agricultural Conservation: A Guide to Programs . The majority of farm bill conservation programs are funded through USDA's Commodity Credit Corporation (CCC) as mandatory spending. Mandatory spending can be thought of as multiyear appropriation in authorizing legislation (e.g., a farm bill). These authorizations do not require an annual appropriation. Mandatory conservation programs either receive a statutorily authorized level of funding (e.g., $1.75 billion available for a conservation program during a fiscal year) or an acreage allotment (e.g., enroll up to 32 million acres nationally). Mandatory funds from the authorizing law are assumed to be available unless they are expressly reduced to smaller amounts by a subsequent act of Congress, usually initiated in the appropriations process or by the authorizing committees. Historically, most conservation programs did not receive mandatory funding. The majority of conservation programs prior to the 1985 farm bill ( P.L. 99-198 ) had discretionary funding authority and were funded through the annual appropriations process. Since the 1985 farm bill, the number of programs receiving mandatory funding as well as the level of authorized funding has grown ( Figure 1 ). Most conservation program advocates view mandatory funding as a more desirable approach than the annual appropriations process. They believe that it is generally easier to protect authorized mandatory funding levels from reductions during the appropriations process than to secure appropriations each year. Congress has supported this by continuing to enact provisions that allow many conservation programs to receive mandatory funding. One of several concerns regarding conservation funding in the next farm bill centers on the possible reduction of mandatory program spending, without an increase in discretionary spending, thereby reducing the total level of conservation funding. During the 2008 farm bill debate conservation groups and producers found themselves competing with other agricultural interests for the necessary resources to expand or even continue many conservation programs. Upon passage of the 2008 farm bill, the conservation title was one of the few titles to have received an increase in mandatory funding levels, which was seen as a victory by many in the conservation and environmental communities. Conservation program funding was authorized to expand from approximately $4 billion total in FY2008 to $6.1 billion in FY2012. In an environment of pronounced domestic budget constraints, many mandatory conservation programs have faced reductions from the farm bill authorized levels, usually through the appropriations process. While other farm bill mandatory programs have experienced reductions in appropriations, the majority affect conservation programs. Conservation and environmental groups criticize these reductions, arguing that when appropriators reduce conservation funding they undercut many of the programs that generated political support for the farm bill's initial passage. Others point out that funding for mandatory conservation programs continues to increase despite these reductions (see Figure 1 ). For additional information on reductions to mandatory agricultural spending, see CRS Report R41245, Reductions in Mandatory Agriculture Program Spending and CRS Report R41964, Agriculture and Related Agencies: FY2012 Appropriations . Current budgetary constraints continue to drive the debate related to the next farm bill. Most programs authorized in the 2008 farm bill ( P.L. 110-246 ) will expire on September 30, 2013, because of the 2012 farm bill extension. Many of the conservation issues discussed in the 112 th Congress continue to be discussed, including program consolidation, environmental regulation, and conservation compliance. While the conservation title was arguably one of the less controversial titles debated during the 112 th Congress's farm bill reauthorization consideration, tension remains on some key policy points, namely funding levels and compliance requirements. One overarching issue affecting conservation in the next farm bill is budgetary constraints and baseline funding. Similar to the conditions during debate on the 2008 farm bill, the current farm bill debate has been driven in part by relatively large budget deficits and demand for fiscal restraint. Most conservation programs authorized in the 2008 farm bill receive mandatory funding. Farm bill reauthorization proposals in the 112 th Congress would have reduced mandatory conservation funding. Also, reductions in mandatory funding through the annual appropriations process continue to impact conservation program funding. Many of these proposed reductions continue to receive strong opposition from conservation and farm supporters alike. The Congressional Budget Office (CBO) generates a budget score and baseline projection for mandatory spending. A "baseline" is an estimate at a particular point in time of what federal spending on mandatory programs likely will be under current law. The baseline serves as a benchmark or starting point for the budget under which the authorizing committees write the farm bill. When new provisions are introduced that affect mandatory spending, their impact (or "score") is measured as a difference from the baseline. Increases in cost above the baseline may be subject to budget constraints such as pay-as-you-go (PAYGO) or cut-as-you-go (CUTGO). Conservation currently accounts for less than 7% of the overall farm bill baseline funding for the next 10 years ( Figure 2 ). The largest percentage of baseline funding is in the nutrition title (primarily the Supplemental Nutrition Assistance Program, or food stamps), which has long been considered to be difficult politically to reduce. If it is assumed that no additional money from outside the agriculture committees' jurisdiction is expected, then funding for any new programs or program growth will likely come from existing farm bill baseline. The three largest sources of funding after nutrition are crop insurance, conservation, and commodity support (namely direct payments). Authorizing committees are not restricted by the current division of the farm bill baseline—only the total amount of baseline available during reauthorization. This means that the authorizing committees can shift funding from one title or program to another, depending on priorities. The American Taxpayer Relief Act of 2012 ( P.L. 112-240 ) extended all 2008 farm bill provisions that were in effect and expiring on September 30, 2012, for one additional year until September 30, 2013. There is no net cost to the extension because mandatory funding to continue most of the major farm bill programs was already in the budget baseline. A subset of the 2008 farm bill programs did not have a continuing mandatory baseline and did not receive any additional mandatory funding under the extension. This group includes certain conservation programs and is discussed further in the next section. Many of these programs would have been funded in the five-year farm bills that were developed in 2012 (both H.R. 6083 and S. 3240 ). However, most of these programs do not have funding for FY2013, and require additional legislative action or appropriations. Thirty-seven provisions in the 2008 farm bill received mandatory budget authority but are not assumed to receive such funding in the budget baseline beyond the original expiration of the 2008 farm bill (FY2012). Of these 37 provisions, five are for programs within the conservation title ( Table 1 ). The estimated cost to extend these five programs for five years is approximately $2.7 billion. If policymakers want to continue these programs, under current budget rules, they will need to pay for the programs with offsets from other sources. Some conservation programs such as CRP have baseline beyond FY2012; therefore the extension allows CRP to continue in FY2013 at the original authorized rate of enrollment—up to 32 million acres at any one time. Other mandatory conservation programs that expired and were extended have limited baseline beyond FY2012, as a result of previous reductions in annual appropriations. For example, the Wetlands Reserve Program (WRP) had authority under the 2008 farm bill to enroll no more than 3.04 million acres before FY2012, and did not include budgetary baseline beyond FY2012. Temporary reductions in FY2011 and FY2012 annual appropriations acts limited USDA's ability to enroll the authorized level of acres. This resulted in limited baseline being carried forward into FY2013, whereas it would have otherwise been expended by the end of FY2012. With the current farm bill extension, WRP can presumably use this additional baseline to enroll acres within its original authorized acreage cap. A different set of mandatory conservation programs has no baseline beyond FY2012 and therefore require offset funding to be continued (e.g., VPAHIP). The extension does not affect these programs, which have expired and will continue to remain inactive unless otherwise funded. The extension authorized VPAHIP to receive $10 million in appropriations for FY2013; however, no additional funding has been appropriated. The 2008 farm bill authorized increases in mandatory funding for many conservation programs. Unlike the discretionary conservation programs, which must be funded through the annual appropriations process, mandatory programs have an authorized level of funding (or acreage enrollment) that is available unless reduced to smaller amounts in the appropriations process. If appropriators do not set a spending limit or reduce the authorized level, then the program receives the authorized level of funding. Despite the increase in mandatory funding authority, many conservation programs have been reduced or capped through annual appropriations acts since FY2003 ( Figure 3 ). Many of these spending reductions were at the request of both the Bush and Obama Administrations. The mix of programs and amount of reduction has varied from year to year. Some programs, such as the CRP, have not been reduced by appropriators in recent years, while others, such as EQIP, have been repeatedly reduced below authorized levels. Total mandatory funding for conservation was reduced by over $5.3 billion from FY2003 through FY2013. Even with these reductions, total mandatory funding for conservation programs has remained relatively constant at around $5 billion annually. For more information about reductions in mandatory program spending, see CRS Report R41245, Reductions in Mandatory Agriculture Program Spending . Although some titles in the 2008 farm bill (e.g., commodities and crop insurance) received a reduction in mandatory funding authority, the conservation title received increased mandatory funding authority. Many supporters of conservation programs viewed this as a victory during the farm bill debate. Yet the President's budget proposals continued the trend of proposed reductions. While the FY2010 Agriculture Appropriations Act ( P.L. 111-80 ) did not include many of these proposed reductions (with the exception of EQIP and Watershed Rehabilitation), the FY2011 ( P.L. 112-10 ) and FY2012 ( P.L. 112-55 ) appropriations acts reduced mandatory conservation program funding by $673 million and $929 million, respectively. The FY2013 continuing resolution ( P.L. 112-175 ) continues FY2012 funding levels, including reductions, to March 27, 2013. Advocates for these programs contend that these limitations are significant changes from the intent of the farm bill, which they say compromise the programs' ability to provide the anticipated magnitude of benefits to producers and the environment. Others, including those interested in reducing agricultural expenditures or in spending the funds for other agricultural purposes, counter that even with these reductions, overall funding for conservation has not been reduced. While most conservation advocates decry reduced conservation funding for any fiscal year, additional emphasis was placed on reductions proposed in FY2012. Authority for many of the farm bill conservation programs expired at the end of FY2012. Because CBO uses the last year of authorization to determine future authorization levels, a reduction in the last year's authorized level could compound the effect on available baseline for the next farm bill. To address this concern, the FY2012 Agriculture Appropriations Act ( P.L. 112-55 ) extended the expiration date of selected farm bill conservation programs to the end of FY2014. Authority for these programs—AMA, CSP, EQIP, WHIP, and FPP—would have expired in FY2012. Appropriators also placed limitations on FY2012 spending for all of these programs. Without the program extension, the reduced FY2012 spending levels would have served as the baseline for future years, based on CBO scoring rules. Because these five conservation programs were extended to the end of FY2014, they were unaffected by the 2012 farm bill expiration and extension. They were, however, affected by the FY2013 continuing resolution, which continued FY2012 funding reductions to March 27, 2013. AMA, EQIP, WHIP, and FPP were reduced by a specific funding level, similar to FY2012 reductions. However, CSP, which is authorized to enroll acres, was affected differently by the appropriations limitation. CSP is authorized to enroll a specific level of acres annually (12.769 million acres) and does not have a limited funding level. Similar to CRP, CSP pays prior year contracts out of current year funding. For example, a 10-year CSP contract signed in FY2009 will be paid annually using FY2009-FY2018 funding. Reductions in appropriations to CSP have not limited the number of authorized acres, but rather the total amount of annual funding available. This affects the program in two ways. First, because existing CSP contracts must be paid first using current year funding, it limits the amount of funding left to enroll new acres, thus indirectly reducing the number acres enrolled for a given year. Second, because the program is authorized to enroll acres each year and grow exponentially, the reductions in appropriations one year may delay the expected growth in baseline for the program. Just as the savings from conservation reductions in appropriations bills are not always redirected toward other conservation activities, the reestablishment of the farm bill baseline through expiring conservation programs does not guarantee that future farm bills or appropriations will extend the same level of support for conservation. Before the 1985 farm bill, few conservation programs existed and only two would be considered large by today's standards. The current conservation portfolio includes more than 20 distinct programs with annual spending over $5 billion. The differences and number of programs can create some general confusion about the purpose, participation, and policies of the programs. Discussion about simplifying or consolidating conservation programs to reduce overlap, duplication, and generate savings frequently arises during farm bill reauthorization. Prior to the 2008 farm bill, USDA proposed a major consolidation of several conservation programs. While the 2008 farm bill did eliminate some conservation programs, it also created several more. Both the House-reported ( H.R. 6083 ) and Senate-passed ( S. 3240 ) farm bills in the 112 th Congress included several program consolidation measures. In light of continued funding constraints, program consolidation to generate potential savings may continue during reauthorization. While many conservation groups supported the consolidation efforts in the 112 th Congress, other expressed concern that program consolidation would remove the geographic or issue-specific emphasis that was originally created by Congress to address identified priorities. The majority of conservation programs are administered nationwide. Some programs have sub-programs that address specific issues or are geographically defined in statute or report language (e.g., the Conservation Innovation Grants is a subprogram of EQIP). Other programs that are geographically specific or issue-specific are stand-alone programs and receive funds in addition to other nationwide programs (e.g., the Chesapeake Bay Watershed Program). If program consolidation occurs, it could remove these previously identified priorities that allowed the number of programs to expand. Conversely, program consolidation could also lead to additional congressionally directed language or "carve-outs" within programs to ensure that identified priorities are still addressed. Efficiencies created by a reduction in the number of programs could be negated or reduced by additional carve-outs within remaining programs. Land retirement programs, such as the CRP, began with a soil conservation and commodity-reduction purpose, during a time of economic downturn in the farm sector. As the conservation effects of these programs were identified, the potential for generating multiple environmental benefits beyond soil conservation emerged and included benefits to wildlife habitat, air and water quality, and carbon sequestration. For producers, land retirement programs are attractive because they receive rental payments at acceptable levels. However, with high commodity prices and incentives to plant crops, producer interest in land retirement may be declining. Some forecasts are that these high commodity price levels may continue for the foreseeable future, thus shrinking farmer interest in land retirement for some time. Also, increased commodity prices can lead to increased land rental rates, which in turn increases the cost of land retirement programs. These factors could signal a shift in farm bill conservation policy away from the traditional land retirement programs toward an increased focus on conservation working lands programs—programs that keep land in production while implementing conservation practices to address natural resource concerns. Some of this shift has already occurred in the last decade (see Figure 4 and Figure 5 ) as the percentage of mandatory program funding for land retirement programs (e.g., CRP) has declined relative to working lands programs (e.g., EQIP) and overall land use. Most conservation and wildlife organizations support both land retirement and working lands programs; however, the appropriate "mix" continues to be debated. Even debate between shorter-term land retirement programs such as CRP and longer-term easement programs such as WPR continues. Supporters of long-term or permanent easement programs cite a more cost-effective investment in sustainable ecosystems for long-term wildlife benefits. Short-term land retirement program supporters cite the increased flexibility, which can generate broader participation than permanent easement programs. There is also a noticeable increase in what USDA terms land preservation programs (long-term and permanent easement programs, see Figure 6 and Figure 7 ). The high cost of land retirement programs (e.g., CRP, which is based on land rental rates) and the lack of baseline for most land preservation programs (e.g., WRP and GRP) make the future of these programs uncertain in the current budget situation. With any proposal, it is likely that environmental interests will not support a reduction in one conservation program without an increase in another conservation program. Two types of payment limits exist for conservation programs. One sets the maximum amount of conservation program payments that a person or legal entity can receive during a specified period of time. The other (known as the adjusted gross income or AGI limit) sets the maximum amount of income that an individual can earn and still remain eligible for conservation program benefits. Limitations on payments received through conservation programs were expanded in the 2008 farm bill. Prior to the 2008 farm bill, most conservation programs were affected by an income limitation, not a limitation on payments. Now, most programs are affected by both, which in turn can affect program participation (see Table 2 ). Payment limits are the maximum amount of conservation program funding that a person or legal entity can receive during a specified period of time. As with commodity programs, payment limits for conservation programs are controversial because of issues relating to the size of operations receiving support and who should receive payments. The effect of payment limits varies by program and the conservation practices implemented. Most conservation programs with higher payments tend to be distributed to farms and ranches with larger acreage because payments for many conservation practices are scaled by the number of acres on which that practice is applied or acres are enrolled. Supporters of payment limits are often advocates for smaller farms and opponents of large animal feeding operations. Most working lands conservation programs provide a percentage of the cost to install conservation practices (known as cost-share) or implement site-specific management practices. As noted above, most of these payments are made on a per-acre applied basis, thereby skewing larger payments to contracts with more acres enrolled. Small farm advocates claim that this disproportionately benefits large agricultural producers by making less money available for small producers. Also, in the case of EQIP, cost-share assistance is provided for more expensive practices such as animal waste storage facilities in concentrated animal feeding operations (CAFOs). Opponents of these animal operations criticize the higher payment limit because of the recipients' production methods. Those who oppose payment limits (or support higher limits) for conservation programs counter that conservation programs should focus on land with the greatest environmental need and not be limited to a price per participant. They argue that higher payment limits allow for greater environmental stewardship on farms and ranches, particularly larger operations with a greater land base, which may have greater natural resource concerns. Others claim that payment limits on restoration agreements could create a disincentive to enroll larger conservation easements, which can be most desirable. Because most conservation easement programs, namely WRP and GRP, enroll land that will also require restoration, a limit on restoration payments could reduce the enrollment of large acre tracts. The AGI limit sets a maximum amount of income that an individual can earn and still remain eligible for program benefits. The 2008 farm bill made the AGI limitation for conservation programs higher than the AGI limitation for the commodity farm support programs. Despite this higher limit, income limitations on conservation programs remain somewhat controversial. Previously, the AGI limit for both conservation and commodities programs was set at $2.5 million and had an exception if three-fourths of AGI was earned from farming sources. Now, if the three-year average of non-farm income AGI exceeds $1,000,000, no conservation program benefits are allowed. The exception to this limit is if two-thirds of the three-year AGI was earned from farming sources. In addition, this limitation may be waived by USDA on a case-by-case basis for the protection of environmentally sensitive land of special significance. In general, the AGI limit for conservation programs is higher than that for commodity programs to encourage environmental stewardship on farms and ranches, particularly larger operations that may have greater natural resource problems. Supporters of AGI limits believe that tighter limits benefit small producers and gain additional public support for all agricultural programs through fiscal responsibility. Opponents of AGI limits on conservation programs believe that if there are greater conservation benefits provided to the general public, then, irrespective of wealth, a producer's enrollment is good for the general public. The 1985 farm bill created the highly erodible lands (HEL) conservation and wetland conservation compliance programs, which tied various farm program benefits to conservation standards. These programs require farmers producing agricultural commodities on HEL to fully implement an approved conservation plan or to not convert wetlands to production in order to remain eligible for certain farm program benefits. Between 1982 and 2007, farmers reduced total cropland soil erosion by 43%. The bulk of this reduction occurred following the 1985 farm bill and the implementation of CRP and conservation compliance requirements. Under the original provisions enacted in 1985, a producer could lose the following farm program benefits if found to be out of compliance: price and income supports and related programs, farm storage facility loans, crop insurance, disaster payments, storage payments, and any farm loans that contribute to erosion on highly erodible lands. The provision has since been amended numerous times to remove certain benefits and add others. Most notably, the 1996 farm bill ( P.L. 104-127 ) removed crop insurance as a program benefit that could be denied and added production flexibility contracts—the precursor to what is now referred to as direct payments. The debate surrounding this decision centered on the desire to encourage producers to purchase crop insurance and to respond to farmer concerns that compliance requirements were intrusive. Currently, the major farm program benefits that could be affected by compliance are counter-cyclical payments, direct payments, and conservation programs. Presently, high commodity prices have resulted in few or no counter-cyclical payments. This leaves conservation program participation and direct payments as the remaining major benefits that could be affected by compliance. The current financial climate has caused direct payments under the farm commodity support programs to come under considerable scrutiny. Debate continues regarding their fate, and many believe that the program could be reduced or eliminated in farm bill reauthorization as a budget saving measure. Conservation advocates worry that without direct payments there will be little incentive for producers to meet conservation compliance and wetland conservation requirements. Environmental and conservation organizations are asking Congress to consider requiring conservation compliance for crop insurance benefits or any new revenue assurance programs. Additional information on this issue may be found in CRS Report R42459, Conservation Compliance and U.S. Farm Policy . Farm bill conservation programs are the voluntary federal policy for addressing environmental impacts related to agriculture. Another federal policy for addressing environmental impacts is through regulation. Increasingly, conservation programs are called upon to prevent or reduce the need for environmental regulation. While the farm bill debate will likely not focus specifically on environmental regulations because most environmental law originates outside of the House and Senate Agriculture Committees, debate could focus on strengthening the voluntary response to environmental issues through conservation programs. This, in turn, could influence the funding debate and how much of the overall farm bill budget is appropriate for conservation programs. Another assistance mechanism recently discussed in relation to environmental regulation is referred to as "certainty" or "assurance standards." Several states have in place or are developing certainty programs to encourage farmers to implement water quality improvement measures without the fear that those actions could lead to further regulation and enforcement under national environmental laws such as the Clean Water Act (CWA). While this is a somewhat new concept for addressing water quality concerns, similar certainty programs have been established in the past between state and federal agencies for the protection of wildlife habitat in private lands. On January 17, 2012, a memorandum of understanding (MOU) was signed between EPA and USDA to establish a water quality certainty program in Minnesota. This is the first formal state-federal certainty program to be developed in the area of water quality. USDA officials continue to express interest in developing a "safe harbor"-type mechanism between USDA and EPA for water quality; however, no formal proposal has been released nationwide. Legislation was proposed in the 111 th Congress ( H.R. 5509 ), but not in the 112 th . It is possible that additional proposals for creating a national certainty program or pilot program in select watersheds (e.g., the Chesapeake Bay) could be included in the farm bill reauthorization debate. Following the significant increase in funding for conservation programs in the 2002 farm bill, USDA initiated a project to measure the environmental benefits of many of these programs. The project is a multi-agency effort known as the Conservation Effects Assessment Project (CEAP). CEAP's stated purpose is to aid policymakers in developing new conservation programs and help existing conservation program managers implement programs more effectively and efficiently to meet the goals of Congress and the Administration. CEAP does not quantify the environmental benefits of any single conservation program or approach; instead, it attempts to understand how conservation efforts are working and what future improvements are needed. CEAP assessments are being developed for cropland, grazing lands, wetlands, and wildlife. To date, five watershed cropland reports have been released: Upper Mississippi River Basin, Missouri River Basin, Ohio-Tennessee River Basin, Chesapeake Bay, and Great Lakes Basin. The reports have shown that conservation practices adopted on cropland have an effect in reducing sediment, nutrients, and pesticides from farm fields. Despite these gains, the reports also find that additional measures are needed within the watersheds studied. One of the recommended approaches is through targeting conservation programs resources to areas that have high need for additional treatment—acres most prone to runoff or leaching. While a targeted approach could increase the effectiveness of conservation programs, it could also reduce the availability of funds in certain areas considered to be at a lower risk. As additional reports continue to be released, their potential outcomes could prove useful in shaping future policy debates surrounding environmental issues in the farm bill. As Congress debates conservation provisions in the next farm bill the focus continues to be on overall federal spending and agriculture's share. Conservation funding has grown to represent a sizable portion of the overall farm bill baseline and could see reductions during reauthorization. Many in the conservation community see this as inevitable; however, they do not want to see a reduction in conservation that is disproportionate to other areas of agricultural spending. While most producers are in favor of conservation programs, it is unclear how much of a reduction in other farm program spending they would be willing to support to further conservation efforts. Recent reports and studies have shown that conservation measures are effective in addressing environmental concerns; however, spending reductions, program efficiencies, and federal policies surrounding environmental regulation and compliance will likely drive conservation farm bill discussion in the 113 th Congress.
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Reauthorization of the Food, Conservation, and Energy Act of 2008 (2008 farm bill) failed to pass in the 112th Congress, leaving it to the 113th Congress to continue the farm bill debate. The conservation title continues to receive attention and interest from farmers and ranchers as well as environmental and conservation organizations. Contentious issues raised in the 2012 farm bill debate might continue in the 113th Congress, specifically calls to reduce overall funding levels, including conservation, and the addition of crop insurance as a benefit lost under conservation compliance. Other issues from the 2012 farm bill reauthorization debate include consolidating duplicative programs, using public-private partnerships to extend federal funding, and amending existing programs by adding new options to protect and restore resources on agricultural lands. Budgetary concerns continue to drive the farm bill reauthorization discussion, with additional emphasis placed on reducing mandatory spending. In the past 25 years, conservation has received an increasing level of mandatory funding authorized through farm bills. Nutrition, direct payments, crop insurance, and conservation make up 99% of the 10-year estimated baseline funding for farm bill programs. As a result, conservation is one of the four major sources of mandatory program spending that continues to be closely examined during reauthorization. Several conservation programs, provisions, and funding authorized in the 2008 farm bill expired at the end of FY2012 and were extended to the end of FY2013 by the American Taxpayer Relief Act of 2012 (P.L. 112-240). This extension did not include additional baseline funding for the 37 farm bill provisions that do not have baseline funding beyond FY2012, five of which are within the conservation title. The Senate-passed (S. 3240) and House-reported (H.R. 6083) farm bills in the 112th Congress included a number of program consolidations within the conservation title. The existing portfolio of conservation includes more than 20 programs, ranging in size and scope. The large number of programs has been cited as a source of confusion and redundancy, causing both the current and previous Administrations to request some form of consolidation. Other programmatic topics continue to be discussed and debated about conservation: (1) Should existing programs be amended, and if so, how? (2) How should funding be divided between programs for land retirement and for working lands? (3) Should conservation programs be subject to the same program limitations as other commodity support programs? (4) How will the debate be affected by new data that highlight the connection between conservation practices and positive environmental results? Various responses to these questions have been offered in extensive testimony at hearings, and are reflected in the policy options that Congress is considering. The federal response to environmental concerns related to agriculture is generally viewed as both supportive and restrictive. One of the primary means of support is provided through the voluntary conservation programs established in the farm bill. These conservation programs are increasingly called upon to support best management practices to meet federal environmental requirements; however, these programs are being considered for funding reductions. Other conservation efforts, such as conservation compliance on highly erodible lands and wetlands compliance, might be viewed as restrictive. Potential changes in commodity programs could reduce the effectiveness of compliance programs. This has caused some to advocate for reestablishing compliance requirements to other farm program benefits, such as crop insurance.
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This report discusses certain federal financial incentive mechanisms for "clean coal" commercial projects; namely, loan guarantees and tax incentives. Both loan guarantees and tax incentives have been available to the private sector for clean coal activities following enactment of the Energy Policy Act of 2005 (EPACT05, P.L. 109-58 ). At issue for Congress is the extent to which the private sector has used these financial tools—and whether they are the right tools—to develop the technology needed for reducing carbon dioxide (CO 2 ) emissions from fossil fuel power plants while continuing to use available domestic coal reserves for electricity generation. Coal represents a major energy resource for the United States. Coal-fired power plants provided approximately 37% of U.S. generated electricity (about 1.5 billion megawatt-hours) in 2012, while consuming over 800 million tons of coal. Power plants that use coal are also a major source of greenhouse gas emissions in the United States. Coal-fired electricity generation emitted approximately 1.5 billion metric tons of CO 2 in 2012, approximately 28% of total U.S. CO 2 emissions. The fraction of U.S. electricity generated by coal-fired plants declined from 2008 to 2012, as did the total coal consumption by coal-fired plants. Carbon dioxide emissions fell over the same period. The use of coal for electricity generation complicates policy efforts to reduce U.S. greenhouse gas emissions. Congress has focused on two EPA regulatory proposals released in 2013 and 2014 that would limit greenhouse gas emissions from new and existing coal-fired power plants, respectively. Some believe the EPA efforts to regulate CO 2 emissions from coal may affect both the short- and long-term future for coal-fired electricity generation in the United States. In the past, others have linked the viability of the U.S. coal-fired electricity industry to its ability to capture and sequester CO 2 emissions from coal-burning plants (carbon capture and sequestration, or storage, referred to as CCS), and allowing the continued use of coal while mitigating its contribution to rising CO 2 levels in the atmosphere. Mitigating CO 2 emissions has become the primary focus of U.S. Department of Energy efforts within the clean coal research and development program (now Coal R&D) within its Office of Fossil Energy. For example, the Coal R&D program accounted for $392 million of the total $562 million within Fossil Energy R&D at DOE in FY2014, or approximately two-thirds of the total. Moreover, the American Recovery and Reinvestment Act ( P.L. 111-5 ) provided $3.4 billion for CCS R&D efforts beginning in 2009. Combined with Recovery Act funding, Congress has appropriated approximately $6 billion for CCS R&D since 2008 at DOE. The appropriations, technology, and program activities are discussed in other CRS reports. For the purposes of this report, the term clean coal is used to describe activities supported by DOE that would reduce greenhouse gas and other emissions from coal combustion, such as carbon capture and sequestration (CCS). DOE notes that its clean coal R&D efforts are focused on developing and demonstrating advanced power generation and carbon capture, utilization, and storage technologies for existing facilities and new fossil-fueled power plants by increasing overall system efficiencies and reducing capital costs. The term clean coal is used here for descriptive purposes only. Historically, loan guarantees have been used as a policy tool for many different purposes, including home ownership, university education, small business growth, international development, and others. A loan guarantee might be defined as "a loan or security on which the federal government has removed or reduced a lender's risk by pledging to repay principal and interest in case of default by the borrower." The DOE loan guarantee program for projects that reduce anthropogenic emissions of greenhouse gases was initially authorized in the EPACT05. Title XVII of EPACT05 Section 1703 (42 U.S.C. 16511-16514) authorized the Secretary of Energy to make loan guarantees for projects that (1) avoid, reduce, or sequester air pollutants or anthropogenic emissions of greenhouse gases; and (2) employ new or significantly improved technologies as compared to commercial technologies in service in the United States at the time. Under Section 1703, EPACT05 included as categories, among others, for eligible projects (1) advanced fossil energy technology (including coal gasification); and (2) carbon capture and sequestration practices and technologies. EPACT05 Section 1703 elaborated on gasification projects eligible for loan guarantees, and included (1) integrated gasification combined cycle projects; (2) industrial gasification projects; (3) petroleum coke gasification projects; and (4) liquefaction projects (coal-to-oil). Eligible projects included under Section 1703 would be subject to emissions limits for sulfur dioxide, mercury, nitrogen oxide, and total particulates; however, no restrictions in the law were included on CO 2 emissions. For integrated gasification combined cycle (IGCC) plants eligible for loan guarantees, Section 1703 required that the IGCC projects have a design that would accommodate equipment likely to be needed to capture CO 2 that would otherwise be emitted in flue gas. Under EPACT05 Section 1703, no loan guarantees would be made unless the loan guarantee costs of a project were paid for by (1) appropriated funds; or (2) the borrower. These costs include the loan guarantee credit subsidy cost, which is the estimated long-term amount that a direct loan or loan guarantee will cost the federal government, calculated on a net present value basis, excluding administrative costs. This estimated cost reflects what the government expects to pay and be paid over the course of the loan: payments by the government to cover defaults and delinquencies, interest subsidies, and other requirements; and payments to the government, including origination and other fees, penalties, and recoveries. Without a specific appropriation, Section 1703 applicants are responsible for paying their own credit subsidy costs. For Section 1703 loan guarantees, Congress has not appropriated funds for credit subsidy costs, with one exception. In addition to the credit subsidy costs, Section 1703 projects would need to cover certain administrative costs: an application fee, which covers the costs associated with DOE's financial and technical reviews of proposed projects; a facility fee, which covers DOE's administrative expenses of due diligence, negotiation, and documentation; and a maintenance fee, which covers DOE's expenses in servicing and monitoring the loan guarantee agreement over the life of the loan. Also, EPACT05 stipulated that the face value of the debt guaranteed by DOE is limited to no more than 80% of the total project costs of the facility subject to the guarantee, as estimated by DOE, at the time the loan guarantee was issued. However, for purposes of calculating the loan guarantee credit subsidy costs, discussed above, the loan guarantee commitment is the full principal amount of the loan, not just the portion guaranteed by the federal government. Although Section 1703 applicants would be fully responsible for the credit subsidy costs and administrative costs, EPACT05 does not disqualify projects that receive tax credits for "clean coal" technology from also receiving loan guarantees under Section 1703. Policies, procedures, and requirements for the Title XVII loan guarantee program are promulgated in rules under 10 C.F.R. Part 609—Loan Guarantees for Projects That Employ Innovative Technologies. Following enactment of EPACT05, various appropriations bills have amended the authorization of loan guarantees under Title XVII Section 1703 and set loan authority limits for certain technology/project categories. DOE has offered several solicitations for projects to take advantage of the loan guarantee authorization since enactment of EPACT05. FY2007 —Under P.L. 110-5 , the Revised Continuing Appropriations Resolution, 2007 ( H.J.Res. 20 ), Congress stipulated that commitments to guarantee loans under title XVII of EPACT05 shall not exceed $4 billion, provided that the costs of the guaranteed loans—namely the credit subsidy costs discussed above—would be provided by the borrowers pursuant to Section 1702(b)(2) of EPACT05. The amounts received from the borrowers would remain available until expended. FY2008 —The Consolidated Appropriations Act for FY2009, P.L. 110-161 (Division C, Title III), restated the loan guarantee authority provided in EPACT05, and made the authority available until the end of FY2009. In the explanatory statement accompanying the bill, Congress increased the allocation for coal-based power generation and industrial gasification activities for facilities that incorporate carbon capture and sequestrations, or other beneficial uses of CO 2 , to $6 billion, and included an additional $2 billion for advanced coal gasification. FY2009 —The Omnibus Appropriations Act, 2009 ( P.L. 111-8 , Division C, Title III), also restated the loan guarantee authority provided in EPACT05, authorizing a maximum of $47 billion for eligible projects under the entire EPACT05 Title XVII program, and restated that no appropriations would be made available to pay the credit subsidy costs of the loan guarantee for Section 1703 projects. FY2011 —The Department of Defense and Full-Year Continuing Appropriations Act, 2011 ( P.L. 112-10 , §1425), provided an additional $1.18 billion in loan guarantee authority to amounts previously authorized under EPACT05, Title XVII and in the appropriations bills discussed above. P.L. 112-10 also rescinded $18.18 billion in previous authority for Title XVII loan guarantees. Table 1 summarizes the current loan guarantee authority under Section 1703. DOE has offered two solicitations for clean coal project loan guarantees since enactment of EPACT05—one in 2008 and one in 2013. An earlier solicitation in 2006 invited submission of pre-applications seeking loan guarantees under Title XVII. The 2006 solicitation inviting pre-applications was in support of debt financing for projects that promoted President Bush's Advanced Energy Initiative. However, the solicitation for pre-applications acknowledged that DOE's ability to enter into any loan guarantee agreement hinged on congressional authorization of appropriations for the loan guarantee. DOE stated that this requirement was necessary even though EPACT05 Title XVII allowed for the cost of a loan guarantee to be paid by the loan recipient. Following enactment of P.L. 110-161 , which provided the required authorization of appropriations, DOE issued its first solicitation on September 22, 2008, with Part I and Part II applications due on December 22, 2008, and March 23, 2009, respectively. In its solicitation, DOE cited P.L. 110-161 as the authority for making $6 billion available for coal-based power generations and industrial gasification activities at new and retrofitted facilities that incorporate CCS or other beneficial uses, and for making $2 billion available for advanced coal gasification projects. The solicitation acknowledged that the authority to issue loan guarantees under P.L. 110-161 expired on September 30, 2009, and raised the possibility that the full loan guarantee process may not be completed by that date. DOE issued its second solicitation on December 12, 2013. In the solicitation, DOE cited P.L. 111-8 , as amended by P.L. 111-32 , as its authority for providing up to $8 billion in loan guarantees, to be available until expended. Projects eligible for loan guarantees under the solicitation would be those that use advanced fossil energy technology in one or more of the following technology areas: (1) advanced resource development; (2) carbon capture; (3) low-carbon power systems; and (4) efficiency improvements. Further, projects would have to meet both of two requirements: (1) avoid, reduce, or sequester anthropogenic emission of greenhouse gases; and (2) employ new or significantly improved technology as compared to commercial technology currently in service in the United States. No loan guarantees have been issued to clean coal projects since enactment of EPACT05. According to the DOE Loan Programs Office, the portfolio of guaranteed loans totals $32.4 billion and over 30 projects, only two of which are projects under Section 1703. Both of the Section 1703 projects are nuclear power-related projects. All the other projects in the current portfolio were issued under Section 1705 or under the Advanced Technology Vehicle Manufacturing (ATVM) program. The Section 1705 loan program expired on September 30, 2011, and all loans under the Section 1705 program have been issued. Clean coal investment tax credits were first authorized in EPACT05. These tax credits were authorized alongside new research spending and other financial incentives, such as the loan guarantees discussed above. Additional tax incentives for clean coal were provided in P.L. 110-343 , the Emergency Economic Stabilization Act of 2008 (EESA). The following sections provide background on tax incentives for investments in clean coal technologies and carbon capture and sequestration. EPACT05 codified two new sections in the Internal Revenue Code (IRC). IRC Section 48A provides tax credits for investment in qualifying advanced coal projects. Under EPACT05, $800 million was authorized for Section 48A tax credits for integrated gasification combined cycle (IGCC) projects. The tax credit rate for investments in IGCC was set at 20% of eligible project costs. Another $500 million was available for investments in other advanced coal-based electricity generation technologies (ACBGT), at a tax credit rate of 15% of eligible project costs. The second clean coal investment tax credit established under EPACT05, IRC Section 48B, provides tax credits for investment in qualifying gasification projects. EPACT05 authorized $350 million for qualified gasification projects qualifying for a tax credit under Section 48B. The credit rate for qualifying investments in gasification projects was 20% of eligible project costs. The Department of the Treasury and DOE work together to evaluate projects seeking tax credits under IRC Sections 48A and 48B. Taxpayers investing in clean coal projects must apply for tax credits, as these tax credits are competitively awarded. Under Section 48A, taxpayers have five years to place in service projects for which tax credits are allocated. In late 2006, the Internal Revenue Service announced that nearly $1 billion in investment tax credits had been awarded to nine clean coal projects, located in nine different states. Two IGCC bituminous coal projects received credits worth $133.5 million each, an IGCC lignite project received a $133 million credit, two ACBGT projects received credits worth $125 million each, and four gasification projects received tax credits ranging in value from $40.7 million to $130 million. Reportedly, 49 companies from 29 states had requested $5 billion in tax credits for projects that cost a total of $58 billion. Credits were awarded to qualifying projects believed to be technologically and economically feasible. Funds authorized in EPACT05 that were allocated in "Phase I" of the program (allocation rounds in 2006 and 2007-2008) may be reallocated if recipients fail to meet the conditions of the initial allocation or otherwise forfeit their awards. The Energy Improvement and Extension Act of 2008, enacted as Division B of EESA, authorized an additional $1.25 billion in investment tax credits for IGCC and ACBGT projects (§48A). An additional $250 million was also provided for qualified gasification projects (§48B). The tax credit rate for all qualified clean coal investments was increased to 30% (depending on the project type, the rate had been 15% or 20%). Beginning with the 2009 allocation, qualifying IGCC and other advanced coal projects must include equipment that separates and sequesters at least 65% of the project's total CO 2 emissions. Gasification projects must separate and sequester 75% of total CO 2 emissions. Credits continued to be awarded for certified projects, with certifications issued in a competitive bidding process by the Secretary of Treasury in consultation with the Secretary of Energy. For Section 48B credits allocated starting in 2009, there is a seven-year placed-in-service requirement. For allocations made after enactment of EESA, the Secretary of the Treasury is required to disclose the identity of taxpayers receiving credits and the amount of the award. The results of the 2009-2010 allocation round were announced in September 2010 (see Table 2 ). More than $1 billion was awarded for Section 48A credits during the 2009-2010 allocation, leaving $240 million available for subsequent allocation. All $250 million made available for gasification projects (§48B) under EESA was awarded in the 2009-2010 allocation round. While $240 million in Section 48A credits were available for allocation in the 2010-2011 allocation round, none were made. The 2011-2012 allocation round resulted in one allocation of $103.6 million in Section 48A credits (see Table 2 ). The 2011-2012 allocation round concluded "Phase II" of the program. In 2012, the Treasury announced that $658.5 million of Section 48A credits were available for allocation. The funding available for the 2012-2013 allocation round included funding that had previously been allocated to projects that had their certification revoked. The Joint Committee on Taxation (JCT) provides annual tax expenditure estimates, or estimates of the foregone revenue collections resulting from the clean coal investment tax credits. Between fiscal years 2014 and 2018, the JCT estimates that the clean coal tax credits will reduce revenue collections by $1.0 billion (see Table 3 ). From fiscal years 2006 through 2013, the JCT estimated that clean coal investment tax credits reduced federal revenue collections by $1.3 billion, bringing the total estimated cost of the credits to $2.3 billion through 2018. These figures might overstate the actual cost of the credits, as projects that initially received allocations have been cancelled and there appear to be few new or proposed projects in the pipeline. The Section 45Q credit for carbon dioxide (CO 2 ) sequestration was added to the IRC as part of the Energy Improvement and Extension Act of 2008, enacted as Division B of EESA. Under Section 45Q, taxpayers may claim a $20 per metric ton credit ($21.51 in 2014, adjusted for inflation) for qualifying domestic carbon dioxide that is captured and sequestered. Qualified carbon dioxide is CO 2 that is captured from an industrial source, would otherwise have been released as an industrial greenhouse gas emission, and is measured at the source of capture and verified upon disposal or injection. A $10 per metric ton credit ($10.75 in 2014, adjusted for inflation) is available for taxpayers using captured CO 2 as a tertiary injectant in an enhanced oil or natural gas recovery project, so long as the qualified CO 2 is disposed of in secure geological storage. The Section 45Q credit is scheduled to terminate after 75 million metric tons of qualified CO 2 have been captured and taken into account for the purposes of the credit. As of June 1, 2014, 27 million metric tons of CO 2 had been taken into account for the purposes of the Section 45Q credit. Previously, on May 14, 2013, the IRS had reported that nearly 21 million metric tons of CO 2 had been taken into account for the purposes of the credit. Thus, over the course of the year ending June 1, 2014, the Section 45Q credit was claimed for approximately 6 million metric tons of captured and sequestered CO 2 . When enacted, the CO 2 sequestration credit was estimated to cost $1.1 billion over the 10-year budget window including fiscal years 2009 through 2018. The CO 2 sequestration credit is not included in JCT's recent tax expenditure tables. The Treasury estimates that the CO 2 sequestration credit will reduce federal revenues by $0.1 billion in FY2014, and $0.7 billion between fiscal years 2014 and 2018 (see Table 3 ). Another area of concern has been the tax treatment of grants received from the Clean Coal Power Initiative (CCPI). Corporate taxpayers can treat CCPI grants received as nonshareholder contributions to capital, meaning that such payments do not have to be included in gross income (and thus are not subject to tax). If grant awards are excluded from gross income, the taxpayer must reduce their basis in the property. The reduction in basis reduces the amount that can be claimed as depreciation deductions over time. Under proposed legislation, the Expiring Provisions Improvement, Reform, and Efficiency (EXPIRE) Act of 2014 ( S. 2260 ), non-corporate taxpayers would be allowed to exclude CCPI grants and awards from gross income. Taxpayers would be required to reduce their basis in the property by the amount of the award. Grant recipients would also be required to pay an up-front interest charge equal to 1.18% of the value of the award. Many issues, not all financial, influence the future of clean coal in the United States. These include the high-risk nature of large, complicated, technology-intensive and as-yet commercially unproven projects that capture and sequester large volumes of CO 2 . In addition to the technological challenges, issues such as liability, ownership, and long-term stewardship of the captured CO 2 add risk and complexity to large clean coal projects. Congress may decide to view loan guarantees and tax incentives within the broader policy context that surrounds clean coal. A question for Congress to consider is why no loan guarantees have been issued for clean coal projects, despite several authorizations of appropriations and two solicitations. The most recent solicitation was issued in late 2013, and information is not publicly available about the number of proposals that may have been submitted pursuant to the most recent solicitation. Yet, only two Section 1703 projects, both nuclear power-related, have received or are on the path to obtaining loan guarantees since enactment of EPACT05 nearly 10 years ago. It could be argued that a major distinction that encouraged projects under Section 1705—renewable energy systems, electric power transmission systems, leading edge biofuel projects—was the decision by Congress to provide appropriated funds to pay for some or all of the loan guarantee credit subsidy costs. DOE has not sought appropriations for Section 1703 projects although, notably, DOE deemed zero credit subsidy costs for both nuclear power related projects that are on track for the loan guarantees. Thus, a common characteristic among all projects that received loan guarantees or are on track to receive loan guarantees is the removal of any requirement by the loan guarantee recipient to self-pay the credit subsidy costs, either through congressional appropriations or within the current regulatory framework (or through higher interest rates on the loan). It is difficult to gauge the interest by industry in seeking guaranteed loans under Section 1703 without knowing how many applications for clean coal projects were submitted in response to the solicitations. Similarly, it is difficult to determine whether projects were not awarded loan guarantees because they failed to meet criteria required under the program, or were disqualified for some other reason. An additional challenge for these projects is the requirement to employ new technology while at the same time achieving commercial viability. In addition, the EPA proposals to regulate CO 2 from new and existing coal-fired power plants have arguably introduced more uncertainty into the future of coal. Whether the 2013 and 2014 EPA proposals will create demand for loan guarantees, or have the opposite effect, is not clear. When it comes to tax incentives for clean coal and carbon capture and sequestration, there are several options for Congress to consider. One option is to maintain the status quo, which would essentially allow existing tax incentives to phase out. Since existing tax incentives have limited funds or are volume capped, these incentives will not be available for new investments or CO 2 sequestration once available funds have been fully allocated. A second option is for Congress to authorize additional funding for investment tax credits under Sections 48A and 48B. However, several projects that were allocated credits under Sections 48A or 48B have been cancelled, and given the lack of new or proposed projects, it is not clear that additional funds for Sections 48A or 48B could be allocated in the near term. Given these developments, a question for Congress is whether there is an appetite for these investment credits. Further, are the tax credits considered an effective tool to further develop eligible technologies for clean coal? Some technical changes also have been cited as potential improvements to existing tax benefits. Modifications to the Section 45Q credit have been proposed in the Carbon Capture and Sequestration Deployment Act of 2014 ( S. 2287 ). Specifically, S. 2287 would change the current structure of Section 45Q. Credits would be allocated to applicants, so that applicants could be assured tax credits would be available before CO 2 is actually captured, with the goal of providing greater certainty to the industry. S. 2287 would also allow credits to be transferred, at the discretion of the tax credit recipient that captured the CO 2 , to the company storing the CO 2 . Both of these proposals were included in a 2012 recommendation by the National Enhanced Oil Recovery Initiative. Regarding Sections 48A and 48B investment credits, there are unresolved issues related to reallocations for forfeited credits and recertification for projects that have not met placed-in-service deadlines. These issues may be addressed through Treasury guidance. Other changes in energy tax policy could also affect the outlook for clean coal and CCS technologies. For example, a tax on carbon emissions or regulations that otherwise increase the cost of carbon-intensive electricity production would make low-carbon coal options more competitive. Electricity produced at facilities equipped with CCS could also benefit from clean energy production and investment credits, such as those proposed by former Senate Finance Committee Chairman Max Baucus. Also at issue is whether tax incentives should be used to promote investment in clean coal, carbon capture and sequestration, or related technologies. Generally, an efficient tax system is one that is free from incentives, where markets dictate where investments are made. There are, however, a number of exceptions to this general case. Tax incentives that result in investments that reduce pollution or emissions, for example, can improve the allocation of resources in the economy. Tax incentives that lead to investment in emerging technologies with spillover benefits can also improve the economy-wide allocation of resources. There are concerns regarding the structure of the clean coal tax credits, particularly the investment tax credits, where recipients are selected for and credit amounts carved out for specified technologies. Another drawback to nearly any form of tax credits is the limited benefit provided to firms that do not pay taxes.
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Coal represents a major energy resource for the United States. Coal-fired power plants provided approximately 37% of U.S. generated electricity (about 1.5 billion megawatt-hours) in 2012, while consuming over 800 million tons of coal. Power plants that use coal are also a major source of greenhouse gas emissions in the United States, contributing approximately 28% of total U.S. CO2 emissions in 2012. As part of federal efforts to reduce greenhouse gas emissions, loan guarantees and tax incentives have been made available to support private sector investment in "clean coal." Both loan guarantees and tax incentives were included in the Energy Policy Act of 2005 (EPACT05, P.L. 109-58). Mitigating CO2 emissions has also become the primary focus of U.S. Department of Energy (DOE) efforts within the clean coal research and development program (now Coal R&D) within its Office of Fossil Energy. At issue for Congress is the extent to which the private sector has used the financial incentive tools available, and whether they are the right tools for promoting the development of technology to reduce CO2 emissions from fossil fuel power plants. No loan guarantees have been issued to clean coal projects since enactment of Section 1703 of EPACT05. This legislation authorized the Secretary of Energy to make loan guarantees for projects that (1) avoid, reduce, or sequester air pollutants or anthropogenic emissions of greenhouse gases; and (2) employ new or significantly improved technologies as compared to commercial technologies in service in the United States at the time. Only two projects, both nuclear power-related, have obtained or are on track to obtain loan guarantees under Section 1703. A question for Congress to consider is why no loan guarantees have been issued for clean coal projects under Section 1703, despite several authorizations of appropriations and two solicitations for proposals since enactment of EPACT05. Tax incentives for clean coal were first authorized in EPACT05. EPACT05 codified two new sections in the Internal Revenue Code: Section 48A was added to provide tax credits for qualifying advanced coal projects; and Section 48B provides tax credits to qualifying gasification projects. Additional tax incentives for clean coal were included in P.L. 110-343, the Emergency Economic Stabilization Act of 2008 (EESA). EESA provided additional funding for clean coal investment tax credits. EESA also included the Section 45Q CO2 sequestration credit, under which taxpayers may claim up to a $20 per metric ton credit for qualifying domestic CO2 that is captured and sequestered. Regarding tax incentives, Congress might consider several options: (1) maintain the status quo, which would allow existing tax incentives to phase out; (2) authorize additional funding for existing tax incentives; or (3) redesign tax incentives for clean coal or carbon capture and sequestration related technologies. Several projects that were previously allocated tax credits have been cancelled. A question for Congress is whether there is demand for tax benefits in their current form. Further, are tax incentives an effective tool for encouraging investment in clean coal technologies?
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This report provides a summary of the status of U.S. compliance efforts in pending World Trade Organization (WTO) disputes that have resulted in adverse rulings against the United States. The report focuses on cases in which panel and Appellate Body reports have been adopted by the WTO Dispute Settlement Body, an action sending the disputes into the compliance phase of the WTO dispute process. Although the United States has complied with adverse rulings in many past WTO disputes, there are 14 pending cases in which the United States is facing compliance deadlines in 2012; deadlines have expired but the United States has not yet fully implemented the WTO decisions involved; or the United States has taken action, including the enactment of legislation, but the prevailing parties in the dispute continue to question whether the United States has fully complied and, as in one case, continue to impose WTO-authorized trade sanctions. Compliance in these cases may implicate either legislative or administrative action by the United States, or both. The report begins with an overview of WTO dispute settlement procedures, focusing on the compliance phase of the process, followed by a discussion of U.S. laws relating to WTO dispute resolution proceedings. The report then lists pending WTO disputes in the compliance phase categorized by subject matter: trade remedies, subsidies, trade in services, and trade-related intellectual property rights. Disputes are listed in chronological order based on the date on which the panel and any Appellate Body in the case were adopted by the WTO Dispute Settlement Body. Each entry contains a discussion of major issues and U.S. compliance history. Long-standing cases also include a section titled "Recent Developments" discussing the latest activity in the dispute. WTO disputes are conducted under the terms of the WTO Understanding on the Rules and Procedures Governing the Settlement of Disputes (Dispute Settlement Understanding or DSU). The DSU, which entered into force with the establishment of the World Trade Organization on January 1, 1995, carries forward and expands upon dispute settlement practices developed under the General Agreement on Tariffs and Trade (GATT). The DSU is administered by the WTO Dispute Settlement Body (DSB), which is composed of all WTO Members. Where individual WTO agreements contain special or additional dispute settlement rules that differ from those in the DSU (e.g., expedited timelines for subsidy disputes in the Agreement on Subsidies and Countervailing Measures), the former will prevail. A list of these agreements and rules is contained in Appendix 2 of the DSU. The Office of the United States Trade Representative (USTR) represents the United States in the WTO and in WTO disputes. WTO dispute settlement may be characterized as a three-stage process: (1) consultations; (2) panel and, if requested, Appellate Body (AB) proceedings; and (3) implementation. Within this framework, the DSB establishes panels; adopts panel and appellate reports; authorizes countermeasures when requested; and monitors the implementation of dispute settlement results. The establishment of panels, adoption of panel and AB reports, and authorization of countermeasures are decisions that are subject to a "reverse consensus" rule under which the DSB agrees to these actions unless all DSB Members object. In effect, these decisions are virtually automatic. Article 23 of the DSU requires a complaining Member to act in accordance with the DSU when it initiates a dispute, including making any internal determination that another Member has violated a WTO obligation consistent with the WTO decision in the case and following DSU procedures to set a deadline by which the defending Member must comply, determining the level of sanctions for non-compliance, and obtaining authorization from the DSB to impose any such sanctions. After the DSB adopts an adverse panel and any Appellate Body report, the defending Member must inform the DSB of its compliance plans. If it is impracticable for the Member to comply immediately, the Member will be allowed a "reasonable period of time" to do so. If the Member proposes a compliance period and it is not approved by the DSB, the disputing parties may negotiate a deadline themselves. If this fails, the length of the period will be arbitrated. A WTO Member found to have violated WTO obligations is expected to comply by withdrawing the offending measure by the end of the established compliance period, with compensation and temporary retaliation available to the prevailing party as alternative remedies. Full compliance is the preferred outcome, however, so as to ensure that negotiated rights and obligations are preserved and maintained. Article 22 of the DSU provides that if the prevailing Member in a dispute believes that the defending Member has not implemented the WTO rulings and recommendations by the end of the established compliance period, it may request the other Member to negotiate a compensation agreement or it may ask the DSB for authorization to suspend WTO concessions, usually to impose higher tariffs on selected imports from the defending country. The Member may choose the latter option without first requesting compensation. In some cases, the prevailing party may agree to extend the original compliance deadline instead of immediately seeking a remedy. If a prevailing Member does choose to suspend concessions, it is expected to do so in the same sector in which the WTO violation was found, but if the Member finds that this is not "practicable or effective," it may seek to suspend concessions in other sectors in the same agreement. If, however, the Member finds that this alternative would also be impracticable or ineffective and that "the circumstances are serious enough," it may seek to suspend obligations under another WTO agreement, referred to as "cross-retaliation." A prevailing Member may seek to cross-retaliate if, for example, in a dispute involving trade in goods, the Member does not import a sufficient amount of goods from the defending Member to remedy the trade injury involved or the Member believes that placing tariff surcharges on goods imported from the defending Member would be unreasonably costly for the prevailing Member's economy. Under the DSU, the DSB is to authorize the retaliation request under the reverse consensus rule within 30 days after the compliance period expires. If the defending Member objects to the request, however, the proposed retaliation will be arbitrated and the 30-day deadline for approving the retaliation request effectively extended. The objection may relate to the level of nullification or impairment of benefits involved or whether DSU cross-retaliation rules have been followed. The arbitration, which may be carried out by the original panel if members are available, or by an arbitrator appointed by the WTO Director General, is ordinarily to be completed within 60 days after the compliance period expires. The DSB then meets to authorize the retaliation request, subject to any modification by the arbitrator. In addition, Article 21.5 of the DSU provides for further dispute settlement proceedings in the event the disputing parties disagree as to whether the defending Member has implemented the WTO rulings and recommendations in a particular case. Once a compliance panel is convened, it is expected to issue its report within 90 days; the report may then be appealed. In practice, compliance panels may require a considerably longer period of time to complete their work where a complicated case is involved. For example, in the European Union's challenge to the U.S. use of "zeroing" in antidumping proceedings (DS294), the EU made its compliance panel request in September 2007, panelists were appointed in November 2007, and the panel report was not publicly circulated until December 2008. Because the DSU fails to incorporate Article 21.5 proceedings into the 30-day period for approving countermeasures and the time frame for any subsequent arbitration, a procedural problem, referred to as "sequencing," has resulted. Disputing Members have often filled the gap by entering into ad hoc bilateral procedural agreements setting out timelines for any requested compliance-related proceedings and reserving Members' rights in the unfolding of these proceedings. Such agreements have been entered into in many of the cases discussed below. The DSU provides that any suspension of concessions or other obligations is temporary and may only be applied by the prevailing Member until the WTO-inconsistent measure is removed, the defending Member provides a solution to any trade injury at issue, or a mutually satisfactory resolution of the dispute is reached. Moreover, if a prevailing Member is ultimately authorized to impose countermeasures, the Member is not required to implement them. As evident from some of the cases discussed in this report, WTO Members may manage disputes in a variety of ways at the compliance phase, short of imposing sanctions. The legal effect of Uruguay Round agreements and WTO dispute settlement results in the United States is comprehensively dealt with in the Uruguay Round Agreements Act (URAA), P.L. 103-465 , which addresses the relationship of WTO agreements to federal and state law and prohibits private remedies based on alleged violations of WTO agreements. The statute also requires the United States Trade Representative (USTR) to keep Congress informed of disputes challenging U.S. laws once a dispute panel is established, any U.S. appeal is filed, and a panel or Appellate Body report is circulated to WTO Members. In addition, the URAA places requirements on regulatory action taken to implement WTO decisions and contains provisions specific to the implementation of panel and appellate reports that fault U.S. actions in trade remedy proceedings. Section 102 of the URAA and its legislative history establish that domestic law supersedes any inconsistent provisions of the Uruguay Round agreements and that congressional or administrative action, as the case may be, is required to implement adverse decisions in WTO dispute settlement proceedings. Section 102(a)(1), 19 U.S.C. Section 3512(a)(1), provides that "[n]o provision of any of the Uruguay Round Agreements, nor the application of any such provision to any person or circumstance, that is inconsistent with any law of the United States shall have effect." The URAA further provides, at Section 102(a)(2), 19 U.S.C. Section 3512(a)(2), that nothing in the statute "shall be construed ... to amend or modify any law of the United States ... or ... to limit any authority conferred under any law of the United States ... unless specifically provided for in this act." As explained in Statement of Administrative Action (SAA) accompanying the Uruguay Round agreements when they were submitted to Congress in 1994, "[i]f there is a conflict between U.S. law and any of the Uruguay Round agreements, section 102(a) of the implementing bill makes clear that U.S. law will take precedence." Moreover, Section 102 is further intended to clarify that all changes to U.S. law "known to be necessary or appropriate" to implement the WTO agreements are incorporated in the URAA and that any unforeseen conflicts between U.S. law and the WTO agreements "can be enacted in subsequent legislation" Congress has traditionally treated potential conflicts with prior GATT agreements and free trade agreements in this way, treatment that it also deems to be "consistent with the Congressional view that necessary changes in Federal statutes should be specifically enacted, not preempted by international agreements." This approach carries over into the implementation of WTO dispute settlement results, a situation explained as follows in URAA legislative history: Since the Uruguay Round agreements as approved by the Congress, or any subsequent amendments to those agreements, are non-self-executing, any dispute settlement findings that a U.S. statute is inconsistent with an agreement also cannot be implemented except by legislation approved by the Congress unless consistent implementation is permissible under the terms of the statute. Where a state law is at issue in a WTO dispute, the URAA provides for federal-state cooperation in the proceeding and limits any domestic legal challenges to the law to the United States. The act's general preclusion of private remedies (discussed below) further centralizes the response to adverse WTO decisions involving state law in the federal government. Section 102(b) provides as follows: No State law, or the application of such a State law, may be declared invalid as to any person or circumstance on the ground that the provision or its application is inconsistent with any of the Uruguay Round Agreements, except in an action brought by the United States for the purposes of declaring such law or application invalid. According to legislative history, the provision "makes clear that the Uruguay Round agreements do not automatically preempt State laws that do not conform to their provisions, even if a WTO dispute settlement panel or the Appellate Body were to determine that a particular State measure was inconsistent with one or more of the Uruguay Round agreements." The statute also contains certain restrictions in any such legal action brought by the United States, including that the report of the WTO dispute settlement panel or the Appellate Body may not be considered binding or otherwise accorded deference. Any such suit by the United States is expected to be a rarity. Private remedies are prohibited under Section 102(c)(1) of the URAA, 19 U.S.C. Section 3512(c)(1), which provides that "[n]o person other than the United States ... shall have a cause of action or defense under any of the Uruguay Round Agreements or by virtue of congressional approval of such an agreements" or "may challenge, in any action brought under any provision of law, any action or inaction by any department, agency, or other instrumentality of the United States, any State, or any political subdivision of a State, on the ground that such action or inaction is inconsistent with such agreement." Congress has additionally stated in Section 102(c)(2) of the URAA, 19 U.S.C. Section 3512(c)(2), that it intends, through the prohibition on private remedies: to occupy the field with respect to any cause of action or defense under or in connection with any of the Uruguay Round Agreements, including by precluding any person other than the United States from bringing any action against any State or political subdivision thereof or raising any defense to the application of State law under or in connection with any of the Uruguay Round Agreements— (A) on the basis of a judgment obtained by the United States in an action brought under any such agreement; or (B) on any other basis. The House Ways and Means Committee report on the URAA discusses the rationale and implications of Section 102(c) as follows: For example, a private party cannot bring an action to require, preclude, or modify government exercise of discretionary or general "public interest" authorities under other provisions of law. These prohibitions are based on the premise that it is the responsibility of the Federal Government, and not private citizens, to ensure that Federal or State laws are consistent with U.S. obligations under international agreements such as the Uruguay Round agreements. The SAA notes, however, that Section 102(c) "does not preclude any agency of government from considering, or entertaining argument on, whether its action or proposed action is consistent with the Uruguay Round agreements, although any change in agency action would have to be authorized by domestic law." In addition to the URAA provisions that limit the direct effect of WTO rules and decisions in U.S. law, the URAA also places requirements on agencies in their implementation of WTO panel and Appellate Body reports. These provisions apply to regulatory action in general and to new agency determinations in response to WTO decisions involving trade remedy proceedings. Section 123(g) of the URAA, 19 U.S.C. Section 3533(g), provides that in any WTO case in which a departmental or agency regulation or practice has been found to be inconsistent with a WTO agreement, the regulation or practice may not be rescinded or modified in implementation of the decision "unless and until" the United States Trade Representative and relevant agencies meet congressional consultation and private sector advice requirements, the proposal has been published in the Federal Register with a request for public comment, and the final rule or other modification has been published in the Federal Register . Section 123(g) does not apply to any regulation or practice of the U.S. International Trade Commission. The statute requires the USTR to consult with "the appropriate congressional committees" regarding the proposed contents of the final rule or other modification. These committees include the House Ways and Means Committee, the Senate Finance Committee, and any other congressional committees that have jurisdiction over matter at hand. In addition, the final rule or other modification may not take effect until 60 days after the USTR has begun committee consultations, unless the President determines that an earlier effective date is in the national interest. The House Ways and Means Committee and the Senate Finance Committee may vote to indicate the disagreement of the committee with the proposed action during the 60-day period. Any such vote is not binding on the agency or department involved. Section 129 of the URAA, 19 U.S.C. Section 3538, sets forth authorities and procedures under which the Department of Commerce (DOC) and the U.S. International Trade Commission (ITC) may issue new subsidy, dumping and injury determinations, referred to as Section 129 Determinations, in implementation of adverse WTO decisions involving U.S. safeguards, antidumping, and countervailing duty proceedings. Section 129 does not authorize the Commerce Department or the ITC to issue new determinations on their own motion, but instead grants the USTR the discretion to direct the agency to do so in a given case. In antidumping and countervailing duty investigations, which are carried out under authorities in Title VII of the Tariff Act of 1930, 19 U.S.C. Sections 1671-1677n, the Commerce Department determines the existence and level of dumping or subsidization, as the case may be, and the ITC determines whether the dumped or subsidized imports cause material injury, or a threat of material injury, to a domestic industry. Under U.S. safeguards law, set forth in Title II of the Trade Act of 1974, 19 U.S.C. Sections 2251-2254, the ITC conducts investigations to determine if increased imports, whether or not they are fairly traded, are a substantial cause of serious injury to a domestic industry. If the ITC makes an affirmative injury determination, it recommends remedial measures (e.g., a tariff surcharge or import quota) to the President, who ultimately determines whether or not to take action. Implemented Section 129 Determinations in antidumping and countervailing duty cases are reviewable in the U.S. Court of International Trade and by binational panels established under Chapter 19 of the North American Free Trade Agreement (NAFTA). Chapter 19 panels are available to review final agency determinations in antidumping and countervailing duty investigations involving NAFTA countries in lieu of judicial review in the country in which the determination is made. If an interim WTO panel report or a WTO Appellate Body report concludes that an action by the ITC in connection with a trade remedy proceeding is inconsistent with U.S. obligations under the WTO Antidumping Agreement, the Agreement on Subsidies and Countervailing Measures, or the Agreement on Safeguards, the USTR may request the ITC to issue an advisory report on whether U.S. antidumping, countervailing duty, or safeguards law, as appropriate, allows the ITC to take steps with respect to the proceeding at issue that would render its action "not inconsistent with" the panel or AB findings. The ITC is to report to the USTR within 30 calendar days of the USTR's request where an interim report is involved, and within 21 calendar days in case of an AB report. These deadlines are aimed at ensuring that the USTR will receive the requested advice in time to decide whether to appeal a panel's interim report or to implement an adverse report, and to estimate the period of time that may be needed to implementing the WTO decision. If a majority of the ITC Commissioners have found that action may be taken under existing law, the USTR must consult with the House Ways and Means Committee and the Senate Finance Committee and may request the ITC in writing to issue a new determination in the underlying proceeding that would render the ITC action "not inconsistent with" the WTO findings. The new determination must be issued within 120 days of the USTR's request. The 120-day limit is intended to allow the USTR to propose a reasonable period of time for implementation to the WTO Dispute Settlement Body once the DSB adopts a WTO panel and any Appellate Body report in a case. In the event the ITC issues a new negative injury or threat of injury determination, the imports subject to antidumping or countervailing duty order at issue, or a least a portion of them, would no longer be considered to have caused a harmful effect, even though they may in fact be dumped or subsidized. The Tariff Act requires that the imposition of antidumping or countervailing duties on dumped or subsidized imports be supported by an affirmative injury determination and thus, absent such a determination, the antidumping or countervailing duty order would need to be revoked in whole or in part. Section 129(a)(6) authorizes the USTR to direct the Commerce Department to take this action. The USTR must consult with the House Ways and Means and Senate Finance Committees before the ITC's new determination is implemented. Where a safeguard proceeding is involved, Section 129 authorizes the President, after receiving a new ITC determination, to reduce, modify, or terminate the safeguard notwithstanding other statutory requirements governing changes in existing safeguard measures. The President must consult with the House Ways and Means Committee and Senate Finance Committee before acting under this authority. The USTR is required to publish a notice of the implementation of any ITC determination in the Federal Register . Section 129 also sets out a procedure for new Department of Commerce determinations in antidumping and countervailing duty proceedings, though without the requirement for an initial agency advisory report regarding the scope of the agency's statutory discretion. Instead, promptly after the issuance of a WTO panel or Appellate Body report finding that a DOC determination in an antidumping or countervailing duty proceeds is inconsistent with U.S. obligations under the WTO Antidumping Agreement or the Agreement on Subsidies and Countervailing Measures, the USTR is to consult with the Commerce Department and the House Ways and Means and Senate Finance Committees, and may request the department, in writing, to issue a determination in connection with the underlying antidumping or countervailing duty proceeding that would render its action "not inconsistent with" the panel or appellate findings. The Commerce Department must issue its Section 129 Determination within 180 days of the request. A new determination may, for example, reduce the dumping margin or net subsidy and thus result in a reduction of existing duties. After consulting with DOC and the above-named congressional committees, USTR may direct DOC to implement its determination in whole or in part. Section 129(c)(1) of the URAA provides that Section 129 Determinations, whether issued by the ITC or the Commerce Department, apply prospectively, that is, the full or partial revocation of the antidumping or countervailing duty order or the implementation of the DOC determination, as the case may be, applies to unliquidated entries of the subject merchandise that are entered, or withdrawn from warehouse for consumption, on or after the date on which the USTR directs the Commerce Department to revoke the order or implement the determination. Unliquidated entries are those for which the U.S. Customs and Border Protection (CBP) has not ascertained a final rate and amount of duty. Notices of the implementation of Section 129 Determinations must be published in the Federal Register . The Uruguay Round SAA explains the operation of Section 129(c)(1) as follows: Consistent with the principle that GATT panel recommendations apply only prospectively, subsection 129(c)(1) provides that where determinations by the ITC or Commerce are implemented under subsections (a) or (b), such determinations have prospective effect only. That is, they apply to unliquidated entries of merchandise entered, or withdrawn from warehouse, for consumption on or after the date on which the Trade Representative directs implementation. Thus, relief available under subsection 129(c)(1) is distinguishable from relief available in an action brought before a court or a NAFTA binational panel, where, depending on the circumstances of the case, retroactive relief may be available. Under 129(c)(1), if implementation of a WTO report should result in the revocation of an antidumping or countervailing duty order, entries made prior to the date of Trade Representative's direction would remain subject to potential duty liability. Canada unsuccessfully challenged Section 129(c)(1) in a WTO dispute settlement proceeding in 2001 on the ground that the provision violated the WTO Dispute Settlement Understanding and various WTO antidumping and countervailing duty obligations. Under the retrospective U.S. antidumping and countervailing duty system, DOC ordinarily makes a final assessment of the duties owed on dumped or subsidized goods in an administrative review conducted after the goods are imported. The review covers goods that enter the United States during a specified prior 12-month period. Until this final duty assessment is made for particular goods, importers must deposit estimated duties with CBP on entry. Canada argued that, where a DOC or ITC determination in an antidumping or countervailing duty proceeding is found to violate a WTO obligation, Section 129(c)(1) effectively prohibits the United States from fully complying with the WTO decision by preventing it from refunding estimated duties deposited with CBP before the date that the Section 129 Determination is implemented. In other words, because the duty deposits supported by the challenged determination would no longer have a WTO-consistent basis, Canada argued that they must be returned. In response to Canada's claim, the United States maintained that Section 129(c)(1) addresses only the treatment of imports entered after the implementation date and does not govern the treatment of prior entries for which final duties have not yet been calculated. The United States further argued that the statute does not mandate any particular treatment of these prior unliquidated entries and that the United States has other legal options for dealing with them, including establishing a new dumping or subsidy margin by using a WTO-consistent methodology in an administrative review of the entries or, in the event the duty order or orders were revoked as a result of the WTO proceeding, revising the duty rate in response to a domestic court decision involving the earlier entries. In a report issued in July 2002, the WTO panel concluded that Canada failed to establish that the statute either required WTO-inconsistent action on the part of the United States or precluded the United States from taking action in accordance with its WTO obligations. Canada did not appeal, and the panel report was adopted by the DSB in August 2002. Although private rights of action based on Uruguay Round agreements are precluded under Section 102(c) of the Uruguay Round Agreements Act, WTO panel findings have at times been brought to the attention of federal courts, most often in challenges to agency determinations in antidumping and countervailing duty proceedings initiated under judicial review provisions contained in Section 516A of the Tariff Act of 1930, 19 U.S.C. Section 1516a. Section 129 determinations issued by the ITC and the Commerce Department to comply with WTO decisions are also reviewable under this statute. These cases are heard in the U.S. Court of International Trade (USCIT), which has exclusive jurisdiction over civil actions brought under Section 516A. The USCIT's decisions may be appealed to the U.S. Court of Appeals for the Federal Circuit, whose decisions are reviewable by the U.S. Supreme Court. Federal courts must hold a final agency determination in an antidumping or countervailing duty proceeding or a Section 129 Determination unlawful if it is found to be "unsupported by substantial evidence on the record, or otherwise not in accordance with law." To determine whether an agency legal interpretation applied in an agency determination is in accordance with law, the court employs the two-step analysis set out by the U.S. Supreme Court in Chevron, U.S.A., Inc. v. Natural Resources Defense Council, 467 U.S. 837 (1984). First, the court, using tools of statutory construction, determines whether Congress has clearly spoken to the issue at hand. Second, if the underlying statute is silent or ambiguous, the court decides whether the agency's construction of the statute is permissible and will defer to an agency's interpretation of a statute provided it is reasonable. It has also been argued that, in considering whether an agency construction is reasonable for purposes of the second prong of the Chevron test, the court should apply the canon of construction articulated by the Supreme Court in 1804 in Murray v. Schooner Charming Betsy, 6 U.S. (2 Cranch) 64, 118 (1804). This canon holds that where a statute does not require a specific interpretation, that is, it permits more than one interpretation, it should be interpreted consistently with U.S. international obligations. In the current context, the international obligation would be that contained in a WTO agreement, either by itself or as interpreted in one or more WTO decisions. Plaintiffs thus argue, on the basis of the Charming Betsy canon, that an agency interpretation that violates a WTO obligation is unreasonable under Chevron step two. Because the underlying cause of action in domestic legal challenges to the agency actions described above is based in the Tariff Act and not on a provision of a WTO agreement, courts have not viewed Section 102(c) of the URAA as preventing them from hearing a WTO-based argument in these challenges. When faced with such arguments, courts may deem WTO decisions to be "persuasive" or a source of useful reasoning, "if sound" to inform a court's decision, but state that WTO decisions are not binding on the United States, U.S. agencies, or the judiciary. Most recently, courts have made clear that, given the statutory scheme established in the URAA for regulatory implementation of adverse WTO decisions, questions as to whether the United States should comply with an adverse WTO decision, and what the extent of U.S. compliance should be, are matters falling within the province of the executive branch. As a result, in ruling on whether an agency's interpretation of a statute is reasonable, courts have rejected Charming Betsy arguments and declined to base their decision making on a WTO decision adverse to the United States where the executive branch has not taken the necessary domestic action to comply. There are currently 14 pending WTO cases in which the United States is the defending (or in the language of the WTO Dispute Settlement Understanding, "responding") party. As noted earlier, this report treats a WTO case as pending if the United States has not fully implemented adopted WTO panel and Appellate Body reports or the United States has taken action, including the enactment of legislation, but the prevailing parties in the dispute continue to question whether the United States has fully complied. In one such case, complaining Members are continuing to impose WTO-authorized trade sanctions. Of the 14 cases, nine involve U.S. trade remedies, with the remainder involving subsidies, trade in services, or trade-related intellectual property rights. Six of the nine pending trade remedy cases focus on the U.S. practice of "zeroing" in antidumping proceedings, discussed in greater detail below. The remaining three are a long-standing dispute with Japan over a portion of U.S. antidumping law governing the calculation of dumping rates for producers and exporters who are not individually investigated by the Commerce Department in an antidumping proceeding; a dispute involving the Continued Dumping and Subsidy Offset Act, a statute that required the distribution of collected antidumping and countervailing duties to petitioners and interested parties in the underlying trade remedy proceedings; and the application of U.S. antidumping and countervailing duty law to products of China. The United States took administrative action to resolve its antidumping dispute with Japan, but has yet to amend a statutory provision at issue in the case. While Congress repealed the CDSOA as of October 1, 2005, and Congress placed additional restrictions on available funds in 2010, the 2005 repeal legislation mandates the distribution to U.S. firms of duties collected on goods entered through September 30, 2007. The European Union and Japan, two complainants who have objected to the post-repeal disbursements, are continuing to retaliate with tariff surcharges on U.S. goods, albeit in decreasing amounts. The United States and China have agreed to a deadline of April 25, 2012, in their countervailing duty dispute. As the result of a compliance panel proceeding, the United States was found not to have fully complied in Brazil's challenge to U.S. cotton subsidies and continues to face the possibility of retaliation by Brazil against U.S. goods and possibly U.S. services or intellectual property interests. While Congress repealed or made statutory changes to U.S. export credit guarantee programs that were found by the WTO to be prohibited subsidies and the executive branch made administrative changes to one of these programs under revised statutory authority, Congress also reauthorized payments under two domestic support programs that Brazil successfully challenged as actionable subsidies. Payments under these programs were found to cause serious prejudice to Brazil in the form of significant price suppression in the world upland cotton market. Brazil is currently authorized to impose sanctions to remedy both prohibited and actionable subsidy measures at issue in the case. The United States and Brazil have temporarily resolved their dispute, however, forestalling any application of sanctions by Brazil. Antigua's challenge to federal laws governing the remote supply of gambling services, while only partially successful, left certain issues unresolved and resulted in the United States withdrawing its market access commitments for gambling services under the General Agreement on Trade in Services (GATS). Antigua sought authorized retaliation in the WTO dispute as well as compensation under the GATS for the negative effects of the U.S. withdrawal of GATS commitments. Outstanding issues still remain subject to discussion by the two parties. Two long-standing disputes involve intellectual property rights, each of these brought by the European Union (EU). The first involves Section 110(5)(B) of the Copyright Act, a statute affecting music licensing; the second, Section 211 of the Omnibus Appropriations Act of 1998, a statute addressing trademarks that involve property confiscated by Cuba. The United States made a payment of $3 million to the EU in partial resolution of the music licensing case, but has not yet fully complied. While bills have been introduced in past and current Congresses aimed at resolving the trademark dispute, none has been enacted. Twenty-one WTO complaints against the United States have challenged the use of "zeroing," a practice used by the Department of Commerce (DOC) in antidumping proceedings to calculate dumping margins, that is, the amount by which the home market or "normal" value of a good exceeds its export price. Under this practice, DOC, in calculating dumping margins for an imported product, disregards non-dumped sales and thus, complainants argue, inflates the dumping margin or establishes a dumping margin where one might not otherwise exist. Of the 21 cases, six are currently in the compliance phase. Two of these cases were brought by the European Union (DS294 and DS350), with one each brought by Japan (DS322), Mexico (DS344), Brazil (DS382), and Vietnam (DS404). The decisions in these cases have resulted in a broad WTO prohibition on the use of zeroing in U.S. antidumping proceedings, a multi-phased process consisting of original investigations, annual administrative reviews, five-year "sunset" reviews, and, in some cases, "changed circumstances" and "new shipper" reviews. In response to the first EU challenge (DS294), the Commerce Department in early 2007 discontinued the use of zeroing in the price comparison employed most frequently in original antidumping investigations and recalculated dumping margins in the investigations cited by the EU, issuing new determinations under Section 129 of the Uruguay Round Agreements Act (URAA). The United States has yet to fully comply with the WTO decisions in this case, the cases initiated by Japan (DS322) and Mexico (DS344), and the second EU challenge (DS350), to the extent that the WTO decisions involve the use of zeroing in other phases of U.S. antidumping proceedings. Both the EU (in DS294) and Japan requested authorization from the WTO to impose trade sanctions against the United States for non-compliance with the WTO decisions involved; the United States objected to the proposals and, thus, under WTO dispute settlement rules, the requests were automatically sent to arbitration. In 2010, the EU and Japan agreed to suspend the arbitrations on the understanding that the United States would address outstanding issues by early September 2011. In response, the Department of Commerce issued a Federal Register notice in December 2010 in which it proposed as a general rule to calculate dumping margins and duty assessment rates with an offset for non-dumped sales, that is, without zeroing, in administrative, expedited administrative, and new shipper reviews and, by implication, to eliminate zeroing in sunset reviews as well. The dates for resuming the sanctions arbitrations were extended several times, ultimately to February 6, 2012, for both the EC and Japan. Under separate memoranda signed by the United States with the EU and Japan on that date, the suspensions will continue while the United States finalizes the December 2010 zeroing proposal and issues Section 129 determinations using the new methodology in eight AD proceedings challenged by the EU, one proceeding challenged by Japan, and possibly a second proceeding challenged by Japan if U.S. courts do not uphold the revocation of the antidumping order at issue. The sanctions arbitrations are to be terminated once the Section 129 proceedings are completed, that is, on the date the USTR directs DOC to implement the new determinations. DOC is expected to issue the Section 129 determinations within four months of February 6, 2012, and the USTR is expected to direct DOC to implement these determinations within seven days after they are issued. Implementation will be on a prospective basis; that is, the new cash deposit rates resulting from the recalculated dumping margins will apply to unliquidated entries (i.e., entries for which final duties have not been assessed) that enter on or after the date that the determinations are implemented. In September 2010, Mexico requested a compliance panel in DS344, alleging the failure of the United States to comply with the WTO decision as it involves antidumping administrative reviews in general and reviews of the original antidumping order challenged in the case. The panel has not yet publicly circulated its report. The United States was expected to comply by March 17, 2012, in Brazil's zeroing challenge (DS382), but it is unclear if recent actions taken by the United States will resolve the dispute. A deadline of July 2, 2012, is set in the dispute with Vietnam (DS404). New complaints involving zeroing were filed in 2011 by Korea (DS420), China (DS422), and the EU (DS424), and by Vietnam in February 2012 (DS429). A panel was established in Korea's challenge on February 22, 2012, following the entry into a bilateral procedural agreement by Korea and the United States; among other things, the agreement aims at expediting the panel proceeding and excludes from the panel's consideration U.S. compliance efforts in other WTO zeroing cases that may address issues also raised in Korea's panel request. A panel was established in China's challenge in October 2011 after the United States and China entered into a bilateral procedural agreement under which the parties agreed to expedite the panel process, China pledged to provide the necessary evidence and arguments to support its allegations, and the United States agreed not to contest China's claim that the measures identified in the agreed-upon panel request are inconsistent with the relevant section of the WTO Antidumping Agreement, an approach the United States has taken in recent cases in which the use of zeroing in initial investigations was challenged. The panel was appointed on December 21, 2011. The complaint by the EU remains in consultations, as does the complaint by Vietnam, which involves a variety of antidumping issues. Finally, 11 other WTO complaints have cited the U.S. use of zeroing; some of these disputes were resolved through the panel process, while others remain in consultations or have been otherwise settled. To date, more than 25 WTO panel and Appellate Body reports have been rendered on this issue. The conduct of antidumping investigations and the imposition of antidumping duties are subject to obligations in the WTO Agreement on Antidumping and Article VI of the General Agreement on Tariffs and Trade 1994 (GATT 1994), which permits the imposition of an antidumping duty on an imported product "not greater in amount than the margin of dumping in respect of such product." While neither of these agreements expressly address the use of zeroing in antidumping investigations or in the various reviews and duty assessments carried out in antidumping proceedings, WTO panels and the Appellate Body have found that the use of zeroing in original investigations, as applied in two types of price comparisons, is inconsistent with obligations in Article 2.4.2 of the WTO Antidumping Agreement, a provision requiring WTO Members to determine dumping margins by comparing normal and export values of "all comparable export transactions." In addition, WTO panels and the Appellate Body have concluded that the use of zeroing in administrative and new shipper reviews violates GATT and Antidumping Agreement prohibitions on imposing antidumping duties that exceed the dumping margin for the goods under investigation. Further, reliance on zeroing-based dumping margins in mandatory five-year sunset reviews of antidumping duty orders has been found to violate Article 11.3 of the WTO Antidumping Agreement on the ground that such reliance taints the fundamental determination made in sunset reviews, namely, whether revocation of the antidumping order is likely to lead to the recurrence or continuation of dumping and injury. As a result of these cases, the use of zeroing has been found to be broadly prohibited in the calculation of dumping margins in U.S. antidumping proceedings, both as a general practice and as applied in particular proceedings. Moreover, findings in related compliance panel proceedings that a WTO decision faulting the use of zeroing in an original antidumping investigation continues to apply with respect to subsequent annual administrative reviews are particularly important for the U.S. "retrospective" antidumping duty system of which administrative reviews are a key component. It has also been found in these cases that, where goods have entered the United States before the end of the compliance period established in a WTO dispute but final duties have not been collected, zeroing-based duties may not be applied to such goods once the compliance period has ended. In addition, the Appellate Body has found that an additional claim may be made in an initial WTO complaint against zeroing, namely, the "continued use" of the practice in subsequent domestic proceedings relating to a particular antidumping duty order. As mentioned earlier, the United States has responded to these decisions by prospectively eliminating the use of zeroing in original investigations under a regulatory modification issued by the Commerce Department under Section 123(g) of the Uruguay Round Agreements Act and finalizing its December 2010 regulatory modification on the use of zeroing in subsequent phases of antidumping proceedings. Where the use of zeroing in an individual original antidumping investigation has been challenged, the United States has resolved the case by the issuance of a Section 129 Determination in which the dumping margin in question has been recalculated without the use of zeroing. The United States has not contested recent complaints of this type before the panel. It is not clear that prospective modification of U.S. zeroing practice—that is, its application to new proceedings only—and the issuance of case-by-case recalculations under Section 129 will be sufficient to satisfy the concerns of all WTO complainants. The EU, however, appears to have dropped any demands that it had for the refund of zeroing-based duties paid after the expiration of the compliance periods in its zeroing cases, given that the memorandum that the EU signed with the United States in February 2012 aimed at resolving its zeroing disputes with the United States provides that the new WTO-compliant dumping margins to be calculated by the United States will be applied only to future entries of merchandise. The United States has been critical of the Appellate Body's broad prohibition on the use of zeroing at meetings of the WTO Dispute Settlement Body and in related documents circulated to Members. In addition, the United States submitted proposals in June 2007 to the WTO Negotiating Group of Rules, which has been negotiating revisions to antidumping and subsidy rules in the Doha Round, asking that negotiators evaluate the reasoning of the WTO panels that have examined the issue of zeroing and stating that "the proper resolution of this issue requires clear text providing that margins of dumping may be determined without offsets for non-dumped transactions, consistent with the long-held concept of dumping." The United States also proposed revised language for the Antidumping Agreement to this effect. While the draft negotiating text issued by the Chairman of the Doha Negotiating Group in November 2007 contained proposed language reflecting U.S. concerns, the draft text issued in December 2008 does not contain such language and instead notes that, with regard to zeroing, "[d]elegations remain profoundly divided on this issue," with positions ranging from "insistence on a total prohibition of zeroing irrespective of the comparison methodology used and in respect of all proceedings to a demand that zeroing be specifically authorized in all contexts." Notwithstanding these uncertainties, including the continued inability of WTO Members to complete the Doha Round, the United States stated at a February 2012 meeting of the WTO Dispute Settlement Body that "it will continue to press in ongoing WTO negotiations for affirmation that 'zeroing' is consistent with WTO rules." Although the Tariff Act of 1930, at Section 735(A), 19 U.S.C. Section 1677(35), defines the terms "dumping margin" and "weighted average dumping margin," it does not expressly address the practice of zeroing. Using the Chevron standard of judicial review, U.S. courts have held that the statute does not unambiguously require zeroing, but that the Commerce Department's interpretation of the statute as allowing the practice is a permissible one. Courts have also refused to implement adverse WTO decisions on zeroing, leaving determinations as to "whether, when, and how" to comply with such rulings to the executive branch. Further, the U.S. Court of International Trade (USCIT) ruled in July 2009 that the Commerce Department's determination under Section 123 of the Uruguay Round Agreements Act to eliminate the use of zeroing in average-to-average comparisons in original antidumping investigations and to offset sales made at less than fair value with fair value sales, an action taken in response to the WTO decision in DS294, was based on a reasonable interpretation of U.S. antidumping law for purposes of Chevron and was thus in accordance with law. As discussed earlier, Section 123 sets out statutory requirements for U.S. regulatory modifications taken to implement WTO decisions. Thus, in its Chevron analysis, the court also considered that the department was undertaking this interpretation in the context of statutory authorities and requirements with an international dimension, stating that the "deference accorded to Commerce's interpretation [under Chevron ] is at its highest when that agency acts under the authority of a Congressional mandate to harmonize U.S. practices with international obligations, particularly when it allows the Executive Branch to speak on behalf of the U.S. to the international community on matters of trade and commerce." The court further held that, because the Section 123 action was in accordance with law, the department's use of this new approach in a Section 129 Determination taken to comply with the WTO decision was "not unlawful." In October 2010, the U.S. Court of Appeals for the Federal Circuit (CAFC), in a decision focused on the Section 129 claim, found that the department's Section 129 Determination "reflects Commerce's reasonable interpretation of an ambiguous statute" and affirmed the USCIT decision. In March 2011, however, the CAFC ruled in Dongbu Steel Co. v. United States that DOC's use of zeroing in administrative reviews while abandoning it in initial investigations was an arbitrary interpretation of the statute for purposes of Chevron step two, vacating and remanding the contrary USCIT judgment and remanding to DOC for further proceedings to enable DOC to explain its reasoning. The court found, in part, that the government's decision to implement an adverse WTO decision "standing alone does not provide sufficient justification for the inconsistent statutory interpretations." The court stated in summary: our prior case law does not address the situation at hand where Commerce has decided to interpret 19 U.S.C. §1677(35) differently based on the nature of the antidumping proceeding at issue. Applying Chevron step two to this ambiguous statute, we conclude that the agency has not provided a reasonable explanation for why the statute supports such inconsistent interpretations.... We accordingly vacate the decision of the Court of International Trade and remand for further proceedings to give Commerce the opportunity to explain its reasoning. It may be that Commerce cannot justify using opposite interpretations of 19 U.S.C. §1677(35) in investigations and in administrative reviews. Under such circumstances, Commerce is of course free to choose a single consistent interpretation of the statutory language. In a subsequent case, JTEKT Corp. v. United States , DOC explained to the CAFC that the reason for continuing to use zeroing in administrative reviews was that investigations and administrative reviews are "different proceedings with different purposes," with the dumping margin calculation in the former used to determine if an antidumping order will be imposed and the dumping margin calculation in the latter used to determine the amount of the duty assessment on entries subject to the order. In response, the court ruled in June 2011 that DOC had "failed to address the relevant question—why is it a reasonable interpretation of the statute to zero in administrative reviews, but not in investigations?"—and again vacated and remanded. The U.S. Court of International Trade remanded the case to the Commerce Department on December 15, 2011, ordering the department to issue a redetermination in which it reconsiders its decision in the administrative review at issue; to modify its decision or explain how the language of 19 U.S.C. §1677(35) may be construed differently as to the use of zeroing whether an original investigation or an administrative review is involved; and, if the department modifies its decision and decides not to apply zeroing or to make some other change, to redetermine the dumping margin for the exporter involved. The court stated that to be adequate under the CAFC standard articulated in Dongbu and JTEKT , discussed above, "any such explanation must identify a ' basis in the statute for reading 19 U.S.C. §1677(35) differently in administrative reviews than in investigations' … and must explain why the differences between antidumping investigations and antidumping administrative reviews, 'make it reasonable to continue zeroing in one phase, but not the other.'" In Union Steel v. United States , a February 2012 decision of the USCIT, the court accepted the department's more expansive explanation and upheld the continued use of zeroing in administrative reviews. The department provided three reasons for its different approaches: (1) zeroing has been was the department's "preferred method" and has been consistently upheld by the courts; (2) the difference in procedures was the result of the department's decision to comply with WTO decisions; and (3) there exist inherent differences in the nature and purpose of investigations and reviews. Regarding the third rationale, the department contrasted the fact that investigations focus on "overall pricing behavior of an exporter in order to establish an antidumping duty order" while reviews are used to set final rates to be used to assess antidumping duties. The court stated that, in reviews, "it is reasonable for the agency to look for more accuracy, which it achieves in some measure through monthly averaging, and also for the agency to look for the full measure of duties resulting therefrom, which it better achieves through zeroing." The court thus concluded that's "when it comes to reviews, which are intended to more accurately reflect commercial reality, Commerce is permitted to unmask dumping behavior in a way that is not necessary at the investigation stage." Considering these reasons in the context of a statute that is silent on the matter of zeroing, the court held that Commerce did not abuse its discretion in changing only its investigation methodology and acted reasonably in applying the antidumping statute to conform to the different purposes of the two. In November 1999, Japan challenged determinations made by the Department of Commerce (DOC) and the U.S. International Trade Commission (ITC) in an antidumping investigation of hot-rolled steel products from Japan initiated in 1998. Under Section 703 of the Tariff Act of 1930, 19 U.S.C. Section 1673, antidumping duties will be imposed if DOC determines that dumping exists, that is, that a product is sold, or likely to be sold, in the United States at less than its fair value, and ITC determines that the dumped imports cause, or threaten to cause, material injury to a domestic industry. At issue in the WTO case were the manner in which DOC calculated the dumping margins in these cases, that is, the amount by which the fair market or "normal" value of the product under investigation exceeded the export price, and elements of the affirmative material injury determination made by the ITC. DOC calculates dumping margins for individual exporters, as well as an "all others" rate for firms that are not investigated individually. Under Section 735(c)(5)(A) of the Tariff Act of 1930, 19 U.S.C. Section 1673d(c)(5)(A), the "all others" rate is to be based on rates determined for individually investigated producers, excluding any zero and de minimis margins (i.e., margins of less than 2%) and any margins determined "entirely" under "facts available." The department uses "facts available" whenever necessary information is not on the public record or any person involved in the investigation withholds requested information, fails to provide information in a timely manner, significantly impedes an investigation, or provides information that cannot be properly verified. When the department decides to use "facts available," it needs to determine what is the most appropriate information on which to base the dumping margin and whether a party has failed to cooperate in such a manner that an adverse inference against it is warranted. Also at issue was the test used by the United States to determine if sales were "in the ordinary course of trade" and therefore included in the calculation of normal value. The Antidumping Agreement requires that sales not made "in the ordinary course of trade" are to be excluded from this calculation, but the agreement neither defines this concept nor establishes a general test for determining whether sales fall within this category. In the case at hand, the "arm's length" pricing test used by the United States to determine whether sales made by exporters and producers to affiliated customers were "in the ordinary course of trade" was argued to unfairly exclude certain low-priced sales and therefore to increase normal value and consequently inflate the dumping margin for the goods under investigation. In 2001, the WTO panel, as upheld by the Appellate Body, found that the United States was in violation of the WTO Antidumping Agreement because (1) U.S. law requires, in effect, that any dumping margins based in part on "facts available" be used in calculating the "all others" rate; (2) the Commerce Department improperly applied "facts available" in calculating dumping margins for producers who were individually investigated; and (3) the department improperly determined the normal value of the goods under investigation due to the manner in which it determined whether sales were "in the ordinary course of trade." While the panel had focused on the "arm's length" test, the Appellate Body looked at the combined operation of two tests used by the department in determining whether goods were "in the ordinary course of trade"—the "arm's length" test and the related and even more limited "aberrationally high" test—finding a "lack of even-handedness" that disadvantaged exporters. As stated by the Appellate Body, the "combined application of these two tests operated systematically to raise normal value, through the automatic exclusion of marginally low-priced sales, coupled with the automatic inclusion of all high-priced sales, except those proved, upon request, to be aberrationally high priced." The Appellate Body reversed the panel on a related point, finding that the United States was not in violation of its WTO obligations regarding the calculation of normal value when it replaced home market sales to affiliates that were excluded under the "arm's length" test with downstream home market sales by the affiliates to independent purchasers. The Appellate Body also ruled against the United States with respect to the ITC's injury determination, reversing two panel findings favorable to the United States. First, in contrast to the panel, the AB found that ITC had not applied a provision of the antidumping statute addressing "captive production" consistently with the Antidumping Agreement. "Captive production" refers to the situation in which a domestic producer does not sell the domestic counterpart of the product under investigation to unrelated parties (the "merchant market") but instead processes it into a higher-value good downstream. Second, the AB determined that the ITC had not found a causal link between the dumped imports and material injury to the domestic industry involved. The AB also found, however, that there was an insufficient factual record to allow completion of the required causation analysis. The original compliance period in the case, which had been determined by arbitration, expired November 23, 2002. It was later extended until December 31, 2003, or the end of the 108 th Congress, first session, whichever was earlier, in order to facilitate full compliance. Addressing the normal value finding, the Commerce Department modified its "arm's length" test by establishing a price band covering a range of prices both below and above those charged by producers or exporters to non-affiliated companies and treating sales to affiliates within the band as being "in the ordinary course of trade" for purposes of determining normal value. It stated that the new methodology would be used to implement the WTO findings regarding the Japan hot-rolled steel AD proceeding, and applied in all investigations and reviews initiated on or after November 23, 2002. The department announced a new dumping determination in the AD proceeding at issue in December 2002, stating that in implementation of the WTO rulings and recommendations, it had recalculated dumping margins for three affected Japanese producers using the new methodology; addressed issues related to the use of adverse facts available; and recalculated the all-others rate based on the new rates for the respondent companies. The recalculations resulted in reduced dumping margins for the three companies as well for all other exporters. Although ITC findings were also faulted in the case, no action was taken by the ITC in response to the WTO decision. The WTO panel, as affirmed on appeal, also concluded that Section 735(c)(5)(A) of the Tariff Act of 1930 is inconsistent with Article 9.4 of the WTO Antidumping Agreement because it requires DOC to consider dumping margins based in part on facts available in determining the all-others rate, whereas Article 9.4 was found to require the exclusion of dumping margins based either in whole or in part on such facts. Absent legislative compliance by the United States, the December 2003 deadline referred to earlier was extended twice, most recently to July 31, 2005. The deadline lapsed without U.S. action. In an understanding between the disputing parties reached earlier in July 2005, Japan stated that it would not request authorization to retaliate at the time but might choose to do so in the future. No legislation has been introduced to amend Section 735(c)(5) of the Tariff Act since the 109 th Congress. H.R. 2473 (Shaw), 109 th Congress, 1 st Sess., would have amended Section 735(c)(5) to remove the word "entirely" each time it appears in the provision, thus enabling the Department of Commerce to exclude dumping margins based in whole or in part on facts available in determining the "all others" rate, as called for by the WTO decision. Although the text of H.R. 2473 was listed for possible inclusion in 109 th Congress miscellaneous tariff legislation, the bill was not made part of the tariff legislation nor was it acted upon as stand-alone legislation. Japan continues to seek legislative action, as the United States continues to state its support for legislative amendments that would achieve full compliance in the case. The United States has also submitted a proposal to the Doha Round Negotiating Group on Rules that Article 9.4 of the Antidumping Agreement be clarified to allow the invalidated practice. No revisions or clarifications of Article 9.4, however, were included in the draft texts of proposed revisions to the Antidumping Agreement circulated by the Chair of the Negotiating Group in November 2007 and December 2008. The Continued Dumping and Subsidy Offset Act (CDSOA) of 2000, also known as the Byrd Amendment, required that duties collected under an existing antidumping or countervailing duty order be distributed annually to petitioners and interested parties in the underlying antidumping or countervailing duty proceeding. Payments were available for "qualifying expenditures" in specified categories (e.g., manufacturing facilities or equipment) incurred by the petitioners and interested parties after the applicable antidumping or countervailing duty order was issued. To be eligible, petitioners and interested parties, referred to in the statute as "affected domestic producers," must also have remained in operation. Although the statute was held WTO-inconsistent in January 2003 and repealed, effective October 2005, by P.L. 109-171 , it remains the target of authorized sanctions by complainants European Union and Japan due to continued payments to U.S. firms under the CDSOA program. Eleven WTO members challenged CDSOA shortly after its enactment in October 2000 as violative of the WTO Antidumping Agreement, the WTO Agreement on Subsidies and Countervailing Measures (SCM Agreement), and other WTO obligations. The complainants based their argument in part on the prohibitions in Article 18.1 of the Antidumping Agreement and Article 32.1 of the SCM Agreement against Members' taking any "specific action against" dumping and subsidization, respectively, except for action taken in accordance with the GATT 1994 as interpreted by the Antidumping Agreement or the SCM Agreement. Two complaints were filed: DS217, filed jointly by Australia, Brazil, Chile, the European Union (EU), India, Indonesia, Japan, Korea and Thailand; and DS234, filed jointly by Canada and Mexico. Considering both complaints at the same time, the WTO panel found that the CDSOA did create an impermissible "specific action against" dumping and subsidization and that it provided a financial incentive for domestic producers to file or support antidumping and countervailing duty petitions, thereby undermining the industry support requirements in the Antidumping and SCM Agreements. At the same time, the panel rejected other arguments made by the complainants, including Mexico's claim that the act constituted a subsidy in and of itself. The Appellate Body upheld the panel's finding that the statute created a "specific action against" dumping and subsidization not allowed under WTO agreements, but reversed the panel on its conclusion regarding industry support requirements. The reports were adopted January 27, 2003, and the compliance period was subsequently determined by arbitration to expire December 27, 2003. Because the United States did not comply by the December 2003 deadline, eight complaining Members—Brazil, Chile, EU, India, Japan, Korea, Canada, and Mexico—asked the WTO in January 2004 for authorization to impose retaliatory measures. The United States objected to the requests, sending them to arbitration. The remaining three complainants—Australia, Indonesia, and Thailand—agreed to give the United States until December 27, 2004, to comply. In awards issued August 31, 2004, the Arbitrator determined that each of the eight Members could impose countermeasures on an annual basis in an amount equal to 72% of the CDSOA disbursements for the most recent year for which official U.S. data are available relating to antidumping and countervailing duties paid on imports from the Member at that time. The Arbitrator stated that the disbursements "operate, in economic terms, as subsidies that may generate import substitution production" and used an economic model to determine the level of nullification or impairment of benefits, or what the Arbitrator characterized as "a value of trade" affected by application of the CDSOA. The eight complainants received formal authorization from the DSB to impose retaliatory measures in late 2004. The EU and Canada began to impose countermeasures in the form of higher tariffs and surcharges on selected U.S. products, respectively, as of May 2005. Mexico began to impose $20.9 million in retaliatory tariffs effective August 18, 2005. In addition, Japan imposed additional tariffs of 15% on 15 categories of U.S. goods as of September 2005. In April 2006, the U.S. Court of International Trade ruled that the CDSOA did not apply to imports from Canada or Mexico, and on September 28, 2006, U.S. Customs and Border Protection (CBP) announced that it was withholding FY2006 and subsequent years' distributions on imports from the two countries pending the outcome of any appeal. Canada allowed its retaliatory tariffs to terminate as of April 30, 2006. Mexico, after a month's lapse, imposed increased tariffs on U.S. dairy products from September 18 through October 31, 2006. These tariffs surcharges have not been reimposed. A provision repealing the CDSOA as of October 1, 2005, but providing for the distribution of "duties on entries of goods made and filed before October 1, 2007," was enacted in the Deficit Reduction Act of 2005, signed by the President on February 8, 2006. While collection of antidumping and countervailing duties for purposes of CDSOA disbursal has thus ceased, duties will continue to be available for disbursement until all relevant customs entries before September 1, 2007, are liquidated, that is, the final assessment of duties on these entries is made. Following the 2006 enactment, the United States informed the WTO Dispute Settlement Body (DSB) that it had taken the actions necessary to implement the WTO rulings. Although complaining Members expressed support for the repeal, Members also stated their concerns that the requirement that duties be distributed through 2007 and possibly after this date would prevent the United States from complying fully with its WTO obligations in the case. While WTO Members have regularly called on the United States to cease payments under the CDSOA program, no Member has formally challenged the compatibility of the 2006 statute with U.S. WTO obligations. A December 2010 enactment, as amended, restricted the funds available for continued payments under the CDSOA program. Section 822 of the Claims Resolution Act of 2010, P.L. 111-291 , a provision included in the public law as a funding offset, provides that no payments may be distributed under the CDSOA with respect to entries of any goods that, on the date of enactment, that is, December 8, 2010, are (1) not liquidated and (2) not in litigation and not under an order of liquidation from the Commerce Department. The EU and Japan are continuing to impose retaliatory tariffs on U.S. products due to the continued CDSOA disbursements, albeit at diminishing levels due to the generally decreasing amount of duties available for distribution to U.S. firms. As of May 1, 2011, the EU removed 30 U.S. products from its retaliation list and suspended tariff concessions on only three products—sweet corn, glass frames, and crane lorries—for a total value of trade that does not exceed $9.96 million. Japan has reduced its retaliation as well, lowering tariffs on U.S. ball bearings and tapered roller bearings to 1.7% beginning September 1, 2011. In June 2011 CBP announced that approximately $25.1 million was preliminarily available for FY2011 disbursements, with approximately $18.2 million under review pursuant to amended Section 822, discussed above. In June 2003, the European Union (EU) requested consultations with the United States over the use of zeroing by the Commerce Department in determining dumping margins, arguing that the practice as it relates to original antidumping investigations and subsequent administrative, new shipper, changed circumstances, and sunset reviews was inconsistent "as such" with provisions of the WTO Agreement on Antidumping and Article VI of the GATT 1994. That is, complainants argued that the existence of the practice violated these agreements regardless of any specific application. The EU also alleged that the United States had acted inconsistently with its WTO obligations in applying zeroing in 31 specific cases, including 15 original investigations and 16 administrative reviews. The EU further claimed that insofar as dumping margins in original investigations should be calculated without the use of zeroing and some exporters may thus have de miminis dumping margins, these imports should be excluded from the volume of dumped imports that the ITC takes into account in determining whether such imports are causing material injury to domestic industry. The EU argued that WTO obligations require the United States to make this determination based only on the volume of imports remaining after this exclusion. A panel was established in March 2004. In a report issued October 31, 2005, the WTO panel found that zeroing, as applied in the weighted-average-to-weighted average price comparisons made in the 15 original investigations cited in the EU's complaint, was inconsistent with Article 2.4.2 of the Antidumping Agreement. This article provides, in pertinent part, that "[s]ubject to the provisions governing fair comparison in [Article 2] paragraph 4, the existence of margins of dumping during the investigation phase shall normally be established on the basis of a comparison of weighted-average normal value of prices of all comparable export transactions or by a comparison of normal value and export prices on a transaction-to-transaction basis." The panel based its conclusion on Appellate Body rulings in earlier cases that "when a margin of dumping is calculated on the basis of multiple averaging by model type, the margin of dumping for the products in question must reflect the results of all such comparisons , including weighted average export prices that are above the normal value for individual models." The Appellate Body had earlier concluded that the term "dumping" in WTO agreements is defined "in relation to a product as a whole" and that, as a result, dumping can thus be found to exist "only for the product under investigation as a whole" and not solely "for a type, model, or category of that product." Thus, in considering the U.S. multiple averaging technique in light of WTO obligations, the Appellate Body concluded that the only was that a dumping margin could be properly established for the product as a whole would be to aggregate " all of the 'results' of the multiple comparisons for all product types." The panel also found that zeroing, as it relates to original investigations, was a "well established and well-defined norm" that could be challenged "as such" in a WTO dispute even though it was not in written form, and that, with respect to its use in weighted-average-to-weighted-average price comparisons in original investigations, the norm "as such" was inconsistent with Article 2.4.2. The panel rejected the EU's claims regarding the application of zeroing in the 16 administrative reviews cited by the EU, as well as on the use of zeroing "as such" in administrative reviews, new shipper reviews, changed circumstances reviews, and sunset reviews. One dissenting panelist would have struck down the use of the practice in proceedings other than original investigations, however. The panel did not address EU claims involving the need for a new injury determination based on excluded imports, viewing this as a dependent claim and finding that any conclusion would not provide the United States with additional guidance as to how to remedy the primary violation. The panel report was appealed by the United States and the EU. While the United States appealed the panel's finding that zeroing was a challengeable norm, it did not appeal the panel's conclusion that the use of zeroing in weighted-average-to-weighted-average price comparisons in the cited original investigations violated the Antidumping Agreement. On April 18, 2006, the Appellate Body found, although on different grounds from the panel, that the zeroing methodology could be challenged "as such" as it relates to original investigations and upheld the panel's finding that the practice is inconsistent with Article 2.4.2 of the Antidumping Agreement. The AB also expanded the range of proceedings in which zeroing was prohibited, finding, contrary to the panel, that the United States could not use zeroing in making weighted-average-to-transaction comparisons to assess duties and set cash deposit rates in the 16 administrative reviews challenged by the EU. The AB found that the application of zeroing in these reviews violated Article 9.3 of the Antidumping Agreement and Article VI:2 of the GATT 1994 since the practice resulted in the imposition of antidumping duties that exceeded the exporters' or producers' dumping margins. Article 9.3, which sets out obligations regarding the assessment of antidumping duties, provides that the "amount of the anti-dumping duty" imposed by a WTO Member "shall not exceed the margin of dumping as established under Article 2" of the Agreement. Article VI:2 of the GATT 1994 provides that a WTO Member may impose an antidumping duty on a dumped product "no greater in amount than the margin of dumping in respect of such product." The Appellate Body did not determine whether the use of zeroing in these reviews was "as such" inconsistent with WTO obligations, however, due to insufficient facts in the panel record to complete this analysis. The AB report, which also addressed other issues, and the modified panel report were adopted on May 9, 2006. While the United States vigorously disputed the Appellate Body decision, it stated at a subsequent DSB meeting that it intended to comply. The disputing parties later agreed on an implementation deadline of April 9, 2007. Shortly before the AB report was issued, DOC had announced in the Federal Register that, in response to the WTO panel report, it would abandon the use of zeroing in weighted-average-to-weighted-average comparisons in antidumping investigations and was seeking comments on alternative approaches that might be appropriate in future investigations. The department noted that the United States had not appealed the panel's finding that the zeroing could not be used in making such comparisons in the specific antidumping investigations challenged by the EU. On December 26, 2006, the department, following the requirements in Section 123 of the Uruguay Round Agreements Act (URAA), published a Federal Register notice stating that it was modifying its antidumping practice as announced earlier, noting that the modification would be used in implementing the findings of the WTO panel pursuant to Section 129 of the URAA with regard to the specific antidumping investigations challenged by the EU in the dispute and, moreover, that it would apply the modification in all current and future antidumping investigations as of the effective date, which at the time was planned for January 16, 2007. The department later extended the date to January 23, 2007, and then to February 22, 2007, noting each time that it was acting "[a]fter further consultations with Congress and in order to afford adequate time for review." The department also announced on February 22, 2007, that it was initiating Section 129 proceedings in which it would implement the WTO ruling with respect to 12 of the 15 original antidumping investigations cited by the EU, three of the cited AD orders having been revoked. On April 9, 2007, the Department of Commerce issued new Section 129 Determinations in 11 of the proceedings using average-to-average comparisons in which offsets were provided, two of which resulted in findings of no dumping. DOC also postponed its determination in the 12 th investigation, a proceeding involving stainless steel products from Italy, as it was investigating a possible clerical error in the original investigation alleged by the respondent. Recalculations were done without the use of zeroing as provided in the modification originally announced in December 2006. Regarding the administrative reviews at issue in the dispute, the United States stated that since they had been superseded by new administrative reviews, it did not need to take any further action to bring these reviews into compliance with the WTO decision. The USTR instructed DOC to implement the new determinations on April 23, 2007. While the United States considered itself in compliance, the EU questioned the prospective nature of the new determinations, that is, that they did not cover duties on goods entered before the date the Section 129 Determinations were implemented; claimed that DOC had "massively increased the 'all others' rate (applicable to exporters who do not have an individual duty rate, notably new exporters)"; and stated that the United States was obligated to review the dumping margins in the 16 challenged administrative reviews, claiming that to its knowledge the United States had not taken any action to bring these reviews into compliance with the WTO decision. On May 4, 2007, the United States and the EU entered into a procedural agreement regarding possible Article 21.5 compliance panel proceedings and the sequencing of a possible retaliation request in the event the United States was found not to have complied in the case. The EU requested consultations with the United States under Article 21.5 in July 2007. In September 2007, DOC issued a new determination in the outstanding antidumping case involving steel products from Italy, finding that the alleged clerical errors were not raised in the WTO dispute and thus were outside the scope of the Section 129 proceeding. The EU requested a compliance panel in September 2007, claiming that the United States had failed to take compliance actions in some cases and that measures that it had taken in others were inconsistent with WTO obligations. In its panel request, the EU cited specific administrative reviews and sunset reviews undertaken by the United States in the 15 original investigations and 16 administrative reviews that were successfully challenged in the original proceeding. The EU also claimed that United States violated its WTO obligations in those cases where it had recalculated dumping margins in original investigations without the use of zeroing, found that some exporters were not dumping or had de miminis margins, and maintained the antidumping order without determining whether the remaining amount of dumped goods were causing material injury to domestic industry. The compliance proceeding was complex not only because of the number of U.S. antidumping determinations that the EU claimed were WTO-inconsistent, but also because of the interaction of the retrospective U.S. duty system with what has generally been considered to be the prospective nature of remedies in a WTO dispute. As described by the WTO Appellate Body, the WTO dispute settlement system is one under which "compliance has to be accomplished at the latest from the end of the reasonable period of time [i.e. the compliance period] with prospective effect." At the same time, due to the U.S. retrospective system, there were goods that had entered the United States before the date on which the compliance period ended but for which final duty assessments would not be made until after this date, or for which final assessments were made before this date, but the duties were not collected until after the period expired. While the United States and the EU agreed that the WTO Dispute Settlement Understanding provides only for prospective remedies, the parties disagreed on what this entailed for the United States with regard to these earlier-entered goods. Questions also arose as to whether dumping determinations made in a phase of the proceeding that occurred after the one at issue in the original WTO dispute were considered measures taken to comply or whether they were properly before the panel for other reasons. Some of the challenged determinations, which had been rendered in original investigations, were the subject of later administrative or sunset reviews. In addition, the challenged administrative reviews had been superseded by determinations made in subsequent administrative reviews. Further, the United States had taken new action in some of the challenged proceedings before the panel and Appellate Body reports were issued. The United States argued that administrative reviews of challenged dumping determinations made in original investigations were not measures taken to comply with the WTO decision and thus outside the panel's terms of reference. In its view, the compliance panel could only review whether the original determination now complied with the WTO decision and could not examine whether the United States had employed zeroing in the subsequent review. The United States made the same argument with regard to administrative reviews that occurred after those that were challenged in the dispute and protested the inclusion of sunset reviews of challenged determinations as well. As noted above, the United States maintained that since the challenged administrative reviews had been superseded by later reviews, the United States was not required to take any action to ensure that the challenged determinations were in compliance. The EU argued that under this approach, the EU would need to initiate a new dispute settlement proceeding for each subsequent administrative review with which it disagreed, thus allowing the United States to avoid permanent compliance with a WTO decision as it related to a specific investigation or review that was successfully challenged. In addition, the United States had undertaken sunset reviews of some of the challenged original determinations and administrative reviews prior to the adoption of the panel and Appellate Body reports by the Dispute Settlement Body, actions that the EU claimed could not be considered measures taken to comply with the WTO rulings and recommendations in these reports. In December 2008, the panel issued a mixed report regarding U.S. compliance, which the EU appealed. In a report issued May 20, 2009, the Appellate Body found that the United States remained out of compliance with its WTO obligations in a variety of respects. Regarding whether actions taken by the United States before the panel and Appellate Body reports were adopted were within the panel's terms of reference, the Appellate Body, reversing the panel, found that measures taken before this date were potentially reviewable as compliance measures. The Appellate Body found that the relevant inquiry was not whether the measures were intentionally taken to comply, but instead whether they each had a "sufficiently close nexus, in terms of nature, effects, and timing ," with the WTO decision and with the declared measures that were in fact taken to comply. The AB found that of the five sunset reviews that met this test determinations in four of these, having relied on dumping margins calculated with the use of zeroing, were inconsistent with WTO obligations; no findings were made on the fifth. Regarding whether subsequent administrative and sunset reviews of challenged measures were amenable to review, it was determined in the compliance proceeding that administrative reviews involving the calculation of a dumping margin based on zeroing and subsequent sunset reviews in which DOC relies on dumping margins calculated with the use of zeroing, could potentially fall within the scope of the compliance proceeding, This conclusion was based on two grounds: (1) the "close nexus that exists in terms of their nature" between the subsequent reviews and measures at issue in the original dispute and (2) the fact that "the subsequent reviews potentially affect or undermine the steps otherwise taken—or the steps that should have been taken—by the United States to comply with the recommendations and rulings of the DSB, notably in the form of Section 129 determinations." The panel had noted that the use of zeroing in an administrative review of an original determination could potentially negate the results of a Section 129 determination in which the dumping margin was calculated without its use, thus undoing an action taken to comply with the WTO decision. Further, regarding the scope of U.S. obligations involving imports entering the United States before the end of the compliance period, the Appellate Body agreed with the panel that the calculation of dumping margins in administrative reviews, or "definitive duty determinations," that occurred after the end of the compliance period, but that involved imports entered before this date, could not be made with the use of zeroing. Contrary to the panel, however, the Appellate Body determined that duties could not be collected after the end of compliance period consistently with WTO obligations if they are based on dumping margins calculated with the use of zeroing during administrative reviews that occur before the end of the compliance period. The panel had found entries could be liquidated on the basis of a zeroing-based dumping determination without violating WTO obligations even though actions taken by the United States after the compliance deadline would ordinarily be expected to comply with the WTO decision. The Appellate Body found that any measures that "derives mechanically " from the assessment of duties, as is the case with the collection (or liquidation) of antidumping duties, would not be WTO-compliant to the extent they are based on zeroing and are applied after the compliance deadline expires. Before drawing these conclusions, the AB had generally noted that, with respect to the original determinations and administrative reviews in which the use of zeroing was challenged "as applied," the assessment of a final duty for previously imported goods in an administrative review also affects the cash deposit rate for certain future imports, a situation that has implications for the administrative reviews not directly at issue in the case. Thus, in light of the prospective nature of WTO remedies, "compliance is not confined by the limited duration of the original measures at issue, especially when a subsequent measure replaces or supersedes the measure at issue in the original proceeding." The panel and AB made various findings regarding the inconsistency of particular determinations challenged by the EU with the obligation to eliminate zeroing. Further, the panel, in an issue not reviewed by the AB, determined that, with regard to four original determinations for which Section 129 determinations were issued, the United States violated the Antidumping Agreement by not revisiting its ITC material injury determinations due to revised import volumes. In some cases, the recalculated dumping margins had led to findings of no dumping or de minimis margins for particular exporters and thus the panel found that, in these four cases, the United States was obligated to reconsider whether dumped imports were causing material injury to domestic industry using import volumes that excluded these non-dumped and de minimis imports. The adverse Appellate Body report and the modified compliance panel report were adopted on June 11, 2009. With the compliance panel proceeding completed, the EU has stated that the United States is required to comply "without delay" by recalculating dumping margins without the use of zeroing in the numerous dumping determinations faulted in the case and then collecting duties at the recalculated rates. At the same time, the United States has raised concerns about what it views as the expanded scope of U.S. obligations in the case. On February 2, 2010, the EU requested authorization from the WTO Dispute Settlement Body to suspend WTO tariff concessions owed the United States for non-compliance in the case. The EU proposed either a "a prohibitive tariff (such as, for example, 100%) on a specified annual value of trade from the United States to the European Union; or of an equivalent ad valorem tariff on an equivalent annual value of trade." In the first scenario, the prohibitive tariff would be applied to an annual value of trade from the United States to the EU of $311 million; in the second scenario, an ad valorem tariff of 13.18% would be applied to an annual value of trade of $477 million. The United States objected to the EU's request, automatically sending it to arbitration. At the request of the parties, the arbitration was suspended as of September 8, 2010, upon the understanding that the United States would take action "in the foreseeable future" to comply fully with its obligations in the case. The suspension could last up to one year, but might also be terminated by either party before then. The Arbitrator stated that if a request for resumption of the arbitration had not been received by September 7, 2011, the Arbitrator's report would be circulated on September 15, 2011. The United States and the European Union subsequently asked for further suspensions, with these dates now extended to June 28, 2012, and July 12, 2012, under a February 2012 bilateral agreement, discussed below, aimed at ultimately resolving the dispute. To respond to outstanding WTO dispute settlement issues, the Commerce Department issued a proposed rule on December 28, 2010, to eliminate the use of zeroing in administrative reviews, new shipper reviews, and expedited administrative reviews. While the department had been making price comparisons in administrative, new shipper, and expedited administrative reviews using transaction-specific export prices and average normal values without offsets for export prices that exceeded normal value, it would now use average-to-average comparisons and provide offsets for non-dumped sales "in a manner that parallels the WTO-consistent methodology" that DOC has been using since 2007 in original antidumping investigations. As stated by the department, unless the department determined that a different price comparison was "more appropriate," the department proposed "to compare monthly weighted average export prices with monthly weighted average normal values and to grant an offset for such comparisons that show export price exceeds normal value" in calculating both the weighted average margin of dumping and the duty assessment rate." Antidumping duties will not be assessed if the weighted average margin is zero or de minimis . Further, if the use of transaction-to-transaction price comparisons in any prior original investigations "could be considered as establishing a practice of the Department" with respect to use of zeroing when calculating the weighted average margin of dumping, an issue arising in Japan's challenge in DS322 (see discussion later in this report), the department proposes "to withdraw any such practice." Regarding the WTO-inconsistency of U.S. practice in five-year sunset reviews, the Commerce Department has stated the following: the Department notes that the underlying issue is the methodology for calculating weighted average dumping margins in investigations and reviews, which is addressed by the modifications the Department has made with respect to investigations and is proposing herein to make with respect to reviews. Moreover, the Department recognizes that while section 752(c) of the [Tariff] Act [of 1930] provides that the Department shall consider the weighted average dumping margins determined in the investigation and subsequent reviews, among other factors, the Act does not require that Department to rely on the weighted average dumping margins, or any particular weighted average dumping margin, as the basis for its determinations in five-year (sunset) reviews where such reliance would render the determination inconsistent with the United States international obligations. The comment period on the proposal closed on February 18, 2011. At 2011 meetings of the WTO Dispute Settlement Body, the EU and Japan responded positively to the U.S. proposal to eliminate the use of zeroing as a general practice in reviews, but indicated that they will not consider the United States to be in full compliance with its WTO obligations unless the United States ceases the collection of zeroing-based duties under existing antidumping orders and, as argued by the EU, refunds zeroing-based duties collected after the termination of the compliance period in the cases brought by the EU. On February 6, 2012, the United States and the EU signed a Memorandum providing a "roadmap" for conclusively resolving both DS294 and the EU's subsequent zeroing dispute, DS350. Under the plan, the United States: (1) by February 13, 2012, was to have completed its internal regulatory procedures under Section 123 of the Uruguay Round Agreements Act and issued a final version of the modification of antidumping practices regarding the use of zeroing in later phases of antidumping proceedings proposed by the Commerce Department in December 2010; (2), by February 18, 2012, was to have begun Section 129 proceedings for eight antidumping proceedings enumerated in the Memorandum using the revised methodology with the aim of revising the current cash deposit rates, which were established as a result of past zeroing-based administrative reviews; and (3) by June 6, 2012, is to issue final dumping determinations in the eight cited proceedings. The Section 129 proceedings are to be completed within seven days after the Department of Commerce issues its final determinations; the proceedings will be considered to be completed on the day that the USTR directs the Commerce Department to implement "each and every [listed] section 129 determination … that would result in a change in the current cash deposit rate." If the Section 129 deadlines are met, the EU and the United States will continue the suspension of the arbitration of the EU's retaliation request in DS294 until the arbitrator notifies the WTO that it is not necessary to render an award. Additionally, within 15 days after the United States completes the above-mentioned Section 129 proceedings, the EU is to withdraw its retaliation request, and the United States and the EU, by joint letter to the arbitrator, are to note that the EU has taken this action, inform the arbitrator that the United States accordingly no longer objects to the request, and request that the arbitrator notify the DSB that it is not necessary to issue an award in the proceeding. The arbitrator has notified the WTO that, if the EU does not submit a request in writing to the arbitrator by June 28, 2012, to terminate the arbitration, the suspension will automatically terminate, the arbitrator will resume work on June 29, 2012, and the arbitral decision will be circulated on July 12, 2012. In furtherance of the U.S.-EU Memorandum, the Commerce Department Final Rule and Final Modification for Reviews (FMR), reflecting the department's December 2010 proposal, was approved on February 7, 2012, and published in the Federal Register of February 14, 2012. The Final Rule and FMR, under which the department will terminate the use of zeroing in calculating dumping margins and the antidumping duty rates in administrative reviews, new shipper reviews, expedited administrative reviews, and sunset reviews, are effective April 16, 2012, with the modification applicable to preliminary dumping determinations in administrative reviews issued after that date. While the EU had sought revisions in antidumping determinations using zeroing issued after the compliance periods had ended, and possible refunds of antidumping duties imposed, the Memorandum is prospective in nature, as indicated above. The department noted again, however, that, as is the case with original investigations, it will determine on a case-by-case basis whether it is appropriate to use a price comparison methodology in administrative, new shipper, and expedited administrative reviews other than the average-to-average method. Regarding five-year sunset reviews, the department stated that it would modify its practice so that it would no longer rely on weighted-average dumping margins that were calculated using the methodology that the Appellate Body found to be inconsistent in the two cases brought by the EU and the case brought by Japan, but that "only in the most extraordinary circumstances will the department rely on margins other than those calculated and published in prior determinations," as provided in current regulations. In November 2004, Japan instituted a broad challenge of the use of zeroing by the United States, claiming in its subsequent panel request that the use of this practice in original antidumping investigations, administrative reviews (referred to in the case as "periodic reviews"), new shipper reviews, sunset reviews, and changed circumstances reviews was in violation of obligations in the WTO Antidumping Agreement. Japan also challenged zeroing as applied in 15 specific antidumping proceedings, including one original investigation, 12 administrative reviews, and two sunset reviews. The cited cases involved imports of steel plate and steel flat products, as well as roller, ball, spherical plain, and antifriction bearings. In addition, Japan challenged subsequent material injury determinations made by the U.S. International Trade Commission based on dumping margins determined through zeroing and made further claims regarding sunset reviews and changed circumstances reviews in which determinations were based on dumping margins obtained in this way. In a report circulated September 20, 2006, the WTO panel concluded that zeroing, when used by DOC in weighted-average-to-weighted-average comparisons in original antidumping investigations and consequently, the use of zeroing in the one original investigation cited by Japan, were inconsistent with Article 2.4.2 of the Antidumping Agreement. As in DS294, discussed above, zeroing was found to be a norm that could be challenged "as such" in a WTO dispute settlement proceeding. At the same time, the panel rejected Japan's claims that the use of zeroing in transaction-to-transaction comparisons and weighted-average-to-transaction comparisons in original investigations, its use administrative reviews and new shipper reviews, its application in the 11 cited administrative reviews was violative of the Antidumping Agreement. The panel also found that Japan had failed to make a prima facie case that the use of zeroing in changed circumstances reviews and sunset reviews violated WTO obligations. The panel also rejected Japan's claims that the ITC had improperly relied on dumping margins calculated in previous proceedings in the two sunset reviews cited by Japan. Both Japan and the United States appealed the decision. In a ruling issued January 9, 2007, the Appellate Body upheld the panel's findings that zeroing could be challenged "as such," but went further in finding that U.S. measures did in fact constitute "as such" violations of the WTO antidumping obligations. The Appellate Body found that, in maintaining zeroing procedures in transaction-to-transaction comparisons in original investigations, the United States was in violation of Articles 2.4 of the Antidumping Agreement, which requires that a "fair comparison ... be made between the export price and the normal value," and Article 2.4.2 of the Agreement, which as noted earlier, provides that "[s]ubject to the provisions governing fair comparison in paragraph 4, the existence of margins of dumping during the investigation phase shall normally be established on the basis of a comparison of weighted-average normal value of prices of all comparable export transactions or by a comparison of normal value and export prices on a transaction-to-transaction basis." The Appellate Body further found that by maintaining zeroing procedures in administrative reviews, the United States acted inconsistently with Article 2.4 of the Antidumping Agreement, Article 9.3 of the Agreement, which provides that amount of the antidumping duty actually assessed "shall not exceed the margin of dumping" as determined under Article 2 of the Agreement, and Article VI:2 of the GATT 1994, which provides that a WTO Member may impose an antidumping duty on a dumped product "no greater in amount than the margin of dumping in respect of such product." The Appellate Body also found that, by using zeroing in new shipper reviews, the United States was out of compliance with Articles 2.4 and 9.5 of the Antidumping Agreement, the latter setting out requirements for such reviews. In addition, the Appellate Body upheld Japan's "as applied" claims, finding that the United States had acted inconsistently with Articles 2.4 and 9.3 of the Antidumping Agreement and Article VI:2 of the GATT 1994 by applying zeroing in the 11 administrative reviews cited by Japan. The Appellate Body also determined that, in relying on zeroing-based dumping margins in two cited sunset reviews, the United States had acted inconsistently with Article 11.3 of the Antidumping Agreement. Article 11.3 requires that duties be terminated after five years unless authorities determine in a review "that the expiry of the duty would be likely to lead to continuation or recurrence of dumping and injury." The Appellate Body had found in an earlier dispute that WTO Members are not required to rely on dumping margins in making this determination, but that, if Members choose to do so, they must calculate the margin in conformity with the requirements of Article 2.4 of the Agreement. If not, the "likelihood" determination would not serve as a proper foundation for maintaining the duty under Article 11.3 The Appellate Body found in the instant case that the United States, in making its sunset determinations, had relied on zeroing-based margins calculated in earlier administrative reviews. Since the Appellate Body had also found that the use of zeroing in such reviews is inconsistent "as such" with Articles 2.4 and 9.3 of the Antidumping Agreement, it concluded that reliance on these margins in the sunset reviews thus violated Article 11.3. The Appellate Body report and the panel report, as modified, were adopted by the DSB at its January 23, 2007, meeting. The United States, while once again disputing the Appellate Body's reasoning, told the DSB on February 20, 2007, that it intended to comply with its WTO obligations in the case and that it needed a reasonable period of time to do so. It later circulated a critical analysis of the Appellate Body decision to WTO Members. While Japan had originally requested the compliance period be arbitrated, the parties later agreed on a compliance period ending December 24, 2007. In its December 7, 2007, WTO status report on the case, the United States made reference to the modification adopted by the Commerce Department in February 2007 under which zeroing would no longer be used in weighted average-to-weighted average comparisons in original investigations and stated only that is was "continually to consult internally on steps to be taken with respect to the other DSB recommendations and rulings." While the Department of Commerce had initiated a proceeding under Section 129 of Uruguay Round Agreements in November 2007 regarding the challenged original investigation, a proceeding involving certain steel plate products, and publicly released final results on December 27, 2007, it took no final action to comply by the December 24 deadline. In January 2008, Japan requested authorization to retaliate by imposing additional import duties on selected products in an initial annual amount of $181.2 million. While the subsequent U.S. objection sent Japan's request to arbitration, the disputing parties entered into a procedural agreement in March 2008 under which Japan was permitted to request a compliance panel without first seeking consultations and, if it made such a request, its retaliation request would be suspended. Under the procedural agreement, either party may request that the arbitration resume in the event that the compliance proceeding results in a finding that U.S. compliance measures are inadequate or non-existent or "there is no disagreement" between Japan and the United States that "a measure taken to comply does not exist" with respect to certain U.S. actions that were successfully challenged in the original dispute. The United States maintained in a status report to the Dispute Settlement Body and in a DSB meeting held on January 21, 2008, that it was in compliance in the case because it was no longer making average-to-average price comparisons in original investigations without offsets, it had issued a revised dumping determination using this methodology in the one challenged original investigation, and it did not need to take action with respect to the challenged administrative reviews because they had been superseded by subsequent reviews. As provided for in the U.S.-Japan procedural agreement, Japan requested a compliance panel on April 7, 2008, stating that the United States was in violation of its WTO obligations by not having fully complied with respect to the one original investigation at issue; by continuing to use zeroing in transaction-to-transaction comparisons in original investigations, administrative reviews, and new shipper reviews; by applying zeroing in five of the administrative reviews originally challenged by Japan and as well as in three "closely connected" administrative reviews that the United States argued had superseded earlier reviews; and by relying on zeroing in one of the originally challenged sunset reviews and a subsequent sunset review of the same antidumping duty order. The compliance panel was established on April 18, 2008. On June 6, 2008, the United States and Japan asked the arbitration panel that was reviewing Japan's January 2008 retaliation request to suspend its work. In the interim, DOC, on May 20, 2008, announced the results of the Section 129 proceeding involving the challenged original investigation, stating in the Federal Register that it had recalculated the affected dumping margins, arriving at slightly reduced rates, which, at the direction of the U.S. Trade Representative, went into effect on April 8, 2008. The compliance panel issued its report on April 20, 2009, finding that the United States had not complied with its WTO antidumping obligations in the administrative reviews cited by Japan and in maintaining zeroing in transaction-to-transaction comparisons in original investigations and in any price comparison used in administrative and new shipper reviews. While the United States had argued that it did not have compliance obligations with respect to five of the reviews because the covered goods had entered the United States before the end of the compliance period, the panel found that the United States was required to bring the importer-specific assessment rates determined in these reviews into compliance with its WTO obligations by the end of the compliance period. The panel also addressed a situation that had not been ruled upon in DS294—that is, one in which duties are assessed before the end of the compliance period, but liquidation instructions are delayed because of injunctions issued under domestic judicial proceedings challenging the assessment—and found that the fact that the delay was due to litigation was of no consequence to compliance with the WTO obligations in the case. The panel further determined that the United States had violated GATT Article II prohibitions on imposing tariff surcharges on goods subject to negotiated tariff rates (so-called "bound items") by issuing WTO-inconsistent liquidation instructions in four challenged administrative reviews involving ball bearing products after the compliance period expired. These reviews were among the five with delayed liquidations because of pending litigation. While the panel had agreed with the United States that the Article II claims were derivative of Japan's claims under the Antidumping Agreement, it nonetheless found it appropriate to rule on them because "they raise an important point of contention between the parties regarding the right of the United States to continue liquidating entries after the expiry of the RPT [reasonable period of time] on the basis of liquidation measures issued pursuant to administrative reviews that have already been found to be WTO-inconsistent." The panel additionally concluded that the United States was out of compliance with its WTO obligations by not withdrawing or modifying the likelihood of dumping determination in the challenged 1999 sunset review in which the United States had relied on zeroing-based dumping margins. The United States appealed the adverse compliance panel report in May 2009. In a report issued August 18, 2009, the Appellate Body upheld the compliance panel on all issues appealed, including against U.S. claims regarding the judicial delay of liquidation and violations of GATT Article II. The Appellate Body emphasized that all antidumping duties collected after the end of the compliance period needed to be calculated without the use of zeroing. Among other things, it upheld the panel's dismissal of the U.S. argument that judicial delay of liquidation permits the collection of zeroing-based antidumping duties after the compliance period expires, stating, inter alia, that it was "not persuaded that the initiation by private parties of domestic judicial proceedings is relevant for determining the scope of the United States compliance obligations in this case." The Appellate Body and compliance panel reports issued in the Article 21.5 proceeding were adopted by the WTO Dispute Settlement Body on August 31, 2009. At the meeting, the United States referred Members to its earlier public statements regarding its intent to comply in all the WTO zeroing disputes and stated that it was "working actively to implement these recommendations and rulings, including those made in other disputes for which the reasonable period of time … is still ongoing." The United States added, however, that in its view the appeal of the compliance panel report in this case "was not about zeroing but rather concerns what a Member with a retrospective antidumping system must do to come into compliance with the DSB's recommendations and rulings with respect to individual administrative reviews" and that the dispute in addition "raised important procedural issues as to the scope of dispute settlement proceedings." Noting the prospective nature of WTO remedies, the United States cited the systemic implications of applying obligations under a WTO decision to governmental actions involving goods that enter the defending Member's customs territory before the end of the compliance period, an approach that, in its view, could be taken toward all border measures imposed on imports, including ordinary tariffs. It also took issue with Appellate Body's finding that the obligation not to use zeroing applied to duty liquidations that take place after the expiration of the compliance period where the liquidation is delayed due to litigation, as well as the Appellate Body's affirmance that a particular administrative review could be reviewed by a compliance panel even though the proceeding was not in existence at the time that Japan made its panel request. In April 2010, Japan requested that arbitration of the sanctions proposal it had made in January 2008 be resumed. The arbitration, which was requested by the United States, had been suspended since June 2008 following Japan's request for a compliance panel. Under the U.S.-Japan procedural agreement in the case, Japan had reserved the option to resume the arbitration once the compliance panel process was completed, assuming, as here, that Japan prevailed before the panel and Appellate Body. On December 10, 2010, the United States and Japan asked the arbitrator to suspend its work once again on the ground that the parties were entering into informal discussions on the implementation of the WTO decisions in the case. The suspension could be terminated at any time at the request of either party; further, the arbitrator would automatically resume its work on September 8, 2011, unless Japan submitted a written communication to the contrary by September 7, 2011. At the request of the disputing parties, the latter date has been extended four times, most recently to January 31, 2012. To address outstanding issues in the case, the Commerce Department, on December 28, 2010, issued a proposed rule to eliminate the use of zeroing in administrative reviews, new shipper reviews, and expedited administrative reviews and to withdraw the use of zeroing in transaction-to-transaction price comparisons in original investigations to the extent that this activity may be considered a WTO-inconsistent "practice." The proposal also implies that zeroing-based dumping margins will no longer be used in sunset reviews. For further discussion, see the entry for "Commerce Department's Proposed Zeroing Rule (December 2010)," under DS294. On February 6, 2012, the United States and Japan signed a Memorandum of Understanding (MOU) setting out a series of steps to be taken by the parties for conclusively resolving the dispute. Similar to the EU-U.S. Memorandum discussed above, the United States: (1) by February 13, 2012, was to have completed its internal regulatory procedures under Section 123 of the Uruguay Round Agreements Act and issued a final version of the Commerce Department's December 2010 regulatory modification terminating the use of zeroing; (2) by February 18, 2012, was to have begun Section 129 proceedings for the antidumping order on Japanese stainless steel products cited in the memorandum using the revised methodology with the aim of revising the current cash deposit rate, which was established as a result of past zeroing-based administrative reviews; and (3) by June 6, 2012, is to issue a final dumping determination in the cited proceeding. The section 129 proceeding on Japanese steel is to be completed within seven days after the Department of Commerce issues its final determinations. If there is a change in the cash deposit rate, the proceeding will be considered completed on the date the USTR directs the Commerce Department to implement the final determination; if there is no change, the proceeding will be completed when the section 129 determination is issued. The United States has also agreed to recalculate the dumping margin in a an antidumping order on antifriction bearings from Japan within a specified time frame if an existing revocation of the order is not upheld by U.S courts. If the Section 129 deadlines are met, Japan and the United States will continue the suspension of the arbitration of Japan's retaliation request until the arbitrator notifies the WTO that it is not necessary to render an award. Additionally, no later than six months after the MOU was signed, Japan is to withdraw its retaliation request and the United States and Japan, by joint letter to the arbitrator, are to note that the Japan has taken this action, inform the arbitrator that the United States accordingly no longer objects to the request, and request that the arbitrator notify the DSB that it is not necessary to issue an award in the proceeding. The arbitrator has notified the WTO that, if Japan does not submit a request in writing to the arbitrator by August 20, 2012, to terminate the arbitration, the suspension will automatically terminate and the arbitrator will resume work on the following day. In furtherance of the MOU, the Commerce Department Final Rule and Final Modification for Reviews (FMR), reflecting the department's December 2010 proposal, was approved on February 7, 2012, and published in the Federal Register of February 14, 2012. For further discussion of the Final Rule, see " Recent Developments " under DS294. Mexico challenged (1) the use of model zeroing by the United States in original antidumping investigations, both as such and as applied in an original investigation of Mexican stainless steel sheet and strips in coils and (2) the use of simple zeroing in annual administrative reviews, both as such and as applied in five administrative reviews in the antidumping proceeding involved. A panel report issued December 20, 2007, concluded that model zeroing, as used in original investigations, was inconsistent with Article 2.4.2 of the Antidumping Agreement, both as such and as applied in the cited antidumping investigation. The panel ruled in favor of the United States, however, in finding that the use of simple zeroing, either as such or as applied in the cited administrative reviews, was not inconsistent with the GATT Article VI or the Antidumping Agreement. In an appeal by Mexico, the Appellate Body issued a report on April 30, 2008, in which it reversed the panel's findings on the use of simple zeroing, finding, as it had in earlier disputes, that the use of this practice in administrative reviews, both as such and as applied in cited antidumping cases, was inconsistent with Article VI:2 of the GATT and Article 9.3 of the Antidumping Agreement. The Appellate Body also criticized the panel for not adhering to earlier Appellate Body rulings on this issue, stating that, although it was "well settled that Appellate Body reports are not binding, except with respect to resolving the particular dispute between the parties," this principle "does not mean that subsequent panels are free to disregard the legal interpretations and the ratio decidendi contained in previous Appellate Body reports that have been adopted by the DSB." Examining the use made of panel and Appellate Body reports in subsequent disputes and by WTO Members in enacting laws and issuing regulations, and the role played by the Appellate Body in the WTO dispute settlement system vis à vis panels, the Appellate Body concluded that the "Panel's failure to follow previously adopted Appellate Body reports addressing the same issues undermines the development of a coherent and predictable body of jurisprudence clarifying Members' rights and obligations under the covered agreements as contemplated under the DSU." The Appellate Body report and modified panel report were adopted at the May 20, 2008, meeting of the Dispute Settlement Body. During the meeting, the United States stated its support for the panel's conclusions regarding simple zeroing and questioned the approach taken by the Appellate Body in reversing the panel. It did not, however, discuss compliance in the case. The United States later circulated a document in which it questioned in a more detailed fashion the reasoning and approach of the Appellate Body regarding the use of zeroing in the transaction-specific calculations employed in administrative reviews. Because the parties could not agree on the length of the compliance period, the issue was arbitrated at Mexico's request. In an October 31, 2008, decision, the Arbitrator set a deadline of April 30, 2009. The Commerce Department issued a determination under Section 129 of the Uruguay Round Agreements Act on March 31, 2009, in which it recalculated the dumping margin in the original investigation without the use of zeroing, and later published a notice in the Federal Register that the USTR had instructed the department to implement this determination effective April 23, 2009. The recalculation resulted in a reduction of the dumping margin from 30.85% to 30.69% for one individually investigated exporter and the same reduction in the "all others" rate. With respect to the administrative reviews that were challenged "as applied," the United States has reportedly informed the WTO Dispute Settlement Body at its May 20, 2009, meeting "that 'any prospective effect of those reviews has been eliminated and all entries of merchandise under the five reviews have been liquidated for customs purposes.'" With regard to other rulings and recommendations in the dispute, however, the United States "informed the DSB that it 'has also been conferring with Mexico about the steps that the United States has taken to comply with the recommendations and rulings of the DSB.'" On May 19, 2009, the United States and Mexico entered into a sequencing agreement involving the possible request by Mexico of a compliance panel and, if it is later determined that the United States has not taken a measure to comply or its compliance measures are inconsistent with WTO obligations, a request for authorization to suspend concessions owed the United States. On August 19, 2009, Mexico requested consultations with the United States under Article 21.5 of the DSU regarding U.S. compliance in the case. Mexico maintains that the United States has not complied with the WTO decision because it (1) "has not taken any steps" to eliminate the use of simple zeroing in periodic, that is, administrative, reviews; (2) continues to maintain and use simple zeroing in the five administrative reviews originally challenged in the case; and (3) continues to "impose, assess and/or collect anti-dumping duties in excess of the proper margin of dumping, and evidences its intention to continue to do so, through … five subsequent periodic reviews [of the original antidumping duty order on stainless steel and sheet in coils from Mexico] ... , any amendments thereto, any measures closely related thereto, any future subsequent periodic reviews, and the United States Government instructions and notices." The U.S.-Mexico procedural agreement gave the parties 15 days to consult on Mexico's request, after which Mexico could request a compliance panel. Mexico requested a compliance panel on September 7, 2010, and DSB referred the matter to the original panel later that month. Because one of the members of the original was unavailable, a replacement panelist was named on May 13, 2011. The compliance panel was expected to issue its final report to the disputing parties by March 2012. Although the European Union (EU) had successfully challenged the U.S. use of zeroing in DS294, it was concerned that the United States had not yet broadly discontinued use of the practice. In October 2006, the EU challenged the continued use and application of zeroing in 18 specific antidumping cases, citing the continued application of antidumping duties at a level in excess of the margins that would result from correct application of the Antidumping Agreement. Ten of the 18 cases had been at issue in the EU's earlier challenge, DS294. The EU also challenged the use of zeroing in administrative and sunset reviews in 13 cases, a sunset review in one case, and original investigations in four others, a total of 52 agency determinations. Along with challenging the use of zeroing both "as such" and "as applied" in the cited antidumping determinations, the EU also claimed that a duty based on zeroing, while not falling within either of these two categories, was a "measure" subject to WTO dispute settlement. The EU considered this new argument to be "key" to the proceeding since, in its view, its effect "would be that of bringing the future use of United States zeroing in each case within the scope of the panel findings." The EU later abandoned its "as such" claim after Japan successfully obtained a ruling on this point in DS322. In its October 1, 2008, report, the WTO panel found that the United States acted inconsistently with its obligations in the Antidumping Agreement by (1) using model zeroing in the four cited original investigations; (2) applying simple zeroing in 29 of the cited administrative reviews cited; and (3) relying on dumping margins obtained through model zeroing in the eight sunset reviews at issue. The panel found, however, that claims involving the continued application of antidumping duties in the18 antidumping cases were not within the panel's terms of reference. One panelist, while agreeing with these conclusions, disagreed with the legal reasoning used by the panel in considering the EU's claims on simple zeroing in periodic reviews and, in part, on model zeroing in original investigations. The report was appealed by both the EU and the United States. In a report issued on February 4, 2009, the Appellate Body ruled that "the continued use of zeroing in successive proceedings in which duties resulting from the 18 anti-dumping duty orders are maintained, constitute 'measures' that can be challenged in WTO dispute settlement." The Appellate Body determined that it had a sufficient factual record to make findings on this basis in four of the 18 cases cited by the EU and found that, with respect to these four cases, the application and continued application of antidumping duties was (1) inconsistent with Article 9.3 of the Antidumping Agreement and Article VI:2 of the GATT 1994 to the extent that the duties were calculated with zeroing in administrative reviews, and (2) inconsistent with Article 11.3, to the extent that reliance was placed on a zeroing-based margin in sunset reviews. The Appellate Body also upheld the panel's findings that zeroing was improperly applied in 29 of the challenged administrative reviews and, contrary to the panel, was able to find that the United States had acted inconsistently with its WTO obligations in five additional administrative reviews originally cited by the EU. In addition, the Appellate Body upheld the panel's finding that the United States had acted inconsistently with Article 11.3 of the Antidumping Agreement in eight sunset reviews. The Appellate Body Report and the modified panel report were adopted at the February 19, 2009, meeting of the Dispute Settlement Body. As it had with respect to past appellate reports on zeroing, the United States expressed concerns with the Appellate Body's approach to a variety of issues in the case. At the March 20, 2009, meeting of the Dispute Settlement Body, the United States stated that it intended to comply in the dispute, "would be considering carefully how to do so," and would need a reasonable period of time for this undertaking. In June 2009 the United States and the EU agreed on a compliance period ending December 19, 2009. With the compliance deadline of December 19, 2009, before it, the United States stated in its December 10, 2009, WTO status report that the USTR had sent a written request to the Secretary of Commerce to issue a Section 129 determination that would render four final antidumping determinations at issue in the case not inconsistent with the recommendations and rulings of the WTO Dispute Settlement Body. The United States also stated that it would "continue to consult with interested parties in order to address the other findings" contained in the adopted panel and Appellate Body reports. At the December 21, 2009, meeting of the WTO Dispute Settlement Body, the United States added that it was "sure that Members appreciate the difficulties that are raised for the United States by the Appellate Body findings on zeroing in this disputes and others," reiterating the action that it had taken and the ongoing discussions on unresolved issues. At the same meeting, the EU reportedly "expressed its disappointment that the reasonable period of time for implementation had expired and the US had yet to bring itself into compliance." With other issues in the case remaining unaddressed, the United States and the EU entered into a procedural agreement in the case in January 2010 providing for a possible compliance panel request by the EU. To address outstanding issues in this and other related cases, the Commerce Department, on December 28, 2010, issued a proposed rule to eliminate the use of zeroing in administrative reviews, new shipper reviews, and expedited administrative reviews. For further discussion of the proposed rule, as well as the February 2012 U.S.-EU memorandum aimed at conclusively resolving this dispute and the final version of December 2010 rule issued in furtherance of this memorandum, see entries for " Commerce Department's Proposed Zeroing Rule (December 2010) " and " Recent Developments " under DS294. China requested consultations with the United States in September 2008 regarding U.S. law and practice in four antidumping and countervailing duty investigations involving Chinese products. China made both "as applied" and "as such" claims; that is, it argued that both the application of U.S. antidumping and CVD law in particular investigations and the law in itself violated WTO obligations. While panel and Appellate Body reports in the case were adopted in March 2011 and the parties originally settled on a February 2012 compliance deadline, U.S. compliance in the dispute was complicated by the December 2011 ruling of the U.S. Court of Appeals for the Federal Circuit in GPX I n t'l Tire Corp. v. Un ited States that the Commerce Department did not have statutory authority to impose CVDs on goods from NME countries. Legislation to provide the department with express authority to do so, effective November 20, 2006, was signed into law on March 13, 2012 ( P.L. 112-99 ). Litigation in the GPX case is still pending. The United States treats China as a nonmarket economy (NME) country for purposes of antidumping investigations, thus triggering a provision of U.S. antidumping law permitting Department of Commerce (DOC) to use a "surrogate country" methodology to determine the fair market or "normal" value of products imported from NME countries. Under the statute, if DOC finds that available information does not permit it to determine normal value under the rules that are ordinarily applicable in U.S. antidumping investigations, DOC must make this determination "on the basis of the value of the factors of production" used in producing the product, adding certain other costs and expenses and base its valuation of these factors on the best available information regarding the valuation of such factors in a market economy country or countries that DOC considers to be appropriate. If DOC finds that available information is inadequate for these purposes, it is to determine normal value on the basis of the price at which merchandise that is (1) comparable to that under investigation, and (2) that is produced in one or more market economy countries that are at a level of economic development comparable to that of the NME country involved, is sold in other countries, including the United States. Assuming that a Chinese product is subsidized and that this subsidization results in a lower domestic sale price, the NME methodology generally produces a higher fair market value than would result if the actual sale price in China were used. Since a dumping margin is determined by measuring the export price against the normal value of the good, a higher normal value may result in a higher dumping margin or, in some cases, might produce a dumping margin that would not otherwise exist. The United States only recently began to impose CVDs on the goods of NME countries, having long refrained from doing so due to the high level of subsidization in such countries and the resulting difficulty of isolating the economic value of subsidies provided with respect to specific products. The Commerce Department's 1984 determination to this effect was upheld by the U.S. Court of Appeals for the Federal Circuit in its 1986 decision in Georgetown Steel Corp. v. United States . The Commerce Department changed its policy in 2006 in accepting the CVD petition in Coated Free Sheet Paper from the People's Republic of China and in issuing affirmative preliminary and final subsidy determinations in the resulting CVD investigation. Although the U.S. International Trade Commission issued a negative final material injury determination in the Coated Free Sheet Paper investigation, thus ending the proceeding, the Department of Commerce issued CVD orders in subsequent CVD investigations involving Chinese products, with more than 20 CVD orders on Chinese goods in effect as of October 2011. Further, because domestic industries often file both antidumping and countervailing duty petitions with regard to the same NME merchandise, the United States may ultimately impose both antidumping and countervailing duties on imports of the same product. As discussed above, the use of NME surrogate country methodology in an antidumping investigation generally produces an unsubsidized (and likely higher) price for normal value, the subsidy later being captured in the margin of dumping. In such situations, subsidization is thus offset not only by the CVD but also by the dumping margin, potentially resulting in a double remedy. In calculating a dumping margin, the Commerce Department is required under Section 772(c)(1)(C) of the Tariff Act, 19 U.S.C. §1677a(c)(1)(C), to make an upward adjustment of the export price to account for any countervailing duty imposed on the same merchandise to offset an export subsidy, thus reducing the margin. There is, however, no such requirement or authority where a CVD is imposed to offset a domestic subsidy, that is, a subsidy that is not contingent on export but that may nonetheless benefit exported goods, thus creating a double remedy or "double counting" where domestic subsidization is involved. This result has been argued to violate both the SCM Agreement and domestic trade remedy law. U.S. international obligations regarding the imposition of CVDs on NME goods are primarily centered in the WTO Agreement on Subsidies and Countervailing Measures (SCM Agreement). Briefly, in order for a subsidy to exist under the SCM Agreement, a preliminary requirement for remediation under WTO rules, there must be "a financial contribution by a government or any public body" within the territory of a WTO Member, or any form of income or price support, that confers a benefit. A financial contribution may take the form of (1) a direct or potential direct transfer of funds such as a loan or loan guarantee, (2) the foregoing of revenue "otherwise due," (3) government provision of goods of services other than general infrastructure or government purchase of goods, or (4) government payments to a funding mechanism, or entrustment or direction of a private body to carry out one of the functions described above. As provided in GATT Article VI and the SCM Agreement, subsidized imports must also be found to cause or threaten to cause material injury to a domestic industry for a countervailing duty to be imposed. Unless a subsidy is prohibited under the SCM Agreement (as are export subsidies and subsidies contingent on the use of domestic over imported products), a subsidy may only be remedied in a direct WTO challenge or a CVD investigation if it is specific to an enterprise or industry or group, either in law ( de jure ) or in fact ( de facto). A subsidy that is limited to certain enterprises in a designated geographic region within the jurisdiction of the subsidizing WTO Member is deemed specific in the Agreement. What qualifies as a "public body" and how to quantify the benefit of a financial contribution such as a loan or the provision of goods and services are important issues in CVD investigations involving Chinese products. Article 14 of the SCM Agreement contains guidelines for WTO Members to follow in calculating the benefit from four types of governmental financial contributions—the provision of equity capital; loans; loan guarantees; and the provision or goods or services or the purchase of goods by a government—each providing for the use of market-based benchmarks. In addition, Article 15(c) of China's WTO Accession Protocol provides that Article 14 provisions will apply in benefit calculations in countervailing duty investigations involving Chinese goods, but that "if there are special difficulties in that application, the importing WTO Member may then use methodologies for identifying and measuring the subsidy benefit which take into account the possibility that prevailing terms and conditions in China may not always be available as appropriate benchmarks." Because a market-based benchmark may not be available in China, the United States has thus used benchmarks based on rates or prices from one or more foreign market economy countries to make its benefit determinations in these investigations. These and other related issues arose in China's 2008 request for consultations and its subsequent panel request in December of that year. In its "as applied" claims, China cited inconsistencies with the GATT articles, the WTO Agreement on Subsidies and Countervailing Measures (SCM Agreement), the WTO Antidumping Agreement, and Article 15 of China's WTO Accession Protocol in four antidumping and four CVD investigations involving Chinese goods. Among other claims, China alleged the following: (1) that in connection with U.S. findings that the alleged provision of goods for less than adequate remuneration fulfilled the definition of a subsidy under the SCM Agreement, DOC erroneously determined that certain state-owned enterprises (SOEs) were public bodies for purposes of the definition, that DOC failed to find that the alleged benefits that trading companies had received from SOE-provided goods were passed on to the producers of the merchandise that was the subject of the CVD investigations, and, in an argument analogous to that used in challenges to the use of "zeroing" in antidumping cases, that DOC improperly included in subsidy benefit calculations only those transactions that produced a positive benefit, while excluding transactions that yielded no benefit; (2) that the United States had failed to demonstrate that the alleged provision of land and land use rights for less than adequate remuneration was specific to an industry or group of industries; (3) that in connection with finding that the government had provided loans on preferential terms, that the United States had erroneously determined that certain state-owned commercial banks were public bodies, and also failed to find specificity; (4) that in each case where the United States chose a benchmark outside of China in order to determine the existence and amount of any subsidy benefit, an action permitted under Article 15 of China's Accession Protocol, the United States had improperly rejected the prevailing terms and conditions in China as the basis for making its determinations; (5) that in using its non-market economy (NME) methodology for determining dumping and imposing antidumping duties simultaneously with a determination of subsidization and the imposition of CVDs on the same product, the United States levied CVDs in excess of the subsidy found to exist in violation of the SCM Agreement, that is, an impermissible "double remedy"; that the levied antidumping and countervailing duties were in excess of the "appropriate" amounts, as called for in Article 9.2 of the AD Agreement and Article 19.3 of the SCM Agreement; that the United States failed to make a "fair comparison" between export price and normal value in its antidumping determination as required under the WTO Antidumping Agreement; that the United States imposed antidumping duties in excess of the amount of dumping found to exist; and that the United States failed to grant China the most-favored-nation (MFN) treatment required under Article I of the GATT by not according it "the same unconditional entitlement to the avoidance of a double remedy for the same unfair trade practice that it accords to imports of like products from the territories of other WTO Members." (6) that in conducting the antidumping and countervailing duty investigations in question, the United States made various procedural errors involving notification and transparency and used improperly made adverse inferences from available information without having requested information from interested parties regarding the factual issue involved. China also argued that U.S. law is inconsistent "as such" with U.S. obligations under the WTO Antidumping and SCM Agreements because it does not provide the Department of Commerce with authority to avoid imposing an impermissible "double remedy" on goods from China when it uses surrogate country values for determining costs of production of goods made in a country designated a NME. Because imports from WTO Members with market economies are not subject to this treatment, China also considered this situation to be a violation of the GATT Article I, the GATT most-favored-nation article. In a report publicly circulated on October 22, 2010, the WTO panel rejected most of China's claims, as follows: Regarding the WTO-consistency of DOC's determinations in cited investigations that there was a financial contribution for purposes of the SCM Agreement's definition of a subsidy, the panel found that China had not established that the United States violated the SCM Agreement in determining that state-owned enterprises and state-owned enterprises (SOEs) and state-owned commercial banks (SOCBs) were "public bodies," agreeing with the United States that the term "public body" means "any entity that is controlled by the government." The panel also rejected China's claim that the United States had violated the Agreement in determining that certain trading companies were "entrusted" or "directed" by the government to provide goods and services to producers of the investigated products. Regarding DOC's determinations of specificity , the panel rejected China's claims that DOC had improperly determined that lending by SOCBs to the off-the-road (OTR) tire industry was de jure specific, but also found that the United States had not acted consistently with the SCM Agreement in determining that the government provision of land-use rights in one investigation was regionally specific. Regarding U.S. benefit determinations, which, at China's later request, were reviewed only in light of Article 14 of the SCM Agreement and not the price comparison provisions in China's Accession Protocol, the panel found that China had not established that DOC violated the SCM Agreement by failing to conduct a "pass through" analysis in the OTR investigation to determine whether any subsidy benefits received by trading companies selling rubber inputs were passed on to OTR tire producers who purchased those inputs; by failing to "offset" positive with "negative" benefit amounts in the same investigation; and by rejecting Chinese prices and interest rates as benchmarks with respect to various government loans and government-provided inputs and land use rights in the OTR and other investigations. At the same time, the panel determined that DOC had acted inconsistently with the SCM Agreement in the OTR investigation (1) by not ensuring that the methodology used to determine the benefit to tire producers from purchases of SOE-manufactured inputs from trading companies did not result in a benefit that exceeded that conferred by the government's provision of the inputs, and (2) by using average annual interest rates as benchmarks for one company's U.S. dollar-denominated loans from SOCBs. Regarding China's double remedy claims, the panel rejected China's "as such" challenge, and reviewing its "as applied" claim, found that, while the panel did not doubt that in general the simultaneous imposition of an antidumping order based on NME methodology and a CVD order on the same merchandise likely result in the same subsidization being offset twice, China did not establish that double remedies were inconsistent with the SCM Agreement, Article VI:3 of the GATT, which prohibits the imposition of CVDs in excess of the amount of subsidization, or the GATT MFN article. Regarding alleged procedural violations , the panel found that China had not established that the United States violated the SCM Agreement by not granting China and various Chinese producers extra time to respond to certain questionnaires in the CVD investigations, but that the United States did violate an obligation under the SCM Agreement in using "facts available," that is, facts not provided by China or its companies, in determining the amount of SOE-provided hot-rolled steel that investigated producers purchased from trading companies. In an appeal by China, the WTO Appellate Body (AB), on March 11, 2011, reversed the panel on two especially significant issues: the interpretation of the term "public body" and the permissibility of "double remedies." The AB reversed the panel's finding that the term "public body" means an entity controlled by the government and thus its consequent finding that the United States had not violated the SCM Agreement in finding that certain SOEs and SOCBs qualified as such. The AB also completed the analysis on this point and concluded that DOC's determinations in the four CVD investigations that SOE input suppliers were public bodies were inconsistent with the Agreement, on the ground that a public body "must be an entity that possesses, exercises or is vested with governmental authority" and not merely an entity that is owned or controlled by the government. The AB also concluded, however, that China had not established that DOC's determination that the SOCBs in the OTR investigation constituted public bodies was improper. The AB upheld panel findings on specificity appealed by China. The AB also upheld two of the appealed findings approving DOC's use of foreign benchmarks in determining the subsidy benefit. The AB reversed the panel's rejection of China's claim that the foreign benchmark actually used by DOC to calculate the benefit from RMB-denominated SOCB loans in three investigations was inconsistent with Article 14(b) of the SCM Agreement, a provision governing the calculation of loan benefits, but, at the same time, found that it could not complete the analysis of China's claim under this article. The AB's reversal was based on its finding that the panel had not made an "objective assessment" of the issue, as required under Article 11 of the WTO Dispute Settlement. In reversing the panel on the issue of "double remedies," the AB found that offsetting the same subsidization twice by the simultaneous imposition of antidumping duties based on NME methodology and countervailing duties is inconsistent with Article 19.3 of the SCM Agreement, which requires that, when a CVD is imposed on a product, it be levied "in the appropriate amount in each case." The AB also reversed related panel findings and found that, in the four sets of challenged antidumping and CVD investigations, because the United States had imposed duties concurrently without having assessed whether "double remedies" arose, the United States acted inconsistently with Article 19.3. As result, the AB also found that the United States was also in violation of two other provisions of the SCM Agreement: Article 10, which requires WTO Members, inter alia, to ensure that the imposition of CVDs is consistent with Article VI of the GATT, and Article 32.1, which prohibits WTO Members from imposing a "specific action" against the subsidy of another Member except in accordance with the GATT, as interpreted by the SCM Agreement. The Appellate Body report and modified panel report were adopted by the WTO Dispute Settlement Body at its March 25, 2011, meeting. At the meeting, the United States and other WTO Members expressed considerable concern over the AB's approach to the term "public body," the United States noting that the AB's interpretation appeared to have "collapsed the terms 'government' and 'public body,' such that there was no purpose for the term 'public body' to have been included by Member in the SCM Agreement at all." As recounted in the DSB minutes, the United States elaborated on the difficulties that it believed would result from this test in attempts by WTO Members to address trade distortions caused by state-owned enterprises: In moving away from an objective "control" standard, as adopted by this Panel and previous panels, the Appellate Body adopted an undefined "governmental authority" standard. The test created by the Appellate Body Report appeared to require an additional analysis into what constitutes "governmental authority" within the domestic legal system of the exporting Member. There was, in addition, no elaboration in the Report as to how to determine whether the entity in question possessed or exercised such authority. In a CVD case, such an analysis could place a considerable additional burden on the responding companies and governments to provide appropriate data, as well as on administering authorities to collect and analyze all of the appropriate data. It may be difficult in many instances to identify concrete evidence establishing that state-owned enterprises (SOEs) were vested with or exercising "governmental authority", despite the fact that they were owned by the government. Yet at the same time, governments could and did use SOEs as key instruments through which to manage national economic activity. In such cases, the pricing policies of SOEs in NMEs could be very trade distorting, primarily the provision of inputs and financing at below market rates. Consequently, the Appellate Body Report could make it much more difficult to address trade distorting subsidies provided through SOEs. The United States and other Members also expressed concerns over the legal reasoning and implications of the AB's finding on double remedies. As described in the DSB minutes, the United States noted that no provision of the Antidumping Agreement or the SCM Agreement restricted a WTO Member's ability to apply antidumping duties based on NME methodology and countervailing duties concurrently. It further maintained that Article 19.3 of the Agreement, on whose language the AB based its conclusion, was not concerned with the definition and calculation of CVDs and "still less" with the concurrent application of antidumping and countervailing duties, but rather with the imposition and collection of CVDs, with the phrase "appropriate amounts" referring "simply to the fact that the CVD on particular imports may vary, even though a CVD should be imposed in a non-discriminatory manner." The United States further stated that the report gave Members "no certainty in determining what would constitute an 'appropriate' amount of a CVD in a given situation" and that it "appeared to impose the entire burden of proving that there was no 'double remedy' on the importing Member." The United States added that the Appellate Body "appeared to impose significant administrative burdens on Members' trade remedy administrators in the situation of concurrent application of CVDs and NMEs," since ["[i]f required, measuring the effect of a subsidy on the export price of a good and other components of the dumping margin may involve highly complex economic and econometric analysis," a measurement that may entail "significant" difficulties. In the U.S. view, this situation "raised serious questions about whether Members would be able to address trade-distorting subsidies by NME Members." The United States stated at the following DSB meeting that it intended to comply with the WTO decision and that it would need a reasonable period of time in which to do so. In July 2011, the United States and China agreed on a compliance deadline of February 25, 2012. As the WTO case was proceeding, the U.S. Court of International Trade (USCIT), in a case involving the antidumping and CVD orders on over-the-road tires at issue in the WTO case, ruled in August 2010 in GPX Int'l Tire Corp. v. United States , that the application of CVDs on these imports concurrently with antidumping duties calculated under the NME methodology without making adjustments to avoid double counting was unreasonable and inconsistent with U.S. law. In an earlier ruling involving the same CVD order, the USCIT stated that "[if] there is a substantial potential for double counting, and it is too difficult for Commerce to determine whether, and to what degree double counting is occurring, Commerce should refrain from imposing CVDs on NME goods until it is prepared to address this problem through improved methodologies or new statutory tools." The court instructed Commerce that it "has a choice," explaining as follows: ... The unfair trade statutes ... give Commerce the discretion not to impose CVDs as long as it is using the NME AD methodology. Thus, Commerce reasonably can do all of its remedying though [sic] the NME statute, as it likely accounts for any competitive advantages the exporter received that are measurable. If Commerce now seeks to impose CVD remedies on the products of NME countries as well, Commerce must apply methodologies, including methodologies that will make it unlikely that double counting will occur. DOC considered in the remand that it had three options—not to apply the CVDs, to apply the market economy antidumping methodology to either the company involved or the PRC, or to offset the CVD against the duty deposit rate for the NME ADs—and chose the third option. In its August 2010 ruling, the USCIT held the offset to be "unreasonable" since it would always result in the unaltered NME AD margin and thus render concurrent AD and CVD investigations unnecessary. The court also found that, "[p]erhaps even more importantly," this practice was inconsistent with Section 772(c)-(d) of the Tariff Act of 1930, 19 U.S.C. 1677a(c)-(d), which lists the specific offsets in dumping margin calculations that are "permissible" and held that the offset "does not comply with the statute." The court further stated that it found DOC's tripartite list to be "exhaustive" and as such "a tacit admission that, at this time, it is too difficult for Commerce to determine, using improved methodologies and in the absence of new statutory tools, whether and to what degree double counting is occurring." The court remanded again, ordering DOC not to apply CVD law to the goods of the exporter that had challenged the duties on this basis as well as to the goods of a second company even though it had not raised the issue in the litigation. The U.S. government and domestic industry defendants appealed the GPX decision to the U.S. Court of Appeals for the Federal Circuit (CAFC). On December 19, 2011, a three-judge panel of the CAFC affirmed the lower court ruling, but on the ground that Congress had legislatively ratified the 1984 DOC interpretation that CVD law did not apply to NMEs and the CAFC's upholding of that interpretation in its 1986 decision in Georgetown Steel Corp. v. United States , and that, as a result, the Commerce Department was no longer permitted to interpret the statute as providing authority to impose CVDs on NME products. The ruling thus prohibited DOC from imposing CVDs on the imports in question even if it were able to reasonably resolve the double counting issue or if there were no concurrent antidumping order on the merchandise under investigation. As the court instructed, the department needed to seek legislative authority to apply CVDs to NME countries it if believed that the law should be changed. In mid-January 2012, Secretary of Commerce Bryson and USTR Kirk wrote to the Senate Finance Committee and the House Ways and Means Committee that the Administration was continuing to review "all options" in the litigation, "including a request for a rehearing by the full appellate court," but that it also wished to pursue legislation amending the CVD statute. The letter stated that without legislation "should the decision of the court become final, Commerce would be required to revoke all CVD orders and terminate all CVD proceedings involving non-market economy countries, including 24 existing CVD orders on imports from China and Vietnam, as well as five pending investigations and two recently filed petitions." According to the letter, the Administration was seeking legislation "clarifying that the CVD law can be applied to subsidized goods from non-market economies, that CVD proceedings Commerce has already initiated on products from non-market economies are to continue, and that CVD determinations Commerce has made with respect to such products are to remain in effect." Legislation to remedy the GPX ruling ( H.R. 4105 ) was introduced on February 29, 2012. The bill was quickly passed by the House and Senate and was signed into law on March 13, 2012. The new statute, P.L. 112-99 , generally authorizes the application of CVDs to NME products, makes this authority effective as of November 20, 2006, and prospectively amends antidumping law to address double counting issues. While the legislation was pending, the Administration filed a petition with the CAFC for a rehearing en banc in the GPX case. The day after the new legislation was signed, the CAFC requested the GPX litigants to submit arguments on the effect of P.L. 112-99 on further proceedings in the case. The United States has asked that the appellate decision be vacated, arguing that it is not final and has been superseded by the new law, and that the case be remanded to the U.S. Court of International Trade for further proceedings in light of the new statute. Importers are primarily arguing that the effective date for the new CVD authority is unconstitutionally retroactive and that the court should affirm its earlier decision. Notwithstanding the December 2011 appellate court ruling that U.S. CVD law did not cover goods from NME countries, the United States proceeded with compliance in China's WTO dispute. In January 2012, the United States and China agreed to extend the compliance deadline in the case to April 25, 2012. In its January 2012 status report to the DSB, the United States stated that the United States Trade Representative (USTR) had "made a written request to the Secretary of Commerce to issue determinations under section 129(b) of the Uruguay Round Agreements Act that would render US Department of Commerce ('Commerce') determinations in four original antidumping investigations and four original countervailing duty determinations of products from China—circular welded pipe, light-walled rectangular pipe, certain new pneumatic off-the-road tires, and laminated woven sacks—not inconsistent with the recommendations and rulings of the DSB." The United States continued: Commerce has been actively working on this matter and has issued questionnaires to Chinese respondents and to the Government of China, seeking additional information related to the issues on which the DSB adopted recommendations and rulings. Respondents have requested and Commerce has granted additional time for the submission of responses to the questionnaires. Commerce is analyzing responses provided to date and awaiting further responses from Chinese respondents and the Government of China. The Commerce Department is statutorily required to issue a Section 129 determination within 180 days after receiving a written request from the United States Trade Representative (USTR). After the determination is issued and the USTR consults with the department and congressional committees, the USTR may direct the department to implement the determination in whole or in part. As noted earlier, P.L. 112-99 , signed into law on March 13, 2012, authorizes the department to impose CVDs on goods of NME countries, effective November 20, 2006, and thus covers the CVD proceedings at issue in China's WTO case. The United States made note of the new law in its April 2012 status report to the WTO Dispute Settlement Body, mentioning the potential role of the statute in resolving the impermissible "double counting" that had been found by the Appellate Body: The new legislation makes clear that where countervailing duties are applied to the exports from a nonmarket economy country at the same time that anti-dumping duties, calculated using a "surrogate value" methodology, are applied to the exports, and evidence is presented that this has resulted in an increase in the dumping margin, Commerce may reduce the antidumping duty to avoid what has referred to as a "double remedy." Commerce is currently working to implement this new law and including as part of US efforts to implement the recommendations and rulings of the DSB in connection with this dispute. The United States also noted that in early April 2012 it had issued to interested parties preliminary determinations in two of the Section 129 proceedings being carried out in the case (off-the-road tires and laminated woven sacks) and had requested comments on these determinations. In November 2008 and May 2009, Brazil requested consultations with the United States over the use of zeroing in antidumping proceedings involving Brazilian orange juice. The Department of Commerce first issued an antidumping duty order on imports of orange juice from Brazil on March 9, 2006. Brazil's consultation request, as expanded, cited the use of zeroing in the original 2003-2004 antidumping investigation, the resulting antidumping order, the continued use of zeroing in successive antidumping proceedings involving the order, specific administrative reviews related to the order, and any ongoing and future administrative reviews involving the covered imports. Brazil also contested any assessment and case deposit requirements resulting from the order and action taken by U.S. Customs and Border Protection (CBP) to collect definitive antidumping duties at zeroing-based rates. In addition, it challenged U.S. statutes, regulations, and practices, including the use of zeroing in administrative reviews, both as such and as applied in the administrative reviews cited in its request. A panel was established at Brazil's request in September 2009. In a report publicly circulated on March 25, 2011, the panel found that Brazil had established that the United States acted inconsistently with Article 2.4 of the Antidumping Agreement in using zeroing to determine the weighted-average margins of dumping—amounts used to set cash deposit rates—and to determine importer-specific assessment rates for two firms in the first and second administrative reviews under the order. The United States chose not to appeal and the panel report was adopted by the WTO Dispute Settlement Body on June 17, 2011. At the meeting, the United States made note of its December 2010 proposal to change its existing practice for calculating dumping margins and assessment rates in administrative reviews. The United States and Brazil later agreed on a compliance deadline of March 17, 2012. At the February 22, 2012, meeting of the WTO Dispute Settlement Body, the United States indicated that its final modification regarding the use of zeroing in administrative reviews, as published in the February 14, 2012 issue of the Federal Register , would address the issues raised in the case. The United States has since reported to the WTO that, as the result of a five-year sunset review, the antidumping order at issue in the case is to be revoked, effective March 9, 2011. It is unclear whether Brazil is satisfied with these responses and will thus seek additional relief. On April 3, 2012, Brazil and the United States entered into a procedural agreement providing for a possible compliance panel and sanctions request by Brazil and a joint effort to expedite any such proceedings. Vietnam instituted dispute settlement proceedings against the United States in 2010 regarding the final dumping determination in a U.S. antidumping investigation of frozen and canned warmwater shrimp from that country, challenging, inter alia, the U.S. use of zeroing in calculating the dumping margins involved; a limitation that the Commerce Department placed on the number of exporters entitled to individual reviews (i.e., exporters eligible to receive company-specific dumping rates as opposed to what is generally a higher "all others" rate and, later, to seek revocation of the antidumping order on an individual basis); and the application of a country-wide dumping rate that was substantially higher than the "all-others" rate to imports of shrimp from companies that were unable to rebut a presumption used by DOC in antidumping proceedings that companies in nonmarket economy countries such as Vietnam operate under the control of the government and, thus, as units of one, government-controlled, country-wide entity. Vietnam also challenged the use of zeroing and the continued application of the "all others" rate and the Vietnam-wide entity rates in subsequent administrative reviews of the order. A panel was established at Vietnam's request in May 2010, and a panel was appointed in July 2010. The panel report, publicly circulated July 11, 2011, generally found against the United States on the zeroing issues and on the application of the higher country-wide dumping rate instead of the "all others" rate to companies that had not rebutted the presumption of government control, but upheld the United States with respect to its limitation on firms eligible for individual reviews. The panel report was adopted on September 2, 2011. The United States and Vietnam have agreed on a compliance deadline of July 2, 2012. In September 2002, Brazil requested consultations with the United States regarding U.S. statutes and programs that Brazil claimed provided prohibited and actionable subsidies to U.S. producers, users, and exporters of upland cotton. Brazil alleged violations of the WTO Agreement on Agriculture, the Agreement on Subsidies and Countervailing Measures (SCM Agreement), and national treatment obligations in the GATT. It requested a panel in February 2003, adding a claim based on subsidy obligations in GATT Article XVI. The panel was established in March 2003; panelists were appointed in May of that year. WTO Members have made commitments in the WTO Agreement on Agriculture to reduce, and in some cases eliminate, domestic support in favor of agricultural producers and export subsidies on agricultural products. The commitments made by each Member to limit domestic support and export subsidization are contained in the Member's Schedule, which is attached to and considered an integral part of the Agreement. "Scheduled products" are those products for which a WTO Member has made domestic support and export subsidy reduction commitments. The United States did not schedule any export subsidy reduction commitments regarding upland cotton. The types of export subsidies for which reduction commitments are made are listed in Article 9.1 of the Agreement. Members may not provide any export subsidy listed in Article 9.1 to an "unscheduled product" or to a "scheduled" product in excess of the Member's scheduled reduction commitments. If the Member does so it is in violation of Articles 3.3 and 8 of the Agreement. In addition, Article 10.1 prohibits Members from applying any subsidy that is not listed in Article 9.1 "in a manner which results in, or which threatens to lead to, circumvention of export subsidy commitments." Alleged violations of the Agriculture Agreement may be challenged under WTO dispute settlement procedures. Agricultural subsidies may also be challenged under the SCM Agreement, which defines the term "subsidy," prohibits export subsidies and subsidies contingent on the use of domestic over imported products "except as provided in the Agreement on Agriculture," and makes any subsidy fitting the Agreement definition "actionable" if the subsidy is specific to an industry and causes "adverse effects" to the interests of another WTO Member. Among these adverse effects is what the SCM Agreement refers to as "serious prejudice," which is defined in Article 6.3 of the Agreement as including, among other effects, "a significant price undercutting by the subsidized product as compared with the price of a like product of another Member in the same market or significant price suppression, price depression or lost sales in the same market." The SCM Agreement contains timelines for dispute settlement proceedings that are shorter than those in the WTO Dispute Settlement Understanding and in general contemplates expedited compliance with adverse WTO decisions in disputes arising under the Agreement. Resort to WTO dispute settlement had been temporarily limited by Article 13 of the Agriculture Agreement—the now-expired "Peace Clause"—which provided that certain domestic support measures and export subsidies that conformed fully with enumerated requirements in the Agriculture Agreement were "exempt from actions" under specified subsidy-related provisions in the GATT 1994 and the SCM Agreement through the end of the "implementation period," that is, the end of the nine-year period following the date the Agriculture Agreement entered into force (January 1, 1995), or December 31, 2003. The United States unsuccessfully argued in the case that certain of its agricultural programs were covered by this provision. In a report issued September 8, 2004, the WTO panel found that the United States was maintaining export subsidy programs and providing payments under domestic support programs in violation of the Agriculture Agreement and the SCM Agreement. First, the panel found that three U.S. export credit guarantee programs in effect at the time constituted export subsidies for purposes of WTO obligations because the programs were provided at premium rates that were "inadequate to cover the long-term operating costs and losses" of the programs. The panel looked to the Illustrative List of Export Subsidies set out in Annex I of the SCM Agreement, which includes export credit guarantee programs fitting this description in item (j) of the List. The cited programs were (1) the Commodity Credit Corporation (CCC) Export Credit Guarantee Program (GSM-102), providing export credit guarantees for up to three years; (2) the CCC Intermediate Export Credit Guarantee Program (GSM-103), providing export credit guarantees for up to 10 years; and (3) the Supplier Credit Guarantee Program (SCGP), allowing export guarantees for 180 days and in some cases up to 360 days. The panel found that the premiums charged for the U.S. programs would not insure adequate financial coverage for several reasons: (1) the existence of a statutory 1% fee cap in connection with GSM-102 and SCGP transactions; (2) the fact that premiums were not risk-based either as to country risk or the creditworthiness of the borrower in individual transactions; and (3) even though the premiums charged offset the programs' long-term costs and losses "to some degree," coverage was "effectively ensure[d]" by the U.S. government's subsidy estimates and re-estimates "and ultimately the availability of United States government funds to cover any costs to government." The panel further found that, to the extent that these programs applied to exports of upland cotton and other unscheduled agricultural commodities supported under the programs, and to exports of rice (a scheduled commodity), the export subsidies were being applied in a manner that circumvented U.S. export subsidy commitments in the Agriculture Agreement in violation of Article 10 of the Agreement. As these programs did not conform fully to export subsidy obligations in the Agreement, they were found not to be covered by the Peace Clause and thus subject to challenge. The panel went on to find that these programs were prohibited export subsidies under Article 3.1(a) of the SCM Agreement. Second, the panel faulted the "Step 2" program, authorized in Section 1207(a) of the Farm Security and Rural Investment Act of 2002, P.L. 107-171 ("2002 farm bill"), 7 U.S.C. Section 7937(a), as it applied both to exporters and domestic users of upland cotton. To the extent that the program provided for payments to exporters for their purchase of higher priced upland cotton, it was found to constitute an export subsidy that was not scheduled by the United States in the Agreement on Agriculture and was therefore inconsistent with U.S. obligations under the Agreement. As such, this part of the Step 2 program was found not to be covered by the Peace Clause and thus also subject to challenge. The panel then found that the program constituted a prohibited export subsidy under the Article 3.1(a) of the SCM Agreement. In addition, the panel found that the Step 2 program, insofar as it provided for payments to domestic users of upland cotton, qualified as a subsidy contingent on the use of domestic over imported products and was thus prohibited under Article 3.1(b) of the SCM Agreement. Third, the panel found that payments under various U.S. domestic support programs, including counter-cyclical payments (CCP), market loss assistance payments (MLA), marketing loan program payments, and Step 2 payments for U.S. cotton producers, were measures that granted sufficient amounts of support to upland cotton to exempt them from the Peace Clause. The panel then found that the payments under the four cited programs—which it characterized as "mandatory price-contingent subsidies"—caused serious prejudice to Brazil's interests in the form of significant price suppression in the world upland cotton market for purposes of Articles 5(c) and Article 6.3(c) of the SCM Agreement. At the time, CCP payments, market loan program payments, and Step 2 payments were authorized in the 2002 farm bill, while the authority for the MLA payments had expired. Among other findings, however, the panel determined that an agricultural program could be challenged in the WTO even though it had expired so long as the program was in force during the Agriculture Agreement implementation period (i.e., between 1995 and the end of 2003) and continued to have an adverse effect on the complaining Member. This finding allowed Brazil to challenge MLA payments and flexibility contract payments (FCP), the legislative basis of which had lapsed in 2002. Brazil was unable, however, to show serious prejudice from the FCP program. The panel recommended that the prohibited subsidies be removed "without delay" and specified that this be done at the latest within six months of the date of adoption of the panel report or July 1, 2005, whichever was earlier. The panel cited Article 4.7 of the SCM Agreement, which requires that where an export subsidy is found, the panel recommend expeditious removal and specify a time period for such action. The panel also recommended that the adverse effects of the actionable subsidies, or alternatively, the subsidies themselves, be removed, as provided in Article 7.8 of the SCM Agreement, that is, upon adoption of the panel report. The panel's finding of serious prejudice for the actionable subsidies also implicated a deadline in Article 7.9 of the SCM Agreement affecting requests for authorization to impose retaliatory measures. Provided there is no agreement between the disputing parties on compensation, Article 7.9 accords a prevailing Member the right to make such a request in the event the defending Member "has not taken appropriate steps to remove the adverse effects of the subsidy or withdraw the subsidy within six months" after the date the panel or Appellate Body report is adopted. The United States and Brazil appealed the panel report, and the Appellate Body, in a March 5, 2005, report largely upheld the panel. The reports were adopted on March 21, 2005. This action effectively established a July 1, 2005, deadline for removal of the prohibited subsidies and an Article 7.9 deadline of September 21, 2005, with respect to the actionable subsidies. The United States told the WTO Dispute Settlement Body, on April 20, 2005, that it would implement the WTO rulings, but that it would need a reasonable period to comply and that it had begun to consider its options for doing so. Brazil complained that the U.S. statement was not sufficiently detailed and made reference to the panel's recommended time periods for compliance. The European Union noted that because the subsidies at issue were found to infringe both the SCM Agreement and the Agreement on Agriculture, the United States was entitled to a "reasonable period of time" to comply with Agriculture Agreement, that is, a compliance period determined on an ad hoc basis, as ordinarily available under the WTO Dispute Settlement Understanding. In response to the WTO finding that fees charged by the Commodity Credit Corporation (CCC) guarantee programs must be risk-based, the United States Department of Agriculture (USDA) announced on June 30, 2005, that, as of July 1, 2005, CCC would use a risk-based fee structure for both the GSM-102 and SCGP program. USDA also announced that CCC would no longer accept applications for payment guarantees under the GSM-103 program. Because prohibited export subsidies had not been removed by July 1, 2005, Brazil requested that the DSB meet on July 15, 2005, to consider its request for authorization to impose countermeasures against the United States. Brazil sought to suspend tariff concessions as well as obligations under the WTO Agreement on Trade-Related Intellectual Property Rights (TRIPS) and the General Agreement on Trade in Services (GATS) until the United States withdrew the exports subsidies identified by the WTO. Brazil proposed sanctions in an amount corresponding to (1) the Step 2 payments made in the most recent concluded marketing year and (2) the total of exporter applications received under the GSM-102, GSM-103, and SGCP programs, for all unscheduled commodities and for rice, for the most recent concluded fiscal year, estimating the annual total for both to be $3 billion. On July 5, 2005, USDA announced that, to further comply with the WTO decision, it was sending proposed statutory changes to Congress to eliminate the Step 2 cotton program, remove the 1% cap on origination fees under the GSM-102 program, and terminate the GSM-103 program. According to USDA: Repealing the Step 2 program would remove both the export subsidies and import substitution subsidies that the WTO cited and address issues related to suppression of cotton prices in world markets. Eliminating the one-percent fee cap would make the Export Credit Guarantee Program more risk-based. Terminating the GSM-103 program would reinforce the recent U.S. decision to stop using longer-term export credit guarantees. On the same day, Brazil and the United States notified the DSB that they had entered into a procedural agreement covering the implementation phase of the dispute. The agreement also recognized both the changes to the CCC programs announced June 30, 2005, and the legislative proposal sent to Congress to repeal the Step 2 program. As provided in the agreement, the United States requested arbitration of Brazil's retaliation proposal; the DSB referred the matter to arbitration at its July 15, 2005, meeting; and the two countries, on August 17, 2005, requested that the arbitration be suspended. The agreement also provided that Brazil could request an Article 21.5 compliance panel at any time after the July 15, 2005, meeting. In addition, because the United States had not complied with its WTO obligations regarding the actionable subsidies by September 21, 2005, Brazil shortly thereafter proposed to suspend tariff concessions as well as obligations under the TRIPS Agreement and the GATS in the annual amount of $1.037 billion. The United States objected to the proposal, and the matter was referred to arbitration. On November 21, 2005, the parties requested that the arbitration be suspended, "noting that the United States reaffirmed" at the November 18, 2005, DSB meeting "its commitment to implement the recommendations and rulings of the DSB in this dispute, and in light of the preference for WTO-consistent solutions mutually acceptable to the parties to a dispute set out in DSU Article 3.7." Congress subsequently repealed the Step 2 program, effective August 1, 2006. On August 21, 2006, Brazil requested an Article 21.5 compliance panel, claiming WTO violations stemming from the U.S. failure to repeal the Step 2 program as of end of the six-month period set out in Article 7.9 of the SCM Agreement (i.e., by September 21, 2005), the continued payments under the marketing loan and counter-cyclical programs authorized in the 2002 farm bill, and continued WTO-related defects in the export credit guarantee programs at issue in the case. In December 2007, the compliance issued a report adverse to the United States with respect to both the marketing loan and CCP payments and the GSM-102 program. First, the panel found that payments under the marketing loan and counter-cyclical programs authorized in the 2002 farm bill resulted in significant price suppression, which constituted present serious prejudice to the interests of Brazil in violation of Articles 5(c) and 6.3(c) of the SCM Agreement. The panel thus found that the United States was in violation of its obligation under Article 7.8 of the SCM Agreement to take "appropriate steps to remove the adverse effects of … or withdraw the subsidy." Second, regarding GSM-102 export credit guarantees provided after July 1, 2005 (the deadline set by the original panel), the panel found that Brazil had established that the revised GSM-102 program constituted an export subsidy on the ground that the program continued to be provided against premiums that were inadequate to cover its long-term operating costs and losses and that the program thus qualified as such under item (j) of the Illustrative List. The panel further found that United States was in violation of its obligations in the Agreement on Agriculture in applying export subsidies in a manner that circumvented its export subsidy commitments regarding various unscheduled products (e.g., cotton, oilseeds, protein meals) as well as three scheduled products (rice, poultry meat, and rice). By providing export subsidies both to unscheduled products and to scheduled products in excess of its reduction commitments, the United States was also found to be granting prohibited subsidies in violation of the SCM Agreement. The panel based its conclusion that the GSM-102 program constituted an export subsidy on the following factors: (a) The US Government continues to project that new GSM 102 export credit guarantees issued under the new fee schedule will be provided at a net cost to the Government. (b) GSM 102 fees are well below the OECD MPR's [minimum premium rates], which we consider to provide an informed appraisal of the level of fees necessary to cover the long-term, operating costs and losses of an export credit guarantee programme; (c) Elements of the structure, design and operation of the GSM 102 programme indicate that the programme is not designed to cover the long term operating costs and losses of that programme. The compliance panel's conclusion in (c) resulted from the following considerations: "the CCC's access to funds from the US Treasury, which facilitates the functioning of the programme"; "the fact that GSM 102 fees do not vary with foreign obligor risk"; and "the fact that the one percent fee cap has not been repealed and in our view prevents the adoption of risk-based fees (notably due to the insufficient 'scaling' of GSM 102 fees [as risk increases])." The panel ultimately found that the United States had failed to bring its measures into conformity with the Agreement on Agriculture and to "withdraw the subsidy without delay" as recommended by the WTO Dispute Settlement Body pursuant to Article 4.7 of the SCM Agreement. Both the United States and Brazil appealed. In a report issued June 2, 2008, the Appellate Body largely upheld the compliance panel, though taking issues with an aspect of the panel's methodology regarding the existence of export subsidization. The Appellate Body reversed the panel's intermediate conclusion that the GSM-102 program would be run at a net cost to the government on the ground that the panel had not accorded sufficient weight to data provided by the United States concerning re-estimates of initial subsidy estimates for the three challenged programs for 1992-2006. The United States had argued that the re-estimates demonstrated that the programs "were in fact not provided at a net loss to the US Government even before the United States took any measures to comply with the DSB recommendations" in the case. At the same time, the Appellate Body upheld the panel's ultimate conclusion that the revised program fell within the scope of item (j) and thus constituted an export subsidy, determining that the panel's findings on the structure, design, and operation of the revised GSM 102 program provided "a sufficient evidentiary basis for the conclusion that it is more likely than not that … [it] operates at a loss." The WTO Dispute Settlement Body adopted the reports on June 25, 2008. On June 18, 2008, a week before the compliance panel and appellate reports were adopted, President George W. Bush signed the Food, Conservation, and Energy Act of 2008, P.L. 110-246 ("2008 farm bill"), a statute containing several provisions relevant to the pending dispute. Section 3101 of the act made statutory changes affecting U.S. export credit guarantee programs, changes that the bill Managers believed "satisfy U.S. commitments to comply with the Brazil cotton case with regard to the export credit programs." The act repealed the GSM-103 intermediate export credit guarantee program and the Supplier Credit Guarantee Program (SCGP) and eliminated the 1% cap on origination fees under the GSM-102 program, a requirement contained in 7 U.S.C. Section 5622(b). While leaving the GSM-102 program intact, Congress placed new requirements on the Secretary of Agriculture in administering the program, including "work[ing] with industry to ensure, to the maximum extent practicable, that risk-based fees associated with the guarantees cover, but do not exceed, the operating costs of and losses over the long term." The phrase "long term" is defined in the statute as "a period of 10 or more years." In addition, Congress directed the Commodity Credit Corporation to make available for GSM-102 programs each year through FY2012 a maximum $5.5 billion, or "the amount of guarantees that can be supported by $40 billion in budget authority (plus any budget authority for prior years)—whichever amount is less." In addition, Congress reauthorized counter-cyclical payments and marketing assistance loans for cotton and other commodities for the 2008-2012 crop years. As discussed earlier, these two programs, as authorized in the 2002 farm bill, were successfully challenged by Brazil as actionable subsidies in the pending WTO case and are the basis of one of Brazil's retaliation requests. In August 2008, following the DSB's adoption of the compliance panel and Appellate Body reports finding the United States not to be in full compliance in the case, Brazil requested that the arbitrations on its retaliation proposals be resumed. Brazil lowered its retaliation requests in March 2009 to approximately $2.5 billion consisting of three components: (1) a one-time countermeasure of $350 million based on payments made under the repealed Step 2 program during the 13-month period between the compliance deadline of July 1, 2005, set by the original panel, and August 1, 2006, the date that the statutory repeal entered into force; (2) an annual countermeasure of approximately $1.2 billion for prohibited subsidies resulting from the GSM-102 export credit guarantee program; and (3) an annual countermeasure of approximately $1 billion based on actionable subsidies resulting from marketing loan and countercyclical payments. In an arbitral proceeding involving prohibited subsidies, the Arbitrator determines whether the proposed countermeasures are "appropriate," that is, not "disproportionate in light of the fact that the subsidies … are prohibited." Where actionable subsidies are involved, the Arbitrator determines whether the proposed countermeasures are "commensurate with the degree and nature of the adverse effects determined to exist." On August 31, 2009, the Arbitrator issued two reports—the first addressing retaliation for prohibited subsidies, the second for actionable subsidies. The Arbitrator rejected Brazil's request for a one-time payment based on the Step 2 program; lowered the other amounts proposed by Brazil to a total $297.4 million annually for both prohibited and actionable subsidies (based on the FY2006 figures); and set out conditions under which Brazil could suspend WTO obligations involving U.S. services and intellectual property, or "cross-retaliate." Among other findings, the Arbitrator rejected U.S. arguments that, with the expiration of the statutory authority for the marketing loan and countercyclical payments at issue in the underlying WTO proceedings, Brazil could not pursue countermeasures for serious prejudice resulting from payments under these programs. The Arbitrator's decisions are final and not subject to appeal. Retaliation for Prohibited Subsidies In examining Brazil's request for countermeasures for the prohibited subsidies, the Arbitrator first concluded that there was no legal basis for Brazil's request for a one-time payment based on past disbursements under the Step 2 program. The Arbitrator found that countermeasures are an exceptional temporary remedy aimed at inducing compliance and that the United States had in fact complied with respect to this program. Second, the Arbitrator determined that Brazil could suspend concessions amounting to $147.4 million annually for the continued operation of the GSM-102 export credit guarantee program, based on GSM-102 transactions in FY2006. As summarized by the Arbitrator, Brazil determined the trade-distorting impact of the program and thus the level of "appropriate" countermeasures for the prohibited subsidy by determining "the interest rate discounts secured by creditworthy and uncreditworthy foreign obligors backed by GSM-102 guarantees and estimating the additional export sales obtained by US exporters as a result of these discounts." Brazil referred to these two factors as the "interest rate subsidy" and "additionality." The Arbitrator modified Brazil's calculations, however, "in order to more accurately calculate the trade-distorting impact of the GSM-102 programme on Brazil" and, taking into account other determinations it had made, reduced Brazil's original proposal to the figure stated above. The Arbitrator found that $147.4 million figure was variable, however, and could change annually depending on the total of amount of GSM-102 transactions in the most recently concluded fiscal year. The Arbitrator set out a formula that Brazil would need to use to determine the amount of permissible sanctions for a given year due to these payments, noting that "the United States does not dispute that it would be permissible for the level of appropriate countermeasures to be determined through a formula, provided that this formula was sufficiently well defined so as to make it applicable in a transparent and predictable manner." Third, the Arbitrator determined that Brazil could cross-retaliate in order to remedy the prohibited subsidy resulting from the GSM-102 payments, but set conditions on Brazil's use of this remedy. The Arbitrator stated that "Brazil has at its disposal a sufficient range of imports of goods, including consumer goods, from the United States so as to enable it to suspend concessions in the area of trade in goods alone, without causing itself such economic harm so as to render such suspension 'not practicable or effective,'" the standard set out in the Dispute Settlement Understanding, taking into account the cumulated $294.7 million in countermeasures the Arbitrator had determined Brazil could impose for both prohibited and actionable subsidies in this case. Based on Brazil's imports of consumer goods for 2007, the Arbitrator identified at least $409.7 million of such goods that could be the subject of countermeasures. For certain consumer goods (food, medical products, and arms), the Arbitrator adopted a benchmark of 20%, finding that a U.S. import share of the good of less than this amount "constitutes a reasonable threshold by which to estimate the extent to which Brazil may be able to find alternative sources of supply" for the product. This annual goods "threshold" is to be updated, however, under a formula set out by the Arbitrator, to take into account any change in Brazil's total imports of U.S. consumer goods for the same year for which the annual countermeasures are determined. Under the decision, if the total level of countermeasures for prohibited and actionable subsidies that Brazil is entitled to for a given year exceeds the updated goods threshold for that year, Brazil may cross-retaliate, that is, suspend WTO obligations involving U.S. services, intellectual property rights, or both, in excess of the goods threshold to the full amount of permissible sanctions for the year. If permissible sanctions do not exceed the goods threshold, however, Brazil may only suspend concessions on trade in goods. Retaliation for Actionable Subsidies The United States preliminarily argued in the arbitration involving actionable subsidies that, with the expiration of the 2002 farm bill, payments would no longer be made under the marketing loan and countercyclical payments programs at issue in Brazil's WTO challenge and that, because the challenged measures were removed, there was no longer a legal basis for Brazil to impose countermeasures with regard to these payments. Brazil argued that because these programs were reauthorized in the 2008 farm bill in a manner that did not materially change them as they applied to cotton, the problematic payments would continue under the same conditions and criteria as the payments subject to the earlier WTO proceedings. Until the United States achieved what the WTO Appellate Body deemed "substantial compliance," Brazil claimed that it had the right to pursue countermeasures for continuing present serious prejudice. The United States responded that Brazil's conclusions about payments that might be made under the 2008 farm bill and their price effect were speculative. In assessing whether the United States had complied, the Arbitrator quoted from the Appellate Body report referred to by Brazil, in which the Appellate Body had stated that for purposes of determining whether a WTO Member has complied in a case, "substantive compliance is required, rather than formal removal of the inconsistent measure." Informed by this principle, the Arbitrator compared the 2002 and 2008 farm bills and concluded that the replacement of the 2002 provisions with new measures that are "essentially the same" as those found to be WTO-inconsistent was not a basis for finding that the United States had complied, if the United States had not shown that "the inconsistencies that were the object of the [prior WTO] proceedings have been remedied." Seemingly alluding to possible activity under the reauthorized CCP and marketing loan provisions, the Arbitrator noted that "any uncertainty about what might happen in the future" could not dissuade the Arbitrator from "assessing the adverse effects determined to exist in relation to a measure which did exist and which, on the facts, continues to exist." The Arbitrator thus stated that "although the legal basis for the granting of ML and CCPs has been modified, such payments continue to be offered and may continue to be made under a new legal basis." The Arbitrator concluded that, to the extent that it was entitled to review whether compliance has been achieved in a case (a task it earlier admitted was not normally the task of arbitrators), it would not have adequate grounds to conclude that the United States had complied. Further noting that the findings in the underlying WTO proceedings related to the payments under the 2002 farm bill and not to the farm bill as such, the Arbitrator concluded that the United States had failed to establish that Brazil no longer had a legal basis to seek countermeasures for payments under these two programs. The Arbitrator ultimately determined that Brazil could impose countermeasures for the actionable subsidies in an amount not to exceed $147.3 million annually. The Arbitrator arrived at this figure by first determining that the world cotton price would have been 9.38 % higher but for the U.S. programs, with adverse effects for the rest of the world of $2.905 billion in marketing year (MY) 2005. The Arbitrator further found that this overall amount needed to be apportioned to Brazil, basing this apportionment on Brazil's 5.1% share of worldwide cotton production for the same marketing year, or $147.3 million. The Arbitrator also found that Brazil may cross-retaliate with regard to the actionable subsidies only if the total amount of permissible countermeasures for a given year (i.e., $284.7 million, as adjusted) exceeds the monetary import threshold (i.e., $409.7 million, as adjusted). Since annual countermeasures for the actionable subsidies is fixed at $147.3 million, the use of cross-retaliation will depend on annual increases in countermeasures due to increased U.S. payments under the prohibited subsidy, that is, the GSM-102 export credit guarantee program. After the WTO arbitral panel issued its August 2009 reports setting out the permissible scope of Brazil's requested retaliation for both prohibited and actionable U.S. subsidies, Brazil asked the United States to provide it with information on transactions under the GSM-102 export credit guarantee program for FY2008 and FY2009 and the most recent data on U.S. export prices of products for which the United States had made export subsidy reduction commitments ("scheduled" products), namely, pig meat, poultry meat, and rice, for 2008 and 2009. Brazil's request was based on language in the Arbitrator's report on prohibited subsidies directing the United States to provide such data to Brazil to enable it to calculate its annual countermeasures under the formula set out in the report. In early November 2009, Brazil published a preliminary list of over 200 U.S. products, primarily consumer and agricultural goods, that could potentially be subject to increased tariffs. On November 19, 2009, the WTO Dispute Settlement Body approved Brazil's request to impose countermeasures against the United States consistent with the August 2009 Arbitrator's decisions. The United States stated at the DSB meeting that it intended to comply and hoped that a resolution of the dispute could be reached, obviating any need for Brazil to impose tariff increases and other authorized measures. WTO dispute settlement rules do not require that Brazil impose countermeasures once it is authorized to do so or that it impose these measures by a given date. As Brazil prepared for and pursued its retaliation request during the fall of 2009, the USDA tightened requirements for the GSM-102 program for FY2010. On September 21, 2009, the Commodity Credit Corporation (CCC) and the Foreign Agricultural Service (FAS) solicited comments from stakeholders on revisions to the GSM-102 fee rate schedule. The revisions were being proposed to implement requirements in the 2008 farm bill to develop a risk-based fee structure for the program. In November 2009, CCC posted higher program fees than those proposed earlier. In addition, CCC announced that maximum credit terms for FY2010 would be based on the risk category of the obligor country associated with the CCC payment guarantees, with shorter repayment terms or "tenor" as country risk category increased. On December 21, 2009, Brazil reported to the WTO Dispute Settlement Body that, based on U.S.-supplied fiscal and calendar year data for 2008, it was entitled to annual retaliation of $829.3 million, with $561 million covering trade in goods and $268.3 million covering other sectors and agreements. At the same time, Brazil delayed announcing a final list of sanctioned products as the two countries engaged in negotiations on at least a temporary resolution of the dispute. On March 12, 2010, however, Brazil notified the WTO that, beginning on April 7, it intended to impose up to $829.3 million in retaliation against the United States, $591 million of which would consist of tariff increases on various agricultural products, cosmetics, cotton textiles, appliances, motor vehicles, and other items. The remainder would involve the suspension of unspecified concessions under the Agreement on Trade Related Intellectual Property Rights (TRIPS) or the General Agreement on Trade in Services (GATS), or both. On April 6, 2010, the United States and Brazil announced a preliminary agreement in the cotton dispute that temporarily forestalled the imposition of WTO-authorized sanctions by Brazil against the United States. The United States agreed (1) to establish a fund with Brazil to provide technical assistance and capacity building to Brazilian cotton farmers and to contribute approximately $147.3 million to the fund per year on a pro rata basis; (2) to make some "near term" modifications of the GSM-102 program and engage in bilateral discussions on the further operation of the program; and (3) to address various food safety issues involving Brazilian exports to the United States. Regarding food safety, the United States agreed that it would publish a proposed rule by April 16, 2010, declaring that the Brazilian state of Santa Catarina is free of various diseases, complete an ongoing risk analysis for the area, and "identify appropriate risk mitigation measures to determine whether fresh beef can be imported from Brazil while preventing the introduction of foot-and-mouth disease in the United States." In return, Brazil postponed its retaliatory measures until April 22, but also agreed that if sufficient progress were made under the preliminary agreement by April 21, it was willing to suspend its measures for an additional 60 days. On the same day the agreement was announced, the USDA stated that, effective April 9, it was canceling all unused balances of the GSM-102 export credit program announcements issued for FY2010 and that, if any unused allocations remained under these announcements, it would issue new announcements making the allocations available under new guarantee fee rates. On April 16, the USDA issued a proposed rule adding Santa Catarina to a list of regions considered free of foot-and-mouth disease (FMD), rinderpest, swine vesicular disease, classical swine fever, and African Swine fever, an action that USDA stated "would relieve certain restrictions on the importation into the United States of live swine, swine semen, pork meat, pork products, live ruminants, ruminant semen, ruminant meat, and ruminant products" from that region "while continuing to protect against the introduction of these diseases into the United States." On April 20, the parties signed a memorandum of understanding providing for the above-described fund for Brazilian cotton farmers. According to USTR, the fund "is scheduled to continue until the next Farm Bill or a mutually agreed solution to the Cotton dispute is reached" and may be terminated by the United States if Brazil imposes retaliatory measures. On the same day, USDA activated a fee increase for most transaction categories in the GSM-102 program. On June 25, 2010, the United States and Brazil signed a framework agreement aimed at permanently settling the cotton dispute, including a pledge by Brazil not to impose authorized countermeasures during the life of the agreement and an understanding that the dispute may be legislatively resolved in the 2012 farm bill. The agreement provides for (1) bilateral discussions on U.S. domestic cotton support; (2) semi-annual reviews of the GSM-102 program to determine whether program usage exceeds $1.3 billion for the relevant six-month period and thus whether USDA must implement an agreed-upon increase in program fees; (3) bilateral consultations at least four times a year on issues relevant to the dispute; (4) Brazil's agreement not to impose countermeasures as long as the agreement is not terminated; and (5) upon the enactment of a successor to the 2008 farm bill, consultations to determine whether the statute provides a mutually agreed resolution to the dispute. The United States and Brazil notified the WTO of their agreement on August 27, 2010. The United States reportedly began making payments into the cotton fund for Brazilian farmers in June 2010. Further, the United States and Brazil reportedly determined during the October 2010 GSM-102 review, the first semi-annual review under the framework agreement, that actual usage of the GSM-102 program from April through September 2010 approached, but did not exceed, the $1.3 billion threshold and thus an automatic increase in fees for the program was not triggered. The USDA issued a final rule regarding the disease-free status of the state of Santa Catarina on November 16, 2010. The USDA, which must release $5.5 billion in GSM-102 allocations each year, announced its first set of FY2011 allocations at the end of October 2010. In addition, USDA announced new GSM-102 guarantee fees, effective February 17, 2011, aimed in part at encouraging the use of loans of shorter length (or "tenor"), a less desirable alternative for exporters. A joint U.S.-Brazil review of the GSM-102 program, tasked with examining actual usage of the program for the six-month period from October 2010 through March 2011, took place in April 2011. Following the review, USDA increased GSM-102 fees based on the amount of program usage during the six-month review period, as called for in the framework agreement. In the six-month joint review held in October 2011, usage of the GSM-102 program was again found to exceed agreed-upon levels, with USDA once more raising its program fees as a result. On June 16, 2011, the House passed H.R. 2112 , appropriations legislation for the Department of Agriculture, with a provision that would have prohibited the USDA from using appropriated funds for FY2012 to provide payments to the Brazil Cotton Institute for the fund established in the framework agreement. Such a prohibition did not appear in the Senate-passed version of the bill and was not included in the final public law. In January 2012, the Brazilian Ambassador to the World Trade Organization wrote to the chairmen and ranking members of the House and Senate agriculture committees that various cotton-related proposals suggested for inclusion in the 2012 farm bill "would result in subsidy programs that are more trade-distortive than the programs currently in place," noting further that modifications to the GSM-102 program, which Brazil views as essential to U.S. compliance in the case, had not been the subject of any legislative proposals to date. As of the date of this report, the passage of a new 2012 farm bill, and thus the possible enactment of provisions to resolve the U.S.-Brazil cotton dispute, is uncertain. Further, the April 2012 bilateral operational review of the USDA's GSM-102 loan guarantee program reportedly found that U.S. exporters' usage of the program for the previous six months exceeded a $1.5 billion benchmark established in the 2010 bilateral framework agreement, requiring the USDA to increase its premiums for the program by at least 15%. The United States and the European Union (EU) challenged each other in the WTO in October 2004 regarding alleged government subsidies provided by each to their major airline manufacturers in what is referred to as the "Boeing/Airbus" dispute. Although a panel began hearing the case in the original EU proceeding (DS317), the panel did not issue a report. In June 2005, however, shortly before the first panel was established, the EU submitted a second complaint, which is the basis of the current dispute proceeding against the United States (DS353). WTO dispute panels and the WTO Appellate Body (AB) ultimately found that the EU provided injurious subsidies to Airbus and that the United States provided prohibited export subsidies and injurious export and domestic subsidies to the Boeing Corporation in violation of the WTO Agreement on Subsidies and Countervailing Measures (SCM Agreement). While each dispute is currently in the compliance phase, the EU challenge to U.S. aircraft subsidies focused on in this report is at an earlier point in the implementation process. Panel and Appellate Body reports in the U.S. challenge were adopted by the WTO Dispute Settlement Body (DSB) on June 1, 2011, with those in the EU challenge adopted on March 23, 2012. In the pending proceeding involving EU aircraft subsidies ("Airbus" case), the EU informed the DSB on December 1, 2011, that it had complied with its WTO obligations, meeting the six-month compliance deadline for subsidy disputes set out in Article 7.9 of the SCM Agreement. The United States disagreed and on December 9, 2011, requested authorization from the DSB to retaliate against the EU in an estimated annual amount of $7 billion to $10 billion. The United States also initiated consultations with the EU regarding a compliance panel under Article 21.5 of the WTO Dispute Settlement Understanding (DSU) on the same day. The EU objected to the U.S. retaliation request on December 22, 2011, sending it to arbitration. The United States and the EU entered into a procedural agreement on January 12, 2012, permitting the compliance proceeding and the arbitration (if needed) to proceed sequentially. Under the agreement, the arbitration has been suspended and the parties will expedite any compliance panel proceeding. At the request of the United States, the DSB established a compliance panel on April 13, 2012. If the EU is found to be out of compliance in the case, the U.S. or the EU may request that the arbitration of the U.S. sanctions request be resumed. A main issue of concern to the United States in its compliance challenge in the Airbus case is the provision of "launch aid" by EU for two Airbus models, the A380 and the A350. The United States is arguing that the EU has not yet removed the largest launch aid subsidies for the A380, which, while not found to be prohibited subsidies in the original proceeding, were nonetheless found to cause serious prejudice to U.S. interests. The United States has also expressed concerns over new launch aid for the Airbus A350, aid that is not covered by the WTO decision in DS316 but that the U.S. maintains exacerbates the subsidy problems addressed in the case. The United States had unsuccessfully argued that all launch aid is part of a unified EU program, a finding that may have made it easier for the United States to challenge any new EU assistance of this type. The SCM Agreement, at Article 1.1 defines the term "subsidy" as a financial contribution by a government or any public body within a WTO Member's territory that confers a benefit. A financial contribution may take the form of a direct transfer of funds, such as a grant, loan, or equity infusion; the foregoing of revenue that is "otherwise due," such as a tax credit; or government provision of goods or services or the purchase of goods. Article 3 of the Agreement prohibits subsidies contingent on export performance and subsidies contingent on the use of domestic over imported products. Subsidies that are not prohibited, but that fall within the Agreement's definition of a subsidy are deemed "actionable" under Article 5 of the Agreement; that is, they may be challenged by a WTO Member if they are alleged to cause one or more types of "adverse effects" to the Member's interests: (1) material injury to a domestic industry; (2) impairment of a tariff concession; or (3) "serious prejudice." To successfully challenge a subsidy, the complaining Member must also show that the subsidy is "specific" in law or in fact to an industry or group of industries under principles set out in Article 2 of the SCM Agreement. Prohibited subsidies are considered to be specific per se , however, and thus complainants do not need to make this showing when challenging subsidies of this type. What constitutes "serious prejudice" is set out in Article 6.3 of the Agreement, which lists such adverse economic effects as significant price suppression, displacement of exports, and significant lost sales. In its panel request, the EU cited subsidies granted to the Boeing Corporation by the states of Washington, Kansas, and Illinois, identifying a variety of "tax breaks, bond financing, fee waivers, lease arrangements, corporate headquarters relocation assistance, research funding, and infrastructure measures and other benefits." The EU also alleged various subsidies on the federal level, claiming that, through a variety of cited programs, the National Aeronautics and Space Administration (NASA), the Department of Defense (DOD), the National Institute of Standards and Technology (NIST), the Department of Labor, and various statutory tax incentives transferred to the U.S. large civil aircraft (LCA) industry economic resources on terms more favorable than available on the market or at arm's length. The EU claimed two types of violations: (1) that the U.S. Foreign Sales Corporation (FSC) program, as modified in subsequent enactments, and a tax reduction under Washington State law constituted export subsidies prohibited under Article 3 of the SCM Agreement, and (2) that all of the subsides alleged by the EU were actionable under Article V of the SCM Agreement as they were specific and caused adverse effects to the interests of the EU, specifically, "serious prejudice" as contemplated by Articles 5(c) and 6.3 of the SCM Agreement. The EU also alleged violations of agreed levels of industry support contained in the bilateral 1992 U.S.-EU Agreement on Trade in Large Civil Aircraft (LCA Agreement), an agreement from which the United States withdrew the same day that it filed its WTO complaint against EU aircraft subsidies (October 6, 2004). The EU estimated that the alleged U.S. subsidies amounted to $14.1 billion between 1989 and 2006, more than half of which ($10.4 billion) was attributable to alleged research and development (R&D) subsidies provide by NASA. The EU argued that the United States maintained an export subsidy on the federal level in providing tax benefits to U.S. companies under the U.S. Foreign Sales Corporation (FSC) program, 26 U.S.C. §§921-927, as well as through subsequent statutes enacted to repeal and replace it, namely the FSC Repeal and Extraterritorial Income Exclusion Act of 2000 (ETI Act) and the American Jobs Creation Act of 2004, which repealed the 2000 statute. The FSC program had been found to constitute an export subsidy in violation of the SCM Agreement in an earlier dispute brought by the EU (DS108). Transition and grandfathering clauses in the 2000 and 2004 acts, which permitted Boeing to continue to receive FSC benefits under existing contracts, were a particular source of contention in the Boeing case. In 2005, Congress repealed the objectionable provision in the 2004 statute in response to adverse panel and AB reports in compliance proceedings in DS108. Among the forms of serious prejudice alleged by the EU in its Article V claims were: price undercutting by subsidized U.S. aircraft of competing EU products in world, EU, U.S., and third country markets where the U.S. and EU producers compete; significant depression and suppression of the prices of competing EU LCA products in these markets; significant lost sales of competing EC LCA products in these markets; and the displacement and impeding of exports of competing EU LCA products in the U.S. and third country markets. A panel was established on February 17, 2006. Because of the complexity of the case, the panel did not issue a final report to the disputing parties until January 31, 2011. The panel report was made public on March 31, 2011. The WTO panel issued a mixed ruling in the case, finding that the United States had provided prohibited subsidies and specific subsidies causing adverse effects, while rejecting a number of EU claims and declining to rule on whether the specific subsidies caused serious prejudice in the form of a threat of significant price suppression or whether the United States had violated the bilateral LCA Agreement. Regarding the EU's prohibited subsidy claims, the panel concluded that the FSC/ETI measures that were in force at the time that the panel was established (provisions that have since been repealed) constituted prohibited export subsidies under Article III of the SCM Agreement, but that the EU had not shown that challenged Washington State tax measures qualified as such. The panel also found that of the 31 subsidies alleged to be specific by the EU, only 15 qualified as such; moreover, the panel estimated that, in total, they provided at least $5.3 billion in subsidies to Boeing's LCA division between 1989 and 2006, less than half the amount originally claimed by the EU. The panel grouped the specific subsidies into three categories: (1) aeronautics R&D subsidies provided by NASA and DOD; (2) tax subsidies; and (3) other subsidies, including property and sales tax relief provided to Boeing under Industrial Revenue Bonds (IRBs) issued by the city of Wichita, KS; various tax credits and exemptions and employment assistance provided by the state of Washington; relocation reimbursement, tax credits, and tax abatement by the state of Illinois; and assistance related to Boeing's move to new headquarters in Chicago. The panel found, however, that only some of these specific subsidies caused serious prejudice to EU interests. In particular, the panel found that: NASA and DOD R&D aeronautics subsidies affected Boeing's development of technologies for the Boeing 787 Dreamliner, causing adverse effects in the 200-300 seat wide-body product market, specifically significant price suppression of the Airbus A330 and Original A350; significant lost sales of the A330 and original A350; and the threat and threat of displacement and impedance of EC exports of the A330 and Original A350 from third-country markets; the FSC/ETI subsidies and the Washington State business and occupation (B&O) tax rate reduction affected Boeing's pricing of the 737NG, causing adverse effects in the 100-200 seat single-aisle LCA product market, specifically significant price suppression of the Airbus A320, significant lost sales of the A320, and displacement and impedance of EC exports of the A320 from third country markets; the FSC/ETI subsidies and B&O tax subsidies provided by the state of Washington and the City of Everett, WA, affected Boeing's pricing of the Boeing 777, causing adverse effects in the 300-400 seat wide-body LCA product market, specifically significant price suppression of the Airbus A340, significant lost sales of the A340, and displacement and impedance of EC exports from third country markets. The panel refrained from making a recommendation as to compliance with its rulings on the FSC/ETI measures, noting (1) that "the FSC/ETI measures in force at the time of the Panel's establishment have been substantially changed during the course of the present proceedings and indeed it appears that the measure is no longer in force with respect to Boeing" and (2) that the rulings in the FSC dispute (DS108) were still "operative" and thus the United States would be subject to those rulings to the extent that it had not already withdrawn the FSC/ETI subsidies to Boeing. With regard to the adverse effects, however, the panel recommended, consistent with the prescription in Article 7.8 of the SCM Agreement, that once the panel and any Appellate Body reports were adopted, the United States "take appropriate steps to remove the adverse effects or … withdraw the subsidy." Both the United States and the EU appealed the ruling. The Appellate Body, in a report publicly circulated on March 12, 2012, again issued a mixed ruling, confirming the existence of NASA and DOD aeronautics subsidies and the specificity of the subsidies provided by the Washington State B&O tax rate reduction and the Wichita IRBs, but, unlike the panel, finding that all DOD programs cited by the EU constituted subsidies and that the Wichita IRBs caused adverse effects. The AB, however, limited some of the adverse effects caused by the specific subsidies that the panel had found. Addressing a systemic issue, the AB found that the information-gathering procedure for serious prejudice cases provided for in Annex V of the SCM Agreement, a mechanism for obtaining "information from the government of the subsidizing Member as necessary to establish the existence and amount of subsidization, the value of total sales of the subsidized firms, as well as information necessary to analyse the adverse effects caused by the subsidized products," is initiated automatically when a disputing party requests the procedure and a panel is established and does not require the consensus of the WTO Dispute Settlement Body. Among the findings made by the AB regarding the existence and effects of subsidization are the following: Financial contribution/benefit (eight NASA R&D programs) : the AB invalidated the panel's finding that government "purchases of services" are excluded from the definition of a financial contribution in Article 1.1(a)(1) of the SCM Agreement, an argument made by the United States, and instead found that the payment and access to facilities, equipment, and employees provided to Boeing under NASA procurement contracts constituted direct transfers of funds and the provision of goods or services and thus financial contributions under the definition; it also upheld for different reasons the panel's finding that these actions conferred a benefit on Boeing, rejected the U.S. claim that the panel erred in estimating the amount of the subsidy provided, and upheld the panel's findings that the estimated value of the NASA procurement-related subsidies totaled $2.6 billion; Financial contribution/benefit (23 DOD Research, Development, Testing and Ev a luation (RDT&E) programs ) : the AB found that payments and access to facilities provided to Boeing under all 23 DOD (instead of just the two programs cited by the panel) also constituted direct transfers of funds and the provision of goods or services and thus financial contributions under Article 1.1; it also upheld for different reasons the panel's finding that DOD programs conferred a benefit on Boeing; Financial contribution (Washington State B&O tax rate reduction): the AB upheld the panel's finding that the state's reduction of the tax rate applicable to commercial aircraft and component manufacturers constituted the foregoing of revenue otherwise due and thus a financial contribution under Article 1.1; Specificity (allocation of patent rights under NASA/DOD contract s ): the AB found that, with respect to the allocation of patent rights under contracts and agreements between NASA and DOD and Boeing, and on the assumption that each allocation is a subsidy in and of itself, the subsidy is not explicitly limited to certain enterprise, that is, is not specific in law; while the AB also found that the panel erred in not examining whether such allocation was specific "in fact" as argued by the EU, and thus could not uphold the panel's finding that these measures were not specific, the AB declined to find de facto specificity; Specificity (Washington State B& O tax rate reduction and Wichita IRBs): the AB upheld the panel's findings that the Washington State tax rate reduction is a subsidy that is specific in law and that the Wichita IRBs are subsidies that are specific in fact; Adverse effects (technology effects of aeronautics R&D subsidies): the AB modified and upheld that panel's overall conclusion that the aeronautics R&D subsidies caused serious prejudice with respect to the 200-300 seat LCA market, inter alia, finding that the panel was correct in finding that these subsidies "contributed in a genuine and substantial way to Boeing's development of technologies for the 787" in 2004; upholding the panel's finding that the effect of these subsidies is significant lost sales with respect to the 200-300 seat LCA market; reversing the panel's finding that, insofar as it relates to Kenya, Iceland, and Ethiopia, that the effect of the subsidies is a th r eat of displacement and impedance of EC exports in third country markets with respect to the 200-300 seat LCA market; and upholding the panel's finding that the effect of these subsidies is significant price suppression with respect to the 200-300 seat LCA market; Adverse effects ( price effects of FSC/ETI subsidies and the B&O tax rate reductions) : the AB reversed the panel's findings that these subsidies caused serious prejudice to EU interests with respect to the 100-200 seat and 300-400 seat LCA markets, and went on to complete the analysis, finding that the subsidies caused serious prejudice in the 100-200 seat LCA market, particularly that in two sales campaigns the subsidies affected Boeing's prices for the 737NG, causing significant lost sales for the EU product; Adverse effects ( collective assessment of the subsidies and their effects): the AB found that the panel erred in not considering whether the price effects of the Washington State B&O tax rate reductions "complement and supplement" the technology effects of the R&D subsidies so as to cause significant lost sales and significant prices suppression and a threat of displacement and impedance in the 200-300 seat LCA market; reversed the panel's finding that the EU had not shown that the remaining subsidies had affected Boeing's prices so as to give rise to serious prejudice in the 100-200 seat and 300-400 seat LCA markets; and, in completing the analysis, found that the effects of the Wichita IRBs complemented and supplemented" the price effects of the FSC/ETI subsidies and the Washington State B&O tax rate reduction, thus causing serious prejudice in the form of significant lost sales in the 100-200 seat LCA market. The Appellate Body acknowledged that "after more than five years of panel proceedings and eleven months of appellate review, a number of issues remain unresolved in the dispute," but that, where there were sufficient facts available to it on an issue, it had tried to complete the analysis "with a view to fostering the prompt settlement of this dispute." The Appellate Body made note of the panel's finding regarding the continuing obligation of the United States to comply with the rulings in the FSC case and recommended that, in accordance with Article 7.8 of the SCM Agreement, the United States "take appropriate steps to remove the adverse effects found to have been caused by its use of subsidies, or to withdraw those subsidies." As was the case with respect to the EU in the Airbus proceeding, Article 7.9 of the SCM Agreement gives the United States six months from the date that the panel and Appellate Body reports were adopted (here, up to September 23, 2012) to remove the subsidies or their adverse effects. Absent an agreement on compensation, the EU may then seek authorization from the WTO Dispute Settlement Body to impose sanctions against the United States, "commensurate with the degree and nature of the adverse effects determined to exist." Any such request will be considered under the reverse consensus rule and therefore approved unless the DSB decides without objection to reject the request. The United States informed WTO Members at the April 13, 2012, meeting of the Dispute Settlement Body that it intends to comply with the WTO decision within Article 7.9 time frame. To address future contingencies, the United States and the EU have reportedly entered into a procedural agreement that would coordinate any sanctions proceedings with a possible compliance panel. Given the panel and AB findings, compliance will focus on NASA and DOD subsidies, the income tax breaks provided by the State of Washington and the City of Everett, and the property tax breaks provided through Wichita's Industrial Revenue Bonds (IRBs). While the United States has repealed the problematic FSC/ETI tax provisions and Boeing has publicly stated that it did not receive benefits under the program after 2006, the EU continues to express concerns that benefits may be provided to Boeing under the program. Antigua and Barbuda (Antigua) requested consultations with the United States in March 2003 regarding federal, state, and local laws affecting the remote supply of gambling and betting services, alleging that the overall effect of these laws was to prevent the supply of gambling and betting services from the territory of one WTO Member into the United States in violation of U.S. market access commitments in Article XVI of the General Agreement on Trade in Services (GATS). As part of their GATS obligations, WTO Members make specific commitments involving particular service sectors, subject to any terms, limitations, or conditions Members may add. Commitments are made with respect to four means or "modes" by which services may be supplied, including supply from the territory of one Member into the territory of any other Member, which is the mode of supply at issue in this case. Each Member's sectoral commitments are set out in a Schedule of Specific Commitments, which is attached to the GATS and considered an integral part of the agreement. GATS market access and national treatment apply only with respect to scheduled commitments. These obligations are set out in GATS Articles XVI and XVII, respectively. All GATS obligations are subject to various general exceptions set out in Article XIV. Among other market access obligations, Article XVI(a) of the GATS prohibits a WTO Member, in sectors where it has scheduled a specific commitment, from maintaining or adopting, unless specified in its Schedule, "limitations on the number of service suppliers whether in the form of numerical quotas, monopolies, exclusive service suppliers or the requirements of an economic needs test." In addition, Article XVI(c) prohibits a Member, in any such sectors, from maintaining or adopting, unless specified in its Schedule, "limitations on the total number of service operations or on the total quantity of service output expressed in terms of designated numerical units in the form of quotas or the requirement of an economic needs test." Although the United States did not expressly identify gambling and betting services in its Schedule of Specific Commitments to the GATS, the WTO panel, in its November 2004 report, interpreted the services sub-sector titled "Other Recreational Services (except sporting)" as including gambling and betting services, and concluded that the United States, by not placing any limitations on the supply of such services from the territory of one WTO Member into the United States, had made market access commitments in the area. The panel then found that three federal statutes and provisions of four state laws conflicted with these obligations. The federal statutes were the Wire Act, the Travel Act, and the Illegal Gambling Business Act (IGBA); the state laws were those of Louisiana, Massachusetts, South Dakota, and Utah. The panel found that by preventing one, several, or all means of delivering gambling and betting services, the statutes constituted impermissible market access limitations on the number of service suppliers for purposes of Article XVI:2(a) of the GATS or, alternatively, on the total number of total number or service operations or total quantity of service output for purposes of Article XVI:2(c). The panel further found that, with regard to the federal laws, the United States could not successfully invoke exceptions in GATS Article XIV for "measures necessary to protect public morals or to maintain public order" (Article XIV(a)) or for "measures necessary to secure compliance with" GATS-consistent laws and regulations (Article XIV(c)) because the United States had not shown that the measures were "necessary" to achieve the stated end or that they were consistent with the Article XIV proviso, which requires that measures justified under the exception not be applied "in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where like conditions prevail." Under WTO jurisprudence, such discrimination may occur not only between the different exporting Members but also between an exporting Member and the importing Member and thus in this case between foreign and domestic providers of Internet gambling services. In an appeal by both parties to the dispute, the WTO Appellate Body, using a different mode of analysis than the panel, nonetheless determined that the United States had made sectoral commitments regarding gambling and betting services. Though the AB upheld the panel's finding of a violation of GATS market access obligations, it reversed the panel on its finding that the United States could not justify the federal measures under GATS exceptions. The AB also reversed the panel's finding that four state laws were inconsistent with the GATS, finding that because Antigua had not made a prima facie case that eight state measures violated the Agreement, the panel had improperly examined their GATS-consistency. With respect to the GATS exceptions, the AB found that the panel had erroneously concluded that the three federal statutes could not be considered "necessary" for purposes of Articles XIV(a) and XIV(c) because the United States had not entered into consultations with Antigua to find a less trade-restrictive alternative. The AB ultimately found that statutes were "necessary to protect public morals or to protect public order" for purposes of Article XVI(a) and that they thus fell within the scope of this exception. At the same time, the AB also found that, in light of a provision in the Interstate Horseracing Act (IHA) that might facially continue to allow the remote supply of wagering on horseracing by domestic firms, the United States had not shown that the Wire Act, the Travel Act, and the IGBA were being applied consistently with the Article XVI proviso, that is, that they may possibly be used to prosecute foreign, but not domestic, providers of remote horserace gambling services. Antigua had based its argument that the United States was applying the three statutes inconsistently with the Article XIV proviso on two aspects of the IHA, a statute allowing the acceptance of interstate off-track wagers provided certain conditions are met, making violators civilly liable for damages to named entities, including the state in which the subject horserace takes place, and authorizing certain civil suits against violators. First, Antigua cited Section 5 of the act, which it characterized as expressly allowing an interstate off-track wager to be accepted by an off-track betting system, where consent is obtained from certain organizations. Second, it cited the statutory definition of "interstate off-state wager," which, in pertinent part, includes pari-mutuel wagers "placed or transmitted by an individual in one State via telephone or other electronic media and accepted by an off-track betting system in the same or another State," provided the wagers are lawful in the States involved. In the words of the AB, Antigua thus argued that "the IHA, on its face, authorizes domestic service suppliers, but not foreign service suppliers, to offer remote betting services in relation to certain horse races. To this extent, in Antigua's view, the IGHA 'exempts' domestic service suppliers from the prohibitions of the Wire Act, the Travel Act, and the IGBA." As further described by the AB, "[t]he Panel found that the evidence provided by the United States was not sufficiently persuasive to conclude that, as regards wagering on horseracing, the remote supply of such services by domestic firms continues to be prohibited notwithstanding the plain language of the IHA." The AB concluded that the panel did not err in making this finding. The Appellate Body report and the panel report, as modified by the AB, were adopted April 20, 2005. The United States reported at the May 19, 2005, meeting of the DSB that it intended to implement the rulings and had begun to consider options for doing so, but that it would need a reasonable period to comply. After the disputing parties had failed to agree on a reasonable period of time for compliance, Antigua requested that the compliance period be arbitrated. In its submission to the Arbitrator, the United States stated that compliance would be achieved "by further clarifying the relationship between the IHA and preexisting federal criminal laws" and that "U.S. authorities intend to seek further clarification through legislation." The United States sought a 15-month compliance period, stressing that such legislative action would be "technically complex." In an award made public August 19, 2005, the Arbitrator determined that the compliance period would last 11 months and two weeks from the date of adoption of the panel and AB reports, thus expiring April 3, 2006. Legislative action was not taken before the deadline; instead, the United States stated in a status report to the DSB that it had complied in the case based on the position of the Department of Justice (DOJ) regarding remote gambling on horse racing, articulated as follows in April 5 DOJ testimony before a House committee: The Department of Justice views the existing criminal statutes as prohibiting the interstate transmission of bets or wagers, including wagers on horse races. The Department is currently undertaking a civil investigation relating to a potential violation of law regarding this activity. We have previously stated that we do not believe that the Interstate Horse Racing Act, 15 U.S.C. §§3001-3007, amended the existing criminal statutes. Antigua disagreed that the United States was in compliance, and in May 2006, the parties entered into a procedural agreement regarding the possible seeking by Antigua of a compliance panel and countermeasures in the case. Antigua requested a compliance panel in July 2006, claiming that the United States had failed to bring the Wire Act, the Travel Act and the Illegal Gaming Business Act into conformity with U.S. GATS obligations and that then-pending legislation— H.R. 4777 and H.R. 4411 —was "expressly contrary "to the WTO ruling in that each bill "would further institutionalise the discriminatory effect" of the three cited statutes. It also questioned whether the DOJ statement was a "measure" or a "measure taken to comply" for purposes of the DSU, noting that the same position had been maintained by the United States during the course of the dispute and was subsequently rejected by the panel and Appellate Body. Antigua further argued that regardless of the nature of the DOJ statement for purposes of the DSU, the United States remained out of compliance with the GATS because of, inter alia, the existence of reasonable technical alternatives to prohibitions on remote gambling and betting services and governmental enforcement problems regarding domestic and cross-border service providers. The compliance panel was established July 19, 2006. On March 30, 2007, the compliance panel issued a report adverse to the United States, finding that the United States had not taken any measures to comply in the case and thus left the statutory ambiguity cited by the panel unresolved. The panel noted that legislation was not the only means of compliance in the proceeding and that "other forms of administrative action, or judicial action, [could be used] to bring the measures into conformity." The United States did not appeal the report, which was adopted by the DSB on May 22, 2007. In early May 2007, the Office of the USTR announced that the United States intended to invoke Article XXI of the GATS "in order to clarify its commitment involving 'recreational services,'" in order to bring the United States into compliance in the dispute and to resolve the dispute permanently. The modification would explicitly exclude gambling and betting services from this broader services category. With Antigua's subsequent pursuit of retaliation in the underlying WTO dispute, the United States became engaged in two WTO proceedings, one involving negotiations with various WTO Members under Article XXI on compensation for changes in the U.S. GATS schedule, and the other involving arbitration of Antigua's request to impose countermeasures against the United States for non-compliance with the WTO decision. Article XXI allows a WTO Member to modify or withdraw any commitment in its GATS Schedule, but any WTO Member whose GATS benefits may be affected by the proposed change has a right to negotiate a compensation agreement with the Member making the change. In negotiating an agreement, Members must try to maintain "a general level of mutually advantageous commitments" that are as favorable to trade as was the case with the Schedule in its original form. In its May 2007 announcement, USTR stated that in negotiating the GATS, the United States "did not make it clear" that its international commitments to open its market to recreational services did not extend to gambling and that since "no WTO Member either bargained for or reasonably could have expected the United States to undertake a commitment on gambling, there would be very little, if any basis for ... [compensation] claims." Antigua, Australia, Canada, Costa Rica, European Union (EU), India, Japan, and Macao requested consultations with the United States by June 22, 2007, the deadline for WTO Members to notify the United States that their interests may be affected by the U.S. Schedule modification. The following month USTR filed a notice in the Federal Register asking for public comment on the requested compensation negotiations. As provided in GATS procedural rules, negotiations were expected to conclude within three months, that is, toward the end of September 2007, but the parties agreed on two extensions with a final deadline of January 14, 2008. On December 17, 2007, the United States and the EU announced that they had reached a bilateral compensation agreement providing EU service suppliers with improved market access in the U.S. postal and courier, research and development, warehouse and storage, and technical testing services sectors. The United States also announced that it had reached agreement with Canada and Japan as well. Australia had reportedly settled outstanding issues with the United States several months earlier and had withdrawn from the negotiations. Since the United States had not agreed on compensation with Antigua, Costa Rica, India, or Macao by the end of the negotiating period, these Members had a right to request that compensation be arbitrated, provided that they made their request within 45 days after deadline, that is, by January 28, 2008. If none of these Members requested arbitration, the United States would then be free to implement its Schedule modification, as originally proposed. Antigua and Costa Rica each filed timely arbitration requests. India and Macao reportedly did not choose this option and thus effectively abandoned their claims. In February 2008, Costa Rica reached agreement with the United States on compensation and as a result withdrew its request to arbitrate. Antigua was thus the only remaining Member pursuing arbitration under Article XXI. Under GATS rules, any arbitral panel established under Article XXI would be expected to issue its report within three months after the panel is appointed. Once a report is issued, the United States would not be able to modify its GATS Schedule until it made compensatory adjustments in conformity with the arbitration. If the United States modified its Schedule without complying with the arbitral decision, Antigua could modify or withdraw substantially equivalent benefits in conformity with the arbitral findings. GATS rules would allow Antigua to apply any such change only to the United States, notwithstanding the general most-favored-nation obligation in GATS Article II. In the WTO dispute itself, Antigua has requested authorization from the DSB to impose $3.4 billion in countermeasures against the United States for non-compliance, primarily by suspending obligations owed the United States under the Agreement on Trade-Related Intellectual Property Rights. The United States objected to the request, challenging both the level of suspension of concessions and Antigua's compliance with DSU principles and procedures governing a WTO Member's consideration of which concessions to suspend. Because of the U.S. objection, Antigua's proposal was sent to arbitration. In a ruling issued December 21, 2007, the Arbitrator determined that Antigua may request authorization from the DSB to suspend concessions under the TRIPS agreement at a level not to exceed $21 million annually. The amount was based on the Arbitrator's assumption that the United States would have complied with the ruling by opening its market to Antiguan providers of remote gambling on horseracing. Although Antigua requested arbitration in January 2008 under GATS Article XXI on compensation owed by the United States because of the U.S. withdrawal of gambling commitments in its GATS Schedule, there have not been reports that panelists have been appointed to hear this claim. Moreover, Antigua has not yet requested the WTO Dispute Settlement Body to authorize its retaliation request as modified by the December 2007 Arbitrator's report in the original WTO dispute settlement proceeding. In a July 2009 government press release, the Minister of Finance of Antigua is quoted as stating that "'[w]hile we may in the future consider exercising the right to impose sanctions, as of this moment, I am instead looking forward to meeting with the United States government in the near future and focusing on a mutually beneficial resolution of the issues raised by the remote gambling case.'" The USTR's annual report for 2010 also indicates that the parties have been consulting with a view to achieving "a mutually agreeable resolution" to the dispute. A June 10, 2009, European Commission staff report on an investigation under the European Union (EU) Trade Barriers Regulation, initiated as a result of a complaint submitted by the London-based Remote Gambling Association, indicates persistent EU concerns over U.S. Internet gambling regulation and its consistency with U.S. GATS obligations. Regarding possible future action, a fact sheet accompanying the report states as follows: "The report concludes that WTO action would be justified. However, this is not an automatic consequence. The report does not include any recommendation for action and also suggests that the issue should be addressed with the US Administration, with a view to finding an amicable solution." During their July 2009 meeting in Washington, USTR Kirk and EU Trade Ambassador Ashton discussed the EU report "and its implications for the WTO rights and obligations of the parties concerned." In November 2008, the Treasury Department and the Board of Governors of the Federal Reserve System issued a final rule implementing the provisions of the 2006 Unlawful Internet Gambling Enforcement Act (UIGEA), P.L. 109-347 , Title VIII. The statute prohibits gambling businesses from accepting checks, credit cards, electronic transfers and similar forms of payment in connection with illegal Internet gambling, while exempting intrastate and intratribal Internet gambling operations that include age and location verification requirements imposed as a matter of law. The rule became effective on January 19, 2009, with the original compliance date of December 1, 2009, extended to June 1, 2010. Various bills were introduced in the 111 th Congress to permit Internet gambling under a federal licensing program. Two 112 th Congress bills— H.R. 1174 (Campbell) and H.R. 2366 (Barton)—would do the same. H.R. 2230 (McDermott), introduced June 16, 2011, would establish a tax on "Internet gambling licensees." H.R. 2702 (Gibson), introduced July 29, 2011, would amend the federal criminal code to provide that provisions of federal law that establish criminal penalties for any activity involved in placing, receiving or otherwise transmitting a bet or wager will not apply to any bet or wager that is permissible under the Interstate Horseracing Act of 1978. In addition, on December 23, 2011, the Office of Legal Counsel (OLC) of the Department of Justice made public a September 2011 opinion in which it provided an avenue for states to permit certain types of online betting. OLC concluded in its opinion that "interstate transmissions of wire communications that do not relate to a 'sporting event or contest,' 19 U.S.C. § 1084(a), fall outside the reach of the Wire Act of 1961," and that, because state-run lotteries proposed by New York and Illinois did not involve wagering on sporting events or contests, they were not prohibited by the act. Further, because OLC found that the Wire Act did not apply in this situation, it found it unnecessary "to consider how to reconcile the Wire Act with the UIGEA." This case, sometimes referred to as the "Irish music" dispute, involves legislation enacted in 1998 (17 U.S.C. §110(5)(b), as added by P.L. 105-298 , §202(a)), which provides that it is not a copyright infringement for bars and restaurants and other retail outlets to play radio and television music without authorization from the copyright holder or the payment of fees so long as the establishments meet certain size limitations or equipment requirements. Challenged by the European Union (EU) in 1999, this so-called "small business" exemption was found to be an improper rights limitation in violation of Article 13 of the Agreement on Trade-Related Intellectual Property Rights (TRIPS). In the absence of U.S. legislative action by the end of the initial compliance period (July 27, 2001), complainant EU agreed to extend the period to the end of 2001, and to consider U.S. compensation for the EU music industry based on an amount of trade injury determined by arbitration under Article 25 of the DSU, a free-standing arbitration provision. A November 9, 2001, arbitral award determined that some $1.1 million in EU trade benefits are affected annually. Notwithstanding the arbitration, the EU, in January 2002, requested authorization from the DSB to impose countermeasures against the United States on the ground that the United States had not fully complied with its obligations in the case by the extended deadline. The EU proposed suspending concessions under the TRIPS Agreement so it could levy "a special fee from US nationals in connection with border measures concerning copyright goods." The United States asked for arbitration of the proposal, but the disputing parties later asked that the arbitration be suspended, with the understanding that it could be reactivated by either party after March 1, 2002. In April 2003, Congress appropriated $3.3 million for a "one-time only, lump-sum payment" to the EU to cover a three-year period of nullification and impairment of benefits in the dispute ( P.L. 108-11 ). The parties notified the WTO in June 2003 that the payment, which will be made into a fund for EU performers, constitutes a temporary settlement of the dispute. They also agreed that the EU may request that the suspended arbitration be resumed any time after December 20, 2004, or if the United States fails to pay within 45 days after being notified that the fund has been established. In November 2004, shortly before the three-year U.S.-EU agreement expired, the EU complained to the DSB that the United States had taken only minimal steps to secure the passage of legislation that would bring the United States into full compliance in the case. The EU has regularly raised the issue of U.S. noncompliance at DSB meetings, with the United States continuing to report to the DSB that it will work with Congress on the matter. During a July 2009 meeting on bilateral trade relations held in Washington, DC, USTR Kirk and European Union Trade Commissioner Ashton "exchanged ideas on potential steps to address" this dispute, and "directed … [their] staffs to explore new options on this dispute in the coming weeks." No agreement on resolving the dispute has yet been announced. As it has since the 2009 meeting with the EU, the United States reported to the DSB in February 2011 that, as well as working closely with Congress, it "will continue to confer with the European Union in order to reach a mutually satisfactory resolution of this matter." This dispute, at the time referred to as the "Havana Club" case, involves a statute ( P.L. 105-277 , 112 Stat. 2681-88), which prohibits the registration or enforcement in the United States, without the consent of the original owner or successors, of a trademark that is the same or substantially the same as one used in connection with a business or assets confiscated by the Cuban government. Challenged by the European Union (EU) in 1999, the law was ultimately found to violate national treatment and most-favored-nation obligations in the TRIPS Agreement in that it limited the prohibition on registration and enforcement of rights to rights asserted by Cuba and Cuban nationals or their successors-in-interest. Panel and Appellate Body reports in the case were adopted January 2, 2002. The original compliance period, as agreed upon by the United States and the EU, expired December 31, 2002; it was extended four times, also by agreement, most recently to June 30, 2005. The United States did not comply by this date. Instead of agreeing to an extension of the deadline or, alternatively, requesting authorization to retaliate, the EU entered into an agreement with the United States regarding rights and procedures involving any future EU retaliation request. The EU agreed not to request authorization from the DSB to suspend concessions for the time being, but pledged to notify and consult with the United States before making any such request in the future. For its part, the United States agreed not to block any retaliation request by the EU on the ground that the request is outside the 30-day window provided for in Article 22.6 of the DSU. The United States also retained the right to object to a proposed retaliation request and to refer the matter to arbitration. The EU, Cuba, and other WTO Members continue to raise the issue of U.S. noncompliance at DSB meetings, while the United States has reported to the DSB that legislative proposals that would implement the WTO ruling have been introduced in the House and Senate and that it will work with Congress on legislative vehicles to resolve this matter. A hearing on possible changes to U.S. law in light of the WTO decision was held by the House Judiciary Committee on March 3, 2010. In the 112 th Congress, H.R. 255 (Serrano) and H.R. 1887 (Rangel) would repeal Section 211, remove the current trade embargo on Cuba, and make other statutory changes involving U.S.-Cuba relations. H.R. 1888 (Rangel) would repeal Section 211 and make various statutory changes to facilitate the export to Cuba of U.S. agricultural and medical products. S. 603 (Bill Nelson) and H.R. 1166 (Issa) would amend Section 211 to apply to all persons claiming rights in trademarks confiscated by Cuba, whatever their nationality.
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Although the United States has complied with adverse rulings in many past World Trade Organization (WTO) disputes, there are currently 14 cases in which rulings have not yet been implemented or the United States has acted and the dispute has not been fully resolved. Under WTO dispute settlement rules, a WTO Member will generally be given a reasonable period of time to comply. While the Member is expected to remove the offending measure by the end of this period, compensation and temporary retaliation are available if the Member has not acted or not taken adequate remedial action by this time. Either disputing party may request a compliance panel if there is disagreement over whether a Member has complied in a case. Nine unresolved cases involve trade remedies, including a long-standing dispute with Japan over a provision of U.S. antidumping (AD) law and another with various WTO Members over the Continued Dumping and Subsidy Offset Act of 2000. The Offset Act was repealed as of October 2005, but remains the target of sanctions by the European Union (EU) and Japan due to continued payments to U.S. firms authorized under the repealer (P.L. 109-171). Six of these cases involve "zeroing," a practice under which the Department of Commerce (DOC), in calculating dumping margins in AD proceedings, disregards non-dumped sales. The practice was challenged by the EU (DS294/DS350), Japan (DS322), and Mexico (DS344), resulting in broad prohibitions on its use. The United States administratively resolved one aspect of DS294 by abandoning zeroing in original AD investigations, but has yet to comply fully either in this case or in DS350, 322, or 344, leading the EU (in DS294) and Japan to request the WTO to authorize sanctions. Under memoranda signed by the United States with each complainant on February 6, 2012, however, U.S.-requested arbitration of the two sanctions proposals has been suspended while the United States makes new dumping determinations in challenged AD proceedings using a methodology finalized in March 2012 that eliminates zeroing in later stages of AD cases. The sanctions arbitrations will be terminated once implementation of the new determinations is complete. A compliance panel report in Mexico's zeroing dispute has not yet been publicly circulated. The United States was expected to comply by March 17, 2012, in Brazil's zeroing challenge (DS382), but it is unclear if recent U.S. action will resolve the dispute. A July 2, 2012, deadline is in place in the dispute with Vietnam (DS404). The United States is expected to comply by April 25, 2012, in China's challenge to U.S. countervailing duties imposed on Chinese goods (DS379). Panel and Appellate Body reports were adopted in the EU's successful challenge of U.S. aircraft subsidies on March 23, 2012 (DS353) ("Boeing" case), and the United States is expected to comply by September 23, 2012. In Brazil's dispute over U.S. cotton subsidies (DS267), Congress repealed a WTO-inconsistent cotton program in 2006 (P.L. 109-171), but other programs were also successfully challenged and the United States was found not to have fully complied. The United States later made statutory and administrative changes to the export credit guarantee program faulted in the case. While the WTO has authorized Brazil to retaliate, the United States and Brazil signed an agreement in June 2010 aimed at permanently resolving the dispute. It includes Brazil's pledge not to impose sanctions during the life of the agreement and foresees possible legislative resolution of the dispute in the 2012 farm bill. The United States and Antigua have been consulting on outstanding issues in Antigua's challenge of U.S. online gambling restrictions (DS285); compensation agreements between the United States and various WTO Members in exchange for U.S. withdrawal of its WTO gambling commitments, an action taken to resolve the case, will not enter into effect until issues with Antigua are settled. Also unsettled are long-pending disputes with the European Union (EU) over a music copyright law (DS160) and a statutory trademark provision affecting property confiscated by Cuba (DS176).
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I n 2013, the Texas legislature passed House Bill 2 (H.B. 2), a measure that prescribed new requirements for abortion facilities and physicians who perform or induce abortions in Texas. Supporters of the bill maintained that these requirements would guarantee a higher level of care for women seeking abortions. Opponents, however, characterized the requirements as unnecessary and costly, and argued that they would make it more difficult for abortion facilities to operate. Since its enactment, critics of H.B. 2 focused on two of the measure's requirements, in particular. First, H.B. 2 required a physician who performs or induces an abortion to have admitting privileges at a hospital within 30 miles from the location where the abortion was performed or induced. In general, admitting privileges allow a physician to transfer a patient to a hospital if complications arise in the course of providing treatment. Second, H.B. 2 required an abortion facility to satisfy the same standards as an ambulatory surgical center (ASC). These standards address architectural and other structural matters, as well as operational concerns, such as staffing and medical records systems. In June 2016, the U.S. Supreme Court (Court) invalidated both requirements, finding that "[e]ach places a substantial obstacle in the path of women seeking a previability abortion ... [and] constitutes an undue burden on abortion access[.]" In Whole Woman's Health v. Hellerstedt , the Court reversed a decision by the U.S. Court of Appeals for the Fifth Circuit (Fifth Circuit) that upheld the requirements on both constitutional and procedural grounds. In Hellerstedt , the Court rejected the Fifth Circuit's analysis, stating that neither requirement "offers medical benefits sufficient to justify the burdens upon access that each imposes." Hellerstedt has been recognized both for its impact in Texas and for its perceived refinement of the undue burden standard that is used to evaluate the constitutionality of abortion regulations. Because at least 25 states are believed to have either an admitting privileges or ASC requirement, Hellerstedt is also expected to have an impact in other jurisdictions. This report examines Hellerstedt , as well as Whole Woman's Health v. Cole , the Fifth Circuit's June 2015 decision. The report also discusses the undue burden standard and explores how Hellerstedt could change how the standard is applied in future cases. The undue burden standard that is now used to evaluate abortion regulations was formally adopted by the Court in Planned Parenthood of Southeastern Pennsylvania v. Casey , a 1992 decision involving five provisions of the Pennsylvania Abortion Control Act. In a joint opinion, the Court reaffirmed the basic constitutional right to an abortion, while simultaneously allowing new restrictions to be placed on the availability of the procedure. The Court declined to overrule Roe v. Wade , its 1973 decision that first recognized the right to terminate a pregnancy, explaining the importance of following precedent: "The Constitution serves human values, and while the effect of reliance on Roe cannot be exactly measured, neither can the certain cost of overruling Roe for people who have ordered their thinking and living around that case be dismissed." At the same time, however, the Court refined its holding in Roe by abandoning the trimester framework articulated in the 1973 decision, and rejecting the strict scrutiny standard of judicial review it had previously espoused. In Casey , the Court adopted a new undue burden standard that attempts to reconcile the government's interest in potential life with a woman's right to terminate her pregnancy. The Court observed: The very notion that the State has a substantial interest in potential life leads to the conclusion that not all regulations must be deemed unwarranted. Not all burdens on the right to decide whether to terminate a pregnancy will be undue. In our view, the undue burden standard is the appropriate means of reconciling the State's interest with the woman's constitutionally protected liberty. According to the Court, an undue burden exists if the purpose or effect of an abortion regulation is "to place a substantial obstacle in the path of a woman seeking an abortion before the fetus attains viability." The Court further indicated that unnecessary health regulations that have the purpose or effect of presenting a substantial obstacle to a woman seeking an abortion would impose an undue burden. Evaluating the Pennsylvania law under the undue burden standard, the Court concluded that four of the five provisions at issue did not impose an undue burden. The Court upheld the law's 24-hour waiting period requirement, its informed consent provision, its parental consent provision, and its recordkeeping and reporting requirements. The Court invalidated the law's spousal notification provision, which required a married woman to tell her husband of her intention to have an abortion. Acknowledging the possibility of spousal abuse if the provision were upheld, the Court maintained: "The spousal notification requirement is thus likely to prevent a significant number of women from obtaining an abortion. It does not merely make abortions a little more difficult or expensive to obtain; for many women, it will impose a substantial obstacle." The Court's decision in Casey was particularly significant because it appeared that the new undue burden standard would allow a greater number of abortion regulations to pass constitutional muster. Prior to Casey , the application of Roe 's strict scrutiny standard of review resulted in most state abortion regulations being invalidated during the first two trimesters of pregnancy. For example, applying strict scrutiny, the Court invalidated 24-hour waiting period requirements and informed consent provisions in two cases: Akron v. Akron Center for Reproductive Health , Inc. and Thornburgh v. American College of Obstetricians and Gynecologists . Casey also recognized that the state's interest in protecting the potentiality of human life extended throughout the course of a woman's pregnancy. Thus, the state could regulate from the outset of a woman's pregnancy, even to the point of favoring childbirth over abortion. Under the trimester framework articulated in Roe , a woman's decision to terminate her pregnancy in the first trimester could not be regulated generally by the state. Following Casey , the Court applied the undue burden standard in just three cases prior to Hellerstedt . In Mazurek v. Armstrong , the Court reversed a decision by the U.S. Court of Appeals for the Ninth Circuit (Ninth Circuit) involving a Montana law that restricted the performance of abortions to licensed physicians. The Ninth Circuit vacated a district court's judgment that denied a motion for a preliminary injunction based on the lower court's conclusion that a group of physicians and a physician assistant had not established a likelihood of prevailing on their claim that the law imposed an undue burden. The Supreme Court concluded that there was no evidence that the law had an improper purpose or that it would place a substantial obstacle in the path of a woman seeking an abortion. Although the Court did not specifically address the law's effect, it did note that it would have an impact on only a single practitioner. Stenberg v. Carhart and Gonzales v. Carhart both involved the so-called "partial-birth" abortion procedure. In Stenberg , the Court invalidated a Nebraska law that restricted the procedure, in part, because it imposed an undue burden on a woman's ability to terminate a pregnancy. Finding that the statute's plain language prohibited the performance of both the "partial-birth" abortion procedure and another more commonly used abortion procedure, the Court maintained that the law imposed an undue burden because abortion providers would fear prosecution, conviction, and imprisonment if they acted. In Gonzales , the Court considered the validity of the federal Partial-Birth Abortion Ban Act of 2003. The Court distinguished the federal law from the Nebraska statute at issue in Stenberg , noting the inclusion of "anatomical landmarks" that identify when an abortion procedure will be subject to the law's prohibitions. Because the plain language of the law did not restrict the availability of alternate abortion procedures, the Court concluded that it was not overbroad and did not impose an undue burden on a woman's ability to terminate her pregnancy. At least 15 states have adopted laws or regulations that require physicians who perform abortions to have admitting privileges at a nearby hospital. Texas's requirement provided that a physician "performing or inducing an abortion ... must, on the date the abortion is performed or induced, have active admitting privileges at a hospital that: (A) is located not further than 30 miles from the location at which the abortion is performed or induced; and (B) provides obstetrical or gynecological health care services." A physician who violated the requirement could be subject to a fine of up to $4,000. The Texas legislature indicated that the requirement raised the standard and quality of care for women seeking abortions, and protected their health and welfare. Opponents maintained, however, that the requirement would likely result in the closure of numerous abortion facilities as physicians faced difficulty obtaining admitting privileges. In 2013, Planned Parenthood and a group of abortion providers and physicians, including Whole Woman's Health, challenged the constitutionality of the admitting privileges requirement and a separate requirement involving the administration of abortion-inducing drugs. In Planned Parenthood of Greater Texas Surgical Health Services v. Abbott , the Fifth Circuit concluded that the admitting privileges requirement was facially constitutional. The Fifth Circuit found that the requirement did not impose an undue burden despite the possibility of facility closures and increased travel distances to obtain an abortion. With regard to travel, the court maintained: " Casey counsels against striking down a statute solely because women may have to travel long distances to obtain abortions." Whole Woman's Health subsequently challenged the admitting privileges requirement as applied to two specific clinics in El Paso and McAllen, Texas. In Whole Woman's Health v. Lakey , a federal district court concluded that the requirement was unconstitutional as applied to both clinics and, when considered together with the ASC requirement, was unconstitutional "as applied to all women seeking a previability abortion." On appeal, the Fifth Circuit considered both facial and as-applied challenges to both requirements. In Whole Woman's Health v. Cole , the appeals court found that the provider's facial challenge to the admitting privileges requirement failed on procedural grounds. The court maintained that the provider's facial claim violated the principle of res judicata, and should have been precluded by its decision in Abbot t . The court noted: "By granting a broad injunction against the admitting privileges requirement ... the district court resurrected the facial challenge put to rest in Abbott ..." Although the Fifth Circuit rejected the facial challenge to the admitting privileges requirement, it upheld an injunction of the requirement as applied to the abortion facility in McAllen, when it utilized a specific physician. This physician was unsuccessful at obtaining admitting privileges at local hospitals for reasons other than his competence. At the same time, however, the Fifth Circuit reversed an injunction of the requirement as applied to the abortion facility in El Paso. Citing a nearby abortion facility in Santa Teresa, New Mexico, and the fact that people travel regularly between the two cities for medical care, the court maintained that the admitting privileges requirement did not impose an undue burden. The Fifth Circuit distinguished the Texas admitting privileges requirement from a similar Mississippi requirement that it invalidated in Jackson Women's Health Organization v. Currier , a 2014 decision. The Fifth Circuit explained that invalidating the Mississippi requirement would have led to the closure of the last abortion facility in the state. An invalidation of the Texas requirement would not have the same effect. State laws that require abortion providers to satisfy the same standards as ASCs have become increasingly more common. Texas regulations define an ASC as a facility "that primarily provides surgical services to patients who do not require overnight hospitalization or extensive recovery, convalescent time or observation." Under Texas law, ASCs are required to satisfy a variety of operating, fire prevention and safety, and construction standards. In Cole , the Fifth Circuit concluded that the plaintiffs' claim involving the ASC requirement failed on both procedural grounds and on the merits. The court found that the claim was precluded by its decision in Abbott . Although the plaintiffs did not challenge the requirement in Abbott because implementing regulations had not yet gone into effect, the Fifth Circuit maintained that because Abbott involved the same parties and legal standards, the requirement should have been challenged in that case. The Fifth Circuit determined that a facial challenge to the ASC requirement would also fail on the merits because the requirement did not have the purpose or effect of placing a substantial obstacle in the path of a woman seeking an abortion. The court maintained that the plaintiffs failed to show that the ASC requirement was adopted for an improper purpose. Although the lower court found an improper purpose based on what it concluded was a lack of credible evidence to support the proposition that abortions performed in ASCs lead to better health outcomes, the Fifth Circuit observed: "All of the evidence referred to by the district court is purely anecdotal and does little to impugn the State's legitimate reasons for the Act." In addition, the Fifth Circuit found that the ASC requirement did not have the effect of placing a substantial obstacle in the path of a woman seeking an abortion. In Casey , the Court indicated that if a law would be invalid in a large fraction of the cases in which it is relevant, it should be found to have an improper effect. Notably, the Court considered the effect of Pennsylvania's spousal notification requirement only on married women who did not want to notify their husbands of their plans to have an abortion, rather than its effect on all women or all pregnant women in the state. In that equation, the Court concluded that the spousal notification requirement would have an effect in a large fraction of the relevant cases. In Cole , however, the Fifth Circuit found that the ASC requirement would not have a similar effect. After considering the number of women of reproductive age in Texas and the number of women of reproductive age who would have to travel more than 150 miles to have an abortion because of the implementation of both the admitting privileges and ASC requirements, the court determined that only 16.7% of women of reproductive age would have to travel more than 150 miles to have an abortion. The Fifth Circuit reasoned that 16.7% did not constitute a large fraction of the relevant cases, and thus, the effect of the ASC requirement was not improper. Although the Fifth Circuit rejected a facial challenge to the ASC requirement, it affirmed an injunction of the requirement as applied to the abortion facility in McAllen, with some modifications. The court acknowledged that the McAllen facility is the sole abortion provider in the Rio Grande Valley and discussed the 235-mile distance some women in the Rio Grande Valley would have to travel to obtain an abortion. In light of this distance, the court indicated that the state would be enjoined from enforcing the requirement until another facility opened at a location that was closer than those located in San Antonio. Acknowledging its discussion of Casey and travel distances in Abbott , the Fifth Circuit observed: "[I]n the specific context of this as-applied challenge as to the McAllen facility, the 235-mile distance presented, combined with the district court's findings, are sufficient to show that [the requirement] has the 'effect of placing a substantial obstacle in the path of a woman seeking an abortion.'" The Fifth Circuit declined, however, to affirm the lower court's judgment involving the ASC requirement as applied to the El Paso facility. Because abortion services are available at the facility in Saint Teresa, New Mexico, and there was evidence that many women traveled to that facility before enactment of H.B. 2, the court concluded that the ASC requirement did not place a substantial obstacle in the path of women seeking an abortion in the El Paso area. In its petition for review of the Fifth Circuit's decision, Whole Woman's Health asked the Court to consider the extent to which the Texas requirements actually supported women's health. Whole Woman's Health maintained that the Fifth Circuit's refusal to consider the promotion of women's health conflicted with the approaches taken by other federal courts of appeals. Whole Woman's Health also challenged the Fifth Circuit's conclusion that res judicata barred it from considering newly developed facts that could have an impact on the provider's facial challenges to the requirements. Whole Woman's Health argued that when a claim rests on facts developed after a judgment is entered in a prior case, the claim is not barred by that judgment, and a court may award any remedy that is otherwise appropriate. In a 5-3 decision, the Court rejected both the procedural and constitutional grounds for the Fifth Circuit's decision in Cole . Writing for the majority in Hellerstedt , Justice Breyer found that res judicata did not bar facial challenges to either the admitting privileges requirement or the ACS requirement. Justice Breyer also concluded that the requirements provide "few, if any, health benefits for women, pose[] a substantial obstacle to women seeking abortions, and constitute[] an 'undue burden' on their constitutional right to do so." Justice Breyer noted that the undue burden standard requires courts to consider "the burdens a law imposes on abortion access together with the benefits those laws confer." Moreover, Justice Breyer maintained that courts should place considerable weight on the evidence and arguments presented in judicial proceedings when they consider the constitutionality of abortion regulations. In addressing the admitting privileges requirement and res judicata, the Court distinguished the pre-enforcement challenge in Abbott with the post-enforcement challenge at issue. Citing the Restatement (Second) of Judgments, the Court noted that the development of new material facts, such as the large number of clinics that closed after H.B. 2 began to be enforced, could mean that a new case and a prior similar case do not present the same claim. The Court observed: "When individuals claim that a particular statute will produce serious constitutionally relevant adverse consequences before they have occurred—and when the courts doubt their likely occurrence—the factual difference that those adverse consequences have in fact occurred can make all the difference." In addition, the Court found that res judicata did not preclude a facial challenge to the ASC requirement. The Court emphasized that the ASC and admitting privileges requirements were separate and distinct, and that the Fifth Circuit failed to account for their differences when it concluded that the challenge to the ASC requirement was precluded by Cole : "This Court has never suggested that challenges to different statutory provisions that serve two different functions must be brought in a single suit." The Court also indicated that the decision not to bring a facial challenge to the ASC requirement in Abbott was reasonable in light of the absence of regulations to implement the ASC requirement and the possibility that some abortion facilities might receive a waiver from the requirement. In its application of the undue burden standard to the admitting privileges and ASC requirements, the Hellerstedt Court referred heavily to the evidence collected by the district court. With regard to the admitting privileges requirement, the Court cited the low complication rates for first and second trimester abortions, and expert testimony that complications during the abortion procedure rarely require hospital admission. Based on this and similar evidence, the Court disputed the state's assertion that the purpose of the admitting privileges requirement was to ensure easy access to a hospital should complications arise. The Court emphasized that "there was no significant health-related problem that the new law helped to cure." Citing other evidence concerning the closure of abortion facilities as a result of the admitting privileges requirement and the increased driving distances experienced by women of reproductive age because of the closures, the Court maintained: "[T]he record evidence indicates that the admitting-privileges requirement places a 'substantial obstacle in the path of a woman's choice.'" The Court again referred to the record evidence to conclude that the ASC requirement imposed an undue burden on the availability of abortion. Noting that the record supports the conclusion that the ASC requirement "does not benefit patients and is not necessary," the Court also cited the closure of facilities and the cost to comply with the requirement as evidence that the requirement poses a substantial obstacle for women seeking abortions. While Texas argued that the clinics remaining after implementation of the ASC requirement could expand to accommodate all of the women seeking an abortion, the Court indicated that "requiring seven or eight clinics to serve five times their usual number of patients does indeed represent an undue burden on abortion access." The majority's focus on the record evidence, and a court's consideration of that evidence in balancing the burdens imposed by an abortion regulation against its benefits, is noteworthy for providing clarification of the undue burden standard. Although the Casey Court did examine the evidence collected by the district court regarding Pennsylvania's spousal notification requirement, and was persuaded by it, the Fifth Circuit discounted similar evidence collected by the lower court in Abbott and Lakey . In Hellerstedt , the Court maintained that the Fifth Circuit's approach did "not match the standard that this Court laid out in Casey ..." In a dissenting opinion joined by Chief Justice Roberts and Justice Thomas, Justice Alito maintained that the petitioners' claims should have been barred by res judicata. With regard to the ACS requirement, in particular, Justice Alito contended that the claim should have been brought in Abbott because it imposed the same kind of burden on the availability of abortion. Justice Alito also criticized the absence of "precise findings" to support the argument that the admitting privileges and ASC requirements caused the closure of abortion facilities. If such facilities closed for reasons other than the requirements, he contended, "the corresponding burden on abortion access may not be factored into the access analysis." Whether Hellerstedt should be interpreted to guarantee the invalidation of all of the other state admitting privileges and ASC requirements is not certain. The Court's emphasis on balancing the burdens imposed by an abortion regulation with its benefits, and its reliance on the record evidence, seems to suggest that each regulation would have to be examined on its own terms. Nevertheless, because of the similarities between the Texas requirements and the other admitting privileges and ASC requirements, it seems possible that other courts will also conclude that these requirements do not provide an appreciable benefit to women. The impact of Hellerstedt will likely become clearer as courts apply the decision to other cases. Notably, following the issuance of its decision in Hellerstedt , the Court declined to review two other cases involving state admitting privileges requirements. In Jackson Women's Health Organization v. Currier and Planned Parenthood of Wisconsin v. Schimel , the Fifth Circuit and the U.S. Court of Appeals for the Seventh Circuit determined that admitting privileges requirements in Mississippi and Wisconsin imposed an undue burden on the availability of abortion. In addition, in light of Hellerstedt , the Attorney General of Alabama indicated that he would dismiss his appeal of Planned Parenthood Southeast v. Strange , a 2014 decision that concluded that the state's admitting privileges requirement imposed an undue burden. Hellerstedt appears to have prompted groups that oppose abortion to explore other legislative options that would restrict the procedure by promoting the health of the fetus rather than the health of the woman. For example, legislation that would prohibit the performance of an abortion once a fetus has reached a gestational age of 20 weeks, a point in development when some contend that the fetus can experience pain, has been considered by state legislatures and the U.S. Congress. It should be noted, however, that fetal pain laws in Idaho, Arizona, and Utah have already been invalidated by the Ninth Circuit and the U.S. Court of Appeals for the Tenth Circuit (Tenth Circuit). In 2014, the Court declined to review the Ninth Circuit's decision in Isaacson v. Horne , a 2013 case that invalidated Arizona's fetal pain law. Even if the Court were to review a case involving a fetal pain law, it seems possible that it could apply the undue burden standard in a manner that deviates from its analysis in Hellerstedt . Unlike the admitting privileges and ASC requirements, which seek to promote women's health, the fetal pain laws were enacted to protect fetuses. Whether the Court would balance the burdens and benefits of a fetal pain law like it did in Hellerstedt is not entirely certain. Notably, the Ninth and Tenth Circuits focused on the Court's discussion of viability in Roe and Casey when they examined the Idaho, Arizona, and Utah fetal pain laws. In Casey , the Court emphasized that a state may not unduly interfere with a woman's right to terminate a pregnancy prior to viability: "Before viability, the State's interests are not strong enough to support a prohibition of abortion or the imposition of a substantial obstacle to the woman's effective right to elect the procedure." Because the state fetal pain laws banned most abortions after a specified gestational age, regardless of whether a fetus had attained viability, the Ninth and Tenth Circuits concluded that the laws were unconstitutional. Like the appellate courts, the Supreme Court may focus on viability, rather than a balancing of burdens and benefits, in an examination of a fetal pain law.
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In Whole Woman's Health v. Hellerstedt, the U.S. Supreme Court (Court) invalidated two Texas requirements that applied to abortion providers and physicians who perform abortions. Under a Texas law enacted in 2013, a physician who performs or induces an abortion was required to have admitting privileges at a hospital within 30 miles from the location where the abortion was performed or induced. In general, admitting privileges allow a physician to transfer a patient to a hospital if complications arise in the course of providing treatment. The Texas law also required an abortion facility to satisfy the same standards as an ambulatory surgical center (ASC). These standards address architectural and other structural matters, as well as operational concerns, such as staffing and medical records systems. Supporters of the Texas law maintained that the requirements would guarantee a higher level of care for women seeking abortions. Opponents, however, characterized the requirements as unnecessary and costly, and argued that they would make it more difficult for abortion facilities to operate. In Hellerstedt, the Court concluded that the admitting privileges and ASC requirements placed a substantial obstacle in the path of women seeking an abortion, and imposed an undue burden on the ability to have an abortion. In applying the undue burden standard that is now used to evaluate abortion regulations, the Court explained that a reviewing court must consider the burdens a law imposes on abortion access together with the benefits that are conferred by the law. The Court also indicated that courts should place considerable weight on the evidence and arguments presented in judicial proceedings when they consider the constitutionality of abortion regulations. Hellerstedt has been recognized both for its impact in Texas and for its perceived refinement of the undue burden standard. Because at least 25 states are believed to have either an admitting privileges or ASC requirement, Hellerstedt is expected to have an impact in other jurisdictions. This report examines Hellerstedt and discusses how the decision might affect the application of the undue burden standard in future abortion cases.
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Budgets for the Department of State and the Broadcasting Board of Governors (BBG), aswell as U.S. contributions to United Nations (U.N.) International Organizations and Peacekeepingare all within the Commerce, Justice, State and Related Agency (CJS) appropriations. Intertwinedwith the annual appropriations process is the biannual Foreign Relations Authorization that, by law,Congress must pass prior to the State Department's expenditure of its appropriations. On April 1, 1999, largely for budgetary savings and streamlining U.S. foreign policy,consolidation of the foreign policy agencies began with the merger of the functions of the ArmsControl and Disarmament Agency (ACDA) into the State Department; as of October 1, 1999, thefunctions of the U.S. Information Agency (USIA), excluding international broadcasting, also camedirectly under the State Department. Although not part of the CJS appropriations, the U.S. Agencyfor International Development (USAID) was required to reorganize and come directly under theauthority of the Secretary of State by April 1, 1999. (1) (For more details on USAID, see CRS Report RL30511 , Appropriations for FY2001: Foreign Operations, Export Financing, and Related Programs, by[author name scrubbed].) The Administration's FY2001 State Department and International Broadcasting budgetrequest totaled $6.96 billion, 10.5% above the FY2000 enacted funding level. Overseas securityfunding continued to be a key issue in the FY2001 CJS appropriations debate. (For more details, seeCRS Report 98-771, Embassy Security: Background, Funding, and FY2001 Budget .) Noticeablyabsent in the President's request was any indication of budget savings attributable to the completedforeign policy agency consolidation. Secretary of State Albright testified on the FY2001 State Department appropriations requestbefore House and Senate Committees in February and March 2000. On June 26 the House passed H.R. 4690 providing $6.11 billion for the Department of State and $438.1 million forinternational broadcasting. The Senate received H.R. 4690 on June 27, 2000. TheSenate Appropriations Committee reported its version of the bill July 18, 2000, recommending $6.1billion for the Department of State and $441.6 million for international broadcasting. On October27, 2000 Congress passed the CJS conference report ( H.R. 4942 , H.Rept. 106-1005 ). After numerous continuing resolutions, the President signed into law ( P.L. 106-553 ) the CJSappropriations portion of H.R. 4942 as contained in H.R. 5548 . Theenacted FY2001 appropriation provides $6.6 billion for the Department of State and $451.5 millionfor international broadcasting for a total of $7.1 billion--nearly $100 million more than the ClintonAdministration had requested. The State Department's mission is to advance and protect the worldwide interests of theUnited States and its citizens through the staffing of overseas missions, the conduct of U.S. foreignpolicy, the issuance of passports and visas, and other responsibilities. Currently, the StateDepartment coordinates with the activities of 50 U.S. government agencies and organizations inoperating 250 posts in over 180 countries around the world. The Department's staff size hasincreased, largely because of the integration of ACDA and USIA into State. Highlights follow. Diplomatic and Consular Programs (D&CP) -- The D&CP account fundsoverseas operations (e.g., motor vehicles, local guards, telecommunications, medical), activitiesassociated with conducting foreign policy, passport and visa applications, regional bureaus, undersecretaries, and post assignment travel. Beginning in FY2000, the State Department's Diplomaticand Consular Program account included State's salaries and expenses, USIA's technology andinformation functions, and ACDA. The FY2000 level passed by Congress for this account totaled$2.823 billion. The Administration's FY2001 request for this account equaled $3.104 billion,including $410 million for embassy security expenses (most of which would be for recurring costssuch as: salaries of increased security guard services, ongoing personnel security training, andupkeep of added information systems, software, and armored vehicles). The House AppropriationsCommittee recommended $3.089 billion, including $410 million for worldwide security upgrades.The Senate Appropriations Committee recommended $3.148 billion for D&CP, including $272.7million for worldwide security upgrades. The final amount passed by Congress is $3.168 billion with$410 million for worldwide security upgrades. Security and Maintenance of Overseas U.S. Missions -- This account supportsthe maintenance, rehabilitation, and replacement of overseas facilities to provide appropriate, safe,secure and functional facilities for U.S. diplomatic missions abroad. Congress originally had enacted$640 million for this account for FY1999. However, following the embassy bombings in Africa inAugust 1998, Congress agreed to more than $1 billion for the Security and Maintenance account when passing an emergency supplemental with a new subaccount referred to as Worldwide SecurityUpgrades. The FY2000 appropriation for the overall account was $742.2 million -- $428.6 millionfor the Security and Maintenance account and $313.6 million for Worldwide Security Upgrades. The Administration's FY2001 request for these functions was $431.2 million for the Security andMaintenance account and $648 million for Worldwide Security Upgrades . In addition to its annualappropriation request, the Administration sought $3.35 million advance appropriations forFY2002-2005. The House Appropriations Committee recommended $416.98 million for Securityand Maintenance and matched the President's request of $648 million for Worldwide SecurityUpgrades. The House agreed with these amounts, but did not include funding for advanceappropriations for overseas security. The Senate Appropriations Committee recommended $417.1million for Security and Maintenance and $364.9 million for Worldwide Security Upgrades . Theenacted appropriation includes $417 million for Security and Maintenance and $663 million for Worldwide Security Upgrades . In November 1999 the State Department-appointed Overseas PresenceAdvisory Panel (OPAP) released its report, which recommended several securityactions to contribute to the safety of American personnel and facilities abroad. TheHouse Appropriations Committee noted that the Department has begun implementingsome of the recommendations, while others require interagency or legislative actions. (For more detail see CRS report 98-771, Embassy Security, Background, Funding,and the FY2001 Budget, by [author name scrubbed].) Educational and Cultural Exchanges -- This account funds programsauthorized by the Mutual Educational and Cultural Exchange Act of 1961, such as the FulbrightAcademic Exchange Program, as well as leadership programs for foreign leaders and professionals. Government exchange programs have come under close scrutiny in recent years for being excessivein number and duplicative. By a July 1997 executive order, the Office of U.S. GovernmentInternational Exchange and Training Coordination was created. Congress appropriated $205 millionfor FY2000 for Educational and Cultural Exchanges , but did not specify a level for the Fulbrightprogram. The Administration request for FY2001 was $225 million. The House passed $213.8million for exchanges. The Senate recommended providing the Administration with its requested$225 million. Congress passed $231.6 million ($6 million more than requested) for the internationalexchanges account, including $114 million for the Fulbright Program. The Capital Investment Fund (CIF) -- CIF was established by the ForeignRelations Authorization Act of FY1994/95 ( P.L. 103-236 ) to provide for purchasing informationtechnology and capital equipment which would ensure the efficient management, coordination,operation, and utilization of State's resources. In FY1998 Congress approved a 250% increase in thisfund, from $24.6 million in FY1997 to $86 million in FY1998. The Administration sought $118.3million (an increase of 38%) in FY1999 for CIF. Congress exceeded the request, agreeing to $158.6million for this account, which included funds from the emergency supplemental appropriation forY2K compliance. The FY2000 request for CIF would have reduced funding to $90 million, plus anadditional $50 million from expedited passport fees. Congress agreed to $80 million. TheAdministration request for CIF in FY2001 was $97 million, although the House AppropriationsCommittee recommended $79.7 million. The Committee expressed a concern that this funding level,combined with Machine Readable Visa fees available Department-wide, would provide State withan "enormous" investment in information technology of $491.9 million and no quantifiable way tomeasure its success. The House agreed with the Committee, funding CIF at $79.7 million. TheSenate Committee recommended increasing CIF to $104 million in FY2001. Congress appropriated$97 million--the Administration's request--for CIF. Contributions to International Organizations (CIO) -- CIO provides funds forU.S. membership in numerous international organizations and for multilateral foreign policyactivities that transcend bilateral issues, such as human rights. Maintaining a membership ininternational organizations, the Administration argues, benefits the United States by advancing U.S.interests and principles while sharing the costs with other countries. Payments to the United Nations(U.N.) and its affiliated agencies, the Inter-American Organizations, as well as other regional andinternational organizations are included in this account. The FY2000 appropriation set CIO fundingat $885.2 million. Congress also appropriated $351 million for U.S. arrearage payments to the U.N. So far, $100 million has been paid. The remainder is being withheld until U.N. reforms arecompleted. The Administration's FY2001 request for U.S. Contributions to InternationalOrganizations equaled $946 million. The House full Committee recommended $880.5 million towhich the House agreed. The Senate Appropriations Committee reported $943.9 million for CIO and$102 million for arrearage payments. Congress appropriated $870.8 million. (For more detail, seeCRS Issue Brief IB86116, U.N. System Funding: Congressional Issues, by VitaBite.) Contributions to International Peacekeeping Activities (CIPA) -- The UnitedStates supports multilateral peacekeeping efforts around the world through payment of its share ofthe U.N. assessed peacekeeping budget. Multilateral peacekeeping often provides an alternativebetween doing nothing and unilateral U.S. action in overseas situations of importance to the UnitedStates. Congress approved $500 million for this account for FY2000. The Administration's FY2001request for CIPA (which does not include NATO peacekeeping costs) totaled $738.7 million andsought it as "two-year funds," noting the unpredictability of peacekeeping from one year to the next. The House Committee recommended $498.1 million for this account in FY2001 and rejected therequest for two-year funding. Furthermore, the House Committee listed specific peacekeepingmissions that were not to get funding under this account, including MINURSO in Western Sahara,UNAMSIL in Sierra Leone, UNMOT in Tajikistan, as well as a request for a new mission inEthiopia and Eritrea. The House-passed legislation included the same level of funding--$498.1million, but did not include language specifying missions that would not get funding. The Senatefull Committee recommended $500 million for peacekeeping. The final funding level, greater thanthe Administration request, totals $846 million. (For more detail, see CRS Issue Brief IB90103, United Nations Peacekeeping: Issues for Congress, by Marjorie AnnBrowne.) The International Commissions account includes the U.S.-Mexico Boundary and WaterCommission, the International Fisheries Commissions, the International Boundary Commission, theInternational Joint Commission, and the Border Environment Cooperation Commission. TheFY2000 enacted level for International Commissions totaled $46.8 million. The FY2001 requestequaled $62.2 million. The 32.9% increase resulted from an $8.5 million increase in theInternational Boundary and Water Commission (largely for construction) and nearly $4 millionincrease in the International Fisheries Commission, a large portion of which was for the Great LakesFishery Commission. The House Appropriations Committee recommended a continuation of theFY2000 funding level for FY2001. A House floor amendment transferring $500,000 from DC&Pto the International Boundary and Water Commission was agreed to, setting the InternationalCommissions total at $47.1 million. The Senate Committee recommendation totaled $60 millionfor international commissions. Congress compromised with an enacted level of $56.2 million. The Asia Foundation -- The Asia Foundation is a private, nonprofitorganization that supports efforts to strengthen democratic processes and institutions in Asia, openmarkets, and improve U.S.-Asian cooperation. The Foundation receives both government andprivate sector contributions. Government funds for the Asia Foundation are appropriated to, andpass through, the State Department. Congress funded The Asia Foundation at $8.2 million forFY2000. The Administration's FY2001 request for the Foundation of $10 million reflects a 22%increase over the current level, mainly to develop stronger and more open market economies,particularly in China. The House Appropriations Committee recommended continuing The AsiaFoundation at its FY2000 level and the House agreed. The Senate did not include any funds for TheAsia Foundation for FY2001. The final CJS appropriation contained $9.3 million for The AsiaFoundation in FY2001. National Endowment for Democracy (NED) -- The National Endowment forDemocracy, a private nonprofit organization established during the Reagan Administration, supportsprograms to strengthen democratic institutions in more than 90 countries around the world. NEDproponents assert that many of its accomplishments are possible because it is not a governmentagency. NED's critics claim that it duplicates U.S. government democracy programs and either couldbe eliminated or could operate entirely with private funding. NED's FY2000 enacted appropriationwas a continuation of the previous year's level of $31 million. The Administration requested a slightincrease -- to $32 million -- for FY2001. The House Appropriations Committee and the Houseconcurred on funding NED at $30.9 million for FY2001. The Senate Appropriations Committeerecommended setting NED funding at $31 million for FY2001. The Congressionally-passed levelis $31 million. East-West and North-South Centers -- The Center for Cultural and TechnicalInterchange between East and West (East-West Center), located in Honolulu, Hawaii, wasestablished in 1960 by Congress to promote understanding and cooperation among the governmentsand peoples of the Asia/Pacific region and the United States. The Center for Cultural and Technicalinterchange between North and South (North-South Center) is a national educational institution inMiami, FL, closely affiliated with the University of Miami. It promotes better relations, commerce,and understanding among the nations of North America, South America and the Caribbean. TheNorth-South Center began receiving a direct subsidy from the federal government in1991. The Administration's FY1999 budget had recommended phasing outgovernment funding of both the East-West and North-South Centers. The House hadset zero funding for both Centers in FY1999, while the Senate had agreed to doubleNorth-South Center funding to $3 million, and continue the East-West Center at itsFY1998 level of $12 million. P.L. 105-277 , however, contained $12.5 million forthe East-West Center and $1.75 million for the North-South Center. The FY2000budget continued these levels for both the North-South and East-West Centers. TheFY2001 request continued these levels, while the House again voted to zero outgovernment funding for both Centers in FY2001. The Senate Committeerecommended $13.5 million for the East-West Center, but did not include theNorth-South Center in its version of the appropriation bill. Congress provided $13.5million for the East-West Center, but no funds for the North-South Center forFY2001. The United States International Broadcasting Act of 1994 (2) reorganized within USIA allU.S. government international broadcasting, including Voice of America (VOA), Broadcasting toCuba, Radio Free Europe/Radio Liberty (RFE/RL), Radio Free Asia (RFA), and the newly-approvedRadio Free Iraq and Radio Free Iran. The Act established the Broadcasting Board of Governors(BBG) to oversee all U.S. government broadcasting; abolished the Board for InternationalBroadcasting (BIB), the administering body of RFE/RL; and recommended that RFE/RL beprivatized by December 31, 1999. During reorganization debate, the 105th Congress agreed that credibility of U.S. internationalbroadcasting was crucial to its effectiveness as a public diplomacy tool. Therefore, Congress agreednot to merge broadcasting functions into the State Department, but to maintain the BroadcastingBoard of Governors (BBG) as an independent agency as of October 1, 1999. Congress appropriated an FY2000 total of $421.8 million for international broadcasting,including $22.1 million for Broadcasting to Cuba and $21.9 million for Radio Free Asia. TheFY2001 budget request for international broadcasting was $448.4 million, a 6.3% increase. Therequest includes $23.5 million for Cuba Broadcasting. The House Appropriations Committee votedto provide $438.1 million to the BBG, including $22.8 million for Cuba Broadcasting. The Housepassed these amounts. The Senate Appropriations Committee recommended a total of $441.6million for international broadcasting -- $388.4 million for broadcasting operations and $22.1 millionfor Cuba Broadcasting. Congress enacted a total of $451.5 million for international broadcasting,including $22.1 million for Cuba Broadcasting. The BBG's total funds also include funding for a Broadcasting Capital Improvementsaccount (formerly USIA's Radio Construction account) which funds the building or renovating ofradio stations, upgrading and refurbishing station capabilities, updating technology, and replacingold transmitters. The FY2000 appropriation for this account was $11.3 million. The President'sFY2001 request was $19.8 million, a 75% increase over FY2000, most of which would pay forrelocation of the Poro medium wave transmitting facility in the Philippines. The House Committeerecommended and the House agreed to $18.3 million for the Broadcasting Capital Improvementsaccount. The Senate Committee reported in its version of H.R. 4690 $31.1 million forBroadcasting Capital Improvements in FY2001. The FY2001 enacted level is $20.4 million forCapital Improvements. State Department, USIA, and Related Agencies Appropriations (millions of dollars) *Does not include the Government-wide rescission of 0.22 percent for FY2001.
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On February 7, 2000, the President submitted his FY2001 budget request which includednearly $7 billion for the Department of State and the Broadcasting Board of Governors. Thisrepresented an increase of $661.5 million (or 10.5%) from the FY2000 enacted level which Congresshad passed in an omnibus bill on November 19, 1999; the President had signed it into law ( P.L.106-113 ) on November 29, 1999. Earlier, the Foreign Affairs Reform and Restructuring Act of 1999 ( P.L. 105-277 , section1001) had required the foreign policy agencies to be reorganized before FY2000. Subsequently, theArms Control and Disarmament Agency (ACDA) merged its functions into the Department of State,and the U.S. Agency for International Development (USAID) reorganized and came directly underthe authority of the Secretary of State as of April 1, 1999. The U.S. Information Agency (USIA)consolidated its information and exchange functions into the Department of State, while as ofOctober 1, 1999 the broadcasting functions became an independent agency referred to as theBroadcasting Board of Governors (BBG). The Administration's FY2001 request would have: 1) provided more than $1 billion forworldwide security upgrades at U.S. facilities, 2) continued increasing the capital investment fund,and 3) increased U.S. Contributions to the U.N.'s International Organizations (CIO) and its U.N.Contributions to International Peacekeeping (CIPA) funds. In addition, the internationalbroadcasting budget request of $6.96 billion represented a 6.3% increase over the FY2000 level. The House Commerce, Justice, State (CJS) Appropriations Subcommittee reported out itsversion of the CJS FY2001funding legislation on June 6, 2000. The full House AppropriationsCommittee reported out its version on June 15th. The bill ( H.R. 4690 ) was formallyintroduced on June 19, 2000. House floor action occurred on June 22nd and 23rd; the House passedthe bill (214-195-1) on June 26, 2000 after agreeing to transfer $10 million out of State and into theLegal Services Corp. The House funding level for the State Department and internationalbroadcasting totaled $6.55 billion. The Senate Appropriations Committee reported their version of H.R. 4690 onJuly 18, 2000. The Senate Committee recommended no significant increase in worldwide securityupgrade funding, but a 30% increase in the Capital Investment Fund and 10% increase in exchangeprograms. The Senate Committee recommended a total FY2001 funding level of $6.56 billion forState and international broadcasting. On October 27, 2000, Congress approved the CJS conference report ( H.R. 4942 ; H.Rept. 106-1005 ). The President signed the measure into law on December 21, 2000( H.R. 5548 as contained in the conference report on H.R. 4942 ; P.L.106-553 ). This is the final update of this report.
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From November 30-December 2, 2004, the Cuban government released six politicalprisoners, including Raul Rivero and Oscar Espinosa Chepe, and reports indicate that up to 18additional dissidents have been transferred to the main prison hospital in Havana, often a sign thata prisoner will be freed. Many observers maintain that the releases are aimed at improving Cuba'srelations with Europe. (See Human Rights below.) On November 20, 2004, both the House and the Senate agreed to the conference report( H.Rept. 108-792 ) to the FY2005 omnibus appropriations bill ( H.R. 4818 ), whichincluded nine regular appropriations bills. The measure dropped provisions easing Cuba sanctionsthat had been included in the Agriculture, Commerce, Justice, and State, and Transportation/Treasuryappropriations bills. The measure also fully funded the Administration's requests for $27.6 millionfor Cuba broadcasting (Radio and TV Marti) and $9 million in Economic Support Funds for Cubaprojects to promote democratization, respect for human rights, and the development of a free marketeconomy. On November 12, 2004, the Treasury Department's Office of Foreign Assets Controlinstructed U.S. banks to stop transfers of funds to U.S. companies for sales of agricultural andmedical products to Cuba. The temporary move was taken so that OFAC could examine whetherthere were any violations of the provisions of the Trade Sanctions Reform and Export EnhancementAct of 2000 ( P.L. 106-387 , Title IX) requiring that the sales be conducted in "payment of cash inadvance." Some observers fear that the action could jeopardize U.S. agricultural sales to Cuba, whichin the first nine months of 2004, amounted to some $320 million. (See Food and Medical Exports below.) On October 25, 2004, Fidel Castro announced that U.S. dollars no longer would be used inentities that currently accept dollars (such as stores, restaurants, and hotels). As of November 14,Cubans need to exchange their dollars for "convertible pesos," with a 10% surcharge for theexchange. (See Economic Conditions below.) On September 23, 2004, the Senate approved the FY2005 Foreign Operations bill, H.R. 4818 , amended, by voice vote with a provision (Section 5091) providing $5million to establish cooperation with appropriate agencies of the Cuban government oncounter-narcotics matters. The Senate Appropriations Committee had reported its version of the bill, S. 2812 ( S.Rept. 108-346 ), on September 15, 2004, with the same provision. (See DrugInterdiction Cooperation below.) On September 22, 2004, the House approved H.R. 5025 , the FY2005Transportation/Treasury appropriations bill, with three Cuba provisions that would ease sanctionson family travel (Section 647), travel for educational activities (Section 648), and on privatecommercial sales of agricultural and medical products (Section 649). The Administration hasthreatened a presidential veto if the final measure weakens Cuba sanctions. (See sections below on Food and Medical Exports and Travel and Private Humanitarian Assistance Restrictions .) On September 18, 2004, the New York Times reported that the Bush Administration, usingmore stringent intelligence standards, has "concluded that it is no longer clear that Cuba has anactive, offensive bio-weapons program." (See Cuba and Biological Weapons? below.) On September 15, 2004, the Senate Appropriations Committee reported its version of theFY2005 Transportation and Treasury appropriations measure, S. 2806 ( S.Rept.108-342 ), with a provision (Sec. 222) that would prohibit funds from administering or enforcingrestrictions on travel or travel-related transactions. The Administration has threatened a presidentialveto if the final measure weakens Cuba sanctions. (See Travel and Private Humanitarian AssistanceRestrictions below.) On September 14, 2004, the Senate Appropriations Committee reported its version of theFY2005 Agriculture Appropriation bill, S. 2803 ( S.Rept. 108-340 ), with a provision(Section 776) directing the Secretary of the Treasury to promulgate regulations allowing for travelto Cuba under a "general license" when it is related to the commercial sale of agricultural andmedical products. The Administration has threatened to veto the measure if it contained provisionsweakening Cuba sanctions. (See Food and Medical Exports below.) On August 13, 2004, the U.S. Interests Section in Havana announced that it would provide$50,000 in U.S. funds to help Cuba in the aftermath of Hurricane Charley. The Cuban governmentrejected the assistance, calling it "hypercritical" and the amount "humiliating." On July 22, 2004, the Cuban government released political prisoner Marta Beatriz Roque forhealth reasons. Roque had received a 20-year sentence in April 2003 and also had been imprisonedfrom July 1997 until May 2000. Since April 2004, the Cuban government has released 11 politicalprisoners for health reasons, including 7 of the 75 dissidents imprisoned in March 2003. (See HumanRights below.) On July 16, 2004, President Bush suspended for another six months the right of individualsto file lawsuits against those persons benefitting from confiscated U.S. property in Cuba under TitleIII of the Cuban Liberty and Democratic Solidarity Act ( P.L. 104-114 ). (See Helms/BurtonLegislation below.) On July 15, 2004, the House approved the FY2005 Foreign Operations Appropriations bill, H.R. 4818 , that would prohibit counternarcotics assistance for Cuba. The report to thebill ( H.Rept. 108-599 ) also expressed the House Appropriations Committee's full support for theAdministration's $9 million request for projects to promote democratization, respect for humanrights, and the development of a free market economy in Cuba. (See Drug Interdiction Cooperation and U.S. Funding to Support Democracy and Human Rights below.) On July 8, 2004, the U.S. Coast Guard published regulations requiring U.S. vessels less than100 meters to have a Coast Guard permit to enter Cuban territorial waters. ( Federal Register , pp.41367-41374) On July 7, 2004, the House approved, by vote of 221-194, a Flake amendment( H.Amdt. 647 ) to the FY2005 Commerce, Justice, and State appropriations bill, H.R. 4754 , that would prohibit funds to implement the Department of Commerce's newrestrictions on gift parcels to Cuba and the amount of personal baggage allowed for travelers toCuba. The House subsequently approved the bill on July 8, 2004. On June 25, 2004, the Treasury Department's Office of Foreign Assets Control (OFAC)delayed the implementation of tightened travel restrictions for family visits and fully-hosted traveluntil August 1, 2004, for those travelers already in Cuba on June 29, 2004. The action was taken togive those already in Cuba time to return to the United States. On June 22, 2004, the Department of Commerce's Bureau of Industry and Security (BIS)published regulations related to the recommendations of the Commission for Assistance to a FreeCuba ( Federal Register , pp. 34565-34567). The new regulations placed new limits on gift parcelsand personal baggage going to Cuba. Items such as seeds, clothing, personal hygiene items,veterinary medicines and supplies, fishing equipment and supplies, and soap-making equipment mayno longer be included in gift parcels. On June 16, 2004, OFAC published interim regulations implementing the President'sdirectives related to the recommendations of the Commission for Assistance to a Free Cuba ( FederalRegister , pp. 33768-33774). This included tightening travel restrictions in several ways, such asfurther restricting educational travel and family visits (and the amount that family visitors may spendwhile in Cuba) and eliminating the category of fully-hosted travel. The new regulations also furtherrestricted the sending of remittances to Cuba by limiting the remittances to the remitter's immediatefamily. Although most of the tightened restrictions were to go into effect on June 30, 2004,implementation of the regulations for family visits and fully hosted travel have been delayed untilAugust 1 for those travelers already in Cuba on June 29 (see June 25 entry above). Educationalactivities already planned may proceed as long as they are completed by August 15, 2004. OFACnoted that it welcomes interested parties to comment on the regulations no later than August 16,2004, and that it will consider such comments in the development of final regulations. On May 6, 2004, President Bush endorsed the recommendations of the inter-agencyCommission for Assistance to a Free Cuba that had been established by the President in October2003. The recommendations included a number of measures to tighten economic sanctions, suchas further restricting family visits, cash remittances, and gift parcels. (The full Commission reportis available at http://www.state.gov/p/wha/rt/cuba/commission/2004/ . Also see "Commission forAssistance to a Free Cuba," below.) On April 15, 2004, by a vote of 22-21, with 10 abstentions, the U.N. Commission on HumanRights (UNCHR) approved a resolution that deplored Cuba's 2003 human rights crackdown andagain urged Cuba to cooperate with the personal representative of the U.N. High Commission forHuman Rights. (See UNCHR Resolutions below.) On April 8, 2004, the Senate approved S.Res. 328 , amended, by unanimousconsent. It calls on Cuba to immediately release individuals imprisoned for political purposes. Italso calls upon the 60th session of the UNCHR to condemn Cuba for its human rights abuses and todemand that inspectors from the International Committee of the Red Cross be allowed to visit andinspect Cuban prisons. On March 30, 2004, Under Secretary of State for Arms Control and International SecurityJohn Bolton testified before the House International Relations Committee that "Cuba remains aterrorist and BW [biological weapons] threat to the United States." Bolton cautioned, however, that"existing intelligence reporting is problematic, and the Intelligence Community's ability to determinethe scope, nature, and effectiveness of any Cuban BW program has been hampered by reporting fromsources of questionable access, reliability, and motivation." (See Cuba and Biological Weapons? below.) On February 26, 2004, President Bush ordered the Department of Homeland Security toexpand its policing of the waters between Florida and Cuba with the objective of stopping pleasureboating traffic. On January 21, 2004, the State Department again condemned Cuba's imprisonment ofjournalists, librarians, and human rights defenders. It criticized the poor conditions and lack ofadequate medical treatment for Oscar Espinosa Chepe and Marta Beatriz Roque and the poor healthof Leonardo Bruzon Avila due to repeated hunger strikes. (See Health and Conditions of PoliticalPrisoners below.) On January 16, 2004, President Bush suspended for another six months the right ofindividuals to file lawsuits against those persons benefitting from confiscated U.S. property in Cubaunder Title III of the Cuban Liberty and Democratic Solidarity Act ( P.L. 104-114 ). (See Helms/Burton Legislation below.) The State Department cancelled the semiannual round of U.S.-Cuba migration talksscheduled for January 8, 2004, because Cuba reportedly has refused to discuss several issues. Cubanofficials maintained that the U.S. decision was irresponsible and that it was prepared to discuss allof the issues raised by the United States. (See Migration Issues below). Although Cuba has undertaken some limited economic reforms in recent years, politicallythe country remains a hard-line communist state. Fidel Castro, who turned 78 on August 13, 2004,has ruled since the 1959 Cuban Revolution, which ousted the corrupt government of FulgencioBatista from power. Castro soon laid the foundations for an authoritarian regime by consolidatingpower and forcing moderates out of the government. In April 1961, Castro admitted that the CubanRevolution was socialist, and in December 1961, he proclaimed himself to be a Marxist-Leninist. From 1959 until 1976, Castro ruled by decree. A Constitution was enacted in 1976 setting forth the Communist Party as the leading forcein the state and in society (with power centered in a Politburo headed by Fidel Castro). TheConstitution also outlined national, provincial, and local governmental structures. Executive poweris vested in a Council of Ministers, headed by Fidel Castro as President. Legislative authority isvested in a National Assembly of People's Power, currently with 609 members, that meets twiceannually for brief periods. While Assembly members were directly elected for the first time inFebruary 1993, only a single slate of candidates was offered. In October 1997, the CubanCommunist Party held its 5th Congress (the prior one was held in 1991) in which the party reaffirmedits commitment to a single party state and reelected Fidel and Raul Castro as the party's first andsecond secretaries. Direct elections for the National Assembly were again held in January 1998 andJanuary 2003, but voters again were not offered a choice of candidates. In response to the challenge posed by the Varela Project, a human rights initiative that calledfor changes to the Constitution (see below), the Cuban government orchestrated a nationalreferendum in late June 2002, signed by 8.1 million people, that declared that Cuba's socialist systemcould not be changed. Subsequently the National Assembly on June 26, 2002, approved amendmentsto the Constitution stating that "socialism and the revolutionary political and social system in theConstitution.....are irrevocable; and Cuba will never again return to capitalism." (1) Observers are divided over the future of the Castro government. Although most believe thatthe demise of the Communist government is inevitable, there is considerable disagreement overwhen or how this may occur. Some point to Castro's age and predict that the regime will collapsewhen Castro is not at the helm. Other observers maintain that Fidel Castro may remain in power foryears, and that Cuba has a plan for the succession of his brother Raul. They point to Cuba's strongsecurity apparatus and the extraordinary system of controls that prevents dissidents from gainingpopular support. Moreover, observers maintain that Cuba's elite has no interest in Castro'soverthrow, and that Castro still enjoys some support, in part because of the social benefits of theCuban revolution, but also because Cubans see no alternative to Castro. Even if Castro is overthrown or resigns, the important question remaining is the possibilityor viability of a stable democratic Cuba after Castro. Analysts point out that the Castro governmenthas successfully impeded the development of independent civil society, with no private sector, noindependent labor movement, and no unified political opposition. For this reason, they contend thatbuilding a democratic Cuba will be a formidable task, one that could meet stiff resistance. Cuba has a poor record on human rights, with the government sharply restricting basic rights,including freedom of expression, association, assembly, movement, and other basic rights. It hascracked down on dissent, arrested human rights activists and independent journalists, and stageddemonstrations against critics. Although some anticipated a relaxation of the government'soppressive tactics in the aftermath of the Pope's January 1998 visit, government attacks againsthuman rights activists and other dissidents have continued since that time. In March 2003, the government began a massive crackdown that resulted in the imprisonmentof 75 independent journalists and democracy activists, many receiving long prison terms. On April11, 2003, the government executed three men who had hijacked a ferry in an attempt to reach theUnited States. The executions, conducted after a swift and secret trial, were condemned around theworld. (See Crackdown in 2003 below). The Cuban government has released a number of prisoners in 2004; as of December 2, thisincludes 13 of the 75 arrested in March 2003. At the same time, however, it has continued itsharassment of democracy and human rights activists, including the imprisonment of severaldissidents during the year. Human rights groups in Cuba estimate that there are between 300-400political prisoners. In late November 2004, the Cuban government began releasing a number ofpolitical prisoners. Many observers maintain that the releases are aimed at improving Cuba'srelations with Europe. The government released three prisoners on November 29 -- Oscar EspinosaChepe, Margarito Broche, and Marcelo Lopez; two prisoners on November 30 -- noted poet andjournalist, Raul Rivero, and Oswaldo Alfonso Valdes; and another prisoner on December 2 -- EdelJosé Garcia. Press reports have indicated that up to 18 additional dissidents have been transferredto the main prison hospital in Havana. Such transfers have often been a prelude to prisoners beingreleased. The State Department's human rights report on Cuba states that the Cuban "authoritiesroutinely continued to harass, threaten, arbitrarily arrest, detain, imprison, and defame human rightsadvocates and members of independent professional associations, including journalists, economists,doctors, and lawyers, often with the goal of coercing them into leaving the country." The reportasserts that "the Interior Ministry Department of State Security investigated and actively suppressedpolitical opposition and dissent" and "maintained a pervasive system of surveillance throughundercover agents, informers, rapid response brigades (RRBs), and neighborhood-based Committeesfor the Defense of the Revolution (CDRs)." Security forces and prison officials reportedly beat andabused prisoners and other detainees, and prison conditions remained harsh and life threatening. TheState Department and international human rights groups have expressed special concern about thehealth of the political prisoners. The Cuban government has reportedly restricted medical care tosome prisoners as a method of control. The following reports provide information on the human rights situation in Cuba: The State Department's 2003 human rights report on Cuba, issued February 25,2004, is available on the State Department's website at http://www.state.gov/g/drl/rls/hrrpt/2003/27893.htm . Amnesty International issued a March 2004 report on the status of the 75dissidents imprisoned in March 2003. "Cuba, One Year Too Many: Prisoners of Conscience fromthe March 2003 Crackdown," available at http://web.amnesty.org/library/Index/ENGAMR250052004?open&of=ENG-CUB . Amnesty International issued a detailed report in June 2003, which termed thecrackdown the most severe since the years following the Cuban revolution. "Cuba: "EssentialMeasures"? Human Rights Crackdown in the Name of Security," June 3, 2003; available at http://web.amnesty.org/library/Index/ENGAMR250172003 ). Florida State University's Center for the Advancement of Human Rights beganpublishing information on the dissidents on the Internet, including the Cuban government'ssentencing documents. (See the website at http://www.ruleoflawandcuba.fsu.edu/ .) Human Rights Watch regularly publishes information on the human rightssituation in Cuba. (See the website at http://www.hrw.org/doc?t=americas&c=cuba .) Crackdown in 2003. As noted above, the humanrights situation in Cuba deteriorated significantly in 2003. Human rights activist Elizardo Sanchez,head of the Cuban Commission for Human Rights and National Reconciliation, has called thecrackdown "the most intense wave of repression in the history of Cuba." (2) In the first two months of 2003, dozens of supporters of Oswaldo Paya's Varela Project were"harassed, jailed, threatened, and expelled from jobs and universities" (3) (see discussion of the "VarelaProject" below). On February 18, 2003, two members of the Oswaldo Paya's Christian LiberationMovement, Jesus Mustafa Felipe and Robert Montero, were sentenced to 18 months in prison oncharges of contempt and resisting arrest. On March 18, 2003, a day after the opening of the 2003 session of the U.N. Commission onHuman Rights in Geneva, the Cuban government began a massive crackdown on independentjournalists and librarians, leaders of independent labor unions and opposition parties, and otherdemocracy activists, including those supporting the Varela Project. Some 75 activists were arrested,subjected to summary trials and prosecutions that began on April 3, 2003, and sentenced to prisonterms ranging from 6 to 28 years. Foreign journalists and diplomats were excluded from the trials. Among the activists were 27 independent journalists, including Raul Rivero and Oscar EspinosaChepe, sentenced to 20 years, and Omar RodrÃguez Saludes, sentenced to 27 years. Other sentenceddemocracy activists included economist Marta Beatriz Roque (who had been imprisoned from July1997 until May 2000), who received 20 years, Hector Palacios, a leader of the Varela Project, whoreceived 25 years, and Luis Enrique Ferrer GarcÃa of the Christian Liberation Movement, whoreceived 28 years. Another prominent political prisoner, Oscar ElÃas Biscet, (who had been arrestedin December 2002 after three years in prison) was also tried in April 2003 and sentenced to 25 yearsin prison. In a further deterioration of Cuba's human rights situation, on April 11, 2003, the Cubangovernment executed three men who had hijacked a ferry in Havana on April 2 in an attempt to reachthe United States. The men were executed by firing squads after summary trials that were heldbehind close doors; four other ferry hijackers received life sentence while another received 30 yearsin prison. The ferry hijacking was preceded by the hijacking of two small planes to the UnitedStates. International human rights groups, such as Amnesty International and Human Rights Watch,and a number of foreign countries, including Mexico, the European Union, the Vatican, and the15-nation Caribbean Community, condemned the crackdown and the executions. Because of thehuman rights crackdown, the EU postponed consideration of Cuba's application for inclusion in theCotonou Agreement, which provides preferential trade terms and development assistance to formerEuropean colonies; as a result, Cuba withdrew its application for the agreement because it did notwant to be forced to comply with "unacceptable conditions." (4) Both U.N. and OAS Special Rapporteurs on Freedom of Expression expressed grave concernon the sentencing of the dissidents. (5) On May 19, 2003, almost half of OAS members approved astatement expressing "their deep concern about the sharp deterioration of the human rights situationin Cuba in March and April 2003." Other OAS members, however, felt that the OAS was not thebody to discuss the issue since Cuba has been excluded from participating since 1962. (Also see UNHCR Resolutions below.) The United States -- both the Administration and Congress (see "Legislative Initiatives"below) -- strongly condemned the Cuban government's actions. In response to the summary trialsof the dissidents, the State Department issued a statement characterizing the actions as "the mostdespicable act of political repression in the Americas in a decade" and called "on the internationalcommunity ... in condemning this repression and in demanding the release of these Cuban prisonersof conscience." (6) Rationale for the 2003 Crackdown. Analysts see avariety of potential reasons for Cuba's severe crackdown on democracy activists. The Cubangovernment asserts that the crackdown was justified because the defendants were supported by theU.S. government and that U.S. diplomats in Cuba, most notably the head of the U.S. InterestsSection in Havana, James Cason, often met with the dissidents. Some analysts believe that thecrackdown was a clear message by the Cuban government that it will not tolerate the U.S.government's active and open support for the opposition movement. Other analysts emphasize thatthe crackdown was an effort by Castro to strengthen the regime's political control in light of afaltering economy and dim economic prospects ahead. According to this view, an increasinglyassertive opposition movement could become a national security threat to the Castro regime in thetough economic times ahead. Along these lines, some analysts see the crackdown as a way for theregime to clear away any potential opposition in order to ensure that the eventual succession of RaulCastro to power will be smooth. Some observers maintain that the Cuban government's willingness to jeopardize thepossibility of easing U.S. trade and travel restrictions as an indication that it currently views thedissident movement as a serious security threat. Others, however, believe that the Cubangovernment judged that there would not be any movement to ease the embargo under the BushAdministration and felt that it had little to lose in cracking down on the opposition movement. Finally, a view often heard when Castro takes harsh action that jeopardizes an improvementin relations with the United States is that Castro actually is opposed to any further opening to theUnited States because it could threaten his regime's control. According to this view, the crackdownagainst the opposition puts the skids on any potential easing of U.S. policy. Varela Project. A human rights initiative withinCuba that has received attention since 2002 is the Varela Project (named for the 19th century priest,Felix Varela, who advocated independence from Spain and the abolition of slavery) in whichthousands of signatures have been collected supporting a national plebiscite. The referendum wouldcall for respect for human rights, an amnesty for political prisoners, private enterprise, and changesto the country's electoral law that would result in free and fair elections. The initiative is organizedby Oswaldo Paya, who heads the Christian Liberation Movement, and it is supported by othernotable Cuban human rights activists. On May 10, 2002, organizers of the Varela Project submitted 11,020 signatures to theNational Assembly calling for a national referendum This was more than the 10,000 required underArticle 88 of the Cuban Constitution. Former President Jimmy Carter noted the significance of theVarela Project in his May 14, 2002 address in Havana that was broadcast in Cuba. Carter noted that"when Cubans exercise this freedom to change laws peacefully by a direct vote, the world will seethat Cubans, and not foreigners, will decide the future of this country." (7) In response to the Varela Project, the Cuban government orchestrated its own referendum inlate June 2002 that ultimately led to the National Assembly amending the Constitution to declareCuba's socialist system irrevocable. The Varela Project has persevered despite the March 2003 human rights crackdown, whichincluded the arrests of 42 active supporters of the human rights initiative. On October 3, 2003,Oswaldo Paya delivered more than 14,000 signatures to Cuba's National Assembly, again requestinga referendum on democratic reforms. Trafficking in Persons. In September 2003,President Bush, pursuant to the Trafficking Victims Protection Act of 2000 ( P.L. 106-386 , DivisionA), determined that Cuba did not comply with minimum standards for the elimination of trafficking in persons or make significant efforts to bring itself into compliance. While the determinationtriggers sanctions on U.S. aid and other support, Cuba already is subject to comprehensive U.S.economic sanctions and an embargo on trade and financial transactions. According to the StateDepartment's June 2004 Trafficking in Persons Report (available at http://www.state.gov/g/tip/rls/tiprpt/2004/ ), "Cuba is a country of internal trafficking for sexualexploitation and forced labor. Child sexual victims are generally teenage girls aged 14 to 17 whoare abused in prostitution. The Cuban government does not condone underage prostitution but doesnot publicly address the problem, which largely takes place in the context of tourism that earns hardcurrency for the state." Cuban officials categorized the allegations as absurd and an insult to thecountry's national dignity. In mid-July 2004, President Bush alleged that Castro "welcomes sex tourism" because it is"a vital source of hard currency to keep his corrupt government afloat." (8) Castro vigorously denied thecharges. While prostitution increased in the early 1990s amid Cuba's rapid economic decline, thegovernment began cracking down on prostitution around 1996, and it reportedly is less visible. (9) UNCHR Resolutions. From 1991 until 1997, theU.N. Commission on Human Rights (UNCHR) called on the Cuban government to cooperate witha Special Representative (later upgraded to Special Rapporteur) designated by the Secretary Generalto investigate the human rights situation in Cuba. But Cuba refused to cooperate with the SpecialRapporteur, and the UNCHR annually approved resolutions condemning Cuba's human rightsrecord. In 1998, however, the UNCHR rejected -- by a vote of 16 to 19, with 18 abstentions -- theannual resolution sponsored by the United States that would have condemned Cuba's rights recordand would have extended the work of the Special Rapporteur for another year. U.S. officials andhuman rights activists expressed deep disappointment with the vote. Observers maintained that thevote did not signify any improvement in human rights in Cuba, but rather was an expression ofdisagreement with the United States over its policy toward Cuba. From 1999-2004, the UNCHR again approved annual resolutions criticizing Cuba for itshuman rights record: In 1999, the UNCHR resolution was approved by a vote of 21-20, with 12abstentions. In 2000, the resolution, sponsored by the Czech Republic and Poland, wasapproved by a vote of 21-18, with 14 abstentions. On April 18, 2001, the resolution, sponsored by the Czech Republic andco-sponsored by 16 other nations, including the United States, was approved by a vote of 22-20, with10 abstentions. A U.S. Congressional delegation traveled to Geneva to encourage adoption of theresolution. Mexico abstained but, in a shift under the new Fox administration, publicly stated itsconcern about human rights in Cuba. On April 19, 2002, the UNCHR approved a resolution, by a vote of 23 to 21,with 9 abstentions, calling on Cuba to improve its human rights record "in accordance with theUniversal Declaration of Human Rights and the principles and standards of the rule of law" andcalling for the U.N. High Commissioner for Human Rights to send a personal representative to Cuba. Uruguay sponsored the resolution, which was supported by six other Latin American nations:Argentina, Chile, Costa Rica, Guatemala, Mexico, and Peru. Brazil and Ecuador abstained, whileVenezuela was the only Latin American country besides Cuba to vote against the resolution. Compared to previous years, the 2002 resolution was milder in that it recognized Cuba's efforts tofulfill the "social rights" of its people "despite an adverse international environment," while at thesame time calling on Cuba "to achieve similar progress in respect of human, civil, and politicalrights." During its 2003 meeting, the UNCHR approved a resolution on April 17, 2003,by a vote of 24-20, with 9 abstentions, sponsored by Costa Rica, Nicaragua, Peru, and Uruguayurging Cuba to receive the personal representative of the U.N. High Commissioner for HumanRights. Cuba has said that it would not accept the visit of the UNCHR representative. Efforts tosecure a more strongly worded resolution expressing "deep concern" about the March 2003crackdown failed, with 31 nations voting against the amendment. On April 15, 2004, by a vote of 22-21, with 10 abstentions, the UNCHRapproved a resolution sponsored by Honduras that deplored the crackdown in 2003 and again urgedCuba to cooperate with the personal representative of the U.N. High Commission for Human Rights. The resolution was co-sponsored by El Salvador, Nicaragua, Peru, Australia, and the CzechRepublic. Legislative Initiatives. Over the years, Congresshas gone on record on numerous occasions condemning the human rights situation in Cuba. In the first session of the108th Congress, both houses approved resolutions condemning theCuban government in the aftermath of the March 2003 crackdown on independent journalists andother democratic activists. The Senate approved S.Res. 97 (Nelson) on April 7, 2003,which condemned the recent arrests and other intimidation tactics against democracy activists andcalled on the Cuban government to immediately release those imprisoned during the crackdown. The House approved H.Res. 179 (Diaz-Balart, Lincoln) on April 8, which condemnedthe crackdown, called for the release of all political prisoners, and called for the United States towork to ensure a strong resolution in the UNCHR this year against the Cuban crackdown. On June 27, 2003, the Senate approved S.Res. 62 (Ensign), calling on OAS and U.N. humanrights bodies, the European Union, and human rights organizations around the world to call attentionto the human rights situation in Cuba. In the second session, the Senate approved S.Res. 328 (Nelson) on April 8,2004, expressing the sense of the Senate regarding the continued human rights violations committedby Fidel Castro and the Cuban government. The resolution called on Cuba to immediately releaseindividuals imprisoned for political purposes and called upon the 60th session of the U.N.Commission on Human Rights to condemn Cuba for its human rights abuses and demand thatinspectors from the International Committee of the Red Cross be allowed to visit and inspect Cubanprisons. Three hearings were held in the 108th Congress on the human rights situation in Cuba. Soonafter Cuba's human rights crackdown, the House International Relations Committee held a hearingon "Castro's Brutal Crackdown on Dissidents" on April 16, 2003. On October 16, 2003, the HouseGovernment Reform Committee's Subcommittee on Human Rights and Wellness held a hearing on"Castro's Cuba: What is the Proper United States Response to Ongoing Human Rights Violationsin Our Hemisphere?" On June 16, 2004, the House Subcommittee on Human Rights and Wellnessheld a hearing on continued human rights abuses in Cuba. Numerous other resolutions have been introduced in the 108th Congress on Cuba's poorhuman rights situation: H.Con.Res. 16 (Andrews), H.Res. 164 (Flake), and H.Con.Res. 125 (Deutsch). H.R. 1201 (Ros-Lehtinen) wouldposthumously revoke the naturalization of an individual reported to be responsible for human rightsviolations in Cuba. H.Res. 208 (Foley) would, among other provisions, condemn themember states of the United Nations Economic and Social Council for renewing Cuba's membershipon the United Nations Commission on Human Rights. S.Res. 146 (Reid) would expressthe sense of the Senate regarding the establishment of an international tribunal to prosecute crimeagainst humanity committed by Fidel Castro and other Cuban political and military leaders. H.Res. 563 (Ros-Lehtinen) would express the sense of the House regarding the one-yearanniversary of Cuba's human rights crackdown and call for the 60th session of the UNCHR toapprove a resolution holding Cuba accountable for its gross violation of human rights and civilliberties. In addition to resolutions on the human rights situation, Congress funds democracy andhuman rights projects for Cuba in annual Foreign Operations and Commerce, Justice, and Stateappropriations measures. For more details, see U.S. Funding to Support Democracy and HumanRights, below. With the cutoff of assistance from the former Soviet Union, Cuba experienced severeeconomic deterioration from 1989-1993, although there has been improvement since 1994. Estimates of economic decline in the 1989-93 period range from 35-50%. From 1994-2000,however, economic growth averaged 3.7% annually, with a low of 0.4% in 1994 and a high of 7.8%in 1996. Growth rates since 2001 have slowed, averaging almost 2.4% (3% in 2001, 1.5% in 2002,and an estimated 2.6% in 2003), although the forecast for 2004 is for 3.5%. (11) Growth in 2001 and 2002slowed in the aftermath of the effects of Hurricane Michelle and the September 11, 2001 terroristattacks in the United States. The terrorist attacks severely affected Cuba's tourist industry, withreports of some hotels closing and restaurants being empty. Hurricane Michelle damaged some45,000 homes and severely hurt the agricultural sector. Low world prices for sugar and nickel andVenezuela's April-September 2002 suspension of oil shipments to Cuba because of Cuba's slowpayment also contributed to the economic slowdown. (12) Economic growth in 2004 could be affected by a drought ineastern Cuba, the worst in 40 years, that has severely damaged agricultural crops, as well as byHurricanes Charley and Ivan that caused significant damage and flooding in western Cuba. Socialist Cuba has expressed pride for the nation's accomplishments in health and education. The World Bank estimates that in 2000, the adult literacy rate was 97%, life expectancy was 76years, and the under-5 years of age mortality rate was 9 per 1,000, the lowest rate in Latin Americaand comparable to the rate of the United States. Nevertheless, the country's economic decline hasreduced living standards considerably and resulted in shortages in medicines and medical supplies. When Cuba's economic slide began in 1989, the government showed little willingness toadopt any significant market-oriented economic reforms, but in 1993, faced with unprecedentedeconomic decline, Cuba began to change policy direction. Since 1993, Cubans have been allowedto own and use U.S. dollars and to shop at dollar-only shops previously limited to tourists anddiplomats. Self-employment was authorized in more than 100 occupations in 1993, most in theservice sector, and by 1996 that figure had grown to more than 150 occupations. Other Cubaneconomic reforms included breaking up large state farms into smaller, more autonomous, agriculturalcooperatives (Basic Units of Cooperative Production, UBPCs) in 1993; opening agricultural marketsin September 1994 where farmers could sell part of their produce on the open market; openingartisan markets in October 1994 for the sale of handicrafts; allowing private food catering, includinghome restaurants ( paladares ) in June 1995 (in effect legalizing activities that were already takingplace); approving a new foreign investment law in September 1995 that allows fully ownedinvestments by foreigners in all sectors of the economy with the exception of defense, health, andeducation; and authorizing the establishment of free trade zones with tariff reductions typical of suchzones in June 1996. In May 1997, the government enacted legislation to reform the banking systemand established a new Central Bank (BCC) to operate as an autonomous and independent entity. Despite these measures, the quality of life for many Cubans remains difficult -- characterizedby low wages, high prices for many basic goods, shortages of medicines, and power outages -- andsome analysts fear that the government has begun to backtrack on its reform efforts. Regulationsand new taxes have made it extremely difficult for many of the nation's self-employed. Some homerestaurants have been forced to close because of the regulations. Some foreign investors in Cubahave also begun to complain that the government has backed out of deals or forced them out ofbusiness. In April 2004, the Cuban government limited the use of dollars by state companies forany services or products not considered part of their core business; some analysts viewed themeasure as an effort to turn back the clock on economic reform measures. (13) On October 25, 2004, Fidel Castro announced that U.S. dollars no longer would be used inentities that currently accept dollars (such as stores, restaurants, and hotels). Instead, Cubans wouldneed to exchange their dollars for "convertible pesos," with a 10% surcharge for the exchange. Cubans could exchange their dollars or deposit them in banks with the surcharge until November14. Dollar bank accounts will still be allowed, but Cubans will not be able to deposit new dollarsinto the accounts. In the early 1960s, U.S.-Cuban relations deteriorated sharply when Fidel Castro began tobuild a repressive communist dictatorship and moved his country toward close relations with theSoviet Union. The often tense and hostile nature of the U.S.-Cuban relationship is illustrated by suchevents and actions as: U.S. covert operations to overthrow the Castro government culminating in theill-fated April 1961 Bay of Pigs invasion; the October 1962 missile crisis in which the United Statesconfronted the Soviet Union over its attempt to place offensive nuclear missiles in Cuba; Cubansupport for guerrilla insurgencies and military support for revolutionary governments in Africa andthe Western Hemisphere; the 1980 exodus of around 125,000 Cubans to the United States in theso-called Mariel boatlift; the 1994 exodus of more than 30,000 Cubans who were interdicted andhoused at U.S. facilities in Guantanamo and Panama; and the February 1996 shootdown by Cubanfighter jets of two U.S. civilian planes, resulting in the death of four U.S. crew members. Since the early 1960s, U.S. policy toward Cuba has consisted largely of isolating the islandnation through comprehensive economic sanctions. These sanctions were made stronger with theCuban Democracy Act (CDA) of 1992 ( P.L.102-484 , Title XVII) and with the Cuban Liberty andDemocratic Solidarity Act of 1996 ( P.L. 104-114 ), often referred to as the Helms/Burton legislation. The CDA prohibits U.S. subsidiaries from engaging in trade with Cuba and prohibits entry into theUnited States for any vessel to load or unload freight if it has engaged in trade with Cuba within thelast 180 days. The Helms/Burton legislation -- enacted in the aftermath of Cuba's shooting down oftwo U.S. civilian planes in February 1996 -- combines a variety of measures to increase pressure onCuba and provides for a plan to assist Cuba once it begins the transition to democracy. Among thelaw's sanctions is a provision in Title III that holds any person or government that traffics in U.S.property confiscated by the Cuban government liable for monetary damages in U.S. federal court. Acting under provisions of the law, however, both President Clinton and President Bush havesuspended the implementation of Title III at six-month intervals. Another component of U.S. policy consists of support measures for the Cuban people, aso-called second track of U.S. policy. This includes U.S. private humanitarian donations, medicalexports to Cuba under the terms of the Cuban Democracy Act of 1992, U.S. government support fordemocracy-building efforts, and U.S.- sponsored radio and television broadcasting to Cuba. Inaddition, the 106th Congress approved the Trade Sanctions Reform and Export Enhancement Act of2000 ( P.L. 106-387 , Title IX) that allows for agricultural exports to Cuba, albeit with restrictions onfinancing such exports. The Clinton Administration made several changes to U.S. policy in the aftermath of thePope's January 1998 visit to Cuba, which were intended to bolster U.S. support for the Cuban people.These included the resumption of direct flights to Cuba (which had been curtailed after the February1996 shootdown of two U.S. civilian planes), the resumption of cash remittances for the support ofclose relatives in Cuba (which had been curtailed in August 1994 in response to the migration crisiswith Cuba), and the streamlining of procedures for the commercial sale of medicines and medicalsupplies and equipment to Cuba. In January 1999, President Clinton announced several additionalmeasures to support the Cuban people. These included a broadening of cash remittances to Cuba,so that all U.S. residents (not just those with close relatives in Cuba) could send remittances to Cuba;an expansion of direct passenger charter flights to Cuba from additional U.S. cities other than Miami(direct flights later in the year began from Los Angeles and New York); and an expansion ofpeople-to-people contact by loosening restrictions on travel to Cuba for certain categories oftravelers, such as professional researchers and those involved in a wide range of educational,religious, and sports competition. The Bush Administration essentially has continued the two-track U.S. policy of isolatingCuba through economic sanctions while supporting the Cuban people through a variety of measures. However, within this policy framework, the Administration has emphasized stronger enforcementof economic sanctions and has moved to further tighten restrictions on travel, remittances, andhumanitarian gift parcels to Cuba. There has been considerable reaction to the Administration's June2004 tightening of restrictions for family visits and other categories of travel. President Bush made his first major statement on his Administration's policy toward Cubaon May 18, 2001. He affirmed that his Administration would "oppose any attempt to weakensanctions against Cuba's government ... until this regime frees its political prisoners, holdsdemocratic, free elections, and allows for free speech." He added that he would "actively supportthose working to bring about democratic change in Cuba." (14) In July 2001, PresidentBush asked the Treasury Department to enhance and expand the enforcement capabilities of theOffice of Foreign Assets Control. The President noted the importance of upholding and enforcingthe law in order to prevent "unlicensed and excessive travel," enforce limits on remittances, andensure that humanitarian and cultural exchanges actually reach pro-democracy activists in Cuba. On May 20, 2002, President Bush announced a new initiative on Cuba that included fourmeasures designed to reach out to the Cuban people: 1) facilitating humanitarian assistance to theCuban people by U.S. religious and other non-governmental organizations (NGOs); 2) providingdirect assistance to the Cuban people through NGOs; 3) calling for the resumption of direct mailservice to and from Cuba (15) ; and 4) establishing scholarships in the United States for Cubanstudents and professionals involved in building civil institutions and for family members of politicalprisoners. While the President said that he would work with Congress to ease sanctions if Cubamade efforts to conduct free and fair legislative elections (in January 2003) and adopt meaningfulmarket-based reforms, he also maintained that full normalization of relations would only occur whenCuba has a fully democratic government, the rule of law is respected, and human rights are fullyprotected. The President's initiative did not include an explicit tightening of restrictions on travelto Cuba that some observers had expected. The President, did state, however, that the United Stateswould "continue to enforce economic sanctions on Cuba, and the ban on travel to Cuba, until Cuba'sgovernment proves that it is committed to real reform." (16) On October 10, 2003, the President announced three initiatives "to hasten the arrival of anew, free, democratic Cuba." First, the President instructed the Department of Homeland Securityto increase inspections of travelers and shipments to and from Cuba in order to more strictly enforcethe trade and travel embargo. Second, the President announced that the United States would increasethe number of new Cuban immigrants each year, improve the method of identifying refugees,redouble efforts to process Cubans seeking to leave Cuba, initiative a public information campaignto better inform Cubans of the routes to safe and legal migration to the United States. Third, thePresident announced the establishment of a "Commission for Assistance to a Free Cuba," that wouldhelp plan for Cuba's transition from communism to democracy and help identify ways to help bringit about (see discussion below). Tightened Sanctions in 2004. In 2004, the BushAdministration has taken several measures to tighten U.S. sanctions against Cuba. In February, aspart of the Administration's efforts to strengthen travel restrictions, the Treasury Department's Officeof Foreign Assets Control identified ten foreign companies (nine travel companies and one giftforwarder provider), blocked their assets under U.S. jurisdiction, and prohibited any transactionswith these companies. (17) President Bush also ordered the Department of Homeland Security to expand its policing of thewaters between Florida and Cuba with the objective of stopping pleasure boating traffic. (18) In March 2004, the StateDepartment announced that it would deny visas to those Cubans who participated in the "show trials"of dissidents in March 2003; the actions will reportedly cover some 300 Cubans. (19) On May 6, 2004, President Bush endorsed the recommendations of a report issued by theinter-agency Commission for Assistance to a Free Cuba, chaired by Secretary of State Colin Powell.The Commission made recommendations for immediate measures to "hasten the end of Cuba'sdictatorship" as well longer-term recommendations to help plan for Cuba's transition fromcommunism to democracy in various areas. In total, the President directed that up to $59 million becommitted to implement key recommendations of the Commission, apparently includingreprogrammed FY2004 funding and new FY2005 funding. This total includes up to $36 million fordemocracy-building activities "to empower Cuban civil society;" up to $18 million for regularairborne broadcasts to Cuba and the purchase of a dedicated airborne platform for the transmissionof Radio and TV Marti broadcasts into Cuba in order "to break the information blockade;" and $5million in public diplomacy efforts by U.S. Embassies worldwide to disseminate information aboutCuba abroad in order to "illuminate the reality of Castro's Cuba." (The full Commission report is onthe State Department website at http://www.state.gov/p/wha/rt/cuba/commission/2004/ .) The report's most significant recommendations included a number of measures to tighteneconomic sanctions on family visits and other categories of travel and on private humanitarianassistance in the form of remittances and gift parcels. The Treasury Department issued regulationson June 16, 2004, implementing the tightened restrictions on travel and remittances, most of whichwent into effect on June 30, 2004 (the regulations were delayed until August 1 for those on familyvisits and fully hosted travelers already in Cuba). The Commerce Department issued regulations onJune 22, 2004, regarding gift parcels and weight limits on luggage allowed for family visits; theserestrictions went into effect June 30, 2004. (For more information, see Travel and RemittanceRestrictions below and CRS Report RL31139 , Cuba: U.S. Restrictions on Travel and Remittances .) Over the years, although U.S. policymakers have agreed on the overall objective of U.S.policy toward Cuba -- to help bring democracy and respect for human rights to the island -- therehave been several schools of thought about how to achieve that objective. Some advocate a policyof keeping maximum pressure on the Cuban government until reforms are enacted, while continuingcurrent U.S. efforts to support the Cuban people. Others argue for an approach, sometimes referredto as constructive engagement, that would lift some U.S. sanctions that they believe are hurting theCuban people, and move toward engaging Cuba in dialogue. Still others call for a swiftnormalization of U.S.-Cuban relations by lifting the U.S. embargo. In general, those advocating a loosening of the sanctions-based policy toward Cuba makeseveral policy arguments. They assert that if the United States moderated its policy toward Cuba --through increased travel, trade and diplomatic dialogue, that the seeds of reform would be plantedin Cuba, which would stimulate and strengthen forces for peaceful change on the island. They stressthe importance to the United States of avoiding violent change in Cuba, with the prospect of a massexodus to the United States and the potential of involving the United States in a civil war scenario.They argue that since Castro's demise does not appear imminent, the United States should espousea more realistic approach in trying to induce change in Cuba. Supporters of changing policy alsopoint to broad international support for lifting the U.S. embargo, to the missed opportunities to U.S.businesses because of the embargo, and to the increased suffering of the Cuban people because ofthe embargo. Proponents of change also argue that the United States should be consistent in itspolicies with the world's few remaining Communist governments, and also maintain that moderatingpolicy will help advance human rights. On the other side, opponents of changing U.S. policy maintain that the current two-trackpolicy of isolating Cuba, but reaching out to the Cuban people through measures of support, is thebest means for realizing political change in Cuba. They point out that the Cuban Liberty andDemocratic Solidarity Act of 1996 sets forth a road map for the steps Cuba needs to take in orderfor the United States to normalize relations, including lifting the embargo. They argue that softeningU.S. policy at this time without concrete Cuban reforms would boost the Castro regime politicallyand economically, enabling the survival of the Communist regime. Opponents of softening U.S.policy argue that the United States should stay the course in its commitment to democracy andhuman rights in Cuba; that sustained sanctions can work; and that the sanctions against Cuba haveonly come to full impact with the loss of large subsidies from the former Soviet bloc. Opponentsof loosening U.S. sanctions further argue that Cuba's failed economic policies, not the U.S. embargo,are the causes of the economy's rapid decline. Major Provisions and Implementation. TheCuban Liberty and Democratic Solidarity Act ( P.L. 104-114 ) was enacted into law on March 12,1996. Title I, Section 102(h) , codifies all existing Cuban embargo executive orders and regulations. No presidential waiver is provided for any of these codified embargo provisions. This provision issignificant because of the long-lasting effect on U.S. policy options toward Cuba. In effect, theexecutive branch is circumscribed in any changes in U.S. policy toward Cuba until certaindemocratic conditions are met. Title III , controversial because of the ramifications for U.S. relations with countriesinvesting in Cuba, allows U.S. nationals to sue for money damages in U.S. federal court thosepersons that traffic in property confiscated in Cuba. It extends the right to sue to Cuban Americanswho became U.S. citizens after their properties were confiscated. The President has authority todelay implementation for six months at a time if he determines that such a delay would be in thenational interest and would expedite a transition to democracy in Cuba. Beginning in July 1996, President Clinton used this provision to delay for six months theright of individuals to file suit against those persons benefitting from confiscated U.S. property inCuba. At the time of the first suspension on July 16, 1996, the President announced that he wouldallow Title III to go into effect, and as a result liability for trafficking under the title became effectiveon November 1, 1996. According to the Clinton Administration, this put foreign companies in Cubaon notice that they face prospects of future lawsuits and significant liability in the United States. Atthe second suspension on January 3, 1997, President Clinton stated that he would continue tosuspend the right to file law suits "as long as America's friends and allies continued their stepped-upefforts to promote a transition to democracy in Cuba." He continued, at six-month intervals, tosuspend the rights to file Title III lawsuits. President Bush has continued to suspend implementation of Title III at six-month intervals,most recently on July 16, 2004. When President Bush first used his authority to suspend Title IIIimplementation in July 2001, he cited efforts by European countries and other U.S. allies to push fordemocratic change in Cuba. In testimony before the House Government Reform Committee'sSubcommittee on Human Rights and Wellness on October 16, 2003, Assistant Secretary of StateRoger Noriega justified the continued suspension of Title III implementation by noting numerousexamples of countries condemning Cuba for its human rights crackdown in 2003. Title IV of the law denies admission to the United States to aliens involved in theconfiscation of U.S. property in Cuba or in the trafficking of confiscated U.S. property in Cuba. Thisincludes corporate officers, principals, or shareholders with a controlling interest in an entityinvolved in the confiscation of U.S. property or trafficking of U.S. property. It also includes thespouse, minor child, or agent of aliens who would be excludable under the provision. This provisionis mandatory, and only waiveable on a case-by-case basis for travel to the United States forhumanitarian medical reasons or for individuals to defend themselves in legal actions regardingconfiscated property. To date the State Department has banned from the United States a number of executives andtheir families from three companies because of their investment in confiscated U.S. property inCuba: Grupos Domos, a Mexican telecommunications company; Sherritt International, a Canadianmining company; and BM Group, an Israeli-owned citrus company. In 1997, Grupos Domosdisinvested from U.S.-claimed property in Cuba, and as a result its executives are again eligible toenter the United States. Action against executives of STET, an Italian telecommunications companywas averted by a July 1997 agreement in which the company agreed to pay the U.S.-based ITTCorporation $25 million for the use of ITT-claimed property in Cuba for ten years. For several years,the State Department has been investigating a Spanish hotel company, Sol Melia, for allegedlyinvesting in property that was confiscated from U.S. citizens in Cuba's Holguin province in 1961. Press reports in March 2002 indicated that a settlement was likely between Sol Melia and the originalowners of the property, but by the end of the year settlement efforts had failed. (20) In mid-June 2004,Jamaica's SuperClubs resort chain decided to disinvest from two Cuban hotels. The State Departmenthad written to the hotel chain in May advising that its top officials could be denied U.S. entrybecause the company's Cuban investments involved confiscated U.S. property. Foreign Reaction and the EU's WTO Challenge. Many U.S. allies -- including Canada, Japan, Mexico, and European Union (EU) nations -- stronglycriticized the enactment of the Cuban Liberty and Democratic Solidarity Act. They maintain thatthe law's provisions allowing foreign persons to be sued in U.S. court constitute an extraterritorialapplication of U.S. law that is contrary to international principles. U.S. officials maintain that theUnited States, which reserves the right to protect its security interests, is well within its rights underNAFTA and the World Trade Organization (WTO). Until mid-April 1997, the EU had been pursuing a case at the WTO, in which it waschallenging the Helms/Burton legislation as an extraterritorial application of U.S. law. Thebeginning of a settlement on the issue occurred on April 11, 1997, when an EU-U.S. understandingwas reached. In the understanding, both sides agreed to continue efforts to promote democracy inCuba and to work together to develop an agreement on agreed disciplines and principles for thestrengthening of investment protection relating to the confiscation of property by Cuba and othergovernments. As part of the understanding, the EU agreed that it would suspend its WTO disputesettlement case. Subsequently in mid-April 1998, the EU agreed to let its WTO challenge expire. Talks between the United States and the EU on investment disciplines proved difficult, withthe EU wanting to cover only future investments and the United States wanting to cover pastexpropriations, especially in Cuba. Nevertheless, after months of negotiations, the EU and the UnitedStates reached a second understanding on May 18, 1998. The understanding set forth EU disciplinesregarding investment in expropriated properties worldwide, in exchange for the ClintonAdministration's obtaining a waiver from Congress for the legislation's Title IV visa restrictions. Future investment in expropriated property would be barred. For past illegal expropriations,government support or assistance for transactions related to those expropriated properties would bedenied. A Registry of Claims would also be established to warn investors and government agenciesproviding investment support that a property has a record of claims. These investment disciplineswere to be applied at the same time that the President's Title IV waiver authority was exercised. Reaction was mixed among Members of Congress to the EU-U.S. accord, but opposition tothe agreement by several senior Members has forestalled any amendment of Title IV in Congress. The Bush Administration initially indicated that the Administration was looking into the possibilitiesof legislation to enact a presidential waiver for the provision, but during the June 2001 U.S.-EUsummit, President Bush noted the difficulty of persuading Congress to amend the law. (21) In July 2003, some pressreports indicated that the Administration was considering an arrangement with the EU in which theEU would take a stronger policy stance toward Cuba in exchange for the Administration securingwaiver authority for Title IV and permanent waiver authority for Title III of the Helms/Burtonlegislation. (22) A European Union challenge of U.S. law regarding Cuba in the World Trade Organizationinvolves a dispute between the French spirits company, Pernod Ricard, and the Bermuda-basedBacardi Ltd. Pernod Ricard entered into a joint venture with the Cuban government to produce andexport Havana Club rum, but Bacardi maintains that it holds the right to the Havana Club name. Aprovision in the FY1999 omnibus appropriations measure (Section 211 of Division A, title II, P.L.105-277 , signed into law October 21, 1998) prevents the United States from accepting payment fortrademark registrations and renewals from Cuban or foreign nationals that were used in connectionwith a business or assets in Cuba that were confiscated unless the original owner of the trademarkhas consented. The provision prohibits U.S. courts from recognizing such trademarks without theconsent of the original owner. Although Pernod Ricard cannot market Havana Club in the UnitedStates because of the trade embargo, it wants to protect its future distribution rights should theembargo be lifted. After Bacardi began selling rum in the United States under the Havana Club label, PernodRicard's joint venture unsuccessfully challenged Bacardi in U.S. federal court. In February 2000,the U.S. Court of Appeals for the Second Circuit in New York upheld a lower court's ruling that thejoint venture had no legal right to use the Havana Club name in the United States, and also that itwas barred from recognizing any assertion of treaty rights with regard to the trade name. After formal U.S.-EU consultations on the issue were held in 1999 without resolution, theEU initiated a WTO dispute settlement panel in June 2000, maintaining that the U.S. law violatesthe Agreement on Trade-Related Aspects of Intellectual Property (TRIPS). An August 6, 2001ruling by the WTO panel was described as mixed, with both sides claiming a partial victory. Thepanel ruled that WTO rules on intellectual property rights did not cover trade names, but also ruledthat a portion of the law (Section 211(a)(2)) prohibiting U.S. courts from recognizing such Cubantrademarks based on common law rights or registration is in violation of the TRIPS because it deniesaccess to U.S. courts by trademark holders. In early October 2001, the EU formally notified the WTO that it was appealing the ruling.The WTO appeals panel issued its ruling on January 2, 2002, and again the ruling was described asmixed. According to the United States Trade Representative (USTR), the appellate panel upheld the"U.S. position that WTO intellectual property rights rules leave WTO members free to protecttrademarks by establishing their own trademark ownership criteria" and overturned the earlier rulingthat Section 211 was in violation of TRIPs because it denied access to U.S. courts by trademarkholders. (24) However,the appellate panel also found that Section 211 violated WTO provisions on national treatment andmost-favored-nation treatment, which could require the United States to amend Section 211 so thatit does not violate WTO rules. Although there is access to courts to enforce trademark rights, Section211 restricted access in a discriminatory manner (against Cuban nationals and foreignsuccessors-in-interest.) On March 28, 2002, the United States agreed that it would come into compliance with theWTO ruling through legislative action by Congress by January 3, 2003. (25) That deadline has beenextended several times, however, since no legislative action has been taken to bring Section 211 intocompliance with the WTO ruling. The current deadline is December 31, 2004. Two different approaches have been advocated to bring Section 211 into compliance withthe WTO ruling. Some want a narrow fix in which Section 211 would be amended so that it appliesto U.S. companies instead of being limited to foreign companies. Advocates of this approach arguethat it would affirm that the United States "will not give effect to a claim or right to U.S. propertyif that claimed is based on a foreign compensation." (26) Some want Section 211 repealed altogether. Those supportinga repeal argue that the law endangers over 5,000 trademarks of over 500 U.S. companies registeredin Cuba. (27) Theymaintain that Cuba could retaliate against U.S. companies under the Inter-American Convention forTrademark and Commercial Protection. In the 108th Congress, identical bills, H.R. 2494 (Rangel), introduced June 17,2003, and S. 2002 (Baucus), introduced December 9, 2003, would, among otherprovisions, repeal the Section 211 trademark provision from law. In addition, four other legislativeinitiatives that would lift the overall trade embargo on Cuba also include provisions that wouldrepeal the Section 211 trademark provision: H.R. 188 (Serrano), introduced January 7,2003; S. 403 (Baucus), introduced February 13, 2003; H.R. 1698 (Paul),introduced April 9, 2003; and H.R. 3422 (Serrano). In the second session, identical bills have been introduced -- H.R. 4225 (Smithof Texas), introduced April 28, 2004, and S. 2373 (Domenici), introduced April 29,2004 -- that would advance a technical fix to Section 211 so that it applies to all parties regardlessof nationality. Press reports in October 2003 had asserted that there were efforts in Congress toadvance the narrow fix that would ensure that Section 211 applies to U.S. companies as well asforeign firms. (28) Plansto add such a remedy advocated by Bacardi to the conference report to the Department of Defenseauthorization measure, H.R. 1588 , were reportedly scuttled when it became apparentthat there would be some opposition. (29) The Senate Judiciary Committee held a July 13, 2004, hearing on the Section 211 trademarkissue featuring those advocating the narrow fix as advanced by S. 2373 and H.R. 4225 , as well as those calling for the repeal of Section 211 as advanced by S. 2002 and H.R. 2494 . Under U.S. sanctions, commercial medical and food exports to Cuba are allowed but withnumerous restrictions and licensing requirements. The 106th Congress passed the Trade SanctionsReform and Export Enhancement Act of 2000 ( P.L. 106-387 , Title IX) that allows for one-yearexport licenses for shipping food and medicine to Cuba, although no U.S. government assistance,foreign assistance, export assistance, credits, or credit guarantees are available to finance suchexports. The law, furthermore, denies exporters access to U.S. private commercial financing orcredit; all transactions must be conducted in cash in advance or with financing from third countries. The law reiterates the existing ban on importing goods from Cuba but authorizes travel to Cuba,under a specific license, to conduct business related to the newly allowed food and medicine sales.Regulations implementing the new provisions were published in the Federal Register on July 12,2001. In the aftermath of Hurricane Michelle that struck in early November 2001, Cuba changedits policy of not buying agricultural products from the United States because of its disapproval ofU.S. financing restrictions. While the U.S. government offered humanitarian assistance to Cuba inthe aftermath of the hurricane, Cuba declined, saying that instead it wanted to purchase food suppliesfrom the United States. As a result, Cuba negotiated with several U.S. agricultural companies toimport products such as wheat, corn, soybeans, rice, and chicken. The first shipments of goodsarrived in mid-December 2001. This marked the first time that Cuba purchased food supplies directlyfrom the United States since the approval of such sales in the 106th Congress. In March 2002, theCuban government agreed to purchase additional agricultural products from the United States. Inlate September 2002, a U.S. Food & Agribusiness Exhibition was held in Havana featuring 288exhibitors marketing 1,000 products from more than 30 states, the District of Columbia, and PuertoRico. (30) In early June2003, the Treasury Department's Office of Foreign Assets Control rejected an application to travelto Cuba for organizers of a potential second U.S. trade exhibition in Cuba. (31) Several Members ofCongress criticized the denial of the license and called for the Administration to reverse OFAC'sdecision. (32) Since late 2001, Cuba has purchased more than $700 million in agricultural products fromthe United States. Overall U.S. exports to Cuba amounted to $7.1 million in 2001, $145.6 millionin 2002, and $259 million in 2003, the majority in agricultural products. For the first nine monthsof 2004, U.S. exports amounted to about $321 million, the majority in agricultural products. (33) On November 12, 2004, the Treasury Department's Office of Foreign Assets Controlinstructed U.S. banks to stop transfers of funds to U.S. companies for sales of agricultural andmedical products to Cuba. The temporary move was taken so that OFAC could examine whetherthere were any violations of the provisions of the Trade Sanctions Reform and Export EnhancementAct of 2000, which requires that the sales be conducted in "payment of cash in advance." Someobservers fear that the action could jeopardize millions of dollars in U.S. agricultural sales to Cuba. Opponents of further easing restrictions on food and medical exports to Cuba maintain thatU.S. policy does not deny such sales to Cuba, as evidenced by the recent sales in the aftermath ofHurricane Michelle. Moreover, according to the State Department, since the Cuban Democracy Actwas enacted in 1992, the United States has licensed more than $4.3 billion in private humanitariandonations. Opponents of easing U.S. sanctions further argue that easing pressure on the Cubangovernment would in effect be lending support and extending the duration of the Castro regime.They maintain that the United States should remain steadfast in its opposition to any easing ofpressure on Cuba that could prolong the Castro regime and its repressive policies. Supporters of easing restrictions on food and medical exports to Cuba argue that therestrictions harm the health and nutrition of the Cuban population. They argue that although the U.S.government may have licensed more than $4.3 billion in humanitarian donations to Cuba since 1992,much smaller amounts have actually been sent to Cuba. Some supporters of easing sanctions believethe embargo plays into Castro's hands by allowing him to use U.S. policy as a scapegoat for his failedeconomic policies and as a rationale for political repression. U.S. agribusiness companies thatsupport the removal of trade restrictions on agricultural exports to Cuba believe that U.S. farmersare missing out on a market of some $700 million so close to the United States. Some agricultural producers exporting to Cuba support continuation of the prohibition onfinancing for agricultural exports to Cuba because it ensures that they will be paid. Instead, someexporters want to change U.S. restrictions in order to sell agriculture and farm equipment toCuba. (34) Otheragricultural exporters, however, support the lifting of the prohibition on financing. They contendthat allowing such financing would help smaller U.S. companies expand purchases to Cuba morerapidly. (35) Legislative Initiatives. In the 107th Congress,numerous initiatives focused in whole or in part on easing restrictions on food and medical exportsto Cuba. The House-passed version of the FY2003 Treasury Department appropriations bill, H.R. 5120 , included a provision stating that no funds in the bill could be used toimplement any sanction on private commercial sales of agricultural commodities or medicines toCuba. Some observers suggested that the practical effect of this amendment would be to prevent theTreasury Department's Office of Foreign Assets Control (OFAC) from ensuring that sales to Cubado not include private financing. (36) The Senate version of the bill, S. 2740 , as reportedout of committee, did not include a similar provision. Final action on the FY2003 TreasuryDepartment appropriations measure was not completed before the end of the 107th Congress, so the108th Congress faced early action on the measure. In the end, the final version of the FY2003omnibus appropriations measure, P.L. 108-7 ( H.J.Res. 2 ), which included TreasuryDepartment funding, did not include the House-passed provision from the 107th Congress that wouldhave provided no funds for enforcing restrictions against private financing of agricultural sales toCuba. The White House had threatened to veto the omnibus bill if it had provisions weakening theembargo on Cuba. The Senate version of the FY2004 agriculture appropriations bill, H.R. 2673 ,included a provision that would have allowed travel to Cuba under a general license (withoutapplying to the Treasury Department) for travel related to commercial sales of agricultural andmedical goods, but the provision was dropped in the conference on H.R. 2673 ( H.Rept.108-401 ), which became the FY2004 Consolidated Appropriations Act that included agricultureappropriations in Division A. The House version of the bill had not included a similar provision. Such travel to Cuba currently is allowed under the Cuba embargo regulations but under a specificlicense, which requires approval by the Treasury Department. As noted above, in June 2003, theTreasury Department rejected application for the U.S. organizers of a trade exhibition to travel toCuba, prompting criticism from some Members of Congress who called for a reversal of thedecision. The Senate version of the FY2005 agriculture appropriations bill, S. 2803 , asreported out of the Appropriations Committee ( S.Rept. 108-340 ), again included a provision thatwould have allowed travel to Cuba under a general license for travel related to commercial sales ofagricultural and medical goods, but the provision was dropped in the FY2005 omnibusappropriations measure ( H.R. 4818 , H.Rept. 108-792 ). The House-passed version of the FY2005 Transportation/Treasury appropriations bill, H.R. 5025 , had a provision (Section 649) that would have prohibited funds from beingused to implement any sanction on private commercial sales of agricultural or medical commodities. The Senate version, S. 2806 , as reported out of the Appropriations Committee ( S.Rept.108-342 ), had a provision (Section 222) that would have prohibited funds from administering orenforcing restrictions on travel or travel-related restrictions, which would include travel related tocommercial sales of agricultural and medical goods. The Cuba provisions from both the House andSenate versions were dropped in the FY2005 omnibus appropriations measure ( H.R. 4818 , H.Rept. 108-792 ). Several additional initiatives were introduced in the 108th Congress that would have liftedrestrictions in whole or in part on food and medical exports to Cuba, but no action was taken onthese measures. H.R. 187 (Serrano), introduced January 7, 2003, would have allowedfor the financing of agricultural sales to Cuba. H.R. 3422 (Serrano), introduced October30, 2003, would, among other measures, have permitted exports of food, medicines, and otherhumanitarian goods to Cuba. Three broad bills, H.R. 188 (Serrano), introduced January7, 2003, S. 403 (Baucus), introduced February 13, 2003, and H.R. 1698 (Paul), introduced April 9, 2003, would have lifted all Cuba embargo restrictions, including thoseon food and medical exports. S. 2449 (Baucus)/ H.R. 4457 (Otter) wouldhave required congressional renewal of trade and travel restrictions with respect to Cuba, includingrestrictions on food and medical exports. Restrictions on travel to Cuba have been a key and often contentious component in U.S.efforts to isolate the communist government of Fidel Castro for much of the past 40 years. Over timethere have been numerous changes to the restrictions and for five years, from 1977 until 1982, therewere no restrictions on travel. Restrictions on travel and remittances to Cuba are part of the CubanAssets Control Regulations (CACR), the overall embargo regulations administered by the TreasuryDepartment's Office of Foreign Assets Control (OFAC). Under the Bush Administration, enforcement of U.S. restrictions on Cuba travel hasincreased, and restrictions on travel and on private remittances to Cuba have been tightened. InMarch 2003, the Administration eliminated travel for people-to-people educational exchangesunrelated to academic coursework. In June 2004, the Administration significantly restricted travel,especially family travel, and the provision of private humanitarian assistance to Cuba in the form ofremittances and gift parcels. Among the new restrictions: Family visits are restricted to one trip every three years under a specific licenseand are be restricted to immediate family members. Under previous regulations, family visits couldoccur once a year under a general license, with travel more than once a year allowed but under aspecific license. Previously travel had been allowed to visit relatives to within three degrees ofrelationship to the traveler. Cash remittances, estimates of which range from $400 million to $800 million,are further restricted. Quarterly remittances of $300 may still be sent, but it is now restricted formembers of the remitter's immediate family and may not be remitted to certain government officialsand certain members of the Cuban Communist Party. The regulations were also changed to reducethe amount of remittances that authorized travelers may carry to Cuba, from $3000 to$300. Gift parcels are limited to immediate family members and are denied to certainCuban officials and certain members of the Cuban Communist Party. The contents of gift parcelsmay no longer include seeds, clothing, personal hygiene items, veterinary medicines and supplies,fishing equipment and supplies, and soap-making equipment. The authorized per diem allowed for a family visit is reduced from the StateDepartment per diem rate, currently $167 per day, to $50 per day. With the exception of informational materials, licensed travelers may notpurchase or otherwise acquire merchandise and bring it back into the United States. Previousregulations allowed visitors to Cuba to import $100 worth of goods as accompaniedbaggage. Fully-hosted travel is no longer allowed as a permissible category oftravel. Travel for educational activities is further restricted, including the eliminationof educational exchanges sponsored by secondary schools. There has been mixed reaction to the tightening of Cuba travel and remittance restrictions. Supporters maintain that the increased restrictions will deny the Cuban government dollars that helpmaintain its repressive control. Opponents argue that the tightened sanctions are anti-family and willonly result in more suffering for the Cuban people. There have also been concerns that the newrestrictions were drafted without considering the full consequences of their implementation. Forexample, the elimination of fully-hosted travel raised concerns about the status of 70 U.S. studentsreceiving full scholarships at the Latin American School of Medicine in Havana. Members of theCongressional Black Caucus, who were instrumental in the establishment of the scholarship programfor U.S. students, expressed concern that the students may be forced to abandon their medicaleducation because of the new OFAC regulations. As a result of these concerns, OFAC ultimatelylicensed the medical students in August 2004 to continue their studies for a period of two years andengage in travel-related transactions. Major arguments made for lifting the Cuba travel ban are it contributes to the suffering ofCuban families; it hinders efforts to influence conditions in Cuba and may be aiding Castro byhelping restrict the flow of information; it abridges the rights of ordinary Americans; and Americanscan travel to other countries with communist or authoritarian governments. Major arguments inopposition to lifting the Cuba travel ban are that more American travel would support Castro's ruleby providing his government with millions of dollars in hard currency; that there are legal provisionsallowing travel to Cuba for humanitarian purposes that are used by thousands of Americans eachyear; and that the President should be free to restrict travel for foreign policy reasons. (For further information, see CRS Report RL31139 , Cuba: U.S. Restrictions on Travel andRemittances , by [author name scrubbed].) Legislative Initiatives. In the first session of the108th Congress, both the House- and Senate-approved versions of the FY2004Transportation-Treasury appropriations bill, H.R. 2989 , had a nearly identical provision(Section 745 in the House version and Section 643 in the Senate version) that would have preventedfunds from being used to administer or enforce restrictions on travel or travel-related transactions.But the provision was dropped in the conference report to the FY2004 Consolidated AppropriationsAct, H.R. 2673 ( H.Rept. 108-401 ), which incorporates seven regular appropriationsacts, including Transportation-Treasury appropriations. The White House had again threatened toveto any legislation that weakened economic sanctions against Cuba. The conference also droppedtwo Cuba provisions from the House version of H.R. 2989 on remittances (Section 746)and on people-to-people educational exchanges (Section 749). The conference version of H.R. 2673 ( H.Rept. 108-401 ) also dropped a Cuba provision from the Senate-approvedversion of the bill (Section 760) that would have eased restrictions for travel to Cuba related tocommercial sales of agricultural and medical goods. The House version of the bill had no suchprovision. In the second session of the 108th Congress, the House-passed version of the FY2005Commerce, Justice, and State appropriations bill, H.R. 4754 , included a provision(Section 801) that would have prohibited funds from being used to implement, administer, or enforcerecent amendments to the Cuba embargo regulations that tightened restrictions on gift parcels andbaggage taken by individuals for travel to Cuba. The provision was added by a Flake amendment, H.Amdt. 647 , approved by a vote of 221-194. Ultimately, the provision was notincluded in the FY2005 omnibus appropriations bill ( H.R. 4818 , H.Rept. 108-792 ). Both the House-approved version of the FY2005 Transportation/Treasury appropriations bill, H.R. 5025 , and the Senate Appropriations Committee version of the bill, S. 2806 , had provisions that would have eased Cuba travel sanctions in various ways, but theseprovision were not included in the FY2005 omnibus appropriations measure ( H.R. 4818 , H.Rept. 108-792 ). In its statement of policy on H.R. 5025, the Administrationindicated that the President would veto the measure if it contained provisions weakening Cubasanctions. S. 2806, as reported out of committee, had a provision (Section 222) that wouldhave prohibited funds from administering or enforcing restrictions on travel or travel-relatedtransactions. As approved by the House, H.R. 5025 had three provisions that would haveeased Cuba sanctions. During floor consideration on September 21, 2004, the House approved aDavis (of Florida) amendment ( H.Amdt. 769 ) by a vote of 225-174, which provided thatno funds could be used to administer, implement, or enforce the Bush Administration's June 2004tightening of restrictions on visiting relatives in Cuba; the amendment became Section 647 of thebill. On September 22, 2004, the House approved two additional Cuba amendments by voice vote.A Lee amendment ( H.Amdt. 771 ) was approved that would prohibit funds from beingused to implement, administer, or enforce the Bush Administration's June 2004 tightening ofrestrictions on travel for educational activities; the amendment became Section 648 of the bill. AWaters amendment was approved ( H.Amdt. 770 ) that would prohibit funds from beingused to implement any sanction imposed on private commercial sales of agricultural and medicalproducts to Cuba , which would include travel related to the sale of such products; the amendmentbecame Section 649 of the bill. The House also rejected a Rangel amendment ( H.Amdt. 772 ) on September 22, 2004, by a vote of 225-188, that would have more broadly prohibited fundsfrom being used to implement, administer, or enforce the economic embargo of Cuba. DuringSeptember 15, 2004 House floor consideration of H.R. 5025 , Representative Jeff Flakeannounced his intention not to offer an amendment, as he had for the past three years, that wouldhave prohibited funds from being used to administer or enforce restrictions on travel or travel-relatedtransactions. The Senate version of the FY2005 Agriculture appropriations bill, S. 2803 , asreported out of committee ( S.Rept. 108-340 ), had a provision (Section 776) that would have directedthe Secretary of the Treasury to promulgate regulations allowing for travel to Cuba under a "generallicense" when it was related to the commercial sale of agricultural and medical products. TheAdministration threatened to veto the measure if it contained provisions weakening Cuba sanctions.Ultimately, the provision was not included in the FY2005 omnibus appropriations measure( H.R. 4818 , H.Rept. 108-792 ). Also in the 108th Congress, H.R. 4678 (Davis of Florida), introduced June 24,2004, would have barred certain additional restrictions on travel and remittances that theAdministration imposed in June 2004. Two bills would have specifically lifted all restrictions ontravel to Cuba: S. 950 (Enzi), introduced April 30, 2003, and reported by the SenateCommittee on Foreign Relations November 11, 2003, and H.R. 2071 (Flake),introduced May 13, 2003. H.R. 3422 (Serrano), introduced October 30, 2003, would,among other measures, have lifted restrictions on travel to Cuba. Three broad bills, H.R. 188 (Serrano), introduced January 7, 2003, S. 403 (Baucus),introduced February 13, 2003, and H.R. 1698 (Paul), introduced April 9, 2003, wouldhave lifted all Cuba embargo restrictions, including those on travel. Finally, S. 2449 (Baucus)/ H.R. 4457 (Otter), introduced respectively on May 19 and 20, 2004, wouldhave required congressional renewal of trade and travel restrictions with respect to Cuba. Because of Cuba's geographic location, the country's waters and airspace have been used bytraffickers to transport illicit drugs for ultimate destinations in the United States. Over the pastseveral years, Cuban officials have expressed concerns over the use of their waters and airspace fordrug transit as well as increased domestic drug use. The Cuban government has taken a number ofmeasures to deal with the drug problem, including legislation to stiffen penalties for traffickers,increased training for counternarcotics personnel, and cooperation with a number of countries onanti-drug efforts. Cuba has bilateral counternarcotics agreements with 29 countries and less formalarrangements with 12 others, according to the Department of State. Britain and France haveprovided counternarcotics training. In November 2001, Cuba hosted a regional counternarcoticsconference focusing on strategies to prevent drug abuse, drug trafficking, and money laundering. The United States has cooperated with Cuba on anti-drug efforts on a case-by-case basisdating back to the 1970s. In 1996, Cuban authorities cooperated with the United States in the seizureof 6.6 tons of cocaine aboard the Miami-bound Limerick , a Honduran-flag ship. Cuba turned overthe cocaine to the United States and cooperated fully in the investigation and subsequent prosecutionof two defendants in the case in the United States. Cooperation has increased since 1999 when U.S.and Cuban officials met in Havana to discuss ways of improving anti-drug cooperation. Cubaaccepted an upgrading of the communications link between the Cuban Border Guard and the U.S.Coast Guard as well as the stationing of a U.S. Coast Guard Drug Interdiction Specialist (DIS) at theU.S. Interests Section in Havana. The Coast Guard official was posted to the U.S. Interests Section in September 2000, andsince that time, coordination has increased somewhat. The State Department, in its March 2004International Narcotics Control Strategy Report, maintains that there has been some Cubancooperation with the Coast Guard specialist, but only after U.S. insistence that he either be usedeffectively or he would be withdrawn. The report also noted that the Coast Guard official had beensubjected to diplomatically unacceptable harassment. In addition, the State Department appeared to be more critical of Cuba in the March 2004drug strategy report than in previous years. According to the report: "Cuban authorities have chosennot to provide an effective use of force policy and adequate resources to counternarcotics authoritiesto give them more than a limited ability to interdict go-fast vessels or aircraft." Nevertheless, thereport maintained that Cuba did provide the U.S. Coast Guard and Drug Enforcement Administrationwith information on suspect aircraft and go-fast vessels that resulted in U.S. drug seizures andarrests. In the past, Cuba has called for a bilateral anti-drug cooperation agreement with the UnitedStates. (37) In January2002, Cuba deported to the United States Jesse James Bell, a U.S. fugitive wanted on drug charges,and in early March 2002, Cuba arrested a convicted Colombian drug trafficker, Rafael Bustamante,who escaped from jail in Alabama in 1992. At the time, while Drug Enforcement Administrationhead Asa Hutchison expressed appreciation for Cuba's actions, he indicated that cooperation wouldcontinue on a case-by-case basis, not through a bilateral agreement. (38) State Departmentspokesman Richard Boucher said that if Cuba "were to demonstrate a willingness to work across theboard with us on law enforcement issues, then we might consider some more formal structure," buthe indicated that Cuba has not demonstrated that kind of commitment. As an example, Bouchermaintained that "there are still dozens of fugitives from U.S. justice who have been provided safehaven by the Cuban government." (39) Legislative Initiatives. In the second session ofthe 107th Congress, both House and Senate versions of the FY2003 Foreign Operationsappropriations bill ( H.R. 5410 and S. 2779 ) had divergent provisionsrelated to Cuba and counternarcotics cooperation with the United States. Section 585 of the Senatebill provided that $3 million in International Narcotics Control and Law Enforcement assistanceshould be made available for preliminary work by the Department of State and other entities toestablish cooperation with appropriate agencies of the Cuban government on counter-narcoticsmatters. The money would not be available if the President certified 1) that Cuba does not have inplace appropriate procedures to protect against the loss of innocent life in the air and on the groundin connection with the interdiction of illegal drugs and 2) that there is evidence of involvement ofthe Cuban government in drug trafficking. In contrast, Section 581 of the House bill provided thatnone of the funds appropriated for "International Narcotics Control and Law Enforcement" may bemade available for assistance to the Cuban government. Final action on the Foreign Operationsmeasure was not completed before the end of the 107th Congress. In the end, the final version of the FY2003 omnibus appropriations measure in the 108thCongress, H.J.Res. 2 ( P.L. 108-7 ), which included Foreign Operations funding, did notinclude either the House or Senate provisions on anti-drug cooperation with Cuba. The Senateversion of H.J.Res. 2 , included a provision (Division E, Foreign Operationsappropriations, Sec. 580) similar to the Senate bill in the 107th Congress described above. It wouldhave provided $3 million for international narcotics control and law enforcement assistance forpreliminary work to establish cooperation with Cuba on counter-narcotics matters. Similar legislative action took place on FY2004 appropriations. The House-passed versionof the foreign operations appropriations measure, H.R. 2800 , would have provided, inSection 571, that no International Narcotics Control and Law Enforcement Funds be made availablefor assistance to Cuba. The House Appropriations Committee report to the bill ( H.Rept. 108-222 )asserted that "full reporting and transparency by the Cuban Government and United Statesmonitoring of the use of counter-narcotics assistance in Cuba would be difficult if not impossible,according to the State Department, given Cuban hostility toward the United States Government." Incontrast, the Senate-passed version of the bill, H.R. 2800 (Section 680), would haveprovided $5 million in International Narcotics Control and Law Enforcement assistance forpreliminary work to establish cooperation with Cuba on counter-narcotics matters. The moneywould not have been available if Cuba did not have in place appropriate procedures to protect againstthe loss of life in connection with the interdiction of illegal drugs or if there were evidence that theCuban government was involved in drug trafficking. In the end, neither the Senate nor the Houseprovision was included in the conference on H.R. 2673 ( H.Rept. 108-401 ), theConsolidated Appropriations Act for FY2004, which incorporates seven regular appropriations acts,including foreign operations in Division D. Again for FY2005, the House-passed version of the foreign operations measure, H.R. 4818 , included a provision, in Section 572, that no International Narcotics Controland Law Enforcement Funds be made available for assistance to Cuba. In contrast, as in the pastseveral years, the Senate-passed version of the bill would have provided (Sec. 5091) $5 million toestablish cooperation with appropriate agencies of the Cuban government on counter-narcoticsmatters. The money would not be available if the President certified that Cuba did not have in placeappropriate procedures to protect against the loss of innocent life in the air and on the ground inconnection with the interdiction of illegal drugs and there was evidence of involvement of the Cubangovernment in drug trafficking. Ultimately, neither provision was included in the FY2005 omnibusappropriations measure ( H.R. 4818 , H.Rept. 108-792 ). Another freestanding legislative initiative introduced in the 108th Congress, H.R. 1432 (Rangel), introduced March 25, 2003, would have authorized the Secretary of State to enterinto negotiations with representatives of the Cuban government to establish cooperation between theUnited States and Cuba on illicit narcotics control efforts. Cuba was added to the State Department's list of states sponsoring international terrorism in1982 because of its alleged ties to international terrorism and its support for terrorist groups in LatinAmerica. Cuba had a history of supporting revolutionary movements and governments in LatinAmerica and Africa, but in 1992 Fidel Castro said that his country's support for insurgents abroadwas a thing of the past. Cuba's change in policy was in large part because of the breakup of theSoviet Union, which resulted in the loss of billions of dollars in annual subsidies to Cuba, and ledto substantial Cuban economic decline. Cuba remains on the State Department's terrorism list. According to the State Department'sApril 2004, Patterns of Global Terrorism report, while Cuba ratified all 12 internationalcounterterrorism conventions in 2001, it has remained opposed to the U.S.-led global coalitionagainst terrorism and "actively condemned many associated U.S. polices and actions throughout2003." The State Department report also noted that Cuba continued to host several members ofForeign Terrorist Organizations as well as some U.S. fugitives from justice. The report maintainedthat Cuba provides safehaven to up to 20 Basque ETA terrorists from Spain and has provided "somedegree of safehaven and support" to members of two Colombian insurgent groups, the RevolutionaryArmed Forces of Colombia (FARC) and the National Liberation Army (ELN). The reportacknowledged, however, that Colombia acquiesced to having the two groups in Cuba; it also notedthat Colombia has publicly said that it wants Cuba's continued mediation with the ELN in Cuba. With regard to the ETA members, the report cited a Cuban declaration in May 2003 that maintainedthat the ETA presence in Cuba stemmed from a request from Spain and Panama, and that the issueis a bilateral matter between Cuba and Spain. In general, those who support keeping Cuba on the terrorism list argue that there is ampleevidence that Cuba supports terrorism. They point to the government's history of supporting terroristacts and armed insurgencies in Latin America and Africa. They point to the government's continuedhosting of members of foreign terrorist organizations and U.S. fugitives from justice. Critics ofretaining Cuba on the terrorism list maintain that it is a holdover of the Cold War. They argue thatdomestic political considerations keep Cuba on the terrorism list and maintain that Cuba's presenceon the list diverts U.S. attention from struggles against serious terrorist threats. Although Cuba offered support to the United States in the aftermath of the World TradeCenter and Pentagon attacks in 2001, Fidel Castro also stated that the attacks were in part aconsequence of the United States having applied "terrorist methods" for years. (41) Cuba's subsequentstatements became increasingly hostile, according to press reports, which quoted Cuba's mission tothe United Nations as describing the U.S. response to the U.S. attacks as "fascist and terrorist" andthat the United States was using the attack as an excuse to establish "unrestricted tyranny over allpeople on Earth." (42) Castro himself said that the U.S. government was run by "extremists" and "hawks" whose responseto the attack could result in an "infinite killing of innocent people." (43) The Cuban government, however, had a much more muted reaction to the U.S. decision tosend captured Taliban and Al Qaeda fighters from Afghanistan to the U.S. naval base at GuantanamoBay, Cuba. Although the Cuban government objects to the U.S. presence at Guantanamo as anational security threat and opposes the presence as illegal, it has not opposed the new mission ofhousing detainees from Afghanistan. (44) The Cuban government has, however, expressed concerns aboutthe treatment of terrorist suspects at Guantanamo. (Also see "Guantanamo Naval Base" below.) Cuba as the Victim of Terrorism. Cuba has beenthe target of various terrorist incidents over the years. In 1976, a Cuban plane was bombed, killing73 people. In 1997, there were almost a dozen bombings in the tourist sector in Havana and in theVaradero beach area in which an Italian businessman was killed and several others were injured. Two Salvadorans were convicted and sentenced to death for the bombings in March 1999, and threeGuatemalans were sentenced to prison terms ranging from 10-15 years in January 2002. Cubanofficials maintain that Cuban exiles funded the bombings. In November 2000, four anti-Castro activists were arrested in Panama for a plot to kill FidelCastro. One of the accused, Luis Posada Carriles, was allegedly involved in the 1976 airplanebombing of a Cuban airliner. (45) The four stood trial in March 2004 and were sentenced in Aprilto prison terms ranging from seven to eight years. In late August 2004, Panamanian PresidentMireya Moscoso pardoned the four men before the end of her presidential term. Three of the menare U.S. citizens and traveled to Florida, where they received strong support from some in the CubanAmerican community, while Posada Carriles reportedly traveled to another country. The pardonsresulted in Cuba breaking diplomatic relations with Panama, although Panama's newly inauguratedPresident Martin Torrijos, who disagreed with the pardon, has vowed to work toward the restorationof relations. U.S. State Department officials did not criticize President Moscoso's pardon of the four,but maintained that they did not lobby Panama for the pardons. (46) Cuba and Biological Weapons? In 2002, the StateDepartment made controversial allegations that Cuba, which has an advanced biotechnology sector,has been involved in developing biological weapons. On May 6, 2002, Under Secretary of State forArms Control and International Security John Bolton stated that "the United States believes thatCuba has at least a limited offensive biological warfare research-and-development effort" and "hasprovided dual-use technology to other rogue states." Bolton called on Cuba "to cease allBW-applicable cooperation with rogue states and to fully comply with all of its obligations underthe Biological Weapons Convention." Although Bolton's statement received considerable mediaattention, it was similar to a March 19, 2002 statement by Assistant Secretary of State forIntelligence and Research Carl Ford before the Senate Committee on Foreign Relations. When questioned on the issue, Secretary of State Powell maintained that Under SecretaryBolton's statement was not based on new information. Powell asserted that the United States believesCuba has the capacity and the capability to conduct research on biological weapons but emphasizedthat the Administration had not claimed that Cuba had such weapons. Some observers viewedPowell's statement as contradicting that of Under Secretary Bolton. (47) In response to Under Secretary Bolton's statement, the Cuban government called theallegations a lie and maintained that the Bush Administration was trying to justify its hard-linepolicies just when the momentum is increasing in the United States to ease the embargo. During histrip to Cuba, former President Jimmy Carter criticized the Bush Administration over the allegationsand said that Administration officials who had briefed him before the trip assured him that Cuba hadnot shared anything with other countries that could be used for terrorist purposes. (48) The Senate Foreign Relations Committee's Subcommittee on Western Hemisphere, PeaceCorps, and Narcotics Affairs held a hearing on the issue on June 5, 2002. (49) At the hearing, AssistantSecretary of State for Intelligence and Research Carl Ford distinguished between the term "effort"and "program," and maintained that Cuba has a biological weapons effort and not a biologicalweapons program. Ford characterized a program as something substantial and multifaceted thatincludes test facilities, production facilities, and a unit within the military specifically designated forsuch weapons capability. In contrast, he characterized an effort as the research and development thatwould be necessary to create biological weapons. In late June 2003, news reports stated that an employee of the State Department's Bureau ofIntelligence and Research maintained that Undersecretary Bolton's assertions about Cuba andbiological weapons were not supported by sufficient intelligence. (50) U.S. government concerns about Cuba's capability to produce biological weapons dates backseveral years. In 1998, then U.S. Secretary of Defense William Cohen stated in a transmittal letter(accompanying a report to Congress on Cuba's threat to U.S. national security) that he was"concerned about Cuba's potential to develop and produce biological agents, given its biotechnologyinfrastructure..." (51) Cuba began building up its biotechnology industry in the 1980s and has spent millionsinvesting in the sector. The industry was initially geared "to apply biotechnology and geneticengineering to agriculture in order to increase yields" but has also produced numerous vaccines,interferon, and other drugs and has exported many of its biotechnology products. (52) In 1999, the Britishpharmaceutical company GlaxoSmithKline announced an agreement to test and market a new Cubanmeningitis vaccine that might eventually be used in the United States. (53) In May 2003, the Centerfor Defense Information published a report on a delegation sent to Cuba that visited nine Cubanbiotechnology facilities. (54) In March 30, 2004, congressional testimony before the House International RelationsCommittee, Under Secretary of State John Bolton asserted that "Cuba remains a terrorist and BWthreat to the United States." According to Bolton: "The Bush Administration has said repeatedly thatwe are concerned that Cuba is developing a limited biological weapons effort, and called on FidelCastro to cease his BW aspirations and support of terrorism." Bolton went on to add a caveat,however, that "existing intelligence reporting is problematic, and the Intelligence Community'sability to determine the scope, nature, and effectiveness of any Cuban BW program has beenhampered by reporting from sources of questionable access, reliability, and motivation." (55) The New York Times reported on September 18, 2004 that the Bush Administration, using more stringent intelligencestandards, had "concluded that it is no longer clear that Cuba has an active, offensive bio-weaponsprogram." (56) Over the past several years, the FBI has arrested and convicted several Cuban intelligenceagents in the United States. In June 2001, five members of the so-called "Wasp Network" wereconvicted on espionage charges by a U.S. Federal Court in Miami. Sentences handed down inDecember 2001 ranged from 15 years to life in prison. The group tried to penetrate U.S. militarybases and exile groups. The Cuban government has vowed to work for the return of the five spieswho have been dubbed "Heroes of the Republic" by Cuba's National Assembly. In addition to thefive, a married couple was sentenced in January 2002 to prison terms of seven years and 3½ yearsfor their participation in the spy network. In addition, two U.S. government officials have been implicated in spying for Cuba. InFebruary 2000, an Immigration and Naturalization Service (INS) official from Miami, MarianoFaget, was arrested and ultimately convicted in May 2000 for passing classified information to afriend with ties to Cuba. He was sentenced to five years in prison in June 2001. The case led to theState Department's expulsion of a Cuban diplomat working in Washington D.C. On September 21, 2001, Defense Intelligence Agency (DIA) analyst Ana Montes wasarrested on charges of spying for the Cuban government. Montes reportedly supplied Cuba withclassified information about U.S. military exercises and other sensitive operations. (57) On March 19, 2002,Montes pled guilty to spying for the Cuban government for 16 years, during which she divulged thenames of four U.S. government intelligence agents working in Cuba and information about a "specialaccess program" related to U.S. national defense. On October 16, 2002, Montes was sentenced to25 years in prison in exchange for her cooperation with prosecutors as part of a plea bargain. In response to the espionage case, in early November 2002 the U.S. Department of Stateordered the expulsion of four Cuban diplomats in the United States, two from the Cuban InterestsSection in Washington D.C. and two from Cuba's U.N. Mission in New York. Cuba stronglyasserted that the diplomats were not involved in intelligence activities. On May 13, 2003, the BushAdministration ordered the expulsion of 14 more Cuban diplomats from the United States, sevenfrom Cuba's U.N. Mission and seven from the Cuban Interests Section in Washington for espionage. Cuba call the action an "irrational act of vengeance and claimed that the United States was trying toprovoke a confrontation that could result in the closure of the diplomatic offices in eachcountry. (58) In December2003, the State Department expelled a third secretary of the Cuban Interests Section in Washington. The 45-square mile U.S. naval facility at Guantanamo Bay, Cuba, has been a U.S. base since1903, and under a 1934 treaty that remains in force, the U.S. presence can only be terminated bymutual agreement or by abandonment by the United States. When Fidel Castro assumed power inthe 1959 Cuban revolution, the new government gave assurances that it would respect all its treatycommitments, including the 1934 treaty covering the Guantanamo base. Subsequently, however,as U.S.-Cuban relations deteriorated, the Cuban government opposed the presence as illegal. The mission of the base has changed over time. During the Cold War, the base was viewedas a good location for controlling Caribbean sea lanes, as a deterrent to the Soviet presence in theCaribbean, and as a location for supporting potential military operations in the region. In 1994-1995,the base was used to house thousands of Cubans and Haitians fleeing their homeland, but by 1996the last of refugees had departed, with most Cubans paroled into the United States, pursuant to a May1995 U.S.-Cuban migration accord. Since the 1995 accord, the U.S. Coast Guard has interdictedthousands of Cubans at sea and returned them to Cuba, while a much smaller number, those deemedat risk for persecution, have been take to Guantanamo and then granted asylum in a third country. In the aftermath of increased violence in Haiti in February 2004, the base reportedly was beingconsidered as a contingency option to house Haitian migrants in the event of a mass exodus fromHaiti. (60) Another mission for the Guantanamo base emerged with the U.S.-led global campaignagainst terrorism in the aftermath of the September 11, 2001, terrorist attacks in the United States. With the U.S. war in Afghanistan in 2001, the United States decided to send captured Taliban andAl Qaeda fighters to be imprisoned in Guantanamo. Although the Cuban government objects to theU.S. presence at Guantanamo, it has not opposed the new mission of housing detainees. DefenseMinister Raul Castro noted that, in the unlikely event that a prisoner would escape into Cubanterritory, Cuba would capture the prisoner and return him to the base. (61) The Cuban government,however, has expressed concerns about the treatment of prisoners at the U.S. base and has said it willkeep pressing the international community to investigate the treatment of terrorist suspects. Atpresent, some 600 detainees are being held at Guantanamo. U.S.-government sponsored radio and television broadcasting to Cuba -- Radio and TV Marti-- began in 1985 and 1990 respectively. As spelled out in the Broadcasting Board of GovernorsFY2005 Budget Request , the objectives of Radio and TV Marti are 1) to support the right of theCuban people to seek, receive, and impart information and ideas through any media and regardlessof frontiers; 2) to be effective in furthering the open communication of information and ideasthrough use of radio and television broadcasting to Cuba; 3) to serve as a consistently reliable andauthoritative source of accurate, objective, and comprehensive news; and 4) to provide news,commentary, and other information about events in Cuba and elsewhere to promote the cause offreedom in Cuba. TV Marti broadcasts for four and one-half hours daily from facilities in Cudjoe Key, Florida;on May 20, 2002, the broadcast schedule was changed from the early hours of 3:30 a.m. - 8:00 a.m.to the evening hours of 6:00 p.m. - 10:30 p.m. In addition, TV Marti began broadcasting on theHispasat satellite 24 hours a day in September 2003. According to the Broadcasting Board ofGovernors Fiscal Year 2005 Budget Request, the Office of Cuba broadcasting (OCB) proposes toclose down the existing aerostat transmission system in Cudjoe Key, Florida, in September 2004. Radio Marti broadcasts 24 hours a day on short and medium wave (AM) channels. Surveysof Cubans have shown a Radio Marti listenership of 9% in 2000 and 5% in 2001. (62) There has been testing ofvarious methods to overcome Cuban jamming efforts. Until October 1999, U.S.-government funded international broadcasting programs had beena primary function of the United States Information Agency (USIA). When USIA was abolished andits functions were merged into the Department of State at the beginning of FY2000, the BroadcastingBoard of Governors became an independent agency that included such entities as the Voice ofAmerica (VOA), Radio Free Europe/Radio Liberty (RFE/RL), Radio Free Asia, and the Office ofCuba Broadcasting (OCB), which manages Radio and TV Marti. OCB is headquartered in Miami,Florida. Legislation in the 104th Congress ( P.L. 104-134 ) required the relocation of OCB fromWashington D.C. to south Florida. The move began in 1996 and was completed in 1998. Both Radio and TV Marti have at times been the focus of controversies, including adherenceto broadcast standards. There have been various attempts over the years to cut funding for theprograms, especially for TV Marti, which has not had an audience because of Cuban jammingefforts. Various studies and audits of these programs have been conducted, including investigationsby the U.S. General Accounting Office, by a 1994 congressionally established Advisory Panel onRadio and TV Marti, and by the State Department's Office of the Inspector General. (63) (For background on Cubabroadcasting through 1994, see CRS Report 94-636(pdf) , Radio and Television Broadcasting to Cuba:Background and Issues through 1994 .) From FY1984 through FY2004, Congress has appropriated about $460 million forbroadcasting to Cuba, with about $281 million for Radio Marti (since FY1984) and $179 million forTV Marti (since FY1989). Debate on TV Marti. In the various congressionaldebates on TV Marti over the years, opponents of continued funding of the program maintain thatvirtually the only people who see TV Marti in Cuba are those Cubans who visit the consular sectionof the U.S. Interests Section in Havana, which has a waiting room in which TV Marti may beviewed. These critics argue that almost $180 million has been spent by the United States for TVMarti, while the Cuban government only needs to spend a few thousand dollars to jam the broadcastseffectively. They argue that TV Marti is a waste of taxpayers' money because it does not contributeto the promotion of freedom and democracy in Cuba, unlike Radio Marti, which some Cubans listento as a source of information. Opponents also argue that the conversion of TV Marti from VHF toUHF transmission has not succeeded in overcoming Cuba's jamming efforts. In contrast, supporters of continued TV Marti funding point to a congressionally mandatedAdvisory Panel in 1994, which stated that "the Cuban people have an ardent desire and a genuineneed to receive the programming produced by TV Marti." (64) Supporters argue that eliminating TV Marti would send amessage to the Cuban people that the United States is not committed to the cause of freedom inCuba. They believe that eliminating TV Marti would be giving in to the dictatorial Castrogovernment, which suppresses the free flow of information in Cuba. These proponents contend thatit is impossible for the Cuban government to completely jam TV Marti, and maintain that significantnumbers of Cubans have attempted to tune in to the programming. Still others point to the potentialuse of TV Marti in the event of a crisis or upheaval in Cuba's future, and argue that in such ascenario, it would be important to have TV Marti available as a news source. Airborne Broadcasts. In early May 2004, theCommission for Assistance for a Free Cuba called for the immediate deployment of the EC-130E/JCommando Solo airborne platform for weekly airborne radio and television broadcasts to Cuba inorder to overcome Cuban jamming. It also called for funds "to acquire and refit a dedicated airborneplatform for full-time transmission of Radio and TV Marti into Cuba." In support of theserecommendations, President Bush directed that up to $18 million be committed "for regular airbornebroadcasts to Cuba and the purchase of a dedicated airborne platform for the transmission of Radioand Television Marti into Cuba." The longer term proposal for a dedicated airborne platform wouldnot be a military aircraft but an aircraft acquired and operated by the Broadcasting Board ofGovernors' Office of Cuba Broadcasting (OCB). Assistant Secretary of State for WesternHemisphere Affairs Noriega indicated that some of the funding may come from existing resourcesalready provided for Cuba broadcasting, while there may be additional resources provided. (65) At present, there are six EC-130E/J Commando Solo aircraft flown by the Air Force SpecialOperations Wing at Harrisburg, Pennsylvania. The aircraft are specialized assets that have been usedto conduct information operations, psychological operations, and civil affairs broadcasts worldwideincluding Grenada in 1983, Operation Desert Storm in 1990-1991, Kosovo in 1999, OperationEnduring Freedom in Afghanistan, and Operation Iraqi Freedom. (66) In May 2003, the aircraftwas used in a test to broadcast Radio and TV Marti to Cuba in an effort to overcome Cuban jammingof the U.S.-government broadcasts. The State Department announced that Radio and TV Marti werebroadcast via the airborne platform for several hours on August 21, 2004. While the production cost of the military aircraft range from $70 million for the EC-130Eto $90 million for the EC-130J, (67) the cost of acquiring and refitting an aircraft to be operated bythe Office of Cuba Broadcasting would be much less and would probably be covered by the amountof funding called for by the President. FY2003 Funding. In September 2002, bothhouses approved the conference report ( H.Rept. 107-671 ) to the Foreign Relations Authorization Actfor FY2003 ( H.R. 1646 ) that authorized $25.923 million for Cuba broadcasting forFY2003. The President signed the measure into law on September 30, 2002 as P.L. 107-228 . The Bush Administration requested $25.362 million for broadcasting to Cuba for FY2003,with about $15 million for Radio Marti and $10 million for TV Marti. In the 107th Congress, theSenate Appropriations Committee reported out its version of the FY2003 Commerce, Justice, Stateand Related Agencies (CJS) appropriations bill, S. 2778 ( S.Rept. 107-218 ) on July 24,2002, which would have provided $24.996 million for Cuba broadcasting. Final action on themeasure was not completed before the end of the 107th Congress. In the 108th Congress, the finalversion of the FY2003 omnibus appropriations bill, H.J.Res. 2 ( P.L. 108-7 ), whichincludes Commerce, Justice and State appropriations in Division B, provides $24.996 million forRadio and TV Marti broadcasting to Cuba. FY2004 Funding. For FY2004, theAdministration requested $26.901 million for Cuba broadcasting, with $16.355 million for RadioMarti and $10.546 million for TV Marti. The House-approved version of the FY2004 Commerce,Justice, and State Department appropriations bill, H.R. 2799 , would fund theAdministration's request for Cuba broadcasting under the International Broadcasting OperationsAccount, but without a specific earmark. The House Appropriations Committee report to the bill( H.Rept. 108-221 ) recommended full funding of the Administration's Cuba broadcasting request. The Senate Appropriations Committee version of the bill, S. 1585 , would provide$28.201 million for Cuba broadcasting, $1.2 million more than the Administration's request. According to the committee report to the bill, S.Rept. 108-144 , the additional funding is to be usedto enhance efforts to defeat Cuban government jamming. The Committee directed the BroadcastingBoard of Governors and the Office of Cuba Broadcasting "to use all available means to overcomethe jamming of Radio and TV Marti, including broadcasting via the Internet and satellite." In theend, funding for Commerce, Justice, and State Department appropriations was included in theFY2004 Consolidated Appropriations Act, H.R. 2673 , ( H.Rept. 108-401 ), whichconsisted of seven regular appropriations bills. The conferees funded Cuba broadcasting underInternational Broadcasting Operations Account, but without a specific earmark, and stated in thereport that they expected the Broadcasting Board of Governors to provide $1.2 million to pursuealternative means of transmission, including Internet transmission, of Cuba broadcasting. FY2005. The Administration requested $27.6million for Cuba broadcasting, with $17.4 million for Radio Marti and $10.3 million for TV Marti,and this was fully funded in the FY2005 omnibus appropriations measure ( H.R. 4818 , H.Rept. 108-792 ). The Office of Cuba Broadcasting (OCB) is proposing to close down the existingaerostat transmission system for TV Marti in Cudjoe Key, Florida in September 2004, while thebroadcast will continue to be carried on the Hispasat satellite. The OCB is reportedly continuing toexplore ways of mitigating the jamming of TV Marti. The House-passed version of the Commerce, Justice, and State appropriations measure, H.R. 4754 , would have funded Cuba broadcasting under the International BroadcastingOperations account, but without a specific earmark. The report to the bill ( H.Rept. 108-576 )recommended full funding of the Administration's $27.6 million request. The Senate version of thebill, S. 2809 , as reported out of committee ( S.Rept. 108-344 ) would have fully fundedthe Administration's request with a specific earmark of $27.6 million under the InternationalBroadcasting Operations account. In the end, funding was included in the FY2005 omnibusappropriations measure ( H.R. 4818 , H.Rept. 108-792 ), which earmarked $27.6 millionfor Cuba broadcasting. In terms of authorization legislation, the House-passed version of the State Departmentauthorization bill for FY2004 and FY2005, H.R. 1950 (Hyde), would have authorized(Section 121) $26.901 million for Cuba broadcasting for FY2004 and $27.439 million for FY2005. Section 502 of the bill would have amended the Radio Broadcasting to Cuba Act to use additionalAM frequencies and the FM and Shortwave bands to improve Radio Marti signal delivery to Cuba. Section 503 of the bill would require a report on efforts to counter jamming of Radio and TV Martibroadcasts. The Senate version of the bill for FY2005, S. 2144 (Section 111), wouldhave authorized appropriations for radio and television broadcasting to Cuba within the InternationalBroadcasting Operations account but without a specific earmark. Over the past several years, the U.S. Agency for International Development has providedassistance to increase the flow of information on democracy, human rights, and free enterprise toCuba. USAID's Cuba program supports a variety of U.S.-based non-governmental organizations topromote rapid, peaceful transition to democracy, help develop civil society, and build solidarity withCuba's human rights activists. (68) These efforts are funded through the annual foreign operationsappropriations bill. In FY2001, $4.989 million was provided for various Cuba projects; $5 millionwas provided in FY2002; $6 million was provided in FY2003; almost $7 million will be providedin FY2004; and the Administration has requested $9 million for FY2005. For FY2004, the Administration requested $7 million in Economic Support Funds forinformation dissemination to foster democratic progress and the development of a civil society inCuba. The House-passed version of the FY2004 foreign operations appropriations bill, H.R. 2800 , had no specific earmark for democracy funding for Cuba, but the HouseAppropriations Committee report to the bill, H.Rept. 108-122 , noted that the committee fullysupported the Administration's $7 million request. The Senate-passed version of H.R. 2800 (Section 699G), would have provided not more than $5 million in Transition Initiatives fundsfor "individuals and independent nongovernmental organizations to support democracy-buildingeffort for Cuba," essentially opening up another spigot of funding for Cuba democracy projects. Inthe end, the conference on H.R. 2800 was included in Division D of P.L. 108-199 ( H.R. 2673 , H.Rept. 108-401 ), the FY2004 omnibus appropriations measure. Theconferees did not earmark assistance for Cuba democracy programs, but the conference reportrecommended full funding of the Administration's $7 million in Economic Support Funds fordemocracy programs supported by USAID. For FY2005, the Administration requested $9 million to back public diplomacy to promotedemocratization, respect for human rights, and the development of a free market economy in Cuba. The House-passed version of the FY2005 foreign operations appropriations bill, H.R. 4818 , did not specifically earmark such assistance for Cuba, but the House AppropriationsCommittee's report to the bill ( H.Rept. 108-599 ) noted that the committee fully supports theAdministration's budget request. In final action, Congress fully funded the $9 million request forCuba projects in the FY2005 omnibus appropriations (H.R. 4818, H.Rept. 108-792 ). In terms of authorization legislation, the House-passed version of the Foreign Relationsauthorization bill for FY2004 and FY2005, H.R. 1950 , would, in Section 1807, haveauthorized $15 million for each of FY2004 and FY2005 to support democracy-building efforts forCuba. The Senate version of the authorization measure, S. 2144 , the Foreign AffairsAuthorization Act, Fiscal Year 2005, had no such provision. (69) In addition, anotherlegislative initiative introduced in the 108th Congress, S. 1089 (Ensign), would haveauthorized $15 million to support democracy building in Cuba and $30 million to the President toestablish a fund to provide assistance to a transition government in Cuba. In early May 2004, the President endorsed the recommendation of the Commission forAssistance to a Free Cuba and directed that up to $29 million be made available fordemocracy-building activities for Cuba to augment the $7 million in FY2004 funding already beingprovided by USAID. It is unclear how the additional assistance relates to the FY2005 budget requestof $9 million for USAID projects to promote democratization. In addition, the President directedthat $5 million for public diplomacy initiatives be provided to "illuminate the reality of Castro'sCuba." In addition to funding through foreign operations appropriations, the United States providesdemocratization assistance for Cuba through the National Endowment for Democracy (NED), whichis funded through the annual Commerce, Justice, and State (CJS) appropriations measure. Cubafunding through NED has steadily increased over the past several years. NED-funded democracyprojects for Cuba amounted to $765,000 in FY2001; $841,000 in FY2002; and $1.143 million inFY2003. 1994 and 1995 Agreements. In 1994 and 1995,Cuba and the United States reached two migration accords designed to stem the mass exodus ofCubans attempting to reach the United States by boat. On the minds of U.S. policymakers was the1980 Mariel boatlift in which 125,000 Cubans fled to the United States with the approval of Cubanofficials. In response to Castro's threat to unleash another Mariel, U.S. officials reiterated U.S.resolve not to allow another exodus. Amidst escalating numbers of fleeing Cubans, on August 19,1994, President Clinton abruptly changed U.S. migration policy, under which Cubans attempting toflee their homeland were allowed into the United States, and announced that the U.S. Coast Guardand Navy would take Cubans rescued at sea to the U.S. naval base at Guantanamo Bay, Cuba. Despite the change in policy, Cubans continued fleeing in large numbers. As a result, in early September 1994, Cuba and the United States began talks that culminatedin a September 9, 1994 bilateral agreement to stem the flow of Cubans fleeing to the United Statesby boat. In the agreement, the United States and Cuba agreed to facilitate safe, legal, and orderlyCuban migration to the United States, consistent with a 1984 migration agreement. The UnitedStates agreed to ensure that total legal Cuban migration to the United States would be a minimumof 20,000 each year, not including immediate relatives of U.S. citizens. In a change of policy, theUnited States agreed to discontinue the practice of granting parole to all Cuban migrants who reachthe United States, while Cuba agreed to take measures to prevent unsafe departures from Cuba. In May 1995, the United States reached another accord with Cuba under which the UnitedStates would parole the more than 30,000 Cubans housed at Guantanamo into the United States, butwould intercept future Cuban migrants attempting to enter the United States by sea and would returnthem to Cuba. The two countries would cooperate jointly in the effort. Both countries also pledgedto ensure that no action would be taken against those migrants returned to Cuba as a consequenceof their attempt to immigrate illegally. On January 31, 1996, the Department of Defense announcedthat the last of some 32,000 Cubans intercepted at sea and housed at Guantanamo had left the U.S.Naval Base, most having been paroled into the United States. Elian Gonzalez Case. (71) From late November 1999through June 2000, national attention became focused on Cuban migration policy as a result of theElian Gonzalez case, the five-year old boy found clinging to an inner tube off the coast of FortLauderdale. The boy's mother drowned in the incident, while his father, who resided in Cuba, calledfor his return. Although the boy's relatives in Miami wanted him to stay in the United States, theImmigration and Naturalization Service ruled that the boy's father had the sole legal authority tospeak on his son's behalf. After numerous legal appeals by the Miami relatives were exhausted, theboy returned to Cuba with his father in June 2000. In Cuba, Fidel Castro orchestrated numerousmass demonstrations and a media blitz on the issue until the boy's return. The case generated anoutpouring of emotion among the Cuban population as well as in south Florida. Wet Foot/Dry Foot Policy. Since the 1995migration accord, the U.S. Coast Guard has interdicted thousands of Cubans at sea and returned themto their country, while those deemed at risk for persecution have been transferred to Guantanamo andthen found asylum in a third country. Those Cubans who reach shore are allowed to apply forpermanent resident status in one year, pursuant to the Cuban Adjustment Act of 1966 (P.L. 89-732). This so-called "wet foot/dry foot" policy has been criticized by some as encouraging Cubans to risktheir lives in order to make it to the United States and as encouraging alien smuggling. Othersmaintain that U.S. policy should welcome those migrants fleeing Communist Cuba whether or notthey are able to make it to land. U.S. prosecution against migrant smugglers in Florida has increased in recent years withnumerous convictions. There have been several violent incidents in which Cuban migrants havebrandished weapons or in which Coast Guard officials have used force to prevent Cubans fromreaching shore. In July 2003, a U.S. federal court in Florida convicted a Cuban national for hijackinga plane to Key West on April 1, 2003. Another six Cubans were convicted in Key West inDecember 2003 for hijacking a Cubana Airlines plane to Florida in March 2003. The Cuban government has taken forceful action against individuals engaging in aliensmuggling. Prison sentences of up to three years may be imposed against those engaging in aliensmuggling, and for incidents involving death or violence, a life sentence may be imposed. On April11, 2003, the Cuban government executed three men who had hijacked a ferry in Havana on April2 in an attempt to reach the United States. The ferry hijacking had been preceded by the hijackingof two small planes to the United States. The summary execution prompted worldwidecondemnation of the Cuban government. The Cuban government maintained that it took the actionto prevent additional hijackings. The U.S. Interest Section in Havana has officers that visit the homes of returned migrants toassess the Cuban government's treatment of those repatriated. The Department of State (pursuantto P.L. 105-277 , Section 2245) makes a semi-annual report to Congress on the methods employedby the Cuban government to enforce the the 1994 migration agreement and on the Cubangovernment's treatment of those returned. In the most recent report to Congress, submitted in May2004, the State Department noted that it has been unable to monitor returnees outside Havana sinceMarch 2003. The State Department noted, however, that prior to that time, "a majority of thereturnees it monitored did not suffer retribution from the Cuban authorities as a result of theirattempt to depart illegally" but noted that "there continued to be clear and credible instances ofharassment and punishment of returnees." (72) On July 21, 2003, the U.S. Coast Guard repatriated 15 Cubans who had been interdicted ona Cuban government vessel that had been stolen on July 15 (12 of the Cubans were involved instealing the boat and overpowered the three others who were guarding the government vessel.) TheUnited States returned the Cubans after assurances from the Cuban government that no one wouldface execution and no one would serve more than 10 years in prison. The Cuban government laudedthe return of the migrants for being in line with the 1995 migration agreement. The repatriation ofthe migrants prompted widespread criticism of the Administration in Florida and among someMembers of Congress. Some critics called for an investigation into the U.S.-Cuban negotiations thatled to the return of the migrants and some have called for the Administration to change the policyof repatriating those Cubans interdicted at sea. Supporters of the policy maintained thatimplementation of the migration accords is important for preventing another mass exodus of Cubansfleeing to the United States. On October 10, 2003, the President announced that the United States would increase thenumber of new Cuban immigrants each year, improve the method of identifying refugees, redoubleefforts to process Cubans seeking to leave Cuba, and initiative a public information campaign inFlorida and Cuba to better inform Cubans of the routes to safe and legal migration to the UnitedStates. The President's announcement was in part a response to the criticism of the Administration'smigration policy in the aftermath of the July 2003 repatriation of several Cubans involved in stealinga Cuban government vessel. Migration Talks. Semi-annual U.S.-Cuban talks(held alternatively between Cuba and the United States) had been held regularly on theimplementation of the 1994 and 1995 migration accords, but the State Department cancelled the 20thround of talks scheduled for January 8, 2004. According to the State Department, Cuba has refusedto discuss five issues identified by the United States: (1) Cuba's issuance of exit permits to allqualified migrants; (2) Cuba's cooperation in holding a new registration for an immigrant lottery; (3)the need for a deeper Cuban port utilized by the U.S. Coast Guard for the repatriation of Cubansinterdicted at sea; (4) Cuba's responsibility to permit U.S. diplomats to travel to monitor returnedmigrants; and (5) Cuba's obligation to accept the return of Cuban nationals determined to beexcludable from the United States. (73) In response to the cancellation of the talks, Cuban officials maintained that the U.S. decisionwas irresponsible and that it was prepared to discuss all of the issues raised by the UnitedStates. (74) The last timetalks were suspended was in 2000 by the Cuban government when Elian Gonzalez was in the UnitedStates. The cancellation of the talks has increased concern among those in Cuba seeking visas tomigrate legally. Excludables. Under a 1984 U.S.-Cubanmigration accord, Cuba agreed to take back 2,746 so-called excludables, criminal alines and mentallyill people, who had arrived in the 1980 Mariel boatlift. To date, Cuba has taken back over 1,600 ofthose on the 1984 list. Another issue in U.S.-Cuban relations is the return of Cubans in the UnitedStates not on the 1984 list who are no longer eligible to remain in the United States because ofcriminal offenses. Over 900 Cubans reportedly fall into this category, and Cuba will not accept theirreturn. (The Supreme Court announced in January 2004 that it wold rule on whether the federalgovernment can indefinitely imprison Cubans and other immigrants who have finished their prisonsentences but whose home countries will not accept their return.) (75) The United States hasproposed a technical working group from both governments to explore options that would allow forthe return of some of these excludables. (76) P.L. 107-77 ( H.R. 2500 / S. 1215 ). State Department and RelatedAgencies Appropriations, FY2002. The measure fully funded the Administration's request of$24.872 million for broadcasting to Cuba for FY2002. H.R. 2500 reported by the HouseCommittee on Appropriations ( H.Rept. 107-139 ) July 13, 2001. House passed (408-19), amended,July 18, 2001. S. 1215 reported by the Senate Committee on Appropriations July 20, 2001( S.Rept. 107-42 ). On September 10, 2001, the Senate substituted the language of S. 1215as its version of H.R. 2500, and on September 13, 2001 the Senate passed (97-3) the bill,amended. Conference report ( H.Rept. 107-278 ) filed November 9, 2001. House approved conference(411-15) on November 14, 2001, and the Senate approved it (98-1) on November 15, 2001. Signedinto law November 28, 2001. P.L. 107-115 ( H.R. 2506 ). Foreign Operations Appropriations, FY2002.Introduced and reported by the House Committee on Appropriations July 17, 2001 ( H.Rept.107-142 ). House passed (381-46) July 24, 2001. The House committee report to the bill notes thatthe Appropriations Committee fully supports the Administration's budget request of at least $5million aimed at promoting democracy in Cuba. Senate Committee on Appropriations reported itsversion September 2, 2001 ( S.Rept. 107-58 ). Senate passed (96-2) October 24, 2001. The Senateversion would have provided $1.5 million for the Department of State and other agencies to establishcooperation with Cuba on counter-narcotics matters. Conference report ( H.Rept. 107-345 ) filedDecember 19, 2001, without the Senate provision on counter-narcotics cooperation with Cuba. However, the conference report called for a report by the Secretary of State within six months on 1)the extent, if any of the direct involvement of the government of Cuba in illegal drug trafficking; 2)the likelihood that U.S. international narcotics assistance to the government of Cuba would decreasethe flow of drugs transiting through Cuba, and 3) the degree to which the government of Cuba isexchanging with U.S. agencies drug-related law enforcement information. The conference reportalso encouraged the Administration to transmit to Congress, not later than nine months, anylegislation necessary to decrease the flow of drugs to or from Cuba. House agreed (357-66) to theconference December 19; Senate agreed (unanimous consent) December 20. Signed into lawJanuary 10, 2002. P.L. 107-228 ( H.R. 1646 ). Foreign Relations Authorization Act, FY2002 andFY2003. Conference report ( H.Rept. 107-671 ) filed September 23, 2002; Section 121 of theconference report version of the bill authorized $25.923 million for FY2003 for Cuba broadcasting.House agreed to conference report by voice vote September 25, 2002; Senate agreed by unanimousconsent September 26, 2002. Signed into law September 30, 2002. H.Res. 91 (Smith, Christopher). Expressing the sense of the House ofRepresentatives regarding the human rights situation in Cuba. House passed (347-44, 22 present)April 3, 2001. S.Res. 272 (Nelson). Expresses support for the Varela Project. IntroducedMay 20, 2002. Senate Foreign Relations Committee reported May 29, 2002. Senate approved (87-0)June 10, 2002. H.R. 4818 ( H.Rept. 108-792 ). Consolidated Appropriations Act for FY2005. Originally introduced as FY2005 Foreign Operations Appropriations, which the House approved onJuly 13, 2004, and the Senate approved, amended, on September 23, 2004. Conference report, H.Rept. 108-792 , filed November 20, 2004, which incorporated nine regular appropriations bills.The House agreed (344-51) to the conference report on November 20, 2004, as did the Senate(65-30). The House is scheduled to complete action on a measure correcting the enrollment of H.R.4818 before it is sent to the President. Division A, covering agriculture appropriations, dropped the Cuba provision that had beenincluded in the Senate committee version of S. 2803 (Section 776) that would haveeased restrictions on travel to Cuba if it was related to the commercial sale of agricultural andmedical products. Division B, covering Commerce, Justice and State appropriations, dropped the Cubaprovision in the House-passed version of H.R. 4754 (Section 801) that would haveprohibited funds from being used to implement recent restrictions on gift parcels and on baggage fortravelers. The omnibus measure also earmarks $27.629 million for broadcasting to Cuba, the fullamount requested by the Administration. Division D, covering Foreign Operations appropriations, drops contrasting House- andSenate-approved provisions from the original versions of H.R. 4818 related toassistance for cooperation with Cuba on counter-narcotics matters. The Senate version would haveprovided $5 million in International Narcotics Control and Law Enforcement assistance for suchefforts, while the House version would have prohibited such assistance. The measure omnibus alsoearmarks $9 million in Economic Support Funds, as requested by the Administration, for Cubaprojects to promote democratization, respect for human rights, and the development of a free marketeconomy. Division H, covering Transportation/Treasury appropriations, drops all House and Senateprovisions that would have eased Cuba sanctions. These consisted of three House provisions in H.R. 5025 that would have eased Cuba sanctions on family and educational travel andon private commercial sales of agricultural and medical products; and one Senate provision in thecommittee version S. 2806 that would have prohibited funds from administering orenforcing restrictions on Cuba travel. P.L. 108-199 ( H.R. 2673 ). Consolidated Appropriations Act for FY2004. Originally introduced as the FY2004 agriculture appropriations measure, which the House passedJuly 14, 2003, and the Senate passed November 6, 2003. On November 25, 2003, a conferencereport was filed, H.Rept. 108-401 , which incorporated seven regular appropriations acts for the year. Conference report agreed to (242-176) in House November 25, 2003; agreed to (65-28) in SenateJanuary 22, 2004. Signed into law January 23, 2004. Division A, covering agriculture appropriations, dropped the Cuba provision that had beenincluded in the Senate-approved version of H.R. 2673 (Section 760) that would haveallowed travel to Cuba under a general license (without applying to the Treasury Department) fortravel related to commercial sales of agricultural and medical goods. Division B, covering Commerce, Justice, and State appropriations, funds Radio and TVbroadcasting to Cuba under the International Broadcasting Operations Account, but without aspecific earmark. The conferees state that they expect the Broadcasting Board of Governors toprovide $1.2 million to pursue alternative means of transmission, including Internet transmission,of Cuba broadcasting. The Administration requested $26.901 million for Cuba broadcasting, with$16.355 million for Radio Marti and $10.546 million for TV Marti. Also see H.R. 2799 / S. 1585 below. Division D, covering foreign operations appropriations, did not include assistance forcounter-narcotics cooperation with Cuba that had been in the Senate-approved version of H.R. 2800 (Section 680), nor did it include the provision in the House version of bill(Section 571) that would have prohibited such assistance. Division D also would fund democracyprograms for Cuba. While the conferees did not earmark assistance for Cuba democracy programsin the bill, the conference report recommended full funding of the Administration's $7 million inEconomic Support Funds for democracy programs supported by USAID. The House-passed versionof H.R. 2800 had no earmark (although the House report, H.Rept. 108-122 , recommendedfull funding of the Administration's $7 million request), while the Senate-passed version of H.R.2800 (Section 699G) would have provided not more than $5 billion in TransitionInitiatives funds for democracy-building efforts for Cuba. Also see H.R. 2800/S.1426 below. Division F, covering Transportation-Treasury appropriations, dropped all provisions easingCuba sanctions that had been included in the House- and Senate-approved versions of H.R. 2989 . Both the House and Senate versions of H.R. 2989 had a nearlyidentical provision (Section 745 in the House version and Section 643 in the Senate verison) thatwould have prevented funds from being used to administer or enforce restrictions on travel ortravel-related transactions. In addition, the House version of H.R. 2989 had provisions thatwould have prevented funds from being used to administer or enforce restrictions on remittances(Section 746) and from being used to eliminate the travel category of people-to-people educationalexchanges (Section 749). Also see H.R. 2989/S. 1589 below. P.L. 108-7 ( H.J.Res. 2 ). Consolidated Appropriations Resolution, 2003.President signed into law February 20, 2003. While the measure does not earmark funding for humanrights and democracy projects for Cuba, it does fund FY2003 Foreign Operations appropriations; theAdministration's FY2003 foreign aid request had included $6 million for such projects ($5.750 wasultimately allocated by the Administration). Also see "Cuba Broadcasting" below for the law'sprovisions regarding Radio and TV Marti. H.Con.Res. 16 (Andrews). To call for the immediate release of all politicalprisoners in Cuba, including Dr. Oscar Elias Biscet. Introduced January 28, 2003; referred toCommittee on International Relations. H.Con.Res. 125 (Deutsch). Expressing the sense of Congress regarding thearrests of Cuban democracy activists by the Cuban government. Introduced March 27, 2003;referred to Committee on International Relations. H.R. 1201 (Ros-Lehtinen). Cuban Victims of Torture Act. To posthumouslyrevoke the naturalization of Eriberto Mederos. Introduced March 11, 2003; referred to Committeeon the Judiciary. H.R. 1950 (Hyde). Foreign Relations Authorization Act, FY2004 andFY2005. Introduced May 5, 2003. Reported by Committee on International Relations May 16, 2003( H.Rept. 108-105 ). House (382-42) passed July 16, 2003. As approved, Section 1807 wouldauthorize $15 million for each of FY2004 and FY2005 to support democracy-building efforts forCuba. (For additional provisions, see "Cuba Broadcasting" below.) H.R. 2800 (Kolbe)/ S. 1426 (McConnell). FY2004 ForeignOperations Appropriations. H.R. 2800 introduced and reported by House Committee onAppropriations July 21, 2003 ( H.Rept. 108-222 ). House passed (370-50) July 24, 2003. S.1426 introduced and reported by Senate Committee on Appropriations July 17, 2003( S.Rept. 108-106 ). Senate passed H.R. 2800 October 30, 2003, by voice vote. The billfunds the Administration's request for human rights and democracy projects for Cuba. The Houseversion does not earmark funding for such projects, although the House Appropriations Committeereport to the bill notes that the committee fully supports the Administration's $7 million request inEconomic Support Funds. The Senate-passed version, in Section 699G, provides not more than $5million in Transition Initiatives funding to support democracy-building efforts for Cuba. (Also see"Anti-Drug Cooperation" below for additional provisions.) For further action, see P.L. 108-199 (H.R. 2673), Consolidated Appropriations Sct for FY2004, above. H.R. 4818 (Kolbe)/ S. 2812 (McConnell). FY2005 ForeignOperations Appropriations. H.R. 4818 introduced and reported ( H.Rept. 108-599 ) bythe House Appropriations Committee July 13, 2004. House approved (365-41), amended, July 15,2004. S. 2812 reported ( S.Rept. 108-346 ) by the Senate Appropriations CommitteeSeptember 15, 2004. Senate approved H.R. 4818, amended, by voice vote on September23, 2004. Neither version specifically earmarks the Administration's $9 million request for projectsto promote democratization, respect for human rights, and the development of a free marketeconomy, but the House Appropriations Committee report to the bill notes that the committee fullysupports the Administration's budget request. does not specifically earmark the Administration'srequest. (Also see "Anti-Drug Cooperation" below for additional provisions of the bill.) For finalaction, see "FY2005 Consolidated Appropriations Act" above. H.Res. 164 (Flake). Expressing the sense of the House regarding the humanrights situation in Cuba, and for other purposes. Introduced March 26, 2003; referred to theCommittee on International Relations Committee. H.Res. 179 (Diaz-Balart, Lincoln). Expresses the sense of the Houseregarding the systematic human rights violations in Cuba committed by the Castro regime, calls forthe immediate release of all political prisoners, and supports respect for basic human rights and freeelections in Cuba. Introduced April 7, 2003. House passed (414-0, 11 present) April 8, 2003. H.Res. 208 (Foley). Condemns the Cuban government's brutal crackdown;calls on the UNCHR to recognize the resolution passed by the House condemning Cuba for itshuman rights atrocities and condemns the member states of the United Nations Economic and SocialCouncil for renewing Cuba's membership on the UNCHR. Introduced April 30, 2003; referred toHouse Committee on International Relations. H.Res. 563 (Ros-Lehtinen). Expressing the sense of the House regarding theone-year anniversary of the human rights crackdown in Cuba. Introduced March 16, 2004; referredto the Committee on International Relations. S. 1089 (Ensign). Cuba Transition Act of 2003. To encourage multilateralcooperation and authorize a program of assistance to facilitate a peaceful transition in Cuba. Requires the Secretary of State to designate a coordinator, with the rank of ambassador, for Cuba'stransition. Authorizes the Secretary of State to designate up to $5 million of monies provided to theOrganization of American States for human rights activities, election support, and scholarships forCuban students. Authorizes $15 million in foreign operations funding to support democracy-buildingefforts for Cuba. Authorizes $30 million for the President to establish a fund to provide assistanceto a transition government in Cuba. Introduced May 20, 2003; referred to Committee on ForeignRelations. S.Res. 62 (Ensign). Calling upon the OAS Inter-American Commission onHuman Rights, the U.N. High Commissioner for Human Rights, the European Union, and humanrights activists throughout the world to take certain actions in regard to the human rights situationin Cuba. Introduced February 24, 2003; referred to Committee on Foreign Relations. Senate agreedto by unanimous consent on June 27, 2003. S.Res. 97 (Nelson). Expresses the sense of the Senate regarding the arrestsof Cuban democracy activists by the Cuban government. Introduced March 25, 2003; SenateCommittee on Foreign Relations discharged by unanimous consent. Senate amended and agreed tothe resolution April 7, 2003, by unanimous consent. S.Res. 146 (Reid). Expressing the sense of the Senate regarding theestablishment of an international tribunal to prosecute crimes against humanity committed by FidelCastro and other Cuban political leaders. Introduced May 20, 2003; referred to Committee onForeign Relations. S.Res. 328 (Nelson). Expresses the sense of the Senate regarding thecontinued human rights violations committed by Fidel Castro and the Cuban government, calls onCuba to immediately release individuals imprisoned for political purposes, and calls upon the 60thsession of the U.N. Commission on Human Rights to condemn Cuba for its human rights abuses anddemand that inspectors from the International Committee of the Red Cross be allowed to visit andinspect Cuban prisons. Introduced April 1, 2004; Senate passed, amended, April 8, 2004, byunanimous consent. H.R. 187 (Serrano). To amend the Trade Sanctions Reform and ExportEnhancement Act of 2000 to allow for the financing of agricultural sales to Cuba. Introduced January7, 2003; referred to Committee on Financial Services and in addition to the Committees onInternational Relations and Agriculture. H.R. 188 (Serrano). Cuba Reconciliation Act. To lift the trade embargo onCuba, and for other purposes. Introduced January 7, 2003; referred to Committee on InternationalRelations and to Committees on Ways and Means, Energy and Commerce, the Judiciary, FinancialServices, Government Reform, and Agriculture. H.R. 1698 (Paul). To lift the trade embargo on Cuba, and for other purposes.Introduced April 9, 2003; referred to Committee on International Relations, and in addition to theCommittees on Ways and Means, Energy and Commerce, the Judiciary, Financial Services,Government Reform, and Agriculture. H.R. 2071 (Flake). Export Freedom to Cuba Act of 2003. To allow travelbetween the United States and Cuba. Introduced May 13, 2003; referred to the Committee onInternational Relations. H.R. 2494 (Rangel)/ S. 2002 (Baucus). United States-CubaTrademark Protection Act of 2003. To improve and promote international intellectual propertyobligations relating to the Republic of Cuba, and for other purposes. Section 3 (d) would repeal aprovision in the FY1999 omnibus appropriations measure (Section 211 of Division A, title II, P.L.105-277 ) that prohibits transactions or payments with respect to trademark registrations and renewalsfrom foreign nationals that were used in connection with a business or assets in Cuba that wereconfiscated. H.R. 2494 introduced June 17, 2003; referred to the Committee onInternational Relations and to the Committee on the Judiciary. S. 2002 introducedDecember 9, 2003; referred to Committee on the Judiciary. H.R. 2989 (Istook)/ S. 1589 (Shelby). Transportation, Treasury,and Independent Agencies Appropriations Act, FY2004. H.R. 2989 reported by HouseCommittee on Appropriations July 30, 2003 ( H.Rept. 108-243 ). House approved September 9, 2003(381-39) after approving three Cuba sanctions amendments: H.Amdt. 375 (Flake)(227-188) would prevent funds from enforcing travel restrictions(Section 745); H.Amdt. 377 (Delahunt) (222-196) would prevent funds from enforcing restrictions on remittances (Section746); and H.Amdt. 382 (Davis) (246-173) would prohibit funds from being used toeliminate the travel category of people-to-people educational exchanges (Section 749). S.1589, reported September 8, 2003 ( S.Rept. 108-146 ), had no such Cuba provisions, but duringSenate floor consideration of H.R. 2989 on October 23, 2003, the Senate approved byvoice vote S.Amdt. 1900 (Dorgan), nearly identical to the Flake amendment notedabove, that would prevent funds from being used to administer or enforce restrictions on travel ortravel-related transactions (Section 643). The only difference between the Flake and Dorganamendments is that the Dorgan amendment, as amended by S.Amdt. 1901 (Craig),provides that the section will take effect one day after enactment of the bill. A motion to table theDorgan amendment was defeated by a vote of 59-36. Senate approved H.R. 2989 October23, 2003 (91-3). For further action, see P.L. 108-199 (H.R. 2673), ConsolidatedAppropriations Act for FY2004, above. H.R. 3422 (Serrano). To provide the people of Cuba with access to food,medicines and other humanitarian goods and from the United States, to ease restrictions on travelto Cuba, to provide scholarships for certain Cuban nationals, to repeal the prohibition on transactionsor payments with respect to certain U.S. intellectual property, to provide for expedited securitychecks for certain visiting Cubans, and to remove restrictions in order to allow Cuban nationals tocome to the United States to play organized professional sports. Introduced October 30, 2003;referred to Committee on International Relations, and in addition to the Committees on Agriculture,Financial Services, Government Reform, the Judiciary, and Ways and Means. H.R. 3470 (Rothman). To amend the Cuban Liberty and DemocraticSolidarity (LIBERTAD) Act of 1996 to require that, in order to determine that a democraticallyelected government in Cuba exists, the government extradite to the United States convicted felonJoanne Chesimard and all other individuals who are living in Cuba in order to escape prosecutionor confinement from criminal offenses committed in the United States. Introduced November 6,2003; referred to Committee on International Relations. H.R. 3670 (Deutsch). Anti-Communist Cooperation Act of 2003. To amendthe Internal Revenue Code to impose a 100% tax on amounts received from trading with Cuba if thetrading is conditioned on lobbying Congress to lift trade or travel restrictions. Introduced December8, 2003; referred to Committee on Ways and Means. H.R. 4225 (Smith of Texas)/ S. 2373 (Domenici). To modifythe prohibition on recognition by United States courts of certain rights relating to certain marks, tradenames, or commercial names. H.R. 4225 introduced April 28, 2004; referred to HouseCommittee on the Judiciary. S. 2373 introduced April 29, 2004; referred to SenateCommittee on the Judiciary. H.R. 4678 (Davis). To bar certain additional restrictions on travel andremittances related to per-diem allowances, family visits, remittances, and accompanied baggage. Introduced June 24, 2004; referred to House Committee on International Relations. H.R. 4754 (Wolf)/ S. 2809 (Gregg). Commerce, Justice, andState, the Judiciary, and Related Agencies Appropriations Act, FY2005. House Committee onAppropriations reported H.R. 4754 ( H.Rept. 108-576 ) July 1, 2004. House approved(398-18) July 8, 2004. As approved, the bill included a provision (Section 801) prohibiting fundsfrom being used to implement, administer, or enforce recent amendments to Cuba embargoregulations that tightened restrictions on gift parcels and baggage taken by individuals for travel toCuba. The provision was added to the bill on July 7, 2004, when the House approved, by vote of221-194, a Flake amendment ( H.Amdt. 647 ). S. 2809 reported ( S.Rept.108-340 ) September 14, 2004. The Senate version of the bill has no such provision on gift parcelsand baggage. (Also see the bill's additional provisions on "Cuba Broadcasting" below.) For finalaction, see "FY2005 Consolidated Appropriations Act" above. H.R. 4766 (Bonilla)/ S. 2803 (Bennett). AgricultureAppropriations, FY2005. H.R. 4766 reported ( H.Rept. 108-584 ) by the HouseAppropriations Committee July 7, 2004. House passed July 13, 2004. S. 2803 reported( S.Rept. 108-340 ) September 14, 2004. As reported, S. 2803 has a provision (Section 776)directing the Secretary of the Treasury to promulgate regulations allowing for travel to Cuba undera "general license" when it is related to the commercial sale of agricultural and medical products. H.R. 4766 has no such provision. In its statement of policy on the bill, the Administrationstated that the President would veto the measure if it contained a provision weakening Cubasanctions. For final action, see "FY2005 Consolidated Appropriations Act" above. H.R. 5025 (Istook)/ S. 2806 (Shelby). Transportation, Treasury,and Independent Agencies Appropriations Act, FY2005. H.R. 5025 reported ( H.Rept.108-671 ) by House Appropriations Committee September 8, 2004. House approved (397-12)September 22, 2004. S. 2806 reported ( S.Rept. 108-342 ) by Senate AppropriationsCommittee September 15, 2004. Both House and Senate versions have different provisions thatwould ease Cuba sanctions. The Administration indicated that the President would veto the measureif it weakened Cuba sanctions. As approved by the House, H.R. 5025 has three provisions easing Cubasanctions. During floor consideration on September 21, 2004, the House approved a Davis (ofFlorida) amendment ( H.Amdt. 769 ) by a vote of 225-174, which provides that no fundsmay be used to administer, implement, or enforce the Bush Administration's June 2004 tighteningof restrictions on visiting relatives in Cuba; this became Section 647. On September 22, 2004, theHouse approved by voice vote: a Lee amendment ( H.Amdt. 771 ) that prohibits fundsfrom being used to implement, administer, or enforce the Bush Administration's June 2004tightening of restrictions on travel for educational activities -- this became Section 648; and a Watersamendment ( H.Amdt. 770 ) that prohibits funds from being used to implement anysanction imposed on private commercial sales of agricultural commodities or medicine or medicalsupplies to Cuba -- this became Section 649. The House also rejected a Rangel amendment( H.Amdt. 772 ) on September 22, 2004, by a vote of 225-188 that would have morebroadly prohibited funds from being used to implement, administer, or enforce the economicembargo of Cuba. S. 2806 , as reported out of committee has a provision (Section 222) that wouldprohibit funds from administering or enforcing restrictions on travel or travel-related transactions. For final action, see "FY2005 Consolidated Appropriations Act" above. S. 403 (Baucus). United States-Cuba Trade Act of 2003. To lift the tradeembargo on Cuba, and for other purposes. Introduced February 13, 2003; referred to the Committeeon Finance. S. 950 (Enzi). Freedom to Travel to Cuba Act of 2003. To allow travelbetween the United States and Cuba. Introduced April 30, 2003; referred to the Committee onForeign Relations. Senate Foreign Relations ordered reported November 11, 2003. S. 2449 (Baucus)/ H.R. 4457 (Otter). Cuba Sanctions ReformAct of 2004. To require congressional renewal of trade and travel restrictions with respect to Cuba. S. 2449 introduced May 19, 2004; referred to Senate Committee on Finance. H.R.4457 introduced May 20, 2004; referred to House Committee on International Relationsand to Committees on Rules, Ways and Means, Energy and Commerce, Financial Services, andAgriculture. P.L. 108-7 ( H.J.Res. 2 ). Consolidated Appropriations Resolution, 2003.President signed into law February 20, 2003. The final version provides $24.996 million for Radioand TV Marti broadcasting to Cuba (Division B, Commerce, Justice, and State appropriations). Alsosee "Human Rights" above regarding the law's funding of human rights and democracy projects. H.R. 1950 (Hyde). Foreign Relations Authorization Act, FY2004 andFY2005. Introduced May 5, 2003. Reported by Committee on International Relations May 16, 2003( H.Rept. 108-105 ). House passed (382-42) July 16, 2003. As approved, Section 121 would authorize$26.901 million for Cuba broadcasting for FY2004 and $27.439 million for FY2005. Section 502bill would amend the Radio Broadcasting to Cuba Act to use additional AM frequencies and the FMand Shortwave bands to improve Radio Marti signal delivery to Cuba. Section 503 of the bill wouldrequire a report on efforts to counter jamming of Radio and TV Marti broadcasts. (For additionalprovisions, see "Human Rights and Democracy" above.) H.R. 2799 (Wolf)/ S. 1585 (Judd). Commerce, Justice, andState, the Judiciary, and Related Agencies Appropriations Act, FY2004. Introduced and reported bythe House Appropriations Committee ( H.Rept. 108-221 ). House passed (400-21) July 23, 2003. TheHouse-passed bill would fund the Administration's request for Cuba broadcasting under theInternational Broadcasting Operations Account, but without a specific earmark. The HouseAppropriations Committee report to the bill recommends full funding of the Administration's Cubabroadcasting request, $26.901 million. S. 1585 reported by the Senate Committee onAppropriations September 5, 2003 ( S.Rept. 108-144 ). The Senate version would provide $28.201million for Cuba broadcasting, $1.2 million more than the Administration's request. According tothe committee report, the additional funding is to be used to enhance efforts to defeat Cubangovernment jamming. For further action, see P.L. 108-199 (H.R. 2673), ConsolidatedAppropriations Act for FY2004, above. H.R. 4754 (Wolf)/ S. 2809 (Gregg). Commerce, Justice, and State,the Judiciary, and Related Agencies Appropriations Act, FY2005. House Committee onAppropriations reported ( H.Rept. 108-576 ) July 1, 2004. House approved (398-18) July 8, 2004. As approved, the bill would fund the Administration's request for Cuba broadcasting under theInternational Broadcasting Operations account, but without a specific earmark. The report to the billrecommends full funding of the Administration's $27.6 million request. S. 2809 reported by the Senate Appropriations Committee ( S.Rept. 108-344 ) September 14, 2004. Asreported, the bill would fully fund the Administration's request with a specific earmark of $27.6million under the International Broadcasting Operations account. (See the bill's additional provisionsmodifying U.S. sanctions above.) For final action, see "FY2005 Consolidated Appropriations Act"above. S. 925 (Lugar). Foreign Relations Authorization Act, FY2004 and FY2005. Section 111 would authorize appropriations for radio and television broadcasting to Cuba within theInternational Broadcasting Operations account but without a specific earmark. Introduced andreported by Committee on Foreign Relations April 24, 2003 ( S.Rept. 108-39 ). For further action, see S. 2144 . S. 2144 (Lugar). Foreign Affairs Authorization Act, Fiscal Year 2005.Section 111 would authorize funding for Cuba broadcasting, but without a specific earmark, underthe International Broadcasting Operations account. Introduced February 27, 2004; Senate ForeignRelations Committee reported March 18, 2004 ( S.Rept. 108-248 ). H.R. 1432 (Rangel). To authorize the Secretary of State to enter intonegotiations with representatives of the Cuban government to establish cooperation between theUnited States and Cuba on illicit narcotics control efforts. Introduced March 25, 2003; referred tothe Committee on International Relations. H.R. 2800 (Kolbe)/ S. 1426 (McConnell). FY2004 ForeignOperations Appropriations. H.R. 2800 introduced and reported by House Committee onAppropriations July 21, 2003 ( H.Rept. 108-222 ). House passed (370-50) July 24, 2003. The Houseversion would, in Section 571, provide that no International Narcotics Control and Law EnforcementFunds be made available for assistance to Cuba. S. 1426 introduced and reported bySenate Committee on Appropriations July 17, 2003 ( S.Rept. 108-106 ). Senate approved H.R.2800, amended, October 30, 2003 by voice vote. The Senate version would provide $5million in International Narcotics Control and Law Enforcement assistance for preliminary work toestablish cooperation with Cuba on counter-narcotics matters. The money would not be availableif Cuba does not have in place appropriate procedures to protect against the loss of life in connectionwith the interdiction of illegal drugs or if there is evidence that the Cuban government is involvedin drug trafficking. For further action, see P.L. 108-199 (H.R. 2673), ConsolidatedAppropriations Act for FY2004, above. H.R. 4818 (Kolbe)/S. 2812 (McConnell). FY2005 ForeignOperations Appropriations. Introduced and reported ( H.Rept. 108-599 ) by the House AppropriationsCommittee July 13, 2004. House approved (365-41), amended, July 15, 2004. S. 2812 reported ( S.Rept. 108-346 ) by the Senate Appropriations Committee September 15, 2004. Senateapproved H.R. 4818 , amended, by voice vote on September 23, 2004. The Houseversion (Section 572) prohibits International Narcotics Control Law Enforcement assistance for thegovernment of Cuba. The Senate version has a provision (Sec. 5091) providing $5 million toestablish cooperation with appropriate agencies of the Cuban government on counter-narcoticsmatters. (Also see "Human Rights and Democracy" above for additional provisions of the bill.) For final action, see "FY2005 Consolidated Appropriations Act" above. H.R. 189 (Serrano). Baseball Diplomacy Act. Waives certain prohibitionswith respect to nationals of Cuba coming to the United States to play organized professionalbaseball. Introduced January 7, 2003; referred to the Committee on International Relations and tothe Committee on the Judiciary. H.R. 3422 (Serrano). Among the bill's provisions, the measure would providefor expedited security checks for certain visiting Cubans and remove restrictions in order to allowCuban nationals to come to the United States to play organized professional sports. IntroducedOctober 30, 2003; referred to Committee on International Relations, and in addition to theCommittees on Agriculture, Financial Services, Government Reform, the Judiciary, and Ways andMeans. (Also see "Modification of Sanctions" above for the bill's additional provisions.) CRS Report RL32308 , Appropriations for FY2005: Transportation, Treasury, Postal Service,Executive Office of the President, General Government, and Related Agencies, coordinatedby [author name scrubbed] and [author name scrubbed]. CRS Report RL31808 , Appropriations for FY2004: Transportation, Treasury, Post Office,Executive Office of the President, General Government, and Related Agencies, coordinatedby [author name scrubbed] and [author name scrubbed]. CRS Report RS20450(pdf) , The Case of Elian Gonzalez: Legal Basics, by [author name scrubbed]. CRS Report RL32251 , Cuba and the State Sponsors of Terrorism List , by Mark P. Sullivan. CRS Report RL30837, Cuba: An Economic Primer, by [author name scrubbed]. CRS Report RL30806 , Cuba: Issues for the 107th Congress, by [author name scrubbed] and MaureenTaft-Morales. CRS Report RL30628 , Cuba: Issues and Legislation in the 106th Congress , by [author name scrubbed] and[author name scrubbed]. CRS Report RL31139 , Cuba: U.S. Restrictions on Travel and Remittances, by [author name scrubbed]. CRS Report RL30386(pdf) , Cuba-U.S. Relations: Chronology of Key Events 1959 -1999, by Mark P.Sullivan. CRS Report RS20468 , Cuban Migration Policy and Issues, by [author name scrubbed]. CRS Issue Brief IB10061, Exempting Food and Agriculture Products from U.S. EconomicSanctions: Status and Implementation, by [author name scrubbed]. CRS Report 94-636(pdf) , Radio and Television Broadcasting to Cuba: Background and Issues Through1994, by [author name scrubbed] and [author name scrubbed]. CRS Report RS21764 , Restricting Trademark Rights of Cubans: WTO Decision and CongressionalResponse , by [author name scrubbed]. CRS Report RL31258 , Suits Against Terrorist States by Victims of Terrorism , by David M.Ackerman. CRS Report RS21003, Travel Restrictions: U.S. Government Limits on American Citizens' TravelAbroad , by [author name scrubbed] and [author name scrubbed]. Figure 1. Map of Cuba
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Cuba under Fidel Castro remains a hard-line communist state with a poor record on humanrights that has deteriorated significantly since 2003. With the cutoff of assistance from the formerSoviet Union, Cuba experienced severe economic deterioration from 1989 to 1993. While there hasbeen some improvement since 1994, as Cuba has implemented limited reforms, the economyremains in poor shape. Since the early 1960s, U.S. policy toward Cuba has consisted largely of isolating the islandnation through comprehensive economic sanctions. Another component of U.S. policy consists ofsupport measures for the Cuban people, including private humanitarian donations andU.S.-sponsored radio and television broadcasting to Cuba. The Bush Administration has furthertightened restrictions on travel for family visits, other categories of travel, and on sending privatehumanitarian assistance to Cuba. While there appears to be broad agreement on the overall objectiveof U.S. policy toward Cuba -- to help bring democracy and respect for human rights to the island,there are several schools of thought on how to achieve that objective. Some advocate maximumpressure on the Cuban government until reforms are enacted; others argue for lifting some U.S.sanctions that they believe are hurting the Cuban people. Still others call for a swift normalizationof U.S.-Cuban relations. Several FY2005 appropriations bills had provisions that would have eased Cuba sanctions,but ultimately these provisions were not included in the FY2005 omnibus appropriations measure( H.R. 4818 , H.Rept. 108-792 ). The House-passed version of the FY2005 Commerce,Justice, and State appropriations bill, H.R. 4754 , would have prohibited funds toimplement recent restrictions on gift parcels and on baggage for travelers. The House-passed versionof the FY2005 Transportation/Treasury appropriations bill, H.R. 5025 , had three Cubaprovisions that would have eased sanctions on family and educational travel, and on privatecommercial sales of agricultural and medical products; the Senate committee version of the bill, S. 2806 , would have prohibited funds from administering or enforcing restrictions onCuba travel. The Senate committee version of the FY2005 Agriculture appropriation bill, S. 2803 , would have eased restrictions on travel to Cuba if it was related to thecommercial sale of agricultural and medical products. The Administration had threatened to vetoboth the Transportation/Treasury and Agriculture appropriations measures if they had provisionsweakening Cuba sanctions. In other action, the 108th Congress demonstrated concern about the poor human rightssituation by approving four resolutions: S.Res. 97 , H.Res. 179 , S.Res. 62 , and S.Res. 328 . Numerous additional legislative initiatives wereintroduced that would have eased sanctions on Cuba, but no action was completed on these bills: H.R. 187 , H.R. 188 , H.R. 1698 , H.R. 2071 , H.R. 3422 , H.R. 4678 , S. 403 , S. 950 , and S. 2449 / H.R. 4457 . Two initiatives, H.R. 3470 and H.R. 3670 , would have tightened sanctions. H.R. 2494 / S. 2002 would have repealed a provision in law that prohibits trademark registration or courts fromconsidering trademark claims if the trademark was used in connection with confiscated assets inCuba; in contrast, H.R. 4225 / S. 2373 would have applied a narrow fix tothe law so that it conformed with a World Trade Organization ruling.
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A streetcar is a type of light rail public transportation that operates mostly in mixed traffic on rail lines embedded in streets and highways. Streetcar service is typically provided by single cars with electric power delivered by overhead wires known as catenaries, although streetcars can also draw power from underground cables or from batteries. Compared with non-streetcar light rail, streetcar lines tend to be shorter and the stops more frequent. Because of the short distance between stops and the overall operating environment, streetcars are slow compared with non-streetcar light rail and other types of rail public transportation, such as commuter rail and heavy rail. Streetcar systems can be categorized into four different types: 1. legacy systems, lines that have been in operation for many years, but are the remnants of more extensive past systems (e.g., New Orleans); 2. heritage systems, new or revived systems using historical equipment (e.g., Memphis); 3. replica systems, new or revived systems using equipment built to replicate historical systems, but sometimes with modern amenities such as air conditioning (e.g., Tampa); 4. modern systems, new systems using modern equipment (e.g., Portland, OR). In early 2014, there were 12 operating streetcar systems, 7 new systems under construction, and approximately 21 new systems in the planning stages ( Figure 1 ). Not included in these figures are several short streetcar lines associated with museums (e.g., Issaquah, WA) or primarily oriented to tourists (e.g., San Pedro, CA). Additionally, a few systems already in operation have extensions in construction or being planned. Because they are often controversial, streetcar systems that are being planned may not be built. The streetcars systems with the largest ridership include those in Philadelphia; New Orleans; San Francisco; Portland, OR; Tacoma; Memphis; and Seattle. Streetcars are intended to provide high-quality transit service for traveling short distances in urban environments. As part of this service, streetcars can link to other transportation modes as part of the "last mile" of a trip, as in Salt Lake City, where a new streetcar line links to light rail and bus lines. Streetcars are often promoted as a means of increasing transit ridership by offering a better quality of service than buses, including such things as frequency of service, predictability of trip time, passenger capacity, and comfort. Additionally, streetcars can more easily accommodate wheelchairs and bicycles. Service quality, however, is not better in all cases: streetcars can be delayed by problems that would not affect buses, such as fallen catenaries or vehicles double-parked on the tracks. Greater capacity in modern streetcars may in part come at the expense of seating. Overall, there is no clear evidence as to whether streetcars attract new riders to transit. In some circumstances, streetcars can help attract and focus development by providing a more permanent transportation investment than buses and by promoting a walkable environment. For example, the greater permanence of a streetcar may improve the coherence of the urban environment, and may reduce the risk for developers of offices, residences, and retail, spurring job creation. The proximity of a streetcar may also reduce some costs that would otherwise confront private developers, such as the need for a large numbers of parking spaces. According to one study, the area within a quarter-mile of the Little Rock streetcar system, opened in 2004, has had a capital investment of $800 million in new businesses, residences, and other activities between 2000 and 2012. In addition, during construction, streetcars tend to be less disruptive of existing activities than other forms of rail systems. However, it is possible that development spurred by streetcar lines is merely shifted from other parts of the urban area. This is a concern in analyzing the effects of rail transit in general, but there is little empirical research on this question for streetcars specifically. In addition to the expense of the streetcar itself, development along streetcar lines has sometimes benefited from other subsidies. Not all streetcar lines have succeeded in stimulating property development. The city planning literature suggests that if a streetcar is to spur development, the host locality needs to at least provide supportive land use laws, such as permitting higher-density, mixed-use developments along a corridor. One study found that government support in the form of such things as incentives, zoning changes, and marketing is the leading factor determining whether or not development occurs around investment in public transportation. The same study found that both light rail transit, including streetcars, and bus rapid transit (BRT) led to development, but that BRT leveraged much more private investment per dollar of transit expenditure. Streetcar systems can be much less costly to build than light rail systems, and may be particularly attractive in small and medium-size cities where a larger and more expensive rail system is not appropriate. Capital costs per mile can vary dramatically, however, depending on the specific circumstances of projects, including the need for major new infrastructure. A study of 21 light rail, streetcar, and BRT lines found that streetcars were middling in terms of capital cost per mile. While the 21 projects ranged from below $10 million per mile to over $80 million per mile, the two streetcar projects analyzed, Portland, OR, and Seattle, cost about $30 million per mile and $60 million per mile to build, respectively (in 2010 dollars). Although conventional buses do not provide some of the advantages of BRT and rail transit, including streetcars, regular bus service improvements are likely to be the least costly of all measures to increase transit capacity. Operating costs, including such things as drivers' salaries, fuel, and track and vehicle maintenance, are difficult to compare among modes because of differing service characteristics. A Government Accountability Office (GAO) analysis of operational costs, for example, showed no consistent advantage for BRT or light rail. A comparison of operating costs of streetcar and bus service in seven cities found that costs per trip were higher for streetcars in only two cities. But measured by cost per passenger mile, streetcar operating costs were significantly higher than bus operating costs. There are currently three main sources of funding available for the construction of streetcar systems: (1) the TIGER grant program; (2) the New Starts and Small Starts program; and (3) flexible federal-aid highway program funds, including funding from the Surface Transportation Program and the Congestion Mitigation and Air Quality Improvement (CMAQ) program. The predominant form of federal support for the construction of streetcars over the past few years has been the Transportation Investment Generating Economic Recovery (TIGER) program. This is likely because TIGER provides moderate sums of discretionary funding, streetcars are favored by the Obama Administration as so-called "livability" projects, and, until passage of the Moving Ahead for Progress in the 21 st Century Act (MAP-21; P.L. 112-141 ) in 2012, streetcar projects did not score well in the evaluation of projects funded by the New Starts and Small Starts program. Initially enacted as part of the American Recovery and Reinvestment Act (ARRA; P.L. 111-5 ), the TIGER program has been funded in five subsequent appropriations bills. TIGER funding was $1.5 billion in FY2009, $600 million in FY2010, $527 million in FY2011, $500 million in FY2012, $474 million in FY2013, and $600 million in FY2014. Funds are drawn from the general fund of the U.S. Treasury. Nine streetcar projects have been awarded a total of $279 million from the TIGER program (see Table 1 ). To date, FY2014 funding has not been awarded. According to a notice of funding availability, applications for FY2014 funding must be submitted by April 28, 2014. The New Starts and Small Starts program provides federal funds to public transportation agencies on a largely competitive basis for the construction of new fixed guideway transit systems and the expansion of existing systems (49 U.S.C. §5309). The New Starts and Small Starts program is one of six major funding programs administered by FTA, accounting for about 18% of FTA's budget. Unlike the other major federal transit programs, which are funded from the mass transit account of the highway trust fund, funding for the New Starts and Small Starts program comes from the general fund of the U.S. Treasury. MAP-21 authorized $1.9 billion for FY2013 and FY2014. Funding appropriated for the program was $1.855 billion in FY2013 and $1.943 billion in FY2014. In addition, the FY2014 appropriations act provided $93 million in unobligated funds from the former discretionary bus and bus facilities program for bus rapid transit projects, and an unspecified amount of unobligated funds from the former alternatives analysis program for any type of New Start and Small Start project. Streetcar projects typically fall into the Small Starts category, defined as projects requesting $75 million or less in federal assistance and costing $250 million or less in total. To go with the smaller amount of federal funds being committed, the approval process for Small Starts projects is simpler than for larger and more expensive New Starts projects. Few streetcar projects have received New Starts and Small Starts program funding over the past two decades, but changes in the way projects are evaluated by FTA may make it easier in the future. GAO found that of the 57 projects approved for funding under the New Starts and Small Starts program between October 2004 and June 2012, only one was a streetcar project (Portland, OR). This was likely due to the use of cost of time savings as part of the evaluation of projects prior to MAP-21, as that measure tended to favor projects supporting faster long-distance trips, like those on commuter rail, rather than slower, shorter trips like those on streetcars. As required by MAP-21, the cost of time savings measure has now been dropped in favor of cost per rider. In December 2013, two streetcar projects, those in Tempe, AZ, and Ft. Lauderdale, FL, were in the project development phase of the Small Starts process. In its study, GAO did not include projects receiving less than $25 million in New Starts and Small Starts program funding, which were exempt from the normal New Starts and Small Starts evaluation process. In FY2010, five streetcar projects were awarded $25 million or less. Streetcar projects in Fort Worth, St. Louis, Charlotte, and Cincinnati were awarded $24.99 million each, and Dallas received $4.9 million. These funds distributed by FTA were from $130 million in unallocated New Starts and Small Starts program funds. The Obama Administration decided that it would use them for what it termed "urban circulator" projects, mainly streetcar and bus rapid transit projects. Instead of the New Starts and Small Starts selection criteria, the Urban Circulator grant program evaluated projects based on livability, including providing additional transportation options, sustainability, and economic development. MAP-21 continues to allow certain federal-aid highway funds to be used for public transportation projects at the discretion of state and local officials. Most of the "flexed" funds have come from two programs, the Surface Transportation Program (STP) and the Congestion Mitigation and Air Quality Improvement Program (CMAQ). Several streetcar projects have used or are proposing to use flexed funding. For example, the streetcar project in Tempe, AZ, is proposing to use $32.1 million dollar of CMAQ funding in addition to $56 million from the New Starts and Small Starts program and $41.24 million in local funding. The costs of operating transit service include such functions as vehicle operation and maintenance, maintenance of stations and other facilities, general administration, and purchase of transportation from private operators. In general, federal law prohibits transit operators in urbanized areas of 200,000 or more residents from using federal transit funds for operating expenditures, including annual distributions of federal public transportation funds by formula. Federal support in urbanized areas of this size is limited to capital expenditures. However, the definition of transit capital expenses includes some items traditionally considered to be operating expenses, such as preventive maintenance. In some circumstances, CMAQ funds can be used to support the operating expenses of streetcars. As the Federal Highway Administration (FHWA) notes, "projects designed to attract new riders, typically by providing new transit facilities or services, are eligible for CMAQ funds ... Projects can include both constructing and operating new facilities." Among other things, CMAQ funds may be used to provide fare subsides. However, FHWA also notes that CMAQ funds typically provide short-term help to launch new or expanded service. Relatively recent changes in federal programs, should they be maintained, are likely to lead to greater support for streetcars in the coming years. These changes include the creation of the TIGER program in FY2009 and its continued funding through FY2014, and reforms to the evaluation of projects in the New Starts and Small Starts program that favor streetcars. Increased funding of these programs may lead to even greater federal support for building new streetcar lines, although this would depend on the competition for funds from other types of projects. Another way to increase federal support for streetcar construction would be to direct more existing funding to these types of projects. One way for Congress to accomplish this would be to reinstitute the set-aside of New Starts and Small Starts funding for Small Starts projects, those requesting $75 million or less in federal assistance and costing $250 million or less in total. Prior to MAP-21, $200 million of the program's funding was reserved for Small Starts projects. This again would not guarantee the funding of streetcars because Small Starts grants also go to other types of projects, such as BRT, but it would limit the competition for these funds. Congress might also consider supporting streetcar systems by allowing the use of federal transit funds to pay for operating costs. The federal government generally prohibits the use of federal transit funds for operating expenses in urbanized areas over 200,000. However, small bus operators in these larger urbanized areas were provided support in MAP-21. Operators of small fixed-guideway systems, such as streetcars, might be afforded the same opportunity. Alternatively, Congress might decide to reduce or eliminate the use of federal funds for streetcar construction and operation. This could be accomplished by reducing or eliminating funding for the TIGER program, the New Starts and Small Starts program, and flexible highway programs, or by prohibiting the use of program funds for streetcars. In the case of the New Starts and Small Starts program it might be easier to reinstitute evaluation criteria that are unfavorable to streetcar projects. This might entail requiring the use of time savings or passenger miles, not passenger trips, as a measure of mobility benefits.
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Streetcars, a type of rail public transportation, are experiencing a revival in the United States. Also known as trolleys, streetcars were widespread in the early decades of the 20th century, but almost extinct by the 1960s. Several new streetcar systems have been built over the past 20 years, and many more are being planned. In early 2014, there were 12 operating streetcar systems, 7 new systems under construction, and approximately 21 new systems in the planning stages. Many streetcars systems, though not all, have been built or are being built with the support of federal funds. This report answers some frequently asked questions about streetcars and federal involvement in their construction and operation. It concludes by laying out policy options for Congress in dealing with streetcars.
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The "discharge rule" of the House of Representatives (Rule XV, clause 2) provides a means for the House to bring to the floor for consideration a measure (a bill or resolution) that has not been reported from committee. Normally, each measure introduced in the House is routinely referred to a committee and cannot receive floor consideration until the committee reports. Because House committees are in general not required to report measures, they can normally prevent House action on any referred measure simply by taking no action thereon. This "gatekeeping" function is a key reason for the central position of committees in shaping the congressional agenda. The discharge rule provides one of the few procedures by which the House can circumvent this gatekeeping role. More generally, the discharge rule offers the only means by which a majority of House Members may secure consideration of any measure against the simultaneous opposition of the committee of jurisdiction, the leadership of the majority party, and the Committee on Rules. Other House procedures may permit bringing a measure to the floor over the opposition of some of these entities—but only through the concurrence of others. For example, the motion to suspend the rules and pass a measure can bring to the floor even an unreported measure, because the motion can suspend the rule requiring it to be reported before it can be considered. The Speaker, however, has discretion in recognition for this motion and, for this purpose, normally recognizes the chair of the committee of jurisdiction (or the chair's designee). Similar practices govern recognition for requests to consider a measure by unanimous consent. Finally, the House can adopt a "special rule" directing that a specified unreported measure be "extracted" from committee and taken up on the floor. Special rules, however, are normally privileged for consideration only when reported by the Rules Committee. The discharge procedure is designed to be difficult to accomplish so as to discourage Members from resorting routinely to a procedure that takes control of the floor agenda away from the Rules Committee and other leadership organs that are normally responsible for it. A discharge motion may be offered on the floor only if a majority of the entire membership of the House, 218 Members, first signs a petition in support of the action. (Delegates are not eligible to sign.) A Member may initiate such a petition only after the measure has remained in committee for at least 30 legislative days without being reported. Seldom is a petition filed this soon; Members generally refrain from initiating one until they consider it clear that the committee does not plan to act. The discharge rule explicitly excludes private bills from being subject to discharge. The chair once asserted that a resolution to establish an investigating committee also is immune from discharge. Apparently, discharge may be sought on any other measure pending before committees of the House. A Member obtains the petition form at the Clerk's desk in the House chamber, where pending petitions are also maintained and made available for signature. Members may sign a petition only by going to the Clerk's desk while the House is in session. Members may sign or remove their names until the total of 218 is obtained, at which point the signature list is frozen and printed in the Record , and the motion is "entered" on the Discharge Calendar. Few petitions reach this point. For those that do, the process usually takes some months, although on three occasions the petition garnered the necessary signatures in one day. The motion to discharge may then be offered on the floor, but only at the beginning of a day's session that falls at least seven legislative days after the motion is entered; only on a "discharge day" (the second or fourth Monday of each month); and not during the last six days of a session of Congress. Any Member who signed the petition may offer the motion; normally the one who initiated the petition is recognized. The motion is debatable for 20 minutes, equally divided between supporters and opponents (typically, controlled by the Member calling it up and the chair of the committee to be discharged). If a simple majority of Members present and voting adopt the motion, the committee is discharged, and the House may proceed to consider the measure. Because the measure has not been reported, however, it comes to the floor in the form introduced, with no recommended committee amendments and no written committee report to guide Members or establish legislative history. Once the House acts on a discharge motion on any measure, any further action under the discharge rule is precluded for any measure on the same subject during the same session of Congress (that is, roughly, for that calendar year). At the final sine die adjournment of a Congress, all legislative business terminates, including pending discharge petitions. A discharge motion that never comes to the floor may still serve proponents' purposes, for a committee may sometimes respond to a discharge effort by reporting the measure on its own initiative. This response may become increasingly likely as the petition approaches or obtains the required 218 signatures. Even counting such cases, nevertheless, usually no more than one measure on which discharge is attempted reaches the House floor in a single Congress. Also, some such measures fail to pass the House, and only 30 have ever become law or otherwise received final approval. Within the structure of this general mechanism, the discharge rule incorporates two distinct approaches: The petition may be filed either directly on the unreported measure itself or on a special rule for its consideration. The first approach permits the committee of referral to nullify the discharge attempt by reporting the measure, for once the committee no longer has the measure in its possession, it can no longer be discharged. The committee may even wait until all 218 signatures are obtained and then report the measure before the next discharge day. The motion to discharge then cannot be called up, because it is moot. Although the measure is then procedurally available to be considered, it remains unlikely to reach the floor unless the reporting committee takes action to bring it up. If a measure is referred to more than one committee, all the committees may be discharged simultaneously by a single petition. A measure referred to multiple committees remains eligible for action under the discharge rule until all committees of referral report it (or otherwise lose possession of it). In these circumstances a single committee cannot nullify the discharge attempt by reporting unless it is the last committee holding the measure. If 218 signatures are obtained and the committee does not report the measure, the discharge motion may be called up, and the House may adopt it. Any Member who signed the petition may then move for the House to take up the measure under the appropriate general rules. (If this motion is defeated, the measure may later be taken up by any of the usual means, but these, again, are normally under the control of the leadership.) If a measure reaching the floor by discharge is a "money bill" (including an authorization, appropriation, or revenue bill) House Rules mandate that it initially be considered in the Committee of the Whole; the proper motion is therefore that the House resolve into the Committee of the Whole for its consideration. If the House agrees to this motion, the measure is considered under the equivalent of an "open rule": It is read by section for amendment, and any germane amendment is in order to each section. This form of consideration offers no possibility of limiting or structuring the amendment process or, conversely, of providing any waivers that prospective amendments might need. It also precludes limiting the time for general debate on the measure or placing it under the control of managers except by unanimous consent. If the House agrees to discharge on a measure that is not a "money bill," then the motion in order is that the House consider it. On agreement to this motion, the House considers the measure under the "one-hour rule," which permits the Member calling up the measure to move the previous question after one hour of debate. If the House orders the previous question, it then proceeds to vote on the measure in the form introduced before any Member has any opportunity to offer an amendment. Even if the House defeats the previous question, a Member who led the effort to do so then normally offers an amendment and is recognized for one hour for debate, at the end of which he or she moves the previous question on the amendment and the measure. Under these conditions, too, this first method of discharge provides no way to adapt the terms of consideration and amendment to the circumstances of the specific measure. The second method of discharge was added to House Rules in 1931 as a means of avoiding the difficulties just discussed, and it became more common in the mid-1990s. Under this second approach, a Member must first draft and submit a special rule (which takes the form of a House resolution) providing that a specified measure be considered even if it remains unreported. The special rule may not permit the offering of any non-germane amendment nor provide for consideration of more than one measure. If the Rules Committee has not reported this resolution after seven legislative days, the same (or another) Member may file a petition to discharge that committee from considering it. At that point, the measure the special rule makes in order either must have remained in committee for at least 30 legislative days or must have been reported. If the petition obtains the requisite 218 signatures, the motion in order on a discharge day is to discharge the Rules Committee from the resolution. If that motion is adopted, the House then automatically proceeds to consider the resolution under the one-hour rule, just as with any other special rule. Presumably, the Member who offered the motion to discharge would likely be recognized to control the one-hour debate on the resolution. The Member would normally yield half the hour to an opponent, most likely a representative of the Rules Committee, and would move the previous question on the resolution at the end of the debate. If the House orders the previous question and then agrees to the resolution itself, the terms of the resolution bring the desired measure out of committee and to the floor, just as with an "extraction rule" that the Rules Committee may report in the ordinary course of events. This method permits supporters of a measure to propose whatever terms to regulate the consideration and amendment of the measure they find appropriate to the specific situation, just as the Rules Committee normally does. A special rule for such purposes normally provides that consideration continue on subsequent days, if necessary, until a final vote. Such a provision guards against the possibility that the leadership will recover control of the floor agenda by turning to other business before the House completes action on the desired measure. This second approach to discharge also prevents the committee of jurisdiction from nullifying the discharge effort by reporting the measure and then taking no steps to call it up. If the special rule provides for considering a measure whether or not it has been reported, then even if the committee does report the measure, its action raises no obstacle to discharging the Rules Committee from consideration of the special rule. House Rules also protect against the possibility that the Rules Committee itself might attempt to vitiate a discharge effort by reporting the special rule and then declining to call it up. If the committee reports any special rule and then fails to call it up within seven legislative days, House Rule XIII, clause 6(d), requires the Speaker to recognize any member of the committee for that purpose once he or she has given one day's notice of intent to do so. This requirement protects any discharge effort that can rely on cooperation from at least one member of the Rules Committee. Finally, if the committee reports the special rule adversely, House Rule XIII, clause 6(e), and House Rule XV, clause 3, require the Speaker, on any discharge day, to recognize any Member of the House for the purpose of calling up that special rule. The chief potential difficulty with this second approach is that it requires Members to draft the special rule at the beginning of the process even though, by the time the measure reaches the floor, judgments about appropriate terms for consideration may have changed. Care may be required to formulate terms for consideration that are flexible enough to accommodate unforeseen circumstances, such as permitting amendments to be offered that may remedy problems recognized subsequently or that may attract broader support. When Members seek to discharge the Rules Committee from a special rule for considering an unreported measure, the actual obstacle to action is presumably not the Rules Committee but rather the committee to which the measure is referred. By contrast, if the Rules Committee declines to report a special rule for considering a measure that the committee of jurisdiction has reported, it can itself become the obstacle to consideration. Such action is not common today but was more frequent before the mid-1960s, when the committee often did not work as an organ of the leadership in managing the agenda. The second method of discharge offers recourse in these circumstances as well, for Members may submit, and seek discharge on, a special rule for considering the already reported measure. This approach was used, for example, by supporters of campaign finance legislation in the 107 th Congress. In such cases, the reporting committee might even support the attempt to discharge the Rules Committee. Although the Rules Committee cannot nullify a discharge attempt directed against a special rule by reporting the special rule, in recent years it has often taken another course of action by which it may recover control of the floor agenda. Often after a discharge petition has obtained the required 218 signatures, and sometimes when such a result has seemed imminent, the committee has reported not the special rule on which discharge was being sought but its own special rule for considering the same measure (or, sometimes, for considering an alternative measure on the same subject). The committee has then called up this special rule during the required layover period before the discharge motion can be brought to the floor. The House has then often adopted this resolution, in which case it has then considered the measure under the schedule and terms that the committee (and perhaps the leadership and the committee of jurisdiction) has found appropriate rather than those preferred by the supporters of discharge. These special rules have also provided that no further action take place pursuant to the original discharge petition. As a result of these actions, supporters of the measure in question still succeed in securing House consideration of the subject, yet the leadership retains its normal control over the schedule and terms of action on the floor. For consideration of campaign finance legislation in the 107 th Congress, however, the Rules Committee reported a special rule that was identical in text to the one on which discharge had been sought. Under such conditions, the leadership's recovery of floor control might be viewed as merely nominal. Ultimately, however, this course of action does not leave discharge proponents without recourse. If they dislike the terms for consideration that the Rules Committee proposes, they can attempt to defeat the committee's special rule, thereby retaining the capacity to call up their discharge motion on a subsequent discharge day. On some occasions, the prospect of such action has led to a negotiated agreement on the terms of consideration and discharge of the committee by unanimous consent. U.S. Congress. House Committee on Rules. Subcommittee on Rules of the House. Discharge Petition Disclosure. Hearing on H.Res. 134 . 103 rd Cong., 1 st sess. Washington: GPO, 1993. CRS Report 97-856, The Discharge Rule in the House: Recent Use in Historical Context , by [author name scrubbed]
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The "discharge rule" of the House of Representatives allows a measure to come to the floor for consideration even if the committee of referral does not report it and the leadership does not schedule it. To initiate this action, a majority of House Members must first sign a petition for that purpose. After a petition has garnered 218 signatures, a motion to discharge may then be offered on the floor—but only after at least seven legislative days and only on a second or fourth Monday of a month. The rule allows for two main methods of action: (1) The committee of referral may be discharged from a measure that has been before it for 30 legislative days or more; or (2) the Committee on Rules may be discharged from a special rule for considering such a measure if the rule has been before the committee for at least seven legislative days. If a measure dealing with raising or spending money reaches the floor through the first method of action, it is considered in the Committee of the Whole, as if under an open rule. Other measures reaching the floor through this method of action are considered in the House under the one-hour rule, with the previous question in order. Under the second method of action, if the House takes up a measure under a special rule from which the Committee on Rules has been discharged, it is considered under the terms provided by the special rule. Under either method of action, the layover periods required by the discharge rule permit the Committee on Rules to preempt the discharge attempt, and recover control of the floor agenda, by securing House adoption of an alternative special rule for considering the measure.
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Major developments affecting the domestic photovoltaic (PV) manufacturing sector include technological advances, improved production methods, dramatically lower prices for PV modules, and trade frictions, particularly with China. These volatile industry trends have adversely affected the operations of many solar companies, forcing some to reassess their business models and others to close factories or declare bankruptcy. In addition, the rapid growth in shale gas production has the potential to affect the competitiveness of solar power, as cheap natural gas possibly may provide an alternative source of energy at a lower price. If oil and gas prices stay low, demand for renewable energy, including solar, might be hurt. These trends affect the ability of the United States to build a sustained domestic production base for PV equipment. U.S. solar manufacturing makes up a small part of the U.S. manufacturing base. In 2014, the nation's solar manufacturing industry directly employed about 32,000 workers, according to the Solar Energy Industries Association (SEIA), a trade group. The U.S. cell and module market, measured by domestic shipment revenues, has grown in size from $3.3 billion in 2008 to $7.1 billion in 2012, reports the U.S. Energy Information Administration (EIA). Following an unprecedented period of growth, the number of PV systems in the United States reached more than 445,000 by the end of 2013, more than twice the total at the end of 2011. Government support has been instrumental in sustaining the solar industry worldwide. In the United States, tax incentives and stimulus funding have helped to spur new PV installations. In its 2013 annual report, SEIA wrote that "more solar has been installed in the United States in the last eighteen months than in the 30 years prior." Nevertheless, even with direct government involvement, solar energy merely accounts for 0.5% of overall U.S. electricity generation. The Obama Administration actively supports greater deployment of solar energy and sees it as one way to encourage advanced manufacturing in the United States, create skilled manufacturing jobs, and increase the role of renewable energy technology in energy production, among other objectives. In its Solar Progress Report: Advancing Toward a Clean Energy Future , the Obama Administration argues that "The Administration's investments have helped expand U.S. manufacturing capabilities, including new facilities to produce cost-effective, high quality solar panels as well as startup operations to commercialize novel PV and concentrating solar power (CSP) technologies." This report looks at the solar photovoltaic manufacturing industry and its supply chain; employment trends; international trade flows; and federal policy efforts aimed at supporting the industry. It does not cover other methods of solar-power generation, such as concentrating solar power plants. Concentrating solar technologies, largely dormant prior to 2006, are suitable mainly for utility-scale generation, whereas solar photovoltaics can be arranged in small-scale installations to produce power for individual buildings and in large installations to supply power to utilities. Even with decreasing PV prices, producing equipment that generates solar power at prices competitive with electricity generated from fossil fuels remains a challenge. This is particularly true for utility-scale installations, as wholesale purchasers of electricity will compare the cost per megawatt hour of solar power directly with the cost of power from other sources. The cost-competitiveness of solar power is better in the residential and business markets, as the relevant comparison is with the delivered cost of electricity rather than with the generating cost. But even if the popularity of solar systems grows, falling equipment prices are likely to undermine efforts to sustain a solar manufacturing base in the United States. Solar PV manufacturing, previously undertaken by numerous small firms, is rapidly maturing into a global industry dominated by a smaller number of producers. Cell manufacturers typically have proprietary designs that seek to convert sunlight into electricity at the lowest total cost per kilowatt hour. Vertical integration, whereby manufacturers produce their own components from wafers to modules, is becoming more common, but many PV manufacturers still rely on extensive supply chains for components such as wafers, glass, wires, and racks. Worldwide, the market for solar PV (including modules, system components, and installations) expanded from $2.5 billion in 2000 to $91.3 billion in 2013, according to one estimate. PV systems do not require complex machinery and thousands of parts. In fact, most PV systems have no moving parts at all. They also have long service lifetimes, typically ranging from 10 to 30 years, with some minor performance degradation over time. In addition, PV systems are modular; to build a system to generate large amounts of power, the manufacturer essentially joins together more components than required for a smaller system. These characteristics make PV manufacturing quite different from production of most other types of generating equipment. In particular, PV systems offer little opportunity for manufacturers to make customized, higher-value products to meet unique needs. Manufacturers offer competing technological approaches to turning sunlight into electricity, but many customers have no reason to care about the technology so long as the system generates the promised amount of electricity. Economies of scale are significant, as increasing output tends to lower a factory's unit costs. Crystalline silicon PV is the main technology used by solar manufacturers, and accounted for about 90% of global PV production in 2013. Production of a crystalline silicon system involves several stages: Polysilicon M anufacturing . Polysilicon, based on sand, is the feedstock for the PV and semiconductor industries. It is the material used to make the semiconductors that convert sunlight into electricity. Polysilicon accounts for about a quarter of the cost of a finished solar panel. Approximately 90% of demand for polysilicon comes from the solar PV industry. Production requires large processing plants that may cost of up to $1 billion to build. Historically, polysilicon prices have been volatile because the construction of a new plant can add a large amount of supply to the market. A handful of manufacturers dominate polysilicon production. In 2013, the largest polysilicon manufacturer was GLC Poly from China, followed by Wacker-Chemie from Germany, Hemlock from the United States, and OCI from South Korea. In 2013, nearly half of the world's polysilicon was produced by Chinese and South Korean companies. Wafer M anufacturing . Using traditional semiconductor manufacturing equipment, wafer manufacturers, including companies such as Elkem, LDK Solar, Okmetic, Siltronic, Nexolon, and SunEdison (formerly MEMC), shape polysilicon into ingots and then slice the ingots into thin wafers. The wafers are then cut, cleaned, and coated according to the specifications of the system manufacturers. Cell M anufacturing. Solar cells are the basic building blocks of a PV system. They are made by cutting wafers into desired dimensions (typically 5 x 5 or 6 x 6 inches) and shapes (round, square, or long and narrow). The manufacturer, such as Yingli, Trina Solar, or Sharp, then attaches copper leads so the cell can be linked to other cells. Minimizing the area covered by these leads is a key issue in cell design, as the lead blocks sunlight from reaching parts of the cell surface and thus reduces potential energy output. The U.S. Department of Energy (DOE) estimated in 2011 that a manufacturing plant to produce 120 megawatts (MW) of cells per year would require an investment of around $40 million. Module M anufacturing. Modules, which normally weigh 34 to 62 pounds, are created by mounting 60 to 72 cells on a plastic backing within a frame, usually made of aluminum. Chinese manufacturers have come to dominate module manufacturing, making up about 70% of the total global production in 2013. The module is covered by a special solar glass, which protects the unit against the elements and maximizes the efficiency of the unit that coverts sunlight into power. Production of solar glass is highly capital intensive, and approximately 60% of the global market is controlled by four manufacturers: Ashai, NSG Group (Pilkington), Saint Gobain, and Guardian. The glass is expensive to ship, so glass producers tend to locate near module manufacturers. In some countries, module manufacturing is highly automated; in others, more labor-intensive processes are used. A newer technology, thin-film PV, accounts for about 20% of total solar PV production. Rather than using polysilicon, these cells use thin layers of semiconductor materials like amorphous silicon (a-Si), copper indium diselenide (CIS), copper indium gallium diselenide (CIGS), or cadmium telluride (CdTe). The manufacturing methods are similar to those used in producing flat panel displays for computer monitors, mobile phones, and televisions: a thin photoactive film is deposited on a substrate, which can be either glass or a transparent film. Afterwards, the film is structured into cells. Unlike crystalline modules, thin-film modules are manufactured in a single step. Thin-film systems are usually less costly to produce than crystalline silicon systems, but have substantially lower efficiency rates. On average, thin-film cells convert 5%-13% of incoming sunlight into electricity, compared to 12%-21% for crystalline silicon modules. Looking ahead, relatively newer thin-film technology may offer greater opportunities for technological improvement. In the United States, First Solar is the largest thin-film panel manufacturer, with an annual production capacity of 280 MW. Crystalline silicon systems and thin-film systems all make use of a variety of other components, known as "balance of system" equipment. These include batteries (used to store solar energy for use when the sun is not shining), charge controllers, circuit breakers, meters, switch gear, mounting hardware, power-conditioning equipment, and wiring. In the United States, inverters are also needed to convert the electricity generated from direct current (DC) to alternating current (AC) electricity compatible with the electric grid. Usually, balance of system components are not made by the system manufacturers, but are sourced from external suppliers. Similar to many other advanced manufacturing industries, solar panel manufacturing depends on a global supply chain (see Figure 1 ), with PV manufacturers sourcing products at each stage of the value chain from suppliers located anywhere in the world. For instance, PV manufacturers purchase the majority of their solar factory equipment for wafer, cell, and module production from European and U.S. firms such as Roth & Rau (Germany), Applied Materials (United States), GT Solar (United States), and Oerlikon Solar (Switzerland). As an example, a system produced by the U.S. firm SunPower may include wafers from its AUO joint venture partner in Malaysia, cells manufactured at its factory in the Philippines, and modules from its assembly facilities in Mexico or France. Each solar panel assembler uses different sourcing strategies, and the levels of vertical integration vary across the industry. At one extreme, SolarWorld, based in Germany, is highly integrated, controlling every stage from the raw material silicon to delivery of a utility-scale solar power plant. At the other extreme, some large manufacturers are pure-play cell companies, purchasing polysilicon wafers from outside vendors and selling most or all of their production to module assemblers. A number of solar manufacturers seem to be moving toward greater vertical integration for better control of the entire manufacturing process. Vertical integration also reduces the risk of bottlenecks holding up delivery of the final product. Labor costs account for less than 10% of production costs for U.S. solar cell and module producers. According to Suntech, a Chinese module manufacturer, labor makes up 3%-4% of the cost of making crystalline solar panels. A 2011 study by the U.S. International Trade Commission (ITC) reported that even the more labor-intensive module assembly process is being automated, and that module assembly in China and the United States uses similar levels of automation. International transport costs for finished modules are also small, in the range of 1%-3% of value, producers have told the ITC. Production and transportation costs do not appear to be the major considerations in determining where manufacturing facilities are located. In 2011, according to a National Renewable Energy Laboratory presentation, Chinese producers had an inherent cost advantage of no greater than 1% compared with U.S. producers; in the U.S. market, China suffered a 5% cost disadvantage before the imposition of antidumping and countervailing duties in 2012 and 2015. With neither labor costs nor transportation costs being decisive, many manufacturers that opened new facilities over the past decade chose to locate them in countries with strong demand—which generally have been countries with attractive incentives for PV installations. Worldwide, the biggest markets have been Europe (principally Germany, Italy, and Spain) and Japan. Together, they comprised about two-thirds of the world's PV installed capacity of nearly 139 GW in 2013. Since 2011, a number of European governments have reduced solar incentives such as feed-in tariffs (FITs), which require utilities to purchase renewable power at generous rates. These policy changes contributed to lower demand for solar PV installations in Europe, adversely affecting European solar manufacturing. In Germany, for example, the market decreased significantly. In 2013, 40 companies manufactured 1,230 MW of PV cells and modules, compared with 62 PV companies with production of about 2,700 MW in 2008. The Japanese government has sustained its domestic solar PV market by offering various inducements, which include a feed-in tariff, tax incentives, and direct grants for solar PV. South Korea, China, Malaysia, and the Philippines also provide various types of support to their domestic solar manufacturing sectors. The U.S. market for PV products has grown in recent years, accounting for about 12% of global PV installations in 2013 (see Figure 2 ). One reason for the increase was the development of leasing and financing options that lower up-front costs to households and businesses. SEIA reports cumulative PV capacity in the United States reached almost 5 GW at year-end 2013. Of new installations linked to the electric grid during 2013, 23% were for commercial or other non-residential customers, excluding utilities; 60% consisted of utility-scale installations, which generally use the largest panels and provide electricity directly to the electric grid; and 17%, the smallest share, were for residential buildings. In the United States, manufacturers produced PV modules with a capacity of 715,000 peak kilowatts (kW) in 2012. By value, combined U.S. PV cell and module shipments totaled about $7 billion in 2012. As shown in Table 1 , SolarWorld and First Solar accounted about half of total domestic module production. SEIA reports the U.S. solar manufacturing sector in 2014 was made up of about 75 production sites that manufacture primary PV components (polysilicon, wafers, cells, modules, and inverters) and more than 450 additional domestic facilities that manufacture other PV-related products such as racking hardware and manufacturing equipment. SolarWorld's Oregon facility is the largest solar cell and module plant in the United States, with the capacity to produce 500 MW of solar cells per year at full production. Other foreign-based firms, such as Sanyo Solar and SMA Solar, also operate PV primary component plants in the United States. As shown in Figure 3 , manufacturing facilities for primary solar PV equipment and components are located throughout the United States, with concentrations in California, Oregon, Ohio, Texas, and Washington. Due to the global supply chains prevalent in the PV industry, the amount of domestic content may vary considerably from one plant to another. The map does not include announced facilities that have yet to start operating. A closer look at SEIA's data shows that in 2014, roughly two dozen U.S. facilities either produced raw materials for the PV industry or were involved in wafer/ingot production. About another 50 facilities made cells or assembled modules, and some 30 were involved in the production of solar inverters. SEIA's list does not include other parts of the PV supply chain, such as equipment for the PV industry or other balance of system components. Challenging market conditions have led to numerous bankruptcies and manufacturing consolidations among solar firms. Consequently, several manufacturers have recently reduced, idled, or closed their U.S. operations, including Suntech, Kyocera, and Schott Solar. Other manufacturers such as Hemlock Semiconductor and GE Energy have abandoned their plans to build new solar factories in the United States. Generally, PV production facilities appear to have relatively short life spans, at least in the United States. A large share of the facilities that have closed operated for less than five years (see Table 2 ). A considerably smaller number of manufacturers have opened or announced plans to open new U.S. manufacturing plants or expand existing ones. 1366 Technologies in Massachusetts and Mission Solar in Texas are among the solar factories that have opened since 2012. Stion, a CIGS thin-film manufacturer in Mississippi, announced that it expects to increase its solar panel manufacturing capacity in 2015. In 2014, Suniva began construction of a second solar PV facility in Michigan. Because of the widespread use of global supply chains, the presence of solar PV manufacturing in the United States does not imply a high level of U.S. content. Estimates dating to 2010, before the imposition of dumping and countervailing duties on imports from China, indicated that U.S. content accounted for 20% of the value of U.S.-installed crystalline silicon modules and 71% of the value of U.S.-installed thin-film modules. The level of U.S.-sourced content was estimated to be significantly higher for inverters (45% in 2010), mounting structures (94% in 2010), and combiner boxes and miscellaneous electrical equipment (59% in 2010). As shown in Figure 4 , the solar manufacturing sector supported 32,490 jobs nationwide in 2014, according to SEIA. This accounted for only about one-fifth of U.S. employment related to the solar energy sector. The remaining 80% of the 141,317 full-time workers employed directly in the solar power industry as of November 2014 are involved in other segments of the industry including installation, sales and distribution, project development, research and development, and finance. U.S. government data indicate that employment in PV manufacturing may be much lower than the SEIA figures suggest. According to EIA, the number of full-time equivalent employees in the U.S. photovoltaic industry was 12,575 in 2012. The number of solar manufacturing jobs has been relatively flat since 2012, even as total employment in the solar energy industry increased, according to figures from SEIA. This is not surprising, as the majority of PV cells and modules are made overseas, including many that are manufactured by U.S. companies at offshore facilities. Domestic producers or assemblers of PV cells and modules do not employ a large number of workers. For example, SolarWorld had fewer than 1,000 production workers in 2013, and Suniva expects to employ a few hundred production workers when its newest factory in Michigan becomes fully operational. First Solar reportedly has more than 1,000 workers at its factory in Ohio. These estimates, combined with the number of solar cell and module manufactures that have shuttered their operations in recent years, suggest that the near-term prospects for increased employment in solar manufacturing seem limited. Solar manufacturing was responsible for a tiny sliver of the more than 12 million domestic manufacturing jobs in 2014. Even if there is a substantial increase in U.S. solar manufacturing capacity, solar PV manufacturing seems unlikely to become a major source of jobs. Employment growth is likely to depend not only upon future demand for solar energy, but also on corporate decisions about where to produce solar PV systems and components. The creation of incentives for solar installations in several countries around 2004 led many companies to enter the PV industry. More recently, the industry has entered a phase of rapid consolidation on a global basis. According to an estimate by SEIA, the number of module manufacturing facilities in the United States shrank from 51 in 2011 to 38 in 2013. Chinese cell production has been relatively flat because demand in some countries has declined and prices have weakened (see Figure 5 ). According to the International Energy Agency, there are now fewer than 100 Chinese PV module and cell manufacturers, compared with more than 300 companies in 2011. By the end of 2017, China aims to reduce the number to 10 major producers that would supply 70%-80% of domestic demand. Price pressures have driven a number of manufacturers, including the U.S. firms Evergreen Solar and Solyndra and the German companies Solon and Q-Cells, into bankruptcy, and have led others to lay off workers. According to IEA-PVPS, China produced approximately two-thirds of the world's solar modules in 2013, and it ships the lion's share of all the PV modules that it produces to markets worldwide. In 2013, China's exports of modules totaled about 16.7 GW, worth about $10 billion. Its domestic market for solar PV installations was small, at 19 GW in total installed PV capacity in 2013, but an increase from less than 1 GW in 2010. Driving this growth are policies to expand domestic solar PV demand, including direct grants for solar PV installations. More recently, China implemented a nationwide feed-in tariff. India aims to boost its domestic solar market to 20 GW of grid-connected electricity by 2022 using government programs like its National Solar Mission. Ten firms now control nearly half of global solar module production. Of these, six are based in China, two in Japan, one in South Korea, and one in the United States (see Table 3 ). As part of their global business strategies, U.S. solar panel manufacturers source a significant share of components outside the United States. Imports of solar cells and panels nearly tripled from 2009, reaching $3.6 billion in 2013. Since 2009, imports of solar equipment rose every year, except for 2013, when PV imports shrank 29% from a year earlier (see Table 4 ). The import decline may be related to the imposition of U.S. antidumping and countervailing duties on Chinese-manufactured solar cells in 2012, which resulted in double- and triple-digit tariffs on imports of PV products from China. Most solar cells and modules imported into the United States come from Asia (see Table 4 ). Mexico is a relatively small exporter of PV modules to the United States, and its exports have been declining as manufacturers have closed some Mexican plants. Although U.S. imports of PV products from South Korea rose through 2012, South Korean manufacturers such as Hyundai Heavy Industry, LG Solar, and Samsung are reevaluating their business plans for the solar PV sector, contributing to a sharp drop in exports to the United States in 2013. South Korea's stated goal of capturing 10% of the global PV market by 2020 may no longer be realistic. Protracted trade cases involving solar equipment manufacturing have been initiated by the United States, China, the European Union, and India. The first case started in October 2011, when the Coalition for American Solar Manufacturing (CASM), led by the U.S. unit of SolarWorld, along with MX Solar USA, Helios Solar Works, and four unnamed companies, filed antidumping and countervailing duty petitions with the U.S. Department of Commerce (DOC) and the International Trade Commission (ITC). SolarWorld and CASM alleged that Chinese makers of crystalline silicon photovoltaic cells and modules had injured U.S. producers by selling their products in the United States at below-market prices, and that the Chinese government had provided illegal subsidies to these manufacturers. The CASM petition asked DOC to levy tariffs of up to 250% on solar cells and modules imported from China. Upon finishing their respective investigations in late 2012, DOC and the ITC each ruled these products had been unfairly priced and subsidized. In the first case, the final antidumping duties on solar cells and modules imported from China ranged from 18.3% to 249.9%, with the majority of tariffs at 24.5%. Countervailing duties ranged from 14.78% to 15.97%. U.S. Customs and Border Protection will collect these duties at least through October 31, 2017. In December 2014, the World Trade Organization (WTO) appellate body said that U.S. countervailing duties on Chinese solar panels breached global trade rules. After the United States imposed tariffs on Chinese PV producers, the Chinese government brought its own antidumping and countervailing duty cases against polysilicon imported into China from the United States and South Korea. In January 2014, the Chinese government responded by issuing final antidumping rates on U.S. polysilicon producers, which included antidumping margins of 57% for REC Silicon, 53.3% for Hemlock Semiconductor, and 53.7% for MEMC (now known as SunEdison). China followed up with countervailing duties on U.S. polysilicon of up to 6.5%. The tariffs do not apply to imports into China from the United States of silicon used in the production of exported modules, which allows U.S. firms to continue to supply polysilicon to Chinese ingot and wafer manufacturers. SolarWorld and CASM responded positively to the duties levied by the United States against China in the 2011-2012 investigation. Still, SolarWorld and some Members of Congress objected to its scope, which they claimed should have been extended to solar modules made in China that incorporate solar components from other countries such as Taiwan. SolarWorld argued that the "loophole" resulted in Chinese manufacturers avoiding the punitive duties by using slightly more expensive Taiwan-manufactured solar cells to make U.S.-bound solar modules in China. In 2014, SolarWorld, with the continued support of CASM, filed new antidumping and countervailing duty cases with the ITC and DOC. Unlike the 2012 petitions, the 2014 cases included both PV cells and modules made in China, and the antidumping investigation extended to PV cells and modules made in Taiwan. In a final decision in December 2014, DOC announced antidumping margins ranging from 26.71% to 165% for Chinese exporters, and countervailing duties from 27.64% to 49.79%. For Taiwanese companies, the antidumping duties range from 11.45% to 27.55%. The ITC confirmed DOC's final decision, setting an effective date for the new antidumping and countervailing of February 5, 2015. SEIA and the Coalition for Affordable Solar Energy (CASE) strongly opposed the second SolarWorld/CASM petition. They claim higher tariffs on PV imports from China would curb domestic demand for solar products by substantially increasing costs in major segments of the U.S. solar industry. In addition, they argue the tariffs erode profit margins across the PV value chain. CASE attributes any injury to the U.S. industry on polysilicon pricing, thin-film panel competition, and the loss of U.S. government incentives. In 2013, SEIA proposed a negotiated solution to avoid further escalation of the solar trade frictions between the United States and China . The SEIA proposal would require China to revoke its tariffs on solar imports by China, that the United States remove its duties for at least five years, and that Chinese manufacturers pay into a U.S. Solar Manufacturing Settlement Fund to support U.S. manufacturers. Solar equipment disputes have expanded beyond the United States and China. For example, the European Commission brought trade cases against solar products from China, which, in August 2013, resulted in a government-to-government agreement limiting imports and setting a floor price on China's solar exports to the European Union. In another case, the United States filed a WTO action against India because of its domestic content requirements, which the United States claims discriminate against U.S. solar cells and modules. U.S. PV exports to the world remain small, at slightly more than $350 million in 2013, shrinking from a high of $1.4 billion in 2010. In 2013, Japan and Germany were the two largest foreign markets for U.S. solar PV exports, at $162 million and $44 million, respectively. PV cell and module exports from the United States to China were valued at $14.4 million in 2013. A DOC analysis predicts that in 2015, Canada and Chile will account for more than half of all U.S. exports of solar products. U.S. exporters of solar cells and panels generally do not face foreign tariffs because of the Information Technology Agreement, whose signatories have agreed to eliminate duties on information technology products. Tariffs in other parts of the PV value chain are also comparably low. For example, the applied tariff on silicon is between zero and 4% in the leading cell- and module-producing countries. However, non-tariff barriers can be significant, including local content requirements at the national level or sub-national level in places like India, Canada, South Africa, and Saudi Arabia and other policies that encourage the use of local content in countries like Italy. Besides these mandates, import charges and taxes, customs procedures, and divergent product standards can hinder trade in solar PV components in markets such as Korea and Japan. Subsidies for domestic production in major overseas markets like China are another potential constraint on U.S. exports. Talks on environmental goods launched in June 2014 among 14 WTO countries, including the United States and China, seek to address non-tariff barriers, including trade remedies, which impose higher trade costs. Several U.S. government programs encourage the export of renewable energy products. Targeting large emerging markets like India, the Export-Import Bank provides direct loans to solar manufacturers through its Environmental Products Program, under which it allocates a certain portion of funding to renewable energy and energy-efficient technologies. Recent Ex-Im Bank beneficiaries in the solar sector include MiaSole, which received a $9 million direct loan to support the export of solar modules to India, SolarWorld, which received a $6.4 million guarantee to finance the export of solar modules to Barbados, and Suniva, which got a $780,000 loan guarantee for solar module exports to Mexico. Federal policies favoring development of a domestic solar power sector include support for the U.S. solar PV manufacturing industry as well as incentives for solar generation of electricity. Three of the five programs listed below have expired. An advanced energy manufacturing tax credit (MTC) was aimed at supporting renewable energy manufacturers. It reached its funding cap in 2010. The Section 1705 Loan Guarantee Program directed funds to manufacturing facilities that employ "new or significantly improved" technologies. The program expired in 2011. The investment tax credit (ITC) provides financial incentives for solar power at a rate of 30%. Without legislative action, the ITC is due to end on December 31, 2016, after which it will revert to a permanent rate of 10% for commercial investments and expire for residential investments. The Section 1603 Treasury Cash Grant Program requires solar projects to have commenced construction by December 31, 2011, and to complete construction by December 31, 2016. The Sunshot Initiative is one of several DOE programs to support the solar industry and increase domestic PV manufacturing. The Advanced Energy Manufacturing Tax Credit, Section 48C, which was included in the American Recovery and Reinvestment Act of 2009, provided a 30% tax credit to advanced energy manufacturers that invested in new, expanded, or reequipped manufacturing facilities built in the United States. Solar panel manufacturing was among the 183 projects funded through the MTC before it reached its cap of $2.3 billion in 2010. Plants receiving the credit had until February 17, 2013, to begin operations. Solar PV manufacturers benefiting from the credit included Abound Solar, Calisolar, MiaSole, First Solar, Sharp, Suniva, Suntech, and Yingli. At least three PV manufacturers that received tax credits under the 48C program—Xunlight, Abound, and Sharp—have closed their factories. Despite the Obama Administration's request for another $5 billion for the 48C credit, Congress has not allocated additional money for the program. The Section 1705 loan guarantee program was a temporary program established under the American Reinvestment and Recovery Act ( P.L. 111-5 ) to provide loan guarantees for renewable energy projects including solar manufacturing and solar power generation projects. A Congressional Research Service report found that solar projects accounted for more than 80% of the of the Section 1705 loan guarantees, totaling $13.27 billion. The loan guarantee program included 16 solar projects, of which four were manufacturing projects. Of the four manufacturers, Solyndra declared bankruptcy in late 2011 and defaulted on its $535 million loan, Abound Solar received about $70 million of its $400 million loan before shuttering its solar panel operation and filing for bankruptcy in 2012, and SoloPower never met the requirements to initiate its $197 million loan guarantee. 1366 Technologies, which received a $150 million guarantee, is the only participant still actively manufacturing solar PV equipment. The Section 1705 loan program expired on September 30, 2011. The Investment Tax Credit for solar was first adopted as part of the Energy Tax Act of 1978, and has been continuously available since that time (when there have been lapses, the credit has been retroactively extended). The current ITC, allowing residential and commercial owners of solar projects to offset 30% of a solar system's cost through tax credits, is in place through the end of 2016, when it is scheduled to revert back to a permanent rate of 10% for commercial investments and lapse entirely for residential investments. In practice, developers of utility-scale solar projects often do not have sufficient income to benefit from the credit, so projects have been developed through structures that transfer the benefit to third-party "tax equity" investors. In 2009, as part of ARRA, the ITC was modified and a new program was adopted which provided a new tax option for solar power developers: a direct cash grant, which may be taken in lieu of the federal business energy investment tax credit that they were otherwise entitled to receive. In the 113 th Congress, the Renewable Energy Parity Act of 2014 ( S. 2003 ) was introduced by Senators Michael Bennet and Dean Heller to make firms eligible for tax credits for projects that are already under construction before the credit's expiration date, instead of having to wait until those projects are competed and in service. More than two dozen Members of Congress have voiced their support for modifying the construction qualification to the solar investment tax credit to ensure that solar projects underway will come to fruition. Other Members argue for letting the credit drop to 10% in 2017 as planned because the solar industry no longer needs such incentives. It is uncertain what impact a reduction in the credit will have on solar installations across the United States. The Section 1603 Treasury Grant program expired at the end of 2011. It allowed owners of renewable energy systems to apply for cash grants to cover 30% of the systems' cost, regardless of their tax liability. Through October 15, 2014, the 1603 Treasury Program had awarded grants to more than 95,000 individual solar projects totaling $7.3 billion. While an ITC, which reduces overall tax liability, will still be available for solar projects until 2016, it is viewed as a less favorable incentive than the cash grant. The U.S. Department of Energy, which has set a goal for solar energy to provide 14% of domestic electricity by 2030 and 27% by 2050, runs a number of efforts intended to create a stronger domestic PV manufacturing base, under the SunShot Initiative. These include the PV incubator program, which began in 2007 and aims to support promising commercial manufacturing processes and products; the PV supply chain and cross-cutting technologies project, which provides up to $20.3 million in funds to non-solar companies that may have technologies and practices that could strengthen the domestic PV industry; the Advanced Solar Photovoltaic Manufacturing Initiative (PVMI), with up to $112.5 million in funding over five years, to advance manufacturing techniques to lower the cost of producing PV panels; and SUNPATH, which stands for Scaling Up Nascent PV At Home and is funded at less than $45 million, aims to increase domestic manufacturing by supporting industrial-scale demonstration projects for PV modules, cells, substrates, or module components. A separate DOE program to strengthen PV manufacturing is the Advanced Research Project Agency-Energy program, or ARPA-E, which received $280 million in FY2014. ARPA-E funds transformative energy research that is not being supported by other parts of DOE or the private sector because of technical and financial uncertainty. As of August 2013, ARPA-E has funded 285 projects. 1366 Technologies, a silicon PV company, and Applied Materials, a semiconductor production equipment manufacturer, are among the solar manufacturers to receive federal funding through this program. Solar manufacturing continues to go through a shakeout, with manufacturers closing U.S. plants because of difficult global business conditions, stiff competition particularly from Chinese companies, and falling prices for solar panels. Beyond that, the extraction of large quantities of shale gas seems likely to lower the cost of generating electricity from natural gas, potentially reducing demand for solar panels. While state-level renewable fuels standards, which require utilities to obtain a certain proportion of their electricity from renewable sources, may provide continuing demand for utility-scale PV installations in some states, the lower cost of gas-fired generation may limit interest. In some parts of the United States, residential and commercial PV systems produce electricity at prices competitive with conventional grid electricity, once subsidies are taken into account. However, although the per-watt cost of solar PV systems has declined significantly, in most areas of the country solar power is still not competitive with power generated from fossil fuels. The cost disadvantage could widen if subsidies are unavailable or if retail electricity prices decline due to the lower price of natural gas. In the absence of continued government support for solar installations or for the production of solar equipment, the prospects for expansion of domestic PV solar manufacturing may be limited. Modern photovoltaic technology traces its roots back to 19 th -century breakthroughs by scientists from Europe and the United States. In 1839, a French physicist, Alexandre Edmond Becquerel, discovered the photovoltaic effect, and in 1883, an American inventor, Charles Fritts, made the first primitive solar cell. Progress in modern solar cell manufacturing began in the 1940s and 1950s when Russell Ohl discovered that a rod of silicon with impurities created an electric voltage when illuminated and three scientists at Bell Laboratories in New Jersey (Daryl Chapin, Calvin Fuller, and Gerald Pearson) developed the first commercial photovoltaic cell. Further advancing PV cell manufacturing was the space race of the 1960s, with the competition between the United States and the former Soviet Union driving demand for solar cells, which were, and still are, used to power some spacecraft and satellites. The first generation of photovoltaic manufacturing firms included such names as Hoffman Electronics, Heliotek, RCA, International Rectifier, and Texas Instruments. The technology, however, remained too expensive for other uses, and the market remained very small. The Japanese manufacturer Sharp pioneered the use of photovoltaics on earth, using them to power hundreds of lighthouses along the Japanese coast, but it could not identify other applications for which photovoltaics were cost-competitive. The oil crises of the 1970s hastened the development of modern solar panels by a second generation of PV firms, which focused on ground applications. Major oil and gas companies entered the field. Exxon underwrote the Solar Power Corporation. Atlantic Richfield Company (ARCO) purchased Solar Technology International and renamed it ARCO Solar in 1977; its corporate descendant is now part of SolarWorld, presently the largest cell manufacturer in the United States. First Solar, one of the biggest manufacturers of PV thin-film cells, can trace its roots to Toledo, OH, where it was established in 1984 as Glasstech Solar. The first direct federal support for solar manufacturing was during the Carter Administration. The Energy Tax Act (ETA) of 1978 provided tax credits for homeowners who invested in solar and certain other technologies. Additionally, the federal government through the Public Utility Regulatory Policies Act required utilities to purchase power produced by qualified renewable power facilities. Notwithstanding this support, production of solar PV power in the United States remained small. By the mid-1980s, domestic photovoltaic manufacturers were selling products at a loss, and many were struggling. President Reagan's Tax Reform Act of 1986 reduced the Investment Tax Credit (ITC) to 10% in 1988, where it remained until 2005. Because of these policy changes, combined with the sustained drop in petroleum prices, solar manufacturing slumped until 2005, when President George W. Bush signed the Energy Policy Act (EPAct). That law included a 30% ITC for property owners who installed commercial and residential solar energy systems.
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Every President since Richard Nixon has sought to increase U.S. energy supply diversity. Job creation and the development of a domestic renewable energy manufacturing base have joined national security and environmental concerns as reasons for promoting the manufacturing of solar power equipment in the United States. The federal government maintains a variety of tax credits and targeted research and development programs to encourage the solar manufacturing sector, and state-level mandates that utilities obtain specified percentages of their electricity from renewable sources have bolstered demand for large solar projects. The most widely used solar technology involves photovoltaic (PV) solar modules, which draw on semiconducting materials to convert sunlight into electricity. By year-end 2013, the total number of grid-connected PV systems nationwide reached more than 445,000. Domestic demand is met both by imports and by about 75 U.S. manufacturing facilities employing upwards of 30,000 U.S. workers in 2014. Production is clustered in a few states including California, Ohio, Oregon, Texas, and Washington. Domestic PV manufacturers operate in a dynamic, volatile, and highly competitive global market now dominated by Chinese and Taiwanese companies. China alone accounted for nearly 70% of total solar module production in 2013. Some PV manufacturers have expanded their operations beyond China to places like Malaysia, the Philippines, and Mexico. Overcapacity has led to a precipitous decline in module prices, which have fallen 65%-70% since 2009, causing significant hardship for many American manufacturers. Some PV manufacturers have closed their U.S. operations, some have entered bankruptcy, and others are reassessing their business models. Although hundreds of small companies are engaged in PV-related manufacturing around the world, profitability concerns appear to be driving consolidation, with fewer than a dozen firms now controlling half of global module production. In 2012, the United States imposed significant dumping and countervailing duties on imports of Chinese solar products after ruling that U.S. producers had been injured by dumped and subsidized solar equipment from China. In a second case, the U.S. Department of Commerce (DOC) and the U.S. International Trade Commission (ITC) ruled in 2014 and early 2015 that U.S. producers were being injured by imports of Chinese-made modules that avoided the duties imposed in 2012 by incorporating solar cells from Taiwan. While these duties may help U.S. production become more competitive with imports, the cost of installing solar systems might rise. Domestic demand for solar products may also be depressed by the end of various federal incentives. Unless extended, the commercial Investment Tax Credit for PV systems will revert to 10% from its current 30% rate after 2016, while the 30% credit for residential investments will expire. Looking ahead, the competitiveness of solar PV as a source of electric generation in the United States will likely be adversely affected by the rapid development of shale gas, which has lowered the cost of gas-fired power generation and made it harder for solar to compete as an energy source for utilities. In light of these developments, the ability to sustain a significant U.S. production base for PV equipment is in question.
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On July 23, 2004, the Architectural and Transportation Barriers Compliance Board (Access Board) published ADA and Architectural Barriers Act Accessibility Guidelines (ADAAG). These guidelines in part provided detailed guidance on play and recreation areas, lodging at a place of education, and communications requirements. These guidelines have no legal effect and serve as guidance only until adopted by the Department of Justice in final regulations. In its June 17, 2008, Notice of Proposed Rule Makings (NPRM), DOJ proposed the adoption of Parts I and III of the Access Board guidelines and also proposed several other amendments. The regulations were sent to the Office of Management and Budget (OMB) but were not released for publication in the Federal Register. On January 20, 2009, the White House issued a memorandum to the heads of executive departments and agencies stating that, with certain exceptions, no proposed or final regulation should be sent to the Office of the Federal Register unless and until it has been reviewed or approved by a department or agency head appointed or designated by President Obama. In response to this memorandum, on January 21, 2009, the Department of Justice notified the OMB of its withdrawal of the draft final rules from the OMB review process. There is considerable uncertainty regarding what form, if any, new proposed regulations would take. The Department of Justice has indicated that "[i]ncoming officials will have the full range of rule-making options available to them under the Administrative Procedure Act." However, it is instructive to briefly examine the provisions of the regulations which were proposed in June 2008. The adoption of the Access Board guidelines would serve to increase accessibility; however, the Department of Justice expressed concern about the potential effect of these changes on existing structures. To address these concerns, DOJ added "safe harbor" provisions for both titles II and III. For title II, which applies to states and localities, individuals with disabilities must be provided access to programs "when viewed in their entirety." Unlike title III, a public entity under title II is not required to make each of its existing facilities accessible. However, in order to provide certainty to public entities and individuals with disabilities, DOJ's proposed regulations add a "safe harbor" provision stating that "public entities that have brought elements into compliance in existing facilities are not, simply because of the Department's adoption of the 2004 ADAAG as its new standards, required to modify those elements in order to reflect incremental changes in the proposed standards." Title III of the ADA, which covers places of public accommodation, requires each covered facility to be accessible but only to the extent that accessibility changes are "readily achievable." The proposed regulations for title III, like those for title II, also contain a "safe harbor" provision. This provision would presume that a qualified small business has done what is readily achievable in a given year "if, in the prior tax year, it spent a fixed percentage of its revenues on readily achievable barrier removal." DOJ stated that it was concerned that "the incremental changes in the 2004 ADAAG may place unnecessary cost burdens on businesses that have already removed barriers by complying with the 1991 Standards in their existing facilities." DOJ solicited comments on whether public accommodations that operate existing facilities with play or recreation areas should be exempted from compliance with certain requirements. The proposed regulations for both titles II and III contain virtually identical language relating to service animals. They define service animal as meaning "any dog or other common domestic animal individually trained to do work or perform tasks for the benefit of a qualified individual with a disability.... " Some examples provided were guiding individuals who are blind, pulling a wheelchair, assisting an individual during a seizure, and retrieving medicine or the telephone. The term "service animals" would not include farm animals or wild animals, such as non human primates (including those born in captivity), reptiles, ferrets, amphibians, and rodents. Assistance for individuals with psychiatric, cognitive and mental disabilities was specifically included; however, "[a]nimals whose sole function is to provide emotional support, comfort, therapy, companionship, therapeutic benefits, or to promote emotional well-being are not service animals." Generally, a public entity (title II) or a public accommodation (title III) must modify its policies, practices, or procedures to permit the use of a service animal by an individual with a disability. If the entity can show that the use of the service animal would fundamentally alter the entity's service, program, or activity, the service animal need not be allowed. The proposed regulations delineate exceptions where a service animal may be removed. These include where the animal is out of control or not housebroken, and where the animal poses a direct threat to the health or safety of others that cannot be eliminated by reasonable accommodation. If the animal is excluded because of these reasons, the entity must give the individual with a disability the opportunity to participate without the animal. The work the service animal performs must be directly related to the individual's disability and the animal must be individually trained, housebroken, under the control of its handler, and have a harness, leash, or other tether. A public entity or public accommodation is not responsible for supervising the animal and, although the entity may not ask about the individual's disability or require documentation, the entity may ask what work the animal has been trained to perform. Finally, an individual with a service animal must be allowed access to areas open to the public, program participants, and invitees, and there shall be no special fees or surcharges although there may be charges for damages caused by the service animal. In its discussion of the proposed regulations, the Justice Department observed that it received a large number of complaints about service animals and that there was a trend toward the use of wild or exotic animals. The Justice Department also noted a distinction between "comfort animals" that have the sole function of providing emotional support and which would not be covered, and "psychiatric service animals" which may be trained to provide a number of services, such as reminding an individual to take his or her medicine, and which would be covered. However, DOJ specifically recognized "that there are situations not governed exclusively by the title II and title III regulations, particularly in the context of residential settings and employment, where there may be compelling reasons to permit the use of animals whose presence provides emotional support to a person with a disability." Since 1990 when the ADA was enacted, the choices of mobility aids for individuals with disabilities have increased dramatically. Individuals with disabilities have used not only the traditional wheelchair but also large wheelchairs with rubber tracks, riding lawn mowers, golf carts, gasoline-powered two-wheeled scooters, and Segways. DOJ indicated that it had received inquiries concerning whether these devices need to be accommodated, the impact of these devices on facilities, and personal safety issues. The proposed regulations under both titles II and III include sections on mobility devices. They require a public entity under title II or a public accommodation under title III to permit individuals with mobility impairments to use wheelchairs, scooters, walkers, crutches, canes, braces, or other similar devices designed for use by individuals with mobility impairments in areas open to pedestrian use. A public entity or public accommodation under title III must make reasonable modifications in its policies and procedures to permit the use of other power-driven mobility devices by individuals with disabilities unless it can be demonstrated that such use is not reasonable or would result in a fundamental alteration of the nature of the services or programs. In addition, a public entity or a public accommodation under title III shall establish policies permitting the use of other power-driven mobility devices when reasonable. The determination of reasonableness is to be based on the dimensions, weight, and operating speed of the mobility device in relation to a wheelchair; the potential risk of harm to others by the operation of the mobility device; the risk of harm to the environment or natural or cultural resources; and the ability of the public accommodation to stow the mobility device when not in use if requested by a user. A public entity or public accommodation under title III may ask a person using a power-driven mobility device if the mobility device is required because of the person's disability, but may not ask questions about the person's disability. DOJ solicited comments on whether there are certain types of power-driven mobility devices that should be accommodated; whether motorized devices that use fuel, such as all terrain vehicles, should be covered; and whether power-driven mobility devices should be categorized by intended function, indoor or outdoor use, or some other factor. The proposed title II and title III regulations contain a number of other provisions. The title II proposed regulations include provisions on program accessibility, including play areas, swimming pools, and dormitories and residence halls at educational facilities, assembly areas, and medical care facilities. Accessibility requirements for detention and correctional institutions are also included in the proposed title II regulations as are provisions on ticketing for accessible seating, and communications. The title III proposed regulations, like the title II proposed regulations, contain provisions on ticketing for accessible seating, provisions relating to play areas and swimming pools, and provisions on communications. Accessibility requirements for place of lodging, including housing at a place of education, are included. A new provision for examinations is added that specifies that if any request for documentation is required, the requirement is to be "reasonable and limited to the need for the modification or aid requested." DOJ noted that this change was made to eliminate inappropriate or burdensome requests by testing entities.
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The Americans with Disabilities Act (ADA) has often been described as the most sweeping nondiscrimination legislation since the Civil Rights Act of 1964. As stated in the act, its purpose is "to provide a clear and comprehensive national mandate for the elimination of discrimination against individuals with disabilities." (42 U.S.C. §12101(b)(1)) On June 17, 2008, the Department of Justice (DOJ) issued notices of proposed rulemaking (NPRM) for ADA title II (prohibiting discrimination against individuals with disabilities by state and local governments), and ADA title III (prohibiting discrimination against individuals with disabilities by places of public accommodations). These proposed regulations are detailed and complex. They would adopt accessibility standards consistent with the minimum guidelines and requirements issued by the Architectural and Transportation Barriers Compliance Board. More specifically, the regulations include more detailed standards for service animals and power-driven mobility devices, and provide for a "safe harbor" in certain circumstances. Comments on the regulations were due by August 18, 2008. The regulations did not advance beyond the Office of Management and Budget during the Bush Administration. On January 20, 2009, the White House issued a memorandum to the heads of executive departments and agencies stating that, with certain exceptions, no proposed or final regulation should be sent to the Office of the Federal Register unless and until it has been reviewed or approved by a department or agency head appointed or designated by President Obama. In response to this memorandum, on January 21, 2009, the Department of Justice notified the OMB of its withdrawal of the draft final rules from the OMB review process. There is considerable uncertainty regarding what form, if any, new proposed regulations would take. However, it is instructive to briefly examine the provisions of the regulations which were proposed in June 2008.
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Enacted in 1978, the Presidential Records Act (PRA), as amended, instructs the collection and retention of—as well as codifies public access to—presidential records. Since the PRA's enactment, some incumbent Presidents have issued executive orders that detail how they interpreted the law. Presidential records are critical tools for understanding the powers and operations of the executive branch of the federal government. These records, however, may include information that, if released to the public, could endanger national security, adversely affect the nation's economy, or result in an unwarranted invasion of personal privacy. The PRA details which presidential records and materials the National Archives and Records Administration (NARA) is to assume responsibility for at the end of a President's Administration. According to the act, when a President leaves office, his official records remain property of the federal government, under the supervision of the Archivist of the United States. Once a location for a presidential library has been determined, and the facility is deeded or otherwise placed into the custody of the United States, the former President's records are to be deposited there. The provisions of the PRA have remained relatively unchanged since the law's 1978 enactment, except for several technical amendments. Incumbent Presidents, however, have varied widely in how they chose to interpret the PRA. Additionally, Presidents from both major political parties have faced questions and concerns about their abilities to maintain accurate, comprehensive, and accessible archives, especially considering their increasing use of electronic—and perhaps ephemeral—platforms like email, Facebook, Twitter, blogs, and YouTube. The PRA requires the collection of all presidential records, including those created on electronic platforms. The increasing volume of records created by incumbent Presidents may prompt further concerns about incumbent Presidents' abilities to appropriately collect and retain records. Congress has the authority to revise or enhance recordkeeping requirements for incumbent Presidents, including requiring more systematic methods for collecting and maintaining email or Internet records. The 113 th Congress (2013-2014), for example, passed H.R. 1233 , and the President signed into law, P.L. 113-187 , the Presidential and Federal Records Act Amendments of 2014, which codifies the length of time an incumbent or applicable former President has to review records and decide whether to challenge release to the public. P.L. 113-187 also prevents the President and his immediate staff from use of a "non-official electronic messaging account" to create federal records, unless that record is forwarded to an "official" email address within five days. The law, however, does not define "non-official electronic messaging account," nor does the PRA. In addition to ensuring the implementation of recent amendments to the PRA, Congress might elect to oversee whether all of the platforms and technologies used to create presidential records allow for appropriate capture, retention, and future access of those records. This report discusses the PRA and its interpretations by successive Administrations. This report examines policy options related to the capture, maintenance, and use of presidential records, with a focus on electronic presidential records. As noted above, the Presidential Records Act (PRA) was enacted in 1978, and the statute, as amended, instructs the collection and retention of—as well as codifies public access to—presidential records. Prior to the enactment of the PRA, "presidential records were under the control of the president whose administration generated them." Pursuant to the PRA, presidential records are collected and maintained by the incumbent President until he leaves office. When a President leaves office, his official records remain property of the federal government, under the supervision of the Archivist of the United States. The act applies to the records of Presidents dating back to Ronald Reagan. The PRA defines a presidential record as "documentary materials … created by the President or his immediate staff." In turn, the term documentary materials includes all books, correspondence, memorandums, documents, papers, pamphlets, works of art, models, pictures, photographs, plats, maps, films, and motion pictures, including, but not limited to, audio, audiovisual, or other electronic or mechanical recordations. Pursuant to Chapter 22 of Title 44 of the U.S. Code , upon leaving office, an outgoing President may restrict access to certain of his archived records for up to 12 years. Certain presidential files and records may be excepted from public access indefinitely if they qualify under any of the six criteria delineated in 44 U.S.C. Section 2204: 1. the information is specifically exempted by an executive order for the purpose of national security or foreign policy; 2. the information is related to federal office appointments; 3. the information is explicitly exempted from disclosure by statute; 4. the information includes trade secrets and commercial or financial information that is privileged or confidential; 5. the information is a confidential communication that requests or submits advice between the President and his advisers—or between the advisers themselves; or 6. the information is personnel or medical files, and their disclosure would amount to an unwarranted invasion of personal privacy. According to the act, the Archivist of the United States—or, if there is a legal challenge, the federal courts—would have final determination over which records should be released to the public. The act also states that it is not to "be construed to confirm, limit, or expand any constitutionally-based privilege which may be available to an incumbent or former President." The act does not define the scope of this privilege. Successive presidential Administrations have interpreted the PRA's meaning differently. This section will examine and compare the most recent two presidential interpretations—one from the George W. Bush Administration and the other from the Obama Administration. These executive orders are pivotal in setting the context for understanding how presidential interpretations of this law may affect its implementation. The final section of this report details P.L. 113-187 , the Presidential and Federal Records Act Amendments of 2014, which, among other things, codifies some parts of the PRA that have historically been interpreted in various ways by incumbent Presidents. On November 1, 2001, President George W. Bush issued E.O. 13233. This executive order gave the incumbent President, former Presidents, former Vice Presidents, and their designees broad authority to deny access to presidential documents after the termination of the 12-year access restriction and to delay the release of certain records indefinitely. Under the order, former Presidents had 90 days to review and decide whether documents requested for public release pursuant to a Freedom of Information Act (FOIA) request should be released. Incumbent Presidents had the authority to extend the review period indefinitely, and the Archivist had no recourse to challenge the status of materials that had been withheld or remained in review. During his first full day in office, President Barack Obama issued Executive Order 13489, which explicitly revoked E.O. 13233. Under E.O. 13489, after termination of the 12-year access restriction, incumbent Presidents and former Presidents were granted 30 days to review presidential records to determine whether they should be released. If an incumbent President claimed executive privilege for the records of a former President, the Counsel to the President was required to notify the Archivist, the appropriate former President, and the Attorney General of the action. The Archivist was then prohibited from releasing those records—unless instructed to do so by a court order. In contrast to claims of executive privilege made by an incumbent President, under E.O. 13489, claims of executive privilege made by a former President required the Archivist to consult with the Attorney General, the Counsel to the President, or other appropriate officials to determine the validity of the request. According to the executive order, the incumbent President could have instructed the Archivist whether to release the records of a former President, and the Archivist is to "abide by" the President's determination—unless directed otherwise by a court order. If the Archivist denied a former President's executive privilege claim and determined that records should have been released, the incumbent President and appropriate former President were to be given 30 days' notice of the records' release. E.O. 13489 vested much of the records disclosure authority in the hands of the incumbent President. This authority to determine which records of a former President should have been released to the public may arguably have stood in contrast to the designs of the Presidential Records Act, which places greater authority over records disclosure in the hands of the Archivist. The executive order did not define the boundaries of executive privilege, but it did define a " substantial question of executive privilege " as a situation in which "NARA's disclosure of Presidential records might impair national security (including the conduct of foreign relations), law enforcement, or the deliberative processes of the executive branch." The 113 th Congress passed and President Obama signed into law the Presidential and Federal Records Act Amendments of 2014 ( P.L. 113-187 ), which addressed the creation of, collection of, retention of, and access to presidential records. The law, among other things, amended the PRA to explicitly provide a 60-day presidential record review period to the incumbent or applicable former President any time the Archivist intended to release previously unreleased presidential records. Pursuant to the bill's language, the review period can be extended for an additional 30 days if the Archivist provides a statement that "such an extension is necessary to allow an adequate review of the record." This language would supersede Executive Order 13489. The bill also codifies the requirement that any claim of executive privilege must be made by the applicable former President or by the incumbent President. P.L. 113-187 also prohibits anyone convicted of inappropriately using, removing, or destroying NARA records from accessing presidential records. Additionally, the Presidential and Federal Records Act Amendments of 2014 prohibits the use of a "non-official electronic messaging account" to create a presidential record. The law, however, does not define "non-official electronic messaging account." Additionally, no definition is provided for "official electronic messaging account." The statutory definition of presidential record , as noted above, includes all materials "created by the President or his immediate staff." The PRA then lists potential types of presidential records, but it does not specifically list or limit the platforms on which these records may be created. Federal statute would seem to suggest that the sender and content of the message created on an electronic messaging account would determine whether the message qualified as a presidential record. The terms "official electronic messaging account" and "non-official electronic messaging account," therefore, might have no effect over whether a particular record qualifies as a presidential record pursuant to the PRA. Alternatively, the Archivist could issue an interpretive rule in the Federal Register that could provide a definition for "non-official electronic messaging account" that could clarify the legislative language. In many cases, only the .gov email addresses of the President and his immediate staff are equipped with automated email archiving technologies. To ensure the automated capture of all qualifying presidential records, Congress could amend the law or the Archivist could promulgate a regulation to ensure that qualifying presidential records created on any electronic messaging account without automated record capturing technology be forwarded to electronic messaging accounts equipped with such technology. Although the PRA was written prior to the use of electronic platforms to create records, the law appears to require collection and maintenance of—and accessibility to—the records of former Presidents, which today are largely created electronically. As new technologies are introduced and increasingly utilized by Presidents, NARA must continuously ensure that widely used and perhaps ephemeral technologies used to create electronic records do so in formats that can be collected, maintained, and accessed in perpetuity. Archiving presidential use of social networking sites like Facebook or Twitter, for example, may pose different archival challenges than email. Pursuant to the PRA, NARA is responsible for the custody, control, and preservation of the records of former Presidents. Incumbent Presidents, however, are responsible for managing and archiving their records during the tenure of their Administrations. NARA has worked with incumbent Presidents as they prepare to leave office to ensure the capture and preservation of records generated through social media. Examples may be found in the preserved whitehouse.gov content available through the websites of the Clinton and George W. Bush Libraries. To address the task of accepting, preserving, and making available presidential records, including those created electronically, NARA created an Executive Office of the President (EOP) system within its Electronic Records Archive (ERA) to maintain and make available such records. According to NARA, the ERA is currently used to preserve the electronic records from the George W. Bush Administration, including the electronic records of former Vice President Dick Cheney, and it is used by archivists to review these records to make them available to the public. ERA is not yet used to preserve the electronic records of the Clinton Administration. Although NARA will not be given archival control of President Obama's records until after his tenure in office ends, the National Archives said the ERA "has the capability to manage the electronic records of any given administration." NARA has said that the "Administration has consulted with NARA regarding the records status of PRA content on social media sites and technical approaches to managing them." At a May 3, 2011, House Oversight and Government Reform Committee hearing, Brook M. Colangelo, chief information officer of the Office of Administration in the EOP, testified that "the EOP has been able to rely on an automated system that archives email sent and received on the EOP system." The commercial, off-the-shelf product used to capture all EOP emails "archives inbound and outbound email messages in near real time and in original format with attachments, whether sent or received from EOP computers or EOP BlackBerries." Mr. Colangelo also testified that Short Message Service (SMS) texts and Personal Identification Number (PIN) messaging are also automatically archived by commercial software. The Obama Administration is the first to extensively use public websites like Facebook, Twitter, and YouTube, as well as other social networking media. Mr. Colangelo testified that there is no software to "offer a sufficiently comprehensive, reliable, and affordable" method of automatic archiving of presidential use of social networking sites. Archiving the presidential use of sites like Twitter and Facebook, therefore, "is handled on a component-by-component basis" using a "combination of traditional manual archiving techniques (like saving content in an organized folder structure) and automated techniques (such as Real Simple Syndication (RSS) feeds and Application Programming Interfaces (APIs))." Mr. Colangelo said the White House would continue to search for a comprehensive automatic archiving option for social media. Mr. Colangelo also said EOP employees are instructed to conduct all work-related communications on their EOP email accounts, except in emergency circumstances when they cannot access the EOP system and must accomplish time-sensitive work. If EOP employees do perform work on nonwork email accounts or other platforms, they are required by White House policy to forward such records to the proper destinations for archiving. Pursuant to the PRA, presidential records are provided to NARA at the end of each presidential administration. As a result, NARA has tracked the increasing volume and varied electronic formats employed by each administration. According to NARA's Report on Alternative Models for Presidential Libraries , "Presidential Libraries … experienced an explosive growth in the volume of electronic records, especially White House email." The report continued: Presidential Library holdings in electronic form are now much larger than the paper holdings. Indeed, the email system for the George W. Bush Administration alone is many times larger than the entire textual holdings of any other Presidential Library. These electronic holdings bring new challenges to processing and making available Presidential records. The sheer volume exponentially increases what archivists have to search and isolate as relevant to a request, a lengthy process in and of itself before the review begins. Once review begins, the more informal communication style embodied in Presidential record emails often blends personal and record information in the same email necessitating more redactions. In that same report, NARA noted that the Administration of William J. Clinton provided NARA 20 million presidential record emails at the conclusion of the President's eight-year tenure. In June 2010, the Government Accountability Office (GAO) submitted testimony to the House Committee on Oversight and Government Reform's Subcommittee on Information Policy, Census, and National Archives on "The Challenges of Managing Electronic Records." GAO stated that the "[h]uge volumes of electronic information" were a "major challenge" in agency record management. Electronic information is increasingly being created in volumes that pose a significant technical challenge to our ability to organize it and make it accessible. An example of this growth is provided by the difference between the digital records of the George W. Bush administration and that of the Clinton administration: NARA has reported that the Bush administration transferred 77 terabytes of data to the [National] Archives [and Records Administration] on leaving office, which was about 35 times the amount of data transferred by the Clinton administration. On April 25, 2013, a NARA blog post provided additional details on the records being transferred to the George W. Bush Library and Museum in Dallas, TX—"more than 70 million pages of textual records, 43,000 artifacts, 200 million emails (totaling roughly 1 billion pages), and 4 million digital photographs (the largest holding of electronic records of any of our libraries)." This amounts to a 3,500% increase in the volume of electronic records created when comparing one two-term administration to the next—an eight-year period. The rapid increase in the volume of electronic presidential records does not present challenges in terms of demands on physical space for storage. Electronic records, however, may present challenges in terms of the collection of and perpetual access to the diverse and often ephemeral platforms used to create the records. As previously noted, Congress has the authority to use its legislative powers to amend the Presidential Records Act. Appendix A describes legislative proposals to amend the PRA that were introduced in recent Congresses. Congress may also use its oversight powers to investigate and potentially influence changes in the PRA's implementation. This section analyzes the potential effects of some of these proposals and explores some of the tensions that have emerged as technology has evolved to allow for the proliferation of presidential records in a wide variety of electronic platforms. In recent Congresses, legislation has been introduced that would require the Archivist to promulgate records management regulations for the incumbent President. These bills would have also required the Archivist to oversee the incumbent President's adherence to these regulations. Requiring the Archivist to detail and oversee the incumbent President's records management practices could prompt more consistency across presidential Administrations. As noted earlier in this report, pursuant to current law NARA is responsible for the custody, control, and preservation of the records of former Presidents. Sitting Presidents, however, are responsible for managing and archiving their records during the tenure of their Administrations. The Presidential and Federal Records Act Amendments of 2014 clarify that the Archivist "may maintain and preserve Presidential records on behalf of the President," but asserts that the Archivist "may not disclose any such records except under the direction of the President" or until the President leaves office. If the Archivist were required to oversee a sitting President's records management, it would appear to mark the first time someone other than the incumbent President was formally authorized to oversee such management. The Archivist is appointed by the President, with the advice and consent of the Senate, "without regard to political affiliations and solely on the basis of the professional qualifications required to perform the duties and responsibilities of the office," and he or she serves at the pleasure of the President. H.R. 1234 sought, therefore, to authorize an official who can be removed by the President to oversee and report to Congress on the actions of the President. Such an arrangement might have prompted tensions between the President and the Archivist or might arguably have complicated or politicized the appointment of future Archivists. The rapid evolution of social media and other means of electronically created records present many challenges for meeting archiving requirements. Congress may choose to further assess and monitor whether the Administration is properly adhering to the PRA through the use of manual archiving techniques for capturing its use of social media. Congress may also have interest in fostering the development of a cost-effective technology that would automate the capture of records created with any electronic platform. As noted earlier in the report, electronic platforms allow records to be created at a much greater volume than they were historically. Acquiring and paying for archival building space may not be a concern because electronic records do not need to be stored on shelves. It is not clear, however, that existing technologies are capturing all Presidential records in every medium of creation. Additionally, it is unclear whether the records captured and retained will be accessible to the public in perpetuity. In short, will the technologies that permit federal employees, lawmakers, and the general public to create and view certain records today (for example PDF technologies) exist in 10, 20, or 30 years? Or will the ephemeral nature of these platforms lead to a future situation in which millions of records created on multiple technologies can no longer be accessed? Appendix A. Presidential Records Act Amendments Introduced in the 111 th , 112 th , and 113 th Congresses This appendix provides background information on bills from the three previous Congresses that sought to amend the Presidential Records Act. Similar provisions can be found in the legislation throughout each Congress. 113 th Congress In addition to H.R. 1233 , which was passed and enacted as P.L. 113-187 , another measure related to recordkeeping stuff was also considered ion the 113 th Congress. Representative Elijah Cummings introduced the Electronic Message Preservation Act ( H.R. 1234 ). H.R. 1234 contained several provisions that would amend the sections of the PRA that apply to the creation of, retention of, collection of, and access to federal records, generally. Additionally, H.R. 1234 would have authorized the Archivist to promulgate regulations that established "standards necessary for the economical and efficient management of electronic Presidential records during the President's term in office." The regulations would have focused on "the capture, management, and preservation of electronic records," the electronic retrieval of electronic messages, and the creation of a process to certify the President's records management system. Pursuant to Section 2208 of H.R. 1234 , the Archivist would have been required to certify annually that the incumbent President was meeting the Archivist's records management requirements. The Archivist would also have been required annually to report to Congress on the President's records management certification status. In the report to accompany H.R. 1234 , the committee stated that the bill sought to address provisions in current law that have been "rendered antiquated" by the "rapid migration ... toward electronic communication and recordkeeping." H.R. 1234 contained language similar to the Presidential and Federal Records Act Amendments of 2014 ( P.L. 113-187 ), which prohibits "an officer or employee" from creating a presidential record on "a non-official electronic messaging account, unless" copies of the message are forwarded to an "official electronic messaging account" within five working days. On June 25, 2013, H.R. 1234 was reported favorably, as amended, by the House Committee on Oversight and Government Reform. After being reported favorably by the committee, H.R. 1234 was placed on the House's Union Calendar. No further action has been taken on H.R. 1234 . 112 th Congress In the 112 th Congress, two bills were introduced that would clarify the terms under which presidential records should be released to the public: the Transparency and Openness in Government Act ( H.R. 1144 ) and the Presidential Records Act Amendments of 2011 ( H.R. 3071 ). Both bills contain identical PRA-amending language. Similar to the language in H.R. 1233 (113 th Congress), both H.R. 1144 and H.R. 3071 would have amended the PRA to provide a 60-day presidential record review period any time the Archivist intended to release previously unreleased presidential records. Pursuant to H.R. 3071 , the review period would have been extended for an additional 30 days if the Archivist provided a statement that "such an extension is necessary to allow an adequate review of the record." The bill also would have codified the requirement that any claim of executive privilege be made by the applicable former President or by the incumbent President. On September 29, 2011, Representative Edolphus Towns introduced H.R. 3071 , which contained identical amending language. 111 th Congress Two bills introduced in the 111 th Congress would have significantly amended the PRA: H.R. 35 and H.R. 1387 . H.R. 35 incorporated amendments that had been introduced in previous Congresses, including an attempt to statutorily rescind President Bush's Executive Order 13233. Although the bill was not enacted, it marked continued concern by some Members of Congress that presidential Administrations were misinterpreting the spirit of the PRA. H.R. 1387 , which would have clarified the PRA's electronic recordkeeping requirements for the incumbent President, also incorporated legislative ideas from previous Congresses. H.R. 35 On January 6, 2009, Representative Towns introduced H.R. 35 , the Presidential Records Act Amendments of 2009, which would have reinstituted many of the presidential records archiving policies in effect prior to George W. Bush's issuance of E.O. 13233, including shortening the presidential record review period to 20 days. The bill would have revoked President Bush's executive order. H.R. 35 would have required an incumbent President, former Presidents, or former Vice Presidents to justify why certain records should be afforded protected status for reasons of executive privilege. In contrast, under E.O. 13233, any person seeking to access unreleased presidential records had to demonstrate why the records should be disclosed—without full knowledge of the information that the record may include. H.R. 35 passed the House under suspension of the rules on January 7, 2009, by a vote of 359-58. The bill was referred to the Senate Committee on Homeland Security and Governmental Affairs on January 8, 2009. On May 19, 2009, the committee reported the bill with an amendment in the nature of a substitute. The bill was placed on the Senate Legislative Calendar that day. No further action was taken on the bill. H.R. 1387 On March 9, 2009, Representative Paul W. Hodes introduced H.R. 1387 , the Electronic Message Preservation Act. The bill, like H.R. 1234 (113 th Congress), would have amended 44 U.S.C. Section 2206, which directs the Archivist of the United States to promulgate regulations that govern PRA's implementation. H.R. 1387 would have required the Archivist to promulgate regulations for provisions to establish "standards necessary for the economical and efficient management of electronic Presidential records during the President's term of office." H.R. 1387 would have required the promulgated regulations to include records management controls necessary for the capture, management, and preservation of electronic messages; records management controls necessary to ensure that electronic messages are readily accessible for retrieval through electronic searches; and a process to certify the electronic records management system to be used by the President for the purposes of complying with H.R. 1387 's new requirements. Also similar to provisions in H.R. 1234 (113 th Congress), H.R. 1387 would have required the Archivist to certify, annually, that "electronic management controls established by the President" met the requirements of the legislation and to report to Congress the results of that certification. The Archivist would have also been required to submit a report within a year of an incumbent President leaving office that detailed "the volume and format of electronic Presidential records deposited into that President's Presidential archive depository" and whether those records met the legislation's requirements. H.R. 1387 was reported by the House Oversight and Government Reform Committee on January 27, 2010, and passed the House under suspension of the rules on March 17, 2010. On March 18, 2010, the bill was referred to the Senate Committee on Homeland Security and Governmental Affairs. No further action was taken on the bill. Appendix B. Vice Presidential Records Similar to the President, the Vice President has discretion to determine which of his records qualify as presidential records under the PRA. 44 U.S.C. Section 2204 explicitly places the same recordkeeping duties and responsibilities on the Vice President as are placed on the President. The PRA does not explicitly define vice presidential records, but the record-preservation policies governing the Vice President's records have prompted controversy. On January 19, 2009, a federal district court judge In Washington, DC, found that Citizens for Responsibility and Ethics in Washington (CREW), which had sued then-Vice President Richard B. Cheney to preserve records he claimed were subject to his control, could not demonstrate that the Vice President failed to comply with his obligations under the PRA. In a previous motion, attorneys for the Vice President asserted that the Vice President alone may determine what constitutes vice presidential records or personal records, and that their creation, maintenance and disposal were actions committed to his discretion by law. The court's decision accepted former Vice President Cheney's claim that he should have discretion over which of his records are to be preserved and released to the public. The court also found that vice presidential records were, pursuant to 44 U.S.C. Section 2207, to be preserved in the same manner as presidential records. See Citizens for Responsibility and Ethics in Washington v. Cheney , 2009 U.S. Dist. LEXIS 3113 (D.D.C. 2009).
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Presidential documents are historical resources that capture each incumbent's conduct in presidential office. Pursuant to the Presidential Records Act ((PRA) 44 U.S.C. §§2201-2207), the National Archives and Records Administration (NARA) collects most records of Presidents and Vice Presidents at the end of each Administration. They are then disclosed to the public—unless the Archivist of the United States, the incumbent President, or the appropriate former President requests the records be kept private. The PRA is the primary law governing the collection and preservation of, and access to, records of a former President. Although the PRA has remained relatively unchanged since enactment in 1978, successive presidential Administrations have interpreted its meaning differently. Additionally, it is unclear whether the PRA accounts for presidential recordkeeping issues associated with increasing and heavy use of new and potentially ephemeral technologies—like email, Facebook, Twitter, and YouTube—by the President and his immediate staff. Presidential records are captured and maintained by the incumbent President and provided to NARA upon departure from office. The records are then placed in the appropriate presidential repository—usually a presidential library created by a private foundation, which is subsequently deeded or otherwise provided to the federal government. According to data from NARA, the volume of records created by Presidents has been growing exponentially, and the platforms used to create records are also expanding. On his first full day in office, President Barack H. Obama issued an executive order that grants the incumbent President and relevant former Presidents 30 days to review records prior to their release to the public. E.O. 13489 changed the presidential record preservation policies promulgated by the George W. Bush Administration through E.O. 13233. During the 113th Congress (2013-2014), a law was enacted to require a 60-day period of review for the incumbent or applicable former President to determine whether to protest the release of particular presidential records. The law appears to supersede E.O. 13489. The law also prevents the President and his immediate staff from using a "non-official electronic messaging account" to create federal records, unless that record was forwarded to an "official" email address. Congress has the authority to revise or enhance recordkeeping requirements for the incumbent President, including requiring a more systematic method of collecting and maintaining email or Internet records. Congress might also act to examine whether the incumbent President is appropriately capturing all records in every available medium and whether NARA can appropriately retain these records and make them available to researchers and the general public in perpetuity. This report examines the newly amended provisions of the PRA, reviews the two most recent presidential interpretations of the PRA, and analyzes potential legislative amendments and oversight considerations. The report also explores the complexities of capturing all presidential records in a digital environment, providing potential policy options for Congress. The appendixes provide a review of proposed amendments to the PRA that were introduced, but not enacted, during recent Congresses as well as background on vice presidential records.
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The federal budget has been in deficit (i.e., spending has exceeded revenues) since 2002, and deficits were significantly larger from 2009 to 2012 than in any other year since World War II. As a result, the federal debt held by the public increased from 39% of gross domestic product (GDP) in 2008 to 72% of GDP in 2013, which was its highest share of GDP since after World War II. From 1946 to 2008, budget deficits averaged 1.7% of GDP and exceeded 5% of GDP only three times (equaling 7.2% in 1946, 6.0% in 1983, and 5.1% of GDP in 1985). The budget deficit was 10.1% of GDP in 2009, falling to 7% of GDP in 2012. The fiscal outlook has improved significantly since then, although the budget is projected to remain in deficit under current policy. In 2014, the baseline deficit is projected to be $492 billion or 2.8% of GDP. Not since the end of World War II has the deficit fallen so much, so quickly. Despite the improvement, the deficit still remains above its historical average. In the past, persistent deficits have proven sustainable because periods of moderate growth in the debt relative to GDP have been followed by periods when debt fell relative to GDP (typically, because the debt grew more slowly than GDP). Current policy is unsustainable because projected deficits are large enough to cause the federal debt to continuously grow faster than national income. This increase is projected to be gradual—the debt does not increase relative to GDP until 2019, is five percentage points higher by 2024, and reaches 100% of GDP by 2036 or sooner. At some point, spending cuts or revenue increases will be needed to restore fiscal sustainability, although the recent decline in the deficit has provided policymakers more flexibility on the timing of these changes. Congress has expressed interest in examining policy options to reduce the deficit. The Congressional Research Service (CRS) does not take a position on the best way to reduce the deficit. This report organizes and presents information to help policymakers frame the debate. This report first discusses the size of projected budget deficits, then discusses how much the deficit would need to be reduced to return to long-term sustainability, then analyzes alternative time frames for reducing the deficit, and finally discusses broad policy choices for reducing the deficit. This report assumes a familiarity with basic budget terms and concepts; for an overview, see CRS Report R43472, The Federal Budget: Overview and Issues for FY2015 and Beyond , by [author name scrubbed]. The budget deficit increased by almost $1 trillion between 2008 and 2009. As shown in Table 1 , this increase was not anticipated—two months before FY2009 began, CBO projected that the 2009 baseline deficit would be slightly lower than the 2008 deficit (for more information on the baseline, see the text box below). From 2012 to 2014, deficits declined by a similar amount—the 2014 deficit is currently projected to be about $1 trillion lower than the 2009 deficit. Table 1 explains what factors caused this sharp increase and subsequent decrease in the deficit. Because the same policy generates different levels of spending and revenue in different fiscal years, it is not possible to say what "caused" the deficit to increase or decrease from one year to the next. However, it can be determined with precision what caused the actual deficit in any given fiscal year to be smaller or larger than what CBO had previously projected. The exact shares assigned to each category will be sensitive to the chosen starting point, however. Table 1 uses the September 2008 projection because of the dramatic increase in the deficit relative to the projection that occurred after that date. Actual budgetary outcomes can turn out differently than previously projected for three reasons—the subsequent enactment of legislation ("legislative changes" in Table 1 ), differences in CBO's projections attributable to economic forecast errors ("economic changes" in Table 1 ), and all other differences ("technical changes" in Table 1 ). For example, if more people received a tax credit or entitlement program than predicted for a given level of GDP, absent any legislative change, that would be classified as a technical change that increased the deficit. Because this table is based on the CBO baseline, policies that maintain current policy but change current law, such as extending expiring tax provisions, are classified as legislative changes. Legislative changes since 2009 can be broken down into three broad categories, with the major changes provided for each: C hanges that temporarily increased the deficit. Legislation was enacted during or following the 2008-2009 recession that temporarily increased the deficit. This legislation either resulted in a one-time increase in spending (the Troubled Asset Relief Program [TARP, created by P.L. 110-343 ], the American Reinvestment and Recovery Act [ARRA; P.L. 111-5 , popularly known as the 2009 "Economic Stimulus Act"]) or was a temporary program that was in place for a finite period of time (extended unemployment insurance , payroll tax cut , assistance to the government sponsored enterprises [GSEs].) Most financial stabilization outlays in the federal budget occurred within the TARP or on transfers to two GSEs, Fannie Mae and Freddie Mac. These programs had a mostly one-time effect on the deficit due to improvements in financial markets and the expiration in 2010 of Treasury authority to enter into new contracts with regard to TARP and the GSEs. In 2009, outlays of $243 billion were recorded for TARP and the GSEs. In 2010 and 2011, transfers to the GSEs declined and, due to budgetary conventions, TARP recorded negative outlays that reduced the deficit. CBO included transfers to the GSEs in technical, not legislative changes, although their entry into receivership was a policy decision. The temporary spike in spending caused by ARRA peaked in 2010 had mostly dissipated by 2012. ARRA was intended to be only a temporary boost to spending to stimulate the economy, and Congress allowed budget authority to return to near pre-ARRA levels in nominal terms. (ARRA also temporarily reduced taxes, but those provisions were subsequently extended.) Extended unemployment insurance was in place from July 2008 through 2013. Payroll taxes were temporarily reduced by two percentage points from 2011 to 2012. This was the only major legislative change affecting revenues that was allowed to expire. C hanges that permanently reduced the deficit . Two policy changes since September 2008 have permanently reduced the deficit—the Budget Control Act (BCA; P.L. 112-25 ) as amended since 2012 and the winding down of overseas contingency operations (OCO) beginning in 2009. Budget authority for OCO has fallen from a peak of $187 billion in 2008 to $93 billion in 2013 as overseas operations, primarily in Iraq and Afghanistan, have been scaled back. This has reduced discretionary defense spending relative to the September 2008 baseline, which assumed that such spending would increase at the rate of inflation each year. For 2012 to 2021, the Budget Control Act (BCA; P.L. 112-25 ) reduced discretionary spending and mandatory spending relative to the baseline. The BCA implemented spending cuts through statutory caps for defense and non-defense discretionary spending for 2012 to 2021 and sequestration for mandatory spending for 2013 to 2021. The BCA exempted most mandatory spending programs from sequestration and capped Medicare cuts at 2%. On the discretionary side, the BCA exempted military OCO, disaster spending, and emergency spending from the spending caps. The BCA did not provide any details as to what discretionary programs would absorb the cuts needed to adhere to the defense and non-defense caps, however, and Congress has struggled to reach a consensus on that issue each year since the BCA was enacted. Through 2014, total discretionary spending has ended up higher than envisioned under the BCA because of subsequent legislation reversing some of the BCA spending cuts and because spending in categories exempt from the caps was higher than envisioned. Overall, discretionary spending was $75 billion lower in 2013 and is projected to be $120 billion lower in 2014 than the September 2008 baseline level. The BCA cuts to mandatory spending were not large enough to offset other legislative changes that increased mandatory spending in 2013 or 2014. C hanges that permanently increased deficit. Various legislative changes since September 2008 have permanently increased the deficit. The major changes involve the extension of expiring tax provisions and temporary extensions of the "doc fix." Congress temporarily extended expiring tax provisions, including major tax cuts enacted in 2001 and 2003, numerous times. Most provisions from the 2001 and 2003 tax cuts were permanently extended in the American Taxpayer Relief Act (ATRA; P.L. 112-240 ) in January 2013. ATRA also temporarily extended ARRA's tax cuts until 2017 and reduced revenues overall by $3.9 trillion over 10 years. On net, all legislative changes to revenues made since September 2008 have increased the budget deficit by $1,750 billion from 2009 to 2014 compared with the current law baseline. To the extent that these tax provisions involved refundable tax provisions, which are classified as mandatory spending, extending expiring provisions also increased mandatory spending. Compared with a current policy baseline, ATRA reduced the deficit because it allowed the payroll tax cut and certain provisions affecting high-income taxpayers to expire at the end of 2012. OMB estimated that the expiration of provisions affecting high-income taxpayers increased revenues by $618 billion over 10 years compared with a current policy baseline. Medicare's sustainable growth rate (SGR) system is intended to constrain Medicare payments to physicians. Congress has temporarily prevented the SGR from reducing physician payments each year since 2003 (called the "doc fix"). If Congress continues the policy that has been in place since 2003, it will permanently increase the deficit, even if there has technically been no permanent policy change so far. All legislative changes that increase (decrease) the deficit also increase (decrease) net interest payments on the debt in future years. Combined, legislative changes to revenue, mandatory spending, and discretionary spending have increased net interest by $277 billion from 2009 to 2014. In sum, several major legislative changes were enacted that increased the deficit between 2009 and 2012 by increasing discretionary or mandatory spending. These changes were temporary and had little effect on the deficit after 2012, except for the fact that they increased interest payments on the debt. By contrast, the (mostly permanent) extension of expiring tax cuts increased the deficit relative to current law, by $1,750 billion over six years. Policies enacted during this time that permanently reduced the deficit, notably the tapering of OCO spending and the BCA as modified, did so primarily by reducing discretionary spending. In 2013 and 2014, legislative changes reduced total discretionary spending relative to CBO's September 2008 projection, but the resulting deficit reduction was more than offset by legislative changes to mandatory spending and revenues that increased the deficit. Economic changes, related to the recession and the sluggish recovery, added around $100 billion each year to the deficit in 2009, 2010, 2011, and 2013, and added smaller amounts in 2012 and 2014. Revenues automatically rise and certain mandatory spending automatically fall as the economy moves from recession to full employment. Economists refer to these changes as "automatic stabilizers." Revenues automatically fall in a recession because taxable income falls. Recessions cause spending on certain means-tested programs, such as unemployment insurance, to automatically increase due to increased eligibility. Overall, CBO estimates that automatic stabilizers at their peak added 2.7 percentage points of GDP ($409 billion) to the budget deficit in 2010. The role of automatic stabilizers has since diminished, but is still exerting some upward pressure on the deficit. Technical changes were a major contributor to the actual deficit from 2009 to 2012, but had little effect in 2013 or 2014. These technical changes reflect the uncertainty inherent in the multitude of assumptions underlying budget projections, putting aside economic uncertainty. The joint effects of economic and technical changes illustrates that even if no legislation had been enacted since September 2008, the actual deficit would have turned out much larger than projected each year and would have increased sharply from 2008 to 2009 and remained large in 2010. There was no year between 2009 and 2014 where economic and technical changes combined exceeded legislative changes, however. Overall, the effect of legislative changes on the deficit was more than twice as large as economic and technical changes combined from 2009 to 2014, and would have been larger if assistance to the GSEs was classified as a legislative change. In the CBO baseline projection, budget deficits fall from 4.1% in 2013 to 2.8% of GDP in 2014, reaching a low of 2.6% of GDP in 2015. (The decline in 2015 is attributable to baseline assumptions and would not occur under different assumptions.) They then rise each year until reaching 4.0% of GDP in 2022. The debt held by the public declines each year until it reaches 72.4% of GDP in 2017, and then increases each year, reaching 78.1% of GDP in 2024. Long-term projections indicate that budget deficits would eventually become very large relative to GDP outside the projection window under current policy. Under a long-term projection of current policy, CBO projects deficits would exceed 10% of GDP by 2073. These projections are highly uncertain, both because of forecast errors and the underlying assumptions made about future spending and revenues. Budget projections are subject to a high degree of uncertainty—based on history, actual outcomes are likely to be much better or worse than projections, even after accounting for policy changes. Projections are often inaccurate even over short-time frames, but small changes in assumptions compound to large changes in budget projections over the long run. For that reason, forecasting errors become larger further into the future. For example, OMB estimates that the absolute average errors for its budget deficit projections are 1.4% of GDP for the next budget year and 3.6% of GDP for five years in the future. Were GDP growth lower or interest rates higher than projected, the primary deficit (i.e., deficit before interest payments) would have to be smaller in dollar terms to be sustainable, and vice versa. By historical standards, CBO's projections of economic growth over the next 10 years are relatively modest, but this is mostly because CBO projects that the labor supply will grow much more slowly than it has historically due to the aging of the population. More problematic is the role of the business cycle on budget projections. CBO's economic forecast only accounts for the short-term effects of the business cycle on the budget in the first few years of the budget window. After that, it assumes that the economy will grow at a steady rate. As a result, CBO's current projection assumes that there is no recession at any point in the next 10 years. Given that the economy has been in expansion since 2009, this projection in effect assumes that the economy will experience the longest uninterrupted economic expansion in the history of the United States. The projection would seem to account for the business cycle by assuming a growth rate that averages out the potential ebbs and flows in the business cycle. The budget has proven to be disproportionately affected by past recessions, however. In other words, were a recession to occur in the next 10 years, it would likely increase cumulative budget deficits over the course of the budget window by more than the baseline projection of steady growth, even after accounting for higher than projected growth in expansion years. CBO's and OMB's projections assume that interest rates will remain at relatively low levels by historical standards over the next 10 years. CBO estimates that if interest rates rose to their average level from 1991 to 2000, the budget deficit would be an average of $144 billion higher per year over the next 10 years. If interest rates rose to their average level from 1981 to 1990, the budget deficit would be an average of $627 billion higher per year over the next 10 years. Besides forecast errors, the baseline projection is based on a number of policy assumptions when alternative assumptions could be employed that would be equally valid. Changing these assumptions would increase or decrease deficit projections. The following examples involve ambiguity about how to define current policy (in contrast to projections about future legislative changes, not meant to be captured in the baseline). War spending —The baseline assumption that current discretionary spending levels (adjusted for inflation) will be maintained is likely to prove inaccurate when circumstances are expected to change significantly. An example is discretionary spending on overseas contingency operations (OCO). A planned reduction in the American troop presence in Iraq and Afghanistan may reduce future OCO spending from current levels (which are already at half of their peak 2008 level), but the baseline assumes that 2014 spending levels will continue. On the other hand, these projections also assume that no new military conflict will require additional budgetary resources over the next 10 years. D isaster spending —Like OCO spending, disaster spending is extrapolated at current year levels adjusted for inflation. Disaster spending varies significantly from year to year, however. In some years, disaster spending is minimal; in years with major disasters, it can exceed $50 billion. Disaster spending is limited by the BCA by a formula based on a 10-year average; however, the BCA also allows any discretionary spending to be designated as emergency spending. For any particular year, an amount based on the prior 10 years is arguably reasonable, but, based on historical experience, disaster spending is likely to significantly exceed that amount at least once in the next 10 years. E mergency spending designation —For most categories of discretionary spending that are exempt from the statutory caps, the BCA defines eligible spending by budget account or limits the amount. One notable exception is emergency spending, which is designated by Congress and the BCA does not constrain. In effect, any type or amount of discretionary spending can be designated as emergency spending. To date, the emergency spending designation has been used in one out of the three years that caps have been in effect—$41.6 billion in 2013, related to Hurricane Sandy relief. Going forward, CBO assumes emergency spending will be zero, but any amount is possible under current law. SGR ("doc fix") —As discussed above, Congress has enacted the "doc fix" on a temporary basis, rather than repealing the SGR. As a result, the CBO baseline assumes that the SGR will be in effect in future years. If Congress continues to prevent the SGR from coming into effect, budget deficits would be $148 billion higher over 10 years. E xpiring tax provisions ( "extenders") —Many provisions of the tax code are scheduled to expire under current law. Congress routinely extends some, but not all, of these provisions, often for one year at a time. If all expiring provisions were permanently extended, budget deficits would be $1.1 trillion higher over 10 years. Unforeseen circumstances and inaccurate assumptions played a major role in the movement from projected baseline surpluses to actual deficits in the last decade. Historically, emergencies and other unforeseen events have typically been deficit financed. The baseline could not anticipate events, such as war in Iraq and Afghanistan, Hurricane Katrina, and two recessions, that were major contributors to last decade's budget deficits. Furthermore, baseline assumptions (some of which are set in statute) that were unrepresentative of past events—such as assumptions that discretionary spending would grow only at the rate of inflation (in years without statutory caps) and tax provisions would expire as scheduled—proved unrepresentative of future events, and this caused baseline deficit projections to repeatedly undershoot. This experience raises the question of the utility of relying on projections, particularly over longer budget windows. Another conclusion is that if budget plans do not use realistic assumptions or build in assumptions about unforeseen contingencies, they are unlikely to prove accurate. In addition to ambiguity about how to best capture current policy in a baseline, it is useful to remember that, on a conceptual level, the baseline does not attempt to account for policy changes even if they are likely or predictable. For example, Congress has intervened to prevent the full effects of the Budget Control Act's automatic spending cuts from occurring each year (although it has not eliminated them entirely). One might conclude it is not only possible, but probable, that future Congresses may similarly intervene to reduce these spending cuts. Because the baseline measures current law, it assumes that those cuts will be implemented in their entirety. To account for some of these issues caused by baseline assumptions, CBO also presents an Alternative Fiscal Scenario that assumes that the doc fix and expiring tax provisions do not expire and that the BCA's automatic spending reductions do not come into effect. Under the Alternative Fiscal Scenario, the budget deficit continues to rise and peaks at 5.1% of GDP in 2022 and the debt held by the public rises as a share of GDP each year, reaching 86.7% of GDP by 2024. Deficits reach 10% of GDP in 2032 and the debt held by the public reaches 100% of GDP by 2029. There is no clear answer to the question of how much the deficit should be reduced because the targeted amount of deficit reduction depends on the policy goal. A balanced budget could be pursued so that the government would have a neutral effect on the national saving rate (by accounting identity, budget deficits reduce the national saving rate). Since the United States has a low national saving rate relative to other countries and relative to domestic investment needs, it could be argued that the government should at least not continue to reduce the national saving rate by running budget deficits in the future. If the policy goal were for the government to increase the national saving rate or reduce the federal debt in dollar terms, then the government could target a budget surplus. A desire to achieve generational equity, so that government spending on present age cohorts was not disproportionately paid for by future age cohorts, would require large budget surpluses today because of the interaction between an aging population and the pay-as-you-go structure of elderly entitlement programs. Some economists call for a balanced structural budget (i.e., a budget that would be balanced if the economy were at full employment), which would allow for modest deficits in downturns and budget surpluses in boom times. This would avoid deficit reduction during a recession that added contractionary pressures on the economy. For 2012, a structurally balanced budget would have allowed for an actual deficit of about 2.3% of GDP. A less ambitious policy goal would be to place fiscal policy on a sustainable path in the medium to long term. History demonstrates that budget deficits can be sustained indefinitely as long as they are small enough that government debt does not continuously grow more quickly than GDP. The budget is not projected to be on a sustainable path under current policy in the long term because the debt held by the public would continuously grow more quickly than GDP. Economists view this as unsustainable because it would imply that an ever-growing portion of national income would be needed to meet interest payments. Under the baseline, the debt would reach 79% of GDP in 2024 and 106% of GDP in 2039. Under the Alternative Fiscal Scenario, the debt grows modestly relative to GDP in the short run and reaches 163% of GDP by 2039. As long as investors remain willing to finance large deficits, there is no barrier to the debt continuing to grow relative to GDP, and there has been no difficulty in financing it to date. Because deficits are projected to continue to grow in the long run, growing reductions in spending or increases in taxes would be required over time to maintain sustainability. Cutting spending or raising taxes sooner rather than later would reduce the need for future changes. CBO projects that spending would need to be cut or revenues increased by 1.8% of GDP immediately and permanently to stabilize the debt-to-GDP ratio over the next 75 years, or 7.4% of GDP under the alternative fiscal scenario. Today's debt levels, high by historical standards, leave policymakers less room to maneuver to cope with future challenges—both anticipated, such as the retirement of the baby boomers, and unanticipated. The state of the economy is an important factor to consider in determining the desired timing of deficit reduction. All else equal, mainstream economic theory predicts that reducing the deficit would have a contractionary effect on GDP in the short run, whether through tax increases or spending reductions (which is a component of GDP). During a period of robust economic growth, that contractionary effect would be more easily offset by other sectors of the economy, and the expansion would likely be sustained. During a period of high unemployment, reducing the budget deficit would be expected to make unemployment higher (or fall more slowly) than would otherwise be the case, all else equal. The economy is now closer to full employment than it has been since the recession, but there is considerable disagreement among economists as to how close and growth has not yet been robust. On the other hand, deficit reduction will eventually be needed to achieve sustainability, and given that the effect on the economy is proportional to the size of the deficit reduction, it could be argued that avoiding unwanted contractionary effects suggests a gradual approach to deficit reduction. Furthermore, policy changes can be phased in such a way that they have little contractionary effect in the short run. Waiting until deficits have become larger leaves less latitude for phasing in changes. The U.S. fiscal outlook is not a purely long-term issue, however—deficits are already above average today, and while projected deficits outside the 10-year budget window are larger than today's deficits, they are also more uncertain. Deficits are also a long-term issue in the sense that most observers believe fundamental reforms to outlays and revenues would be necessary to put the budget on a sustainable path; however, any delay to implementing those changes increases the eventual budgetary cost of returning to a sustainable fiscal path, all else equal. The deficit is a long-term issue in that any negative economic consequences from running large deficits have been minor to date, but there is the risk that the deficit's effect on the economy could become negative at any time. Although economic theory suggests that larger deficits provided a stimulative boost to the economy during the recent recession by partially offsetting the contraction of private spending, continued deficits would be expected to eventually have a negative effect on the economy. At some point, the economy is expected to return to full employment (i.e., practically all existing labor and capital resources are in use). When it does, government budget deficits are expected to "crowd out," or compete with, private-investment spending in the standard macroeconomic model. Setting aside foreign capital flows for the moment, borrowing can only be financed through saving, and government borrowing competes with business borrowing for the same pool of national saving. By increasing the demands on that pool of national saving, government borrowing pushes up the cost of all borrowing through higher interest rates, causing businesses to finance less capital spending than they otherwise would. Business borrowing finances capital spending on plant and equipment, and lower capital spending results in lower potential gross domestic product, and hence lower future national income, than would otherwise occur. The financial crisis and Great Recession led to a marked decline in private-investment spending and increase in private saving. Both of these factors reduced the potential for large government deficits to crowd out private-investment spending. Low interest rates since the recession began support the view that the deficit caused little crowding out to occur. With international capital mobility, borrowing can also be financed by foreign saving. In the standard macroeconomic model with perfect capital mobility, the boost in aggregate spending from the stimulus would cause the trade deficit to rise as foreign capital is attracted to higher domestic interest rates. Net foreign borrowing is equivalent to the trade deficit because one country can borrow from the rest of the world only if it imports more than it exports. The availability of foreign credit would avoid the crowding out of domestic capital investment. But the boost to aggregate spending from the budget deficit would be negated (or "crowded out") by the higher trade deficit (in the form of lower exports, higher imports, or both). The United States relies heavily on foreign borrowing, and this is another reason that large budget deficits could be less effective at stimulating the economy. Since the recession began, the trade deficit has fallen substantially, so a problem of crowding out from the trade deficit is not apparent at this time. Despite the significant decline in the budget deficit since 2012, crowding out and higher interest rates will likely become a more pressing issue as the economy returns to full employment because of the anticipated increase in business investment back to historically normal levels, particularly if the increase in private saving following the recession proves not to be permanent. If that is the case, the decline in the trade deficit may reverse. Interest rates have already increased modestly as the economy has strengthened, although they remain low compared with those prevailing in recent decades. Budget deficits can be reduced through cuts in spending, higher taxes, or a combination of both. Plans to reduce the deficit that are narrowly targeted require commensurately larger spending cuts or tax increases to targeted programs or provisions. To that end, deficit reduction proposals can start with the observation that Social Security, Medicare, net interest (which cannot be changed), and defense discretionary make up almost two-thirds of total spending. Figure 1 compares the projected deficit to overall spending and revenues in 2014. It shows that the deficit is about two-fifths the size of all non-interest spending outside of Social Security, Medicare, and defense discretionary. It is about one-sixth the size of total revenues. Budget deficits are the result of the shortfall between spending and revenue. In 2009, spending reached its highest share of GDP since 1945 and revenues reached their lowest share of GDP since 1950. As seen in Figure 2 , from 1946 to 2008, outlays averaged 19.6% of GDP and were generally below 20% of GDP until 1975, above 20% of GDP from 1975 to 1996, and below 20% of GDP from 1997 to 2005. From 2009 to 2011, outlays averaged 24.1% of GDP. From 1946 to 2008, revenues averaged 17.8% of GDP, showing no long-term upward or downward trend from 1952 to 2007. Revenues were at least 17% of GDP in each year during that period except for 1955, 1959, 2003, and 2004, when they were between 16% and 17%. From 2009 to 2012, revenues were below 16% of GDP. Over the next 10 years, revenues are projected to be near their historical average at 18.1% of GDP. Outlays are projected to be 21.5% of GDP, above their historical average of 19.6% of GDP and comparable to their level from 1975 to 1996. However, the composition of outlays is projected to be significantly different, as discussed below. Just as recent deficits are the combination of all past outlay and revenue decisions, returning the budget to balance would be difficult without a combination of outlay and revenue changes. For instance, to return the budget to balance while maintaining baseline revenue levels would require that outlays decline to a share of GDP last seen in the early 1970s. Likewise, to balance the budget while maintaining baseline outlay levels would require revenues to rise to their highest share of GDP ever. Total spending has fallen from an average of 24% of GDP from 2009 to 2011 to 21% of GDP in 2013. It is projected to rise to 22% of GDP from 2020 to 2024 under current policy. From 1946 to 2008, there were only three years when outlays were above 23% of GDP. Spending rises under the baseline projection despite discretionary spending falling to its lowest share of GDP since data were first collected because mandatory spending and net interest on the federal debt are projected to grow relative to GDP. The projected increase in net interest is due to the growth in the federal debt and the return to more normal interest rates from the current below-average rates. Discretionary spending has fallen from 12.3% of GDP in 1962 to a projected 6.8% of GDP in 2014. Discretionary spending was at high levels relative to GDP from 2009 to 2012, but not historically high levels since data were first available in 1962, as seen in Figure 3 . Over time, the two components of discretionary spending, defense and non-defense, have followed different paths. Defense discretionary spending was lower from 2009 to 2012 than it was in all but two years from 1962 to 1992 as a share of GDP. From 1963 to 2001, defense discretionary spending generally fell relative to GDP, but rose in nominal dollars. It then began to grow, when overseas military operations expanded. In 2014, defense discretionary spending is projected to fall to its lowest share of GDP since 2002. Non-defense discretionary spending has shown no long-term upward or downward trend relative to GDP—except for an elevated period from 1975 to 1983, it has always stayed within 3% to 4% of GDP. Over the late 1990s, it fell to its lowest level of GDP since data have been collected, and then rose from that low base in the 2000s. It was above its long-term average from 2009 to 2012, but still below the levels prevalent from 1975 to 1981. Since 2009, much of the growth in non-defense discretionary spending was a result of the 2009 stimulus (ARRA). Most discretionary spending provided under this act was completed by 2011. In 2014, non-defense discretionary spending is projected to fall back to the historically low levels of the 1990s, which is well below its share of GDP before the 1990s. In the CBO baseline, discretionary spending declines significantly relative to GDP over the next 10 years to its lowest share of GDP ever since data were first collected in 1962, as shown in Figure 3 . The baseline, based on current law, assumes that discretionary spending will adhere to the levels set in the Budget Control Act (BCA) through 2021 and discretionary spending not subject to the caps (notably, OCO) will rise at the rate of inflation. In long-term projections, CBO assumes discretionary spending will remain at its 2024 share of GDP. Because discretionary spending is held constant, it becomes a smaller share of spending over time and therefore does not contribute to the growth of the long-term budget deficit. If assumed instead that discretionary spending remained at its current share of GDP, non-interest spending would be 1.5 percentage points higher annually and long-term deficits would be even larger. Discretionary spending fell in nominal terms (i.e., not adjusted for inflation) each year from 2011 to 2014. From 1963 to 2010, discretionary spending fell in nominal terms in only four years, most recently in 1996. Adjusted for inflation, both defense and non-defense spending fell in real terms each year from 2011 to 2013, and they are projected to continue falling each year through 2018. The decline is caused by the decline in the BCA caps in real terms and, through 2014, in OCO spending. This contrasts to the significant growth in discretionary spending that occurred from 2000 to 2010, as shown in Table 2 . One macroeconomic implication of reducing discretionary spending is that most federal spending on physical capital (e.g., infrastructure) and human capital (e.g., education) is located in the discretionary portion of the budget. Economic theory predicts that a lower future capital stock would result in a smaller economy from what it otherwise would be in the long term, all else equal. To achieve further deficit reduction through discretionary spending would involve reducing discretionary spending even lower as a share of GDP than the all-time low already achieved under the BCA. By 2030, if discretionary spending were reduced to zero, there would still be a deficit in the extended baseline scenario. For defense, the timing and magnitude of any potential drawdown in overseas military operations could cause military spending to decline relative to the baseline, but traditionally such changes have not been motivated by the desire for deficit reduction. Even if current operations are reduced, future geopolitical events could require military personnel to be deployed elsewhere in the next 10 years, so the baseline does not necessarily overestimate future defense spending. Unlike discretionary spending, mandatory spending has grown as a share of GDP since 1962. Net of offsetting receipts, it doubled relative to GDP from 1962 to 1975, increasing from 4.7% to 9.4% of GDP. It then fluctuated in a range of 8.7% to 10.4% of GDP from 1975 to 2007, peaking in recession years in part because of automatic stabilizers. It peaked at 14.5% of GDP in 2009, marking its highest share of GDP since data were first compiled in 1962. Mandatory spending has fallen as a share of GDP since, but has remained above its pre-crisis share of GDP. In contrast to discretionary spending, mandatory spending is projected to continue to grow faster than inflation and exceed 13% of GDP over the next 10 years under current policy. Since 1962, mandatory spending fell in nominal terms in only one year, 2010; outside of TARP and deposit insurance, which recorded negative outlays that year, all other mandatory spending grew in 2010. Outside of health and retirement programs, outlays on other mandatory programs are projected to decline relative to GDP over the next 10 years. As the economy improves, "automatic stabilizer" spending has declined significantly: spending on income security programs more than doubled in nominal terms between 2007 and 2010, but is projected to decline from $438 billion in 2010 to $219 billion in 2014. Over its 75-year projection, CBO assumes that other mandatory spending will fall from 2.7% of GDP in 2013 to 0.8% of GDP by 2088. Since data were collected in 1974, it has never been lower than 1.9% of GDP. Over the long term, however, the upward trend in mandatory spending in the past and future is dominated by entitlement spending on the elderly (Social Security, Medicare, and Medicaid), which accounted for about three-quarters of total mandatory spending in 2010. Social Security has risen from 3.7% of GDP in 1974 to 4.9% of GDP in 2013, its highest share of GDP ever. Major mandatory health programs (Medicare, Medicaid, the Children's Health Insurance Program, and health insurance exchange subsidies, net of offsetting receipts) rose from 1% of GDP in 1974 to 5% of GDP in 2011, its highest share of GDP ever, before falling to 4.6% of GDP in 2013. Within the 10-year baseline, Social Security and major health spending each exceed total discretionary spending for the first time. In long-term budget projections, rising budget deficits are driven primarily by the growth in entitlement programs for the elderly, particularly health spending. Social Security outlays are projected to rise from 4.9% of GDP today to 6.3% of GDP in 2039, and federal health outlays (mainly on Medicare and Medicaid) are projected to rise from 4.9% today to 8.0% of GDP in 2039. By 2066, outlays on Social Security and health programs would exceed projected total revenues in 2014 as a share of GDP. In long-term projections, health spending per capita is projected to continue to grow faster than GDP per capita because it has historically grown much more quickly. If health spending per capita grew at the same rate as GDP per capita (technically, this is referred to as an excess cost growth rate of zero), one-third of the increase in federal health spending would be avoided through 2039, although spending would still grow somewhat because of demographic changes—namely, the retirement of the baby boomers—that increased the number of recipients. Figure 5 illustrates that if there was zero excess cost growth over the next 75 years, spending on major health programs would decline from 14% of GDP to 7.7% of GDP in 2089. The difference between the two is significantly larger than the baseline primary deficit (2.6% of GDP) in 2089. Therefore, if health spending were to grow at the rate of GDP instead, the budget would be on a sustainable path. The growth in elderly entitlement spending makes deficits unsustainably large in the long run. In part, the link between entitlement spending and deficits is driven by the assumptions that go into these projections—other spending is assumed to gradually fall relative to GDP in the long run, revenues are projected to gradually rise relative to GDP because of bracket creep, while health spending per capita is projected to continue to grow faster than GDP per capita. Restraining the future growth rate of elderly entitlement spending would not result in significant deficit reduction in the short run, however. Most proposals to reform elderly entitlement programs would generate significant budgetary savings in the long run, but little budgetary savings in the short run, partly because most proposals exempt current retirees from reform and partly because the savings from these changes would compound over time. For example, immediately reducing excess cost growth for federal health spending to zero would reduce federal spending by 2% of GDP after 20 years, but by 0.3% of GDP after 5 years. Mandatory spending could be reduced by restricting benefits or eligibility. For retirement programs, it is straightforward to do so through a change in the benefit formula. For health programs, it is less straightforward, and there is a lack of consensus on how excess cost growth, which has persisted for decades, can be effectively minimized. On a positive note, excess cost growth has shown a downward trend over time. However, CBO's projections already assume the decline will continue, and it still results in an unsustainably large budget deficit. In 2009 and 2010, revenues were at historically low shares of GDP across all major categories—individual income taxes were at their lowest share of GDP since 1950, corporate income taxes were at their lowest share of GDP since the 1930s, social insurance receipts were at their lowest share of GDP since the 1970s, and excise taxes were at their lowest share of GDP since 1934, the first year for which data are available. Total revenues remained at historically low shares of GDP in 2011 and 2012, as shown in Figure 2 . In recent years, most revenues have come from the individual income tax and social insurance categories. In 2013, revenue as a share of GDP returned closer to historically average levels because of the economic recovery and because of the expiration of the payroll tax cut and certain provisions from the 2001 and 2003 tax cuts. Revenues in the CBO baseline are projected to equal about 18% of GDP from 2015 on, around their historical average. Total revenues would gradually increase relative to GDP over the next 10 years due to the improvement in the economy (initially) and "real bracket creep," returning to their historical average around 2014. "Real bracket creep" refers to the fact that the same tax structure generates more revenue relative to GDP when incomes rise. Bracket creep does not lead to a significant increase in revenues relative to GDP over a 10-year projection, but it does over a 75-year projection. In CBO's Long-Term Budget Outlook, projected revenues increase by 1.8 percentage points to 19.4% of GDP as a result of bracket creep in 2039. By 2089, revenues would reach 23.9% of GDP, which would represent their highest share of GDP ever. Revenues also increase by 0.3 percentage points by 2039 because it is assumed that temporary provisions will be allowed to expire, although many are routinely extended. An argument could be made that current law does not represent current policy in long-term projections, because current law would make revenues reach an unprecedented share of GDP. If argued instead that the revenues equal to current share of GDP represented current policy, then the long-term fiscal gap would be much larger because revenues would not rise in tandem with spending as a share of GDP. If policymakers decided to increase revenue to reduce the deficit, five broad choices are often discussed: redesigning the structure of the tax system; adding new revenue sources, such as a carbon tax or a value added tax (VAT); increasing existing taxes; "broadening the tax base" by eliminating tax expenditures (deductions, exemptions, and credits); or allowing tax cuts to expire as scheduled. Redesigning the tax system or adding new revenue sources could theoretically improve economic efficiency and might be more appealing to some than increasing existing taxes, but in practice, compensating those made worse off from these changes may result in those policies raising little additional revenue. Generally, economists favor eliminating tax expenditures over raising marginal tax rates on efficiency grounds, although some specific expenditures may promote economic efficiency. Tax expenditures have also been criticized on the grounds of equity and complexity.
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The federal budget deficit was the largest it has been since World War II as a percentage of GDP from 2009 to 2012, peaking at 10.1% of GDP. This occurred because spending reached its highest share of GDP since 1945 and revenues reached their lowest share of GDP since 1950. Since then, the deficit has declined to a projected 2.8% of GDP in 2014, which is still above the 1946 to 2008 average. Over the next 25 years, deficits are projected to become very large again under current law. The recent decline in the deficit is partly due to improvements in the economy, the expiration of temporary measures taken in response to the recession, and spending cuts (mainly to discretionary spending). Spending was cut by the Budget Control Act of 2011 (BCA; P.L. 112-25) and the reduction in overseas contingency operations (OCO), primarily in Iraq and Afghanistan. Since September 2008, legislative changes to spending have added a cumulative $1.12 trillion to deficits and legislative changes to revenues, mainly the extension of expiring tax provisions, have added $1.75 trillion to deficits, excluding resulting interest costs. Looking forward, several uncertainties are inherent in the baseline that may lead to different outcomes than projected. There have been large errors to budget projections historically, in part because economic forecasting is subject to large errors. The budget has also proven to be highly sensitive to recessions, and CBO does not project a recession in its 10-year projection. Budget projections also do not assume any significant changes in spending on future wars or disasters. The baseline projection follows current law, assuming that the "doc fix" and tax "extenders" will expire as scheduled. If Congress temporarily extends either, as it has done regularly in the past, the deficit will be larger than projected. In the long run, legislative changes will be needed to reduce spending or increase taxes to keep the debt on a sustainable path. Postponing action requires larger changes to be made in the long run, and limits the ability to phase in changes gradually. Economists view the debt as currently unsustainable because it is projected to grow faster than gross domestic product (GDP) indefinitely under current policy, causing an ever growing share of national income to be devoted to servicing the debt. The main source of long-term fiscal unsustainability is the growth in elderly entitlement spending. In particular, spending on major health programs, such as Medicare and Medicaid, is assumed to continue to grow faster than GDP, as it has historically. Overall, mandatory spending has grown as a share of GDP, rising from 4.7% of GDP, when data were first compiled in 1962, to a projected 12.3% of GDP in 2014, and is projected to continue rising. By contrast, discretionary spending has fallen from 12.3% of GDP in 1962 to a projected 6.8% of GDP in 2014, and under the baseline it is projected to decline to its lowest share of GDP ever, primarily because of the BCA's statutory caps. Revenues are projected to stay near their historical average over the next 10 years. Economic theory predicts that deficits have a stimulative effect on the economy during recessions, but harm economic growth by resulting in an increase in interest rates or the trade deficit during economic booms. Thus, the state of the economy is a consideration for the timing of deficit reduction. Options for deficit reduction on the spending side are constrained by the fact that Social Security, Medicare, net interest, and defense discretionary spending make up almost two-thirds of total spending. On the revenue side, 80% of revenue is raised by income and payroll taxes.
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The September 11, 2001 terrorist attacks and the subsequent deliberate release of anthrax sporesin the mail have focused policymakers' attention on the preparedness and response capability of theU.S. public health system. Though small in scale compared to the scenarios envisioned bybioterrorism experts and played out in recent government exercises, the recent anthrax attacksstrained the public health system and exposed weaknesses at the federal, state, and local levels. Many bioterrorism experts believe that had those responsible for the anthrax attacks employed amore sophisticated delivery mechanism or released a deadly communicable biological agent suchas smallpox, the health care system may have been overwhelmed. Bioterrorism poses a unique challenge to the medical care and public health systems. Unlike an explosion or chemical attack, which results in immediate and visible casualties, the public healthimpact of a biological attack can unfold gradually over time. Until a sufficient number of peoplearrive at emergency rooms and doctors' offices complaining of similar illnesses, there may be nosign that an attack has taken place. The speed and accuracy with which doctors and laboratoriesreach the correct diagnoses and report their findings to public health authorities has a direct impacton the number of people who become ill and the number that die. The nation's ability to respondto a bioterrorist attack, therefore, depends crucially on the state of preparedness of its medical caresystems and public health infrastructure. Public health experts have for years complained about the deterioration of the public health system through neglect and lack of funding. They warn that the nation is ill-equipped andinsufficiently prepared to respond to a bioterrorist attack. For example, they point out that there aretoo few medical personnel trained to spot biological attacks, a shortage of sophisticated laboratoriesto identify the agents, and inadequate supplies of drugs and vaccines to counteract the threat. Theyalso contend that inadequate plans exist for setting up quarantines and emergency facilities to handlethe sick and infectious victims. Improving public health preparedness and response capacity offersprotection not only from bioterrorist attacks, but also from naturally occurring public healthemergencies. Public health officials are increasingly concerned about our exposure andsusceptibility to infectious disease and food-borne illness because of global travel, ubiquitous foodimports, and the evolution of antibiotic-resistant pathogens. On June 12, 2002, the President signed into law the Public Health Security and Bioterrorism Preparedness and Response Act of 2002 ( P.L. 107-188 , H.R. 3448 ), which is intendedto bolster the nation's ability to respond effectively to bioterrorist threats and other public healthemergencies. This report provides a brief overview and legislative history of P.L. 107-188 , followedby a detailed side-by-side comparison of the act's provisions with preexisting law. Appendix A lists,by committee, all the bioterrorism-related hearings held in the 107th Congress prior to enactment of P.L. 107-188 . In most cases, hearing testimony is available on the committee Web sites. AppendixB provides a list of bioterrorism-related Web sites. For a discussion of bioterrorism preparednessissues, see CRS Report RL31225, Bioterrorism: Summary of a CRS/National Health Policy ForumSeminar on Federal, State, and Local Public Health Preparedness. Representatives Tauzin (R-LA) and Dingell (D-MI) introduced the Public Health Security and Bioterrorism Response Act ( H.R. 3448 ) on December 11, 2001. The bill wasimmediately considered under suspension of the rules and passed by the House the following dayon a vote of 418-2. H.R. 3448 built on the provisions of a bipartisan Senate bill, theBioterrorism Preparedness Act ( S. 1765 ), which had been introduced by Senators Fristand Kennedy on November 15, 2001. S. 1765 incorporated ideas and objectives fromseveral other Senate bioterrorism bills introduced in the wake of the anthrax attacks. (1) The Senatetook up H.R. 3448 on December 20, 2001, following its passage in the House, substitutedthe text of S. 1765 and passed H.R. 3448, as amended, by unanimous consent. A conference report ( H.Rept. 107-481 ) was filed on May 21, 2002. The next day the House agreedto the conference report by a vote of 425-1. The Senate approved the conference report 98-0 on May23, 2002. The President signed H.R. 3448 into law ( P.L. 107-188 ) on June 12, 2002. As enacted, P.L. 107-188 incorporates many of the provisions in the original House and Senate-passed bills. It adds to the programs and authorities established in Title III of the PublicHealth Service (PHS) Act by the Public Health Threats and Emergencies Act of 2000 ( P.L. 106-505 ,Title I) and creates a new PHS Act Title XXVIII: National Preparedness for Bioterrorism and OtherPublic Health Emergencies. P.L. 107-188 is a 5-year authorization act, which calls for a total of $2.4billion in funding for FY2002, $2.0 billion for FY2003, and such sums as may be necessary for theremaining years. The act authorizes grants to state and local health departments and hospitals toimprove planning and preparedness activities, enhance laboratory capacity, and educate and trainhealth care personnel. It also directs the Secretary to upgrade and renovate CDC's facilities. Inaddition, the act authorizes the HHS Secretary to purchase smallpox vaccine and expand the nationalstockpile of medicine and medical supplies to meet the nation's health security needs. To help prevent bioterrorism and to establish a national database of potentially dangerous pathogens, P.L. 107-188 requires the HHS Secretary to register facilities and individuals inpossession of biological agents and toxins that pose a severe threat to public health and safety, andto promulgate new safety and security requirements for such facilities and individuals. The actgrants authority to the Secretary of Agriculture to establish a parallel set of requirements for facilitiesthat handle agents and toxins that threaten crops and livestock. The bioterrorism legislation alsoincorporates language taken from S. 1275 that authorizes grants to states and localitiesto increase public access to defibrillators (i.e., devices that restore normal heart rhythm to patientsin cardiac arrest by administering a controlled electric shock). P.L. 107-188 contains several provisions to protect the nation's food and drug supply and enhance agricultural security. The act authorizes $545 million for FDA and USDA to hire newborder inspectors, develop new methods of detecting contaminated foods, work with state foodsafety regulators, and protect crops and livestock. It also provides FDA with new regulatory powersto require prior notice of all imported foods and detain suspicious foods for inspection. All foreignand domestic food facilities are required to register with the FDA. Finally, P.L. 107-188 includesa set of provisions aimed at protecting the nation's drinking water supply, including authorizing $160million to provide financial assistance to community water systems to conduct vulnerabilityassessments and prepare response plans. The bioterrorism legislation also includes language reauthorizing the Prescription Drug User Fee Act (PDUFA), which was set to expire on September 30, 2002. Congress first enacted PDUFAin 1992. (2) The original law authorized the FDA tocollect fees from pharmaceutical companies anduse the funds to hire additional reviewers to expedite the drug review and approval process, inaccordance with performance goals developed by the agency in consultation with the industry priorto PDUFA enactment. The 1992 law directed the FDA to provide Congress with an annual reporton the agency's progress in achieving those goals. Encouraged by the success of the user feeprogram, Congress in 1997 reauthorized PDUFA through FY2002. (3) Under PDUFA II, the FDA triedto meet tighter performance goals, as well as achieve more transparency in the drug review processand better communication with drug makers and patient advocacy groups. For more information onPDUFA, see CRS Report RL31453(pdf) , The Prescription Drug User Fee Act: Structure andReauthorization Issues. Table 1 below summarizes the bioterrorism legislation's authorizations of appropriations forFY2002 and FY2003. Only those authorizations that specify a dollar amount are included. Table 1. P.L.107-188: Authorizations of Appropriations for FY2002 and FY2003 ($ millions) Table 2 , beginning on page 6, provides a detailed side-by-side comparison of the provisionsof P.L. 107-188 with preexisting law, where applicable. All the PHS Act Title III provisions relatingto public health emergencies that were established by P.L. 106-505 (i.e., Sections 319, 319A --319G) are included in the table, regardless of whether they are amended by the bioterrorism bill. Unless specifically noted otherwise, the term Secretary refers to the Secretary of HHS. Table 2. Comparison of P.L.107-188 with Preexisting Law
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Last fall's anthrax attacks, though small in scale compared to the scenarios envisioned by bioterrorism experts, strained the public health system and raised concern that the nation isinsufficiently prepared to respond to bioterrorist attacks. Improving public health preparedness andresponse capacity offers protection not only from bioterrorist attacks, but also from naturallyoccurring public health emergencies. On June 12, 2002, the President signed into law the Public Health Security and Bioterrorism Preparedness and Response Act of 2002 ( P.L. 107-188 , H.R. 3448 ), which is intendedto bolster the nation's ability to respond effectively to bioterrorist threats and other public healthemergencies. The act builds on the programs and authorities established in Title III of the PublicHealth Service (PHS) Act by the Public Health Threats and Emergencies Act of 2000 ( P.L. 106-505 ,Title I). P.L. 107-188 is a 5-year authorization bill, which calls for a total of $2.4 billion in funding in FY2002, $2.0 billion in FY2003, and such sums as may be necessary for the remaining years. Theact authorizes the Secretary of Health and Human Services (HHS) to upgrade and renovate facilitiesat the Centers for Disease Control and Prevention (CDC), purchase smallpox vaccine, expand thenational stockpile of drugs, vaccines, and other emergency medical supplies, and provide grants tostate and local governments and hospitals to improve preparedness and planning. The Secretariesof HHS and Agriculture are required to register and regulate facilities that handle potentiallydangerous biological agents. The anti-bioterrorism legislation also includes provisions to protect the nation's food and drug supply and enhance agricultural security, including new regulatory powers for the Food and DrugAdministration (FDA) to block the importation of unsafe foods. To protect the drinking watersupply, the act requires community water systems to conduct vulnerability assessments and developemergency response plans. P.L. 107-188 also reauthorizes the Prescription Drug Use Fee Actthrough FY2007. The following analysts may be contacted for additional information:
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The block grant of Temporary Assistance for Needy Families (TANF) is best known as a funding source for cash welfare for low-income families with children. However, the block grant also funds a wide range of benefits and services for economically disadvantaged families. It also funds activities to help achieve the goals of reducing out-of-wedlock pregnancies and raising children in two-parent families. TANF was created in the 1996 welfare reform law ( P.L. 104-193 ), with the funding originally slated to expire at the end of Fiscal Year (FY) 2002. Congress debated reauthorization of the block grant during the 107 th through the 109 th Congresses. Comprehensive legislation to reauthorize and revise TANF did not pass during this period, and the program operated on the basis of a series of temporary extensions. The Deficit Reduction Act of 2005 (DRA, P.L. 109-171 ) included a slimmed down version of welfare reauthorization that extended TANF funding through FY2010, though TANF " Supplemental Grants " (discussed below) were extended only through FY2008; revised the work requirements that apply to welfare recipients; and established new funding for competitive grants to demonstrate initiatives to promote healthy marriage and responsible fatherhood. A decision on whether and how to extend TANF supplemental grants, which go to 17 states in the South and West on the basis of low historic levels of welfare funding and high population growth, beyond September 30, 2008, is the only "must-do" task related to TANF in the 110 th Congress. However, Congress might examine the impact of DRA's provisions related to TANF work participation standards for welfare recipients. Additionally, in light of renewed interest in issues related to poverty and disadvantaged families with children, interest might be raised in the flexibility states have to use TANF funds for a wide range of "non-welfare" activities. TANF is the block grant created in the 1996 welfare reform law that replaced the New Deal program of Aid to Families with Dependent Children (AFDC). AFDC provided monthly cash welfare benefits to needy families with children, with most of these families headed by single mothers. Concerns that AFDC helped create disadvantage by discouraging work and breaking up families dominated welfare reform debates from 1970 onward, culminating in the 1996 welfare reform law. Some of the most visible policies of the 1996 welfare reform law are TANF work requirements for welfare recipients, time limits on the receipt of welfare, and the end of a federal entitlement to welfare for needy families with children. The monthly TANF cash welfare benefit, like the monthly AFDC benefit before it, is determined by the states, and benefit amounts vary widely among the states. In January 2005, the monthly cash benefit in California was $723 for a family of three. The California benefit amount is high relative to many other states, though even that benefit is only a fraction (54%) of poverty-level income. In Alabama, a family of three received $215 per month (16% of poverty-level income). Table 1 shows selected economic and social indicators for 1995, 2000, and 2006. As shown, the cash welfare caseload plummeted from nearly 5 million to 1.9 million families over this period. Most of that caseload decline occurred from 1995 to 2000, though recently the cash welfare caseload has fallen again. The number of children in families receiving cash welfare fell from 9.1 million to 3.5 million from 1995 to 2006. Work among single mothers (who head most welfare families) increased from 1995 to 2000, with some slippage in the 2000-2006 period. However, despite the decline in receipt of cash welfare and increase in work among single mothers, improvements in other social and economic indicators have been less dramatic. The child poverty rate did fall from 1995 to 2000, but the 2006 rate of 17.4% is higher than in 2000. There remained 12.8 million children living in families with incomes below the poverty threshold in 2006. Further, the percentage of babies born out-of-wedlock in 2006 was 38.9%—an all-time high. Cash welfare reaches far fewer disadvantaged children than it did prior to welfare reform. The ratio of the average monthly number of children in families receiving cash welfare to the total number of children in poverty declined from about six out of ten in 1995 to less than three out of ten in 2006. TANF is not just a welfare program. The 1996 law granted states permission to use funds for a wide range of benefits, services, and activities to address some of the social and economic ills afflicting disadvantaged families with children. States may use their funds in any manner "reasonably calculated" to further TANF's purpose, which is to provide states with the flexibility to achieve four goals set in statute: (1) provide assistance to needy families so that children may live in their own homes or in the homes of relatives; (2) end dependence of needy parents on government benefits by promoting work, job preparation, and marriage; (3) reduce the incidence of out-of-wedlock pregnancies; and (4) promote the formation and maintenance of two-parent families. Given the fixed funding of the TANF block grant, states are able to use the savings from the welfare caseload decline to fund other "nonwelfare" benefits, services, and activities. Total funding in the TANF "system" comprises both the federal block grant to states and a state's own funds spent to meet a maintenance of effort (MOE) requirement. Figure 1 shows the uses of TANF and MOE funds in FY2006. It shows that the categories typically associated with a traditional cash welfare program—cash benefits, administrative costs, and work activities—accounted for only a little more than half of total TANF funds. Thus, TANF has the potential to make an impact on disadvantaged families with children through both its "nonwelfare" benefits, services, and activities, as well as its "welfare" component. Enactment of the Deficit Reduction Act of 2005 (DRA, P.L. 109-171 ) ended more than four years of congressional debate on "reauthorizing" the TANF block grant. Over the 2002 to 2005 period, Congress passed twelve temporary extensions of the program while more comprehensive reauthorization bills remained pending. The DRA included a slimmed down version of reauthorization, extending TANF funding and making some limited policy changes. Many of the policy changes proposed in the reauthorization bills considered from 2002 to 2005 were not included in the DRA, and some of those changes may be revived for legislation in the 110 th Congress. Additionally, DRA's changes to the TANF work participation standards have met with some criticism that also might spur proposals in this Congress. This section provides a brief summary of the DRA provisions affecting TANF. For more detail, please see CRS Report RS22369, TANF, Child Care, Marriage Promotion, and Responsible Fatherhood Provisions in the Deficit Reduction Act of 2005 (P.L. 109-171) , by [author name scrubbed]. The DRA extended most TANF funding through FY2010. However, TANF " Supplemental Grants " (discussed in some detail below) were extended only through FY2008. Therefore, the 110 th Congress may consider whether to further extend these grants. Additionally, the DRA eliminated two TANF bonus funds: the first bonus ($200 million per year) was for states that achieved high performance on measures relating to achieving TANF goals; the second ($100 million per year) was for states that reduced out-of-wedlock birth ratios without increasing abortions. The 1996 welfare reform law established work participation standards for a state's welfare caseload. States that fail these participation standards could be financially penalized by a reduction in their block grants. The TANF work participation standards are numerical standards computed in the aggregate for a state's cash welfare caseload. The participation standards are 50% for all families; and 90% for the two-parent portion of its cash welfare caseload. These standards may be met either by engaging welfare adult and teen parents in specified work and job preparation activities or through reductions in the TANF cash welfare caseload. The 1996 welfare reform law provided states with credit for caseload reduction that occurred from FY1995. The caseload reduction credit provided a state with a one percentage point reduction in its participation standards for each percent decline in its TANF cash welfare caseload from FY1995. The large caseload declines that occurred subsequent to FY1995 meant that most states had large reductions in the standards they were required to meet; for many states, the effective (after credit) participation standard was reduced to 0%. The DRA revised the caseload reduction credit, so that states will receive credit only for future welfare caseload reduction. Beginning in FY2007, states receive credit for caseload reductions measured from FY2005 forward. The effect of this change is much smaller caseload reduction credits for FY2007 and higher effective (after credit) participation standards. Like the prior law caseload reduction credit, states are not given credit for caseload declines estimated to come from policy changes that restrict eligibility for welfare benefits. Under the 1996 welfare reform law, states could provide welfare to families using state MOE funds and not count those families when determining whether the state met its work participation standard. States could designate families receiving welfare from MOE funds as being assisted by "separate state programs" outside of the TANF program. This effectively exempted the family from TANF's work participation standards. The most common use of separate state programs was to house a state's two-parent welfare caseload and avoid the 90% participation standard, but states also used separate state programs for other populations such as college students and the disabled. The DRA requires, beginning in FY2007, that states count families receiving cash welfare in separate state programs when determining work participation rates. This effectively ends the exemption from TANF work participation standards for families placed in separate state programs. Before the DRA, the operational details of state work programs were generally left to the states. Federal law lists 12 categories of activities that count toward the participation standards, but regulations promulgated during the Clinton Administration from the Department of Health and Human Services (HHS) explicitly allowed states to define the specific activities counted in these categories. HHS also left to states how work participation would be verified (i.e., how to determine whether a recipient scheduled to be in an activity actually performed that activity). The Government Accountability Office (GAO), in a 2005 report, found that the lack of further definition for what counts as work led to a wide-range of state practices, particularly with respect to education and rehabilitative activities. GAO concluded that this led to an "inconsistent" measurement of work across states and recommended that HHS regulate what counts as work. The DRA required HHS to issue regulations providing a consistent definition of work activities and describing procedures for states to verify work activity. These regulations were issued in interim form on June 29, 2006, then revised and published in final form on February 8, 2008. The major issues raised by those regulations are discussed below. See " What Activities Count Toward the Participation Standards? " section later in this report. The DRA established within TANF new competitive grants totaling $150 million per year for research and demonstration projects to promote "healthy" marriages and responsible fatherhood. The marriage promotion grants are generally for nonwelfare services (and not necessarily restricted to low-income families) such as advertising campaigns, education in high schools on the value of marriage, and education in "social skills." The "responsible fatherhood" grants attempt to reach noncustodial parents with education in "social skills" as well as job training. The DRA extended the bulk of federal TANF and MOE funding through FY2010. However, DRA continued supplemental grants only through FY2008, making a decision on their extension beyond then the business of the 110 th Congress. Unless Congress acts to extend supplemental grants, the FY2009 TANF grant awards, beginning October 1, 2008, would be reduced for the 17 states that receive supplemental grants. In light of the potential for an economic slump, 110 th Congress might also review TANF's contingency provisions for financing unanticipated spending increases because of a recession. The bulk of federal funding for TANF is in a fixed basic block grant, with its amount determined by the amount of funding a state received under pre-1996 welfare and related programs. All state funding, under the TANF MOE, is also determined by the historical level of welfare spending by the state. Each state's basic grant and MOE levels has been frozen since FY1997: it is neither adjusted for inflation nor for changing circumstances (population or TANF cash welfare caseload). Thus, TANF funding rules have effectively "locked-in" historical levels of funding, which reflected the pre-1996 welfare policies of states. During the welfare reform debate of the mid-1990s, concerns were raised that the fixed funding based on historical spending patterns disadvantaged two sets of states: (1) those that paid relatively low welfare benefits and consequently had low federal grants relative to poverty in the state; and (2) high population growth states. The supplemental grants were added to TANF to target additional funds to such states. Seventeen states qualify for supplemental grants. From FY1998 through FY2001, supplemental grants grew each year until they reached $319 million. They have been frozen at that level since. The DRA extended supplemental grants at $319 million per year until the end of FY2008. Table 2 shows the 17 states that receive supplemental grants and the grant amount. The table shows the amount of TANF funding each of these states would lose if Congress does not extend supplemental grants beyond FY2008. Supplemental grants, at $319 million per year, have only a small impact on the pattern of welfare funding relative to the number of poor children in a state. Appendix Table A-1 ranks states by TANF and MOE funding per poor child per year. Total basic block grant plus MOE funding per poor child per year ranges from a low of $480 in Arkansas to a high of over $5,000 in Hawaii. Supplemental grants bring up funding for some states with low funding per poor child. For example, the $480 in basic funding per poor child per year in Arkansas is 23% of the national average. The Arkansas supplemental grant adds $38 per year per poor child, raising its funding to $518 per year per poor child. The $518 is 25% of the national average. Additionally, not all states with low levels of funding per poor child receive supplemental grants; some were excluded because their population growth was less than the national average. A one-year extension of supplemental grants through FY2009 is included in H.R. 6331 , a Medicare bill. President Bush vetoed the bill (because of certain Medicare provisions), but Congress overrode the veto on July 15, 2008. Extension of supplemental grants through FY2010, when other TANF grants expire, will require further action by Congress. Earlier in 2008, Senator Rockefeller introduced S. 2820 , which would both extend and expand supplemental grants. S. 2820 would fund supplemental grants through FY2010 and provide additional grants for all states with below average total federal and state TANF resources per poor child. TANF's fixed block grant led to concerns that funding might be insufficient in the event of a recession. Therefore, the 1996 welfare reform law included three provisions intended to allow states to supplement their annual block grant in the case of a recession. A state may reserve or "save" funds during periods of economic growth to be used to pay for any increased costs associated with a recession; draw from a "contingency fund," if it meets criteria of economic need, expends extra state funds to reach a level of 100% of FY1994 state spending, and also expends extra state funds to match federal contingency funds; and obtain interest-bearing loans from the federal government that would have to be repaid. TANF was only tested by one recession—the relatively shallow 2001 recession. However, during and after that recession, employment among single mothers slumped some and child poverty increased. On a national level, the cash welfare caseload did not respond as it remained relatively constant during the period 2001 to 2004 when child poverty increased. Unspent TANF funds have sometimes been seen not as "reserves" to save in the case of a recession but as an indicator of lack of need. The Bush Administration's 2002 welfare reauthorization proposal and all except one of the comprehensive reauthorization bills considered during 2002-2005 allowed states to designate either some or all of their unspent monies as "contingency" reserve funds. No state drew funds from the TANF contingency fund during or immediately after the 2001 recession. There were two major reasons states failed to draw down contingency funds during a recession. First, states would have had to increase spending from their own funds before they could qualify for the first matching contingency dollar. Second, many states failed to meet the criteria of economic need based on high and increasing unemployment rates and food stamp caseloads during the recession. Ironically, a few states drew upon contingency funds in 2005 and 2006 —well after the 2001 recession had ended. They qualified based on high food stamp caseloads. The 1996 law provided that a state would be considered economically needy for contingency funds if a state's food stamp caseload was 10% higher than its adjusted caseload during the corresponding period in FY1994 or FY1995. (FY1994 and FY1995 are adjusted downward for immigrants made ineligible for food stamps by the 1996 welfare reform law.) Food stamp caseloads, unlike cash welfare caseloads, did increase with the 2001 recession and have remained historically high. The food stamp contingency fund trigger is also expressed in terms of number of participants, rather than a rate of receipt, in a state. Population growth over the 12- or 13-year period means that the number of participants in a state can be higher than in the base years, even if the rate at which people in the state receive food stamps declined. The 2002 Bush Administration welfare reauthorization proposal and all comprehensive reauthorization bills considered during the 2002-2005 period would have made some changes to the contingency fund. Reauthorization proposals emanating from the Senate Finance Committee would have made more far-reaching changes to the contingency fund. They would have eliminated matching requirements and made the unemployment and food stamp criteria for qualifying for contingency funds more sensitive to recent economic changes. TANF includes a loan fund, so that states running short of TANF grants could borrow funds from the federal government. These loans would have to be repaid with interest. Aside from loans to states affected by Hurricane Katrina that were forgiven, no state has drawn a loan from the fund. The Bush Administration's 2002 welfare reauthorization proposal and all comprehensive reauthorization proposals considered during 2002-2005 would have eliminated the loan fund. However, DRA extended the TANF loan fund through FY2010. Though "welfare" now accounts for only a little more than half of all TANF and MOE funding, most issues the 110 th Congress might consider, other than financing issues, relate to families receiving welfare. Specifically, these issues relate to the law's requirement that a specified percentage of cash welfare families in each state participate in work or related activities. DRA's changes to the caseload reduction credit require states to either: (1) raise the share of families on the welfare roles working or engaged in job preparation activities or (2) reduce the cash welfare caseload. Although much attention has been paid to the required increase in participation standards and the impact of DRA-required regulations specifying the operational details of state work programs, the cash welfare caseload has been declining at an accelerating rate. Over the most recent 12-month period for which data are available, the TANF/MOE cash welfare caseload declined by 10%. The change in the caseload reduction credit—beginning in FY2007, providing credit only for caseload reduction from FY2005—means that many states had to either quickly raise participation in activities or reduce their caseloads to meet TANF's work participation standards. Simultaneously, states had to adjust to new rules, in the form of regulations from HHS required by the DRA, for what specific activities count toward the participation standards and how participation is supervised and verified. However, a couple of points might help put issues regarding TANF work participation standards in perspective. First, although the TANF work participation standard rules undoubtedly influence the design of state work requirements, states themselves still determine the requirements that apply to individuals. States are free to determine that some families may be exempt from participating and can determine that some individuals in these families may participate in activities that are not countable toward the federal standards. Second, these TANF work participation rules affect a relatively small number of families each month. As discussed above, while cash welfare caseloads have declined markedly, within the cash welfare caseload the number of families with an adult recipient who is not employed has declined even faster. (Families with a non-employed adult recipient have been the focus of most welfare-to-work efforts.) Figure 2 shows the composition of the cash welfare caseload in FY2006. Child-only cases are families receiving cash welfare where the adults caring for the children are not receiving benefits on their own behalf. They comprised 43% of all cash welfare families in FY2006, totaling about 830,000 families per month. These families have been excluded from TANF's work participation standards. Additionally, about 8% of families were single-parent families caring for an infant (153,000 families per month), who may be exempted and excluded from work participation standards. An additional 13% of all cash welfare families (259,000) already had an employed member. Therefore, the focus of much of the work rules is the remaining 36% of families (713,000 families per month) with an adult recipient who is not employed. This is not to say that TANF work rules are unimportant. TANF cash welfare is received by the most disadvantaged of poor families with children, and policymakers remain concerned about finding effective strategies to help adults in these families move from welfare to self-sufficiency. As indicated above, the rules are likely to influence state policies concerning how this very disadvantaged group is served. FY2006 was the last year states received credit for caseload reduction from FY1995. In that year, the caseload reduction credit reduced the statutory 50% TANF work participation standard to below 20% in 47 states, among them 0% in 19 states. Beginning in FY2007 states are given credit only for caseload reduction from FY2005. Based on caseload data for FY2005 through FY2006, most states are likely to receive a caseload reduction credit against their FY2007 participation standard. The national average decline for FY2005 to FY2006 in the cash welfare caseload was 6%. Actual caseload reduction credits might be higher or lower: states are not given credit for caseload reduction that results from restricting eligibility, but might get additional credit if the state is aiding cases using state dollars in excess of the TANF MOE. Assuming that the average state receives a credit equal to the caseload decline, the national average effective all-family participation standard would be 44% for FY2007. (The two-parent standard is discussed below.) This is substantially higher than the national average participation rate states officially achieved in FY2006 of 32%. (See Appendix Table A-2 for FY2006 official work participation rates by state.) States that fail to meet TANF work participation standards may be penalized by up to a 5% reduction in their block grant for the first year of noncompliance, though the penalty is reduced by the "degree" of noncompliance. Penalties increase for each subsequent year that a state fails to meet the standards. However, states can either avoid or delay the penalty for failing to meet the FY2007 participation standard by either entering into a corrective compliance plan or claiming reasonable cause. HHS has already publically announced that it would consider requests to avoid the penalty based on reasonable cause if a state's legislature had not met in time to enact program changes needed to meet the FY2007 requirement. S. 1461 (Rockefeller) would prohibit HHS from penalizing a state for failing to meet participation standards for the period of time (FY2007) while HHS and the state is negotiating its work verification plan and for one year thereafter. President Bush's FY2009 budget proposal would eliminate the higher, 90% work participation standards required of two-parent welfare families. All welfare reauthorization proposals that received action in 2002 through 2005 sought to eliminate the separate standard, except the slimmed down version of welfare reauthorization included in the conference report on the DRA. In the 110 th Congress, H.R. 3188 (Weller) would eliminate the two-parent standard. Additionally, the elimination of the two-parent standard is included in broader "responsible fatherhood" legislation proposed in H.R. 3395 (Davis-Il) and S. 1626 (Bayh). The higher participation standard for two-parent families on welfare dates back to pre-TANF policies under the Family Support Act of 1988. That act first required states to provide welfare for two-parent families; before then it was optional. The Family Support Act also established participation standards in the pre-1996 education, employment, and training program for welfare families. Higher participation standards and stricter work requirements for two-parent families responded to criticisms that extending welfare to two-parent families without work could promote more welfare dependency. The two-parent component of the cash welfare caseload remained relatively small even after the 1988 expansions and subsequently after states liberalized eligibility for two-parent families under TANF. In FY2006, the two-parent caseload averaged 98,000 families per month, or 5% of the total cash welfare caseload. (There is a great deal of variation across states in the share of the cash welfare caseload that consists of two-parent families. See Appendix Tables A3 and A4 for a state-by-state breakdown of the two-parent caseload versus the one-parent and no-parent caseload in FY2006.) Though the number of two-parent families on cash welfare has remained small, work participation rates for this category of families never reached the high levels envisioned either under the Family Support Act or TANF. In FY2005, the national work participation rate for two-parent families in both TANF and separate state programs was 36%—only a few percentage points higher than the all families work participation rate of 32%. (FY2005 is the last year for which this comparison is available. ) As previously noted, many states avoided having to meet the 90% two-parent standard by placing the two-parent component of their caseload in separate state programs. In FY2006 (the latest year for which official TANF work participation data are available), 19 states had all of their two-parent cash welfare families in separate state programs. Other states generally met the standard, in part, through caseload reduction measured from FY1995. (Arkansas and the District of Columbia failed the two-parent standard.) The combination of the two DRA changes—counting families in separate state programs and providing a credit for welfare caseload declines only from FY2005—means that many states are in jeopardy of failing the two-parent standard. Failure to meet the two-parent participation standard by itself is likely to result in a fairly small penalty to the states. Under HHS regulations, the maximum penalty for failure to meet the two-parent participation standard would be pro-rated based on the share of the cash welfare caseload that consists of two-parent families. However, this would not be the case if a state failed both the all-family and two-parent participation standards. The rules penalize a state more heavily if they fail both standards than if they fail one of the two standards. Additionally, the high two-parent participation standard potentially encourages states to calculate ways to "game" TANF rules. Through June 2007, 12 states had dropped serving two-parent families with TANF or MOE funds. States are no longer reporting information on these families, though states may have shifted to serving these families with state-only funds outside of the TANF-MOE system. Federal law lists 12 categories of activities that count toward TANF work participation standards. Table 3 lists these 12 categories and any statutory limitation that might apply to counting participation in these categories. The statutory list influences the content of state work programs for cash welfare recipients, since these are the categories of activities that count toward meeting the numerical performance standards states must meet or risk being penalized. The federal participation standards reflect a "work-first" approach, which emphasizes job seeking and relatively rapid attachment to either a job or an activity to work off welfare benefits. All pre-employment activities are subject to limits. Job search and readiness is usually limited to six weeks in a year (12 weeks under certain circumstances). Education and training are subject to limits, including a 12-month lifetime limit for counting vocational educational training. For adults, education and training other than vocational educational training counts only in conjunction with other activities more closely related to work. Teen parents (under the age of 20) may be deemed engaged in work through education. The "work-first" approach to work participation is part of a long-standing controversy over the effectiveness of different approaches to getting welfare recipients off the rolls and into jobs. "Work-first" approach advocates often point to research conducted in the 1990s that found that when the work-first and education-focused programs were directly compared, the long-term impact of education-focused programs on increasing earnings and reducing welfare receipt was no greater and sometimes smaller than programs that focus on job seeking and quick attachment to a job. Additionally, the impact of "work-first" programs occurs faster. However, the evaluated programs with the largest increases in earnings and reductions in welfare tended to have a strong work message like the "work-first" programs but provided some flexibility for education and training. For example, large impacts were attributed to a program operated in Portland, Oregon during the 1990s, that, like other "work-first" programs, had job search as its most common activity. However, Portland program recipients also often participated in education or in both job search and education during the two years following entry into the program more often than in other evaluated programs. In Portland, job search and education were typically done sequentially, not simultaneously. Additionally, a fairly large proportion of adults on welfare have certain barriers to employment; that is, they are either ill or disabled, are taking care of ill or disabled children, have mental health issues, or have been victims of domestic violence. The Clinton Administration explicitly side-stepped the issue of whether TANF's work activities should accommodate activities designed to address "barriers" to work, allowing states themselves to interpret the 12 federal categories of activities and decide what specific activities were countable toward the participation standard. The comprehensive welfare reauthorization proposals considered during 2002 to 2005 differed considerably in their approach to education and disabilities, reflecting the old controversies. As shown above, the TANF statute limits education and training as activities countable toward the TANF work participation standards. Vocational educational training is limited to 12 months in a lifetime. Other educational activities are generally countable only in combination with work or those activities more closely associated with work. HHS, in its interim regulations required by DRA, prohibited states from counting coursework leading to a four-year or advanced college degree program from being counted as "vocational educational training." However, in its final regulations published on February 5, 2008, HHS reversed this policy, allowing states to count all college as vocational educational training. Thus, college can now count as the prime or sole activity of a cash welfare recipient for up to 12 months. After 12 months, college coursework can be combined with work (for example, a paid work-study position) as "job skills training directly related to employment" and thus be counted toward the TANF work participation standards. However, in FY2006 a large share of TANF adult recipients failed to have even a high school diploma or equivalent. Teen parents can be deemed as satisfying the participation standards through education leading to a high school diploma or General Educational Development (GED) credential. However, adult recipients aged 20 and older may have their participation in a GED program count only in combination with work or with activities more closely related to work. Figure 3 shows the educational attainment of TANF teen heads of households and adult recipients in FY2006. Overall 42% of TANF adults and teen heads of households lacked a high school diploma. Among the adult recipients (aged 20 and older), 41% lacked a high school diploma or equivalent with the highest incidence being in the youngest age categories. Under HHS regulations, participation in a GED program, adult basic education, and English as a Second Language (ESL) activities are counted in two ways. They may be counted within vocational educational training, if they are a "necessary" part of a larger vocational education program. Thus, if an individual is enrolled in a community college vocational education program, remedial adult basic education or ESL classes that may be needed for the individual to succeed in the program may be counted toward TANF work participation standards. Pursuing a GED, adult basic education, and ESL activities may also be counted in the participation categories that may be counted only in combination with work. For single-parent families, this means that they count only after an individual already participated for at least 20 hours in unsubsidized or subsidized work, community service, work experience, on-the-job training, job search and readiness, vocational educational training, or providing child care to a community service recipient. For single parents with a school-age child, this means that activities such as pursuing a GED, adult basic education, or ESL classes can count for the remaining 10 hours of participation to meet the 30 hours of participation required of them. However, single parents with a pre-school child—who comprise a large share of the young TANF adults without a high school degree or equivalent—are required to participate for only 20 hours per week. The state gets no further credit by having such recipients engaged in GED, adult basic education, or ESL activities because all 20 hours of participation must come from work or activities closely related to work. Research has consistently shown that a fairly large share of families receiving cash welfare have non-educational barriers to work. Pre-TANF law exempted from participation requirements the ill and incapacitated and those needed in the home to care for an ill or disabled family member. TANF made no such exemption. Studies show that at least one-third of TANF adults have disabilities, and one in four families on TANF include a child with an impairment. Though federal benefits are available for disabled persons, such as the Supplemental Security Income Program (SSI) and Social Security Disability Insurance (SSDI), cash welfare has often served as a way-station for those awaiting determination that they are eligible for them. The SSI and SSDI disability determination process can take months or even span several years if the initial application is turned down and appealed. Additionally, TANF may provide benefits to those who have impairments that are not permanent or considered severe enough to qualify them for SSI or SSDI. Further, research by the GAO concluded that former TANF cash welfare recipients with physical or mental impairments are less likely to be employed than those without impairments. When those with impairments do get jobs, they tend to be at lower wages than for those without impairments. As discussed below, many families dealing with disability have—like those considered easier to employ—left the welfare rolls and contributed to the caseload decline. HHS conducted a study in six states to examine employment barriers within their single parent, cash welfare caseloads. Figure 4 shows the percent of recipients in six states in the HHS study with selected barriers to employment. It shows the most common barrier was mental health issues, reported as a barrier by 30% of all recipients. Having a child with a disability or special needs was the second most common barrier (29%), followed by a recipient's own physical health issue (21%). Rehabilitative activities, including vocational rehabilitation, mental health services, and substance abuse, are not explicitly mentioned in federal law as activities that would count toward TANF work participation standards. Before DRA, states defined these activities inconsistently across the 12 federally listed categories of work activities that are countable toward the standards. Some states offered certain rehabilitative services, but did not count rehabilitative activities toward the federal work participation standards. Some states placed disabled recipients into "separate state MOE programs," effectively exempting them from work participation standards, a practice not permitted under DRA. The HHS regulations issued under the DRA place such rehabilitative activities under the time-limited job search and readiness category. Activities in this category are countable for up to six weeks in a year—12 weeks under certain conditions that many, but not all, states currently meet. No more than four consecutive weeks of job search or readiness may be counted. The time limit applies to all activities within this category. This sets up a "zero-sum" situation: a week spent in job search reduces the period of time that rehabilitative activities can be counted by one week, and vice-versa. The final HHS regulations provided states some additional flexibility relative to the interim regulations for counting job search and readiness. Under the interim regulations, one hour of participation in the job search and readiness category during the week resulted in that full week being counted toward the six- or 12-week limit. HHS final regulations convert these six- or 12-week limits to hourly equivalents. Over the course of a year, single-parent families with preschool children are granted up to 120 hours of job search and readiness; other families are granted up to 180 hours in this category. (This is based on a 20 hour per week requirement for single parents caring for a child under the age of 6, and 30 hours per week for others.) These limits double if a state qualifies for 12 weeks of job search and readiness. Further, the HHS regulations allow states to count "supported work" programs for disabled recipients as either subsidized employment or on-the-job training (depending on the content of the program). "Supported work" programs in the vocational rehabilitation system combine employment with various support services. HHS regulations also permit states to exempt from work participation requirements, and exclude when calculating participation rates, families with adults needed in the home to care for a disabled child. S. 1730 (Smith) would allow states to create an individualized employability plan for a disabled adult or an adult caring for a disabled family member and count them toward the TANF participation standards. The bill would also allow states to exempt from the participation standards applicants for SSI and those who would temporarily meet the SSI standard for disability. TANF cash aid is usually talked about in the context of families with children where the parents do not work, sometimes because of barriers to employment or stable employment, or who face low wages. However, a sizeable share of the TANF cash aid caseload—approximately 484,000 children out of the 3.5 million children on the rolls in FY2006—is comprised of children living with relatives, such as grandparents, aunts or uncles. Many children living with relatives are doing so by private or public arrangement, where a relative has simply assumed responsibility for the children of parents who cannot or will not care for and support them. Others, however, are caring for children who are in foster care. In this second situation, a court, typically because of the abuse or neglect of a child by their parents, has ordered the child removed from the home of the parents and has given the state child welfare agency care and placement responsibility for the child. Children ordered to foster care who are placed by the child welfare agency with non-relatives receive a monthly foster care maintenance payment to cover their "room and board." However, foster children who are placed by the child welfare agency with relatives sometimes receive a TANF payment. While a TANF payment is typically worth much less than a foster care payment, relative caregivers are nearly always eligible for TANF payment and may turn to it for financial support because they do not meet the eligibility requirements for federally supported foster care. In particular, those criteria provide that any foster family home where a child is placed must meet state licensing requirements in order for the state to seek federal reimbursement of a foster care maintenance payment. Many relatives cannot meet (or do not wish to undergo) state foster care licensing procedures. S. 661 (Clinton) and H.R. 2188 (Davis, IL) could increase relative access to federally supported foster care maintenance payments by permitting states to establish separate licensing standards for relatives, which, provided the standards ensured children's safety, could include less restrictive requirements than those for non-relatives. Though these bills do not amend the TANF program itself, they can affect the TANF cash aid caseload by permitting greater access to an alternative source of federal help for relative caregivers raising children. That is, they could transfer these families from the TANF cash aid caseload to the foster care caseload. Families receiving TANF cash welfare are required to assign (turn over rights to) child support received from noncustodial parents to the state to reimburse it and the federal government for their welfare costs. States may pay some or all of that child support to the family but must pay the cost of that "passed-through" child support. The DRA gave states a financial incentive to pass-through some child support to families receiving cash welfare, by having the federal government share the cost of the first $100 in monthly child support—$200 for a family of two or more children—in passed through child support, so long as the receipt of that child support by the family does not affect a family's TANF eligibility or benefit amount. H.R. 896 (Ryan) would require all child support paid by noncustodial parents to be passed-through to a TANF cash welfare family. However, H.R. 896 would leave it up to the states to decide whether the child support received by the family would affect TANF eligibility or decrease the TANF cash welfare benefit amount. Discussions of the new TANF work participation standards have tended to focus on the need to increase the number of recipients engaged in countable activities. However, a state could meet the increased standards by either increasing engagement in activities or producing further caseload declines. Thus, the DRA gives states a strong incentive to attempt to cut their caseloads from FY2005 levels. Further, with fixed federal funding through FY2010, either keeping a family off or moving a family off the TANF cash welfare rolls helps the state meet the work participation standards without having to spend additional funds to engage its adult members in work. The resulting caseload decline would free up money to help maintain funding for the "nonwelfare" activities funded through TANF. Figure 5 shows that the national cash welfare caseload has recently resumed its decline, after being relatively constant for a number of years. Over the most recent 12-month period, the caseload has declined by 10.4%—the greatest decline since June 1999 to June 2000. Some of these declines are likely to stem from changes in eligibility rules for TANF/MOE cash welfare programs, including ending TANF/MOE funding for certain families (two-parent families, families dealing with disabilities) and funding their benefits from state-only funds outside the TANF/MOE system. There is no reporting on the number of families receiving benefits in state-only programs outside of the TANF/MOE system, so it is not possible to quantify at this point how much of the recent caseload reduction was caused by shifting families to state-only programs. The most common metric used to evaluate welfare policies is whether they lower welfare caseloads, and caseload decline is the most cited indicator of the success of welfare reform. A TANF goal is to "end dependency on government benefits," and lower cash welfare caseloads help achieve that end. To the degree that receipt of welfare itself helps create disadvantage, a smaller role for cash welfare in society could be viewed as a positive outcome. Families that work are eligible for benefits outside of the cash welfare system, and some of these benefits such as the Earned Income Tax Credit (EITC) and the State Children's Health Insurance Program (SCHIP) have increased their role in supporting families with children while the role of cash welfare has diminished. However, the TANF welfare caseload decline raises questions about the economic security of those who face barriers to work or cannot achieve steady work. The available evidence indicates that the TANF caseload decline has been broad-based: the decline has affected both those who were "work-ready" as well as those considered "hard-to-serve." The Urban Institute, using data from their National Survey of American Families, estimated that from 1997 through 2002, the share of welfare recipients with specified barriers to work had changed little. However, the share of recent welfare leavers with barriers such as health conditions that limit work and poor mental health has increased. Despite the increased role of programs that supplement and support work, the declining role of welfare might leave families with barriers to work or without steady work with a diminished safety net to support their children. The savings to government budgets from the cash welfare caseload decline remain within the TANF system for states to use in any manner reasonably calculated to achieve the broad purposes of the block grant. In FY2006, almost half of all TANF and MOE funding—totaling $14 billion—was available to states for benefits, services, and activities other than those associated with traditional cash welfare programs. TANF funds are used for a wide range of activities often discussed in the debate about ways to combat poverty: providing early childhood programs, supporting post-secondary education, job retention and advancement programs, and helping noncustodial parents. Thus, while TANF cash welfare reaches less than three in ten poor children, TANF's nonwelfare benefits and services can have a much broader reach into the population of disadvantaged children and their families. The "nonwelfare" component of TANF is much less debated than its traditional cash welfare programs and activities for a number of reasons. First, the information TANF requires of states to describe the "nonwelfare" component of TANF precludes a comprehensive and systematic examination of these activities. A 2006 GAO report found that "reporting and oversight mechanisms have not kept pace with the evolving role in TANF budgets, leaving information gaps at the national level related to the numbers served and how states use funds to meet welfare reform goals...." Second, on the basis of what is known, a great deal of TANF's "nonwelfare" spending goes to two other federal-state program areas: child care and child welfare. (Child welfare means foster care, adoption assistance, and other benefits and services for children who either have been, or are at risk of, abuse and neglect.) Both of these areas have their own dedicated funding streams, which are supplemented with considerable dollars by TANF. Both of these areas also have their own policy debates which, while related to TANF, are sometimes conducted independently of TANF debates. The welfare reauthorization proposals considered by Congress during 2002 through 2005 included two relatively "technical" issues (use of carry-over funds and whether certain services are classified as "welfare") that were not in the final DRA agreement. These two issues and two others relating to "nonwelfare" uses of TANF and MOE funds are discussed below. Current law allows states to reserve unused block grant funds without fiscal year limit only for the purpose of paying cash welfare benefits. This was intended as a reserve fund for states to draw on during recessions when it was presumed that the cash welfare caseload could increase. The Bush Administration's 2002 welfare reauthorization plan, and all comprehensive reauthorization proposals considered by Congress during the 2002-2005 period, would have allowed TANF carry-over funds to be used for any TANF benefit or service. The proposal was not included in the final version of DRA. Under current regulations, child care and transportation aid for nonworking families is considered "welfare." (Child care and transportation aid for working families is considered "nonwelfare.") As such, receipt of these benefits by a family triggers TANF requirements, such as the five-year time limitation on federally funded benefits, subjection to the work participation standards, and assignment of child support. The Bush Administration's 2002 welfare reauthorization proposal, and all comprehensive welfare reauthorization proposals, would have permitted child care and transportation aid for nonworking recipients to be considered a "nonwelfare" benefit and service and hence not subject to TANF requirements. This proposal was not included in the final version of DRA. TANF's detailed reporting requirements focus on families receiving cash welfare. The statutory reporting requirements date back to the 1996 welfare reform law, and the reporting requirements in regulations were promulgated in the wake of that law—before it became clear that the cash welfare caseload was dramatically declining and that the money saved from the caseload decline was being used in the diverse ways allowed by the TANF block grant. The "TANF caseload" that is often cited represents families receiving TANF welfare, excluding those families that receive only "nonwelfare" benefits and services. It thus understates the number of families benefitting from TANF-funded benefits, services, and activities. In annual program reports due after the close of the fiscal year, states are required to provide information on all "programs" funded with MOE dollars, with a description of the types of benefits and services provided and the number of beneficiaries receiving them. These program reports do not capture the same information for nonwelfare programs funded with federal TANF dollars. Additionally, program expenditure information collected by HHS fails to capture spending for child welfare benefits and services as a category (it is subsumed in other more general categories). The result is an incomplete picture of how TANF and MOE dollars are spent and how many families benefit from them. The Bush Administration's 2002 welfare reauthorization proposal would have required reporting on nonwelfare benefits and services. All of the comprehensive welfare reauthorization bills except one (Senate Finance Committee-reported H.R. 4737 , 107 th Congress) considered during 2002-2005 included provisions to extend the annual program report information from covering the use of only MOE dollars to covering both TANF and MOE dollars. This would have required states to provide a description and caseload number for all "programs" and activities funded with TANF and MOE funds. Additionally, the 2005 Senate Finance Committee bill would have required that the child care reporting system be extended to TANF-funded child care so that it would be possible to determine both numbers of families receiving this benefit as well as their characteristics (e.g. income, demographic information). No reporting changes were included in the final version of DRA that was enacted. Though much of the controversy during the welfare reauthorization debate focused on cash welfare recipients—and their work requirements—a major component of the Bush Administration's 2002 welfare reform proposals was to provide grants to promote "healthy marriages." These initiatives were "nonwelfare" initiatives, education in social skills as well as campaigns in schools and in the media on the importance of marriage. The DRA included a $150 million per year appropriation for competitive grants to promote "healthy marriages" and "responsible fatherhood." About $100 million per year of these funds are for "research, demonstrations, and technical assistance" related to promotion of healthy marriages. HHS awarded five-year grants to a variety of organizations from this appropriation. This amount of funding is large relative to other available funds for research and demonstrations under TANF. (TANF has a $15 million appropriation for both state and federally initiated research projects; HHS also receives an appropriation for research, which was $5.7 million for FY2007.) Congress might conduct oversight to examine how these projects are likely to improve the research base from which programs to promote healthy marriage may be evaluated. As discussed above, TANF supplements federal funding for both the child care block grant and the various federal programs that help fund foster care, adoption assistance, and child welfare services. The supplement provided by TANF is fairly large. In FY2005, total TANF and MOE funding for child care totaled about $5.4 billion, which reflected both transfers to the Child Care and Development Fund (CCDF) and expenditures within the TANF program. At 19% of total TANF and MOE funding, child care is the second largest category next to cash welfare within TANF. Expenditures on child welfare activities—for example, foster care and services for families with children who have been abused and neglected or are at-risk of abuse and neglect—cannot be derived directly from TANF's financial reporting system. The Urban Institute, on the basis of a survey of the states, reported that in state FY2004, TANF's contribution to child welfare agency funding totaled $3.0 billion. Thus, child care and child welfare services together account for more than half (at least $8 billion of the $13 billion) of TANF and MOE funding available for "nonwelfare" activities. Therefore, legislation affecting either child care or child welfare financing could have an impact on how much funding is available for TANF's other activities. Legislation affecting child welfare funding would also have an impact on TANF. As discussed above, legislation has been introduced that would allow nonparent relatives caring for children to be eligible for federal foster care payments; some of these relatives currently rely on TANF cash welfare. This change could transfer some cases out of TANF and onto the foster care rolls, freeing up some TANF dollars. Other long-standing child welfare financing issues, if resolved, could also affect the amount of TANF and MOE funds used by the child welfare system. The 110 th Congress might consider a range of TANF issues. A number of them stem from policy changes made by Congress in the DRA. These issues also touch on some that have been long-debated, such as the role of education and training in helping recipients move from welfare to work and achieving self-sufficiency. Even absent a scheduled reauthorization of TANF, this may be an opportune time to reconsider TANF issues and the role the block grant can play to help disadvantaged families with children. The context that TANF operates in has changed considerably from the time of the welfare reform debates in the early and mid-1990s. The cash welfare caseload has declined substantially and incentives are in place for states to seek further caseload declines. Non-welfare support for the working poor has increased, both with TANF-funded benefits and services (e.g., child care) and from other programs (e.g., Earned Income Tax Credit and State Childrens' Health Insurance Program). The "nonwelfare" part of TANF has the potential to help disadvantaged families with children through new and innovative ways. Whether that is happening is an open question given the information gap on these activities. Illuminating TANF's "nonwelfare" side might recast future discussions about TANF to reflect the changing context in which the block grant operates.
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Enactment of the Deficit Reduction Act of 2005 (DRA, P.L. 109-171) ended more than four years of congressional debate on "reauthorizing" the block grant of Temporary Assistance for Needy Families (TANF). The DRA extended funding for most TANF grants through FY2010, except TANF supplemental grants that expire at the end of this year (FY2008). Supplemental grants go to 17 states that have high population growth or low historic funding in TANF's predecessor programs per poor person. H.R. 6331, a Medicare bill enacted over President Bush's veto on July 15, 2008, extends supplemental grants for one year, through FY2009. TANF is best known as the funding source for welfare benefits for low-income families with children. In 2006, 1.9 million families per month received TANF cash welfare, down from the historical high of five million families receiving cash welfare in the mid-1990s. In 2006, less than three in ten poor children were in families that received TANF cash welfare. However, TANF funds a wide range of "nonwelfare" benefits and services for needy families with children. In FY2006, spending on activities related to traditional cash welfare accounted for a little more than half of total TANF funding, while other "nonwelfare" activities accounted for the remainder. Though cash welfare is a shrinking part of what TANF funds, many of the issues Congress might consider in the 110th Congress (beside supplemental grants) focus on families receiving cash welfare, particularly the work participation standards that apply to these families. The DRA made changes that require states to either increase participation among families receiving cash welfare in work or job preparation activities or reduce their welfare caseloads to meet these numerical performance standards. The DRA also required the Department of Health and Human Services (HHS) to issue rules regulations defining what specific activities count toward the participation standards. HHS final regulations, published on February 5, 2008, allow states to count participation in a four-year college degree program toward the participation standards and provide for limited counting of rehabilitative activities. However, the regulations also limit counting activities such as adult basic education (ABE), pursuing a General Educational Development (GED) credential, and English as a Second Language courses, generally requiring them to be counted only in conjunction with activities more closely related to work. In terms of "nonwelfare" spending from TANF, Congress might consider proposals left over from TANF reauthorization proposals, but not included in DRA, to loosen some rules for nonwelfare spending. Congress might also consider improving the information available on how TANF funds are used for "nonwelfare" benefits and services, since relatively little is known about this half of TANF funding. Additionally, legislation that affects foster care, child welfare services for abused and neglected children, and child care funding would have an effect on TANF, since large amounts of TANF "nonwelfare" dollars are used to supplement dedicated federal and state funding for these programs. This report will be updated as legislative events warrant.
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The "child nutrition programs" (National School Lunch Program and certain other institutional food service programs) and the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) were last reauthorized in 2010. Some of the authorities created or extended in that last reauthorization law (Healthy, Hunger-Free Kids Act of 2010 [ P.L. 111-296 ]) expired on September 30, 2015, but the vast majority of operations and activities continue because appropriations laws continued funding. Despite efforts to complete the next child nutrition reauthorization during the 114 th Congress, the legislation did not advance beyond committees. Although the formal legislative process must begin anew with the new Congress, 114 th Congress child nutrition reauthorization issues, proposals, and controversies may still influence policymaking in the new Congress; thus, background on these child nutrition reauthorization proposals may remain of interest. At the same time, regulations and initiatives implemented during the Obama Administration are a significant dimension to these programs' current law; transition to a Trump Administration may impact how the 115 th Congress proposes changes to these laws. The first part of this report (" Current Status of Program Operations ") offers some basic background on the last (2010) reauthorization, its expiration, and the current status of program operations. The second part of the report (" 114th Congress Senate and House Committees' Proposals ") presents an overview of the 114 th Congress Senate and House committees' proposals: legislative process, summary of selected provisions, and CBO cost estimates. For more background on the programs' operations (such as eligibility rules, benefits, and services) or the 2010 reauthorization, see the following CRS products: CRS In Focus IF10266, An Introduction to Child Nutrition Reauthorization CRS Report R41354, Child Nutrition and WIC Reauthorization: P.L. 111-296 CRS Report R43783, School Meals Programs and Other USDA Child Nutrition Programs: A Primer CRS Report R44115, A Primer on WIC: The Special Supplemental Nutrition Program for Women, Infants, and Children CRS Report R41354, Child Nutrition and WIC Reauthorization: P.L. 111-296 This report will track reauthorization activity in the 115 th Congress. The "child nutrition programs" (National School Lunch Program [NSLP] and certain other institutional food service programs) and the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) are primarily authorized by two statutes, the Richard B. Russell National School Lunch Act (codified at 42 U.S.C. 1751 et seq.) and the Child Nutrition Act of 1966 (codified at 42 U.S.C. 1771 et seq). These statutes and programs were last reauthorized by the Healthy, Hunger-Free Kids Act of 2010 (HHFKA, P.L. 111-296 ). Some of the authorities created or extended in the last reauthorization law expired on September 30, 2015. As of the date of this report, Congress has not reauthorized the child nutrition and WIC programs, but the vast majority of operations and activities continue with funding provided by appropriations laws. The FY2016 omnibus appropriation law ( P.L. 114-113 ) provided continued funding and extended one expiring policy. Operations continued under the terms of FY2017 continuing resolutions (CRs), and currently continue under the FY2017 omnibus appropriations law ( P.L. 115-31 ). The FY2017 omnibus also extended several expiring policies. A lapse in the reauthorization or extension of the HHFKA does not affect all activities equally: Most of the programs' authorities to operate are in statute permanently (i.e., without expiration dates). Also, many of the programs' authorizations of appropriations are permanent; these include NSLP, the School Breakfast Program (SBP), and the Child and Adult Care Food Program (CACFP). These programs with permanent authorizations of appropriations continue, without issue, with appropriated funding (currently provided by P.L. 115-31 ). However, a few pilot programs or temporary activities expire or sunset if the authorizing law is not amended. These include a California program to provide Summer Food Service Program (SFSP) snacks year-round, certain food safety audits, and preappropriated funds for a National Hunger Clearinghouse. Under the FY2017 omnibus, the preappropriated funding for the National Hunger Clearinghouse and the food safety authorities were extended. USDA has discontinued the SFSP pilot. A number of programs' authorizations of appropriations ended after September 30, 2015. These include SFSP, WIC, WIC Farmers' Market Nutrition Program (FMNP), and State Administrative Expenses. Programs with an expired authorization of appropriations can continue to operate so long as funding is provided. FY2016 appropriations law ( P.L. 114-113 ) and the FY2017 CRs allowed these programs to continue to operate. Operations currently continue under the FY2017 omnibus appropriations law. The sections to follow describe the 114 th Congress committee proposals: legislative history, selected provisions, and CBO cost estimates. Aspects of this now-historical information may be relevant for 115 th Congress policymaking. During the 114 th Congress, committees of jurisdiction marked up child nutrition reauthorization bills. In 2016, both committees of jurisdiction—the Senate Committee on Agriculture, Nutrition, and Forestry and the House Committee on Education and the Workforce—completed reauthorization legislation: S. 3136 and H.R. 5003 , respectively. Prior to the markups, the committees of jurisdiction had held related hearings. On January 20, 2016, by a unanimous voice vote, the Senate Committee on Agriculture, Nutrition, and Forestry voted to report its WIC and child nutrition reauthorization proposal. Bipartisan approval of the committee's legislation, the Improving Child Nutrition Integrity and Access Act of 2016, was the 114 th Congress's most significant first step toward reauthorizing the child nutrition and WIC programs. On July 6, 2016, Chairman Pat Roberts introduced this approved proposal as S. 3136 . On April 20, 2016, Representative Todd Rokita, chairman of the Subcommittee on Early Childhood, Elementary, and Secondary Education of the House Committee on Education and the Workforce, introduced the Improving Child Nutrition and Education Act of 2016 ( H.R. 5003 ), a proposal to reauthorize WIC and the child nutrition programs. On May 18, 2016, the House Committee on Education and the Workforce marked up H.R. 5003 , adopting an amendment in the nature of a substitute as well as five Member-offered amendments. The committee approved the bill, 20 to 14, largely along partisan lines. As in weeks prior to the markup, committee Republicans applauded and Democrats decried the bill's changes to current law. On December 8, 2016, Chairman Kline submitted, together with minority views, committee report H.Rept. 114-852 . Before the end of the 114 th Congress, the Chairman of the Senate Committee on Agriculture, Nutrition, and Forestry, announced the end of reauthorization negotiations. This section summarizes selected provisions of the Senate and House committees' proposals. Provisions are discussed thematically, by program. The versions of legislation summarized in this report are the Senate committee's legislation as the committee voted to report on January 20, 2016 ( S. 3136 ); and the House committee's legislation, H.R. 5003 , as the committee amended and voted to report on May 18, 2016. The summaries below do not provide all specifications for the policies discussed; see legislation for further detail. In particular, these summaries generally do not include the required timeline for USDA action, nor do they include reports to Congress. Please also note that agency rulemaking is often required or implied by the legislation; such rulemaking is likely to have added details or specifications. The Senate committee's proposal would have extended the authorizations of appropriations of the Summer Food Service Program, WIC, WIC FMNP, and State Administrative Expenses through FY2020. (Other major programs—like NSLP and SBP—have a permanent authorization of programs.) The Senate committee's proposal would also have continued some of the authorizing provisions that sunset after September 30, 2015. The Senate and House committees' proposals would have continued the California pilot and the food safety audit authorities, but they would not have continued the preappropriated funding for a National Hunger Clearinghouse. The House committee's proposal included these same extensions, but used a different time period. While the Senate would have extended most programs for the period of FY2016 to FY2020, the House committee's bill would have extended for FY2017 through FY2021. Under current law, most funding for child nutrition programs is open-ended, mandatory, and appropriated. Funds are provided in annual appropriations acts to fulfill the legal financial obligation established by the authorizing laws, but the level of spending is not controlled through the annual appropriations process; instead, it is derived from the benefit and eligibility criteria specified in the authorizing laws. In the case of the child nutrition programs (NSLP, SBP, CACFP, SFSP, Special Milk, and related activities), funding is not capped and fluctuates based largely on the reimbursement rates and the number of meals/snacks served (i.e., participation in the programs). Under the Senate and House committees' reauthorization proposals, the open-ended, mandatory, and appropriated nature of child nutrition programs' funding would mostly have continued. However, the House committee's proposal (§109) included a demonstration project for up to three states to receive a block grant in place of the open-ended funding (though still mandatory and appropriated). No such demonstration project was included in the Senate committee's proposal. Under the House committee's proposal, up to three states would have received a fixed amount of funding for flexible purposes (a block grant), in place of the open-ended funding provided by NSLP, SBP, SFSP, Special Milk, and several related activities. The grantee states would have received funding each year for three years, in an amount equal to the respective state's reimbursements for free and reduced-price meals provided through NSLP and SBP programs in FY2016. Grantee states would not have been eligible to receive funding from the open-ended NSLP, SBP, SFSP, Special Milk, State Administrative Expenses, and Team Nutrition programs that would continue to be available for non-grantee states. Grantee states would not have had to follow national standards currently in place for nutrition requirements, eligibility rules, or meal price-setting, among other requirements; instead, grantee states could have set their own rules in these areas. Among other required assurances, a state applying for the block grant funding would have been required to assure "that each school-aged child in the [s]tate will have access to at least one affordable meal service option during the school day at the school in which the child is enrolled." The applying state would have also been required to provide an implementation plan that includes the state's need-based eligibility rules, standards for meals and prices, estimated participation in the program, and monitoring and verification procedures, among other specified state-determined parameters. The proposal included specified "limitations to federal interference," which would have restricted USDA from defining many aspects of implementation, including nutritional standards and how program participants are identified and verified. The proposal also included reporting requirements for USDA and the participating states. During the House committee's markup, committee members defeated an amendment that sought to block grant the NSLP and SBP nationwide and permanently. Debates about the next child nutrition reauthorization have often centered on the school meals programs' updated nutrition standards. An update had been required by the 2004 and 2010 reauthorizations, and USDA-FNS issued the final rule in January 2012. The 2010 reauthorization also required nutrition standards for food served outside the school meals programs ("competitive foods"); to implement this, USDA-FNS issued an interim final rule in June 2013. Both of the committees' proposals would have changed existing nutrition standards but would have done so differently. The Senate committee's proposal included a number of provisions that would have or could have affected the current nutrition standards regulations and their implementation: Change whole grains and sodium meal standards. The proposal would have required USDA to make changes to the current regulations on the whole grain and sodium requirements, using an expedited rulemaking process (e.g., within 90 days of enactment). Although these details were not included in the proposal itself, 2016 negotiations between the Senate committee, the White House, USDA, and the School Nutrition Association resulted in agreement that these edits would have been (1) reducing a 100% whole-grain requirement to 80% whole-grain, and (2) delaying the Target 2 sodium requirements for two years (2019). ( § 309(b))Study of sodium limits. The proposal would have required USDA to contract with an independent entity to review the sodium standards in the meal regulations. The proposal listed particular study questions, such as assessing the impact of the standards on student participation rates and "whether the latest scientific research indicates that further reduction ... is necessary to safeguard the health of children." (§309(a))Advisory groups. The proposal would have required USDA to establish two groups specific to nutrition standards: (1) an interagency working group (USDA and the Centers for Disease Control and Prevention [CDC]) to issue guidance regarding fruits and vegetables in the school meals programs, and (2) an advisory panel to consider and develop recommendations on food sold outside of the reimbursable meals programs (§309(c), (d)) . More generally, the proposal would also have established a School Nutrition Advisory Committee to "provide input in administration of" the NSLP and SBP (§305) .Fluid milk requirements. The proposal would have required USDA to review school-age children's milk consumption and the availability of varieties of milk in schools under current regulations. Among other questions, reviews would have been required to assess whether consumption and availability meet the recommendations of the 2015-2020 Dietary Guidelines. Based upon specified requirements, revision of the regulations would also have been required. (§105) The House committee's proposal included the following nutrition standards policies: Triennial review. On the school meals nutrition standards generally, the House committee's proposal would have required the Secretary to review school meals regulations "at least every three years." The Secretary would have, with consultation from school stakeholders, been required to certify that certain requirements are met, including that the regulations are age-appropriate, do not increase the costs of implementing the school meals programs, and do not discourage students from participating in the school meals programs. If necessary, the Secretary would have been required to revise the regulations. (§104)First triennial review include d whole grains and sodium. The first review after the enactment of the proposal would have to have been concluded by December 31, 2016, and would have to have focused on the current sodium and whole grain requirements. Specifically the proposal would have required sodium standards to remain at Target 1 limits until the review had been completed. Sodium review requirements in the proposal included that any further reductions must be supported by a high research standard as well as health and food safety requirements. If the review proposed sodium reductions below Target 1, the proposal would have prevented reductions from taking effect until three years after the revision had been published in the Federal Register . (§104)Family meals. The House committee's proposal would have required the Secretary to issue guidance or regulations on "up to 4 family meal days." On such days, parents may have been invited to meals, nutrition education may have been provided, and the school would not have been subject to nutrition standards for these meals. (§104)Other flexibilities and accommodations. The House committee's bill would also have required the Secretary to provide guidance on making substitutions to accommodate product availability and to accommodate special dietary needs, including medical needs and religious dietary restrictions. (§104)Nutrition standards for "competitive foods." The House committee's bill would have changed the nutrition standards for competitive foods in two respects: (1) standards would not apply to fundraisers held by student groups/organizations (though schools and the state agency could determine what fundraisers may be held); and (2) any foods that may be served as part of a reimbursable meal may be served a la carte. (§204)Advisory groups. The House committee's bill included the same School Nutrition Advisory Council (SNAC) included in the Senate committee's proposal, but it did not include the other nutrition standards groups that are in Section 309 of the Senate committee's proposal. (§305)Fluid milk. Similar to the Senate committee's language. (§104) The Senate committee's proposal did not include changes to the school meals programs income eligibility rules nor would it have changed the rates of reimbursement for the school meals programs. On the other hand, the House committee's proposal would make changes in both of these areas. Community Eligibility Provision The 2010 child nutrition reauthorization law (HHFKA, P.L. 111-296 ) created an option for eligible schools to serve all meals free of charge and without collecting applications, the "Community Eligibility Provision" (CEP). The House committee's proposal would make fewer schools eligible for the CEP option. Eligibility for CEP depends on a school's "identified student percentage" (ISP), the share of enrolled students that can be identified as eligible for free school meals through direct certification. Direct certification is a proactive process where government agencies (for example, state departments of education and departments of human services) cross-check their program rolls and certify children for free school meals based on the household's participation in other specified means-tested programs or vulnerable population status, without the household having to complete a school meals application. Under current law, a school, school district, or group of schools within a district must have an ISP of 40% or greater to use CEP. Though CEP schools serve free meals to all students, CEP schools are not necessarily reimbursed at the "free meal" rate for every meal. Under the House committee's proposal (§105) , the ISP threshold would have been raised from 40% to 60% beginning July 1, 2017. The provision also would have allowed for a grace period of one school year for schools that had been eligible for CEP but would no longer be eligible under the amended law. Breakfast Reimbursement Rates Of the two committees' proposals, only the House committee's would have made changes to the school meal reimbursement rates. The House committee's proposal (§202) would have increased all School Breakfast Program reimbursements. That is, the proposal would have increased the reimbursement for free, reduced-price, and full-price ("paid") breakfasts. The increase would have begun in School Year (SY) 2018-2019 and would have continued as follows: For SY2018-2019, the base rate for reimbursements would have increased by two cents per breakfast above the current law rate. For SY2019-2020, the prior year's rate would have increased by inflation only. For SY2020-2021, the prior year's rate would have been adjusted by inflation and then would have been increased by one cent. In SY2021-2022 and each subsequent year, only inflation adjustment rules apply. Note: this amendment, due to cross-references in the authorizing statute, would also have changed accordingly the rate of reimbursement for breakfasts served through CACFP. Under current law, schools are required to verify the data submitted on a sample of household applications for free and reduced-price school meals. In general, the standard verification sample under current law is the smallest of 3,000 or 3% of approved applications, with a focus on error-prone applications. Schools may also conduct verification "for cause" for questionable applications. Many schools employ "direct verification" (matching data from other low-income programs) to conduct their verification activities, but if data cannot be verified in this way, schools will contact households to verify. Both the Senate and House committees' proposals would have significantly revised and reworked application verification in the school meals programs. Both proposals were similar in their approach, with some differences in the specific details. Below is an overview of the major changes proposed: Size of sample. Both committees' proposals would have created a sample ceiling of the smallest of 10,000 or 10% of a local education agency's (LEA's) applications. Both proposals included factors that could have reduced the LEA's verification sample requirement; these included high or improved performance among certain integrity and program access activities (activities included direct verification, household responses, and direct certification). The Senate committee's proposal (§105) would have allowed the sample to be reduced to as low as 3,000 or 3%. The House committee's proposal (§104) would have allowed the sample to be reduced as low as 2,500 or 2.5%. Diverse types of applications sampled. Instead of a focus on error-prone applications, both proposals would have required that the sample include various categories of applications, including applications with data consistent with a documented pattern of error or fraud, applications with a case number from certain low-income programs instead of income information, and close-to-the-income-limit applications. Beyond specifically listed application types, random sampling may have been used to reach the required sample size. The House and Senate committees' proposals did differ in the specific ratio of application types in the sample. (§105 Senate committee proposal; §104 House committee proposal)Error reduction plans for high-error schools. Both proposals would have required states to work with the LEAs that have the highest rates of certification error to develop an error reduction plan and to monitor its implementation. The proposals differed on the requirements for such a plan. For example, the Senate committee's proposal (§113) lists a number of potential discretionary measures that might have been included in such a plan; in that proposal, one possible measure for states was to increase an LEA's verification sample size, but that measure may only have been used for up to 50% of the LEAs with plans and may not be higher than 15,000 or 15% of applications. The House committee's proposal (§111) , on the other hand, would have required certain elements in an error reduction plan, including an increase in the sample size; the increase was capped at 15% of applications, but the number of LEAs with that increase was not capped. Paid Lunch and Non-Program Food Pricing HHFKA set a floor for schools' pricing of full-price ("paid") lunches and non-program foods (i.e., vending machines, a la carte line foods). These policies had been intended to ensure that federal subsidies for free and reduced-price lunches did not end up subsidizing meals for non-needy children and non-meal foods. The Senate committee's proposal would have stricken these price calculation requirements and replaced them with a broader "non-federal revenue target." This proposal would have required schools to contribute a calculated target of nonfederal funds; the source of these nonfederal funds may have been household payments for full-price lunches but could also be other state or local contributions to the school food service program. (§106) The House committee's proposal would only have stricken the price calculation requirements; it would not have replaced them. (§105(e)) Kitchen Equipment and Infrastructure The Senate committee's proposal would have added to the Richard B. Russell National School Lunch Act policies regarding kitchen equipment and related infrastructure. It would have authorized discretionary grants for equipment and other specified capital improvements (up to $30 million in discretionary funding for FY2016 and each fiscal year thereafter). It also would have required USDA to offer loan guarantees; it included discretionary funding (up to $5 million for FY2016 and each fiscal year thereafter) for related fees, although appropriations for the fees would not have been required for loan guarantee activities to occur. (§116) The House committee's proposal included both the grants and the loan guarantees but would have authorized less funding for the discretionary grants (up to $25 million in discretionary grants "for fiscal year 2017 through fiscal year 2019"). (§114) Potable Water The House committee's proposal would have provided up to $475,000 to ensure that children have access to potable water during meal service, for a period of no more than 90 days when certain requirements are met. (§104) This policy was not included in the Senate committee's proposal. Under current law, most food offered in summer months is provided in congregate settings through the SFSP or the NSLP's Seamless Summer Option (SSO, an option only for schools). ("Congregate" settings refer to specific sites where children come to eat and are supervised.) With the exception of the California pilot mentioned earlier and the SSO option for schools, organizations that provide summer and afterschool food need to participate in two separate programs (SFSP and CACFP At-risk Afterschool). Following related testimony in multiple 114 th Congress committee hearings, as well as the introduction of a number of freestanding proposals, the Senate and House committees' proposals would have piloted or expanded a number of alternatives for feeding low-income children during the summer months. Still, there were significant differences between the reauthorization proposals' SFSP provisions. (§ 107 Senate committee proposal; § 106 House committee proposal ) Both committees' proposals would have authorized eligible institutions to operate SFSP and CACFP At-risk Afterschool sites under one application. Under the Senate committee's proposal (§107) , participating institutions would have been reimbursed at SFSP rates, which are higher than CACFP's. In FY2018, up to seven states would have been authorized to operate this pilot. In FY2019, three states could have been added to the limit. In FY2020, two additional states could have been added. In FY2021, and each fiscal year thereafter, one additional state could have been added. The Secretary of Agriculture would have been required to select states with low SFSP participation and states that had not yet transitioned their WIC program to Electronic Benefit Transfer (EBT). Among other requirements, eligible institutions would have had to provide meals during at least 20 summer days (or school vacation days in areas that operate a continuous school calendar) in order to participate. Under this streamlined option, the daily reimbursement maximum would have been one meal (during summer, only lunch/breakfast) and one snack. Under the House committee's proposal (§106) , participating institutions would have been reimbursed at CACFP At-Risk Afterschool rates. Beginning in May 2017, up to five states would have been selected for participation. Selection of states would have largely based on the state's demonstrated capacity to reduce paperwork and other administrative burdens while retaining program integrity. Beginning in October 2018, up to five additional states could have been added. Beginning in May 2020 and each year thereafter, the Secretary may have chosen additional states. Throughout the transition and expansion, the Secretary would have to provide technical assistance to the states, to collect best practices from them, and to update technical assistance to reflect the implementing states' best practices. The daily reimbursement maximum would have been the same as the Senate committee's proposal. Both proposals addressed the provision of benefits via EBT to children that are eligible for free and reduced-price school meals over the summer months. The Senate would have expanded this alternative with mandatory funding. The House would keep the existing pilot funded with discretionary funding. The Senate committee's proposal would have authorized states to make a special election, in place of congregate meal service, to issue $30 per summer month, per eligible child, on a WIC EBT card. This election, funded by the SFSP mandatory funding, would have been provided for a limited number of children. In FY2018 (the first year), no more than 235,000 children could have been served under this election; in FY2019, no more than 260,000 children; in FY2020, and each fiscal year thereafter, no more than 285,000 children. In addition to the mandatory funding authorized, up to $50 million would be authorized to be appropriated to serve additional children. Among other criteria and considerations, USDA would have been required to limit this election to eligible households that live in (1) poor areas that are rural and without congregate feeding sites, (2) poor areas that have limited access to SFSP and other authorized alternatives, or (3) areas with less than 50% of households eligible for free school meals and with limited access to SFSP and other authorized alternatives. (§107) The House committee's proposal would have authorized resources to continue the Summer EBT demonstrations. The proposal would have authorized up to $10 million in appropriations for each of FY2018, FY2019, and FY2020. The funding would only have been available to those states that currently operate an SEBTC program. Area and household eligibility rules were similar to the Senate committee's proposal. Participating children may have received from $15 to $30 per month. Participating states may have considered differentiating benefit amounts based on a variety of community-level factors, such as the proportion of applicants that are eligible for free meals, rather than reduced-price. During the committee's markup, an amendment was adopted to strike the requirement that participating states must administer benefits through WIC EBT, allowing states to use SNAP or WIC (as in the current pilot). ( § 109) Seasonal Off-Site Election The Senate committee's proposal (§107) would have, beginning in summer 2017, permitted states to allow institutions to provide SFSP meals to be consumed off-site. This election would have been available for children (1) in a rural area (as defined by the Secretary), or (2) in a non-rural area in which more than 80% of students are certified as eligible for free or reduced-price meals. (Home delivery of meals [no more than two meals per child per delivery] is an example of how a state might have used this election.) The House committee's proposal (§106) was substantially similar with a few differences. In addition to the Senate committee proposal's area eligibility criteria, the House committee's proposal would have only allowed implementation of the off-site election if "an area is eligible to participate in [SFSP] but is not currently being served." Also, the House committee's proposal would have required the state, rather than USDA, to define rural. Temporary Off-Site Allowances For institutions operating congregate feeding sites, the Senate committee's proposal would have required USDA to grant a state's request for off-site consumption when the site is closed due to extreme weather considerations, violence or other public safety concerns temporarily prevent children from traveling safely to the site, or other emergency circumstances. (§107) The House committee's proposal was substantially similar. (§106) Discretionary Funding for a Third Meal . The Senate committee's proposal (§107) would have authorized discretionary funding for up to six state agencies to pilot the provision of three meals per day, or two meals and one snack. This was not included in the House committee's proposal; a related amendment was offered in markup and defeated. Business Partnership Demonstration Project . The House committee's proposal would have authorized USDA to award competitive grants, using available SFSP mandatory funding, to improve SFSP service delivery through "sustainable, scalable, business-driven solutions." Such grants would have been available for as many as four states and could have been provided for as long as three years. Additional requirements were included regarding state applications, vendors, and auditing. (§109) The Senate and House committees' proposals (§ 109, §108, respectively) were substantially similar in their CACFP policy changes, but only the Senate committee proposal would have provided an additional snack for a child in care for longer hours. Among their changes, both proposals would have allowed new types of institutions into the program. Residential child care institutions (RCCIs) and boarding schools funded by the Bureau of Indian Education would have been eligible for CACFP meal and snack reimbursement in addition to the school meals programs. Under current law, two meals and one snack or one meal and two snacks are the daily limits per child regardless of duration of care. The Senate committee's proposal would have provided additional food for longer-duration child care. Child care institutions would have been able to claim reimbursement for an additional snack for each child that is in care for nine hours or more per day. The House committee's proposal did not include this change; an amendment to add a related change was defeated during committee markup. As noted under " Breakfast Reimbursement Rates , " §202 of the House committee's proposal would also have increased reimbursement rates for breakfasts served through CACFP. Beginning FY2017 and each year thereafter, the Senate committee's proposal would have increased annual mandatory funding (from $5 million to $10 million) for the Farm to School Grant Program. It would also have increased maximum grant amounts (from $100,000 to $200,000). The proposal would also have authorized up to $10 million in discretionary appropriations each year (FY2016-FY2020). Among other updates, the proposal would have added "implementing agricultural literacy and nutrition education" as an allowable use for grants and required USDA to make improving procurement and distribution a goal of grant making. (§110) The House committee's proposal was substantially similar, except that maximum grants would have been $150,000 and the proposal does not include authorization of additional discretionary funds. (§109) Under current law, with the exception of a pilot included in the 2014 farm bill ( P.L. 113-79 ), the fruit and vegetable snacks served through this program must be fresh—not frozen, dried, or canned. The Senate and House committees' proposals would make distinct changes. The Senate committee's proposal (§111) would have created "hardship exemption" criteria and a process under which some schools could have served frozen, dried, or canned fruits and vegetables instead of only fresh items. Subject to USDA's and the states' implementation, schools with limited access to quality fresh fruits and vegetables year-round or with limited facilities to store, prepare, or serve fresh fruits and vegetables would have been able to participate in the snack program by providing frozen, dried, or canned fruit and vegetable snacks. In the first year of a hardship exemption, the school could have served up to 100% of their fruit and vegetable snacks in these forms; however, the ceiling would have dropped over four years, moving from 100% to 60% to 20% to 0%, transitioning the exempt schools from 0% fresh offerings to 100% fresh offerings. The House committee's proposal (§110) would have allowed participating schools to serve all forms of fruits and vegetables, changing the program's name to "Fruit and Vegetable Program." The proposal would also have allowed schools to serve snacks that include tree nuts. USDA would have been required to promulgate guidance to limit fruit, vegetable, and tree nut snacks to meeting the respective nutrition standards that are currently in place for competitive food items—including sodium, sugar, and total fat limits. On WIC, most of the Senate and House committees' provisions (§204 , §206, respectively) were similar, but the proposals have a few key differences. Currently, WIC's authorization of appropriations does not have a numerical cap; it authorizes "such sums as are necessary." The House committee's proposal would set its authorization of appropriations at $6.35 billion each year through FY2021. The Senate committee's proposal would maintain "such sums as are necessary" through FY2020. Only the Senate committee's proposal would have made changes to child eligibility and the certification period for infants: Child eligibility. Under current law, in all states, children (who meet all other eligibility criteria) are eligible for WIC benefits until they reach five years of age. The Senate committee's proposal would have created a state option where children may have participated in WIC until their sixth birthday or until they enter full-day kindergarten (whichever comes first). Infant certification period. Currently, states have the option to certify infants and children for up to one-year periods. The Senate committee's proposal would have allowed states to certify infants for up to two years at a time. The above changes were not included in the House committee's proposal. Both committees' proposals did include similar changes to the calculation of income in the WIC program: Income eligibility calculation. When counting a household's income for WIC eligibility, the House and Senate committees' proposals would have required all states to exclude certain Department of Defense payments (Basic Allowance for Housing, Basic Allowance for Subsistence) and the amounts of child support paid if household members are legally obligated to pay child support. The supplemental food package in a given state is the result of federal regulation and state policies. "Supplemental foods" is defined in federal WIC law as those foods containing nutrients determined by nutritional research to be lacking in the diets of pregnant, breastfeeding, and postpartum women, infants, and children and foods that promote the health of the population served by the program authorized by this section [WIC], as indicated by relevant nutrition science, public health concerns, and cultural eating patterns, as prescribed by the Secretary [of Agriculture]. State agencies may, with the approval of the Secretary, substitute different foods providing the nutritional equivalent of foods prescribed by the Secretary, to allow for different cultural eating patterns. Both committees' proposals included changes to this definition. The Senate committee's proposal would have allowed the list of supplemental foods to consider commercial availability and participant demand. It also would have required the inflation adjustment of the cash value voucher (used to purchase fruits or vegetables) to round to the nearest dollar. The House committee's proposal included similar language to the Senate committee's proposal with a few additions. In addition to considerations of commercial availability and participant demand, the House committee proposed a limit that any changes "shall not limit the overall fruit intake of children." The proposal would also have required an examination of current fluid milk criteria. The House committee proposal also included some additional accommodations for special dietary needs and other requirements for food package formulation. Both of the committees' proposals were substantially similar in other WIC areas, with similarities and differences summarized below: Measures related to the integrity of benefit redemption. The Senate and House committees' proposals would have required all states to educate participants on the safe and legal disposal of unused or excess infant formula purchased with WIC benefits. The proposals also included several policy changes related to accurate invoicing of WIC infant formula purchases, so that manufacturer rebates might be issued more precisely. WIC vendors. The Senate committee's proposal would have required states to add notification requirements if a state placed a moratorium on authorizing new vendors. The House committee's proposal would have placed these notification requirements on USDA instead. In setting maximum allowable reimbursement levels for certain vendors, both proposals would have required states to exclude WIC vouchers that had not been redeemed in full (would not include EBT purchases). The proposals would have required the Secretary to review states' vendor authorization processes. Changes to competitive bidding for infant formula and infant foods. The proposals would have made a number of changes related to the competitive bidding and contract award process for infant formula and infant foods, including allowing an infant formula contractor in a state to terminate its contract if the state raises Medicaid income eligibility (with exact parameters of this increase and contract termination to be determined by the Secretary) and requiring states to issue a justification statement to USDA before entering into exclusive contracts for infant food. On infant food competitive bidding, the House committee's proposal would have required additional state considerations and actions that were not included in the Senate committee proposal; for instance, it would have required the state to provide a report that includes net savings. Also, the House committee's proposal would have required the justification statement before the state "solicits bids for a contract" rather than before entering into a contract. Transition to EBT. HHFKA of 2010 set a requirement that states transition their WIC benefit systems from voucher-based to EBT by October 1, 2020. The Senate committee's proposal would have authorized discretionary funding (up to $25 million annually for FY2016-FY2020) for "enhancing and accelerating" EBT implementation. The House committee's proposal would have authorized discretionary funding also, but for fewer years ($25 million annually for FY2017-FY2019). Both proposals would also have created penalties for states that fail to comply with the implementation timeline. This section summarizes CBO's cost estimates of the committees' child nutrition reauthorization proposals, as of the date of this report: On March 11, 2016, CBO published a cost estimate of the Senate committee's proposal (as marked up on January 20, 2016). CBO completed a formal cost estimate of the direct spending (i.e., mandatory spending), but has not released an estimate of the discretionary spending provisions. This proposal was scored against CBO's March 2015 baseline and cost estimates are for a budget window of FY2016-FY2025. On June 30, 2016, CBO published a cost estimate of the House committee's proposal (as marked up on May 18, 2016). CBO completed a formal cost estimate of both the direct spending and the discretionary spending provisions. This proposal was scored against CBO's March 2016 baseline and cost estimates are for a budget window of FY2017-FY2026. CBO explained, "Any differences in the [proposals'] estimates reflect differences in both the language of the legislation and in the baselines used for the estimates." In other words, the different budget windows and baselines limit the significance of comparing the cost estimates as an exact measure of their policy differences. The sections that follow include selected information from the cost estimates. See CBO's cost estimates for further details. Based on changes to direct spending and revenues, CBO estimated that the legislation would have increase d the deficit by $269 million over 5 years (FY2016-FY2020) and approximately $1.1 billion over 10 years (FY2016-FY2025). More specifically, CBO estimated that some of the policies discussed in this CRS report would impact direct spending in the child nutrition programs. CBO estimates (in outlays over the 10-year budget window FY2016-FY2025) that, if enacted, changes to school meals' application verification requirements would have reduce d direct spending by $294 million; discretionary funding for school meals equipment grants would have increased participation in the school meals programs, increasing direct spending by $224 million; changes to the provision of summer meals (including streamlining with CACFP, EBT, and off-site consumption) would have increase d direct spending by $568 million; increases to the Farm to School Grant Program's mandatory funding would have increase d direct spending by $44 million; and changes to CACFP (all changes in §109) would have increase d direct spending by $445 million. At the time, committee leadership had said they would work to revise the proposal to make it cost-neutral. Based on changes to direct spending and revenues, CBO estimated that the legislation would have reduce d the deficit by $131 million over 5 years (FY2017-FY2021) and $67 million over 10 years (FY2017-FY2026). For certain policies that were in the House committee's proposal but not the Senate committee's proposal, CBO estimated (in outlays over the 10-year budget window of FY2017-FY2026) that, if enacted, the block grant demonstration project ("State Administration of Child Nutrition Programs") would not have affect ed direct spending as no states are expected to participate; increases to the threshold for CEP participation would have resulted in 6,500 schools no longer participating in CEP, fewer students in those schools participating at free and paid meal rates, and a reduc tion of direct spending by approximately $1.6 billion; and increases to SBP reimbursements would have increase d direct spending by $801 million. In some of the areas where both proposals would have amended policy, CBO estimates (in outlays over the 10-year budget window of FY2017-FY2026) the following for the House committee's proposal, if enacted: changes to school meals' application verification requirements would have reduce d direct spending by $261 million; discretionary funding for school meals equipment grants would have increased participation in the school meals programs, increasing direct spending by $42 million; changes to the provision of summer meals (including streamlining with CACFP, off-site consumption, and demonstration projects) would have increase d direct spending by $929 million; increases to the Farm to School Grant Program's mandatory funding would have increase d direct spending by $49 million; and changes to CACFP (all changes in §108) would have reduce d direct spending by $33 million. For discretionary programs (i.e., spending subject to appropriation), CBO estimated that the House committee's proposal would have cost $29.8 billion over the five-year (FY2017-FY2021) period, assuming the appropriation of necessary amounts. The vast majority ($29.6 billion) of this estimate is based on the reauthorization of WIC and WIC FMNP programs.
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The "child nutrition programs" (National School Lunch Program [NSLP] and certain other institutional food service programs) and the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) were last reauthorized by the Healthy, Hunger-Free Kids Act of 2010 (HHFKA, P.L. 111-296). Some of the authorities created or extended in the last reauthorization law expired on September 30, 2015, but the vast majority of operations and activities continue because appropriations laws continued funding. In the 114th Congress, both committees of jurisdiction—the Senate Committee on Agriculture, Nutrition, and Forestry and the House Committee on Education and the Workforce—completed markups of reauthorization legislation but did not complete reauthorization. (At the final adjournment of a Congress, all legislation that has not yet been sent to the President dies. When the new Congress convenes, the formal legislative process must begin anew.) Legislative activity in the 114th Congress, though historical, may provide helpful background for the 115th Congress. On January 20, 2016, by a unanimous voice vote, the Senate Committee on Agriculture, Nutrition, and Forestry voted to report its WIC and child nutrition reauthorization proposal, the Improving Child Nutrition Integrity and Access Act of 2016 (later introduced as S. 3136). On May 18, 2016, the House Committee on Education and the Workforce marked up its reauthorization proposal, the Improving Child Nutrition and Education Act of 2016 (H.R. 5003). The committee approved the bill, 20 to 14, largely along partisan lines. While both proposals would have extended authorities and included many of the same policies, the House committee's proposal would have made three major policy changes to the school meals programs that are not in the Senate committee's proposal: (1) a demonstration project for up to three states to receive a block grant in lieu of funding from a number of open-ended child nutrition programs, (2) a higher threshold for school participation in the Community Eligibility Provision (CEP), and (3) increased reimbursement rates for the School Breakfast Program. In other school meal policies, both proposals included different changes to school meal nutrition standards, including whole grain and sodium requirements. The proposals would both have revamped the current law procedures for the verification of household applications for free and reduced-price school meals. The Senate and House committees' proposals would have piloted or expanded a number of alternatives for feeding low-income children during the summer months through the Summer Food Service Program (SFSP). Proposals would have streamlined SFSP with afterschool meals and snacks and created off-site alternatives to the congregate feeding site model. Both proposals included a continuation of the Summer Electronic Benefit Transfer (EBT) pilot, although the Senate committee would have expanded it and made it permanent. The proposals are similar in their policy changes for the Child and Adult Care Food Program (CACFP) and the Farm to School Grant Program. Both proposals would have expanded the types of snacks served through the Fresh Fruit and Vegetable Program. They would each have expanded offerings beyond fresh to frozen, dried, and canned, although the Senate committee's proposal would have done so in a more limited way. Both proposals included a number of changes to Special Supplemental Nutrition program for Women, Infants, and Children (WIC) policy. Only the Senate committee would have raised the age of child eligibility and increased infant certification periods. Both proposed changes to income eligibility calculation, WIC-eligible foods policy, integrity of benefit redemption, transition to EBT, and competitive bidding for infant formula and foods. The Congressional Budget Office (CBO) estimated that the Senate committee's proposal would have increased the deficit by $1.1 billion over 10 years (FY2016-FY2025) and that the House committee's proposal would have reduced the deficit by $67 million over 10 years (FY2017-FY2026).
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Debt-for-nature initiatives were conceived to address the rapid loss of resources and biodiversity in developing countries that were heavily indebted to foreign creditors. Conservationists had noted that the pressure to pay off foreign debts in hard currency was leading to increased levels of natural resource exports (i.e., timber, cattle, minerals, and agricultural products) at the expense of the environment. In many cases, indebted developing countries had difficulty meeting their hard currency debt obligations and defaulted. Reducing foreign debt and allowing for portions of it to be paid with local currency while increasing funds for the environment was thought to improve environmental conditions in developing countries and had the advantage of relieving the debtor country's difficulties in procuring sufficient hard currency to pay off its debts. Money generated from debt-for-nature transactions has been used to fund a variety of projects, ranging from national park protection in Costa Rica to supporting ecotourism in Ghana and conserving tropical forests in Bangladesh. Since 1993, there has been a declining trend in the number of debt-for-nature transactions involving official (public) and private funds. Accounting changes requiring new appropriations to support official (public) debt transactions in creditor countries such as the United States, and a higher price of commercial debt on secondary markets, are two reasons suggested for the decline of debt-for-nature transactions. While Congress has periodically authorized U.S. participation in three-party debt-for-nature transactions and has supported two bilateral debt-for-nature initiatives, appropriations to support these types of efforts have generally diminished over the years. Early debt-for-nature legislation concentrated on understanding and promoting third-party debt-for-nature transactions (see Appendix for legislation summaries and United States Code citations). Congress in 1989 directed the Secretary of the Treasury to ask the U.S. Executive Director of the World Bank to develop a pilot debt-for-nature program and other ways of reducing debt owed by foreign countries while generating funds for the environment. A subsequent law, the International Development and Finance Act of 1989, authorized the U.S. Agency for International Development (USAID) to make grants to nongovernmental organizations (NGOs) to purchase debt in three-party transactions. Official (public) P.L. 480 debt owed to the United States by eligible Latin American countries was authorized to be reduced by the 1990 farm bill ( P.L. 101-624 ; 7 U.S.C. 1738b). The 102 nd Congress authorized debt reduction for foreign assistance loans made by USAID ( P.L. 102-549 ; 22 U.S.C. 2430 and 2421), the Export-Import Bank (Ex-Im Bank; P.L. 102-429 ; 12 U.S.C. 635i-6), and the Commodity Credit Corporation (CCC; P.L. 102-549 ; 22 U.S.C. 2430 and 2421). Together, the P.L. 480, USAID, Ex-Im, and CCC debt-reduction authorizations were undertaken as part of President George H. W. Bush's Enterprise for the Americas Initiative. In 1996, USAID was further authorized by Congress to conduct swaps, buybacks, and cancellations of debt owed to the United States by eligible Latin American and Caribbean countries ( P.L. 104-107 ). In 1998, the Tropical Forest Conservation Act (TFCA; P.L. 105-214 ; 22 U.S.C. 2431) was passed, allowing debt swaps, buybacks, and restructuring to generate funds for tropical forest conservation worldwide. Funding for the TFCA was reauthorized by Congress in 2004 ( P.L. 108-323 ). In the 115 th Congress, S. 1023 would authorize appropriations for the TFCA of $20.0 million annually from FY2018 to FY2021. The bill also would expand the TFCA to include coral reefs and coral reef ecosystems. Further, the bill would allow concessional debt incurred before the date of enactment of the bill to be eligible for debt-for-nature transactions. Under current law, eligible concessional debt must be incurred before 1998. Three-party debt-for-nature transactions, involving nongovernmental organizations such as The Nature Conservancy and Conservation International, were the first debt-for-nature agreements to be formed. In a three-party swap, a conservation group purchases a hard currency debt owed to commercial banks on the secondary market or in some cases a public (official) debt owed to a creditor government at a discounted rate compared to the face value of the debt, and then renegotiates the debt obligation with the debtor country. The debt is generally sold back to the debtor country for more than it was purchased for by the NGO, yet less than what it was on the secondary market. The proceeds generated from the renegotiated debt, to be repaid in local currency, are typically put into a fund that often allocates grants to local environmental organizations for conservation projects (see Figure 1 ). In these cases, the fund is administered by the conservation organization, representatives from local environmental groups, and the debtor government. Money to buy the debt initially may come from the nongovernmental organization, governments, banks, or other private organizations. In 1989, Congress authorized the United States Agency for International Development (USAID) to provide assistance to nongovernmental organizations to purchase the commercial debt of foreign countries as part of debt-for-nature agreements ( P.L. 101-240 ; 22 U.S.C. 2282-2286). Several nongovernmental organizations participated in debt-for-nature transactions with financial assistance from USAID; however, specific information on funds given by USAID to support three-party debt-for-nature transactions was not available. While debt initiatives conducted with three-party transactions are numerous, they have resulted in less reduction in total debt than the debts swapped under bilateral agreements (government-to-government), and slightly less in conservation funds generated. In total, approximately $200 million in debt (face value) has been reduced, restructured, or swapped using this mechanism, generating approximately $167 million in local currency for conservation purposes (see Table 1 ). Bilateral debt transactions are conducted with official (public) funds directly between the creditor and debtor governments. The creditor government determines the criteria for eligibility, which usually involve the existence of certain financial and political conditions in the debtor country. Debt agreements are usually cancelled and then restructured to extend payback periods, or in some cases, debt is bought back by the debtor country for a discounted price. Money for the environment can be generated through interest payments from the debtor country if the debt is restructured, or from a percentage of the buyback price. Multilateral debt-for-nature agreements have also been conducted between more than one creditor country and a debtor country (see Table 2 ). The model for bilateral debt-for-nature agreements conducted by the United States was first defined in 1990 by the Enterprise for the Americas Initiative (EAI; Title 15, Section 1512 of the Food, Agriculture Conservation and Trade Act of 1990, "1990 farm bill," P.L. 101-624 ; 7 U.S.C. 1738) and has since been expanded numerous times (see Appendix ). It was last amended by the Tropical Forest Conservation Act (TFCA) in 1998 ( P.L. 105-214 ; 22 U.S.C. 2431). The EAI legislation authorizes the sale, reduction, cancellation, and country buyback of eligible debt of Latin American and Caribbean countries that meet certain criteria. The debt authorized to be treated include the following types: P.L. 480 debt ( P.L. 101-624 ; 7 U.S.C. 1738m, p-r, etc.) AID debt ( P.L. 102-549 ; 22 U.S.C. 2430 and 2421) CCC debt ( P.L. 102-549 ; 22 U.S.C. 2430 and 2421) Exim debt ( P.L. 102-429 ; 12 U.S.C. 635i-6) Debtor countries must meet certain political and macroeconomic criteria in order to be eligible. Eligible countries are required to (1) have a democratically elected government, (2) not support terrorism, (3) not fail to cooperate with the United States on drug control, and (4) not engage in gross violations of human rights. From an economic perspective, eligible countries are required to have (1) an International Bank for Reconstruction and Development (IBRD) or International Development Association (IDA) structural or sectoral adjustment loan or its equivalent, (2) a macroeconomic agreement with the International Monetary Fund or equivalent, and (3) instituted investment reforms, as evidenced by a bilateral investment treaty with the United States, an investment sector loan, or progress towards implementing an open investment regime. Each country that participates in the EAI must enter into an Americas Framework Agreement with the United States to establish an Americas Trust Fund and create enforcement mechanisms to insure payments into the fund and prompt disbursements out of the fund. Funds can be used to support environmental, natural resource, health protection, and child development programs within the debtor country. Debt swaps, buybacks, and restructuring are three mechanisms authorized to conduct debt-for-nature transactions under the EAI. Seven of the eight countries that have participated in debt-for-nature transactions under the EAI used the debt-restructuring mechanism to generate environmental funds (see Table 3 ); only Peru took advantage of the debt buyback option. In a debt-restructuring agreement, the original debt agreement is cancelled (e.g., a percentage of the face value of the debt could be reduced) and a new debt agreement is created with a provision for an annual amount of money (in local currency) to be deposited into an environmental fund. In 1992, for example, the United States reduced a $310 million (face value) debt owed by Colombia by 10% in return for a total deposit of $41.6 million in local currency into an environmental fund managed by the Colombian government over 10 years. In a debt buyback, the debtor country purchases its debt at a reduced price. The lesser of either 40% of the repurchase price or the difference between the face value of the debt and the repurchase price is deposited in local currency into an environmental trust to support environmental and child support programs in the debtor country ( P.L. 104-107 , Title V, Sec. 574). For example, in 1998 Peru took advantage of this program and bought back $177 million in debt for $57 million, generating nearly $23 million (40% of the repurchase price) in local currency funds for conservation and child development programs. For all eight debtor countries, more than $1 billion (face value) of debt was reduced from a total debt of $1.9 billion, and almost $180 million of conservation funds were generated under the guidelines of the EAI (see Table 3 ). All deposits into EAI funds have stopped, and some countries continue to award grants from their funds. Three transactions under the EAI continued to operate in 2015 (Chile, Uruguay, Bolivia, Argentina, and Peru have been concluded). These programs support small projects with grants and monitor existing projects that have been funded. Some examples of EAI projects include coastal zone marine management and hurricane relief projects in Jamaica, environmentally based development projects in the Peruvian Andes, and community conservation grants in Bolivia. Acknowledging that tropical rainforests were valuable for preserving biodiversity, reducing atmospheric carbon dioxide, and regulating hydrological cycles, Congress sought to expand the EAI authorization to countries throughout the world with tropical forests. The result was the 1998 Tropical Forest Conservation Act (TFCA, P.L. 105-214 ; 22 U.S.C. 2431), which was established to generate funds to conserve tropical forests by reducing external debt in countries with such forests. TFCA is an extension of the Enterprise for the Americas Act, in that it allows debt swaps, debt restructuring, and debt buybacks to generate conservation funds. These funds, however, are specifically designated for the conservation of tropical forests and are not confined to Latin America. To date, 14 countries have participated in this program, establishing 20 agreements (several countries have two agreements) that will reduce a total of at least $90.0 million from the face value of their debts to the United States and generate $339.4 million in local currency for tropical forest conservation projects (see Table 4 ). To date, the Republic of the Philippines completed the largest ever debt-for-nature transaction under the TFCA in 2013. To be eligible for this program, a developing country must contain at least one tropical forest with unique biodiversity, or a tropical forest tract that is representative of a larger tropical forest on a global, continental, or regional scale. Political and macroeconomic criteria for eligibility are almost identical to those used for participation under the EAI. Conservation funds (in local currency) from these transactions are deposited in a tropical forest fund for each country. The fund is overseen by an administrating body composed of one or more appointees chosen by the U.S. government and the government of the beneficiary country, and individuals who represent a broad range of environmental, academic, and scientific organizations in the beneficiary country (the majority of the board is represented by these individuals). This fund operates in the same manner as the Americas Fund: Local currency payments of interest accrued on restructured loans are deposited into a tropical forest fund and serve as the principal. Interest earned from this principal balance and the principal itself is usually given in the form of grants to fund tropical forest conservation projects. Eligible conservation projects include (1) the establishment, maintenance, and restoration of parks, protected reserves, and natural areas, and the plant and animal life within them; (2) training programs to increase the capacity of personnel to manage parks; (3) development and support for communities residing near or within tropical forests; (4) development of sustainable ecosystem and land management systems; and (5) research to identify the medicinal uses of tropical forest plants and their products. The TFCA was reauthorized for appropriations in 2004, including $20 million for FY2005, $25 million for FY2006, and $30 million for FY2007. This law also authorizes funds to conduct audits and evaluations of debt-for-nature programs. A "TFCA Evaluation Sheet" has been created to evaluate the performance of TFCA country programs. The evaluation sheet establishes criteria for TFCA program categories and functions and is completed each year by the U.S. government representative on the local TFCA board or oversight committee. This law also authorizes the use of the principal of restructured loans for debt-for-nature transactions. Advocates of debt-for-nature initiatives argue that reducing debt in developing countries will help create free-market systems (as part of the reforms required for eligibility), stimulate economic growth and trade liberalization, provide incentives for foreign investment, and help protect the environment. Converting hard currency debts to local currency debts, advocates argue, will lower debt burdens on developing countries and in the long run may reduce resource extraction at the expense of the environment. Critics of debt-for-nature initiatives argue that only a small percentage of debt is reduced, thereby minimizing the positive benefits of debt reduction in developing countries. For example, in some transactions under the TFCA, the interest paid for the debt is used for conservation projects, while the principle of the debt remains. Supporters point out that although the percentage of debt reduced by debt-for-nature transactions is small, the establishment of laws, programs, and funds dedicated to conservation that follows debt-for-nature initiatives in debtor countries is generally significant relative to what the country originally would have spent on conservation. The relationship between debt reduction and lower resource extraction rates is controversial. Some analysts suggest that debt reduction has no direct relationship to lower extraction rates of minerals or timber in developing countries with foreign debt. Advocates of debt-for-nature initiatives note that the United States has a history of supporting debt reduction initiatives in developing countries and appropriating funds for environmental causes. For example, the Heavily Indebted Poor Countries (HIPC) initiative (22 U.S.C. §262p-6) aims to reduce debt in developing countries. HIPC was created by international creditors, the World Bank, and IMF to reduce debt of poor countries that have demonstrated social and economic policy reforms that enable fluid export revenues and capital inflows. Funds generated for the environment in developing countries arguably improve local environmental conditions, promote sustainable resource use, and help to preserve global biodiversity and ecosystem services. Critics argue that such benefits are limited in scope because conservation spending is unbalanced. The majority of conservation funds are often directed toward a few areas and specific projects that already feature work by organizations and researchers and do not address other areas that are equally rich in biodiversity. Advocates also suggest that debt-for-nature transactions that generate funds to support tropical forest conservation are especially appropriate to address climate change. Deforestation is responsible for the largest share of carbon dioxide (CO 2 ) released to the atmosphere due to land use changes, approximately 20% of total anthropogenic greenhouse gas (GHG) emissions annually. Much of the deforestation responsible for CO 2 releases occurs in tropical regions, specifically in developing countries such as Brazil, Peru, Indonesia, and the Democratic Republic of the Congo. Some of these tropical countries with high levels of total debt owed to the United States also have some of the largest areas of tropical forest cover. For example, Indonesia and has concessional debts to the United States totaling over $140 million, and has one of the largest areas of tropical forest cover in the world. Other countries, such as the Democratic Republic of Congo and Sudan, also fit this pattern; however, these countries may be ineligible for debt-for-nature transactions under the TFCA due to political and economic eligibility requirements. Those who oppose debt-for-nature transactions often argue that they are not adequately enforced by debtor countries, generate insufficient funds to improve environmental problems, and may infringe on national sovereignty. Three-party debt transactions have historically had weak enforcement mechanisms; however, bilateral debt transactions such as those conducted under the EAI generally include safeguards and default provisions to protect the U.S. government from losing funds. National sovereignty became an issue with the first debt-for-nature swap in Bolivia when a conservation organization was reported to have obtained title to forested lands. There was a public outcry and ensuing political crisis when the Bolivian people thought a large part of their country had been given to a foreign organization. Consequently, conservation organizations involved in recent three-party transactions have generally refrained from directly buying land in debtor countries with conservation funds earned from debt-for-nature transactions. The number of debt-for-nature transactions has declined in recent years, perhaps due to accounting changes that require greater appropriations to fund debt-for-nature transactions with official (public) debt and a higher price of commercial debt on the secondary market (see Figure 3 ). Before 1991, no appropriations were required for debt cancellations, and the United States cancelled between $11 billion and $12 billion in debt between 1988 and 1991. This changed with the Federal Credit Reform Act of 1990 (2 U.S.C. 661a et seq.). This law requires that the net present value (NPV) of debts owed to the United States by foreign countries be used to calculate the cost of debt restructuring, buybacks, swaps, and cancellations to the U.S. government. The NPV of the loan is calculated often giving consideration to projected default losses, fees, and interest subsidies. Funds appropriated by Congress for conducting debt-for-nature transactions cover the cost of loan modifications, which could include a face-value reduction in the amount of eligible debt owed to the United States. TFCA has not received appropriations since FY2014. A decline in three-party commercial debt-for-nature transactions may also be due to the conclusion of Brady Plan operations by Latin American countries. The Brady Plan allowed for partial debt forgiveness with a restructuring of the remaining debt into bonds that could be traded on the securities markets. When this program was concluded, the price of debt on the secondary market increased and financing leverage decreased, making it difficult and less attractive for environmental organizations to acquire debt for resale. Further, debt relief for developing countries is available through other programs that allow for relatively greater amounts of debt to be cancelled (e.g., HIPC). These programs may be more desirable to developing countries with debt than debt-for-nature initiatives under the EAI or TFCA. Under the TFCA, there was an 18-month period from 2004 to 2006 when no transactions were made, largely due to the length of time needed to negotiate and create debt-restructuring agreements. Lastly, the political and economic requirements needed to be eligible for debt-for-nature transactions make it difficult, according to some, for some countries with eligible debt to participate in EAI or TFCA programs. Few studies have analyzed the effectiveness of debt-for-nature transactions. Because most of the transactions address several aspects of forest conservation, it would be difficult to comprehensively analyze their effectiveness in conserving tropical forests. A 2011 study on deforestation in poor countries found that poor nations that have implemented debt-for-nature transactions and have high levels of conservation funds tend to have lower rates of deforestation than countries that do not. Nevertheless, many conservation organizations support the framework of the TFCA and suggest that the TFCA should serve as a model for conserving other ecosystems, such as coral reefs and grasslands. Appropriations for debt reduction activities authorized by the EAI totaled $90 million; $40 million was appropriated for P.L. 480 debt reduction for FY1993 ( P.L. 102-341 ) and $50 million was appropriated for other debt restructuring under EAI in FY1993 ( P.L. 102-391 ). For debt reduction activities under TFCA, appropriations have totaled approximately $233.4 million from FY2000 to FY2013 (see Table 5 ). Authorization for appropriations under TFCA expired in FY2008, and Congress has not appropriated funding for the program since FY2013. Bilateral debt-for-nature initiatives implemented by the U.S. government were supported through appropriations under programs such as the EAI and TFCA. Recently, appropriations for conducting debt-for-nature transactions under these programs have stopped. Additionally, there generally has been less interest in conducting debt-for-nature transactions. Some possible reasons for the decreased interests could include the following: Eligible debt to conduct these transactions has decreased, making these transactions either insignificant or not allowed for some debtor countries. The amount involved in the transactions is too small for some eligible countries to show interest in participating. There is a lack of appropriations to support debt-for-nature transactions. The focus on tropical forests (i.e., through TFCA) might be too narrow for many eligible countries. Some Members of Congress contend that transactions under TFCA should continue because the program is included in strategies to address global climate change. Tropical forests make up the largest proportion of carbon stored in terrestrial land masses and are thought to be a carbon sink. Despite uncertainties on the part of some, it is generally thought that maintaining existing tropical forests will store carbon and that preventing deforestation will reduce the release of stored carbon into the atmosphere. The most recent debt-for-nature swap with Indonesia under the TFCA in 2014, for example, has been billed as a cooperative effort to deal with climate change. However, no quantitative analyses have examined the amount of stored-carbon emissions reduced by TFCA efforts. Others have supported expanding TFCA to include coral reefs. The addition of coral reefs to the program could expand the number of eligible countries for debt-for-nature transactions, pending economic and political criteria. Continuing Appropriations Act for 1988 ( P.L. 100-202 ; Section 537(C)(1-3)). Directs Secretary of the Treasury to analyze initiatives that would enable developing countries to repay portions of their debt obligations through investments in conservation activities. International Development and Finance Act of 1989 ( P.L. 101-240 ; Title VII, Part A, Section 711) (22 U.S.C. 2282 - 2286). Authorizes USAID to provide assistance to nongovernmental organizations to purchase debt of foreign countries as part of a debt-for-nature agreement (i.e., three-party swap). Authorizes USAID to conduct a pilot program for debt-for-nature swaps with eligible sub-Saharan African countries. Support for East European Democracy (SEED) Act of 1989 ( P.L. 101-179 ; Title I, Section 104) (22 U.S.C. 5414). Authorizes the President to undertake the discounted sale, to private purchasers, of U.S. government debt obligations from eligible Eastern European countries. FY1990 Foreign Operations Appropriations Act ( P.L. 101-167 ; Title V, Section 533(e)) (22 U.S.C. 262p-4i - 262p-4j). Directs the Secretary of the Treasury to (1) support sustainable development and conservation projects when negotiating reduction of commercial debt and assisting with reduction of official (public) debt obligations, (2) encourage the World Bank to assist countries in reducing or restructuring private debt through environmental project and policy-based loans, and (3) encourage multilateral development banks to support lending portfolios that will allow debtor countries to restructure debt that may offer financial resources for conservation. Enterprise for the Americas Initiative (Title XV, Section 1512 of the Food, Agriculture Conservation and Trade Act of 1990) ( P.L. 101-624 ; 104 Stat. 3658) (7 U.S.C. 1738b). Amends the Agriculture Development and Trade Act of 1954 to allow the President to reduce the amount of P.L. 480 sales credit debt owed to the United States by Latin American and Caribbean countries. Export Enhancement Act of 1992 ( P.L. 102-429 ; Title I, Section 108) (12 U.S.C. 635i-6). Authorizes the sale, reduction, cancellation, and buyback of outstanding Export-Import Bank (Exim) loans for EAI purposes. Jobs Through Exports Act of 1992 (debt forgiveness authority under EAI) ( P.L. 102-549 ; Title VI, Section 704) (22 U.S.C. 2430 and 22 U.S.C. 2421). Authorizes the sale, reduction, cancellation, and country buyback (through right of first refusal) of eligible Commodity Credit Corporation (CCC) debt. Also authorizes the reduction of foreign assistance (USAID) debt. Enterprise for the Americas Initiative Act of 1992 ( P.L. 102-532 ) (7 U.S.C. 1738m, p-r, etc.). Establishes guidelines for debt-for-nature swaps for Latin American and Caribbean countries. Agriculture Appropriations for FY1993 ( P.L. 102-341 ). Provided $40 million for P.L. 480 debt reduction under EAI. Foreign Operations Appropriations for FY1993 ( P.L. 102-391 ). Provided $50 million for debt restructuring under EAI. Foreign Operations Appropriations for FY1995 ( P.L. 103-306 ; Title II, Section 534). Authorizes nongovernmental organizations associated with the Agency for International Development to place funds from economic assistance provided by USAID in interest-bearing accounts. Earned interest may be used for the purpose of the grants given. Foreign Operations Appropriations for FY1996 ( P.L. 104-107 ; Title V, Section 571). Provides authority to perform debt buybacks/swaps with eligible loans made before January 1, 1995. For buybacks, the lesser of either 40% of the price paid or the difference between price paid and face value must be used to support conservation, child development and survival, or community development programs (Title V, Section 574). Tropical Forest Conservation Act of 1998 ( P.L. 105-214 ) (22 U.S.C. 2431). Amends the Foreign Assistance Act of 1961 to facilitate the protection of tropical forests through debt restructuring, buybacks, and swaps in eligible developing countries with tropical forests. Reauthorization of the Tropical Forest Conservation Act ( P.L. 107-26 ). Authorizes the appropriation of $50 million, $75 million, and $100 million for FY2002, FY2003, and FY2004. Reduces the magnitude of investment reforms that must be in place for eligible countries. Reauthorization of Appropriations under the Tropical Forest Conservation Act ( P.L. 108-323 ). Authorizes the appropriation of $20 million, $25 million, and $30 million for FY2005, FY2006, and FY2007, respectively. Includes authorization for evaluating programs and allows for the principal on debt agreements to be treated by the debt-for-nature transaction.
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In the late 1980s, extensive foreign debt and degraded natural resources in developing nations led to the creation of debt-for-nature initiatives that reduced debt obligations, allowed for debt repayments in local currency as opposed to hard currency, and generated funds for the environment. These initiatives, called debt-for-nature swaps typically involved restructuring, reducing, or buying a portion of a developing country's outstanding debt, with a percentage of proceeds (in local currency) being used to support conservation programs within the debtor country. Most early transactions involved debt owed to commercial banks and were administered by nongovernmental conservation organizations and referred to as three-party transactions. Other debt-for-nature initiatives involved official (public) debt and were administered by creditor governments directly with debtor governments (termed bilateral transactions). In the early 1990s, the United States initiated a program called the Enterprise for the Americas Initiative (EAI), which involved debt-for-nature transactions. The United States restructured, and in one case sold, debt equivalent to a face value of over $1 billion owed by Latin American countries; these transactions were authorized by Congress as part of the EAI, which broadened the scope of debt transactions to include a number of social goals. Nearly $177 million in local currency for environmental, natural resource, health protection, and child development projects within debtor countries was generated from these transactions. The model for debt-for-nature transactions, outlined in the EAI, was used in the Tropical Forest Conservation Act (TFCA; P.L. 105-214; 22 U.S.C. 2431) to include countries around the world with tropical forests. Under this program, debt can be restructured in eligible countries and funds generated from the transactions are used to support programs to conserve tropical forests within the debtor country. TFCA authorizes the use of debt swaps, debt restructuring, and debt buybacks to generate conservation funds. Under these agreements, the existing debt agreement is canceled and a new one is created; a Tropical Forest Agreement is created and interest payments for the principal of the loan are deposited in local currency equivalents in a Tropical Forest Fund; and the money in the fund is given in the form of grants to local conservation groups or the debtor government to conduct conservation activities for tropical forests. Eligible conservation projects include (1) the establishment, maintenance, and restoration of parks, protected reserves, and natural areas, and the plant and animal life within them; (2) training programs to increase the capacity of personnel to manage parks; (3) development and support for communities residing near or within tropical forests; (4) development of sustainable ecosystem and land management systems; and (5) research to identify the medicinal uses of tropical forest plants and their products. Since 1998, $233.4 million has been used under TFCA to restructure loan agreements in 14 countries (20 transactions), and over $339.4 million will be generated for tropical forest conservation at the conclusion of these agreements. TFCA was authorized to receive appropriations through FY2007, but no funds have been appropriated for the program since FY2014. TFCA is being considered for reauthorization in the 115th Congress in S. 1023. This bill would expand the purpose of TFCA to include coral reefs and authorize $20 million in appropriations annually from FY2018 to FY2021, among other things. Debt-for-nature transactions generally are viewed as a success by conservation organizations and debtor governments because of the funds generated for conservation efforts. Debt-for-nature transactions under TFCA have stopped in recent years. Some observers suggest that this is due to lack of appropriations to support TFCA and competing debt-relief programs, such as the Highly Indebted Poor Countries Initiative.
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The Conservation Reserve Program (CRP) is the largest federal, private-land retirement program in the United States. The program provides financial compensation for landowners to voluntarily remove land from agricultural production for an extended period (typically 10 to 15 years) for the benefit of soil and water quality improvement and wildlife habitat. The program was first authorized in the Food Security Act of 1985 (1985 farm bill, P.L. 99-198 ), initially as both a supply management tool for removing land from agricultural production, thus lowering commodity supply and potentially raising prices, and for providing environmental benefits. Currently, close to 25.6 million acres are enrolled in the program with total funding of approximately $2 billion annually. Acres enrolled in CRP have shown a number of positive environmental benefits including reduced soil erosion; water quality improvements through vegetative cover, buffer strips, and reduced fertilizer application; and wildlife population improvement from increased habitat. While a number of natural resource improvements are attributed to the program, the program contains a number of controversial elements as well, including the economic and environmental effect of permitted activities, such as haying and grazing on CRP acres and the reduction of enrolled acres due to high crop prices and farm bill reauthorization. Program and funding authority for CRP was reauthorized and extended through FY2018 by the Agricultural Act of 2014 (2014 farm bill, P.L. 113-79 ). The program is administered by the Farm Service Agency (FSA) at the U.S. Department of Agriculture (USDA), with technical support from the Natural Resources Conservation Service (NRCS) and other USDA agencies. Enrollment is limited to no more than 27.5 million acres at any given time in FY2014. There are two main types of enrollment into CRP: general sign-up and continuous sign-up. Several continuous sign-up "initiatives" focus enrollment on specific resource concerns or conservation practices. CRP is a competitive program, in which landowners offer eligible land for enrollment into the program. A general sign-up is a specific period of time during which FSA accepts these offers. Offers are ranked according to an Environmental Benefits Index (EBI, see text box) to determine the relative environmental benefits for the land offered. For each general sign-up, FSA collects data on each of the EBI factors and ranks all eligible offers across the country. After the sign-up ends, USDA determines an EBI threshold. Acceptance for enrollment into CRP is extended to offers that scored above the EBI threshold. This threshold varies by sign-up depending on the offers received. Producers generally try to maximize EBI points and increase the likelihood that their offer will be accepted for enrollment. As of July 2014, 19.7 million acres were enrolled in CRP under general sign-up contracts, or 77% of total CRP acres. This includes 262,417 contracts on 177,983 farms. During the most recent general sign-up (#45), USDA accepted 1.68 million acres offered for enrollment starting October 1, 2013. On June 4, 2014, USDA announced that contract holders of eligible FY2014 expiring contracts will qualify for a one-year extension. A general sign-up is not scheduled for FY2014. Continuous sign-up is designed to enroll the most environmentally desirable land into CRP through specific conservation practices or resource needs. Unlike the general sign-up process, land offered under continuous sign-up may be enrolled at any time and is not subject to competitive bidding. If offers meet certain eligibility requirements then they are automatically accepted. Contracts are effective the first day of the month following the month of approval and typically include additional financial incentives. Continuous sign-up includes a number of initiatives that target acres with specific resource concerns or support additional conservation practices. These are described in Appendix A . As of July 2014, 5.75 million acres were enrolled in CRP under continuous sign-up, or 23% of total CRP acres. This includes 1.6 million enrolled through the two statutorily created sub-programs—the Conservation Reserve Enhancement Program (CREP, 1.3 million acres) and Farmable Wetland Program (FWP, 339,673 acres). The remaining 4.2 million acres were enrolled in other continuous sign-up initiatives. To be eligible for CRP enrollment, a producer must be an owner, operator, or tenant of the land for at least 12 months prior to the close of the CRP sign-up period, and show control of the land for the duration of the contract. The land may be eligible if owned for less than 12 months and if (1) the land was acquired due to the previous owner's death; (2) the ownership change occurred due to foreclosure where the owner exercised a timely right of redemption in accordance with state law; or (3) adequate assurances are made that the new owner did not acquire the land for the purpose of placing it in CRP. For land to be eligible for CRP, USDA may consider the following land types for enrollment: highly erodible cropland that (1) if untreated could substantially reduce the land's future agricultural production capability or (2) cannot be farmed in accordance with a conservation plan; and has a cropping history or was considered to be planted for four of the six years preceding February 7, 2014 (except for land previously enrolled in CRP); marginal pasture land devoted to appropriate vegetation for water quality purposes; grasslands that (1) contain forbs or shrubland on which grazing is the predominant use; (2) are located in an area historically dominated by grasslands; and (3) could provide habitat for ecologically significant animal and plant populations if restored or retained in its current condition. cropland that is otherwise ineligible, if it is determined that (1) if permitted to remain in agricultural production, it would contribute to the degradation of soil, water, or air quality; (2) the land is a newly created, permanent grass sod waterway, or a contour grass sod strip; (3) the land will be devoted to newly established living snow fences, permanent wildlife habitat, windbreaks, shelterbelts, or filterstrips or riparian buffers devoted to trees or shrubs; (4) the land poses an off-farm environmental threat; or (5) enrollment of the land would facilitate a net savings in groundwater or surface water resources; or certain land enrolled as a riparian buffer or for similar water quality purposes. In exchange for enrollment into CRP, participants receive payments from USDA. These payments offset the cost of temporarily retiring the land from production and implementing resource-conserving and wildlife-promoting practices. A number of payment types under CRP are highlighted in Table 1 . The authorizing statute establishes the maximum number of acres that can be enrolled in the program at any one time. The program is authorized to spend such sums as necessary to enroll up to the maximum level of allowable acres. This funding is mandatory (i.e., not subject to annual appropriations) and is provided through the borrowing authority of the USDA's Commodity Credit Corporation (CCC). In total, the average annual federal cost for CRP is close to $2 billion. The majority of this cost is annual rental payments, which average $63.65 per acre, but can vary greatly by location. Producers have a number of conservation practices to consider for installation on their land when enrolling in CRP. The selection of practices is part of the voluntary enrollment process and is determined by the landowner, with assistance from USDA, while developing a CRP offer. Once an offer is accepted for enrollment, the participant must develop a conservation plan of operation, which serves as a guide for which practices will be used, where, and for how long. Once the plan is approved and the contract signed by the participant, the land is considered enrolled in CRP. Certain continuous sign-up initiatives require specific conservation practices for enrollment. The most widely applied conservation practices are described in Table 2 . The 2014 farm bill reauthorized CRP and reduced the enrollment cap from 32 million acres to 24 million acres by FY2018. While CRP enrollment has fluctuated since its creation in the 1985 farm bill, recent enrollment has declined from its peak in FY2007 of 36.8 million acres to 25.6 million acres in FY2013. Reduced enrollment is thought to be a product of high commodity prices, low rental rates, and declining interest in retiring land from production. Further reduction in the farm bill was viewed as inevitable given the fiscal challenges. Conservation and wildlife groups, however, remain concerned that reduced enrollment will impact critical species habitat and soil and water quality. The 2014 farm bill enrollment reduction created an estimated savings of $3.3 billion over 10 years. A number of programmatic changes centered around permitted activities. Emergency harvesting, grazing, and other use of forage are permitted, in some cases, without a reduction in rental rate, as well as livestock grazing for a beginning farmer or rancher. Other approved activities, such as annual or routine grazing, may continue to require a reduction in rental rate (discussed further in the " Harvesting and Grazing " section below). The Grassland Reserve Program (GRP) was repealed in the 2014 farm bill. Grassland contracts, similar to what was repealed under GRP, are now eligible under CRP. The 2014 farm bill also allows CRP participants the opportunity to terminate their contract early if the land has been enrolled longer than five years and it does not contain environmentally sensitive practices. A detailed analysis of the programmatic changes may be found in Appendix B . An analysis of the full farm bill reauthorization debate may be found in CRS Report R43504, Conservation Provisions in the 2014 Farm Bill (P.L. 113-79) . Harvesting and grazing became a major concern beginning in the summer of 2012. A prolonged drought and flooding in parts of the Midwest had livestock owners requesting access to land enrolled in CRP for forage harvesting and grazing. While USDA did allow emergency harvesting and grazing under CRP, annual rental rates were reduced due to the statutory requirement that payments be reduced commensurate with the economic value of the authorized activity. Historically, this reduction ranged between 10% and 25% of the annual rental payment. Following amendments made in the 2014 farm bill, harvesting and grazing are still permitted on CRP land under certain conditions. The amendments expand these opportunities by reducing or eliminating payment penalties and incorporating elements of the repealed Grassland Reserve Program (GRP) into grassland contracts. In some cases, environmentally sensitive land is ineligible for harvesting and grazing and most have restrictions during primary nesting season ( Figure 1 ). Now rate reductions for permitted activities are as follows: Forage in response to drought, flooding, or other emergency— no reduction in rental rates. Authorized activities consistent with soil conservation, water quality , and wildlife habitat; managed harvesting; and commercial use (including biomass harvesting) 11 — not less than a 25% reduction in annual rental rates for acres covered by the activity. To occur at least every five years but not more than once every three years. Annual prescribed grazing for invasive species control— not less than a 25% reduction in annual rental rate, subject to nesting season restrictions. Routine grazing— not less than a 25% reduction in annual rental rate, subject to nesting season restrictions, vegetation management requirements and stocking rates, and limited to not more than once every two years (accounting for regional differences). Wind turbine installation— not less than a 25% reduction in annual rental rate, subject to nesting restrictions and limitations on the number and location or the turbines. Seasonal use of vegetative buffer practices— no reduction in rental rates assuming the permitted use does not damage the permanent vegetation. Livestock grazing by a beginning farmer or rancher— no reduction in rental rates, providing the grazing is consistent with soil conservation, water quality, and wildlife habitat; nesting season; control of invasive species; or routine grazing. The 2014 farm bill repealed GRP and incorporated elements of the program into CRP. GRP included two enrollment types—contracts and easements. GRP contracts limited future development and cropping uses of the land and retained the right to conduct common grazing practices and operations related to the production of forage and seeding. A number of similar activities associated with grasslands are now permitted under CRP. These include common grazing and maintenance practices; haying, mowing, or harvesting for seed production (subject to nesting season); fire presuppression, rehabilitation, and breaks; and fencing and livestock watering. Grassland enrollment is limited to no more than 2 million acres between FY2014 and FY2018 as part of the overall program. Recent droughts have fueled questions about the reduction of CRP acres. It is unclear what level of relief to livestock is achieved through the emergency harvesting and grazing during drought or if there is any long-term impact on wildlife habitat. Other questions remain, including, if fewer acres are enrolled in CRP for conserving uses, or if enrollment were limited to more sensitive land that would not support harvesting and grazing, what impact would this have on livestock times of prolonged drought? Is the role of CRP to provide drought relief or is that beyond the scope of the program? What are the positive and negative effects of harvesting and grazing, whether managed or in the event of emergency, that might impact wildlife, plant quality, and erosion control? The nature of CRP enrollment has changed since the program's inception in the 1985 farm bill. Program priorities have shifted, total acres enrolled have fluctuated (see Figure 2 and Figure 3 ), farming technologies have advanced, and producer preferences have changed. Many of these changes are cited as the reason for further reducing the level of CRP acres enrolled in the 2014 farm bill. CRP contracts vary in length, though most are 10 years in duration. At the end of a contract, the participant may either seek reenrollment into the program (via a general or continuous sign-up, if eligible) or let the contract expire. This 10-year cycle resulted in more than 16 million acres enrolled in 1997 potentially expiring all at once in 2007. To stagger this expiration process, USDA offered two- to five-year reenrollment and extension contracts in 2006 to contacts expiring between 2007 and 2010 (27 million acres). While approximately 83% of those offered accepted these extensions (23 million acres), over 8.5 million acres expired from the program during that time. The 45 th general sign-up in 2013 recorded 1.57 million acres of the 1.68 million acres deemed acceptable. Acceptable acres had an EBI score of 209 and above and an average rental rate of $64/acre. Approximately 3.3 million acres under CRP contract (both general and continuous) were scheduled to expire on September 30, 2013. Following the FY2013 general sign-up and continuous sign-ups, 1.7 million acres left CRP on October 1, 2013, either through contract expiration or attrition. An estimated 2 million acres are scheduled to expire at the end of FY2014. Between FY2007 and FY2014, over 17.1 million CRP acres under contact have expired and were not reenrolled in the program ( Figure 3 ). The majority of these acres in FY2013 are located in the central part of the United States, which also has the largest number of acres enrolled ( Figure 5 and Figure 3 ). The number and location of these acres concerns some program advocates because of the potential loss of environmental benefits, particularly migratory and grassland bird habitat. Under the 1985 farm bill, CRP was initially authorized to enroll up to 45 million acres between crop years 1986 and 1990. USDA did not reach this enrollment cap and subsequent farm bills reduced the authorized level of enrollment. CRP enrollment reached its peak in 2007 with 36.8 million acres. The 2008 farm bill reduced the enrollment cap to 32 million acres and the 2014 farm bill continues this reduction to 24 million acres by FY2018. This reduction in enrollable acres will further reduce the opportunity for reenrollment of expiring acres under contact and any new general sign-up would be relatively small. Under current law, a producer wishing to terminate a CRP contract early faces a penalty of full repayment, with interest, of all the funds already paid to the producer, including any cost-share payments and other financial incentives, plus a fee of 25% of rental payments received. Although the Secretary of Agriculture always has the authority to release land from CRP without penalty, this option has not been commonly used. In program history, this option has been exercised twice—in 1995 and 1996—when acres were allowed a voluntary, penalty-free early release in order to enroll more environmentally sensitive cropland. In both cases, environmentally sensitive acres were not released and certain restrictions applied to acres returning to production or harvesting and grazing. In addition to the Secretary's discretion, an early-out provision has been in statute since the 1996 farm bill, but only applied to CRP contracts in effect before January 1, 1995. The 2014 farm bill amended this provision to allow for a one-time early release in FY2015, but requirements of the old provision remain, including: land cannot be devoted to filterstrips, waterways, strips adjacent to riparian areas, windbreaks, and shelterbelts, land cannot have an erodibility index of 15, rental payments must be prorated for the year of termination, land is still eligible for future CRP contracts, and land is still subject to conservation compliance requirements. Section 2006 of the 2014 farm bill expands this provision to allow CRP contract holders to terminate prior to the contract's expiration in FY2015 if the contract has been in effect for at least five years and meets additional eligibility requirements. Specifically, in addition to the existing requirements above, the land is considered ineligible if it is devoted to hardwood trees, wildlife habitat, duck nesting habitat, pollinator habitat, upland bird habitat buffer, wildlife food plots, State acres for wildlife enhancement, shallow water areas for wildlife, and rare and declining habitat, a farmable wetland and restored wetland, land that contains diversions, erosion control structures, flood control structures, contour grass strips, living snow fences, salinity reducing vegetation, cross wind trap strips, and sediment retention structures located within a federally designated wellhead protection area, covered by an easement under CRP, located within an average width, according to the applicable NRCS field office technical guide, of a perennial stream or permanent water body, and enrolled under CREP. Generally, most conservation and wildlife organizations are opposed to this penalty-free early-out option, however, they believe the additional restrictions on ineligible land could minimize the overall impact. CRP rental payments are based on two main factors: the county average rental rate and soil productivity. The county average rental rate uses the National Agricultural Statistics Service's (NASS's) survey of county average rental rates for cropland and pastureland. Soil productivity is based on a Natural Resources Conservation Service (NRCS) calculation that uses data of the local soil, landscape, and climate to determine the ability of the land to produce crops on non-irrigated soil. The average CRP rental payment rates are as follows: $51.09 per acre for general sign-up, $97.25 per acre for non-CREP continuous sign-up, $136.70 per acre for CREP continuous sign-up, and $111.70 per acre for farmable wetlands. Rental rates for CRP contracts became an important issue to some producers when commodity prices began to rise in 2008. Commodity prices have remained high, causing producers to claim that CRP rental rates are significantly lower than the producers could get by renting their land out for production. On the other hand, contracts are for 10 or more years and could be viewed as long-term investments rather than reactions to short-term commodity price fluctuation. If rental rates are set too low, producers might decline to enroll their land, or, if already enrolled, they might decline to renew their contracts at expiration. A 2011 study by the Economic Research Service (ERS) at USDA modeled the effect of increasing commodity prices on CRP enrollment. The study suggested that maintaining CRP under its current configuration could lead to program cost increases. When constraints were placed on increasing rental rates, the study suggested that enrollment goals could be met with moderate increases in the CRP rental rates. The latter scenario might mean that enrollment goals could be met, but at the cost of applying a lower EBI, as producers with profitable, but environmentally sensitive, acreage choose not to enroll. If crop prices remain high and enrolling environmentally sensitive land continues to be a program priority, then finding the level of rental payments that encourages enrollment and keeps the cost of the program acceptable to policy makers might continue to be an issue. In July 2012, the USDA Office of Inspector General (OIG) issued a report on the use of CRP rental rates. The report concluded that for the 39 th general sign-up in 2010, FSA (1) did not use the most recent NRCS soil productivity factors; and (2) allowed states and counties to propose alternate rates that did not adhere to its own policies for reviewing and approving the alternate rates. OIG accepted two of the four agency responses to its recommendations. The two responses that it found unacceptable concerned the use of the most recent NRCS productivity data and establishing procedures for approving alternate county average rental rates. It is unclear what follow-up action, if any, will be taken by FSA to address the remaining concerns. Despite the potential limiting factors affecting CRP enrollment, the number of acres enrolled under continuous sign-ups, including for the Conservation Reserve Enhancement Program (CREP, see Appendix A ), has increased. Continuous sign-ups allow landowners to enroll land in certain high priority practices in exchange for additional financial incentive. As of July 2014, almost 5.8 million acres (23%) were enrolled through continuous sign-up, an increase of 2.2 million acres since 2007. The additional financial incentive under continuous sign-up could offset the potential gap between CRP rental payments and local rental rates to enroll more environmentally sensitive acres. More contracts and farms are enrolled under continuous sign-ups (409,713 and 239,033, respectively) than for general sign-ups (262,417 and 177,983, respectively). Continuous sign-up enrollment represents a fraction of the total CRP acreage because, in general, these enrollments involve only a small portion of a farmer's total acreage. Since the inception of CRP, the Internal Revenue Service (IRS) has issued a number of rulings, notices, and opinions on whether CRP rental payments are regarded as income from the "trade or business" of farming and therefore subject to self-employment taxes of 15.3%. For years, the IRS generally treated CRP payments as farming income (subject to the self-employment tax) when received by someone who was engaged in the trade or business of farming, or as rental income (not subject to self-employment tax) when received by others (e.g., investors, heirs, and absentee landowners). The IRS recently changed its position, stating that by entering into a CRP contract the participant is in the trade or business of farming and therefore CRP payments are subject to the self-employment tax. This was upheld in the courts in the 2013 U.S. Tax Court ruling of Morehouse v. Commissioner . In the Morehouse decision, the Tax Court ruled in favor of the IRS, stating that the CRP participant (Morehouse) was in the business of maintaining "an environmentally friendly farming operation," making CRP payments subject to self-employment taxes. The decision is currently on appeal in the Eighth Circuit U.S. Court of Appeals. The Morehouse decision concerns many producers and conservation advocates. Conservation groups fear that the tax will discourage CRP participation and possibly encourage contract cancellations. Others fear that the 15.3% tax will lower the value of CRP land. Some also argue that Morehouse could have broader implications for investor income, including cash rent landowners or possibly stock investors. The greatest concern over a reduced level of CRP acres is a reduced level of environmental benefits. Since its inception, research has shown that CRP has contributed to reduced levels of soil erosion, water quality improvement, and wildlife habitat development. While these benefits vary across the country, some conclude that without CRP there could be additional environmental degradation from agricultural production. Table 3 includes a list of conservation practices applied on CRP land that is set to expire from the program between FY2015 and FY2017. It is unknown how many of the practices would expire as a result of acres not reenrolling in CRP due to the reduced number of authorized acres. It is also unknown whether these practices would be maintained without a CRP contract. Landowners may choose to continue these practices voluntarily or through other federal, state, or local assistance. In large part, the majority of practices that could be lost if allowed to expire would be grasslands, both native and introduced species, new and existing plantings. According to FSA, since 2002, CRP has reduced soil erosion by 325 million tons from pre-CRP levels each year. Since the program's inception in 1986, CRP has reduced more than 8 billion tons of soil erosion. Through FY2010, CRP has enrolled more than 2 million acres in wetlands and over 2 million in buffers. Other annual conservation benefits include an equivalent of approximately 52 million metric ton net reduction in carbon dioxide (CO 2 ) from sequestration, reduced fuel use and nitrous oxide emissions avoided from no fertilizer use; more than 2 million acres of wildlife habitat established; and a reduction of about 607 million pounds of nitrogen and 122 million pounds of phosphorus. From a wildlife perspective, it is estimated that CRP land produces over 13.5 million pheasants and 2.2 million ducks each year through habitat availability. The 113 th Congress reauthorized CRP as part of the farm bill, but reduced the acreage cap to achieve a cost savings. Other pressures from high crop prices, increased demand for land, and the potentially low rental rates could also impact the program's ability to enroll the most desirable acres in the future. Despite these challenges, supporters encourage maintaining CRP enrollment because of the numerous environmental gains achieved by the program, including improved water quality, soil health, and wildlife species habitat. Balancing the cost of maintaining such benefits with the cost of the program could continue to be a challenge for Congress. Appendix A. Continuous Sign-Up Initiatives Continuous sign-up is designed to enroll the most environmentally sensitive land into CRP through specific conservation practices or resource needs. Continuous sign-up includes a number of initiatives that target acres with specific resource concerns or support additional conservation practices. These are described below. Conservation Reserve Enhancement Program (CREP) Initially implemented in 1997, CREP is a joint federal-state continuous sign-up program under CRP. CREP targets geographic regions with agricultural-related environmental concerns, such as Maryland's Chesapeake Bay and Florida's Everglades. Some states (e.g., New York and Ohio) have multiple CREP projects, each targeting a different area of the state. Projects are designed to address specific environmental objectives through targeted CRP enrollments. Sign-ups are continuous, non-competitive, and typically provide additional financial incentives beyond annual rental payments and cost-share assistance. There are currently 45 CREP agreements in 33 states. Farmable Wetland Program (FWP) The Farmable Wetland Program (FWP) enrolls farmable or prior converted wetlands into CRP. In exchange for additional financial incentives, landowners agree to restore the hydrology of the wetland, establish vegetative cover, and prohibit development. For land to be considered eligible it must meet one of the following criteria: a wetland or converted wetland cropped at least 3 of the immediately preceding 10 crop years; a constructed wetland that receives flow (surface and subsurface) from a row crop agriculture drainage system and is designed to provide nitrogen removal in addition to other wetland functions; land in a commercial pond-raised aquaculture in any year between 2002 through 2007; or cropland that was cropped at least 3 of 10 crop years between 1990 and 2002, and is subject to the natural overflow of a prairie wetland. The enrollment of buffer acreage is also permitted to enhance wildlife benefits. No more than 100,000 acres may be enrolled in FWP in any state and no more than 750,000 acres nationally. The enrollment of wetlands (described under the first and second bullets above) is limited to 40 contiguous acres. "Flooded farmland," or that defined in the fourth bullet above, is limited to 20 contiguous acres, and has a 20-acre limit. Transition Incentive Program (TIP) The 2014 farm bill reauthorized the Transition Incentive Program (TIP) option for expiring CRP contracts. Under TIP land from expiring CRP contracts may be transitioned back into sustainable grazing or crop production by a beginning, veteran, or socially disadvantaged farmer or rancher. The land must be from a retired or retiring owner or operator (not a family member) in exchange for up to two additional years of annual CRP rental payments following the expiration of the CRP contract. The program was authorized to spend up to $33 million between FY2014 and FY2018. This is an increase over the previously authorized $25 million in the 2008 farm bill. Other Initiatives Several other initiatives under CRP have been developed over time, mostly in response to Administration priorities. Table A-1 includes a list of recent initiatives and their enrollment size. Appendix B. CRP Provisions in the 2014 Farm Bill Table B-1 compares CRP provisions in the Agricultural Act of 2014 ( P.L. 113-79 ) and prior law. U.S. Code citations are included in brackets in the 'Prior Law' column. Corresponding section numbers in P.L. 113-79 are included in brackets in the 'Enacted 2014 Farm Bill' column.
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The Conservation Reserve Program (CRP) provides payments to agricultural producers to take highly erodible and environmentally sensitive land out of production and install resource conserving practices for 10 or more years. CRP was first authorized in the Food Security Act of 1985 (P.L. 99-198, 1985 farm bill) and is administered by the U.S. Department of Agriculture's (USDA's) Farm Service Agency (FSA) with technical support from other USDA agencies. Participants offer land for enrollment through two types of sign-up: general and continuous. General sign-ups are competitive and only open during select times. Continuous sign-ups are not competitive, always open for enrollment, and offer additional financial incentives to those who qualify. Continuous sign-ups are targeted to specific environmental and resource concerns and operate through a number of initiatives. The largest and most well-known is the Conservation Reserve Enhancement Program (CREP), which partners with states to address agricultural-related environmental concerns in specific geographic regions. While the majority of current acres enrolled were under general sign-ups (19.7 million acres), an increasing number are enrolled under continuous sign-ups (5.8 million acres). The Agricultural Act of 2014 (2014 farm bill, P.L. 113-79) reauthorized CRP and reduced the enrollment cap from 32 million acres to 24 million acres by FY2018. The 2014 farm bill made several changes centered on permitted activities. Emergency harvesting, grazing, and other use of forage are permitted, in some cases, without a reduction in rental rate, as well as livestock grazing for a beginning farmer or rancher. Other approved activities, such as annual or routine grazing, may continue to require a reduction in rental rate. The Grassland Reserve Program (GRP) was repealed in the 2014 farm bill. Grassland contracts, similar to what was repealed under GRP, are now eligible under CRP. The 2014 farm bill also allows CRP participants the opportunity to terminate their contract early if the land has been enrolled longer than five years and it does not contain environmentally sensitive practices. A number of factors have impacted CRP enrollment recently, mainly high commodity crop prices. These strong prices have encouraged farmers to put CRP acres, even marginal acres, back into production. This pressure could potentially reduce the number of CRP acres offered for reenrollment once they have expired or cause existing current CRP participants to seek an early release from their CRP contract. Some participants also have cited a potentially low CRP rental rate compared to the market rental rate as a reason for decreased enrollment interest. Despite these factors, enrollment has increased under continuous sign-ups and demand for the program, in general, still exceeds the current enrollment level. CRP has contributed to a number of environmental benefits including reduced soil erosion, improved water quality through wetlands and field buffers, reduced fertilizer use, and increased wildlife habitat. The recent expiration of a number of acres from the program, and a reduced reenrollment, has some concerned that a number of the environmental benefits gained under CRP could be lost or reduced if land is returned to production.
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Federal laws require government approval prior to beginning any work in or over waters of the United States that affects the course, location, condition, or capacity of such waters, or prior to discharging dredged or fill material into U.S. waters. Regulatory programs that implement these laws are administered through permits issued by the U.S. Army Corps of Engineers (the Corps), which shares responsibility with the Environmental Protection Agency (EPA), under the authority of the Clean Water Act; the Rivers and Harbors Act; and the Marine Protection, Research, and Sanctuaries Act. The Corps' regulatory process involves two types of permits: general permits for actions by private landowners that are similar in nature and will likely have a minor effect on waters and wetlands, and individual permits for more significant action. A nationwide permit (NWP) is a form of general permit that authorizes a category of activities throughout the nation and is valid only if the conditions applicable to the permit are met. The NWP program is intended to provide timely authorizations for the regulated public while protecting the nation's aquatic resources. These permits are issued under authority of Section 404(e) of the Clean Water Act (CWA) and Section 10 of the Rivers and Harbors Act of 1899 (RHA). Under Section 404, permits are required for discharges of dredged or fill material into jurisdictional waters of the United States, including wetlands, such as fills to convert waters and wetlands to dry land. Under Section 10, permits are required for any structures or other work that affect the course, location, or condition of navigable waters of the United States, such as piers, dredging, and aids to navigation. Nationwide permits, which number 52 and cover a range of activities, can be issued for a period of no more than five years and cannot be extended. They automatically expire and become null and void if they are not modified or reissued within five years of their effective date. They were last reissued in total in 2012. In advance of their scheduled expiration in 2017, the Corps issued a proposal to reissue and modify the existing nationwide permits on June 1, 2016, and issued final permits on January 6, 2017. At issue in the program is the balance of two objectives: providing regulatory protection to ensure minimal impacts on aquatic resources, and providing a fair and efficient regulatory system. For several years, interest groups of differing perspectives have criticized the program and increasingly questioned whether either objective is being achieved, much less both objectives. Stakeholders involved in this debate include, on the one hand, industry groups (e.g., members of building—especially homebuilding—design, realtor, and petroleum and mining organizations) and, on the other, environmental advocacy groups, along with many state water quality, water resources, and environmental agencies. Particularly under the CWA, the Corps' regulatory authority is broadly defined. It covers waters of the United States, including the territorial seas, and includes traditionally navigable waterways capable of supporting interstate and foreign commerce, plus their tributaries, and adjacent wetlands and isolated waters where the use, degradation, or destruction of such waters could affect interstate or foreign commerce. In fact, much of the public concern about the nationwide permit program—with regard to impacts of authorized activities, and terms and conditions intended to limit impacts—often focuses on permits for projects that affect the nation's wetlands. Controversies about the permit program are compounded by disputes about the Corps' assessment that adverse environmental impacts of authorized activities are minimal. Critics, especially environmental advocates, argue that the Corps lacks an effective tracking and monitoring system for evaluating impacts and thus lacks adequate information to assess the permit program. The nationwide permit regulatory program has drawn Congress's attention several times in the past, but not recently. In 1997, House and Senate committees held oversight hearings to review several issues and controversies. In 1999 and 2000, congressional appropriators directed the Corps to take certain actions concerning its overall regulatory program, and nationwide permits in particular. This report describes and reviews the nationwide permit program and discusses several major issues that have drawn the attention of stakeholder interest groups, including program complexity, coordination with states, and mitigation requirements. General permits, including nationwide permits, are a key means by which the Corps seeks to minimize the burden and delay of its regulatory program: they authorize a landowner or developer to proceed with the covered activity without having to obtain an individual, site-specific permit in advance. Individual permits are subject to public notice, public interest review, public hearing, activity-specific environmental documentation, and case-by-case evaluation which typically involve longer time before the activity is authorized. General permits are intended to allow certain activities to proceed with little delay or paperwork, thus reducing regulatory burden on applicants and the Corps. According to Corps data, in FY2016, nationwide and other general permits that required Corps approval entailed average processing time of 40 days, in contrast with standard individual permits, which, on average, took 217 days of processing and evaluation, once an application was completed. The specific statutory authority for these permits in CWA Section 404(e) emphasizes that to qualify for a general permit, activities must have minimal adverse impact on the environment, individually and cumulatively. In carrying out the functions relating to the discharge of dredged or fill material under this section, the Secretary [of the Army] may, after notice and opportunity for public hearing, issue general permits on a State, regional, or nationwide basis for any category of activities involving discharges of dredged or fill material if the Secretary determines that the activities in such category are similar in nature, will cause only minimal adverse environmental effects when performed separately, and will have only minimal cumulative adverse effect on the environment. According to the Corps, between 2012 and 2015, the agency authorized an average of 63,000 activities per year; 97% were authorized by nationwide and other general permits. More than half require advance notification to the Corps and written verification by the agency before applicants may proceed for some activities (i.e., 10 NWPs) or all covered activities (i.e., 21 NWPs). For 19 others, proponents may proceed without application to the Corps (about 31,000 authorized activities are "non-reporting" each year), unless advance notification is required to comply with certain general conditions and related laws such as the Endangered Species Act or the National Historic Preservation Act. The following are examples of nationwide permits: Placement of aids to navigation approved by, and installed according to, U.S. Coast Guard requirements (NWP 1); Stream or river bank stabilization activities necessary to prevent erosion (NWP 13); Minor dredging, that is, dredging of no more than 25 cubic yards of material (NWP 19); Activities associated with restoration, enhancement, or establishment of wetlands and riparian areas where the activities result in net increase in aquatic resource functions and services (NWP 27); and Discharges of dredged or fill material for the construction or expansion of residential developments (NWP 29). Many nationwide permits have specific conditions and terms (such as maximum acreage limitations). In addition, a number of general conditions apply to some or all NWPs; for example, no activity may cause more than a minimal adverse effect on navigation; no activity may jeopardize a threatened or endangered species; discharges into spawning areas and migratory waterfowl breeding areas must be avoided, to the maximum extent practicable; and discharges of dredged or fill material must be minimized or avoided through mitigation to offset more than minimal impacts on the aquatic environment, to the maximum extent practicable. Several permits also require coordination with other federal and state resource agencies, for example, if the activity will result in loss of more than a specified acreage of waters of the United States or linear feet of stream bed. When coordination is required, the Corps will consider the agency's comments concerning the proposed activity's compliance with terms and conditions of the permit, including the need for mitigation. The Corps is not required to adopt another agency's recommendations but is required to record its response to agency comments in the administrative record. The Corps believes that NWPs provide a benefit by encouraging applicants to minimize a project's environmental impacts in order to qualify for NWP authorization. If NWPs did not exist, or were not reissued prior to expiration (they cannot be administratively extended), project proponents would have to apply for standard individual permits. The Corps believes that the likely result would be greater annual acreages of authorized impacts to aquatic resources, because standard individual permits have no acreage limits. A project proponent who wants to use one or more of the NWPs to fulfill requirements for authorization by the Corps must comply with regulations that implement the NWP program (at 33 C.F.R. Part 330) and all applicable terms and conditions of the appropriate NWPs, including any regional conditions imposed by the Corps division engineer and any activity-specific conditions imposed by the district engineer (see " Regional Conditioning "). If the proponent does not fully comply, the activity is unauthorized, and the person may be subject to an enforcement action. The Corps first issued regulations for general permits in the mid-1970s, and Congress codified the concept in amendments to the Clean Water Act in 1977 ( P.L. 95-217 ). Nationwide and other general permits are valid only for a period of five years, as is the case with other Clean Water Act permits. Thus, they were reissued in 1982, 1987, 1992, and 1997. Prior to 1992, the nationwide program involved little individualized review of these permits, as the guiding criterion was that covered activities impose so minimal an environmental impact that the full review given individual permits was not warranted. In the 1992 revisions, however, district engineers were given greater authority to modify, suspend, or revoke nationwide permits for specific activities, and division engineers were authorized to exercise discretionary authority to revoke applicability of specific nationwide permits in high value aquatic areas and to then require individual permits for the activity. Further, preconstruction notification (PCN) to the Corps was required for several of the nationwide permits, and when such notice is required, the applicant was required to provide a wetlands delineation of the project site. Advance notification is intended to give the Corps time to determine that the adverse effects of the discharge or activity will be minimal. The district engineer generally has 45 days to notify the person of approval to proceed or, instead, of the need to obtain an individual permit before the applicant may proceed. Even with those changes, the reissued nationwide permits did not attract significant controversy when they became effective in 1992. More attention and controversy focused on the Corps' process of reissuing the permits in 1997. The Corps had several substantive purposes behind modifying the permits at that time. One was the need to better ensure that permits have minimal adverse effects, especially on isolated wetland areas. A second was the need to better regionalize the program, by emphasizing that Corps officials (38 district and 11 division engineers) should condition nationwide permits on a local basis with limitations that reflect differences in aquatic ecosystem functions and values that exist across the nation. A third purpose in the 1997 permits was the Corps' desire to restrict a particular nationwide permit, NWP 26, which authorized discharges in headwaters or isolated waters. Critics had long been concerned that this permit was overly broad and had resulted in large amounts of unmonitored wetland losses. Consequently, in 1997 the Corps re-issued NWP 26 with modifications that reduced the allowed acreage limits and required advance notification by the applicant if the discharge would affect ⅓ acre or more. In 2000, in an action midway before routine permit reissuance was due in 2002, the Corps repealed NWP 26 entirely and replaced it with five specific activity-based permits (e.g., NWP 39, covering residential, commercial, and institutional development). Also in 2000, the Corps added two general conditions that put limits on the use of nationwide permits for projects within critical resource waters, and for permanent above-grade wetland fills within the 100-year floodplain as defined by the Federal Emergency Management Agency (FEMA). Critical resource waters are those designated as having particular environmental or ecological significance (such as designated marine sanctuaries and state natural heritage sites). The Corps reissued the entire NWP package again in 2002, 2007, and 2012. On each occasion, the Corps modified some existing permits and general conditions and added new general conditions and several new permits, bringing the total to 50. Among the newer authorizations, permits now cover discharges in ditches (NWP 46), coal remining activities (NWP 49), underground coal mining activities (NWP 50), and renewable energy generation facilities (land-based facilities, NWP 51, and water-based facilities, NWP 52). And with each reissuance, new issues and controversies arose. For example, in the 2007 permits, the Corps modified NWP 29, which authorizes construction of residential developments, adding certain acreage impact restrictions and requiring preconstruction notification for all applications. Industry groups criticized both changes to this permit, while environmental groups argued that acreage thresholds under the permit should be more stringent. In 2012, the major issue involved NWP 21, the nationwide permit that authorizes certain discharges associated with surface coal mining activities. The Corps and others had become concerned that the then-existing permit did not adequately protect against loss of aquatic resources, and in the 2012 reissuance, the Corps modified NWP 21 to limit its application. Industry groups, which had generally supported NWP21, criticized restrictions on the permit, while environmental groups favored halting its use altogether (see " Coal Mining Activities " below). In June 2016, the Corps proposed to reissue and modify the 2012 NWPs, which are due to expire March 18, 2017. The Corps issued final revised permits on January 6, 2017; they go into effect on March 19, 2017, and will expire on March 18, 2022. The reissued permits include the 50 existing NWPs, with modifications to 29 of them, and two new nationwide permits. The reissued permits also modify several existing general conditions and definitions. The new permits are: NWP 53, Removal of low-head dams. This permit authorizes activities that remove low-head, or run-of-the-river dams, that have small hydraulic heads and storage volumes, as well as short residence times, and where there is little or no control of the rates at which water is released from the dams. Many of the estimated 2 million small dams in the United States are low-head dams, and the Corps believes that many need to be repaired or replaced. Removing them could help restore rivers and streams by removing barriers that adversely affect ecological processes, as well as enhance public safety. According to the Corps, removal of some low-head dams could be authorized by existing NWP 27 (aquatic habitat restoration activities), but the new permit would authorize removal of larger low-head dams. The Corps estimates that this NWP would be used 25 times per year, resulting in impacts to less than 1 acre of waters of the United States, including wetlands. NWP 54, Living shorelines. This permit authorizes the construction of living shorelines for bank stabilization activities that control erosion. Two existing nationwide permits, NWP 13 (bank stabilization) and NWP 27, already authorize activities to help protect public and private property from erosion. These permits are generally used for hardened structures such as bulkheads and involve substantial amounts of fill materials. In contrast, a living shoreline provides nature-based erosion control by techniques that incorporate vegetation or other natural elements alone or in combination with some type of harder shoreline structure (e.g., oyster reefs) for added stability. They are not practical or feasible in all coastal environments, as they work best in sheltered coasts that are not subject to high energy erosive forces that occur along open coasts. The Corps believes that this nationwide permit is needed, because the structures, work, and fills associated with constructing living shorelines often do not fall within the terms and conditions of existing NWPs 13 and 27. The Corps estimates that the permit would be used 200 times per year, resulting in impacts to approximately 27.5 acres of waters of the United States, including jurisdictional wetlands. The Corps believes that most of the changes in the 2017 NWPs are clarifications that are expected to have little impact on the number of activities authorized by nationwide permits. Overall, the agency estimates that, under the reissued permits, about 492 additional activities per year could be authorized by NWPs, rather than standard individual permits, compared with the 2012 NWPs (out of about 63,000 NWP-authorized activities in all). The Corps prepared a Regulatory Impact Analysis (RIA) for the entire proposal and decision documents containing an environmental assessment for each of the proposed NWPs in order to comply with requirements of the National Environmental Policy Act (NEPA); all of these documents are available in the regulatory docket. The decision documents constitute national-scale analysis that discusses environmental impacts caused by activities authorized by the permit and, in general terms presented similarly in each decision document, the statutory authority for the permits and related laws, alternatives (e.g., no NWP), environmental consequences, public interest review factors, and cumulative effects analysis. These documents and the RIA also present the Corps' estimates of how many times each NWP will be used, plus estimates of impacts to waters of the United States, including jurisdictional wetlands, and estimates of compensatory mitigation acreage, if any, that will be required as part of the NWP's authorization. Compensatory mitigation would be required if the Corps determines that a proposed activity will have more than minimal individual and cumulative adverse effects on the aquatic environment (see " Mitigation Requirements "). Some NWPs are projected to be used infrequently and have limited acreage impact (for example, NWP 20, authorizing response operations for oil or hazardous substances; NWP 28, modification of existing marinas). Others are projected to be used several thousand times each year and impact several hundred acres of water and wetlands, many with at least partial compensatory mitigation (e.g., NWP 12, authorizing construction, maintenance, repair, and removal of utility lines, is projected to be used for 13,950 activities each year and impact 1,775 acres of water and wetlands annually, with 296 acres of that impact estimated to be mitigated). In total, the Corps estimates that the 2017 NWPs would authorize 63,437 activities annually and impact 20,346 acres annually, with 2,374 acres of required compensatory mitigation. As the nationwide permit program has grown (from 15 permits in 1977 to 52 currently) and become more complex over time, interest groups have increasingly united to argue that the program as it has developed fails to meet its overall objectives, although their reasons for this criticism are very different. For example, one view was expressed by a coalition of environmental advocacy groups. The nationwide permit system was presumably developed in order to balance two somewhat contrary objectives: to ensure that the permits issued result in only minimal impacts on aquatic resources, and to provide a predictable, fair, and simple regulatory system for citizens applying for permits. Given the complexity and confusion surrounding the nationwide permit program, together with the clearly more than minimal environmental impacts, we question whether either of these objectives is being achieved. Critical views of a different sort were expressed by a group representing one set of developers. Over time, however, the NWPs have become increasingly restrictive and complex to the point that they faintly resemble the streamlined permitting process Congress envisioned when it enacted Section 404(e).... [T]he program waivers between providing administrative relief and imposing red tape, between a truly streamlined process and one that is so severely limited that few projects can qualify.... The history of the NWP has been a consistent tightening of the eligibility for the program.... Each time the Corps has drawn the line between NWP eligibility and ineligibility, eligibility has been restricted, never relaxed. Beyond apparent broad agreement that the program fails to meet its objectives, the views of industry and environmental advocacy groups diverge greatly. Industry groups support the NWP program, or the type of streamlined program that they believe was originally intended, and agree with the Corps that the use of nationwide permits will result in minimal adverse environmental impacts. Nevertheless, they have been highly critical of many of its aspects. The Corps' attempt to illegally expand its jurisdiction, the stringent and largely inflexible acreage and PCN [preconstruction notification] thresholds, the lack of a proper administrative process and record to support the proposal, the problematic regional conditions and the overall trend toward the elimination of NWPs all contribute to a permit package that is hardly even a semblance of the streamlined process directed by Congress. Environmental groups argue that permitted activities will have more than minimal impacts on the environment and that the Corps has no substantial or scientific evidence to conclude otherwise. They argue that the permits are unlawful because they violate the requirements of Section 404(e) that there may be no more than minimal adverse environmental effects on aquatic resources, both individually and cumulatively. Further, they criticize what they view as inconsistent and inadequate PCN requirements, overly vague requirements which will result in weakened regulatory protection, the granting of excessive authority to Corps district engineers to waive permit limits in individual cases, and excessive reliance on compensatory mitigation to offset the harmful effects of permitted activities. One of the current nationwide permits, NWP 12, is used to authorize utility line activities, including the construction, maintenance, or repair of utility lines in waters of the United States. Under this permit, a "utility line" is defined as any pipe or pipeline for the transportation of any gaseous, liquid, liquescent, or slurry substance, for any purpose such as an oil or natural gas pipeline, any cable, line, or wire for the transmission for any purpose of electrical energy, telephone, and telegraph messages, and radio and television communication. This permit has long been controversial with environmental critics of the nationwide permit program, and it has recently also drawn critical attention from tribal organizations in connection with several large oil and natural gas pipeline projects, as discussed below. A PCN is generally required for authorization under NWP 12, and work cannot begin before the Corps district engineer provides written verification to the applicant that the proposed activity will comply with the requirements of the nationwide permit. Generally, the Corps is to provide such verification within 45 days of receiving a complete PCN, but if the proposed activity may affect threatened or endangered species or critical habitat, or historic properties, the Corps must carry out certain procedural steps and consultations, discussed below, that are not limited to a 45-day review. Under the CWA and the RHA, the Corps' regulatory authority only applies to areas where a pipeline or other utility line activity crosses waters of the United States or federal real property interests acquired and managed by the Corps for flood control and navigation projects—it does not have regulatory jurisdiction over portions of a pipeline that cross upland areas. As a result, for many pipeline and utility line projects, the Corps has jurisdiction over a very small portion of the overall pipeline. When the Corps proposes to reissue the nationwide permits, as it did in June 2016, it prepares a Decision Document for each of them for purposes of complying with NEPA. In that document, the Corps estimates that NWP 12 is used on average approximately 14,000 times per year on a national basis, resulting in impacts to approximately 1,750 acres of waters of the United States, including wetlands that are regulated under the CWA. (The total includes an estimated 11,500 times per year for activities that involve PCN to the Corps and about 2,500 that occur each year that do not require a PCN.) While NWP 12 covers the large majority of utility line and pipeline activities, some do not qualify for a nationwide permit—generally because they will have more than minimal individual and cumulative environmental impacts—and thus they must be authorized by individual Corps permits. The Corps does not have a centralized database or other information on the number of individual permits that it issues for pipeline and utility line projects, nor does it have a database on utility line activities that are authorized by NWP 12. As noted previously, activities that may be authorized by the nationwide permit program are subject to a number of general conditions, in addition to permit-specific restrictions. One of these concerns tribal rights: General Condition 17 states that no NWP activity may cause more than minimal adverse effects on tribal rights (including treaty rights), protected tribal resources, or tribal lands. Other general conditions apply if the project has potential to affect historic properties or a threatened or endangered species or critical habitat. When a PCN is submitted to the district engineer, the applicant must identify endangered species or historic property issues and may not begin work without written verification from the Corps allowing the activity to proceed. General Condition 18 states that no activity may be authorized if it will directly or indirectly jeopardize a threatened or endangered species or critical habitat. Further, no activity is authorized that "may affect" a listed specifies or critical habitat unless consultation pursuant to Section 7 of the Endangered Species Act (ESA, 16 U.S.C. §1536) has been completed. (See " Endangered Species Act Consultation .") General Condition 20 states that when an activity may affect properties listed or eligible for listing in the National Register of Historic Places, the activity is not authorized until requirements of Section 106 of the National Historic Preservation Act (NHPA, 54 U.S.C. §306108) have been satisfied. Section 106 requires federal agencies to consider the effects of projects that they carry out, approve, or fund on historic properties. If properties are identified by the applicant in a PCN, the Corps is responsible for initiating Section 106 review and consultation, most of which takes place between the agency and state and tribal or Native Hawaiian historic preservation officials. Agencies also consult with officials of federally recognized Indian tribes when the projects have the potential to affect historic properties on tribal lands or historic properties of significance to such tribes located off tribal lands. Once General Condition 20 is triggered, the activity cannot proceed unless the district engineer completes a site-specific analysis and verifies either (1) that the activity will not actually affect any eligible historic site, or (2) that the consultations required by the NHPA are complete. The Advisory Council on Historical Preservation (ACHP) may be involved in consultation under certain circumstances, such as substantial impacts to important historic properties, but it does not have a veto over the Corps' decision. Further, General Condition 21 states that if a permittee discovers previously unknown historical, cultural, or archaeological remains, the permittee must immediately notify the district engineer and, to the maximum extent practicable, avoid construction activities until required coordination has been completed. The district engineer will coordinate with tribes and federal and state agencies to determine if the items or remains warrant a recovery effort, or if the site is eligible for listing in the National Register of Historic Places. Environmental advocates have frequently criticized several of the current nationwide permits, including NWP 12. Under Corps regulations, nationwide permits can be used for a "single and complete project" that will cause only minimal adverse environmental effects, individually or cumulatively (33 CFR 330.2(i)). A "single and complete project" is a portion of a total project that includes all crossing of a single waterbody at a specific location. Thus, NWP 12 can be used for each individual crossing of a waterbody, even if it is part of a large project that consists of multiple stream crossings. Because the Corps evaluates pipeline and other utility line water crossings in this segmented fashion, it does not evaluate the environmental or other impacts of the totality of water crossings for an overall pipeline or utility line project. This has led to criticism that, by reviewing discrete geographic segments, the Corps fails to evaluate whether the totality of a project may have adverse environmental effects. Considered in totality, a project's impacts might require authorization under a standard individual permit, not a nationwide permit, critics say. The Corps' response is that under the CWA and the RHA, its regulatory jurisdiction does not cover aspects of a project in upland areas on private property, which often represent the majority of a pipeline's or utility line's length. Critics say that such segmenting of utility line projects fails to account for cumulative effects that can have more than minimal impact on aquatic resources, but legal challenges to use of this permit have been largely unsuccessful. A related criticism of the Corps' reliance on NWP 12 is that the nationwide permit process does not allow for project-specific environmental review or public input. The Corps' environmental assessment for NWP 12 and other nationwide permits is essentially preauthorization of a group of similar activities on a programmatic level that is done every five years when the permits are issued or reissued. The agency's position in that assessment is that, with the qualifying conditions and limits that attach to the nationwide permits (including regional conditioning by Corps division engineers or states), the Corps is able to determine that environmental impacts will be no more than minimal. Further, the Corps believes that its procedures for addressing possible impacts on threatened or endangered species or historic property meet all requirements of other federal laws, including the ESA and the NHPA. Critics, however, assert that under the nationwide permits, private project proponents can make their own project-specific determinations about threatened or endangered species or historic properties, through submission of a PCN, and that the Corps only responds to information presented in a PCN, as it is not independently responsible for determining their presence on a project site. Finally, recent legal controversies over several oil and natural gas pipelines, such as the proposed Dakota Access Pipeline, have focused in part on the Corps' compliance with the NHPA in connection with authorizing permits for pipeline projects. An applicant seeking Corps regulatory authorization for a proposed discharge—whether for a standard individual permit or general permit—must demonstrate that all appropriate and practicable steps have been taken to avoid and minimize impacts to aquatic resources. For unavoidable impacts of permitted activities, compensatory mitigation is required to replace the loss of wetland, stream, and/or other aquatic resource functions. Compensatory mitigation can be accomplished through the restoration, creation, enhancement, and/or preservation of aquatic resources, either by the permittee's individual project, or the use of mitigation banks or other consolidated mitigation efforts. The Corps acknowledges that, although it anticipates minimal adverse effects from the nationwide permit program, the use of NWPs may still affect the aquatic environment. Therefore, the permits include a general condition detailing how district engineers may require compensatory mitigation to offset the authorized impacts. Mitigation requirements incorporated in the nationwide permit program have become more specific over time and are viewed by environmental protection advocates as critically important. Compensatory mitigation will be required for all wetland losses that exceed 1/10-acre and require preconstruction notification. For lesser wetland losses that require preconstruction notification, the district engineer may require compensatory mitigation on a case-by-case basis. Before reissuance in 2002, this general condition required one-for-one mitigation of adverse impacts to wetlands with a stated preference for restoration of wetland impacts over preservation. In 2002, the Corps revised the mandate to allow a case-by-case waiver of the requirement in cases where the Corps determines that some other form of mitigation, such as establishment of vegetated buffers, is more appropriate. The Corps said that it will require mitigation for impacts based on a watershed approach, often involving a mix of vegetated buffers and other mitigation in non-wetland areas. Thus, for example, a district engineer might authorize a project with impacts on a particular wetland and require mitigation within the overall aquatic environment of the particular watershed involved but not wetland-acre-for-wetland-acre mitigation. However, greater than a one-to-one ratio can be required in some cases to adequately replace aquatic resource functions and values lost as a result of NWP-authorized activities. This approach, the Corps said, allows district engineers to require the mitigation for project impacts that best protects the aquatic environment. Environmentalists are critical of the Corps' reliance on mitigation as the basis for concluding that impacts of the nationwide permits will be minimal. They have pointed to the incomplete track record of mitigation projects described in a number of reports, including a 2001 report of the National Research Council and a 2005 GAO report, showing that mitigation is not fully successful and does not compensate for wetlands lost to permitted fills. In light of the lack of data that mitigation is performed or that it would successfully replace lost functions and values, they assert that the Corps lacks sufficient evidence to conclude that mitigation will render the impacts of authorized activities minimal. If an activity requires mitigation, these critics say, by definition it has more than minimal adverse effects to begin with, and under the Clean Water Act, activities with more than minimal adverse effects can only be authorized by an individual permit. They also note that the Council on Environmental Quality has said that relying on mitigation to assume impacts are reduced below the threshold of significance violates the National Environmental Policy Act. The Corps acknowledges that ecological success of mitigation varies widely, but argues that mitigation is important to ensuring that nationwide permits result in minimal adverse effects. The Corps says that it has increased its compliance efforts to ensure that authorized projects are constructed as authorized, and that mitigation is successful. Under the NWPs, compensatory mitigation is required for all wetland losses that exceed 1/10-acre, unless the district engineer issues a project-specific waiver. Industry has been critical that the Corps appears to elevate one form of mitigation (compensation) above all others and does not give district engineers sufficient flexibility to determine the extent to which mitigation is needed, on a case-by-case basis. Environmental groups, on the other hand, strongly object to allowing waivers from mitigation requirements and giving discretion to district engineers, particularly because the NWPs contain no criteria or performance standards that would govern mitigation. In response to much of the criticism about mitigation requirements, in 2008 the Corps and EPA promulgated regulations that set standards for mitigating the loss of wetlands and associated aquatic resources under the Section 404 permit program and detail the requirements for a developer to provide compensatory mitigation. This rule provides one set of regulations for compensatory mitigation instead of numerous separate guidance documents that previously had been in use. Under the rule, all compensation projects must have mitigation plans that include the same 12 fundamental components, such as site selection criteria and a maintenance plan. The rule also clarifies stream mitigation standards and emphasizes that impacts to aquatic resources are to be avoided if possible. Only when impacts are unavoidable does the rule permit mitigation and compensation. In reissuing the nationwide permits in 2012, the Corps modified some language of the mitigation general condition to conform to the 2008 regulation. The use of nationwide permits to authorize coal mining activities has been and continues to be controversial, particularly in connection with NWP 21, which authorizes surface coal mining activities. Critics say that the environmental impacts of coal mining are typically far greater than the standard set forth in the Clean Water Act Section 404(e), that authorized activities will cause only minimal adverse environmental effects, individually and cumulatively. The mining industry argues that nationwide permit procedures are necessary to minimize regulatory burdens that would threaten the economics of coal mining and to provide the kind of flexibility needed by industry to respond to quickly changing operating requirements. On several occasions, the Corps has modified NWP 21 to strengthen environmental protection for projects that it authorizes. For example, in 2002, the Corps required explicit authorization before an activity can take place, rather than only requiring preconstruction notification, as in the past. In 2012, the Corps added limits of ½-acre or 300 linear feet of loss of stream bed; impacts above those limits could not be authorized with NWP 21. Despite such modifications, environmentalists have long contended that NWP 21 authorizes disposal of coal mining waste material which buries streams with overburden material, thereby disturbing the natural stream processes and water quality in entire watersheds and resulting in permanent loss of habitat. According to that view, mitigation cannot sufficiently compensate for these impacts, and any use of this permit is inconsistent with ensuring "minimal adverse effects" on the aquatic environment. For many years, the Corps allowed the use of NWP 21 to authorize mountaintop mining activities in several Appalachian states. This controversial practice involves removing the tops of mountains to expose and remove underlying coal seams. Upon completion of the coal removal, some amount of the overburden, or excess spoil, is placed back on the top of the mountain, while the majority is disposed in nearby valleys where streams and wetlands are filled with the mining waste. Environmentalists have sought to strengthen regulation of mountaintop mining, if not halt it altogether, in part by arguing that the practice should be regulated under more stringent Clean Water Act provisions than Section 404. The mining industry argues that mountaintop removal mining is essential to conducting surface coal mining in Appalachia, which would not be economically feasible there if operators were barred from using valleys for the disposal of mining overburden, and that NWP 21 facilitates effective and timely mining operations. Critics have used litigation to try to halt the Corps' use of NWP 21 for mountaintop mining operations, but with mixed success. However, in 2009, the Corps took the first of several steps to restrict use of this permit for surface coal mining activities and ensure that it results in no more than minimal adverse environmental impacts. First, the Corps proposed to suspend the use of NWP 21 in Appalachia, explaining its reason as follows: [T]he Corps now believes that impacts of these activities on jurisdictional waters of the United States, particularly cumulative impacts, would be more appropriately evaluated through the individual permit process, which entails increased public and agency involvement, including an opportunity for public comment on individual projects. The suspension was formalized in 2010. Second, as described above, in 2012 the Corps added acreage limits on the use of NWP 21 outside of Appalachia and prohibited its use to construct valley fills. Two other nationwide permits, 49 and 50, also address coal mining activities. The Corps' intention with these permits, which were added to the program in 2012, was to provide incentives to coal remining and underground mining activities, arguing that for permittees that meet specified terms and conditions such as acreage impact limits, it will be faster to gain authorization under an NWP than it would be to obtain an individual permit and that the environment will benefit from encouraging coal remining in this manner. By allowing such activities to proceed under a nationwide permit, rather than requiring an individual permit, the environmental benefits of remining (such as removing existing sources of water pollution that harm downstream waters) are more likely to occur, according to the Corps. Further, while acknowledging that permits 21, 49, and 50 have the potential to result in more than minimal adverse effects on water quality, the agency contended that compensatory mitigation, opportunities for division engineers to impose regional conditions, and site-specific evaluation of PCNs will ensure that adverse environmental effects are minimal. In the decision documents accompanying the 2016 NWP proposal, the Corps estimates that permits 49 and 50 will be used to authorize 18 activities annually and are expected to impact 55 acres of wetlands and other waters per year. The Corps also estimates that 39 acres of compensatory mitigation will be required to offset the impacts of those authorized activities. NWP 21 is projected to be used to authorize seven surface coal mining activities nationally per year, and these activities will impact 1.3 acres of waters and wetlands, while 1.6 acres of compensatory mitigation will be required annually to offset these impacts. Environmental critics continue to assert that the Corps has no factual basis for determining that impacts of the coal mining NWPs will be minimal. They point out that coal mining waste contains chemicals that are toxic to aquatic life: there have been cases of spills of impounded wastes, with impacts that are more than minimal. Underground mining is a destructive practice, they say, which results in loss of stream and wetland functions through subsidence and waste disposal. They also argue that the general permit process is inappropriate for such large-scale activities. The nationwide permit program raises additional issues. For example, the program is intended to balance a desire for administrative simplicity and reduced regulatory burden, on the one hand, with protecting aquatic resources. Yet, many industry stakeholders question whether a number of administrative requirements of the permits, such as advance notification to the Corps and other agencies, written verification of permit compliance, and opportunities for regional conditions, are tilted too much in the direction of protecting aquatic resources and not enough in the direction of regulatory relief, while also making the nationwide permit program unduly complicated. Corps officials have the authority to apply special conditions to the use of any of the nationwide permits or even to revoke use of specific permits in aquatic environments of particularly high value or in specific geographic areas. Indeed, the Corps utilizes regional conditioning to ensure effective protection at the local level of wetlands and other water resources, because aquatic resource functions and values vary considerably across the country, thus requiring more stringent limitations in some regions or watersheds (conditioning cannot be used to make an NWP less restrictive). One type of regional conditioning is done by Corps division engineers who approve specific conditions if there are concerns for the aquatic environment in a particular district, watershed, or other geographic region. Corps officials also may propose revocation of NWP authorization for all, some, or portions of the nationwide permits within a Corps division. A second type of regional conditioning is imposed by states, tribes, or EPA for Section 401 water quality certification or for coastal zone consistency (see discussion below). Regional conditions might include identifying distinct watersheds or waterbodies where certain nationwide permits should be suspended or revoked, thus requiring landowners to obtain individual project-specific permits; reducing the acreage thresholds in certain types of waters; restricting activities authorized by NWPs to certain times of the year in a particular waterbody; or adding notification requirements for all permitted work in certain watersheds. For more than 15 years, the NWP program has relied greatly on regional conditioning to adjust the national program to local watersheds. A division engineer can either add special conditions to the NWP authorization or exercise discretionary authority to require an individual permit. This flexibility continues to cause various concerns among stakeholders, with some environmentalists arguing that more restrictive national standards on the NWPs should be imposed instead of relying upon a discretionary authority process. Some in industry believe that the discretionary authority results in greater complexity and less predictability for regulated entities. Some environmental groups have been skeptical that the Corps would be able to attach meaningful conditions, while developers have had the opposite concern—that restrictions imposed by Corps regions would be unduly burdensome. The Corps continues to rely on regional conditioning and review of preconstruction notification of specific projects as a way for regulators to ensure that impacts of activities are no more than minimal. Echoing their concerns about the Corps' reliance on compensatory mitigation, environmental groups have criticized the Corps' expectation that regional conditioning can assure that impacts are minimal. Industry groups contend that regional conditions make the NWPs more complex and burdensome for both the Corps and permit applicants. "As more conditions are placed on the use of NWPs, fewer permit applicants fall outside of the many restrictions and exclusions, thus fewer will qualify for the efficient NWP process." Implementation of the Corps' regulatory program, including the nationwide permits, requires considerable coordination between federal and state governments. For one thing, many states (and some localities) administer their own wetlands management and protection programs which vary in the way wetlands are defined and the activities that may or may not take place within or near regulated wetlands, and officials attempt to minimize duplication and overlap. More important, however, is a coordinating responsibility given to states and tribes under Section 401 of the Clean Water Act. This provision requires certification by a state or tribe that a proposed project seeking a federal license or permit, such as a Section 404 permit, will not violate applicable water quality standards. In addition, the 34 states and territories that operate management programs under the Coastal Zone Management Act (16 U.S.C. §1451 et seq.) are required to provide concurrence that the activity is consistent with the state's coastal zone management (CZM) program. Review under the 401 water quality certification process or CZM concurrence is an important means by which states or tribes ensure that their water quality concerns will be considered in federally licensed activities, because a state can use this authority to place its own conditions on the federal permit, or to deny the permit's use in that state. Coordination begins at the time the Corps proposes to issue or reissue the nationwide permit package. However, coordination evidences a number of tensions between the Corps and states, especially when states deny certification or CZM concurrence. Issuance or reissuance of NWPs typically begins approximately 12 months in advance of expiration of existing nationwide permits, when the Corps drafts a proposal for review by the Office of Management and Budget and other federal agencies. After that review, publication of the proposed permits in the Federal Register initiates a 60-day public comment period on the draft permits and also serves as the Corps' request to states to issue, deny, or waive certification of the NWPs. Concurrent with the Federal Register Notice, Corps district offices solicit comments on proposed regional conditions and also on their proposals to suspend or revoke some or all of the NWPs, if they have issued or propose to issue regional general permits, programmatic general permits, or letters of permission in lieu of NWPs. The comment period for district public notices typically is 45 days. The 60-day public comment period is arguably brief for any groups or individual to review the draft permits, but is especially so for states and Indian tribes to simultaneously review the draft permits and proposed regional conditions and issue their own 401 certifications and CZM consistency determinations. From the Corps' perspective, the time restrictions are necessary in order to complete the reissuance process before expiration of the current NWPs. If the NWPs were not reissued before expiration, permit holders would have to seek standard individual permits for all activities that are currently authorized by the nationwide permits. After reviewing public comments on the draft NWPs, the Corps prepares final NWPs, which are subject to another round of review by interested federal agencies (but not the public). The Corps then publishes the final NWPs, which become effective 60 days after publication. During this 60-day period, Corps division engineers approve regional conditions for the final NWPs and issue decision documents which address the environmental considerations related to the use of NWPs in specific Corps districts. The decision documents certify that the NWPs, together with any regional conditions or geographic revocations, will only authorize activities that result in minimal individual adverse effects on the aquatic environmental at the regional level. Also during the 60-day post-publication period, states and Indian Tribes complete their 401 water quality certification and CZMA consistency decisions. Water quality certifications and/or CZMA consistency determinations may be issued without conditions, issued with conditions, or denied for specific NWPs. Conditions placed as a result of 401 certification or CZMA concurrency automatically become part of a nationwide permit in that state. Many states have denied blanket water quality certification for certain NWPs. For example, many states have opposed NWP 29 (residential developments) since it was first issued in 1997, and about one-third of states have denied 401 certification, because the permit was determined to be inconsistent with state water quality standards or other state wetlands management activities. Some states have prohibited the use of certain nationwide permits in state-designated critical areas or waters. Others have attached additional conditions to the use of NWPs to ensure that water quality impacts are minimal, and to reduce the scope of impacts. The Corps believes, in general, that activities authorized by NWPs will not violate state or tribal water quality standards and will be consistent with CZM plans. Thus, if a state denies a water quality certification or disagrees that the activities authorized by the NWPs are consistent with a state CZM program, the Corps will deny authorization for the affected activities within that state, but does so without prejudice. Thus, when applicants request approval of such activities, and the Corps determines that the activities meet the terms and conditions of the NWP, the Corps will issue provisional verification letters, notifying the applicant that NWP authorization is contingent upon obtaining the necessary project-specific water quality certificate or waiver thereof, or CZMA consistency determination, from the state, through a process called "individual certification of NWP use on a case-by-case basis." An issue of long-standing concern to states is the fact that, if a state denies 401 certification or CZM concurrence, the Corps does not necessarily consider the state's action sufficient cause to deny issuance of the federal permit. When this happens in the case of nationwide permits, the state is forced either to accept the permitted activity, as authorized by the Corps, or to expend its resources to review the project separately and issue a 401 certification or CZM consistency determination with conditions specific to that project. States object that when the Corps issues provisional verification of NWP authorization, this puts pressure on states to certify projects. Many states take the position that, if a state denies certification, the Corps should evaluate the project under the individual permit process. States would like the Corps to treat a 401 denial of an NWP as a veto. The Corps may deny the permit (withdrawing its applicability in a state), but will not always do so. The Corps does not believe that state denial of 401 certification should be the sole basis for requiring an individual permit. The Corps' position is that denial of state water quality certification for a nationwide permit does not necessarily mean that unacceptable adverse effects will occur on a case-by-case basis, and the Corps prefers that the burden of conditioning or restricting the project at that point be with the state through issuance of a project-specific 401 certification or CZM consistency determination. This tension over state and federal responsibilities does not exist under other Clean Water Act permits. For example, under the act's discharge permit program for industrial and municipal sources (the National Pollutant Discharge Elimination System program in Section 402 of the act), if a state denies 401 water quality certification, EPA insists on changes to the project until it gains certification. One option for states is to seek approval of a programmatic general permit (PGP; see discussion in footnote 7 ), if the state is qualified and has sufficient regulatory authority. The Corps would then suspend federal permitting, and there would be less question over state water quality or other requirements. This is the case in a number of states with PGP programs, which replace some or all of the federal nationwide permits. State PGPs are duplicative of some nationwide permits and offer a more streamlined regulatory process for applicants. Another option is for states to seek authorization for full assumption of the 404 program, a more complicated process than PGP approval, and only Michigan and New Jersey have done so. However, not all states are interested or able to seek either PGP approval or full program authorization. Thus, even though the Corps has stated its intention to work in partnership with states, most states will continue to conduct 401 certification reviews of nationwide and other wetlands permits, and it is likely that conflicts over water quality certification will persist. The Endangered Species Act (ESA) is intended to protect and conserve endangered and threatened species and their habitats. Among the act's provisions, ESA Section 7 prescribes the steps that federal agencies must take to ensure that their actions do not jeopardize endangered or threatened wildlife and flora. Section 7(a) requires federal agencies to consult with the U.S. Fish and Wildlife Service (FWS, for terrestrial or freshwater species and habitat) or National Marine Fisheries Service (NMFS, for marine species and habitat) if a planned action, such as permit issuance, may jeopardize the continued existence of a threatened or endangered species or adversely modify habitat designated as critical. After this consultation process has been completed, FWS or NMFS is required to provide a written biological opinion (BiOp) detailing how the proposed action would affect a species or its critical habitat. If the agency action would place the listed species in jeopardy or adversely modify its critical habitat, FWS or NMFS is required to suggest reasonable and prudent alternatives (RPAs). The RPAs must be measures that the action agency has authority to enforce. Following the issuance of a "jeopardy" opinion, the action agency must (a) terminate the action, (b) implement the proposed alternative(s), or (c) seek an exemption from a Cabinet-level Endangered Species Committee. The Corps' regulatory programs—standard individual permits and general permits—are subject to ESA compliance and consultation requirements. Through ESA consultations and coordination with FWS and/or NMFS, the Corps establishes procedures to ensure that NWPs are not likely to jeopardize any threatened or endangered species or result in the destruction or adverse modification of designated critical habitat. Such procedures may result in development of regional conditions added to the NWP by the division engineer, or in conditions added to a specific NWP authorization by the district engineer. Each activity authorized by an NWP is subject to general condition 18, which states that no activity that "may affect" listed species or critical habitat is authorized by the NWP unless ESA Section 7 consultation with FWS and/or NMFS has been completed. General condition 18 also requires a non-federal permit applicant to submit a preconstruction notification (PCN) to the district engineer if any listed species or designated critical habitat might be affected or is in the vicinity of the project, or if the project is located in designated critical habitat, making it the responsibility of the project proponent to determine if a listed species or critical habitat is or might be present. General condition 18 and similar language in Corps regulations (33 C.F.R. §330.4(f)) allow the Corps to conclude that activities authorized by the NWPs will not jeopardize the continued existence of any listed threatened or endangered species or result in the destruction or adverse modification of designated critical habitat. That is, the Corps' legal position, described in the June 2016 reissuance proposal, is that the action of issuing or reissuing the NWPs per se has no effect on listed species or their critical habitat and thus requires no ESA Section 7 consultation, because general condition 18 and the Corps' rules ensure that ESA consultation will take place on an activity-specific basis wherever appropriate at the field level of the Corps, FWS, and NMFS. Controversy about the Corps' compliance with ESA requirements has been evident for some time, but especially since the NWPs were reissued in 2012. At that time, NMFS for the first time issued a BiOp that found that several of the 2012 NWPs could create jeopardy for as many as 55 threatened or endangered marine species, such as Cook Inlet beluga whale and several sea turtle species. "Reasonable and prudent alternatives" identified in the BiOp were not implemented. Instead, the Corps agreed to open ESA consultation with NMFS, with an expectation that a new BiOp would be issued. In 2014 NMFS did issue a new BiOp that reversed its 2012 finding that the NWPs could result in jeopardy to listed species, noting that NMFS's determination was based in part on Corps plans to ensure that species are protected, including by improved tracking of the permits' authorized activities. The Corps subsequently issued guidance on coordination with NMFS local offices, and on information required of applicants that submit a PCN pursuant to general condition 18. The 2012 NMFS concerns also reflect long-standing concerns of some environmental advocates that the Corps fails to ensure that the NWP program will not jeopardize endangered or threatened species. In August 2012, the Center for Biological Diversity notified the Corps of its intent to file a lawsuit over ESA compliance, seeking to force the Corps to cease the program until it can ensure that authorized discharges will not violate ESA. Although the organization did not ultimately file such a lawsuit, environmentalists remain interested in the Corps' compliance with ESA. Congress has shown some interest in CWA permitting issues and the NWP program specifically, but not for some time. In 1997, a House Transportation and Infrastructure subcommittee held an oversight hearing on developments concerning nationwide permits and other issues. A Senate Environment and Public Works subcommittee held a similar hearing that year. At both hearings, a number of witnesses were critical of the 1996 proposed changes to the nationwide permit program, saying that the changes would be costly and could result in project delays. Administration witnesses supported the modifications, responding that the changes would allow the Corps to implement a more fair, flexible, and effective program that is appropriately responsive to environmental protection needs. Subsequently, on two occasions Congress addressed aspects of the NWP program in the context of appropriations legislation. Both reflected congressional interest in the costs of the program and permit processing times and concerns that the increasing activity restrictions and general conditions in NWPs were also increasing permit processing time. First, in the FY2000 Energy and Water Development Appropriations Act ( P.L. 106-60 ), Congress directed the Corps to study the workload impacts and costs of compliance with the 2000 nationwide permits. Second, the FY2001 Energy and Water Development Appropriations Act ( P.L. 106-377 ) directed the Corps to prepare another cost estimate of the NWP program, along with providing the public with additional information on permit applications. The Corps responded to these mandates with reports in March 2000 and August 2001 that acknowledged some increases in processing time and individual permit applications. It has been more than 15 years since Congress examined the nationwide permit program through oversight hearings or legislation (in connection with appropriations bills). As this report has described, the program has continued to evolve and to generate wide-ranging concerns among stakeholder and interest groups. While the Obama Administration's initiatives concerning some activities that are authorized by nationwide permits have drawn congressional attention and criticism—such as surface coal mining activities in Appalachia —that attention has not extended to oversight of the Corps' regulatory program generally. Whether recent controversies about NWP 12 and its use in siting of pipeline and utility line projects, or other issues, will lead to greater congressional interest in the program is unknown for now. The following is a list of the nationwide permits as issued in January 2017. These permits will be effective from March 19, 2017, through March 18, 2022. The full text of these permits and related general conditions is available at http://www.usace.army.mil/Missions/CivilWorks/RegulatoryProgramandPermits/NationwidePermits.aspx . 1. Aids to Navigation 2. Structures in Artificial Canals 3. Maintenance 4. Fish and Wildlife Harvesting, Enhancement, and Attraction Devices and Activities 5. Scientific Measurement Devices 6. Survey Activities 7. Outfall Structures and Associated Intake Structures 8. Oil and Gas Structures on the Outer Continental Shelf 9. Structures in Fleeting and Anchorage Areas 10. Mooring Buoys 11. Temporary Recreational Structures 12. Utility Line Activities 13. Bank Stabilization 14. Linear Transportation Projects 15. U.S. Coast Guard Approved Bridges 16. Return Water from Upland Contained Disposal Areas 17. Hydropower Projects 18. Minor Discharges 19. Minor Dredging 20. Response Operations for Oil and Hazardous Substances 21. Surface Coal Mining Operations 22. Removal of Vessels 23. Approved Categorical Exclusions 24. Indian Tribe or State Administered Section 404 Programs 25. Structural Discharges 26. [Reserved] 27. Aquatic Habitat Restoration, Establishment, and Enhancement Activities 28. Modifications of Existing Marinas 29. Residential Developments 30. Moist Soil Management for Wildlife 31. Maintenance of Existing Flood Control Facilities 32. Completed Enforcement Actions 33. Temporary Construction, Access and Dewatering 34. Cranberry Production Activities 35. Maintenance Dredging of Existing Basins 36. Boat Ramps 37. Emergency Watershed Protection and Rehabilitation 38. Cleanup of Hazardous and Toxic Waste 39. Commercial and Institutional Developments 40. Agricultural Activities 41. Reshaping Existing Drainage Ditches 42. Recreational Facilities 43. Stormwater Management Facilities 44. Mining Activities 45. Repair of Uplands Damaged by Discrete Events 46. Discharges in Ditches 47. [Reserved] 48. Existing Commercial Shellfish Aquaculture Activities 49. Coal Remining Activities 50. Underground Coal Mining Activities 51. Land-Based Renewable Energy Generation Facilities 52. Water-Based Renewable Energy Generation Pilot Projects 53. Removal of Low-Head Dams 54. Living Shorelines
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Permits issued by the U.S. Army Corps of Engineers (the Corps) authorize various types of development projects in wetlands and other waters of the United States. The Corps' regulatory process involves two types of permits: general permits for actions by private landowners that are similar in nature and will likely have a minor effect on jurisdictional waters and wetlands, and individual permits for more significant actions. The Corps uses general permits to minimize the burden of its regulatory program: general permits authorize landowners to proceed with a project without the more time-consuming need to obtain standard individual permits in advance. More than 97% of the Corps' regulatory workload is processed in the form of general permits. Nationwide permits are one type of general permit. Nationwide permits, which number 52, are issued for five-year periods and thereafter must be renewed. They were previously reissued in total in March 2012. In advance of their scheduled expiration in March 2017, the Corps reissued the 2012 permits, with some revisions and modifications, in January 2017. The current nationwide permit program has received criticism from multiple stakeholders and has few strong supporters, for differing reasons. Developers and other industry groups say that it is too complex and burdened with arbitrary restrictions that limit opportunities for an efficient permitting process and have little environmental benefit. Environmentalists say that it does not adequately protect aquatic resources, because the review procedures and permit requirements are less rigorous than those for individual permits and because the Corps fails to adequately track impacts on aquatic resources. At issue is whether the program has become so complex and expansive that it cannot either protect aquatic resources or provide for a fair regulatory system, which are its dual objectives. Controversies also exist about the use of specific nationwide permits for authorizing particular types of activities, such as pipeline and utility line projects and surface coal mining operations. In addition to general objections, interest groups have a number of specific criticisms of the permit program, such as requirements that there must be compensatory mitigation for impacts of some authorized activities and impacts of regional conditioning through which local aquatic considerations are addressed. Coordinating implementation of the nationwide permits between federal, state, and tribal governments also raises a number of issues. Of particular concern to states is tension over whether their authority to certify the nationwide permits is sufficient to assure that state water quality standards or coastal zone management plans will not be violated. Whether the Corps adequately ensures protection of endangered or threatened species and critical habitat is an issue of concern to some stakeholders. It has been more than 15 years since Congress examined the nationwide permit program in oversight hearings or in connection with bills to fund the Corps' regulatory program. While the Obama Administration's initiatives concerning some activities that are authorized by nationwide permits drew congressional attention and criticism—such as initiatives concerning surface coal mining activities in Appalachia—that attention has not extended to oversight of the Corps' regulatory program generally. The nationwide permit program has continued to evolve and to generate wide-ranging concerns among stakeholder and interest groups. Recent controversies about the Corps' use of nationwide permits to authorize large pipeline and utility line projects could lead to greater congressional interest in the program.
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This report summarizes the key provisions affecting private health insurance in Title I of S. 1679 , the Affordable Health Choices Act, as ordered reported by the Senate Committee on Health, Education, Labor and Pensions (HELP) on July 15, 2009. Title I of the bill focuses on reducing the number of uninsured, restructuring the private health insurance market, setting minimum standards for health benefits, and providing financial assistance to certain individuals and, in some cases, small employers. In general, the bill includes the following: Individuals would be required to maintain health insurance, and employers with more than 25 employees would be required to either provide insurance or pay a fee, with some exceptions. Several market reforms would be made, such as modified community rating and guaranteed issue and insurance renewal. Both the individual and employer mandates would be linked to qualifying health insurance coverage. Qualifying coverage would include qualified health plans offered through a Gateway, and employment-based and nongroup plans not offered through a Gateway that meet specified criteria, including meeting required minimum standards and the market reforms established in the bill; grandfathered employment-based plans; grandfathered nongroup plans; and other coverage, such as Medicare and Medicaid. States could either establish a Gateway (referred to as an establishing state) or request that the Secretary of Health and Human Services establish a Gateway in the state (referred to as a participating state). In the case of a state that was not an establishing or participating state at the end of four years after enactment, the Secretary would establish and operate a Gateway in that state, deeming the state as a participating state. Gateways would offer private plans alongside a community health insurance option. Certain individuals with incomes below 400% of the federal poverty level could qualify for subsidies toward their premium costs; these subsidies would be available only through the Gateways. Currently existing plans offered by employers as well as plans offered in the individual market (the nongroup market) could be grandfathered indefinitely, but only if no substantial changes were made to benefits and cost-sharing. New plans could also be sold in both the individual and group market outside of the Gateway, but only those new plans that meet the minimum requirements would satisfy the mandates for individuals and employers. Most of these provisions would be effective one year after enactment, or on the date on which a state becomes a participating or establishing state. This report begins by providing background information on key aspects of the private insurance market as it exists currently. This information is useful in setting the stage for understanding how and where S. 1679 would reform health insurance. This report summarizes key provisions affecting private health insurance in Title I of the Affordable Health Choices Act, as ordered reported by the Senate Committee on Health, Education, Labor and Pensions (HELP) on July 15, 2009. Although the description that follows segments the private health insurance provisions into various categories, these provisions are interrelated and interdependent. For example, the bill includes a number of provisions to alter how current private health insurance markets function, primarily for individuals who purchase coverage directly from an insurer or through a small employer. S. 1679 would require that insurers not exclude potential enrollees or charge them premiums based on preexisting health conditions. In a system where individuals voluntarily choose whether to obtain health insurance, however, individuals may choose to enroll only when they become sick, known as "adverse selection," which can lead to higher premiums and greater uninsurance. When permitted, insurers often guard against adverse selection by adopting policies such as excluding preexisting conditions. If reform eliminates many of the tools insurers use to guard against adverse selection then, instead, America's Health Insurance Plans (AHIP), the association that represents health insurers, has stated that individuals must be required to purchase coverage, so that not just the sick enroll. Furthermore, some individuals currently forgo health insurance because they cannot afford the premiums. If individuals are required to obtain health insurance, one could argue that adequate premium subsidies must be provided by the government and/or employers to make practical the individual mandate to obtain health insurance, which is in turn arguably necessary to make the market reforms possible. In addition, premium subsidies toward plans with high cost-sharing (i.e., deductible, copayments, and coinsurance) may provide individuals with health insurance that they cannot afford to use. So, while the descriptions below discuss various provisions separately, the removal of one from the bill could be deleterious to the implementation of the others. The private health insurance provisions are presented under the following topics, with the primary CRS contact listed for each: Individual and employer mandate: the requirement on individuals to maintain health insurance and on employers to either provide health insurance or pay a fee. [[author name scrubbed], [phone number scrubbed]] Private health insurance market reforms. [[author name scrubbed], [phone number scrubbed]] Gateway [Chris Peterson, [phone number scrubbed]], through which the following two items can only be offered: Community Health Insurance Options. [Paulette Morgan, [phone number scrubbed]] Premium subsidies. [Chris Peterson, [phone number scrubbed]] Americans obtain health insurance in different settings and through a variety of methods. People may get health coverage in the private sector or through a publicly funded program, such as Medicare or Medicaid. In 2008, 60% of the U.S. population had employment-based health insurance. Employers choosing to offer health coverage may either purchase insurance or choose to self-fund health benefits for their employees. Other individuals obtained coverage on their own in the nongroup market. However, there is no federal law that either requires individuals to have health insurance or requires employers to offer health insurance. Approximately 46 million individuals (15% of the U.S. population) were estimated to be uninsured in 2008. Individuals and employers choosing to purchase health insurance in the private market fit into one of the three segments of the market, depending on their situation—the large group (large employer) market, the small group market, and the nongroup market. More than 95% of large employers offer coverage. Large employers are generally able to obtain lower premiums for a given health insurance package than small employers and individuals seeking nongroup coverage. This is partly because larger employers enjoy economies of scale and a larger "risk pool" of enrollees, which makes the expected costs of care more predictable. Employers generally offer large subsidies toward health insurance, thus making it more attractive for both the healthier and the sicker workers to enter the pool. So, not only is the risk pool larger in size, but it is more diverse. States have experimented with ways to create a single site where individuals and small employers could compare different insurance plans, obtain coverage, and sometimes pool risk. Although most of these past experiments failed (e.g., California's PacAdvantage ), other states have learned from these experiences and have fashioned potentially more sustainable models (e.g., Massachusetts's Connector ). There are private-sector companies that also serve the role of making various health insurance plans easier to compare for individuals and small groups (e.g., eHealthInsurance), available in most, but not all, states because of variation in states' regulations. Less than half of all small employers (less than 50 employees) offer health insurance coverage; such employers cite cost as the primary reason for not offering health benefits. One of the main reasons is a small group's limited ability to spread risk across a small pool. Insurers generally consider small firms to be less stable than larger pools, as one or two employees moving in or out of the pool (or developing an illness) would have a greater impact on the risk pool than they would in large firms. Other factors that affect a small employer's ability to provide health insurance include certain disadvantages small firms have in comparison with their larger counterparts: small groups are more likely to be medically underwritten, have relatively little market power to negotiate benefits and rates with insurance carriers, and generally lack economies of scale. Allowing these firms to purchase insurance through a larger pool, such as an Association, Gateway or an Exchange, could lower premiums for those with high-cost employees. Depending on the applicable state laws, individuals who purchase health insurance in the nongroup market may be rejected or face premiums that reflect their health status, which can make premiums lower for the healthy but higher for the sick. Even when these individuals obtain coverage, there may be exclusions for certain conditions. Reforms affecting premiums ratings would likely increase premiums for some while lowering premiums for others, depending on their age, health, behaviors, and other factors. States are the primary regulators of the private health insurance market, though some federal regulation applies, mostly affecting employer-sponsored health insurance (ESI). The Health Insurance Portability and Accountability Act (HIPAA) requires that coverage sold to small groups (2-50 employees) must be sold on a guaranteed issue basis. That is, the issuer must accept every small employer that applies for coverage. All states require issuers to offer policies to firms with 2-50 workers on a guaranteed issue basis, in compliance with HIPAA. As of January 2009, in the small group market, 13 states also require issuers to offer policies on a guaranteed issue basis to the self-employed "groups of one." And as of December 2008, in the individual market, 15 states require issuers to offer some or all of their insurance products on a guaranteed issue basis to non-HIPAA eligible individuals. Most states currently impose premium rating rules on insurance carriers in the small group and individual markets. The spectrum of existing state rating limitations ranges from pure community rating to adjusted (or modified) community rating, to rate bands, to no restrictions. Under pure community rating, all enrollees in a plan pay the same premium, regardless of their health, age, or any other factor. Only two states (New Jersey and New York) use pure community rating in their nongroup markets, and only New York imposes pure community rating rules in the small group market. Adjusted community rating prohibits issuers from pricing health insurance policies based on health factors, but allows it for other key factors such as age or gender. Rate bands allow premium variation based on health, but such variation is limited according to a range specified by the state. Rate bands are typically expressed as a percentage above and below the index rate (i.e., the rate that would be charged to a standard population if the plan is prohibited from rating based on health factors). Federal law requires that group health plans and health insurance issuers offering group health coverage must limit the period of time when coverage for preexisting health conditions may be excluded. As of January 2009, in the small group market, 21 states had preexisting condition exclusion rules that provided consumer protection above the federal standard. And as of December 2008, in the individual market, 42 states limit the period of time when coverage for preexisting health conditions may be excluded for certain enrollees in that market. In fact, while there are a handful of federal benefit mandates for health insurance that apply to group coverage, there are more than 2,000 benefit mandates imposed by the states. One issue receiving congressional attention is whether a publicly sponsored health insurance plan should be offered as part of the insurance market reform. Some proponents of a public option see it as potentially less expensive than private alternatives, as it would not need to generate profits or pay brokers to enroll individuals and might have lower administrative costs. Some proponents argue that offering a public plan could provide additional choice and may increase competition, since the public plan might require lower provider payments and thus charge lower premiums. Some opponents question whether these advantages would make the plan a fair competitor, or rather provide the government with an unfair advantage in setting prices, in authorizing legislation, or in future amendments. Ultimately, they fear that these advantages might drive private plans from the market. S. 1679 includes a mandate for most individuals to have health insurance, with penalties for noncompliance. Individuals would be required to maintain qualifying coverage, defined as coverage under a group health plan or heath insurance coverage that an individual is enrolled in on the date of enactment or coverage that meets or exceeds the criteria for minimum qualifying coverage, Parts A and B of Medicare, Medicare Advantage, Medicaid, CHIP, Tricare, certain veteran's health care program coverage, Federal Employees Health Benefits Program (FEHBP), state health benefits high-risk pools, coverage for the Peace Corps, and coverage under a qualified health plan. Most individuals who do not maintain qualifying coverage for themselves and their dependents could be required to pay an annual amount established by the Secretary of Labor of no more than $750 per person (with a limit of no more than four times the penalty in total for the taxpayer and any dependents), adjusted for inflation beginning with taxable years after 2011. Members of Congress and congressional staff would be required to enroll in a federal health insurance program created under this bill or an amendment made by the bill, or offered through a Gateway. Some individuals would be provided with subsidies to help pay for their premiums. (A complete description of who is eligible and the amount of subsidies is found in the " Individual Eligibility for Premium Credits " section). Others would be exempt from the individual mandate, including those without coverage for less than 90 days, those who reside in a state that was not a participating or establishing state, Indians (as defined in the Indian Health Care Improvement Act), those for whom affordable health care coverage was not available, or individuals whose adjusted gross income did not exceed 150% of the FPL. The individual mandate requirements would be effective beginning in tax years after December 31, 2011. The Secretary would also determine whether coverage was unaffordable (see discussion in " Essential Health Benefits "). S. 1679 would require employers either to provide employees with qualifying coverage or to pay a set amount, with some exceptions. One of the requirements for states and residents to receive subsidies through the Gateway would be that states apply the employer mandate and notification requirements to their state and local employees. The employer mandate would become effective beginning in the calendar year in which the state in which the employer is located has a Gateway. For those employers that chose to offer health insurance, the following rules would apply: Employers could offer employment-based coverage, or for certain businesses, they could offer coverage through a Gateway (see section on " Individual and Employer Eligibility for Gateway Plans "). Current employment-based health plans would be grandfathered as long as no substantial changes were made. Employers would have to contribute at least 60% of the premiums of the plan they offered—prorated for part-time employees. Employers would not have to provide coverage for seasonal workers. Employers would be required to file a return providing the name of each individual for whom they provide qualifying coverage, the number of months of coverage, and any other information required by the Secretary. They would also be required to provide notice to employees about the existence of the American Health Benefits Gateway, including a description of the services provided by the Gateway. Employers who did not offer coverage would be required to pay $750 per employee for each full-time employee in excess of 25 employees. Employers would pay $375 for part-time employees. These amounts would be adjusted for inflation after 2013. Employers with 25 or fewer employers who chose not to offer coverage would not be required to pay any fee. Within 90 days after enactment, the bill would create a temporary reinsurance program, with funding not to exceed $10 billion, to assist employment-based plans (located in states that are not participating or establishing states) with the cost of providing health benefits to eligible retirees who are 55 and older and their dependents. The Secretary would reimburse the plan for 80% of the portion of a claim above $15,000 and below $90,000 (adjusted annually for inflation). Amounts paid to the plan would be used to lower costs directly to participants in the form of premiums, co-payments, and other out-of-pocket costs, but could be not used to reduce the costs of an employer maintaining the plan. Certain small businesses would be eligible for a credit toward their share of the cost of coverage beginning in calendar year 2010, but only in establishing or participating states. The credit would be available to employers who employed an average of 50 or fewer full-time employees and had an average wage of less than $50,000 for full-time employees. The credit would be limited to three consecutive years. The credit would only be available for months during which the employer provided at least the minimum contribution of 60% toward qualified employee health insurance expenses. This credit would be phased out as the number of employees increased from 10 up to 50 employees, would be greater for firms who contributed more than the required 60% of premiums, and would vary by individual coverage ($1,000), employee +1 coverage ($1,500) and family coverage ($2,000). The credit would also be available to self-employed individuals with net earnings between $5,000 and $50,000, as long as they did not receive premium credits through a Gateway. S. 1679 would establish new federal health insurance standards applicable to new, generally available health plans specified in the bill. Among the market reforms are provisions that would do the following: Prohibit coverage exclusions of preexisting health conditions. (A "preexisting health condition" is a medical condition that was present before the date of enrollment for health coverage, whether or not any medical advice, diagnosis, care, or treatment was recommended or received before such date.) Require premiums to be determined using adjusted community rating rules. ("Adjusted, or modified community rating" prohibits issuers from pricing health insurance policies based on health factors, but allows it for other key characteristics such as age or gender.) Under S. 1679 , premiums would only be allowed to vary based on age (by no more than a 2:1 ratio across age categories specified by the Commissioner), tobacco use (by no more than 1.5:1 ratio), adherence to or participation in a reasonably designed program of health program and disease prevention, premium rating areas, and family enrollment (for example, for single versus family coverage). Require coverage to be offered on both a guaranteed issue and guaranteed renewal basis. ("Guaranteed issue" in health insurance is the requirement that an issuer accept every applicant for health coverage. "Guaranteed renewal" in health insurance is the requirement on an issuer to renew group coverage at the option of the plan sponsor [e.g., employer] or nongroup coverage at the option of the enrollee. Guaranteed issue and renewal alone would not guarantee that the insurance offered was affordable; this would be addressed in the rating rules.) Require public reporting of the percentage of total premium revenue expended on reimbursement for clinical services, quality activities, taxes and fees, and on all other non-claims costs (including an explanation of these costs). Impose new nondiscrimination standards building on existing nondiscrimination rules in group coverage and adequacy standards for insurers' networks of providers, such as doctors. S. 1679 would also require new plans to cover certain broad categories of benefits, prohibit cost-sharing on preventive services, require out-of-pocket limits, prohibit lifetime or annual limits on benefits, continue coverage for dependents until age 26 (but only if the plan chose to cover dependents), and meet the standards for the "essential benefits package," described below. New individual policies and group policies issued post-enactment could be offered both inside and outside of a Gateway. Existing group plans and nongroup insurance policies would be grandfathered as long as there are no significant changes to benefits and cost-sharing. The Secretary would establish "essential health benefits" that would be required of health plans to enroll and receive federal funding for credit-eligible individuals (discussed below in the " Individual Eligibility for Premium Credits " section). Those benefits would include at least the following general categories: ambulatory patient services; emergency services; hospitalization; maternity and newborn care; mental health and substance abuse services; prescription drugs; rehabilitative and "habilitative" services and devices (i.e., habilitative services are those that maintain the physical, intellectual, emotional, and social functioning of developmentally delayed individuals); laboratory services; preventive (certain ones with no cost-sharing permitted), vaccines and wellness services; and pediatric services, including oral and vision care. The Secretary would ensure that the scope of essential health benefits is equal (as certified by the Chief Actuary of the Centers for Medicare and Medicaid Services) to the scope of benefits under typical employer-sponsored coverage. In addition, the Secretary would establish criteria for plans meeting "minimum qualifying coverage," which would exclude plans with out-of-pocket maximums above those permitted in Health Savings Account (HSA)-qualified high-deductible health plans and those that cover only a single disease or condition. The Secretary would also establish the criteria of what coverage is "affordable" to individuals and families at different income levels; the Secretary could consider coverage unaffordable only if the premium paid exceeded 12.5% of an individual's adjusted gross income (AGI). In addition, no later than one year after the Secretary established criteria for minimum qualifying coverage under the essential benefit package, those plans that failed to provide such coverage would be required to notify prospective and current enrollees. This requirement would seem to also apply to grandfathered plans. However, enrollees in grandfathered plans would still meet the individual mandate, and employers offering grandfathered plans would meet the requirements for the employer mandate, regardless of whether or not the plan meets the criteria for minimum qualifying coverage. For individuals buying new plans in the individual or group market, as well as employers offering new plans, they would only satisfy their respective mandate by enrolling in or offering coverage that meets or exceeds minimum qualifying coverage. A National Independent Commission on Essential Health Care Benefits would be established with a $1.5 million authorization to provide input for the Secretary's initial determination of the essential benefit package and minimum qualifying coverage. In particular, the commission would (1) review typical employer-sponsored insurance and state laws requiring coverage of certain items and services, (2) hold public hearings, and (3) make recommendations to the Secretary regarding specific items and services to be included in the essential benefits package. The commission would have 17 members, appointed by the Secretary within 45 days of enactment. The commission would provide its recommendations and other analyses in a report to Congress and the Secretary within six months of enactment. The commission would terminate within 30 days of the report submission. In addition to establishing new federal private health insurance standards, S. 1679 would enable and support states' creation of "American Health Benefit Gateways," similar in many respects to the Exchange proposed in H.R. 3200 and to existing entities like the Massachusetts Connector and eHealthInsurance. Gateways would not be insurers but would provide eligible individuals and small businesses with access to insurers' plans in a comparable way (in the same way, for example, that Travelocity or Expedia are not airlines but provide access to available flights and fares in a comparable way). Gateways would be government or nonprofit entities that would have additional responsibilities as well, such as certifying plans, establishing risk-adjustment mechanisms to reimburse plans enrolling sicker-than-average populations, and identifying individuals eligible for Medicaid, CHIP, and premium and cost-sharing credits. If states adopt the federal private health insurance provisions described above, and if they agree to make state and local governments subject to the employer mandates, states would have the first opportunity to establish a Gateway—to be an "establishing state"—or to request the Secretary to set up a Gateway—to be a "participating state." If four years after the date of enactment a state is not an establishing state or a participating state, there would be a federal fallback. The Secretary would establish and operate a Gateway in the state, the federal individual- and group-market insurance provisions described above would become effective "notwithstanding any contrary provision of State law," and the state would be deemed a participating state. Under S. 1679 , within 60 days of enactment (or as soon as possible thereafter), the Secretary would make grant awards to states to create Gateways. The Secretary's formula would consist of two parts: a minimum amount for each state and an additional amount based on population. At least 60% of the total allotted amount would be toward the state-level minimum. S. 1679 sets no limit on the total to be allotted; the bill authorizes whatever sum emerges from the grand total of each state's allotment as calculated by the formula, although the actual appropriation may limit this. A state's allotment could not be renewed after the second year after a Gateway is established in the state. Ongoing operations would be financed by a surcharge on participating plans of up to 4% of premium amounts. Multiple Gateways could operate in a state, but each would require a geographically distinct area. A Gateway could operate in multiple states. Individuals could enroll in a Gateway plan if they are (1) residing in a participating or establishing state; (2) not incarcerated, except individuals in custody pending the disposition of charges; (3) not entitled to Medicare Part A, or enrolled in Medicare Part B; and (4) not eligible for coverage under Medicaid (or a Medicaid waiver), Tricare, the Federal Employees Health Benefits Program, or, in some cases, employer-sponsored insurance. In an establishing state, the criteria for employers to offer Gateway coverage, including employer size, would be set by the state. In a participating state, criteria for qualified employers would be set by the Secretary. However, in both cases, the cut-off for small business participation in the Gateway could not be lower than 50. If neither the Secretary nor the state establishes criteria on employer size, the maximum employer size would be deemed to be 50. Gateway plans would have to meet not only the new federal requirements of all private health insurance plans, but would also have their cost-sharing options somewhat standardized into the three cost-sharing/benefit tiers shown in the table below. Expenditures considered "out of pocket" would be defined as those considered "qualified medical expenses" in the Internal Revenue Code for HSAs. Under S. 1679 , the Secretary of HHS would establish a community health insurance option through each Gateway. Any individual eligible to purchase insurance through Gateways would be eligible to enroll in the community option and may also be eligible for income-based premium credits. The community option would have to meet the requirements that apply to all plans participating in the Gateway unless otherwise excluded. The requirements would include federal and state laws related to guaranteed renewal, rating, preexisting conditions and nondiscrimination. The community health insurance option would provide coverage only for the essential health benefits, unless it is required by the state to include additional benefits. The Secretary would be required to establish premiums at a level sufficient to cover expected costs including claims, administration, and a contingency margin. Limited start-up funds would be available but would be repaid within 10 years. The Secretary would be required to negotiate with medical providers to set payment rates, subject to limits. Specifically, the payment rates in aggregate would not be allowed to be higher than the average rates paid by other qualified health plans offered in Gateways. Subject to the rate negotiations, a State Advisory Council established by each state would be allowed to develop and encourage the use of innovative payment policies to promote quality, efficiency, and savings to the consumer. This proposal does not address provider participation in the community health insurance option. The Secretary would be required to enter into no-risk contracts for the administration of the community health insurance option, in the same way the Secretary enters into contracts for the administration of the Medicare program. The administrative contractor would have to meet specified criteria, including being a non-profit entity. The fee paid to the contractor could vary based on its performance on specified quality and savings measures. In addition, during the first two years and at the Secretary's discretion thereafter, the Secretary would be required to make risk corridor payment adjustments to the administrative contractor based on risk corridor payment adjustments made to Medicare prescription drug plans under Medicare Part D during FY2006 and FY2007. A risk corridor payment adjustment is a method for limiting the losses (or gains) the contractor would experience if their costs (or revenues) fell outside of specified boundaries. Annually, the Secretary would be required to study the solvency of the community option and submit a report to Congress. If the community option was found to be insolvent, the President would be required to submit proposed legislation to Congress to address the insolvency. Congress would be required to consider the legislation. The Secretary would pay an annual premium credit to each Gateway for qualified, enrolled individuals. The Gateway would remit the credit to the qualified health plan an individual is enrolled in. The amount of the annual premium credit would be determined by the Secretary so that an eligible individual whose AGI is 400% of the federal poverty level (FPL) would not have to pay more than 12.5% of income in premiums. (Individuals above 400% FPL would not be eligible for credits.) Eligible individuals with an income of 150% FPL or lower would pay no more than 1% of income in premiums. Between 150% FPL and 400% FPL, the percentage of income one would have to pay toward premiums would rise in a straight line from 1% of income to 12.5% of income, as illustrated in the solid line of Figure 1 and the table below. For a family of three in the 48 contiguous states in 2009, 150% FPL is $27,465, and 400% FPL is $73,240. The premium credit amount would also be based on the "reference premium" for the area. For an individual whose family income is at or below 200% of poverty, the reference premium would be the weighted average annual premium of the three lowest-cost plans in Tier C offered in the individual's community rating area. For an individual whose family income is above 200% of poverty but is not above 300% of poverty, the reference premium would be the weighted average annual premium of the three lowest-cost plans in Tier B offered in the individual's area. For an individual whose family income is above 300% of poverty but is not above 400% of poverty, the reference premium would be the weighted average annual premium of the three lowest-cost plans in Tier A (basic plan) offered in the individual's area. (The community health insurance option could not be considered in determining the three lowest-cost plans.) Regardless of their credit amount, individuals could enroll in any qualified health plan, but would have to pay the difference between the premium and the credit, if any. S. 1679 offers more generous plans with lower cost sharing to lower-income individuals in lieu of a separate cost-sharing credit (as included in H.R. 3200 ). Eligibility would be calculated based on (1) an applicant's AGI from two years prior or (2) in the case of an individual seeking a credit based on claiming a significant decrease in AGI, the applicant's reported or estimated AGI for a most recent period. For individuals who would receive a premium credit payment on their behalf for a year and who claim a significant decrease in AGI in that year, the individual would file an income reconciliation statement. Based on the income reconciliation statement, the Secretary would determine the size of overpayments or underpayments. Individuals would be liable to the Secretary for overpayment amounts. If such a person had a verified AGI of no more than 400% of poverty, the amount of repayment could not exceed $250 for an individual tax filer or $400 for a joint filer. The Secretary would pay to the individual any deficit associated with underpayments. The Secretary would verify, through the Internal Revenue Service (IRS), the income data received from individuals submitting applications for credits. To be eligible to receive a credit, an individual would have to authorize the disclosure of tax return information. The Secretary would delegate to a Gateway or state the authority to carry out these eligibility-determination activities. The Gateway could consult with the IRS to verify income data received from individuals submitting applications for credits. An individual who has been determined to be eligible for subsidies would be responsible to notify a Gateway of any changes that might affect his or her eligibility status. Upon an individual's notice, the Gateway would promptly re-determine the individual's eligibility. The Gateway would terminate payments on behalf of the individual, if the individual fails to provide the status change information in a timely basis or the Gateway determines the individual is no longer eligible for the premium credits. Applications for this process could be done in person, by mail, telephone, and the Internet. The Secretary would determine the form of the application and the manner of submission, and the application could require documentation. An application could be submitted to the Gateway or a state agency for determination. No payments could be made for individuals who are not lawfully present in the United States. Necessary amounts to finance these credits would automatically be paid out of the U.S. Treasury.
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This report summarizes key provisions affecting private health insurance in S. 1679, the Affordable Health Choices Act, as ordered reported by the Senate Committee on Health, Education, Labor and Pensions (HELP) on July 15, 2009. Title I of the bill focuses on reducing the number of uninsured, restructuring the private health insurance market, setting minimum standards for health benefits, and providing financial assistance to certain individuals and, in some cases, small employers. In general, the Senate HELP bill would require individuals to maintain health insurance and employers to either provide insurance or pay a fee in lieu of coverage, with some exceptions. Several insurance market reforms would be made, such as modified community rating and guaranteed issue and renewal. Both the individual and employer mandates would be linked to qualifying health insurance coverage. Qualifying coverage would include (1) coverage under a qualified health plan (QHP) obtained through the newly created American Health Benefits Gateways; (2) new group or individual coverage that meets or exceeds minimum qualifying coverage; (3) grandfathered employment-based plans; (4) grandfathered nongroup plans; and (5) other coverage, such as Medicare and Medicaid. The Gateways would offer private plans alongside a community health insurance option. Based on income, certain individuals could qualify for subsidies toward their premium costs; these subsidies would be available only through a Gateway. Currently existing plans could be grandfathered indefinitely, if the plan had not been altered to a significant extent. Most of these provisions would be effective one year after enactment, or on the date on which a state has an operating Gateway. A state would be required to have an operating Gateway within four years of enactment, or the Secretary of Health and Human Services would establish one in the state as a federal fallback. A Gateway would not be an insurer; it would provide eligible individuals and small businesses with access to insurers' plans in a comparable way. A Gateway would consist of a selection of private plans as well as a community health insurance option. A community health insurance option is a public plan created by the Secretary of Health and Human Services that generally meets the requirements that apply to all private Gateway plans. Eligible individuals for a Gateway plan could purchase the community health insurance option or a private health insurance plan. Individuals would be eligible to enroll in a Gateway plan only if they were not eligible for certain other coverage, including coverage through an employer, Medicare, and Medicaid, among others. The community health insurance option established by the Secretary of Health and Human Services (HHS) would offer the essential benefits package plus any state mandated benefits. For the community health insurance option, the Secretary would be required to negotiate with medical providers to set payment rates, subject to limits. Credits to limit the amount of money certain individuals would pay for premiums would be available only within a Gateway. New plans could also be sold in both the individual and group market outside of the Gateway, but only those new plans that meet the minimum requirements would satisfy the mandates for individuals and employers.
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On November 22, 2000, President Clinton signed P.L. 106-522 (formerly H.R. 5633 ), an act appropriating funds for the District of Columbia forFY2001. In one of the actions it took between election day on November 7, 2000,and the Thanksgiving holiday, the House and the Senate approved H.R. 5633 by unanimous consent. An earlier version of the act, H.R. 4942 ,was approved by the Senate on October 27, 2000, and by the House on October 26,2000. However, the conference version of H.R. 4942 included fundingfor Departments of Commerce, Justice, and State. The President in a letter datedOctober 26, 2000, indicated that he would veto an otherwise acceptable District ofColumbia Appropriations Act because of objections surrounding the inclusion ofCommerce, Justice, and State appropriations to the act. These include issuesrelating to immigration, tobacco litigation, hate crimes, the sale and display of socialsecurity numbers, Violent Crime Reduction Trust Fund, and number of riderscharacterized by the Administration as anti-environmental and anti-competitive. On September 27, 2000, the Senate passed its version of H.R. 4942 , theDistrict of Columbia Appropriations Act forFY2001, two-weeks after the Houseapproved its version of the bill on September 14, 2000. The House bill includes $414million in special federal payments to the District of Columbia. The Senate billincludes $448 million in special federal payments to the District. A significantpercentage of these payments is for court operations and criminal justice activities.The city's general fund budget, as passed by the council and approved by the controlboard, includes increased funding for public education and economic development.On June 7, 2000, the District of Columbia Financial Responsibility and ManagementAssistance Authority approved a city council-passed budget for the 2001 fiscal year.The $5.5 billion operating budget, which must be approved by Congress, includes$445.4 million in special federal payments to the District of Columbia. Table 1. Status of District of Columbia Appropriations: FY2001 On November 29, 1999, the President signed the Consolidated AppropriationsAct for FY2000, P.L. 106-113 . Division A of this act appropriated funds for theDistrict of Columbia for FY2000. Since the passage of the Act, District of Columbia voters, their elected leadership, the District of Columbia Financial Responsibility andManagement Assistance Authority (the Authority), and Congress have taken actions that will affect the structure and efficacy of the District government. These changesinclude: improvements in the city's financial condition, including the city's third consecutive year with a budget surplus; and proposed amendments in the city's home rule charter that would change the size and composition of the Board of Education (Board). These changes have been accompanied by: a controversial 13-week delay incompletion of the city's annual financial report; debate concerning structure,composition, and effectiveness of elected versus appointed school boards; and theresignations of the city's Chief Financial Officer (CFO) and the superintendent ofpublic schools. In addition, the District government has had to address problemsrelated to special education, foster care, Medicare fraud, and court operations. During the last year, the Authority's role has evolved from that of direct management of the daily operations of the city's nine largest agencies to one ofexercising oversight of the District government. This transition has been aided by congressional support for Mayor Williams' government reform efforts, as evidencedby congressional passage of the District of Columbia Management Reform Act of1999, P.L. 106-1 . The Act, which was signed March 5, 1999, transferred directadministrative authority for the District's nine largest agencies from the Authority tothe mayor. The District of Columbia Financial Responsibility and Management Assistance Act of 1995 ( P.L. 104-8 ) created the Authority and the Office of Chief FinancialOfficer (CFO). The Authority and CFO are charged with improving the delivery ofcity services, and returning the District of Columbia to a position of financialsolvency. Working in concert with the District's elected political leadership, theAuthority and the CFO have implemented a series of financial and managementreforms and have improved tax collection. These reforms, federal assistance, and animproved economy have resulted in three consecutive years of budget surpluses. P.L.104-8 requires the District to produce four consecutive years of balanced budgets asa prerequisite for the abolition of the Authority and the return of home rule. The District ended FY1997 with a surplus of $185,900,000. For FY1998, the city's budget surplus was $112,492,000. (1) After a13-week delay, the city's CFO reported a FY1999 surplus of a $86.4 million after subtracting a $35 millionpayment to the retirement of the city's long-term debt. The CFO's delay in releasingthe Comprehensive Annual Financial Report (CAFR) strained the CFO's relationshipwith the mayor, the city council, the control board, and the private firm charged withconducting the annual audit. The 13-week delay in the CFO's release of the report- due February 1, 2000, but not released until April 29, 2000- triggered criticism of theCFO's leadership, and eventually contributed to her resignation. In a February 28,2000, letter to the Authority, eight members of the council requested her dismissal. Council members cited the CFO's failure to: meet the statutory deadline for the CAFR; produce trial balances during FY1999; adequately ensure that District of Columbia staff participatedin training on the new financial management system; and notify elected official of theCAFR delay. On June 13, 2000, during testimony before the Senate Appropriations Subcommittee on the District of Columbia, Alice Rivlin, the chair of the Authority,noted that the District is anticipating a budget surplus of $57 million for FY2000, anda projected accumulated general fund balance for FY2001 of $260 to $270 million. Like so many District government institutions, the city's public educationsystem has experienced changes during the past year, and will face challenges in thecoming months. Reforming the city's Board of Education, improving theperformance of public school students, continuing support of charter schools as analternative, hiring a new superintendent, and addressing the problems of specialeducation students are but a few of the challenges that must be addressed. School Board Reform. In 1999, members of the Board of Education clashed over allegations that Board of EducationChair Wilma Harvey improperly used school board personnel for personal projects. Eventually, the Board replaced Harvey as chair and installed Robert Childs, anat-large member, as chair. The chairmanship controversy jeopardized the scheduledJune 30, 2000, transfer of administrative authority to the existing school board, andrefocused city and congressional attention on the need to reform what many perceiveas a flawed and ineffective institution. The direction of school board reform in the District of Columbia, including the size of the school board, and whether to elect or to appoint school board members,has been a hotly debated topic that was decided by the voters (51% for the hybridBoard of Education and 49% against) in a referendum vote on June 27, 2000. Muchof the debate on elected-versus-appointed boards involves matters of accountability,democracy, efficacy, and expertise. (2) Supporters ofan elected board believe that suchboards are directly accountable and sensitive to the concerns of residents becausethey are democratically elected. Detractors argue that elected boards, particularlythose elected by ward or district, are too parochial in their focus, and too partisan intheir politics. School boards, they offer, often serve as a political training ground forpersons with higher political aspirations who are more interested in building apolitical base than in improving the schools. Supporters of appointed boards contend that appointed board members are more likely to bring education or other expertise to the board's deliberations, and are lesslikely to be subjected to, or swayed by, partisan or parochial pressures to protect theinterest of a particular group in order to win political advantage. Detractors arguethat appointed boards are subject to patronage and are selected in an undemocraticfashion. The mayor and the city council settled on a hybrid board comprising both elected and appointed members after considering and rejecting proposals that wouldhave: allowed the mayor to appoint the superintendent and a five-member Board of Education; transferred control of the schools, including thehiring and firing of the superintendent, to the mayor for a specific period afterdeclaring a state of emergency, and then returning power to a restructured andsmaller seven member elected board; reduced the Board of Education from 11 to seven electedmembers; and allowed District residents to choose between a nine-member electedschool board and a five-member board appointed by themayor. The latter proposal, which was initially approved by the city council on February 1, 2000, was criticized by Alice Rivlin, the chair of the Authority, who argued thata referendum fight over an elected versus appointed board would be divisive. Sheurged the council and the mayor to support a single plan or face the possibility ofAuthority or congressional action. On February 17, 2000, after weeks of debate, the city council, with the mayor's support, approved a bill (PR13-295) that would restructure the District of ColumbiaBoard of Education pending approval of a referendum by District voters and a 35-daycongressional review period, during which a resolution of disapproval could beoffered to repeal the Act. (3) The Act, which wouldamend the District's Home RuleAct, would: reduce the school board from 11 to nine members; allow voters to elect four members of the board from four newschool election districts (currently eight members of the board are elected byward);allow voters to elect one at-large member to serve as President of the Boardof Education; and allow the mayor to appoint four members to the board with theadvice and consent of the city council. The Board of Elections and Ethics (BEE) held a public meeting on May 2, 2000, to formulate the final short title and summary statement for the ProposedCharter Amendment III, "The School Governance Charter Amendment Act of 2000." Upon completion of this exercise, the BEE certified the referendum question, whichwill ask D.C. voters for a yes-or-no vote in support of a hybrid school board. TheBEE has estimated the costs of conducting the special election at approximately$371,000. Because the voters approved the ballot question on June 27, 2000, thenames of candidates for the five elected seats on the new school board will appear onthe November 7, 2000, general election ballot. During the campaign to win support for the charter amendment questions were raised about the appropriateness of the mayor's use of city employees, resources,facilities, and funds. Critics charged that the mayor's use of taxpayer funds andgovernment employees was a violation of the city's campaign, election, andpersonnel laws.. On June 16, 2000 the Office of Campaign Financed ruled in favorof the complaint against the mayor and directed the mayor to immediately stop usingDistrict employees and resources in support of the charter amendment. On September 6, 2000, the Board of Elections and Ethics upheld the Office of CampaignFinance's order to stop using government employees, resources, and funds in thecampaign. The Mayor has announced he will appeal further, to the Court of Appeals. Support for Charter Schools. The charter school movement in the District of Columbia has been gaining support,despite some setbacks and controversy. Nearly one in every 11 school childrenattending public schools in the District is enrolled in one of 31 public charter schools. For its part, Congress provided additional support for the charter school movementlast year. Last year Congress amended the District of Columbia School Reform Actof 1995, extending the legislative authority for charter schools indefinitely andincluding charter schools as eligible entities for school construction and repair funds. (4) The act provides $5 million in funds for public charter schools. These funds areadministered by a 5-member board appointed by the mayor and the Public CharterSchool Board. This provision is intended to help charter schools meet one of theirmost pressing needs-adequate physical facilities. In March of this year, four members of the Emergency Transitional Education Board of Trustees, the school advisory panel created by the authority, resigned inprotest of the authority's support for the conversion of the Paul Junior High Schoolbuilding to a charter school. The scheduled conversion was also opposed by thesuperintendent of public schools who had sought to create a math and technologyprogram to be housed in the same building. The conversion of Paul to a charterschool was supported by two-thirds of the parents with children in attendance at Paul,granted by the Public Charter School Board, which is one of two charter grantingauthorities in the District, (5) and subsequently endorsedby the authority. The Paul Junior High School debate served as a lightning rod for issues surrounding the conversion and transfer of public school buildings to charter schools. On March 7, 2000, in the midst of the Paul Junior High School controversy, the citycouncil passed emergency legislation that places a seven-and-one-half monthmoratorium on public school building conversions and transfers to public charterschools. Though the bill does not affect the conversion of Paul, according to charterschool supporters, it would have a chilling effect on future conversions. In addition,the authority has transferred the power to dispose of surplus schools to the office ofthe mayor. Special Education. Addressing the needs of special education students has been a focus of House and Senateappropriators, and is one of several education-related issues that District officialshave promised to address. The District's FY1999 Appropriations Act, P.L. 105-277 ,included $30 million in special federal payments to address the backlog in evaluatingthe special education needs of students. The FY2000 appropriations act for theDistrict included a provision that would allow District officials to increase theamount of compensation awarded to attorneys representing students seeking specialeducation services. The problems of the District's special education program havebeen well documented. They include issues related to the timely evaluation ofstudents and transportation issues. Despite congressional scrutiny, the appointmentby the courts of a special master for special education, and promises from schoolofficials to address these concerns, the school system has shown little progress inaddressing the educational needs of special education students, who represent about15% of total public school enrollment, according to advocates representing specialeducation students. Bus services for students with special needs are routinely late ornonexistent. According to a report by the special master appointed by a federal judgeto help resolve transportation and other special education issues, at least one in every10 special education students missed a significant part of morning classes during thefirst two months of the year because of transportation problems. In August 2000, the school system announced its latest efforts to address problems surrounding the transportation of special education children. Schooladministrators plan to offer parents of special education students stipends rangingfrom $3,000 to $7,500 to cover the cost of transporting kids to and from schools. Inexchange for the stipends parents would forfeit their child's right for school busservice. On April 13, 1999, the city council passed PR 13-113, a resolution that established, on an emergency basis, a special committee to investigate the deliveryof special education services. All members of the city council serve on the SpecialEducation Program Investigation Special Committee. The resolution gave the committee one year to investigate the delivery of services and recommendimprovements. Earlier this year the council passed a resolution extending thedeadline for submission of the report by the special committee until September 2000.In April 1999, the superintendent of public schools placed three of the agency's topspecial education administrators on administrative leave. The superintendent alsoannounced administrative and programmatic changes as part of a 90-day action planintended to address some of the agency's longstanding problems, includingtransferring the responsibility for special education assessments to school principals. On April 19, 1999, a three-judge panel heard arguments for and against providing voting representation in the House of Representatives and the Senate forcitizens of the District of Columbia. Two cases ( Adams et al. v. Clinton et al., andAlexander et al. v. Daley et al. ) were consolidated and argued before a special panelcomprising Judges Louis F. Oberdorfer and Colleen Kollar-Kotelly of the UnitedStates District Court, and Judge Merrick B. Garland of the United States Court ofAppeals for the District of Columbia. Plaintiffs in the case were represented by attorneys from the firm of Covington & Burling, and George S. LaRoche, Esq. Provisions of the District of Columbia Appropriations Act of 1999, prohibited theDistrict government from using city funds and resources in filing the court challenge. Presently, the District of Columbia elects a non-voting delegate to Congress, who has been granted the right to cast committee votes, but cannot vote in either theCommittee of the Whole or the House. The plaintiffs' arguments for grantingfull-congressional voting representation--a single House vote and two Senatevotes--rest on the equal protection clause of the 14th Amendment. Lawyers for theplaintiffs contend because the apportionment process deprives District residents ofa republican form of government because it leaves them unrepresented in the nationallegislative body. This, the plaintiffs have argued, denies them equal protection underthe law, because although they are subject to laws passed by Congress, they lackvoting representation therein. The Justice Department argued that the 14th Amendment provision governing equal protection does not apply and that the Constitution grants voting representationin the House and the Senate only to states. Specifically, Article I, Section 2,paragraph 1 states that "The House of Representatives shall be composed ofMembers chosen every second Year by the People of the several States...." ArticleI, Section 3, paragraph 1 states that "The Senate of the United States shall becomposed of two Senators from each State ...." In addition, Article I, Section 8 ofthe Constitution grants to Congress the power "To exercise exclusive Legislation inall Cases whatsoever, over such District (not exceeding ten Miles square) as may, bycession of particular States, and the acceptance of Congress, become the Seat of theGovernment of the United States ...." Further, Article IV, Section 3 grants only toCongress the power to admit new states into the union. The three judge panel, whose ruling was later appealed directly to the Supreme Court, handed down their decision on March 20, 2000. By a decision of two to one,the panel founded that District residents did not have a legal right to votingrepresentation in Congress. The panel acknowledged the apparent inequity andparadox that residents of the nation's capital do not possess the right to votingrepresentation in the House and Senate as do residents of the 50 states, but themajority opinion stated that the Constitution clearly states that voting representationin the House and Senate is reserved for "the People of the several States." Themajority opinion suggested that residents seek redress through the political processand not the courts. Political remedies could include a statehood constitutionalamendment, creation of a federal enclave and return of the remaining portion of theDistrict to Maryland, or allowing District residents to vote with Marylanders inSenate and House elections. On October 16, 2000, the Supreme Court affirmed theMarch 20, 2000, ruling of the three judge panel. The courts continue to play a significant role in the daily operations of the District government. According to the District's proposed budget for FY2001, 7% of proposed total general fund expenditures ($4.8 billion) will be controlled by court-appointed receivers. Three agencies (the Child and Family Services, Mental HealthServices, and District Columbia Jail Medical Services) account for at least $394.6million in proposed spending controlled by court order. The budget did not includecost estimates for one other agency controlled by a court-appointed receiver: theDistrict of Columbia Public Housing Authority. In December 1999, Mayor Williams appointed Grace M. Lopes as his administration's liaison with the four agencies under receivership. Her primarymission is to help fashion solutions that will lead to the return of these agencies toDistrict administrative control. However, the effectiveness of the agencies underreceivership and their progress toward return of the four agencies to Districtgovernment control has been uneven, at best. City officials are hopeful that the agencies will be returned to District control within a year. The Housing Authoritywas returned to District control by September 2000. There is little to indicate thattwo other agencies-Child and Family Services and Mental Health Services-havemade substantial progress in addressing the problems and issues that forced theagencies into receivership. The agencies' problems were highlighted by news reportsof the deaths of children and retarded adults in their care. On October 23, 2000, aUnited States District Judge Thomas Hogan approved a plan that would returncontrol of the Child and Family Services agency to the District government by thesummer of 2001, and elevate the agency to a cabinet level agency. Mental HealthServices is set to return to District control by April 2001. The fourth agency, JailMedical Services, will be returned by the end of the year through the efforts of themayor. During the interim, city officials are seeking greater budget coordination with court-appointed receivers. Presently, city officials, including the authority, lack thepower to review, revise, or alter the budget request of an agency under receivership. The agency's budget request for each fiscal year is simply included in the District'sproposed budget, and is subject only to court review. As part of the mayor's strategy to hasten the return of agencies under receivership, and to enhance financial accountability and management of Districtfunds, the congressional delegate for the District of Columbia introduced the Districtof Columbia Receivership Accountability Act of 2000, H.R. 3995 , onMarch 5, 2000. The act would require each court-appointed receiver to: consult with the mayor and CFO when preparing the agency's annual budget; prepare and submit to the Mayor, for inclusion in the District's annual budget, the agency's proposed or estimated budget; follow the applicable procurement policies and practices of the Chief Procurement Officer of the District; submit to annual financial and management audits conducted by the Inspector General of the District; and ensure that the costs incurred in the administration of each agency are consistent with applicable regional and national standards (unless waivedby the court during an interim period of up to two years). Housing Authority. The Housing Authority, which has been in receivership since 1995, could be returned to citycontrol sometime this year. Earlier this year District public housing residents electedthree tenants to a nine-member board of commissioners charged with setting policyand approving major contracts for the agency after the court-appointed receiver,David Gilmore, completed his assignment as receiver during September 2000. Child and Family Services. In the case of Child and Family Services, the city agency charged with protecting abusedand neglected children, critics of the receiver point to the case of Brianna Blackmon,a 23-month old child who died in January after being returned to her mother. Themother had been charged and found guilty of child neglect a year earlier. The child'sdeath prompted a congressional hearing and recommendations that includedadditional training for social workers and requiring social workers to provide fieldreports to judges 10 days before hearings on a child's status. In the wake of theBrianna Blackmon case, the court-appointed receiver asked the city for $60 millionin additional funds. This would increase the agency's budget to $184 million, andwould be used to provide higher payments to foster parents, hire additional socialworkers, and implement other initiatives necessary to fully comply with the courtorder to improve the agency's services. On October 23, 2000, the District Court Judge Thomas Hogan approved a plan that would return the agency to District control by the summer of 2001. Theagreement returning control of the agency to the District requires the District toelevate the agency to a cabinet level agency with the administrator reporting directlyto the mayor, develop licensing standards for foster and group homes, and enactlegislation that gives the agency responsibility for investigating abuse and neglectcases. Currently, neglect allegations are investigated by the agency while abuse casesare investigated by the police. Mental Health Services. On March 6, 2000, U.S. District Judge Thomas F. Hogan approved a plan to return theagency to District control. The judge found that since being placed in receivershipin 1997, the system had deteriorated. The plan agreed to by District officials and acoalition representing mental health groups, removed the court-appointed receiverat the end of March 2000, placed the agency under control of an interim receiver, andwill transfer control to the District by April 2001. The court will appoint a monitorto review the District's administration of mental health services during the firstsix-month period following the District takeover. The state of mental health services in the District was illustrated on February 29, 2000, when police and firefighters were called to a Northwest Washington mentalhealth group home and found the doors chained shut. The home is part of anunofficial network of unregulated group homes for the mentally ill. Advocates forthe mentally ill assert that many of them are firetraps. Mental health officials notedthat once patients are considered eligible for independent living mental health caseworkers are no longer responsible for their housing. Although, no formal lists of theunregulated homes exist, it is estimated that there are approximately 200 such homesin the District. During an October 28, 1999 hearing before Judge Aubrey Robinson,mental health advocates noted cases of fraud, neglect, and abuse by mental healthresidential facilities operators. More recently, during late May and early June 2000, the mayor and his staff testified before a council committee investigating the city's troubled history in theadministration of services for the mentally retarded. The Deputy Mayor for ChildrenYouth, and Families acknowledged in press reports that there had been 24 deaths ofgroup home residents with mental retardation and developmental disabilities in 1999,and a total of 159 such deaths since 1993. During his June 1, 2000, testimony before the city council committee, the mayor pledged to make improvements in the city's health services for mentally retardedadults. Some of the steps the city will take include reporting all deaths in grouphomes for the mentally retarded to the medical examiner for autopsy, the formationof a committee to review all deaths in group homes, and hiring of an outsidecontractor to determine the medical status of retarded group home residents. Inaddition, the mayor plans to develop legislation that would create a commissioncharged with reviewing and restructuring the system of services for mentally retardedgroup home residents. In March 2000, the head of Psychological Development Associates, Inc. a private firm providing therapeutic services to the mentally retarded, was convictedin United States District Court of defrauding the city of $1.6 million in Medicaidfunds for services that were never rendered. In May 2000, a former head of the dayprogram branch of the District's Mental Retardation and Development DisabilitiesAdministration, was convicted of federal conspiracy and conflict-of-interest chargeslinked to Psychological Development Associates, Inc. District Columbia Jail Medical Services. The cost of health services is one of the issues promptingcity officials to seek removal of the receiver for medical services at the District ofColumbia jail. The jail's medical services, which have been under receivershipsince 1995, carry an excessively high price tag, according to the city's congressionaldelegate. The delegate, on March 7, 2000, cited statistics from the National Instituteof Corrections, and noted that the District per-inmate per-day medical cost of $19 isfar higher than the city of Baltimore's $5.18 per-inmate per-day medical cost. Shealso noted that the cost of medical services for District inmates is almost three timesthe national average. The Balanced Budget Act of 1997 ( P.L. 105-33 ), (6) initiated several changes inthe operation of the District's corrections and criminal justice system, including theclosing of the Lorton Correctional Facility by the end of 2001. The most recentactivity involves the transfer of D.C. felons into the federal prison system andprivately-run prisons, and public review of the recommendations of the D.C.Sentencing Commission. In addition, the role of the U.S. Parole Commission and itsresponsibility for parole decisions affecting D.C. offenders is also an issue of currentconcern. Lorton Inmate Transfers. As of April 6, 2000, approximately 2,300 District of Columbia felons have been transferredinto the custody of the Federal Bureau of Prisons (FBOP). At a House Appropriationssubcommittee hearing on March 2, 2000, and a Senate Subcommittee on CriminalJustice Oversight hearing on April 6, 2000, the Director of FBOP testified thatovercrowded conditions in the federal prison system, and the change in closure datefor Lorton from the year 2003 to 2001, complicates the FBOP's ability to transferD.C. felons into the federal prison system. She added that every effort will be madeto meet Lorton facility closure deadline of December 31, 2001. In addition, thetransfer of D.C. felons to privately operated facilities has been delayed due toenvironmental and legal challenges. In an effort to ensure the scheduled closure ofLorton, the FBOP negotiated a contract with the state of Virginia to house 900 D.C.felons. Advisory Commission on Sentencing. The National Capital Revitalization and SelfGovernment Improvement Act of 1997, Title XI of the Balanced Budget Act of 1997( P.L. 105-33 ), mandated the restructuring of the city's sentencing system to complywith federal truth-in-sentencing guidelines. The 1997 act eliminated parole andindeterminate sentencing of convicted felons. The act required the District todevelop a set of determinate sentences, and requires felons convicted of such crimesto serve 85% of the term for such convictions behind bars. Felons convicted ofsubsection (h) felonies such as murder and rape are also required to serve "anadequate period" of supervised release. In 1998, the city council created theAdvisory Commission on Sentencing and directed the 13-member commission tomake recommendations regarding criminal sentencing reform mandated by the 1997Revitalization Act. The commission submitted its latest recommendations to the citycouncil on April 5, 2000. The new rules took effect August 5, 2000. Thecommission's eight page report recommends: establishing a unitary sentencing system by abolishing parole for all offenders (the Revitalization Act of 1997 abolished parole for subsection (h)offenders who commit serious crimes such as murder andrape); training for judges and other parties regarding the switch from indeterminate sentences, where felons are sentenced to serve time within a range ofyears-for example, 10 to 15 years for rape-to determinate sentencing, whereconvicted felons serve a set term of years-for example, seven years for rape-thus,making sentencing and time served more predictable; allowing the courts to impose a five-year supervised release period for offenses that carry a statutory maximum sentence of 25 years or more, athree year supervised release period for offenses that carry a statutory maximumsentence of less than 25 years; allowing the courts to impose a supervised release period greater than five years for certain sex offenses; and establishing a maximum sentence of 60 years for first degree murder, 40 years for second-degree murder, and 30 years for all other offenses thatpreviously carried a maximum penalty of life imprisonment. Several public hearings have been conducted to increase public awareness of the new sentencing provisions and recommendations of the Commission. The councilhas set June 26, 2000 as the target date for voting on the sentencing guidelinesincluded in council bill PR13-696, the District of Columbia Sentencing Reform Actof 2000. Parole. The transfer of D.C. offenders to the federal system also includes changes in parole authority. The U.S.Parole Commission has assume responsibility for making parole release decisions forD.C. felons since August 5, 1998. The D.C. Board of Parole, however has theauthority to supervise and revoke parole of D.C. parolees until August 5, 2000. Subsequent to this date, the D.C. Board of Parole has been abolished and the U.S.Parole Commission has jurisdiction over all D.C. offenders. The AdvisoryCommission on Sentencing (ACS) included several recommendations intended toaddress issues surrounding the revocation of supervised release and parole. TheCommission recommended that the city council enact legislation setting themaximum terms of imprisonment for revocation of supervised release consistent withfederal standards under 18 U.S.C. 3583(e)(3) and 18 U.S.C. 3559. No additional funding for the District of Columbia was requested by the Clinton Administration or the authority, and none was included in the House version of H.R. 3908 , Emergency Supplemental Appropriations Act for FY2000. On February 7, 2000, the Clinton Administration released its FY2000 budget recommendations. The Administration's proposed budget includes $445.5 millionin federal payments to the District of Columbia. An overwhelming percentage of thePresident's proposed federal payments and assistance to the District involve thecourts and criminal justice system. This includes $103.5 million for the CourtServices and Offender Supervision Agency for the District of Columbia, anindependent federal agency which has assumed management responsibility for theDistrict's pretrial services, adult probation, and parole supervision functions. Inaddition, the Administration is requesting $103 million in support of courtoperations, and $134 million for the trustee appointed to oversee the Districtcorrections systems, including the closing of the Lorton correctional facility and thetransfer of its inmates into the federal prison system. These four functions (prisonadministration, court operations, defender services, and offender supervision)represent 84% of $445.4 million of the President's proposed federal payments to theDistrict of Columbia (See Table 2). On June 7, 2000, the Authority approved a $5.5 billion budget for FY2001. The budget proposal includes a $150 million reserve fund mandated by the District ofColumbia Appropriations Act of 1999, P.L. 105-277 . In addition, the budget wouldincrease funding for public education by $131 million, for economic development by$24 million, and for general government support by $135 million. The budget mustbe approved by Congress (See Table 2). Table 2. District of Columbia General and Special Federal Payment Funds: Proposed and Final FY2001Appropriations (in millions of dollars) a Funds would be provided under a separate heading-Defender Services for the District of Columbia Courts. The Committee's recommendation is based on theCourt's misuse of funds appropriated for such activities in previous years. b Funds would be provided under a separate heading-Defender Services for theDistrict of Columbia Courts. The Committee's recommendation is based on theCourt's misuse of funds appropriated for such activities in previous years. c In previous years funds would be provided as part of District of Columbia Courtoperations. The Committee recommends creation of a separate appropriations toensure payment of attorneys representing indigent persons, guardianship, and abusedand neglected children in court proceedings. d An additional $18 million would be transferred from interest bearing accounts heldby the Authority on behalf of the District government. Note: Brackets indicate amount subsumed under line immediately above. Total maybe off due to rounding. e The $5 million made available for FY2001 is a carryover of unobligated fundsappropriated in FY2000. This amount is not included in total special federalpayments for FY2001. Note: Total may not add due to rounding. General Provisions for FY2001. Unlike previous years, the Administration's budget for FY2001 does not includegeneral provisions. The Administration and city leaders had hoped to eliminate anumber of provisions included in last year's appropriations act that they considerarcane, irrelevant, or inappropriate. Congress not only appropriates federal payments to the district to fund ceratin activities, but also reviews the District's entire budget including the expenditure oflocal funds. The District subcommittees of both the House and SenateAppropriations Committees must approve-and may modify-the District's budget. House and Senate versions of the District budget are reconciled in a joint conferencecommittee and must be passed by the House and the Senate. After this final actionby the House and he Senate, the District's budget is forwarded to the President whocan sign it into law or veto it. Section 302(b) of the Congressional Budget Act requires that the House and Senate pass a concurrent budget resolution establishing aggregate spending ceiling(budget authority and outlays) for each fiscal year. These ceilings are used by Houseand Senate appropriators as a blueprint for allocating funds. Section 302(b) of theCongressional Budget Act of 1974 requires Appropriations Committees in the Houseand Senate to subdivide their 302(b) allocation of budget authority and outlaysamong the 13 appropriation subcommittees. On May 4, 2000, the Senate Appropriations Committee approved a 302(b) suballocation for the District of $441 million. This is $4 million less than the $445million requested by the Administration for FY2001. The House AppropriationsCommittee approved 302(b) suballocation of $414 million in budget authority forFY2001 for the District of Columbia. House Appropriations Committee. On July 25, 2000, the House Appropriations Committee reported an originalmeasure, H.R. 4942 , appropriating funds for the District of Columbiafor FY2001 ( H.Rept. 106-786 ). Federal Funds. The Appropriations Committee bill includes $414 million in special federal assistance. The majority ofthese funds ($384 million) would be allocated to courts, prisons, and criminal justiceactivities including offender services. In addition, the bill appropriates $14 millionfor college scholarship program, and $7 million for construction of a New YorkAvenue Metro station. The bill directs an additional $18 million in funds held by theAuthority to complete the $25 million federal contribution for construction of theNew York Avenue station. Local Funds. The District's budget as approved by the House Appropriations Committee includes $4.842 billion ingeneral fund operating expenses and $654 million in enterprise funding for a total of$5.496 billion in total operating expenses for FY2001. The budget eliminates aproposed $3.360 million increase in funding for the Authority for FY2001. Theincrease was proposed to cover the cost of severance pay for the agency's staff. Theproposed severance packages were criticized as excessive by the HouseAppropriation's Committee in its report ( H.Rept. 106-786 ) accompanying H.R. 4942 . The report notes that the Authority proposed budget of $6.5million was more than double that of its FY2000 appropriation of $3.140 million, ata time when the Authority is preparing to be phrased out of existence in anticipationof the District meeting the congressionally mandated requirement of four consecutiveyears of balanced budgets before the restoration of home rule. General Provisions. The bill includes several social rider provisions that are viewed as controversial or intrusive by someDistrict officials and residents. The House bill includes a provision barring thefederal funding of needle exchange programs aimed at reducing the spread of AIDSand HIV among drug users. The Committee approved by voice vote an amendmentthat would allow city and private funds to be used to finance a needle exchangeprogram. The amendment would prohibit the use of federal funds for a needleexchange program. The Committee rejected an amendment that would have restrictedthe distribution of hypodermic needles. The provision would have prohibited thedistribution needles within 1,000 feet of a public or private day care center, schoolor university, public swimming pool, park, playground, video arcade, youth center,or near any event sponsored by these facilities. The Committee also included a provision in the appropriations bill that would allow the District to implement a provision in a proposed Health Insurance Coveragefor Contraceptive Act of 2000. The proposed legislation would require employerswith employee health plans to pay for contraceptive services if they have aprescription drug plan, even if the employers may object to the use of contraceptiveson religious or moral grounds. The chairman of the House District of ColumbiaAppropriations Subcommittee included a provision in the subcommittee draft of theDistrict of Columbia Appropriations Act for FY2001 that would have prohibited thecontraceptive provision from taking effect. During the Appropriations Committeemarkup on July 20, 2000, the committee approved, by voice vote, an amendment thatwould allow the contraceptive parity provision to stand conditioned on the citycouncil drafting a "conscience clause" that would allow employers to opt out of therequirement based on religious or moral objections. House Floor Action. On September 14, 2000, the House passed H.R. 4942 , the District ofColumbia Appropriations Act for FY2001 by a vote of 217 (yeas) to 207 (nays). OnJuly 26, 2000, the House considered H.R. 4942 , the District of ColumbiaAppropriations Act for FY2001. The House, by voice vote, approved an amendmentintroduced by Representative Istook, that would transfer $100,000 for a study of theDistrict's tax structure to help finance construction of a New York Avenue Metrorailstation. The total federal contribution for construction of a New York AvenueMetrorail station would be $25 million including $7.1 million in direct federalcontribution and $17.9 million in transferred funds from interest bearing accountscontrol by the Authority. In addition, several other amendments were offered duringHouse consideration of H.R. 4942 , including amendments that would: prohibit the public funding of needle exchange programs; prevent the exchange of needles within 1000 feet of certain public places that serve as gathering places for children such as schools, playgrounds,and day care centers; and provide for penalties for persons under the age of 18 years who are found in possession of tobacco products. During the July 26, 2000 floor debate on H.R. 4942 , an amendment was introduced by Delegate Norton (D-D.C.) that would have eliminated a provision(Section 168(a))of the bill that would prohibit the District from implementing the Health Insurance Coverage for Contraceptive Act of 2000. The amendment wasrendered moot after Mayor Williams vetoed the legislation. Senate Appropriations Committee. On September 13, 2000, the Senate Appropriations Committee reported S. 3041 , a bill appropriating funds for the District of Columbia forFY2001 ( S.Rept. 106-409 ). Federal Funds. The Senate Appropriations Committee bill includes $445 million in special federal assistance. The majority of these funds ($390.2 million) would be allocated to courts, prisons,and criminal justice activities including offender services. In addition, the billappropriates $17 million for college scholarship program, and $25 million forconstruction of a New York Avenue Metro station. This is the full federalcommitment to the project, which is expected to receive an additional $50 millionfrom the city and the private sector. Local Funds. The District's budget as approved by the Senate Appropriations Committee includes $4.680 billion ingeneral fund operating expenses and $654 million in enterprise funding for a total of$5.334 billion in total operating expenses for FY2001. The budget supports aproposed $3.360 million increase in funding for the Authority for FY2001. Theincrease was proposed to cover the cost of severance pay for the agency's staff. The Authority is preparing to be phrased out of existence in anticipation of the Districtmeeting the congressionally mandated requirement of four consecutive years ofbalanced budgets before the restoration of home rule. General Provisions. The bill includes several social rider provisions that are viewed as controversial or intrusive by someDistrict officials and residents including a provision barring the federal and cityfunding of needle exchange programs aimed at reducing the spread of AIDS andHIV among drug users. The Committee bill would allow private funds to be usedto finance a needle exchange program. The Senate Appropriations Committee alsoincludes a provision that would prohibit legalizing the medical use of marijuana and restricting the use of federal and city funds for abortions to cases where thepregnancy was the result of rape or incest, or threatens the health of the would-bemother. The bill requires the Chief Financial Officer to submit a comprehensive financial management policy comprising cash, debt, financial asset, emergency andcontingency reserve management, and real property tax exemption policies. Inaddition, it identifies the process for review and approval of these policies. The billwould also amend the Financial Responsibility and Management Assistance Actrelating to the hiring and dismissal of the CFO. The Senate bill proposes a 30-daycongressional review period following the mayor, city council's, and Authority'sapproval of the appointment or dismissal of the CFO. In addition, the bill identifies24 specific duties and responsibilities of the CFO. Earlier this year CFO Valarie Holtwas dismissed, in part, because of criticism of the office's tardiness in deliveringfinancial reports critical to the development of this year's budget plan. The Senate bill would eliminate or slowly phase out over several years the requirement that the city maintain a $150 million reserve fund. Instead, the Senatebill would require that the city create two reserve funds: a contingency reserve fund;and an emergency reserve fund. The contingency cash reserve fund would set asideup to 3% of each year's operating budget for unforseen or nonrecurring needs suchas natural disasters, federal mandates, and revenue shortfalls. The second reservefund, the emergency cash reserve fund, would require the city to maintain a 4%reserve of each year's operating budget for unanticipated and nonrecurring needssuch as a natural disaster or calamity. In order to reach the 4% set-aside requirementfor the emergency cash reserve, the District would be required to deposit at least0.5% of each fiscal year's operating budget ending in FY2008. The District alsowould be required to deposit at least 0.5% of each year's operating budget in orderto meet the 3% contingency fund requirement by FY2006. Senate Floor Action. On September 27, 2000, the Senate passed its version of H.R. 4942 ,substituting the language of S. 3041 , a bill appropriating funds for theDistrict of Columbia for FY2001 ( S.Rept. 106-409 ). The bill was approved by thefull Senate by unanimous consent. On October 11, 2000 House and Senate conferees reached agreement on a conference version of H.R. 4942 . On October 26, 2000, the conferencecommittee on H.R. 4942 , release the conference report ( H.Rept.106-1005 ) accompanying the bill. The conference version of H.R. 4942 included appropriations for the Departments of Commerce, Justice, and State. Themove was intended to expedite the consideration of appropriations for thesedepartments. On October 26, 2000, the House approved H.R. 4942 despite the threat of a veto. On October 27, 2000, the Senate approved theconference bill by a vote of 48 to 43. In a October 26, 2000, letter to the HouseSpeaker and Majority Leader of the Senate, the President indicated that he wouldveto an otherwise acceptable District Appropriations Act because of the inclusion ofobjectionable provisions in the Commerce, Justice, and State portion of the bill. Upon returning from an election recess, Congress considered and passed H.R. 5633 , an act appropriating funds for the District of Columbia forFY2001. The bill did not include provisions appropriating funds for the Departments of Commerce,Justice, and State that resulted in the threatened veto by President Clinton. TheHouse and the Senate quickly passed H.R. 5633 by unanimous consenton November 14, 2000, leaving unchanged the District of Columbia appropriationsprovisions first approved in the conference report accompanying H.R. 4942 . President Clinton signed H.R. 5633 into law on November 22,2000, as P.L. 106-522 . Federal Funds. P.L. 106-522 includes $444.975 billion in special federal payments to the District of Columbia. The majority of these funds ($386 million) would be allocated to corrections andcriminal justice activities. The bill also includes $17 million for a college tuitionassistance program, $25 million for New York Avenue Metro station. The act alsoincludes $100,000 for enforcement of law banning possession of tobacco productsby minors. Local Funds. P.L. 105-522 includes $5.5 billion in general and enterprise fund expenditures for FY2001. Thisis $142 million more than the District budgeted in FY2000. The conference bill,which was vetoed, included $998.9 million budget for public education includingcharter schools. This is a $132 million increase in funding for public education, thelargest increase in the District's budget. Other increases include $15 million foreconomic development and regulatory activities, and $8 million for public works. These and other increases were balanced against cuts in other government activitiesincluding $14 million less for public safety activities and $85 million less inrepayment of loans and interest, and $7.9 million reduction in the payment of intereston short term borrowing. General Provisions. P.L. 106-522 , the District of Columbia Appropriations Act for FY2001, also includes several socialrider provisions that are viewed as controversial or intrusive by some Districtofficials and residents. Many of these provisions were included in previous Districtof Columbia appropriation acts. P.L. 106-522 bars the use or District and federalfunds for needle exchange programs aimed at reducing the spread of AIDS and HIVamong drug users, a provision that was included in the FY2000 appropriations for thecity. The new public law, consistent with FY2000 appropriations language wouldallow private funds to be used to finance a needle exchange program. The actincludes a provision that restricts the distribution of hypodermic needles. This new provision prohibits the distribution of needles within 1,000 feet of a public or privateday care center, school or university, public swimming pool, park, playground, videoarcade, youth center, or near any event sponsored by these facilities. P.L. 106-522 , also includes a provision that allows the District to pass and implement laws requiring the inclusion of health insurance coverage forcontraceptive prescriptions. The legislation also includes a provision that wouldallow the contraceptive parity provision to stand so long such legislation included a"conscience clause" that would allow employers to opt out of the requirement basedon religious or moral objections. The act also include provisions prohibiting thedecriminalization of marijuana for medical purposes, the use of funds for lobbyingfor statehood or voting representation in Congress, and the use of District and federalfunds for abortion services except when the life of the mother is in danger or thepregnancy is the result of rape or incest. These provisions were included in previousacts appropriating funds for the District of Columbia. The act also includes a newprovision that would phase out over several years the requirement that the citymaintain a $150 million reserve fund. Instead, the act includes a provision containedin the Senate version of H.R. 4942 requiring the city to establish tworeserve funds: a contingency reserve fund; and an emergency reserve fund. Thecontingency cash reserve fund would set aside up to 3% of each year's operatingbudget for unforseen or nonrecurring needs such as natural disasters, federalmandates, and revenue shortfalls. The second reserve fund, the emergency cashreserve fund, requires the city to maintain a 4% reserve of each year's operatingbudget for unanticipated and nonrecurring needs. In order to reach the 4% set-asiderequirement for the emergency cash reserve, the District would be required to depositat least 0.5% of each fiscal year's operating budget ending in FY2008. The Districtalso would be required to deposit at least 0.5% of each year's operating budget inorder to meet the 3% contingency fund requirement by FY2006. Table 3. District of Columbia General Funds: Proposed and Final Appropriations for FY2001 (in millions ofdollars) a Brackets indicate projected saving to be achieved and not actual expenditure. b Conference and Senate versions of the bill would establish two reserve funds: a"contingency reserve fund" into which the Mayor may deposit at least 3% of the totalfiscal year operating budget; and a "emergency cash reserve fund" into which theMayor may deposit at least 4% of the total fiscal year operating budget. Thesereserve funds would be established over a multi-year period and would replace thepresent reserve fund of $150 million.
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On February 7, 2000, President Clinton submitted his budget recommendations for FY2001. The Administration's proposed budget includes $ 445 million in federal payments and assistance tothe District of Columbia. On March 13, 2000, D.C. Mayor Anthony Williams submitted hisproposed budget for FY2001. The proposed budget included $4.7 billion in general fundexpenditures and $695 million in enterprise funds. The District of Columbia Financial Responsibilityand Management Assistance Authority (Authority), on June 7, 2000, approved a budget compromisereached by the city council and the mayor, which includes $137 million more in funding for publiceducation than appropriated for FY2000, and $47 million more than requested by the mayor. Inaddition, the city's budget appropriates $214.6 million for economic development, which is $24million more than appropriated in FY2000, and $197.8 million for governmental support activities,which is $62.0 million more than appropriated in FY2000. The District budget, which must be approved by Congress, requests $445 million in special federal payments. On September 27, 2000, the Senate completed action on its version of theDistrict's Appropriations Act for FY2001, H.R. 4942 (previously S. 3041 ) , which includes $445 million in special federal payments. On September 14, 2000, the Housepassed its version of the District's appropriation bill, H.R. 4942 , which includes $414million in special federal payments to the District. On October 26, 2000, the House approved aconference version of H.R. 4942 , which included appropriations for the Departmentsof Commerce, Justice, and State. The conference bill includes $448 million in special paymentsto the District. Earlier this year District residents approved by referendum an amendment to the District's home rule charter that restructures the city's Board of Education. The charter amendment reconfigures theschool board from an 11 member panel with eight members elected by ward and 3 at-large to a boardcomprising five elected members and four members appointed by the mayor. The referendum, whichwas approved by voters on June 27, 2000, will give the mayor greater influence over educationpolicy, funding, and resource allocation through his appointed members on the Board of Education. It also means the mayor assumes greater accountability for the state of the city's public schools. In addition, the council must complete its work on revising sentencing guidelines governing convicted felons as mandated by the National Capital Revitalization Act of 1997, P.L. 105-33 . The1997 Act transferred to the federal government funding responsibility for criminal justice activities. These activities account for $244.9 million (55%) of the total $445 million in requested specialfederal payments. This report will be updated to reflect the latest action affecting the District'sFY2001 appropriations. Key Policy Staff DSP= Domestic Social Policy Division, GF=Government and Finance Division
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On January 29, 2010, President Obama spoke at a meeting of Republican Members of the House, in Baltimore. After speaking for approximately 20 minutes, President Obama took eight questions, for a total of approximately 65 minutes. The questions were asked by individual Members of the conference, with conference chairman Representative Mike Pence selecting those who posed questions. On February 3, 2010, President Obama spoke at a meeting of Democratic Senators, in Washington, DC. After speaking for approximately 15 minutes, the President took eight questions for a total of approximately 60 minutes. The questions were asked by individual Senators, with conference chairman Senator Reid selecting the questioners. The two appearances by the President generated significant media attention, and a number of prominent observers called on both the President and Congress to continue such interactions on a regular basis. Although the question and answer sessions were not conducted as formal House or Senate actions, some proponents of a question period may view this as an advantage. The unofficial nature of the interactions avoided the procedural issues associated with instituting a question period in the House or Senate, and the apparent lack of strict rules or procedures regarding questions arguably improved the quality and candidness of the exchange. On the other hand, if such interactions were to continue on a regular basis, the lack of formal procedures for selecting questioners or the lack of rules regarding the content of questions could potentially become problematic. Similarly, the unofficial nature of such interactions may not produce as much public interest as a formal question period on the floor of the House or Senate. In May 2008, Senator and presidential candidate John McCain stated that, as President, he would "ask Congress to grant me the privilege of coming before both Houses to take questions and address criticism, much the same as the Prime Minister of Great Britain appears regularly before the House of Commons." Such a "question period," in which the chief executive official appears before the legislature to answer questions, is a feature of most parliamentary systems. Prime Minister's Questions is a major component of British politics, receiving substantial press, radio, and television coverage. In many national parliaments, including the British House of Commons, questions are also directed to other Cabinet Ministers, serving as a major form of legislative oversight and constituency service. Proposals to permit, or require, executive branch officials to appear before Congress to answer questions and to explain policy have been made periodically in the United States. In 1991, Representative Sam Gejdenson introduced a proposal that provided for a two hour question period each month. In the early 1970s, Senator Walter Mondale proposed various forms of a "question period" for executive branch officials. During World War II, Representative Estes Kefauver offered a series of similar proposals, but none was ever acted upon by the House. Similar inaction took place regarding proposals offered by President Taft in 1912, and by George Pendleton, a Representative and Senator during the late 19 th century. Scholars and other observers have debated the merits of introducing a question system in Congress. Advocates argue that a question period will improve the performance of executive departments, enhance congressional oversight capabilities, promote inter-branch dialogue, increase public knowledge and interest in government affairs, and strengthen the institutional position of Congress within the government relative to the President. Opponents contend that a question period is ill-adapted for non-parliamentary system, provides poor oversight, will intensify partisanship, will undermine the committee system, will be generally filled with theatrics and manipulation, may be expensive, and will give the executive branch an unnecessary forum within Congress. This report surveys how question periods are conducted in Britain and other parliamentary democracies, examines previous proposals for question periods in the United States, considers potential advantages and disadvantages of a question period, and outlines some legislative considerations for policy makers considering a question period for Congress. To analyze the possible options for structuring a question period in Congress and the potential effects of a question period on legislative-executive relations, an initial examination of the question period practices in other countries, and into proposals for a similar procedure in the American Congress, is necessary. Existing question periods in parliamentary democracies vary widely in their format and procedures. Likewise, historical proposals in the United States have involved a range of question period procedures. The following sections of the report survey the use of Question Time in Britain, Question Period in Canada, Question Hour in Germany, and Oral and Government Questions in France. Afterward, a variety of historical proposals for a question period in the United States are discussed. The British Parliament engages in the most familiar question period process. Members of Parliament (MPs) submit written and oral questions to Ministers, seeking information about government actions and policies, which in turn requires Ministers to explain and defend their actions. The system thus allows for both opposition party scrutiny of the government as well as governing party defense of current policy. Prime Minister's Questions, in which the Prime Minister fields oral questions regarding important national policies from the opposition parties in Parliament, is the most visible and well-known aspect of question time in Britain. The system, however, also serves as a primary means of constituent service; Members often pose detailed written questions to Ministers in regard to specific constituent casework concerns. Question Time in Great Britain dates to 1721. The system has evolved considerably over the course of 300 years, and some aspects of its procedures and functioning are based on custom rather than written rule. In the 19 th century, MPs had relatively unlimited opportunities to ask questions, but gradual restrictions on the number of questions a Member could ask and the total amount of time available for questions occurred between 1909 and the present. The modern format of question time was largely achieved by 1965, although procedural reviews and minor changes have occurred regularly since then. Questions by Members are submitted in advance to the Table Office (the British equivalent of the Parliamentarian's Office). The Table Office then puts the draft question into acceptable form according to the practices of the House of Commons and determines whether a proposed question falls under the jurisdiction of the Minister to whom the question is put. At the time of submitting a question, Members specify whether they require an oral or a written response. Members are limited to two oral questions per day and no more than eight in any 10-day period. Members who seek a written response categorize their question as either ordinary or named. Ordinary questions have no deadline for answer (but are usually answered within a few weeks); named questions must be answered within a set period (usually two or three days). There is no limit on ordinary questions, but Members are restricted to a daily maximum of five named questions. Although oral questions receive substantial press coverage and are the subject of much political commentary, written questions are far more common, accounting for between 80% and 90% of all questions submitted in a given year. Most British MPs are active questioners. A survey of Members during the 2001-2002 financial year indicated that 93% of Members reported submitting at least one oral question per week, and 91% reported submitting at least one written question per week. Despite increased restrictions on the number of questions Members may submit, since 1970 there has been a sharp increase in the total number of questions, from approximately 18,000 questions in financial year 1972-1973 to over 74,000 questions in 2006-2007. Department Ministers appear daily in Parliament to answer questions on a pre-arranged, but informal, rotating basis. In practice, each Minister appears before Parliament about once every four weeks, except for the Prime Minister, who answers questions once a week. Members seeking to ask an oral question must submit it three days in advance of a Minister's appearance. Thus, to question a Minister appearing on Thursday, a Member must submit his question by noon on Monday, although questions are often submitted further in advance. All questions submitted are placed in the Notice Paper of the House of Commons, which is published on a daily basis. Therefore, department Ministers and their staff have at least three days to prepare their answers for oral questions (except for supplementary follow-up questions, discussed below). At 12:30 p.m. daily, after the deadline for submitting oral questions for the session three days forward, the questions for oral response are shuffled and drawn at random, and are numbered on the Order Paper in the order drawn. A quota system determines the number of questions that are listed, based on the length of time a given department is slated to answer questions. Members whose questions are drawn lower in the shuffle may request a written answer or submit their question again for a future oral reply. The time for oral questions fills about one hour each day Monday through Thursday when the House of Commons is in session. Some Cabinet Ministers (such as Treasury or Defence) are scheduled for the entire hour, while Ministers from departments that typically receive fewer questions may appear for only part of the hour. At noon each Wednesday, a 30-minute block of time is reserved for questions to the Prime Minister. Question Time, like other official parliamentary proceedings, is chaired by the nonpartisan Speaker. On the day assigned for a question, the Speaker calls for the first question as determined by the order set in the shuffle. The text of the question is printed in full in Hansard (the British equivalent of the Congressional Record ). Therefore, the inquiring Member need only identify for the Speaker the numbered question he is asking. The Minister typically responds with the prepared response drafted by the civil service. The content and delivery of answers are governed similarly to questions; if the Speaker believes a Minister is not answering the question or using the time to make a speech, he may interrupt and urge the Minister to finish. After the answer is given, supplementary questions are in order. The Speaker may use his discretion, but will typically allow the original questioner one follow-up, and then will alternate between majority and opposition party Members. As supplemental questions are not known to the Minister beforehand, it is here that spontaneous and strategic debate is most evident, both in an unforeseen supplemental and in the Minister's response to an unexpected inquiry. The Speaker has sole authority to decide when to stop accepting supplementary questions. Once the Speaker so decides, he calls for the second printed question, and the process begins again. Any printed question that does not get asked prior to expiration of a Minister's allotted time is required to receive a same-day written response. A Minister is not required to answer a question nor to assign a reason for so refusing. Ministers occasionally decline to answer an oral question because a formal government response to the question is forthcoming or because an answer would be detrimental to national security interests. Additionally, a substantial body of precedent exists in Britain whereby the Speaker rules questions on certain subjects out of order, such as the Royal Family, commercial information regarded as confidential, personal information pertaining to civil servants, and some matters relating to defense and national security, among other subjects. Oral questions not listed on the daily Order Paper may be asked in unusual circumstances. Called "Urgent Questions," these are normally reserved for emergencies that do not permit the required notice. The Member seeking to ask an urgent question is required to consult the Speaker, who determines if the question warrants immediate reply. If it does, the Speaker notifies the Minister of the question. It is not uncommon for this notice to be as short as a half hour before the question is asked. In 2007, Parliament began experimenting with a process known as "topical questions," in which the last 10 to 15 minutes of each Question Time hour would be reserved for rank and file MPs to ask supplementary questions on any topic. Oral questions account for only a small percentage of the questions asked of Ministers by MPs. The remainder of the questions specify a written answer. As with questions for oral response, questions for written response are normally submitted to senior civil servants to draft an appropriate reply. It is common practice for a Member to submit a constituent issue question first for written response, and then only require an oral answer if the original reply was unsatisfactory. Written responses are delivered to the inquiring Member and are printed in Hansard. The Prime Minister appears before Parliament each Wednesday at noon to answer oral questions for 30 minutes. Parliamentary questions directed toward the Prime Minister now receive substantial press, radio, and television coverage in the United Kingdom, and are routinely rebroadcast in the United States on the C-SPAN network. Procedures for Prime Minister's Questions differ somewhat from the procedures used for all other oral question periods. Oral questions to the Prime Minister may be submitted as with ordinary oral questions to other Ministers. In practice, however, submitted questions to the Prime Minister typically ask only about his engagements for the day; once this question is asked, all further questions are effectively unknown supplementals, which allows the discussion to cover the full range of government policies. This practice reflects the differing role of the Prime Minister from other Ministers, and allows for a lively and unscripted debate about timely policies. The almost universal use of such "open" questions to the Prime Minister has both benefits and drawbacks. Proponents of the open question system argue that it makes it easy for the opposition to raise topical issues and is the only existing mechanism by which to hold the Prime Minister publicly accountable for his policies and decisions. Critics of the system argue that "open" questions tend to create fiercely partisan debates and result in a lack of depth in the scrutiny of the Prime Minister, due to the questions jumping around from issue to issue. The availability of the Prime Minister for frequent questioning is a relatively new development in the British Question Time. In the 19 th century, the Prime Minister was liable to questioning in the same proportion of the time as were his Cabinet colleagues. As a courtesy to the elderly Prime Minister at the time, William Gladstone, the Prime Minister's questions were put last in the order to permit him to come late to the daily session. As the number of questions increased, the number of occasions when the Prime Minister was questioned decreased. The Gladstone exception became custom, and it was not until 1961 that a separate time period for directing questions to the Prime Minister was established. Many, if not most, parliamentary democracies provide for some form of question period in which MPs can scrutinize the government. The particulars of these question periods vary widely. Often custom and tradition are as important as institutional structure in determining how a given question period functions in practice and how effectively it serves its stated goals. The "Question Period" in the Canadian House of Commons is similar in structure to British Question Time, but differs in several important respects. Most importantly, there is no requirement that oral questions be submitted in advance; as a matter of routine, Members of the Canadian Parliament ask questions of Ministers without advance notice. Thus all oral questions, in theory, operate under the same spontaneous context as Prime Minister's Questions in Britain. In practice, however, some Members may notify Ministers in advance of their questions, and questions from the governing party rarely contain unpleasant surprises. A second important difference between the British and Canadian systems is that all Ministers appear at Question Period in Canada each day, unless a prior obligation of official business prohibits their attendance. Members can thus question any Minister on any day. Questions, however, are not directed toward specific Ministers; any individual Minister may answer any posed question. The nonpartisan Speaker has no authority to compel an individual Minister to respond to a particular question. Procedurally, Question Period in Canada is structured to allow opposition parties the opportunity to question the government. Typically, the lead opposition party is given the first three questions, with smaller opposition parties allowed one or two questions, based on arrangements between the Speaker and the leaders of the various parties. Individual questions to be asked are organized by the parties; the parties decide on a daily basis which Members will participate in the questioning and deliver a list of names and suggested order of recognition to the Speaker. Once the Question Period has begun, the Speaker calls on the Members at his discretion, and also may allow supplementary follow-up questions. Finally, the Canadian Parliament augments Question Period with Adjournment Proceedings, commonly called the "late show." Any Member who is dissatisfied with the answer to a question posed during the afternoon Question Period may petition the Speaker to discuss the matter further at the conclusion of the day's legislative business, usually 6:30 p.m. Due to the large number of petitions received, the Speaker will designate up to five for debate. When directed, a Member may then speak for up to four minutes on the topic, with a Minister getting two minutes to respond. At the conclusion of the 30-minute period, the House stands in adjournment. The procedures and customs of Canadian Question Period tend to create an atmosphere of spontaneity and excitement, which occasionally includes parliamentary heckling, normally recorded verbatim in the Canadian Hansard , thereby serving as a vehicle for many Members' opinions to be recorded. A Canadian observer has commented: What usually ensues is a verbal fencing match with precocious opposition members sparring with ministers, attempting to bait them into saying something that is an embarrassment to the government. The minister must "keep his cool" and not allow himself to be goaded into saying anything more than is necessary to provide factual information or, as is often the case, to gracefully avoid the question. The arrival of live television coverage in the Canadian Commons in 1977 increased the visibility of this daily exchange as well as chamber attendance during questions. As a result, the Speaker felt compelled, in light of the placement of microphones on each desk, to rule that the traditional expression of support for a speaker (the slamming of desks lids in unison by one party or another) was too noisy and disruptive of the new electronic coverage. In the Bundestag, up to 180 minutes per week may be allotted for Question Hour, a question period styled similarly to the British system. Deputies may submit oral or written questions for Cabinet Ministers and the Chancellor. Deputies must submit oral questions during the week prior to when they wish to receive an answer; urgent questions may be allowed on a day's notice. Deputies are also allowed to submit up to four questions per month for written response. Although questions are becoming more common in Germany, their number does not begin to equal the number submitted and responded to in Great Britain or Canada; a total of 15,000 oral and written questions were asked between 1998 and 2002. A German variant of the system is the "interpellation" procedure in which a group of deputies (typically from the opposition parties) can petition the President of the chamber to call a special question period. If 31 or more deputies sign the petition, then a plenary session debate is held on the questions and the government's reply. Such "major interpellation" sessions occur with regularity; between 1998 and 2002, 156 were held. Some scholars, however, suggest that major interpellations have become less frequent during the past few decades, in part because investigating committees of the Bundestag have the right to compel testimony from federal or state government officials. Groups of Members may also petition for written replies to a so-called minor interpellation, in which the government issues a written reply, but no debate is held. The 1958 constitution established the right of Assembly Members to question the government on a weekly basis. Two procedures are now used for oral questions: one period called "oral questions" and one called "government question time." Oral questions, which typically involve questions local in nature, are currently asked on Tuesday. Such questions are screened in advance by the President's Conference, a steering committee comprised of the heads of all the parties represented in the chamber. Seven minutes are allotted for each question, including the answer and follow-up questions from the Member. In the 2005-2006 ordinary session, 384 questions were asked. The second procedure, government question time, usually considers issues more national and political in character. Government question time takes place for one hour each Tuesday and Wednesday. Five minutes are allotted per question (including answer and follow-ups), and thus 12 questions are asked each day. The process is overseen by the President's Conference, which allots the questions to parties based on numerical strength. The questions are not screened in advance. The President's Conference may decide to permit a brief period of chamber debate after a Minister responds to a particularly important question, but most oral questions are simply followed up by one or two supplementals from the inquiring Member. Questions for written response form the bulk of inquiries in the assembly. Members are allowed unlimited written questions, and the questions often reflect constituent casework inquiries. Written questions have gained significant popularity among Members in the past two decades; in the 2005-2006 session, 32,423 questions were submitted, up from approximately 12,000 in 1994. Answers are expected to be obtained within two months. Both questions and responses are printed in the Journal Officiel . Members may submit questions electronically, and all questions and answers are publically searchable on the Parliament's website. At various times, proposals have been offered by American scholars and public officials to increase the formal contact between the executive branch and Members of Congress. Most of these proposals favored various forms of a question period for Cabinet members, and even for the President. Others have tied the question period to proposals to permit Cabinet members to appear on the floor of the House and/or Senate as debate participants, but not to vote. During the First Congress, it was not unusual for Cabinet members, and even the President, to appear before Congress to consult on matters of policy. During the First Congress, Cabinet members appeared before the Senate 14 times, and 8 times before the House, in most cases delivering written messages in person. It appears that the practice fell into disfavor in the Second Congress. A resolution calling for the Secretaries of War and of the Treasury to appear before the House to answer questions pursuant to the House investigation of the defeat of General St. Clair's Indian expedition was defeated. James Madison, a leader of the forces opposed to summoning the Secretaries, said that to do so would lead to "embarrassing and perplexing consequences." Apparently the House concurred, and little effort to bring the Cabinet and Congress together officially was made until the Civil War. During the Civil War, Representative George H. Pendleton introduced the first of several bills permitting Cabinet Secretaries the privilege of the floor in the House and Senate with the right to debate matters affecting their departments. Under the bill, the Secretaries were to be available for questions submitted by Members and by committees on two days of the week. The bill was referred to and reported from a select committee, and debated by the House but never voted upon. In 1881, Pendleton (then a Senator) again offered the proposal which was referred to a select, bipartisan committee, and was unanimously reported to the floor. In its report, the select committee claimed the requirement that Cabinet officers answer questions and participate in floor debate would Require the selection of the strongest men to be heads of departments and will require them to be well equipped with the knowledge of their offices. It will also require the strongest men to be the leaders of Congress and participate in debate. It will bring these strong men in contact, perhaps into conflict, to advance the public weal, and thus stimulate their abilities and their efforts, and will thus assuredly result to the good of the country. Although the measure received the support of many senior Senators, the bill was never brought to a vote. The next major proposal to bring the Cabinet into Congress was offered by President William Howard Taft in 1912, in his third message to Congress on the State of the Union. Taft recommended that Cabinet Secretaries be available for questioning by Members of both Houses, and that they be permitted to participate in debate (but not vote) relating to their departments: I do not think I am mistaken in saying that the presence of the members of the cabinet on the floor of each House would greatly contribute to the passage of beneficial legislation. Nor would this in any degree deprive either the legislative or the executive branch of the independence which separation of the two branches was intended to promote. It would only facilitate their cooperation in the public interest. The Taft proposal was not acted upon in the brief period remaining in his term. Proposals either for a question period, for the appearance of Cabinet officers in the House and Senate, or for variations of both were introduced at intervals over the next 40 years. One proposal came from Representative (later Senator) Estes Kefauver. In 1943, Representative Kefauver proposed a "question and report" period for Cabinet members and officers of independent agencies. The officials would be invited to appear before the House or Senate at least twice per month to respond to written questions submitted by Members and approved by the committee of jurisdiction. After written questions were disposed of, Members would be permitted to ask oral questions, with the time for such oral inquiries equally divided between the majority and minority parties. The Kefauver proposal received generally favorable comments from the press and from scholars. A Gallup poll taken in December 1943 showed 72% of those interviewed supporting the question and report period. In 1943, Secretary of State Hull addressed a joint meeting of the House and Senate, and General Marshall appeared at the Library of Congress to report informally to the House on the conduct of the war, and to answer Members' questions. These successful meetings between executive branch officials and Congress aided the proposal to institutionalize such contacts. Ultimately, opposition from congressional leaders worried about increased partisanship and concerns expressed by executive agency heads regarding legislative micro-managing of the executive were sufficient to kill the plan. The Judiciary Committee, to which the Kefauver bill was referred, did not conduct hearings on the bill, and never reported the measure. Kefauver continued to promote question periods in Congress over the next 20 years, but none of his proposals were ever adopted. In the 1970s, the leading congressional supporter of the question period proposal was Senator Walter Mondale. In the 93 rd and 94 th Congresses, Mondale introduced resolutions permitting weekly question and report periods. No more than two hours were to be consumed by the report periods in which agency and department heads would be invited to respond to written questions offered by Senators and approved by the committee having jurisdiction. At least one of the two hours would be devoted to oral questions, germane to the subject of the earlier written questions. The chairman and ranking minority Member of the committee approving the written questions would control the time for oral questions asked by their parties' Members. Under the Mondale resolution, television and radio coverage of the proceedings would have been permitted, under guidelines set by the Committee on Rules and Administration. Subsequently, support for the question period proposal came from a subcommittee of the House International Relations (now Foreign Affairs) Committee. In the second session of the 94 th Congress, the Special Subcommittee on Investigations conducted a series of hearings on "Congress and Foreign Policy." The subcommittee report concluded that "relations between the executive and legislative branches need urgent attention and improvement, lest existing frictions seriously impair the attainment of U.S. foreign policy objectives." To minimize these perceived deficiencies, the subcommittee offered a series of policy and analysis recommendations. Among them was a proposal for a limited question period to enhance congressional oversight of national security matters. Early in the 95 th Congress, the executive and legislative branches should agree to initiate a "question hour" period, during which ... Cabinet officers, answer questions from Members of Congress.... The use of such, procedure by the U.S. Congress will provide direct and regular access to the executive branch's senior foreign policy official. He should appear before each House of Congress separately and in alternation, once a month while Congress is in session. These sessions would be open to the entire membership of the House and Senate, and would take the form of "question and answer" periods. The practice would be limited to foreign policy matters, and the sessions would be open or closed depending on the sensitivity of the issues and on the will of the parties. This device would supplement, but not be a substitute for, the Secretary of State's appearances before the standing committees of Congress. Other Cabinet officers who have foreign policy responsibilities should also appear for such sessions, when requested by Congress, although presumably not as frequently or periodically as the Secretary of State. A "question hour" period on a wide range of issues will help restore a dialogue and facilitate the flow of information between both branches on important matters of foreign policy and national security. Ground rules for this procedure would have to be determined between the two branches, taking into account Congress' right to know and query, and the executive branch's justified concern over the possible revelation of secret or sensitive information. No further action was taken on the question period proposals in the 94 th or 95 th Congress. In December 1990, the House Democratic Caucus endorsed a proposal by Representative Sam Gejdenson calling upon the House Rules Committee to study the feasibility of establishing a "question period" in the House. In May 1991, Representative Gejdenson introduced H.Res. 155 , which provided for a two-hour question period each month. Members of the President's Cabinet would be invited by the Speaker of the House to come before Congress. Questions would alternate between the majority and minority, and the original questioner would be allowed to ask one unscripted follow-up question. Under the Gejdenson plan, questions would be submitted in writing to the Cabinet member in advance, as well as published ahead of time in the Congressional Record . The questions would be chosen by the majority and minority leader from among questions submitted by Members. Each Member would be limited to submitting one question per month. During the question period, House committees would be prohibited from meeting or conducting business. Fifty-three Members cosponsored H.Res. 155 . Hearings on the proposal were held by the Committee on Rules in March 1992, but no further action was taken. In May 2008, presidential candidate John McCain proposed that, as President, he would "ask Congress to grant me the privilege of coming before both Houses to take questions and address criticism, much the same as the Prime Minister of Great Britain appears regularly before the House of Commons." Although Senator McCain offered no specifics as to how he envisioned a question period operating had he become President, his statement implied that he would have personally appeared before Congress, as opposed to members of his Cabinet. His analogy to the Prime Minister of Great Britain suggests that he would have asked Congress for something like the "Prime Ministers Questions" component of the British question system. Beyond this broad outline, it is unclear whether Senator McCain would have sought support for individual aspects of past question time proposals regarding written questions, the appearance of Cabinet officials, or the various options for the format of the question and answer session. On January 29, 2010, President Obama spoke at a meeting of Republican Members of the House, in Baltimore. After speaking for approximately 20 minutes, President Obama took eight questions, for a total of approximately 65 minutes. The questions were asked by individual Members of the conference, with conference chairman Representative Mike Pence selecting those who posed questions. On February 3, 2010, President Obama spoke at a meeting of Democratic Senators, in Washington, DC. After speaking for approximately 15 minutes, the President took eight questions for a total of approximately 60 minutes. The questions were asked by individual Senators, with conference chairman Senator Reid selecting the questioners. The two appearances by the President generated significant media attention, and a number of prominent observers called on both the President and Congress to continue such interactions on a regular basis. Although the question and answer sessions were not conducted as formal House or Senate actions, some proponents of a question period may view this as an advantage. The unofficial nature of the interactions avoided the procedural issues associated with instituting a question period in the House or Senate, and the apparent lack of strict rules or procedures regarding questions arguably improved the quality and candidness of the exchange. On the other hand, if such interactions were to continue on a regular basis, the lack of formal procedures for selecting questioners or the lack of rules regarding the content of questions could potentially become problematic. Similarly, the unofficial nature of such interactions may not produce as much public interest as a formal question period on the floor of the House or Senate. Journalistic accounts suggest that both President Carter and President Clinton considered the possibility of creating a parliamentary-style question period in Congress. During the 1976 presidential election campaign, President Carter indicated his support for a question period. At a speech announcing his candidacy, Carter stated the following: We must insure better public understanding of executive policy, and better exchange of ideas between the Congress and the White House. To do this, cabinet members representing the President should meet in scheduled public interrogation sessions with the full bodies of Congress. Journalistic accounts also suggest that President Clinton considered proposing that he answer questions from Congress the day after the State of the Union address in 1993. House majority leader Richard Gephardt promoted the idea after observing Clinton's rhetorical ability at a party caucus meeting. Although White House spokespersons revealed that the idea was under consideration, negative reactions from congressional leaders prevented the idea from going further. As previously discussed, existing question periods in parliamentary democracies vary widely in their format and procedures. Likewise, historical proposals in the United States have suggested a range of question period procedures. An assessment of the potential merits and drawbacks of any particular proposal for a question period in Congress will be influenced by the specific format selected. Similarly, the effects of a question period on the congressional policy process and congressional-executive relations might be somewhat dependent on the specific format. Two dimensions of particular importance that differentiate various question time formats are (1) which executive officials will answer questions, and (2) whether questions and answers will be written, oral, or both. Legislators seeking to structure a presidential question period that consists only of oral answers may need to consider different issues than legislators seeking a structure that includes both written and oral questions to Cabinet officials. In practice, a presidential question period with oral answers only might resemble the Prime Minister's Questions portion of Question Time in Britain. This would perhaps limit the time and resources expended while also generating a high level of public interest and coverage of national issues. A more extensive question period that included Cabinet officials or written answers, however, might allow for greater oversight and scrutiny of the executive branch, and allow for Member questions about more specific policy or oversight concerns. The following sections of the report examine the potential advantages and disadvantages of a question period, and then discuss some of the legislative concerns for policy makers considering the adoption of a question period in Congress. Given the variety and scope of different proposals, not all of the advantages or disadvantages are applicable to all question time formats; in such cases, differences are noted in the text. Advocates of adopting a parliamentary-style question period in Congress have advanced a variety of arguments in its favor. These arguments generally advance four themes: that a question period will improve the performance of executive departments by improving congressional oversight capabilities; that a question period will promote inter-branch dialogue and relations; that a question period will promote increased public knowledge and interest in government affairs; and that a question period will strengthen the institutional position of Congress within the government relative to the President. Many supporters of a question period for Congress believe that a question and answer period with Cabinet officials could lead to improved accountability of the executive branch. By serving as a complement to the committee oversight system, a question period could allow Members frequent, direct public access to Cabinet-level officials. Some critics of the current system of committee oversight hearings believe that a question period could help alleviate perceived problems of timeliness, access, and shared interests that currently exist. A question period could allow for routine, timely oversight by the entire congressional membership. Typically, under the current committee-based oversight system, only committee members are allowed to question executive branch officials. A committee might permit Members of Congress who are not members of the committee to sit with it to question witnesses if they have a recognized concern in the committee's inquiry, but such instances are infrequent. Junior members of the committee may also have little opportunity for participation. The large number of committees and high volume of committee and subcommittee work inherently limits Members in the number of oversight areas in which they can participate. The question period might allow all interested Members of Congress both to hear the officials' explanations of policy, and to offer questions if they wish, time permitting. It also has been charged by some scholars that some congressional committees have become uncritical supporters of the agencies they have been responsible for overseeing, and thus no longer perform their institutional roles as effectively as they might. By allowing the full membership of Congress to question Cabinet officials, proponents believe that such relationships between agencies and committees would not preclude serious scrutiny of executive departments. As Representative Derrick stated during a hearing, Over the years there becomes a somewhat incestuous relationship between the committees of jurisdiction and the areas they oversee. Over a period of time, in many instances, rather than becoming disciplinarians of the areas they oversee, committees become advocates. In the British Parliament, observers have noted that backbenchers tend to develop subject expertise through the question period. Although it could be argued that this subject specialization in the U.S. Congress generally develops through congressional committee membership, there are a limited number of committee positions available. Thus, a Member of the House might be interested in and knowledgeable about tax law but may not have a seat on the Ways and Means Committee. Arguably, the Member is effectively cut off from contact with the appropriate officials formulating tax policies, although many Members may now channel such interest into membership in informal groups and caucuses. With a question period, such Member interest in subjects outside the purview of their committees could arguably be harnessed more effectively. Proponents of a question period also argue that the committee system cannot produce timely answers from the executive branch; it is not a speedy means of obtaining information. Oversight hearings may occur weeks or months after the events that triggered them. A regular question period would allow Members to raise concerns about any contemporary matter, including administration policy or responses to events that occurred in a timely manner. As stated by Colin Campbell, former president of the Canadian Study of Parliament group, in hearing testimony, One of the great difficulties I find in the United States is that it does take time, nonetheless, to get the inquiry system through committees running, and sometimes the most crucial period of a crisis is lost in terms of galvanizing public opinion, in giving people a sense of how the executive branch is dealing with it because there is no more immediate way of having officers of the executive branch come and answer questions. A question period might also effectively speed up constituent casework. In the British parliamentary experience, questions submitted for written response constitute a major means of constituent service for MPs. Matters of a purely local nature, or involving individual citizens' complaints against government bureaus, are frequently resolved by means of parliamentary questions submitted for written response. The parliamentary requirement that named questions receive a written response within days of submission enforces an efficient constituent service program for MPs. Members of Congress devote considerable time to constituent service, including inquiries to agencies on behalf of constituents. This casework activity is frequently a protracted procedure. Adopting the British parliamentary requirement of a quick response time to questions for written response might improve the casework performance of Members of Congress, assuming that agencies provided comparably thorough service in a shorter time period. If Congress were to follow British practice and publish agency responses to written questions in the Congressional Record , a more public record of agency responses would be available than the current practice, with casework responses forwarded directly to individual Members. Written response questions can also serve to notify a government agency of an individual Member's attitude toward a proposed policy. One observer of the British parliament recorded an instance in which the government intended to shut an aircraft factory, resulting in the loss of 400 jobs in one parliamentary district. The MP representing the district sent the Defence Ministry more than 250 questions for written response. Work virtually ceased at the Ministry in an attempt to reply within 48 hours. The Defence Minister, who previously had been unwilling to meet with the MP from the affected district, then did so, and a compromise was reached. Some proponents of the current committee oversight system contend that a question period would result in a greater number of Cabinet officials taking part in the oversight process. As Representative Gejdenson testified, Presently, committee chairmen have a very difficult time getting Cabinet members to come before their committees ... [L]ower level staffers and appointees are sent. Scholars have also noted that it is often subordinate department officials who testify at hearings. If top Cabinet officials knew that they would be making regular public appearances before all of Congress and (presumably) wide media exposure, it might induce greater top-to-bottom knowledge regarding the day-to-day workings of the executive departments among the Cabinet-level leaders. In Canada, for example, it is widely believed that question time is responsible for producing executive branch leaders who are exceptionally well-versed in the inner workings of their respective departments. A possible secondary benefit of such direct scrutiny of top Cabinet officials is improved internal oversight within the executive branch departments. Cabinet members might become more watchful of their staffs and their administrative actions, since the Cabinet Secretaries themselves might be instantly called to account for their subordinates. As one scholar put it, [P]arliamentary questions take top priority in the departments, for the political career of the minister depends on how well he is able to meet his adversaries in the House…. [E]very policy of the department must be defended, not merely in general terms, but as it affects particular persons and groups. In Britain, some observers believe this is the primary benefit of question time. One scholar noted that question time is successful even when the Ministers are evasive of the questions, because "what [an MP] is trying to do is put the fear of God in the civil servants." One final concern about the committee oversight system is that it may be viewed as procedurally inefficient. Witnesses appearing before a committee frequently read, at length, prepared remarks into the hearing record. Members of the committee generally question the witnesses sequentially. Since Members often have scheduling conflicts, it is not uncommon for them to be present for only part of the hearings, and thus, they may inadvertently ask many of the same questions offered by other Members in their absence. In complex subjects involving the jurisdiction of several committees, agency heads and other officials may be required to appear before several committees and subcommittees to respond to questions which are often duplicative. Similarly, in comparison with a question time system, the committee oversight procedures tend not to produce substantial spontaneous interaction between differing points of view. An observer has noted, "[in the hearing process] there is little opportunity for interaction among witnesses of varying views. This problem was highlighted when President Ford forbade Administration witnesses from appearing at congressional hearings simultaneously with their critics." Proponents of a question time also believe it would promote a more positive relationship between the legislative and executive branches of the government. Regular availability of the President or executive branch officers to questions by Congress might lower the institutional barriers between the legislative and executive branches. Currently, there is little formal public interaction between Members of Congress and the executive branch. Cabinet officers tend to testify before a limited number of committees, and consequently, come into direct contact most frequently with only a limited number of Members. Questions by the general membership of both Houses would expose Cabinet officers to a wider variety of congressional opinion. At the same time, executive branch accountability to Congress would be emphasized in a visible and public manner. From the position of the executive branch, the question period has several advantages. It could permit increased, direct access to the legislative branch. Member opinions, suggestions, and complaints could be dealt with in a timely and public fashion. Executive branch accountability has a corollary: if the question period can expose inefficient executive management, it can also provide a means for presenting executive agency successes. If the executive agency can convince the House or the Senate of the need for a specific policy or program, such popular support throughout the respective Houses could provide the leverage needed to gain agency support, within or circumventing hostile committees. Some proponents of a question period believe that it could strengthen the political power of Congress as an institution relative to the executive branch. Scholars and other political observers contend that the institutional advantages of the presidency over Congress, such as unity of thought and the ability to plan political strategy, have been expanded in the age of mass media. They argue that the President's single voice allows him to dominate public discussion while individual Members of Congress have difficulty even being heard. As Representative Gejdenson testified, It seems to me that we have frankly lost power as an institution, not by any Supreme Court decision ... but by the fact that the President, no matter who he is, speaks with one voice and the number of voices that we have here at the Congress tend to not make for a clear debate. I think a question period would frankly give Congress more equal footing with the President ... in that it would place us on the same plane, at least with the leading Cabinet Secretary on a particular issue. From this perspective, by placing the executive branch on the same stage as Congress, two things might occur: first, Congress might come to occupy a stronger institutional position in the mind of the public. Proponents maintain that by appearing alongside the President in a position of equality, or perhaps even strength, Congress might reclaim institutional power lost in the past. Second, public communication between the legislative and executive branch about important issues may increase, as well as public attention to key issues. As Representative Gejdenson testified, Often, there is such a wide variety of responses from House/Senate Members [to Presidential issue positions] that you don't get a real dialogue between the legislative and executive branches, and that by [instituting a question period] in the well of the House, without other legislative business going on, it would give a very direct focus. Supporters of a question period believe that it would raise public awareness of contemporary issues and generate increased public interest in legislative activity and policy options. Many proponents of question time believe this to be its greatest virtue; even if it has little ability to provide Members with substantial information from the executive branch, they argue, it certainly makes for lively debate, which in turn attracts a wider public audience to public affairs. Experiences with question time in other countries indicates that it is very popular among the general public. The parliamentary question period is widely reported in the British press. Question time in Canada is now the most widely seen portion of televised Commons proceedings. The C-SPAN network routinely rebroadcasts question time in both parliaments to its American audience. It was this frequent broadcasting that led Representative Gejdenson to initially suggest his proposal in December 1990. At the time, he stated, "I think it was Thomas Jefferson who said, 'If the electorate isn't informed, don't exclude them, inform them.'" In addition to raising public awareness about contemporary issues and the different policy options available, a question time may make Cabinet officials more readily known to the public. Supporters argue that Cabinet-level officials have significant authority in the United States, but are largely unknown to the public at large. Opponents of adopting a parliamentary-style question period in Congress have criticized the idea on a number of grounds. These arguments generally assert seven points: that a question period is ill-adapted for non-parliamentary system; that a question period is a poor form of oversight; that a question period will intensify partisanship; that a question period will undermine the committee system; that a question period will be generally filled with theatrics and manipulation; that a question period may be expensive; and that a question period will give the executive branch an unnecessary forum within Congress. Critics of a question period have argued that systems such as the one in place in the British parliament are not institutionally suitable for the American system of government, which is based on separation of powers between co-equal branches. Such objections have been raised on structural, constitutional, and institutional grounds. As a structural matter, the relationship between executive officials and the legislature in the American system is different from that in a parliamentary democracy. The President is neither a Member of Congress nor entirely reliant on Congress for his governing authority. He is independently elected and has constitutional authority separate from Congress. In a parliamentary system, the Prime Minister derives his authority from the consent of the majority of the legislature. His office is beholden to the Parliament; as a political actor, he is ultimately responsible to the legislature, much the way the Speaker of the House is beholden to the membership of Congress. Similarly, department Ministers in parliamentary systems are drawn from the membership of the parliament. In the United States, Members of Congress are constitutionally prohibited from simultaneously holding offices in the executive branch. Legislators appointed to Cabinet positions by the President must resign their legislative office. Thus, the nature of any question period in the United States—and in particular a question period involving the President—would necessarily adopt a different institutional character than a parliamentary question period. The nature of party governance is also different in the United States than in most parliamentary systems. In Britain, for example, the government has the implicit backing of the majority of the legislature; failure to capture a majority on a key legislative item would signal a loss of confidence in the executive and the need to call elections. In the United States, Members organize into parties, but party cohesion in the legislature is not necessary to maintain control of the executive branch. Voters may individually choose to elect a Member of Congress from one party and a President from another. Thus unlike most parliamentary systems, the American system does not generate a discernable party of government and a clear Opposition. As political scientist Hugh Heclo has pointed out, this means "question periods are therefore unlikely to clarify the fundamental choice as to which party is more fit to govern." Some critics of a question period have raised concerns that the constitutionally based separation of powers doctrine might prohibit the establishment of mandatory appearances by the President and/or other executive branch officials before Congress. In particular, because the President is an independent constitutional office, a presidential question period probably could not be established without the implicit support of the sitting President. Although Cabinet members do not have the same constitutionally based status, it is similarly unclear whether Congress could establish mandatory appearances for such officials. Without any constitutional duty to appear before Congress upon request, a President might refuse to appear (or refuse to allow Cabinet members to appear) unless conditions were made so favorable that Congress would no longer be interested. As a practical matter, subjecting executive branch officials to direct questions by Members of Congress could increase the frequency with which claims of executive privilege are invoked as a basis for withholding certain requested information. Such increased use of executive privilege may endanger the success of the question period as an informational device, and might potentially strain inter-branch relationships in general. As an institutional matter, critics of a question period have also raised concerns about the propriety of unelected Cabinet officials speaking on the floor of the House or Senate. In committee testimony, Hugo Heclo noted the following: [A] question period [that included Cabinet officials] would compromise the integrity of the floor of the House as a forum for debate among the people's elected Representatives ... [t]he floors of the House and the Senate ... are the embodiment of a master idea ... government by discussion ... [which] can be legitimately carried out only by the elected Representatives of the people. The floor of the Congress is no place for unelected Presidential appointees to be sharing in the debate. Representative Robert Michel made similar comments: Proponents of the Question Period might argue that the House already questions administration officials in committee, so what difference would it be if we questioned them on the floor? My answer is that the floor of the House of Representatives is a special place ... [each] Member on the floor is equal to every other member. But to have an administration official come to the floor to answer questions alters the chemistry of the place ... the kind of question period we are being asked to consider could transform it from a meeting place of equals to an interrogation room. A presidential question period would probably not raise this specific concern, as the President is an elected official. In addition, the President has historically made periodic appearances in Congress in times of crisis, and modern Presidents have delivered their State of the Union addresses to Congress in person. Significant disagreement exists regarding question period effectiveness in obtaining information about federal agency programs and administration. Many observers of the parliamentary question period contend that Ministers answering questions provide only such information as they want, and that the information obtained might not warrant the expenditure of time and effort required. One of the first things learned by a rising politician in any democracy is how to artfully avoid giving information he does not want to give. A question period might elicit some marginal information not now obtainable through congressional hearings and official news conferences, but I doubt it would be worth the additional demands of time and energy it would impose on administrative officers. British parliamentary observers, it should also be noted, are not uniformly satisfied with the question period as a device to obtain information about government policy. In recent years, proposals have been made to require Cabinet officials not only to appear for question period, but also to appear before the growing number of parliamentary standing committees. It is thought that information of a general character can best be obtained through the question period, but that more detailed responses could be gathered through ministerial testimony to committee. In comparing the investigative tools already available to Congress and to various parliamentary bodies, some students of parliament and Congress have rated the question period as an inferior legislative device. Colin Campbell, a Canadian academic and former president of the Canadian Study of Parliament group, testified that "people in parliamentary systems look longingly ... to the committee system, because you can really get into detail in a way you can't in [a Parliamentary question system]." Similarly, other scholars have noted, because Congress is more directly involved in administration of programs—due to hearings, appropriations, and confirmations—than is the House of Commons, a question period in Congress would not "carry the punch of an investigative committee on American lines." The committee system also arguably provides a wider set of oversight tools for Members than simply questioning executive officials. Through hearings, travel, staff investigations, review of appropriations and authorizations, and other means, members of congressional committees become specialists on the subjects and agencies within their committee's jurisdiction. Committee hearings also give diverse interest groups and private citizens ready access to the legislative process. A question period would not involve such outside political actors to make their case regarding public policy proposals and the implementation of governmental programs. Of course, a congressional question period would not be the only information source available to the legislative branch. None of the past proposals consider replacing the committee system with a question period; instead, they see the two systems as complementary. Congressional committees would continue to be responsible for review of executive branch policies. Should a question period be introduced in Congress, it is likely that committee hearings would continue to focus on detailed examination of policy issues, and that the question period would feature broader discussions of issues reflecting the less specialized policy knowledge of Members not serving on the relevant committees. Many critics—both in countries with existing question periods and in the United States—believe that question periods encourage partisanship and foster unnecessary partisan strife. It has been noted that Question Time in the British parliament is "debate at its most partisan." During debate on the Kefauver bill in 1944, Representative Clarence Cannon, a leading parliamentary theorist in the House, claimed the proposal would unnecessarily increase party strife in Congress and would upset delicate balances between the executive and legislative branches. Such a question hour would degenerate immediately and inevitably into a political fencing match.... The device would be used for partisan political advantage.... The questions submitted from the floor ... would probe excruciatingly into the depths of the rawest nerve centers of current campaign issues. It would give rise to bad taste, bad manners, and bad blood. Instead of bringing about better teamwork between the Congress and the executive departments, it would drive a wedge of discord between the legislative and executive branches. Similar concerns were echoed by Members during the 1992 hearings on the Gejdenson resolution. Members thought question time "would just be another opportunity for [the President's opponents] to try to embarrass the Administration" and would produce "more heat than light." Representative Benjamin Gilman described the idea of bringing Cabinet members to the floor as "an invitation to partisanship rather than a beneficial addition to the deliberative process." This argument presupposes that Members of Congress would value political point scoring more highly than pragmatic inquiry when given an opportunity to question executive branch officials appearing before the respective Houses. It also presumes that when presented with a similar opportunity in committees, Members act with more restraint than they would show on the floor. In rebuttal, an argument could be framed to assert that there appear to exist adequate rules in both Houses to enforce decorum and propriety on Members during legislative debate, and such rules could also be applied during a question period. It is likely that any question period in Congress that involved the questioning of Cabinet members would alter the practices of the standing committees in the House and Senate. Critics of a question period for Congress have raised concerns that such systems would undermine committee jurisdiction, increase the difficulty of getting high-ranking officials to appear before the committee, and reduce the overall quality of oversight interactions between Congress and the administration. The standing committees of both the House and the Senate might find themselves sharing oversight responsibility with the entire membership of the chamber under a system of question time. If all Members were given the opportunity to ask any questions of Cabinet officials, the agendas of the standing committees would potentially compete with the policy preferences of individual Members of Congress. As a remedy, the standing committees might be given the power to control or pre-clear questions prior to their submission. However, this would arguably undermine one of the stated advantages of a question time, universal access to the administration for all Members. Similarly, the question period could also frustrate administration officials used to receiving a limited set of committee oversight instructions. An executive department, accustomed to maintaining frequent consultations with particular authorizing and appropriating committees of the House and Senate, could suddenly be faced with substantially different and potentially conflicting indicators of policy preferences from questions received on the floor. Of similar concern is the effect of question time on the willingness of administration officials to participate in committee hearings. Critics note that many administration officials "already feel harried with the amount of time they have to spend on the Hill before committees" and might not be amenable to taking part in both question time and committee oversight hearings. During hearings on the question period in 1992, several committee chairmen submitted written testimony with concerns about the ability of committees to successfully call administration witnesses to committee hearings once a question time system was introduced. An appearance before the House for questioning might allow a Cabinet Member to argue that that fulfills his or her obligation to appear before Congress, and thus resist accepting an invitation from a Congressional Committee. Finally, a question period might result in a lower quality of interaction between Members and the administration. Questions from the floor are likely to be more general in their focus or more concerned with the local impact of proposed policies than questions initiated in committee hearings. Similarly, some Cabinet Secretaries may view the question periods as a less valuable forum than committee hearings for interacting with Members of Congress. There may also be some question by the agencies about the value of questions from the floor: in dealing with committees, the agency must respond to generally well-informed questions from Members knowledgeable about the agency's duties. Critics of question periods in parliamentary systems often maintain that in practice the system rarely results in substantive policy debates. As James Sundquist testified in 1992, "the first thing an MP does in rising in the ministerial hierarchy is learn how to give a smooth and effective evasion of an unpleasant question." British observers have similarly noted that the question period often has little substantive value, calling it "the twice-weekly exhibition of schoolboy humour" and "an undergraduate pastiche of a White House press conference." MPs have similarly denigrated the substantive value of it. For instance, one Canadian Member said Anyone who has participated in question period knows its main purposes are to embarrass the government, to amuse the tourists and TV audiences, and to make life easier for reporters. It is a totally ineffective way to elicit significant information. The question period also has been manipulated for political or policy purposes. In 1971, the British Ministry of Environment distributed prepared questions (for oral response) to MPs who supported ministry policy, for the purpose of blocking awkward questions by opposition Members. A parliamentary select committee was named to investigate the situation and determined that in previous sessions both the government and the opposition had sought to rig questions. One Minister claimed that question rigging had become a common practice. Of course, question rigging cannot be entirely successful. Urgent questions may be submitted if conditions warrant, and a determined MP whose question is not reached may continue his question for oral response at a subsequent appearance by the Minister. Opponents of written response questions frequently cite the cost of providing such a service. In Great Britain, the written responses are generally provided by senior civil servants. The most recent statistics from the British government estimate the average cost at £140 (approximately $280) for a written question and £385 (approximately $770) for an oral question. During the past few years, MPs have asked over 75,000 questions. Supporters of a written response proposal could contend that preparation of written responses within a firm deadline would cost no more than current, fragmented casework activities already undertaken by federal agencies in response to congressional inquiries. Moreover, it could be argued that cost is an insufficient objection when weighed against the duty of Congress to oversee the administration of the programs it has enacted. Opponents of a question period in Congress have often raised concerns that such a system would upset the institutional balance between Congress and the President, by giving the administration a new forum to promote its policies and positions, in the heart of the legislative branch. Scholars of Congress and the presidency have argued that the rise of mass media, particularly television media, has given the President a comparative advantage over Congress. While the President can employ the resources of the executive branch to promote his unitary message, individual Members of Congress may lack the institutional resources to compete with the President, and Congress as a whole lacks a unity of message. The introduction of a televised question period might serve to increase this presidential advantage. Opponents also worry about the institutional and partisan balance of a question time period. Since the President is almost certain to have a significant number of ideological or partisan allies in Congress, it is likely that a significant portion of the time for questions and answers would be taken up by pro-administration positions. As James Sundquist testified in 1992, Half of the question would be asked by partisans of the administration in power who would undoubtedly, in baseball vernacular, toss up fat balls for the [administration] to knock out of the park. The question period would thus give the administration in power an extraordinary opportunity to score points in political debate before a national audience. Relative to the committee system, the structure of a question period, as Sundquist notes, also favors the administration. In committee hearings, the legislative majority can pursue their questions at length, offer commentary, and have the opportunity for the final word. In most proposals for question periods, this would not be the case. As has been noted earlier, various format options for a question period exist. The potential effects, on both the procedures of the legislation branch and the relationships between the executive and Congress, will vary according to the question period format selected, and in particular according to the scope of the proposed question period: whether questions will be written, oral, or both; how often the question period will take place; and whether the question period will include questions to the Cabinet members or only to the President. Perhaps the most fundamental decision about any question period will involve who would be asked to appear. Popular perceptions in America of parliamentary question periods focus on the oral questioning of the Prime Minister. Prime Minister's Questions in England, however, comprise a tiny fraction of the questioning system. As discussed, past proposals for question periods in Congress have focused on the questioning of the Cabinet members, not the President; the Kefauver, Mondale, and Gejdenson proposals called for the appearance of Cabinet members only. The involvement of the President, however, is perhaps more likely to produce the positive effects sought by proponents of the question period. Appearances by the President would presumably generate greater public interest than appearances by Cabinet officials. Similarly, appearances in Congress by Cabinet members already occur in committee hearings; a question period would be a change in format, but not necessarily a sharp change in practice. A presidential question period, on the other hand, would be a wholly new development in American politics, and would presumably have an impact on the practice of politics. A second important question for Congress to consider is whether question time would include both oral and written questions. In most parliamentary systems that employ question periods, written questions vastly outnumber oral questions due to time limitations. Oral questions, however, generate more public interest and typically involve questions of general interest and important contemporary public policy. The Kefauver, Mondale, and Gejdenson proposals differed from the traditional question period in not providing for written responses to Members' questions. Moreover, if a British MP's question for oral response is not reached, he/she has the option of accepting a written response to the question in lieu of an oral answer. Within the limited time provided for oral questions in past American proposals (at most two hours weekly), few Members of the House and Senate would be able to receive an oral response. If oral questions were to be used, a second issue would arise as to whether and how many unannounced questions would be allowed, either as initial inquiries or supplemental follow-up questions. How much time Congress devoted to question periods would also affect the number of government officials appearing at these sessions. The British House of Commons devotes four hours weekly to the question period to permit roughly the same number of Cabinet members as there are in the United States to be questioned once monthly. But the United States, in addition to Cabinet department heads, has a number of other senior officials who do not hold Cabinet rank yet influence national policy enormously. Independent agency heads, directors of government corporations, and senior presidential staff subject to senatorial advice and consent might all be prime candidates for appearances at question periods. Yet, none of the earlier proposals has directly addressed what role, if any, these officials are to play in any question period plan. Since it is likely that the demand to ask oral questions will exceed the amount of time available, a system for choosing among Members questions will probably be needed. Oral questions in Britain are chosen by the shuffle; pre-clearance is not required either by committee or party. Both the Mondale and Kefauver proposals tied the administration of the question period into the committee system. Questions by Members would first be cleared by the committee having jurisdiction over the subject area. The Gejdenson proposal placed the selection of questions with the majority and minority leaders. Use of the committees to clear questions would potentially allow for a smooth integration of the question period and the committee system. Committees could select questions related to current policy and oversight debates within the committee and project them into public view through the question period. On the other hand, in subjects which span the jurisdictions of several committees (such as energy policy), it might be necessary to obtain the approval of a half dozen committees before the question could be put to the Cabinet official. It might also be unlikely that a committee would approve inquiries which questioned either the policy attitudes of the committee majority or of the department when the same party controlled Congress and the executive branch. Use of the majority and minority leaders to select questions would potentially have the advantage of focusing the question period on the policy differences between the political parties. Arguably, congressional leaders would be likely to choose questions of national political prominence which highlight policy differences between the competing parties. Under such a system, however, rank and file Members may find themselves left out of the question process. Thus, the use of chamber leaders as selectors of questions might not be desirable if legislators perceive question time as a means to allow wider participation in congressional oversight. Use of a random shuffle to choose among questions would potentially allow greater participation from rank and file or junior Members. On the other hand, a random shuffle might result in a greater number of questions that were not of general interest. As occasionally occurs in the British system, Members might use an oral question to seek a government answer in response to a particular constituent casework concern. Previous proposals for question periods in Congress have not provided for joint House and Senate participation. The Mondale and Gejdenson proposals would have established question periods only in the Senate and House, respectively. The Kefauver proposals would have established separate question periods for Members of each chamber. Such separation arguably avoids procedural issues that might arise under a combined House and Senate question period, such as which chamber's rules would govern the question period and who would preside. Additionally, a well-attended joint question period might raise practical concerns about how the full membership of Congress would be accommodated in (presumably) the House in a manner that is both physically comfortable and conducive to parliamentary procedure. On the other hand, a question period involving the President, such as the one proposed by Senator McCain, might necessitate a bicameral arrangement. Given the schedule of the President and the logistical complexities of presidential travel, both the President and Members of Congress may prefer to conduct such a question period in a joint meeting or session. Such an arrangement would limit the number of appearances the President would need to make while also allowing for both House and Senate participation. Other contemporary joint sessions of Congress—such as the annual joint session for the President's State of the Union address—might serve as a logistical and procedural model for policy makers considering bicameral issues. Parliamentary systems that employ a question period have complex rules regarding both the procedures and content of questions. For example, in the British system, the rules state that questions must be succinct, must either seek information or press for action, may not convey information or advance an argument, and must relate to a matter which is the responsibility of the Minister addressed. Similar rules are used to keep answers as short as possible. For any question period in Congress, rules would have to be drafted regulating general question time procedures—such as the number and kind of supplementary questions which could be answered—as well as specific aspects of floor procedure, such as the control of time. Legislators might consider adopting entirely new chamber rules to govern question time, or they might consider conducting question time under existing rules for floor debate. Modifying existing rules, however, might prove just as complicated, or even more complicated, as adopting entirely new rules. Issues of civility might also need to be addressed. Question Time in Britain and other parliamentary systems often includes sharp verbal confrontations and heated exchanges. A question period in Congress that followed the British norms would likely require at least a minimal relaxation of current congressional rules of decorum during debate. Otherwise, concern needs to be taken to require that written questions and oral supplementals are delivered in a manner consistent with chamber standards of decorum and civility. Question period proposals would also require a general examination of House or Senate rules of procedure to permit the accommodation of a question routine. Establishing a regular time for questions in the House, for example, would force a reexamination of the time spent on other House business. Should the length of daily House floor sessions be expanded to include 45 minutes to one hour of questions, or should other institutionalized presentations such as one-minute speeches or special order speeches be curtailed? Expanding session length would likely cause periods of substantial overwork toward the end of a session or Congress, while at other periods of relatively light floor schedules, the additional session time spent on questions may be relatively inconsequential. The enforcement of House or Senate rules might become more vital if a question period took on the partisan intensity shown in Britain and Canada. In those parliaments, the Speaker is a clearly recognized non-partisan—removed effectively from electoral and legislative politics by precedents dating back (in the British Parliament) more than 200 years. The American Speaker is both a political leader and a presiding officer, and some observers have doubted whether intense political exchanges could be effectively managed by any Speaker having this dual role. The same complication arises for the Vice President in the Senate. Furthermore, in the British Parliament (and to a lesser degree in the Canadian Parliament), clear precedents have long been established regarding the content and form of appropriate questions, and the rulings of the Speaker are not challenged. In the U.S. Congress, rulings by the Speaker or Vice President about issues such as the proper form of questions may increase both partisan feeling and the number of appeals taken from the chair's rulings. The question period is widely used in parliamentary systems as a means of informing MPs about the effects of government policies. Parliaments vary widely in the frequency with which question periods are held and in the number of questions submitted by Members. The data suggest that establishing a question period is no guarantee that it will develop into an effective information tool of the legislature. Although executive branch officials periodically appeared on the floor during the first Congresses, by the late 1790s the practice had largely ceased. Proposals for a question period for Congress have been offered with relative regularity beginning in the mid-19 th century. Initially, the proposals were endorsed by scholars who sought to increase executive branch influence in Congress at a time when the legislative branch was preeminent. In recent decades, the proposal has been offered as a means to assure greater executive branch accountability during periods of perceived executive dominance in the federal government. Whether the question period would be successful in a system of separated powers depends in large part on the attitude of its participants and on the format the question period ultimately assumes. The question period has the potential of involving more rank-and-file Members in the policy-making process, and improving the means of communication between executive departments and Congress. It also could harden relations between Congress and the executive, and might increase the level of partisan controversy in Congress. In crafting a question period proposal for use in Congress, attention would likely be given to balancing the interests of both parties and their leadership, the concerns of committees, the institutional interests of Congress, and the wishes of the general membership of the chambers.
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In May 2008, Senator and presidential candidate John McCain stated that, as President, he would "ask Congress to grant me the privilege of coming before both Houses to take questions and address criticism, much the same as the Prime Minister of Great Britain appears regularly before the House of Commons." Such a "question period," in which the chief executive official appears before the legislature to answer questions, is a feature of most parliamentary systems. Prime Minister's Questions is a major component of British politics, receiving substantial press, radio, and television coverage. In many national parliaments, including the British House of Commons, questions are also directed to other Cabinet Ministers, serving as a major form of legislative oversight and constituency service. In the early years of the U.S. government, the President and members of his Cabinet appeared occasionally on the floor of the House and Senate to advise on treaties and to consult on pending legislation. But the practice fell into disfavor as stronger notions of the separation of powers took hold. A variety of proposals have been offered in the 19th and 20th centuries to establish a formal question period in one or both congressional chambers, but no proposal has ever been formally voted upon by the House or Senate. Scholars and other observers have debated the merits of introducing a question system in Congress. Advocates argue that a question period will improve the performance of executive departments by improving congressional oversight capabilities, promote inter-branch dialogue and relations, increase public knowledge and interest in government affairs, and strengthen the institutional position of Congress within the government relative to the President. Opponents contend that a question period is ill-adapted for a non-parliamentary system, provides poor oversight, will intensify partisanship, will undermine the committee system, will be generally filled with theatrics and manipulation, may be expensive, and will give the executive branch an unnecessary forum within Congress. This report surveys how question periods are conducted in Britain and other parliamentary democracies, examines previous proposals for question periods in the United States, considers potential advantages and disadvantages of a question period, and outlines some legislative considerations for policy makers considering a question period for Congress. This report will be updated as events warrant.
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Insurance companies constitute a major segment of the U.S. financial services industry. The industry is often separated into two parts: life and health insurance companies , which also often offer annuity products, and property and casualty insurance companies , which include most other lines of insurance, such as homeowners insurance, automobile insurance, and various commercial lines of insurance purchased by businesses. In 2017, premiums for life and health insurance companies totaled $592.2 billion with assets totaling $7.07 trillion, and premiums for property and casualty insurance companies totaled $556 billion with assets totaling $1.98 trillion. Different lines of insurance present different characteristics and risks. Life insurance typically is a longer-term proposition with contracts stretching over decades and insurance risks that are relatively well defined in actuarial tables. Property and casualty insurances typically are shorter-term propositions with six-month or one-year contracts and have greater exposure to catastrophic risks. Health insurance has evolved in a different direction, with many insurance companies heavily involved with health care delivery, including negotiating contracts with physicians and hospitals, and a regulatory system much more influenced by the federal government through Medicare, Medicaid, the Employee Retirement Income Security Act of 1974 (ERISA), and the Patient Protection and Affordable Care Act (ACA). This report concentrates primarily on the regulation of property and casualty insurance and life insurance. Insurance companies, unlike banks and securities firms, have been chartered and regulated solely by the states for the past 150 years. Legal and legislative landmarks in the state-based insurance regulatory system have included Supreme Court decisions in 1868 ( Paul v. Virginia ) and 1944 ( U.S. v. South-Eastern Underwriters Associa t ion ) and federal legislation in 1945 (the McCarran-Ferguson Act). The McCarran-Ferguson Act specifically preserved the states' authority to regulate and tax insurance and also granted a federal antitrust exemption to the insurance industry for "the business of insurance." There are no federal insurance regulators akin to those for securities firms or banks, such as the Securities and Exchange Commission (SEC) or the Office of the Comptroller of the Currency (OCC), respectively. Each state government has a department or other entity charged with licensing and regulating insurance companies and those individuals and companies selling insurance products. States regulate the solvency of the companies and the content of insurance products as well as the market conduct of companies. Although each state sets its own laws and regulations for insurance, the National Association of Insurance Commissioners (NAIC) acts as a coordinating body that sets national standards through model laws and regulations. NAIC-adopted models, however, must be enacted by the states before having legal effect, which can be a lengthy and uncertain process. The states have also developed a coordinated system for insurer resolution, including guaranty funds designed to protect policyholders in the event of insurer insolvency. Since the passage of the McCarran-Ferguson Act, both Congress and the federal courts have taken actions that have somewhat expanded the reach of the federal government into the insurance sphere. The insurance industry has often been divided over the possibility of federal actions affecting insurance. States typically, though not always, have resisted federal actions, arguing that states are better positioned to regulate insurance and address consumer complaints and that states have engaged in concerted actions to address concerns raised at the federal level. The two large legislative overhauls of financial regulation in the past two decades, the Gramm-Leach-Bliley Act of 1999 (GLBA) and the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank), expanded the federal role in insurance, but states continued as the primary regulators of insurance following these acts. GLBA removed legal barriers between securities firms, banks, and insurers, allowing these firms to coexist under a financial holding company structure. Under the act, such a holding company was overseen by an umbrella regulator—the Federal Reserve for holding companies that included bank subsidiaries or the Office of Thrift Supervision (OTS) for holding companies with thrift or savings association subsidiaries. Within a holding company, GLBA established a system of functional regulation for the bank, thrift, securities, and insurance subsidiaries. This meant that insurance company subsidiaries within a bank or thrift holding company were functionally regulated by state insurance authorities, with limited oversight by the holding company's federal regulator. The Dodd-Frank Act altered the post-GLBA regulatory structure, but left the basic functional regulatory paradigm largely the same. The act gave enhanced systemic risk regulatory authority to the Federal Reserve and to a newly created Financial Stability Oversight Council (FSOC), including some oversight authority over insurers. The act created a new Orderly Liquidation Authority (OLA), which potentially could result in the Federal Deposit Insurance Corporation (FDIC) overseeing the resolution of insurers. The authority to oversee holding companies, including those with insurance subsidiaries, was consolidated in the Federal Reserve with additional capital requirements added. The Dodd-Frank Act also included measures affecting the states' oversight of surplus lines insurance and reinsurance and created a new Federal Insurance Office (FIO) within the Department of the Treasury. Following the financial crisis of 2007-2009 and Dodd-Frank, international insurance issues have been of greater interest to Congress. The Financial Stability Board (FSB) named several U.S. insurers as global systemically important insurers (G-SIIs), and the International Association of Insurance Supervisors (IAIS) has been developing a multifaceted set of regulatory standards to apply to G-SIIs and other internationally active insurers. The United States and the European Union (EU) negotiated a covered agreement addressing a long-standing dispute over reinsurance collateral as well as questions about how U.S. insurers would be treated under the EU's new "Solvency II" regulatory regime. Possible insurance regulatory issues before the 115 th Congress include overseeing the implementation of, and possible amendments to, the Dodd-Frank Act, including specific legislation, such as P.L. 115-61 , H.R. 10 , H.R. 3746 / S. 2702 , H.R. 3861 , and H.R. 4483 ; narrowly reforming the current regulatory system, such as H.R. 3363 ; and responding to international developments, such as the development of international standards by the IAIS, with oversight and specific legislation, such as P.L. 115-174 , S. 1360 , and H.R. 3762 / H.R. 4537 / S. 488 . S. 1463 was introduced by Senator Mike Crapo on June 28, 2017; it was ordered to be reported favorably on a voice vote by the Senate Committee on Banking, Housing, and Urban Affairs on September 9, 2017. H.R. 3110 was introduced by Representative Randy Hultgren on June 29, 2017; it was reported by the House Committee on Financial Services by a vote of 60-0 ( H.Rept. 115-293 ) on September 5, 2017. H.R. 3110 passed the House by a vote of 407-1 on September 5, 2018, and passed the Senate by unanimous consent on September 19, 2018. President Trump signed the bill on September 27, 2017 ( P.L. 115-61 ). P.L. 115-61 amends the Dodd-Frank Act's language creating an independent member with insurance expertise, who serves on the FSOC. Specifically, the law adds language allowing the independent member to serve up to 18 months after the end of his or her 6-year term or until a successor is appointed and confirmed. The first independent member, S. Roy Woodall, was confirmed on September 26, 2011. President Trump nominated Thomas E. Workman to the position on January 8, 2018, and the Senate confirmed Mr. Workman on March 21, 2018. S. 2155 was introduced by Senator Crapo and 19 cosponsors on November 16, 2017. The bill was marked up and reported on a vote of 16-7 by the Senate Committee on Banking, Housing, and Urban Affairs in December 2017. It passed the Senate by a vote of 67-31 on March 14, 2018. The House passed S. 2155 without amendment on May 22, 2018, and the President signed the bill into P.L. 115-174 on May 24, 2018. P.L. 115-174 includes a broad range of financial services provisions largely dealing with noninsurance issues. As introduced, it included no provisions focused on insurance, but a new section was added in the Senate committee markup with language similar to S. 1360 (discussed below). Section 211 of P.L. 115-174 finds that the Treasury, Federal Reserve, and FIO director shall support transparency in international insurance fora and shall "achieve consensus positions with State insurance regulators through the [NAIC]" when taking positions in international fora. It creates an "Insurance Policy Advisory Committee on International Capital Standards and Other Insurance Issues" at the Federal Reserve made up of 21 members with expertise on various aspects of insurance. The Federal Reserve and the Department of the Treasury are to complete both an annual report and provide testimony on the ongoing discussions at the IAIS through 2022, and the Federal Reserve and FIO are to complete a study and report, along with the opportunity for public comment and review by the Government Accountability Office (GAO), on the impact of international capital standards or other proposals prior to agreeing to such standards. Unlike S. 1360 , however, the enacted law does not have specific requirements on the final text of any international capital standard. After signing S. 2155 , the President released a statement indicating that the congressional directions in the findings contravene the President's "exclusive constitutional authority to determine the time, scope, and objectives of international negotiations" but that the President will "give careful and respectful consideration to the preferences expressed by the Congress in section 211(a) and will consult with State officials as appropriate." H.R. 10 was introduced by Representative Jeb Hensarling on April 26, 2017, reported ( H.Rept. 115-153 ) by the House Financial Services Committee on May 25, 2017, and passed by the House by a vote of 233-186 on June 8, 2017. H.R. 10 would make a broad range of changes to the financial regulatory system, including some insurance-related regulations, although insurance regulation is not a primary focus of the bill. Title X of H.R. 10 would amend the Dodd-Frank Act to merge Treasury's FIO and the FSOC's independent insurance expert position, creating the Office of Independent Insurance Advocate, a new independent bureau within Treasury. The Independent Insurance Advocate would be appointed by the President and confirmed by the Senate and an FSOC voting member. The office would take over many, but not all, of the FIO director's duties, including such changes as the advocate would have the authority to observe the insurance industry, rather than FIO's charge to monitor the insurance industry; would not be required to monitor the access of underserved communities to insurances, as FIO currently is; and would not have the authority to require the submission of data from the industry that FIO currently has. H.R. 10 would also add an additional public notice and comment period for any covered agreement. Section 115(a) of H.R. 10 would repeal the nonbank designation authority and the application of enhanced prudential requirements by the Federal Reserve. Section 111(a) of H.R. 10 would repeal all of Dodd-Frank Title II, which created OLA, and replace it with a new chapter of the Bankruptcy Code for financial firms, but one that would not apply to insurers. Thus, any insurer failure would be resolved by the state resolution system. Representative Sean Duffy along with seven additional cosponsors introduced H.R. 4537 on December 4, 2017. (A substantially similar bill, H.R. 3762 , was previously introduced and addressed in an October 24, 2017, hearing by the House Financial Services' Subcommittee on Housing and Insurance.) H.R. 4537 was marked up and ordered reported on a vote of 56-4 by the House Committee on Financial Services on December 12-13, 2017. It was reported ( H.Rept. 115-804 ) on July 3, 2018. The House considered a further amended version on July 10, 2018, and passed it under suspension of the rule by a voice vote. S. 488 was originally introduced by Senator Pat Toomey as the Encouraging Employee Ownership Act, increasing the threshold for disclosure relating to compensatory benefit plans. After Senate passage on September 11, 2017, it was taken up in the House and amended with a number of different provisions, mostly focusing on securities regulation. Title XIV of the amended version of S. 488 , however, is nearly identical to H.R. 4537 as it passed the House. H.R. 4537 as passed by the House and S. 488 as passed by the House would institute a number of requirements relating to international insurance standards and insurance covered agreements. U.S. federal representatives in international fora are directed not to agree to any proposal that does not recognize the U.S. system as satisfying that proposal. Such representatives would be required to consult and coordinate with the state insurance regulators and with Congress prior to and during negotiations and to submit a report to Congress prior to entering into an agreement. With regard to future covered agreements, the bill would require U.S. negotiators to provide congressional access to negotiating texts and to "closely consult and coordinate with State insurance commissioners." Future covered agreements are to be submitted to Congress for possible disapproval under "fast track" legislative provisions. The Congressional Budget Office's (CBO's) cost estimate on H.R. 4537 as reported from committee found that, Any budgetary effects of enacting H.R. 4537 would depend, in part, on how often the United States negotiates international insurance agreements and how frequently the negotiators must consult and coordinate with state insurance commissioners. CBO has no basis for predicting that frequency but expects that the cost of such consultations would be less than $500,000 per year. H.R. 5059 was introduced by Representative Keith Rothfus with cosponsor Representative Joyce Beatty on February 15, 2018. The House Financial Services' Subcommittee on Housing and Insurance held a hearing on the bill on March 7, 2018, and the full committee marked up the bill on July 24, 2018. An amended version was reported ( H.Rept. 115-937 ) on September 12, 2018, and the House passed the bill by a voice vote on the same day. The Senate has not acted on the legislation. H.R. 5059 as passed by the House would define a new category of "insurance savings and loan companies" consisting primarily of (1) savings and loan holding companies whose asset holdings are at least 75% in their insurance subsidiaries, or (2) savings and loan holding companies which maintained that status continually since July 21, 2010, and which held 25% or more of their assets in insurance underwriting companies and were thus exempt from the Federal Reserve's Basel III capital requirements promulgated in October 2013. In the Federal Reserve's oversight of such companies, the Fed is directed to "the fullest extent possible" to align record keeping and coordinate examinations with the s tate insurance regulators and to not unnecessarily duplicate the supervision of insurers by the states. The bill also would require the Fed to promulgate rules specifically tailoring its supervisory framework to insurers' unique risks and operations and would exempt insurance assets (except for those assets associated with credit risk insurance) from supervisory assessment fees. CBO's cost estimate on the bill found that, The exemption for certain supervisory assessment fees, however, would result in a reduction in federal revenues. CBO estimates that in 2016 about 5 percent ($25 million) of such fees were paid by firms that would be exempt under H.R. 5059 . Because the fees reduce the firms' base for income and payroll taxes, CBO estimates that the decline in fees would be partially offset by higher income and payroll taxes and that the net reduction in revenues under the legislation would total $261 million over the 2019-2028 period. H.R. 3746 was introduced by Representative Sean Duffy with cosponsor Representative Gwen Moore on September 12, 2017. It was addressed in a December 7, 2017, hearing by the House Financial Services' Subcommittee on Financial Institutions and Consumer Credit, was marked up and ordered reported by the House Financial Services Committee by a vote of 37-18 on January 18, 2018, and was reported ( H.Rept. 115-668 ) on May 10, 2018. S. 2702 , a nearly identical bill to the reported version of H.R. 3746 , was introduced by Senator Tim Scott with three cosponsors on April 18, 2018. H.R. 3746 and S. 2702 would amend the Dodd-Frank Act to "clarify" the authority of the Consumer Financial Protection Bureau (CFPB) over the business of insurance. The bills would add further language to the current statute which limits CFPB authority over the business of insurance and would direct that enforcement should be "broadly construed in favor of the authority of a State insurance regulator." CBO's cost estimate on the House bill found "no significant effect on the agency's costs or operations because the bill would primarily codify current agency enforcement practices" but that it "could reduce civil penalties collected by the CFPB ... by slightly limiting the scope of enforcement cases the agency may pursue." S. 1360 was introduced by Senator Dean Heller with cosponsor Senator Jon Tester on June 14, 2017, and referred to the Senate Committee on Banking, Housing, and Urban Affairs. Similar language to S. 1360 was added to P.L. 115-174 / S. 2155 as discussed above. S. 1360 would create an "Insurance Policy Advisory Committee on International Capital Standards and Other Insurance Issues" at the Federal Reserve made up of 11 members with expertise on various aspects of insurance. It would require both an annual report and testimony from the Federal Reserve and the Department of the Treasury on the ongoing discussions at the IAIS through 2020. The Federal Reserve and FIO would be required to complete a study and report, along with the opportunity for public comment and review by the Government Accountability Office (GAO), on the impact of international capital standards or other proposals prior to agreeing to such standards. Any final text of an international capital standard would be required to be published in the Federal Register for comment and could not be inconsistent with either state or Federal Reserve capital standards for insurers. H.R. 3363 was introduced by Representative David Kustoff on July 24, 2017, and referred to the House Committee on Financial Services. This bill would preempt state laws requiring claims adjuster licensing and allow insurance claims adjusters to apply for membership in the National Association of Registered Agents and Brokers (NARAB; created in P.L. 114-1 ) and thus operate in multiple states under NARAB. This preemption would apply four years after enactment and only for states that do not enact laws allowing for uniformity and reciprocity in claims adjuster licensing. It would not apply to states that do not require a license for claims adjusting. H.R. 3762 was introduced by Representative Sean Duffy with cosponsor Representative Denny Heck on September 13, 2017. It was addressed in an October 24, 2017, hearing by the House Financial Services' Subcommittee on Housing and Insurance, but has not been the subject of further committee action. The sponsor introduced an identically titled and substantially similar bill, H.R. 4537 , which was ordered reported by the House Committee on Financial Services on December 13, 2017. See the above section on H.R. 4537 for more information on the bill. H.R. 3861 was introduced by Representative Sean Duffy with cosponsor Representative Denny Heck on September 28, 2017. It was addressed in an October 24, 2017, hearing by the House Financial Services' Subcommittee on Housing and Insurance, but has not been the subject of further committee action. H.R. 3861 would amend the Dodd-Frank Act provisions creating the Federal Insurance Office, generally limiting the focus and size of FIO. It would place FIO specifically within the Office of International Affairs and narrow its function in international issues to representing the Treasury rather than all of the United States and require FIO to reach a consensus with the states on international matters. The bill would remove FIO's authority to collect and analyze information from insurers, including its subpoena power, and issue reports with this information. The authority to preempt state laws pursuant to covered agreements would now rest with the Secretary of the Treasury, and FIO would be limited to five employees. H.R. 4483 was introduced by Representative Alexander Mooney along with two cosponsors on November 29, 2017. The bill would abolish FIO, striking the Dodd-Frank Act provisions that created FIO. A section relating to covered agreements would remain in law, however, without the preemption authority vested in the director of FIO. H.R. 4483 would remove the FIO director as a nonvoting member of FSOC and replace the FIO director with the Secretary of the Treasury where the FIO director has a role in nonbank stress testing and orderly liquidation authority. H.R. 4885 was introduced by Representative Mark Takano along with six cosponsors on January 25, 2018. The bill would require the FIO director to collect a variety of data on automobile insurance in order to conduct a study and report on disparities in premiums costs and claims payments between geographical areas having a majority of residents who are racial minorities and those areas having a majority of residents who are not racial minorities. The FIO director is to commence the data collection with federal and state agencies before seeking data from third-party intermediaries and then directly from insurance companies. Upon submission of the report, the collected data are to be made publicly available except for any insured's personally identifiable information. H.R. 5502 was introduced by Representative Bonnie Watson Coleman on April 12, 2018. It was referred to the House Committee on Financial Services and the House Committee on Energy and Commerce. The bill would prohibit insurers from using a number of factors in offering or setting rates for personal automobile insurance, including education, occupation, employment status, home ownership, credit score, and previous insurance purchase. It also would require that all insurer underwriting rules and rate filings be publicly available. The act would be enforced by the Federal Trade Commission and may also be enforced by the states. H.R. 5666 was introduced by Representatives Dennis Ross with cosponsor Representative Denny Heck on April 27, 2018. It was referred to the House Committee on Financial Services. S. 3177 was introduced by Senator Tim Scott with cosponsor Senator Doug Jones on June 28, 2018. It was referred to the Senate Committee on Banking, Housing, and Urban Affairs. The bill would amend the Dodd-Frank Act to add a state insurance commissioner as a voting member of the Financial Stability Oversight Council to be appointed by the President and confirmed by the Senate for a four-year term. The current, nonvoting insurance commissioner position on FSOC would be repealed.
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Insurance companies constitute a major segment of the U.S. financial services industry. The insurance industry is often separated into two parts: (1) life and health insurance companies, which also often offer annuity products, and (2) property and casualty insurance companies, which include most other lines of insurance, such as homeowners insurance, automobile insurance, and various commercial lines of insurance purchased by businesses. Different lines of insurance present different characteristics and risks. Life insurance typically is a longer-term proposition with contracts stretching over decades and insurance risks that are relatively well defined in actuarial tables. Property and casualty insurances typically are shorter-term propositions with six-month or one-year contracts and have greater exposure to catastrophic risks. Since 1868, the individual states have been the primary regulators of insurance with the National Association of Insurance Commissioners (NAIC) acting to coordinate state actions and collect national data. In accordance with the 1945 McCarran-Ferguson Act, the states have operated as the primary insurance regulators with congressional blessing, but they have also been subject to periodic congressional scrutiny. Immediately prior to the 2007-2009 financial crisis, congressional attention on insurance regulation focused on the inefficiencies in the state regulatory system. A major catalyst was the aftermath of the Gramm-Leach-Bliley Act of 1999 (GLBA; P.L. 106-102), which overhauled the regulatory structure for banks and securities firms, but left the insurance sector largely untouched. The 2007-2009 financial crisis refocused the debate surrounding insurance regulatory reform. Unlike many financial crises in the past, insurers played a large role in this crisis. In particular, the failure of the insurer American International Group (AIG) spotlighted sources of systemic risk that had gone unrecognized. The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank; P.L. 111-203), enacted following the crisis, gave enhanced systemic risk regulatory authority to the Federal Reserve and to a newly created Financial Stability Oversight Council (FSOC). The Dodd-Frank Act also included measures affecting the states' oversight of surplus lines insurance and reinsurance and created a new Federal Insurance Office (FIO) within the Department of the Treasury. Following the financial crisis and Dodd-Frank, international insurance issues have been of greater interest to Congress. In particular, the development of various regulatory standards by the International Association of Insurance Supervisors (IAIS) has been the subject of both hearings and legislation. In addition, using Dodd-Frank authorities, the United States negotiated a covered agreement with the European Union (EU) addressing a long-standing dispute over reinsurance collateral as well as questions about how U.S. insurers would be treated under the EU's new "Solvency II" regulatory regime. A variety of legislation addressing insurance regulatory issues has been introduced in the 115th Congress with one bill enacted. Issues recurring in multiple bills include amendments to the Dodd-Frank Act provisions on FIO and FSOC (P.L. 115-61; H.R. 10; H.R. 3861; H.R. 4483; H.R. 5666/S. 3177) and international insurance standard negotiations (P.L. 115-174/S. 2155; S. 1360; H.R. 3762; H.R. 4537/S. 488). Individual legislation has been introduced on other topics, including licensing of insurance claims adjusters (H.R. 3363), discrimination in automobile insurance (H.R. 4885; H.R. 5502), and Federal Reserve oversight of insurers (H.R. 5059).
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The 114 th Congress debated several gun control proposals following two high-fatality mass shootings in December 2015 and June 2016. In both cases, the offenders attempted to justify their murderous rampages with, and were quite possibly influenced by, radical Islamic views. According to the Federal Bureau of Investigation (FBI), one of the offenders had been watch-listed as a suspected terrorist, but had been removed from the watchlist before he purchased his firearm from a federally licensed gun dealer. After both shootings, congressional gun control debate coalesced around the following issues: Should the Attorney General be given the authority to deny firearms (and explosives) transfers to persons she determines to be "dangerous terrorists"? Should federal background check requirements be expanded to include intrastate firearms transfers among private, unlicensed persons? Should grants be provided or withheld to encourage state, local, municipal, tribal, and territorial authorities to increase computer access to records on persons prohibited from possessing firearms for the purposes of background checks? Should definitions related to mental incompetency in federal gun control regulations be codified or revised? Debate on the latter three issues mirrored congressional debate in the Senate that followed the December 2012, Newtown, CT, mass shooting. While Congress did not pass any of these proposals, Congress included a provision in the 21 st Century Cures Act ( P.L. 114-255 ) that codified certain Department of Veterans' Affairs (VA) procedures that address benefit claims, mental incompetency determinations, and firearms transfer and possession eligibility. For context, this report provides background on the two major federal gun control statutory frameworks: the National Firearms Act of 1934 (NFA), as amended, and the Gun Control Act of 1968 (GCA), as amended. It also provides analysis of several Senate-considered amendments in the 114 th Congress that would have addressed the above listed issues. Since 1998, the VA has been providing records on beneficiaries for whom a fiduciary (a person selected to manage veterans' benefits) has been appointed to the Federal Bureau of Investigation (FBI) for firearms-related background checks, because the appointment of a fiduciary is based on a determination that the beneficiary is "mentally incompetent" under veterans law. Based on this VA determination, the beneficiary is also considered "adjudicated as a mental defective" under the GCA, because he or she "lacks the mental capacity to contract or handle their own affairs." Pursuant to the NICS Improvement Amendments Act of 2007 (NIAA; P.L. 110-180 ), the VA has been required to notify beneficiaries of the ramifications of mental incompetency determinations and a potential loss of their gun rights. The act also required the VA to provide those beneficiaries with an avenue of administrative relief, by which they could appeal such determinations and have their rights restored. In the 21 st Century Cures Act ( P.L. 114-255 ), Congress included a provision that codified certain VA procedures related to mental incompetency determinations and potential loss of gun rights. Following the December 2015, San Bernardino, CA, mass shooting, President Barack Obama called on Congress to pass a "No Fly, No Buy" act. In the 109 th Congress, Representative Carolyn McCarthy introduced the "No Fly, No Buy" act ( H.R. 1195 ), a bill that would have prohibited any individual from shipping, transporting, possessing, or receiving a firearm or ammunition if he or she were known to pose, or suspected of posing, a risk of air piracy or terrorism or a threat to airline or passenger safety and, hence, were watch-listed on either the "No Fly" or "Automatic Selectee" watchlists. It would have also prohibited anyone from knowingly transferring a firearm or ammunition to such a person. This proposal, however, has not been introduced since the 111 th Congress. Over time, it was superseded by a proposal that has become known as the "Terror Gap" proposal (described below). Under current law, simply being on a terrorist watchlist is not grounds to deny a firearms transfer. Nevertheless, after the September 11, 2001, terrorist attacks, the Department of Justice (DOJ) began screening individuals against a watchlist of known or suspected terrorists during firearms- and explosives-related background checks. In addition, under then-Attorney General Alberto Gonzalez, DOJ developed a proposal that would authorize the Attorney General to deny a firearms transfer to any person deemed to be a particularly "dangerous terrorist." Senator Frank Lautenberg and Representative Peter King first introduced this proposal ( S. 1237 / H.R. 2074 ) in the 110 th Congress, and it became known as the "Terror Gap" proposal. In the 114 th Congress Senator Dianne Feinstein and Representative King reintroduced this proposal ( S. 551 and H.R. 1076 ). On December 3, 2015, the Senate debated several gun control amendments during consideration of the Restoring Americans' Healthcare Freedom Reconciliation Act ( H.R. 3762 ). Senator Feinstein offered an amendment ( S.Amdt. 2910 ) that included the text of S. 551 , the "Terror Gap" proposal. It is noteworthy that this proposal made no specific mention of the "No Fly" list or any other terrorist watchlist maintained by the federal government. Neither would the "Terror Gap" proposal, nor any of the related amendments described below, have provided for a blanket prohibition for all persons on the "No Fly" list, or any other terrorist watchlist maintained by the federal government, from receiving or possessing firearms. All the same, under the "Terror Gap" proposal, a terrorist watchlist check during a firearms- or explosives-related background check could possibly be the precipitating event that would prompt the Attorney General to make a "dangerous terrorist" determination about some individual. Senator John Cornyn offered a related amendment ( S.Amdt. 2912 ) that would have provided judicial review of a "dangerous terrorist" determination prior to a firearms-related background check denial. Senators Joe Manchin and Pat Toomey offered an amendment ( S.Amdt. 2908 ) that would have amended the NICS Improvement Amendments Act of 2007 ( P.L. 110-180 ) to encourage state and local authorities to make firearms eligibility disqualifying records available to the FBI for the purposes of firearms-related background checks. This amendment would have also expanded federal firearms background check requirements to cover private, intrastate transfers between non-gun dealers, when such transfers were arranged in a public forum, such as on the Internet or at a gun show or flea market. Supporters of the Manchin-Toomey amendment maintain that this bill would have provided for "comprehensive" background checks. Senator Chuck Grassley offered an amendment ( S.Amdt. 2914 ) that also included provisions intended to improve background checks, but did not include any provisions that would have expanded background check requirements. Alternatively, the Grassley amendment included provisions that would have loosened certain restrictions on interstate handgun commerce between federally licensed gun dealers and private persons. In addition, the Grassley amendment included several provisions that would have increased penalties for certain violations of the GCA (e.g., providing a firearm to a convicted felon), while modifying mandatory sentencing provisions for other provisions of that act. While the Senate and House Committees on the Judiciary have reported standalone bills with those penalty and sentencing provisions, the Senate blocked the amendments discussed on procedural grounds. Similar, but unsuccessful, efforts were made in the House of Representatives to bring gun control proposals to the floor for general debate and votes. Following the June 12, 2016, Orlando, FL, mass shooting, Senator Christopher Murphy and other Democrats successfully advocated for the consideration of gun control legislation. In the House, Representative John Lewis and other Democrats made an unsuccessful bid to convince the Leadership to bring gun control legislation up for general consideration. When the Senate took up the FY2017 Departments of Commerce and Justice, Science, and Related Agencies (CJS) Appropriations bill ( H.R. 2578 , the expected vehicle for S. 2837 ), several gun control-related amendments were debated. Senator Murphy offered an amendment ( S.Amdt. 4750 ) that would have expanded federal background check requirements and captured more private, intrastate firearms transfers than under the Manchin-Toomey amendment. Supporters of the Murphy amendment maintain that it would have required "universal" background checks, although it too included exceptions, albeit under narrower circumstances than under the Manchin-Toomey amendment. The Senate, however, rejected further consideration of the Murphy amendment on procedural grounds. While the Manchin-Toomey amendment (S.Amdt. 4716) was also filed, the Senate did not take it up. The Senate also rejected a procedural motion on an amendment offered by Senator Grassley ( S.Amdt. 4751 ) that included some provisions that were identical to those included in the amendment he previously offered in December 2015 to the Health Care Reconciliation bill ( H.R. 3762 ) . In addition, the Senate considered several other amendments ( S.Amdt. 4720 , S.Amdt. 4749 , S.Amdt. 4858 , and S.Amdt. 4859 ) that would have authorized the denial of firearms and explosives transfers to any person whom the Attorney General deemed to be a "dangerous terrorists." While some of those amendments made reference to the "No Fly" list, all of these amendments were loosely modeled on the "Terror Gap" proposal. None of these amendments would have prohibited anyone from receiving or possessing a firearm simply because they were on the "No Fly" list, a claim mistakenly but repeatedly made by many media outlets. All but one of those "Terror Gap" amendments were blocked on procedural votes. The Senate voted on a procedural motion on a "Terror Gap" proposal ( S.Amdt. 4858 ) that has commonly been referred to as the "Collins compromise." In what has been described as a "test vote," the Senate rejected a motion (46 to 52) to recommit H.R. 2578 to the Committee on the Judiciary with instructions to report the bill back with the language of the Collins compromise. But the 52 votes against that motion were not enough to suggest that the Senate would be able to obtain the 60 votes likely required to amend the bill successfully. Just before the July 4, 2016, recess, House Democrats sought to force votes on gun control issues by occupying the House floor. The Speaker of the House, Representative Paul Ryan, voiced qualified support for bringing counterterrorism legislation to the House floor for consideration. In turn, the House Majority Leader, Representative Kevin McCarthy, proposed an alternative "Terror Gap" proposal ( H.R. 5611 ) that included provisions related to firearms and terrorist watchlist screening, including new provisions that would have provided potentially denied persons with greater recourse to legal redress at initial stages of the denial process, as well as other counterterrorism provisions. However, efforts to bring that bill before the Committee on Rules broke down when Democrats sought a rule to amend that bill with other gun control-related amendments, including a bill to expand background checks ( H.R. 1217 ) that is nearly identical to the Manchin-Toomey amendment described above. Until December 2015, legislative action in the 114 th Congress was largely confined to providing an FY2016 appropriation for the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF), the lead federal agency charged with administering and enforcing federal firearms laws. During consideration of the FY2016 Commerce, Justice, Science, and Related Agencies (CJS) appropriations bill ( H.R. 2578 ), the House passed several amendments that would have prevented the Administration from implementing certain gun control measures, including an ATF-proposed administrative framework to reclassify certain ammunition cartridges that might be used in certain types of "handguns" as "armor piercing." While these House-passed amendments were not included in Consolidated Appropriations Act, 2016 ( P.L. 114-113 ), other long-standing gun control limitations were left in place. For FY2017, the Senate Committee on Appropriations reported a bill ( S. 2837 ) that would have provided ATF with $1.259 billion, and the House Committee reported a bill ( H.R. 5393 ) that would have provided ATF with $1.258 billion. The Administration has requested increased funding for "gun safety," most of which was or would have been provided under the act and bills mentioned above. However, Congress has not provided a requested $10 million for gun violence research. Since FY1997, Congress has prohibited the Centers for Disease Control and Prevention (CDC) from "advocating or promoting gun control." CDC-sponsored "gun violence" research in the past was viewed by at least some Members of Congress as insufficiently objective. Consequently, Congress included this limitation in the CDC appropriation from FY1997 through FY2011. Congress extended this limitation to the entire Department of Health and Human Services for FY2012, and has done so every fiscal year thereafter. On September 29, 2016, President Obama signed into law a Continuing Appropriations Act, 2017 ( P.L. 114-203 ), which funds most of the federal government through December 9, 2016, at the same levels as appropriated for FY2016. This continuing resolution also extends the long-standing gun control limitations discussed above through that date. The ongoing struggle between gun control and gun rights advocates has resulted in what has been described as a divisive fault line in the American body politic. Gun control advocates generally view the prevalence of firearms in the United States as causing more harm than good. In their view, guns intensify violence by escalating the chances that a crime victim will die in a robbery, aggravated assault, or domestic dispute. They observe that most American gun violence involves "attacks on intimate partners," "gang and drug beefs in disadvantaged neighborhoods," and "suicides," not necessarily in that order. They observe further that there is considerable overlap between mental illness and suicide, and the use of a gun in a suicide attempt nearly always proves fatal. They contend that level of gun violence in the United States is out of line with other industrialized nations and that those nations' experience shows that progressive gun control laws have successfully reduced crime and other forms of gun violence. Gun control supporters, moreover, often view the use of firearms for self-defense or to resist a tyrannical government as impractical and unnecessary, especially in countries with well-developed democratic institutions and rule of law like in the United States. Gun rights supporters, conversely, view firearms as a viable and necessary means of self-defense against predatory criminals and during times of civil unrest and a consequent breakdown in the rule of law. Many gun rights supporters maintain that some gun control laws do not significantly reduce crime, and firearms possession by law-abiding Americans could serve to deter crime in some circumstances. Indeed, many gun rights supporters view armed self-defense with a firearm as a "natural right" that precedes but is enshrined in the U.S. Constitution. In short, they view the prevalence of firearms in the United States as a guarantor of freedom and security for individuals, as well as the wider civic body, and as a means to deter oppressive or tyrannical governments. In addition, gun rights supporters often pursue and enjoy hunting, marksmanship, and other shooting sports. Gun rights views have been bolstered to a degree by the Supreme Court's Heller and McDonald decisions, which interpreted the Second Amendment to the U.S. Constitution as guaranteeing law-abiding citizens an individual right to possess an operable handgun in their home for the purpose of self-defense. Two major federal statutory frameworks regulate the commerce in and possession of firearms: the National Firearms Act of 1934 (26 U.S.C. §5801 et seq.) and the Gun Control Act of 1968, as amended (18 U.S.C. Chapter 44, §921 et seq.). Supplementing federal law, many state firearms laws are stricter than federal law. For example, some states require permits to obtain firearms and impose a waiting period for firearms transfers. Other states are less restrictive, but state law cannot preempt federal law. Federal law serves as the minimum standard in the United States. The ATF is the lead federal law enforcement agency charged with administering and enforcing federal laws related to firearms and explosives commerce. To manage firearms commerce, ATF issues licenses to firearms manufacturers, importers, dealers, pawnbrokers, and collectors. It also inspects these federal firearms licensees (FFLs) to monitor their compliance with federal and state law. While there are statutory prohibitions against ATF, or any other federal agency, maintaining a registry of firearms or firearms owners, current law requires FFLs to maintain a distributed system of firearms transfer records that allow ATF agents to trace, potentially, the origins of a firearm from manufacturer or importer to a first retail sale and buyer. ATF agents assist other federal agencies, as well as state and local law enforcement, with criminal investigations. The ATF also makes technical judgements about firearms, including the appropriateness of importing certain makes and models of firearms and firearms parts. The term "firearm" means (a) any weapon (including a starter gun) which will or is designed to or may readily be converted to expel a projectile by the action of an explosive; (b) the frame or receiver of any such weapon; (c) any firearm muffler or firearm silencer; or (d) destructive device. Such term does not include an antique firearm. Firearms are activated by a trigger pull, which causes a firing pin to strike a cartridge primer detonating a small amount of explosive that ignites propellant. The burning propellant produces high pressures that push the projectile(s) out of the muzzle of the barrel at high, accelerating rates of speed. By most estimates, there are over 300 million firearms available for transfer to, and possession by, private persons in the United States. The NFA was originally designed to make it difficult to obtain types of firearms perceived to be especially "dangerous and unusual" or to be the chosen weapons of "gangsters," most notably machine guns and short-barreled shotguns. This law also regulates firearms, other than pistols and revolvers, which can be concealed on a person (e.g., pen, cane, and belt buckle guns). It taxes all aspects of the manufacture and distribution of such weapons, and it compels the disclosure (through registration with the Attorney General) of the production and distribution system from manufacturer to buyer. Machine guns—or fully automatic firearms—have been banned from private possession since 1986, except for those legally owned and registered with the Secretary of the Treasury as of May 19, 1986. In other words, manufacturing licenses for machine guns have not been issued for non-military or law enforcement purposes since that date, but machine guns and conversion kits legally held by civilians prior to that date are generally available for transfer under the conditions described below. According to one estimate, as of November 2007, there were approximately 182,600 machine guns available for transfer to civilians in the United States based upon an audit of the ATF-maintained National Firearms Registry and Transfer Record (NFRTR). Under the NFA, a machine gun is defined as: any weapon which shoots, is designed to shoot, or can be readily restored to shoot, automatically more than one shot, without manual reloading, by a single function of the trigger. The term also includes the frame or receiver of any such weapon, any part designed and intended solely and exclusively, or combination of parts designed and intended, for use in converting a weapon into a machinegun, and any combination of parts from which a machinegun can be assembled if such parts are in the possession or under the control of a person. To deal in NFA firearms, a person is required to be a federally licensed gun dealer (federal firearms licensee, or FFL) under the Gun Control Act of 1968 (described below) and also be a special occupational taxpayer (SOT) under the NFA. Class I SOTs are importers of NFA firearms; Class II SOTs are manufacturers of NFA firearms; and Class III SOTs are dealers. NFA firearms are often referred to as Class III weapons, for Class III dealers. The NFA imposes a $200 manufacturing tax and a $200 transfer tax each time a firearm is transferred from an unlicensed individual. For non-tax exempt transfers, ATF places a tax stamp on the tax paid transfer document upon the transfer's approval. The transferee may not take possession of the firearm until he holds the approved transfer document. Private persons, who are not otherwise prohibited by law, may acquire an NFA firearm in one of three ways: a registered owner of an NFA firearm may apply for ATF approval to transfer the firearm to another person residing in the same state or to an FFL in another state; an individual may apply to ATF for approval to make and register an NFA firearm (except machine-guns); or an individual may inherit a lawfully registered NFA firearm. It is a felony to receive, possess, or transfer an unregistered NFA firearm. Such offenses are punishable by a fine of up to $250,000, imprisonment for up to 10 years, and forfeiture of the firearm and any vessel, vehicle, or aircraft used to conceal or convey the firearm. To the extent it can be known, legally registered NFA machine guns are rarely used in crime. As stated in the GCA, the purpose of federal firearms regulation is to assist federal, state, and local law enforcement in the ongoing effort to reduce crime and violence. In the same act, however, Congress also stated that the intent of the law is not to place any undue or unnecessary burdens on law-abiding citizens in regard to the lawful acquisition, possession, or use of firearms for hunting, trapshooting, target shooting, personal protection, or any other lawful activity. The GCA, as amended, contains the principal federal restrictions on domestic commerce in firearms and ammunition. The statute requires: all persons manufacturing, importing, or selling firearms as a business to be federally licensed; prohibits the interstate mail- or Internet-order sale of all firearms; prohibits interstate sale of handguns generally; sets forth categories of persons to whom firearms or ammunition may not be sold, such as persons under a specified age or with criminal records; authorizes the Attorney General to prohibit the importation of non-sporting firearms; requires that dealers maintain records of all commercial gun sales; and establishes special penalties for the use of a firearm in the perpetration of a federal drug trafficking offense or crime of violence. Persons who are federally licensed to be "engaged in the business" of manufacturing, importing, or selling firearms are known as "federal firearms licensees (FFLs)." As summarized by ATF in January 2016 guidance: A person engaged in the business of dealing in firearms is a person who "devotes time, attention and labor to dealing in firearms as a regular course of trade or business with the principal objective of livelihood and profit through the repetitive purchase and resale of firearms." Conducting business "with the principal objective of livelihood and profit" means that "the intent underlying the sale or disposition of firearms is predominantly one of obtaining livelihood and pecuniary gain, as opposed to other intents, such as improving or liquidating a personal firearms collection." Consistent with this approach, federal law explicitly exempts persons "who make occasional sales, exchanges, or purchases of firearms for the enhancement of a personal collection or for a hobby, or who sells all or part of his personal collection of firearms." Under current law, FFLs may ship, transport, and receive firearms that have moved in interstate and foreign commerce. FFLs are currently required to verify with the FBI or state and local authorities through a background check that unlicensed persons are eligible to possess a firearm before subsequently transferring a firearm to them. FFLs must also verify the identity of non-licensed transferees by inspecting a government-issued identity document (e.g., a driver's license). Unlicensed persons are generally prohibited from engaging in firearms-related interstate or foreign commerce. In contrast, FFLs may engage in interstate firearms transfers among themselves without conducting background checks. Licensees may transfer long guns (rifles and shotguns) to unlicensed out-of-state residents, as long as the transactions are face-to-face and not knowingly in violation of the laws of the state in which the unlicensed transferees reside. FFLs, however, may not transfer handguns to unlicensed out-of-state residents. Since 1986, there have been no similar restrictions on the interstate transfer of ammunition. Furthermore, a federal firearms license is not required to sell ammunition; however, such a license is required to either manufacture or import ammunition. Also, since 1986, FFLs are statutorily authorized to do business temporarily away from their licensed premises, at properly organized gun shows or at events sponsored by any national, state, or local organization devoted to the collection, competitive use, or other sporting use of firearms in the communities that are located in their state, as long as those gun shows and events are held in the state in which their licensed premises are located. In addition, FFLs are statutorily required to submit "multiple sales reports" to the Attorney General if any person purchases two or more handguns within five consecutive business days. As described below, FFLs are required to maintain records on all acquisitions and dispositions of firearms. They are obligated to respond to ATF agents requesting firearms tracing information within 24 hours. Under certain circumstances, ATF agents may inspect, without search warrants, their business premises, inventory, and gun records. Unlicensed persons are generally prohibited from acquiring firearms from out-of-state sources (except for long guns acquired from FFLs under the conditions described above). Unlicensed persons are also prohibited from transferring firearms to anyone who they have reasonable cause to believe are not residents of the state in which the transaction occurs. It is also notable that firearms or ammunition transfers initiated through the Internet are subject to the same federal laws as transfers initiated in any other manner. Federally licensed gun dealers, or federal firearms licensees (FFLs), are prohibited from transferring a long gun or long gun ammunition to anyone less than 18 years of age, or a handgun or handgun ammunition to anyone less than 21 years of age. Since 1994, moreover, it has been a federal offense for any unlicensed person to transfer a handgun or handgun ammunition to anyone less than 18 years of age. It has also been illegal for anyone under 18 years of age to possess a handgun or handgun ammunition (there are exceptions to this law related to employment, ranching, farming, target practice, and hunting). Under current law, there are nine classes of persons prohibited from shipping, transporting, receiving, or possessing firearms or ammunition: persons convicted in any court of a crime punishable by imprisonment for a term exceeding one year; fugitives from justice; unlawful users or addicts of any controlled substance as defined in Section 102 of the Controlled Substances Act (21 U.S.C. §802); persons adjudicated as "mental defective" or committed to mental institutions; unauthorized immigrants and nonimmigrant visitors (with exceptions in the latter case); persons dishonorably discharged from the U.S. Armed Forces; persons who have renounced their U.S. citizenship; persons under court-order restraints related to harassing, stalking, or threatening an intimate partner or child of such intimate partner; and persons convicted of a misdemeanor crime of domestic violence. In addition, there is a 10 th class of persons prohibited from shipping, transporting, or receiving (but not possessing) firearms or ammunition: persons under indictment in any court of a crime punishable by imprisonment for a term exceeding one year. It also unlawful for any person to sell or otherwise dispose of a firearm or ammunition to any of the prohibited persons enumerated above, if the transferor (seller) has reasonable cause to believe that the transferee (buyer) is prohibited from receiving those items. Under the GCA, there is also a provision that allows the Attorney General (previously, the Secretary of the Treasury) to consider petitions from a prohibited person for "relief from disabilities" and have his firearms transfer and possession eligibility restored. Since FY1993, however, a rider on the ATF annual appropriations for salaries and expenses has prohibited the expenditure of any funding provided under that account on processing such petitions. While a prohibited person arguably could petition the Attorney General, bypassing ATF, such an alternative has never been successfully tested. As a result, the only way a person can reacquire his lost firearms eligibility is to have his civil rights restored or disqualifying criminal record(s) expunged or set aside, or to be pardoned for his crime. As described below, however, Congress provided other avenues of relief for a person "adjudicated as a mental defective" under the NICS Improvement Amendments Act of 2007 ( P.L. 110-180 ). ATF regulates the U.S. firearms industry by inspecting FFLs to monitor their compliance with the GCA and NFA, and to prevent the diversion of firearms from legal to illegal channels of commerce. Despite its crime-fighting mission, ATF's business relationships with the firearms industry and larger gun-owning community have been a perennial source of tension, which from time to time has been the subject of congressional oversight. Nevertheless, under current law, ATF Special Agents (SAs) and Industry Operations Investigators (IOIs) are authorized to inspect or examine the inventory and records of an FFL without search warrants under three scenarios: in the course of a reasonable inquiry during the course of a criminal investigation of a person or persons other than the FFL; to ensure compliance with the record-keeping requirements of the GCA—not more than once during any 12-month period, or at any time with respect to records relating to a firearm involved in a criminal investigation that is traced to the licensee; or when such an inspection or examination is required for determining the disposition of one or more firearms in the course of a criminal investigation. By inspecting the firearms transfer records that FFLs are required by law to maintain, ATF SAs and IOIs are able to trace guns from their domestic manufacturer or importer to the first retail dealer that sold those firearms to persons in the general public, generating vital leads in homicide and other criminal investigations. In addition, by inspecting those records, ATF investigators sometimes discover evidence of corrupt FFLs dealing in firearms "off the books," straw purchases, and other patterns of illegal behavior. Criminal "gun trafficking" essentially entails the movement or diversion of firearms from legal to illegal markets. Therefore, it follows that the entire GCA is arguably a statutory framework designed to combat gun trafficking domestically, particularly interstate gun trafficking. ATF has developed a nationwide strategy to reduce firearms trafficking and violent crime by preventing convicted felons, drug traffickers, and juvenile gang members from acquiring firearms from gun traffickers. Gun trafficking cases include, but are not limited to, the following activities: straw purchasers or straw purchasing rings; trafficking in firearms by corrupt federally licensed gun dealers; trafficking in firearms by unlicensed dealers (i.e., persons who deal in firearms illegally as the principal source of their livelihood); trafficking in stolen firearms; and trafficking of secondhand firearms acquired from unlicensed persons at gun shows, flea markets, and other private venues. Unlike other forms of contraband, almost all illegal firearms used criminally in the United States were diverted at some point from legal channels of commerce. ATF works to reduce firearms-related crime with two approaches, industry regulation and criminal investigation. A "straw purchase" occurs when an individual poses as the actual transferee, but he is actually acquiring the firearm for another person. In effect, he serves as an illegal middleman. As part of any firearms transfer from an FFL to a private person, the GCA requires them to fill out jointly an ATF Form 4473. In addition, the FFL is required to verify the purchaser's name, address, date of birth, and other information by examining a government-issued piece of identification, most often a driver's license. Among other things, the purchaser attests on the ATF Form 4473 that he is not a prohibited person, and that he is the "actual transferee/buyer." Hence, straw purchases are known as "lying and buying for the other guy." Straw purchases are illegal under two provisions of the GCA. If the purchaser makes any false statement to a FFL with respect to any fact material to the lawfulness of a prospective firearms transfer, it is a federal offense punishable under 18 U.S.C. §922(a)(6). This provision also captures misrepresentations such as presenting false identity documents. Violations are punishable by up to 10 years of imprisonment under 18 U.S.C. §924(a)(2). It is also illegal for any person knowingly to make any false statement with respect to the records that FFLs are required to maintain under 18 U.S.C. §924(a)(1)(A). This provision, however, also captures misrepresentations related to licensure and other benefits under the GCA. Violations are punishable by up to five years of imprisonment under 18 U.S.C. §924(a)(1)(D). Straw purchases, however, are not easily detected, because their illegality only becomes apparent when the straw purchaser's true intent is revealed by a subsequent transfer to the actual buyer (third party). In many cases, the actual buyer may be a prohibited person, who would not pass a background check. Under such a scenario, if the straw purchaser knew or had reasonable cause to know the actual transferee was a prohibited person, he would also be in violation of 18 U.S.C. §922(d), for which the penalty is up to 10 years of imprisonment. It would also be a violation for the prohibited person to possess or receive the firearm under 18 U.S.C. §922(g), for which the penalty is also up to 10 years of imprisonment. Alternatively, the actual buyer may not be a prohibited person, but may be seeking to acquire firearms without any paper trail linking him to the acquisition of the firearm. Under such a scenario, however, the straw purchase and subsequent illegal transfer would be even less apparent for several reasons. Under federal law, it is legal for an unlicensed, private person to purchase firearms and then resell them or give them away, as long as the transferees are not prohibited or underage persons; transferors do not deal in firearms in a volume that would require licensing; and transfers are intrastate , as generally only federally licensed gun dealers can legally transfer firearms interstate . Hence, individuals may buy several firearms at a time with the intention of giving those firearms away as presents to anyone, as long as they do not present those firearms to persons who are underage; out-of-state residents; or prohibited persons. They may also buy firearms and, then, sell those firearms at any time, as long as selling firearms is not the principal objective of their livelihood and profit, in which case they would be required to be federally licensed to deal in firearms. Furthermore, no federal background checks are required for recipients of subsequent intrastate firearms transfers. On the other hand, if the suspected straw purchaser were observed departing the licensed gun dealer's place of business and traveling immediately to another locale, where he transferred the firearm(s) to another person, there would be a reasonable suspicion that he was a straw purchaser. However, the actual buyer would not have committed a crime unless it could be proven that he had sponsored the straw purchase. Usually, such illegal arrangements become clear when the straw purchaser is interviewed by agents and admits to having bought the firearms for the third party, non-prohibited person. Moreover, depending on the time that elapses between the initial straw purchases and subsequent transfers to the actual buyer (third party), the illegality of the transfers may not become apparent until the actual buyer's true intent is revealed, when he either transports those firearms across state lines to be sold or bartered, attempts to smuggle them across an international border, or engages in some other illegal act. Sometimes, the behavior of the prospective transferee (straw purchaser) may raise reasonable suspicions. For example, during a controversial ATF Phoenix-based investigation known as "Operation Fast and Furious," several of the individuals under indictment made multiple purchases from the same FFL of multiple semiautomatic firearms. Raising suspicions further, they paid for these firearms with thousands of dollars in cash. Indeed, FFLs contacted ATF about these suspicious transfers, prompting the investigation. They did so, in part, because they realized that these firearms might be traced back to their businesses and they probably wanted to avoid any negative attention that those traces might bring back on them. It is notable that if an FFL believes a firearms transfer to be suspicious, he may choose not to sell those firearms to the individuals in question. If he should proceed with the transfer, however, as long as he had conducted the required criminal background check on the prospective buyer, and he and the prospective buyer had filled out the proper paperwork, his obligations under federal law would have been fulfilled. In summation, with regard to interstate transfers, it is unlawful for any person who is not federally licensed to deal in firearms to transport or receive a firearm into his own state of residence that was obtained in another state. In addition, it is unlawful for any person who is not federally licensed to deal in firearms to deliver a firearm to another unlicensed person who resides in a state other than the transferor's state of residence. Violations of either provision are punishable by a fine and/or not more than five years of imprisonment. It is also unlawful to smuggle firearms, or any other merchandise contrary to U.S. law from the United States. Violations are punishable by a fine and/or not more than 10 years of imprisonment. As amended by the Brady Handgun Violence Prevention Act, 1993 (Brady Act), the GCA requires background checks be completed for all unlicensed persons seeking to obtain firearms from federal firearms licensees. Private transactions between persons "not engaged in the business" are not covered by the recordkeeping or the background check provisions of the GCA. These transactions and other matters such as possession, registration, and the issuance of licenses to firearms owners may be covered by state laws or local ordinances. The Brady Act included two provisions (interim and permanent). During a five-year interim provision, FFLs were required to contact state and local government officials to conduct background checks on unlicensed persons seeking to acquire a handgun. State and local government officials had up to five business days to conduct such checks. During the permanent provision, which has been in effect since late 1998, FFLs are required to conduct a name-based background check on unlicensed buyers seeking to acquire a firearm (handgun and long gun) through a computer system that would check a preexisting computerized index of felony criminal history records, as well as any other computer systems that might include pertinent records disqualifying an individual from receiving, possessing, transporting, or shipping a firearm under federal or state law. To these ends, the Brady Act required all federal agencies holding any disqualifying information on individuals to make that information available to the Attorney General. On November 30, 1998, the FBI activated the National Instant Criminal Background Check System (NICS) to facilitate firearms-related background checks, when the permanent provisions of the Brady Act became effective. Through NICS, FFLs conduct background checks on non-licensee applicants for both handgun and long gun transfers. As part of NICS checks, the system will respond to an FFL or state official with a NICS Transaction Number (NTN) with one of three outcomes: (1) "proceed" with transfer or permit/license issuance, because a prohibiting record was not found; (2) "denied," indicating a prohibiting record was found; or (3) "delayed," indicating that the system produced information that suggested there could be a prohibiting record. Under the last outcome, a firearms transfer may be "delayed" for up to three business days while NICS examiners attempt to ascertain whether the person is prohibited. At the end of the three-day period, an FFL may proceed with the transfer at his discretion if he has not heard from the FBI about the matter. The FBI, meanwhile, would continue to work the NICS adjudication for up to 90 days, during which the transaction is considered to be in an "open" status. If the FBI ascertains that the person is not in a prohibited status at any time during the 90 days, then the FBI would contact the FFL through NICS with a proceed response. If the person is subsequently found to be prohibited, the FBI would inform ATF and a firearms retrieval process would be initiated. The FBI handles background checks entirely for most states, while other states serve as full or partial points of contact (POCs) for state and local firearms background check purposes. In POC states, federally licensed gun dealers contact a state agency, and the state agency contacts the FBI for background checks. As Figure 1 shows, under the permanent Brady Act provisions, the FBI and state and local agencies conducted over 202 million NICS transactions from 1999 through 2014. Of these transactions, the FBI conducted 93.5 million transactions, and state and local law enforcement authorities in POC states conducted 109.1 million transactions. There is a one-to-one correspondence between FBI NICS transactions and individual background checks, and the 93.5 million FBI transactions—that is, background checks—resulted in 1.17 million denials (1.2%). It is noteworthy that some POC state background checks involved more than one background check transaction. The FBI does not report on how many state and local background checks correspond with those transactions. Nor does the FBI report the total number of state and local firearms transfer or license denials. The Bureau of Justice Statistics (BJS), however, collects and analyzes the data as part of its Firearm Inquiry Statistics Program and reports annually on the total number of firearms-related background checks and related denials conducted under the Brady Handgun Violence Prevention Act ( P.L. 103-159 ). In June 2016, BJS reported that the 109.1 million POC state NICS transactions referenced above corresponded with 74.1 million individual background checks. Those POC state checks resulted in 1.34 million denials (1.8%). In summation, BJS estimated that the FBI and POC state and local agencies together have conducted 167.5 million firearms-related background checks from November 1998 through calendar year 2014, resulting in 2.5 million denials (1.5%) of firearms transfers or permits. Under no circumstances is an FFL informed about the prohibiting factor upon which a denial is based. Consequently, the FFL cannot inform the denied person why he was denied. Under the Brady background check process, however, a denied person may challenge the accuracy of the underlying record(s) upon which his denial is based. He would initiate this process by requesting (usually in writing) the reason for the denial from the agency that conducted the NICS check (the FBI or POC). The denying agency has five business days to respond to the request. Upon receipt of the reason and underlying record for the denial, the denied person may challenge the accuracy of that record. If the record is found to be inaccurate, the denying agency is legally obligated to correct that record. As with other screening systems, particularly those that are name-based, false positives occur as a result of Brady background checks, but the frequency of these misidentifications is unreported. Nevertheless, the FBI has taken steps to mitigate false positives. In July 2004, DOJ issued a regulation that established the NICS Voluntary Appeal File (VAF), which is part of the NICS Index. DOJ was prompted to establish the VAF to minimize the inconvenience incurred by some prospective firearms transferees (purchasers) who have names or birth dates similar to those of prohibited persons. So as not to be misidentified in the future, these persons agree to authorize the FBI to maintain personally identifying information about them in the VAF as a means to avoid future delayed transfers. Current law requires that NICS records on approved firearm transfers, particularly information personally identifying the transferee, be destroyed within 24 hours. Congress passed the NICS Improvement Amendments Act (NIAA) of 2007 ( P.L. 110-180 ) following the April 2007 Virginia Tech tragedy. This act includes provisions designed to encourage states, tribes, and territories (states) to make available to the Attorney General certain records related to persons who are disqualified from acquiring a firearm, particularly records related to domestic violence misdemeanor convictions and restraining orders, as well as mental health adjudications. To accomplish this, the act establishes a framework of incentives and disincentives, whereby the Attorney General is authorized to make grants, waive a grant match requirement, or reduce a law enforcement assistance grant depending upon a state's compliance with the act's goals of bringing firearms-related disqualifying records online. Under the act, two provisions authorized the Attorney General to make grants available to states to improve further electronic access to records, including court disposition and corrections records, which are necessary to fully facilitate NICS background checks. The Attorney General is required to report annually to Congress on federal department and agency compliance with the act's provisions. The Attorney General, in turn, has delegated responsibility for grant-making and reporting to DOJ's Bureau of Justice Statistics (BJS). BJS designated the grant program under the act as the "NICS Act Record Improvement Program (NARIP)," although congressional appropriations documents generally referred to it as "NICS improvement" or the "NICS initiative" program. As shown in Table 1 , Section 103(e) of the act included an authorization for appropriations for FY2009 through FY2013. The act directed that the grants provided under this authorization be made "in a manner consistent" with the National Criminal History Improvement Program (NCHIP). The act also requires that between 3% and 10% of each grant be allocated for a relief from disabilities program for persons adjudicated mentally defective or unwillingly committed to a mental institution, whereby they can petition to have their gun rights restored. Also, as shown in Table 1 , Section 301(e) of the act included an additional authorization for appropriations for the same fiscal years to improve state court computer systems and the timeliness of criminal history dispositions. Under both authorizations, up to 5% of all grants may be set aside to provide assistance to tribal governments. To have been eligible for grants under either section, states must be certified by ATF that they have established a relief from disabilities program for persons adjudicated "mentally defective" or committed to a mental institution. As an additional incentive, Section 102 of P.L. 110-180 also provided that on January 8, 2011, any state that had provided at least 90% of disqualifying records would be eligible for a waiver of the 10% match requirement under NCHIP for two years. To be eligible for that waiver, as well as Sections 103 and 301 grants, states were required to provide BJS with a reasonable estimate of the number of NICS-related disqualifying records that they held within 180 days of enactment (July 6, 2008). In consultation with the National Center for State Courts (NCSC) and SEARCH Group, Inc., BJS has collected several rounds of estimates. For FY2011, 47 of 56 states and territories provided estimates, but the precision of these estimates collectively were deemed insufficient to determine whether the NCHIP 10% matching grant waiver ought to be awarded to any of these states or territories. BJS, NCSC, and SEARCH are currently working on a statistical model with which to assess these estimates. To further encourage compliance, Section 104 of P.L. 110-180 included a schedule of discretionary and mandatory reductions in Byrne Justice Assistance Grants (JAG) for states that did not provide certain percentages of disqualifying records: for a two-year period (January 8, 2011, through January 8, 2013), the Attorney General could have withheld up to 3% of JAG funding from any state that provided less than 50% of disqualifying records; for a five-year period (January 8, 2013, through January 8, 2018), the Attorney General may withhold up to 4% of JAG funding from any state that provides less than 70% of disqualifying records; and after January 8, 2018, the Attorney General is required to withhold 5% of JAG funding from any state that provides less than 90% of disqualifying records. The act also allows the Attorney General to waive the mandatory 5% cuts if a state provides substantial evidence that it is making reasonable compliance efforts. For FY2014, FY2015, and FY2016, Congress continued to appropriate funding for these purposes, notwithstanding the lapsed authorizations for appropriations under the act, but the Committees on Appropriations merged the NCHIP and NARIP program accounts, and refocused the combined program generally on firearms-related background check records improvement. Under the Consolidated Appropriations Act, 2014 ( P.L. 113-76 ), Congress appropriated $58.5 million for this program, renamed the "NICS Initiative," of which not less than $12.0 million was made available to make grants under P.L. 110-180 . Under the Consolidated and Further Continuing Appropriations Act, 2015 ( P.L. 113-235 ), Congress appropriated $73.0 million for the NICS Initiative, of which not less than $25.0 was made available to make grants under P.L. 110-180 . Under the Consolidated Appropriations Act, 2016 ( P.L. 114-113 ), Congress appropriated the same amount for FY2016 as was appropriated for FY2015 with the same condition. Through FY2015, BJS had not provided any NCHIP 10% matching grant waivers. Nor had BJS levied any of the discretionary penalties described above. Nevertheless, House Committee on Appropriations report language for FY2015 indicated The Committee directs that grants made under the broader NCHIP authorities be made available only for efforts to improve records added to NICS. Additionally, the Department [DOJ] shall prioritize funding under NARIP authorities with the goal of making all States NICS Improvement Amendments Act of 2007 (NIAA) compliant. The Department also shall apply penalties to noncompliant States to the fullest extent of the law. Senate report language and the explanatory statement accompanying the Consolidated and Further Continuing Appropriations Act, 2015 ( P.L. 113-235 ) were silent on this issue of the reward and penalty provisions of P.L. 110-180 . On December 3, 2015, and June 16, 2016, the Senate debated gun control-related amendments that would have (1) authorized the Attorney General to deny the transfer of firearms or the issuance of firearms and explosives licenses to known or suspected dangerous terrorists; (2) expanded federal firearms-related background check requirements; (3) increased background check system access to records on persons prohibited from receiving and possessing firearms; and (4) revised and/or codified definitions related to mental incompetency and guns. Table 2 shows the Senate amendments and their sponsors to two bills, the Restoring Americans' Healthcare Freedom Reconciliation Act ( H.R. 3762 ) and the FY2017 Departments of Commerce and Justice, Science, and Related Agencies (CJS) Appropriations bill ( H.R. 2578 , the expected vehicle for S. 2837 ). In addition, there is discussion of proposals to study "mass violence" and legislative action related to funding ATF and other gun safety initiatives. "No Fly, No Buy" or "Terror Gap" Proposal On December 2, 2015, the day of the San Bernardino mass public shooting, President Barack Obama called on Congress to pass legislation that would prevent known or suspected terrorists on a "No Fly" terrorist watchlist from acquiring a gun. While such legislation had not been offered for several Congresses, the President was likely referring rhetorically to the "Terror Gap" proposal. In the 114 th Congress, Representative King reintroduced the "Terror Gap" proposal ( H.R. 1076 ), and Senator Dianne Feinstein introduced a similar proposal ( S. 551 ), formally entitled as the Denying Firearms and Explosives to Dangerous Terrorists Act of 2015. The June 12, 2016, Orlando, FL nightclub mass shooting sparked similar calls for legislative action. Following the September 11, 2001, terrorist attacks, the U.S. government reevaluated its terrorist screening procedures. In February 2004, the DOJ and FBI modified the NICS background check procedures and recalibrated NICS to query an additional file in the National Crime Information Center (NCIC) that included terrorist watchlist records. Prior to that, the FBI did not conduct terrorist watchlist queries as part of firearms background checks because being a known or suspected terrorist was not a disqualifying factor for firearms transfer and possession eligibility; nor is it today under current law. Under the new procedures, information related to the subjects of NICS-generated terrorist watchlist matches have been passed on to the FBI Counterterrorism Division and special agents in the field, who are usually members of Joint Terrorism Task Forces (JTTFs). These FBI agents, in turn, verify the match between the individual and the watchlist record, and they check for information that would prohibit that individual—the prospective transferee, licensee, or permittee—from possessing firearms or explosives (e.g., illegal immigration or fugitive status). While the modified NICS procedures initially generated little public opposition, those procedures called three possible issues into question. One, should terrorist watchlist checks be incorporated statutorily into the firearms- and explosives-related background check processes? Two, given certain statutory prohibitions related to prohibiting a firearms registry, should approved firearm transfer records be maintained on a temporary basis to determine whether persons of interest in counterterrorism investigations have obtained firearms? Three, should the Attorney General be granted authority to deny a firearms transfer based solely on a terrorist watchlist match? Since the 109 th Congress, several related legislative proposals have been introduced. Several of those bills would have addressed the retention of firearms-related transfer records. Another proposal would have prohibited persons watch-listed as terrorists for aviation security purposes on the "No Fly" list from firearms transfer or possession eligibility. Following the President Obama's call to pass the "No Fly, No Buy" act, on December 3, 2015, Senator Feinstein offered the language of the Terror Gap bill ( S. 551 ) as an amendment ( S.Amdt. 2910 ) to the Restoring Americans' Healthcare Freedom Reconciliation Act ( H.R. 3762 ). The Senate rejected a motion to waive a point of order made against the amendment by roll call vote (45-54). Senator John Cornyn offered an alternative amendment ( S.Amdt. 2912 ) to H.R. 3762 that would require the Attorney General to file an emergency petition with a "competent court of jurisdiction" prior to prohibiting a firearms transfer to an otherwise eligible person, who had been determined to be a "dangerous terrorist." A point of order was also raised against the Cornyn amendment, and it too was ruled out of order. On December 6, 2015, however, President Barack Obama again called on Congress "to act to make sure no one on the no-fly list is able to buy a gun" in a nationally broadcasted Oval Office address. On the next day, Representative Mike Thompson filed a discharge petition on H.R. 1076 . As of December 18, the petition had 173 signatures. On December 9, 2015, Representative Thompson moved to recommit a bill, the Red River Private Property Protection Act ( H.R. 2130 ), back to committee with instructions to report the bill back to the House amended with the language of H.R. 1076 . The chair ruled this motion out of order because the amendment was not germane to the bill, and the chair's ruling was sustained by a vote of 246-182, preventing further consideration of this amendment. On June 15, 2016, Senator Christopher Murphy and other Senators advocated for 15 hours on the Senate floor for votes on the "No Fly, No Buy" and "universal" background check proposals. During consideration of the FY2017 Commerce, Justice, Science, and Related Agencies Appropriations bill ( H.R. 2578 , the expected vehicle for S. 2837 ), the Senate considered several amendments related to firearms- and explosives-related background checks and terrorist watchlist screening. Among those amendments were the No Guns for Terrorists Act ( S.Amdt. 4720 ) offered by Senator Dianne Feinstein; Stop Terrorists from Buying Guns While Protecting Constitutional Rights for Law-Abiding Americans Act ( S.Amdt. 4749 ) offered by Senator John Cornyn; Terrorist Firearms Prevention Act of 2016 ( S.Amdt. 4858 ) offered by Senator Susan Collins; and S.Amdt. 4859 , offered by Senator Ron Johnson. The Senate did not pass any of these amendments and H.R. 2578 was set aside by the Senate leadership. In the House of Representatives, Representative John Lewis led Democrats in a 26-hour "sit-in" in an ultimately unsuccessful attempt to convince the House leadership to bring gun control bills to the House floor for debate and votes. Instead, the House Speaker, Representative Paul Ryan, brought several counterterrorism bills to the floor. The Majority Leader, Representative Kevin McCarthy, introduced the Homeland Safety and Security Act ( H.R. 5611 ), which includes provisions that would address gun background checks and terrorist watchlists, as well as several other provisions related to counterterrorism. The bill did not receive floor action. In short, these Senate and House amendments would have authorized the Attorney General to deny a firearms transfer to any person she deemed to be a "dangerous terrorist." All these amendments would have provided some level of redress or remedy to persons improperly watch-listed or mistakenly identified as a known or suspected terrorist and, as a consequence, denied a firearms transfer. However, most of these proposals generally provided such redress and remedy in federal circuit or district court after the denial with no provision for notification as to the reason for the denial, the Cornyn amendment, in contrast, would have required some level of judicial review prior to the denial and the McCarthy bill would have required notification of the reason for the denial with some form of judicial oversight or hearing at or near the time of denial. During consideration of a Health Care Reconciliation bill ( H.R. 3762 ) and FY2017 Department of Justice appropriations bill ( H.R. 2578 ), the Senate considered two amendments ( S.Amdt. 2908 and S.Amdt. 4750 ) that would have expanded federal background check requirements to cover private, intrastate firearms transfers on December 3, 2015, and on June 16, 2016, respectively. These and other amendments ( S.Amdt. 2914 and S.Amdt. 4751 ) also included provisions to increase information sharing on persons who are ineligible to receive or possess firearms for background check purposes. Among those amendments were the Public Safety and Second Amendment Rights Protection Act of 2015 ( S.Amdt. 2908 ) offered by Senators Joe Manchin and Pat Toomey; Protecting Communities and Preserving the Second Amendment Act of 2015 ( S.Amdt. 2914 ) offered by Senator Charles Grassley; Fix Gun Checks Act of 2016 ( S.Amdt. 4750 ), offered by Senator Christopher Murphy; and Protection Communities and Preserving the Second Amendment Act of 2016 ( S.Amdt. 4751 ) offered by Senator Grassley. Similar amendments were considered previously by the Senate in the 113 th Congress, following the December 2012, Newtown, CT, mass shooting. The Administration supported expanding background checks, as was called for in President Obama's post-Newtown plan to reduce gun violence. As discussed above, under current law, intrastate transfers between unlicensed persons, who are not "engaged in the business" of dealing in firearms "as a regular course of ... business with the principal objective of livelihood and profit," are not covered by the recordkeeping or the background check provisions of the GCA. Nevertheless, such private transactions and other matters such as possession, registration, and the issuance of licenses to firearms owners may be covered by state laws or local ordinances. Proponents of greater gun control view the fact that unlicensed persons engaging in intrastate firearms transfers are not subject to the recordkeeping and Brady Act background check requirements of the GCA as a "loophole" in the law, particularly within the context of gun shows. This circumstance arguably flowed from two developments. First, in 1986, Congress amended the GCA to allow FFLs to transfer firearms to unlicensed persons at gun shows located within the state of their business; however, prohibitions on interstate transfers still applied. Second, in 1994, Congress passed the "Brady Act" and amended the GCA to require background checks be completed for all unlicensed persons seeking to obtain firearms from FFLs; however, it does not require background checks for intrastate (in-state) firearms transfers between unlicensed persons. On December 3, 2015, during Senate consideration of the Restoring Americans' Healthcare Freedom Reconciliation Act ( H.R. 3762 ), Senators Joe Manchin and Patrick Toomey offered an amendment ( S.Amdt. 2908 ) that would have required intrastate (same state) firearms transfers between unlicensed persons (private transfers) be processed through FFLs and, thus, it would have required a background check on the recipient (transferee/buyer). Supporters have dubbed the Manchin-Toomey amendment as the "comprehensive" background check proposal, because the background check requirements described above would have been expanded to transfers between unlicensed persons arranged at a "gun show" or "pursuant to advertisement, posting, display or other listing on the Internet or other publication by the transferor of his intent to transfer, or the transferee of his intent to acquire, a firearm." In the House, Representatives Peter King and Mike Thompson introduced a nearly identical measure, the Public Safety and Second Amendment Rights Protection Act of 2015 ( H.R. 1217 ). In addition, the Manchin-Toomey amendment ( S.Amdt. 2908 ) would have amended the Brady Act ( P.L. 103-159 ) to authorize appropriations for NCHIP at $100 million annually for FY2016-FY2019. Both proposals would also amend the NICS Improvement Amendments Act of 2007 ( P.L. 110-180 ) to require states to implement plans to provide records on all prohibited persons to the FBI, or face reductions in their JAG funding. Such plans would have addressed NICS accessibility to all prohibiting records, establishing qualitative and quantitative benchmarks for evaluative purposes, and potential JAG reductions for not meeting those benchmarks. For example, under both proposals, states that did not meet certain benchmarks would face a 10% reduction in JAG funding in year one, an 11% reduction in year two, a 13% reduction in year three, and a 15% reduction in year four. Moreover, if a state failed to submit such a plan to the Attorney General, it would have faced those reductions immediately, whereas if the states submitted such plans, the Attorney General would have been given discretion whether to make those reductions, even when the states had not met established benchmarks. S.Amdt. 2908 would have also amended P.L. 110-180 to reshape the NARIP program and authorize appropriations of $100 million annually for FY2016-FY2019 for this program. Under the amendment, grant funding could have been used to carry out assessments of the needs of states and state court systems; implement policies, systems, and procedures for the automation and submission of records on prohibited persons; create electronic systems to allow for the submission of such records; allow states to perform their own background checks; and develop and maintain disability relief programs. S.Amdt. 2908 would have also required that states match any $1 in grant funding with $3 in state funding for assessments. It would have mandated further that all grant funding be used to improve records accessibility for NICS. It would have continued to reserve up to 5% of total available funding for Indian tribal governments. On June 16, 2016, during Senate consideration of the FY2017 CJS Appropriations bill ( H.R. 2578 , the expected vehicle for S. 2837 ), Senator Christopher Murphy offered an amendment ( S.Amdt. 4750 ) to expand federal background check requirements that would have captured private, intrastate firearms transfers under a wider set of circumstances than under the Manchin-Toomey amendment. Indeed, Title II of the amendment is entitled, "requiring a background check for every firearm sale." Hence, supporters have dubbed the Murphy amendment as the "universal" background check proposal, although it too includes exceptions, albeit under narrower set of circumstances than under the Manchin-Toomey amendment. The Murphy amendment reflects the language of a bill previously introduced by Senator Chuck Schumer and Representative Jackie Speier, the Fix Gun Checks Act ( S. 2934 and H.R. 3411 ). The Murphy amendment ( S.Amdt. 4750 ) also included provisions to increase availability to NICS of prohibiting records related to firearms transfer and possession eligibility that were nearly identical those included in the Manchin-Toomey amendment ( S.Amdt. 2908 ) described above. By comparison, Senator Grassley offered amendments ( S.Amdt. 2914 and S.Amdt. 4751 ), during consideration of H.R. 3762 and H.R. 2578 , respectively, that would have also amended P.L. 110-180 to reshape the NARIP program. S.Amdt. 2914 would have authorized appropriations of $20 million annually for FY2013-FY2017 for this program, whereas S.Amdt. 4751 would have authorized appropriations or $125 million annually for FY2016-FY2020. Both amendments would have refocused the grant program on mental health records exclusively. Beginning 180 days after enactment, both amendments would have required the Attorney General to reduce JAG grant funding by 5% annually for states that have not provided prohibiting records to the FBI on at least 90% of persons "adjudicated mentally incompetent" or "committed to a psychiatric hospital," and by 10% annually following five years from enactment for the same reasons. It would have also amended the Brady Act ( P.L. 103-159 ) and required federal courts to provide records on persons prohibited from possessing firearms for reasons related to mental incompetency and commitment to the FBI for inclusion in NICS. It would also have required federal agencies to report annually to Congress on the number of records they submit to NICS. The Manchin-Toomey, Grassley, and Murphy amendments included provisions that would have addressed the issue of mental incompetency and firearms eligibility. While the Senate blocked all these amendments on procedural grounds, Congress included a provision in an enacted bill that addresses VA mental incompetency determination procedures that hinge on the ATF definition of "adjudicated as a mental defective." In addition, the Obama Administration published several related regulations. When Congress considered the NICS Improvement Amendments Act of 2007 ( P.L. 110-180 ), some opposition to the underlying bill coalesced around an assertion that, under those amendments, any veteran who was or had been diagnosed with Posttraumatic Stress Disorder (PTSD) and was found to be a "danger to himself or others would have his gun rights taken away ... forever." However, a diagnosis of PTSD in and of itself is not a disqualifying factor for the purposes of gun control under the NICS improvement amendments, previous law, or current law. The Veterans' Medical Administration has rarely submitted any disqualifying records on VA medical care recipients to the FBI for inclusion in NICS for any medical/psychiatric reason (like PTSD). While veterans with PTSD or any other condition, who have been involuntarily committed under a state court order to a VA medical facility because they posed a danger to themselves or others, are ineligible to ship, transport, receive, or possess a firearm or ammunition under federal law, the Veterans' Medical Administration would not always make a related referral about that ineligibility to the FBI. Instead, the state in which the court resides would submit the disqualifying record to the FBI, if such a submission would be appropriate and permissible under state law. Also, under the GCA, there is a provision that allows the Attorney General (previously, the Secretary of the Treasury) to consider petitions from a prohibited person for "relief from disabilities" and have his firearms transfer and possession eligibility restored. Since FY1993, however, a rider on the ATF annual appropriations for salaries and expenses has prohibited the expenditure of any funding provided under that account on processing such petitions. As a result, except for as provided under P.L. 110-180 , the only way a person can reacquire his lost firearms eligibility is to have his civil rights restored or disqualifying criminal record(s) expunged or set aside, or to be pardoned for his crime. Consequently, prior to P.L. 110-180 , a mental defective-related NICS referral by the VA to the FBI related to PTSD or any other condition could have been considered a life-long prohibiting factor with regard to firearms eligibility. Under P.L. 110-180 , Congress included provisions that require the VA to inform veterans and other beneficiaries (surviving spouses and dependents) beforehand that by having a fiduciary appointed on their behalf they will be considered "mentally incompetent" and, as a consequence, will lose their firearms eligibility under federal law. In addition, the act requires the VA to establish a process under which veterans or other beneficiaries who have been deemed mentally incompetent may file for administrative relief and possibly have their gun rights restored if they are able to demonstrate that they are no longer afflicted by a disqualifying condition. The act makes the same requirement of any other federal agency that makes such a referral to the FBI. As a condition of federal assistance, the same requirement is made of states as well. According to the BJS, as of June 1, 2012, there were 153,298 files in the NICS mental defective file, which had been referred to the FBI by the VA. Those VA files accounted for 99.3% of mental defective files (154,458) referred to the FBI by a federal department or agency. According to the FBI, as of December 31, 2015, there were 263,492 files, a 71.9% increase over the early count, or 98.8% of the mental defective files (260,381) referred to the FBI by a federal department or agency. In the view of some Members of Congress, it is questionable that other federal agencies, such as the Social Security Administration, that provide similar disability and income maintenance benefits to persons who are mentally incapacitated, refer relatively few, if any, firearms-related disqualifying records about beneficiaries whom they serve to the FBI. Moreover, there are other individuals in the U.S. population who are similarly incapacitated due to their age-related infirmities or mental disabilities, but in many cases there are no mechanisms for state or local authorities to make similar referrals to the FBI. As a consequence, even with the changes put in place by P.L. 110-180 , those Members of Congress may view the VA's continued referral of firearms-related disqualifying records on veterans who have had a fiduciary appointed on their behalf, but who had not behaved in a threatening or dangerous manner, to be an unwarranted indignity placed on individuals who had served their country honorably in the Armed Forces. Other Members of Congress would maintain that the VA has dutifully complied with the law and that public safety is enhanced by making those referrals to the FBI. They might also argue that opposition to the VA policy waned between November 1998 and the 2007 congressional debate, demonstrating that veterans who were "adjudicated mental defective" rarely, if ever, sought to acquire and were subsequently denied firearms in a manner that could be described as an injustice. Those Members would likely underscore that, in their view, the VA's current policy does not diminish national recognition of those veterans' honorable service. Rather, the VA's policy has been implemented to protect those veterans and others from the harm that might result if they acquired a firearm and used it improperly due to reasons possibly related to their mental incompetency. The Manchin-Toomey ( S.Amdt. 2908 ) to H.R. 3762 would have amended veterans law to prohibit the VA from turning records on veterans or other beneficiaries who had been determined mentally incompetent over to the FBI for inclusion in NICS index unless certain notification and review conditions were met. Under these amendments, the Secretary of Veterans Affairs first would have been required to provide to a beneficiary, who has been deemed mentally incompetent for VA purposes, notification that includes (a) the determination made by the Secretary; (b) a description of the implications of such a determination upon one's firearms eligibility under federal law; and (c) the right to request review by the board that would be established by the VA or a court of competent jurisdiction. Within 180 days of enactment, the Manchin-Toomey amendment would have required the Secretary of Veterans Affairs to establish a board that would have reviewed, upon request by a VA beneficiary, whether the individual's status as mentally incompetent for the purpose of receiving benefits prevented him from possessing firearms under the GCA. As mentioned above, a VA beneficiary would have had the option to request such a review from this board or from a court of competent jurisdiction. Under the Manchin-Toomey provision, the board would have been able to consider the individual's honorable discharge or decoration in determining whether he or she "cannot safely use, carry, possess, or store firearms due to mental incompetency." A beneficiary who receives a determination from the board also would have been permitted to seek judicial review in federal court of the board's decision. It appears that until this review process is complete, a person would not have been considered "adjudicated as a mental defective" for purposes of firearms eligibility. As such, it appears that the Secretary, by implication, would not have been permitted to make a NICS referral during this period of time. If a beneficiary did not request review by a board or court of competent jurisdiction within 30 days after receiving the initial notification from the Secretary, then the beneficiary who was to be determined mentally incompetent would have been considered "adjudicated as a mental defective" for purposes of the GCA. This suggests that the Secretary would not have been able to make a NICS referral until the 30-day period has passed. For VA beneficiaries who had already been considered "adjudicated as a mental defective" after being determined mentally incompetent by the VA, the Manchin-Toomey amendment would have required the Secretary to provide, within 90 days of enactment, written notice to these individuals of the opportunity for administrative review and appeal, as would have been established by the amendment. Furthermore, the amendment would have also required the Secretary to review and revise all policies and procedures whereby beneficiaries are determined to be mentally incompetent, so that any individual "who is competent to manage his own financial affairs, including receipt of Federal benefits, but who voluntarily turns over the management thereof to a fiduciary is not" considered "adjudicated mentally defective" for purposes of the GCA. Within 30 days of conducting this review, the Secretary would have been required to submit to Congress a report detailing the results of the review and any resulting policy and procedural changes. On June 15, 2016, Senator Manchin submitted a nearly identical amendment (S.Amdt. 4716) during consideration of the FY2017 Departments of Commerce and Justice, Science, and Related Agencies (CJS) Appropriations bill ( H.R. 2578 , the expected vehicle for S. 2837 ); however, the amendment was not brought to a vote. The Grassley amendments ( S.Amdt. 2914 and S.Amdt. 4751 ) to H.R. 3762 and H.R. 2578 would have amended veterans law to prohibit the Department of Veterans' Affairs (VA) from turning records on veterans or other beneficiaries who had been deemed mentally incompetent to the FBI for inclusion in NICS without "the order or finding of a judge, magistrate, or other judicial authority of competent jurisdiction that such person is a danger to himself or herself, or others." In addition, both Grassley amendments ( S.Amdt. 2914 and S.Amdt. 4751 ) to H.R. 3762 and H.R. 2578 would have replaced the term "adjudicated as a mental defective" with the term "mentally incompetent" in both 18 U.S.C. Section 922(d) and (g), and would have amended the GCA to define the terms, "has been adjudicated mentally incompetent or has been committed to a psychiatric hospital," "order or finding," and "psychiatric hospital." These definitions and other language would have narrowed the scope of whose records, and under what circumstances, a federal or state agency could refer to the FBI for inclusion in the NICS mental defective file. By comparison, the Murphy amendment ( S.Amdt. 4750 ) would have codified the ATF current law regulatory definition of "adjudicated as a mental defective," which as described below is much wider in scope than the proposed definition in the Grassley amendment. In addition, on December 3, 2015, Speaker of the House Paul Ryan indicated that he favored further consideration of mental health reform proposals in lieu of gun control legislation. He asserted that part of the discussion surrounding mental health legislation is who should not have access to guns due to their mental incapacities. A possible legislative vehicle in the House was the Helping Families in Mental Health Crisis Act of 2015 ( H.R. 2646 ), sponsored by Representative Tim Murphy. However, H.R. 2646 did not include any provisions that directly addressed mental incompetency and gun control. On the Senate side, by comparison, a potential legislative vehicle was the Mental Health Reform Act of 2015 ( S. 1945 ), sponsored by Senator Bill Cassidy. Senator Cornyn indicated that a bill he had introduced, the Mental Health and Safe Communities Act of 2015 ( S. 2002 ), would have likely also been considered, if and when the Senate debated mental health care reform. Like the Grassley amendments, S. 2002 included a provision (in Title III) that would have amended the Gun Control Act of 1968 with a statutory definition of "adjudicated mentally incompetent" that is arguably narrower than the current law regulatory definition of "adjudicated mental defective." Congress included the Helping Families in Mental Health Crisis Act in the 21 st Century Cures Act (Division B of P.L. 114-255 ). Although this act did not include any of the provisions included in the amendments described above, it did include a provision that addressed veterans' benefits, mental incompetency, and gun control. In December 2016, Congress included a provision in the 21 st Century Cures Act ( P.L. 114-255 ) that codified elements of the VA's implementation of NIAA. Section 14017 of this act amended 38 U.S.C. with a new Section 5501A to prohibit the VA Secretary from making certain determinations of mental competency about VA benefits claimants, unless the claimant is: notified of the proposed adverse determination and the supporting evidence; provided an opportunity to request a hearing to address such a proposed adverse determination; given the opportunity to present evidence, including an opinion from a medical professional or other person, on his or her capacity to manage his or her own monetary benefits paid to or for him or her by the Secretary under this title; and given the opportunity to be represented by counsel at a hearing and to bring a medical professional or other person to provide relevant testimony at any such hearing at no expense to the government. In short, this provision gives benefit claimants the ability to present evidence from their own health care providers and have counsel present during an administrative hearing to contest a determination of mental incompetency by the VA. As part of President Obama's post-Newtown plan to reduce gun violence, the Attorney General undertook a comprehensive review of federal law to identify "potentially dangerous individuals" who ought not be trusted with firearms. Both the ATF and Social Security Administration (SSA) published draft rules that addressed mental incompetency and firearms transfer and possession eligibility. Neither rule has been made permanent, however. Under current law, any person who has been "adjudicated as a mental defective" or who has been committed to a mental institution is ineligible to possess or receive firearms or ammunition. Under 27 C.F.R. §478.11, the term "adjudicated as a mental defective" is defined to include a determination by a court, board, commission, or other lawful authority that a person, as a result of marked subnormal intelligence or a mental illness, incompetency, condition, or disease, (1) is a danger to himself or others, or (2) lacks the mental capacity to manage his own affairs. The term also includes (1) a finding of insanity by a court in a criminal case and (2) those persons found incompetent to stand trial or found not guilty by reason of lack of mental responsibility pursuant to articles 50a and 72b of the Uniform Code of Military Justice, 10 U.S.C. Sections 850a, 876(b). Under the same section, the term "committed to a mental institution" is defined to include A formal commitment of a person to a mental institution by a court, board, commission, or other lawful authority. The term includes a commitment to a mental institution involuntarily. The term includes commitment for mental defectiveness or mental illness, It also includes commitments for other reasons, such as for drug use. The term does not include a person in a mental institution for observation or a voluntary admission to a mental institution. Under the same section, the term "mental institution" is defined to include mental health facilities, mental hospitals, sanitariums, psychiatric facilities, and other facilities that provide diagnoses by licensed professionals of mental retardation or mental illness, including a psychiatric ward in a general hospital. As part of the President's gun violence reduction plan, the Department of Health and Human Services (HHS) published a proposed rule that addressed the Health Insurance Portability and Accountability Act (HIPAA) Privacy Rule, a provision that had been interpreted possibly to be a legal barrier that prevented some states from sharing records with the FBI about persons who had been "adjudicated mental defective." On January 7, 2014, ATF published a notice of proposed rulemaking to amend the definition of "adjudicated as a mental defective. The draft rule seeks to clarify that that the term includes 1. any person found not guilty by reason of mental disease or defect; 2. any federal, state, local, and military courts that can find persons incompetent to stand trial or not guilty by reason of insanity, mental disease or defect, lack of mental responsibility, or insanity, by removing the reference to "articles 50a and 72b of the UCMJ" and adding "by a court in a criminal case"; and 3. any person found guilty but mentally ill by a court in a criminal case in a jurisdiction that provides such a finding. In addition, the draft rule seeks to clarify that the term "committed to a mental institution" includes 1. 1.involuntary commitment for either inpatient or outpatient treatment. As part of this rulemaking, ATF considered whether commitments that occur when persons are under the age of 18 years ought to be included. In addition, the draft rule underscored that voluntary admission to a mental institution or a temporary admission for observation would not fall under the term "committed to a mental institution." However, in the latter case, it would be included if such an admission turns into a qualifying commitment as a result of a formal commitment by a court, board, commission, or other lawful authority. On May 5, 2016, the Social Security Administration (SSA) published a proposed rulemaking to identify on a prospective basis individuals receiving Disability Insurance benefits, who meet the definition given above of "adjudicated mental defective." As described below, the VA has been making similar determinations since the inception of the NICS program in 1998. Such determinations would be based on has filed a claim for Social Security or SSI benefits based on a disability; has been determined to have an impairment (or combination of impairments) that meets or medically equals the criteria of one of the mental disorders specified in SSA's Listing of Impairments; a primary diagnosis code based on mental impairment, which is basis for the disability; has a primary diagnosis code based on a mental impairment; has attained age 18 but not yet attained Social Security's full retirement age (currently 66); and has had a representative payee appointed because he or she has been determined by SSA to be mentally incapable of managing benefit payments. On December 19, 2016, the SSA published a final version of this rule, with an effective date of January 18, 2017; and SSA NICS referrals to begin on December 19, 2017. The Manchin-Toomey amendment ( S.Amdt. 2908 ) and the Grassley amendments ( S.Amdt. 2914 and S.Amdt. 4751 ) included provisions that would require studies of mass violence and mass shootings. The Manchin-Toomey amendment would have provided for the establishment of a National Commission on Mass Violence. The commission would have been tasked with studying the availability and nature of firearms, including the means of acquiring firearms; issues related to mental health; and all positive and negative impacts of the availability and nature of firearms on incidents of mass violence or in preventing mass violence. Under this provision, the Senate Majority Leader and the Speaker of the House would have appointed six members each to serve on the commission within 30 days of enactment. The provision would have stipulated further that not more than six commission members could have been from the same party. The commission members would have been charged with empaneling a field of non-elected experts in four categories: firearms, mental health, school safety, and mass media. It would have required an interim report within three months of the commission's first meeting and a final report within six months of that date. The Grassley amendments would have required the Attorney General to instruct the Director of the National Institutes of Justice (NIJ) to conduct a study of the "various sources and causes of mass shootings including psychological factors, the impact of violent video games, and other factors." In this endeavor, the NIJ Director would have been instructed to contact with the National Academy of Sciences to conduct this study jointly with a panel of five experts. The Administration's FY2017 budget request included $1.306 billion for ATF. This amount was $66.1 million above the FY2016 appropriation. This proposed increase included $11.8 million in technical and base adjustments to anticipate inflation and other variable costs and $54.3 million in budget enhancements. As part of President Barack Obama's gun safety initiative, these budget enhancements included $35.6 million for ATF to hire 80 additional special agents and 120 industry operations investigators; $4 million (including eight positions) to upgrade the National Integrated Ballistics Information Network (NIBIN) and ballistic imaging hardware and software; $5.7 million and 22 positions to help process federal firearms and explosives licenses and National Firearms Act (NFA) applications, and expand the use of firearms trace data by ATF and other federal, state, and local law enforcement agencies; and $9 million to integrate ATF's disparate case management systems into a Next Generation Case Management system. The FY2017 budget request also called for the repeal of two appropriations limitations that prevent ATF from (1) requiring federal firearms licensees (FFLs) to inventory their gun stocks prior to annual inspections and (2) changing an administrative definition of "curios and relics." In addition, the President's gun safety initiative included $35 million for the Federal Bureau of Investigation (FBI) to address an increase in firearms background checks through the National Instant Criminal Background Check System (NICS); $55 million for grants to state, local, tribal, and territorial authorities under the National Criminal History Improvement Program (NCHIP) and NICS Amendments Record Improvement Program (NARIP, P.L. 110-180 ); and $10 million for gun violence research. As discussed above, NICS was established by the FBI in November 1998 to facilitate firearms background checks. Through both NCHIP and NARIP, the DOJ Office of Justice Programs provides grants to states and territories to improve NICS accessibility to state records on persons prohibited from acquiring firearms under federal or state law. The Senate Committee on Appropriations rS. 3040 reported a bill ( S. 2837 ) that would have provided ATF with $1.259 billion for FY2017. On June 7, 2016, the House Committee on Appropriations reported a bill ( H.R. 5393 ) that would have provided ATF with $1.258 billion for FY2017. Both bills included ATF funding limitations with regard to FFL inventory taking and curios and relics, which the Administration had requested to be removed. With regards to NICS, report language accompanying both bills indicates that within the amounts that would be appropriated for the FBI funding was provided to fully support NICS. For NCHIP and NARIP, the Senate bill would have provided $75 million and the House bill, $73 million. Under both bills, not less than $25 million of the amounts given above would have been designated for purposes under P.L. 110-180 . Neither committee included funding for gun research in the House- and Senate-reported Departments of Labor, Health and Human Services (HHS), and Education Appropriations bills (and H.R. 5926 ). Both Committees included a limitation in these bills that has prohibited the Centers for Disease Control and Prevention (CDC) since FY1997 and HHS since FY2012 from using appropriated funding to advocate or promote gun control. Another provision was also included in these bills that has prohibited any department or agency since FY2012 from engaging in "publicity or propaganda" related to restricting any legal consumer product, including the advocacy or promotion of gun control. At issue, in 1996, was CDC-sponsored research by Dr. Arthur L. Kellermann, who had his findings published in 1993 in the New England Journal of Medicine . It is significant to note that, in 1996, the House Committee on Appropriations heard testimony from several witnesses who either provided "scathing attacks" or "passionate defenses" of Kellermann's work. At issue, in 2011, were three National Institutes of Health (NIH)-sponsored research initiatives that examined links between alcohol availability and gun violence, as well as parental gun ownership as a hazard to children. In the aftermath of the December 2012, Newtown, CT, mass shooting, President Obama released a plan, Now Is t he Time , to reduce gun violence, in which he asserted that "research on gun violence is not advocacy." President Obama issued a memorandum directing CDC and other agencies within HHS to "conduct or sponsor research into the causes of gun violence and the ways to prevent it." On September 29, 2016, President Obama signed into law a Continuing Appropriations Act, 2017 ( P.L. 114-203 ), which funded most of the federal government through December 9, 2016, at nearly the same levels as appropriated for FY2016. For those activities and projects funded under P.L. 114-203 , the act provided an across-the-board decrease of 0.496% for the period October 1, 2016, through December 9, 2016. On December 10, 2016, the President signed into law a Further Continuing and Security Assistance Appropriations Act, 2017 ( P.L. 114-254 ), which funds most of the federal government through April 28, 2017, at nearly the same levels as appropriated for FY2017. For those activities and projects funded under P.L. 114-154 , the act provides an across-the-board decrease of 0.1901% for the period, December 10, 2016, through April 28, 2017. Like the previous FY2017 continuing resolution, P.L. 114-254 also extends the long-standing gun control limitations on ATF, CDC, HHS, and the Departments of Labor and Education discussed above through that date.
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In the 114th Congress, the Senate debated several gun proposals following two high-fatality mass shootings in December 2015 and June 2016. After both shootings, Senate debate coalesced around the following issues: Should the Attorney General be given the authority to deny firearms (and explosives) transfers to persons she determines to be "dangerous terrorists"? Should federal background check requirements be expanded to include intrastate firearms transfers among private, unlicensed persons? Should grants be provided or withheld to encourage state, local, municipal, tribal, and territorial authorities to improve computer access to records on persons prohibited from possessing firearms for the purposes of background checks? Should definitions related to mental incompetency in federal gun control regulations be codified or revised? Debate on the latter three issues mirrored congressional debate that followed the December 2012, Newtown, CT, mass shooting. Similar efforts were made in the House of Representatives to bring gun control proposals to the House floor for general debate and votes, but those efforts proved unsuccessful. While Congress did not pass any of these proposals, Congress included a provision in the 21st Century Cures Act (P.L. 114-255) that codified certain Department of Veterans' Affairs procedures related to benefit claims, mental incompetency determinations, and gun control. In December 2015, the Senate debated several gun control amendments during consideration of the Restoring Americans' Healthcare Freedom Reconciliation Act (H.R. 3762). Two of those amendments (S.Amdt. 2910 and S.Amdt. 2912) addressed firearms transfers and dangerous terrorists. Another amendment (S.Amdt. 2908) would have expanded federal firearms background check requirements to cover private, intrastate transfers between non-gun dealers, when such transfers were arranged in public fora, such as on the Internet or at a gun show or flea market. Still another amendment (S.Amdt. 2914) would not have expanded the scope of federal background check requirements, but included provisions to improve background checks. In June 2016, the Senate again debated several gun control amendments during consideration of the FY2017 Departments of Commerce and Justice, Science, and Related Agencies (CJS) Appropriations bill (H.R. 2578, the expected vehicle for S. 2837). One amendment (S.Amdt. 4750) would have expanded the scope of federal background check requirements and captured more private, intrastate firearms transfers than the amendment (S.Amdt. 2908) to H.R. 3762. In addition, several amendments were considered that would have addressed firearms transfers and dangerous terrorists (S.Amdt. 4720, S.Amdt. 4749, S.Amdt. 4858, and S.Amdt. 4859). As before, another amendment (S.Amdt. 4751) would not have expanded the scope of federal background checks requirements, but included provisions to improve information sharing for background check purposes on persons who are ineligible to receive or possess firearms. For context, this report provides background on the two major federal gun control statutory frameworks: the National Firearms Act of 1934 (NFA), as amended, and the Gun Control Act of 1968 (GCA), as amended. It provides analysis of the Senate amendments offered in the 114th Congress that would have addressed the above listed issues. It tracks the status of gun control-related appropriations for the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF), Federal Bureau of Investigation National Instant Criminal Background Check System (NICS) Section, National Criminal History Improvement Program (NCHIP), and NICS Amendments Record Improvement Program (NARIP).
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The DOE Weatherization Assistance Program enables low-income families to permanently reduce their energy bills by making their households more energy efficient. DOE program guidelines specify that a variety of energy efficiency measures are eligible for support under the program. The measures include insulation, space-heating equipment, energy-efficient windows, water heaters, and efficient air conditioners. The program was created under Title IV of the Energy Conservation and Production Act of 1976 ( P.L. 94-385 ). The statute specifies that the program's primary purpose is to increase the energy efficiency of dwellings owned or occupied by low-income persons, reduce their total residential energy expenditures, and improve their health and safety, especially low-income persons who are particularly vulnerable such as the elderly, the handicapped, and children. The 1973 oil crisis caused rapid increases in energy prices, which caused major economic dislocations for the nation. As one result, the program was designed to save imported oil and cut heating bills for low-income households. This included senior citizens living on fixed incomes and Social Security, who were especially hard hit by rising energy bills. The Department of Health and Human Services (HHS) operates a Low-Income Home Energy Assistance Program (LIHEAP), which was designed to help pay energy bills for low-income households. Since the inception of LIHEAP in 1981, up to 15% of funds could be used for weatherization. In 1990, the statute was amended to allow states to use up to 25% of funds for weatherization, without requiring a waiver from HHS. At first, weatherization providers emphasized low-cost measures, such as covering windows with plastic sheets and caulking and weatherstripping windows and doors. Many of these activities involved emergency and temporary measures. With the accumulation of experience over time, the emphasis shifted to more permanent and more cost-effective measures. The range of qualified measures expanded to include storm windows and doors, attic insulation, space heating and water heating systems, furnace and boiler replacements, and cooling efficiency measures. The cooling efficiency measures include activities such as air conditioner replacements, ventilation equipment, and screening and shading devices. DOE recounts that the use of home energy audits was key to adapting portfolio of measures: In the 1990s, the trend toward more cost-effective measures continued with the development and widespread adoption of advanced home energy audits. This proved to be a key advance for weatherization service providers since it required every home to be comprehensively analyzed before work began in order to select the most cost-effective measures and the best approach. This custom analysis of every home has become the hallmark of weatherization and ensures each client receives the most cost-effective treatment. DOE's Weatherization Program is one of the largest energy efficiency programs in the nation. It is implemented in all 50 states, in the District of Columbia, in the U.S. trust territories, and by Native American Tribes. Vulnerable groups are targeted, including the elderly, people with disabilities, and families with children. A high priority is given to households with an elderly or disabled member. In FY2000, 49% of the weatherized households were occupied by an elderly resident or by a person with a disability. The American Recovery and Reinvestment Act of 2009 (Recovery Act, P.L. 111-5 ; §407a) revised the program guidelines to raise the low-income eligibility ceiling from 150% to 200% of the poverty level. Low-income households have lower total energy use and smaller bills than the non-low-income population. However, those bills represent a higher proportion of total income. For 2009, Oak Ridge National Laboratory (ORNL) estimated the average energy cost burden at about 10% of income for low-income households compared to about 3.3% for non-low-income households. DOE elaborates further: Low-income households have lower average residential energy usage and lower residential energy bills than the non-low-income population, but this difference is not in proportion to household income. The average income of low-income households as provided in the 2005 RECS and adjusted for inflation was estimated at $18,624 compared to $71,144 for non-low-income households. In 2009 the group energy burden of low-income households, defined as average residential energy expense divided by average income, was estimated to be 10 percent of income for low-income households compared to 3.3 percent for non-low-income households.... Households that actually received energy payment assistance, estimated at just over 5 million in 2005, had an even higher energy burden of 11.5 percent of income. DOE employs a formula to allocate funding to the states and territories. Each state and territory, in turn, decides how to allocate its share of the funding to local governments and jurisdictions. Funds made available to the states are allocated to local governments and nonprofit agencies for purchasing and installing energy efficiency materials, such as insulation, and for making energy-related repairs. The law directs DOE to reserve funds for national training and technical assistance (T&TA) activities that benefit all states and Native American Tribes. DOE allocates funding for T&TA activities at both the state and local levels. The total funding for national, state, and local T&TA was originally limited to 10% of an annual congressional appropriation. The Recovery Act allowed the T&TA share to increase temporarily to 20%. The remaining funds comprise the total allocation to state programs. The program allocation consists of two parts: the base allocation and the formula allocation. The base allocation for each state is fixed, but the amount differs for each state. The fixed base was computed so that a revised formula would not cause large swings from previous allocations, which could disrupt a state's program operations. Appendix A provides a history of total annual funding. In FY2010, a new program account for "Innovations in Weatherization" was funded. The new activity was designed to demonstrate new ways to increase the number of low-income homes weatherized and lower the federal cost per home for residential retrofits, while also establishing a stable funding base. Partnerships with traditional weatherization providers such as non-profits, unions, and contractors is the focus. The partners are expected to leverage financial resources, with a goal of $3 of non-federal contributions for each $1 that DOE provides. The distribution of total formula allocations across the states is based on three factors: the relative size of the low-income population, climatic conditions, and residential energy expenditures. The low-income population factor is the share of the nation's low-income households in each state expressed as a percentage of all U.S. low-income households. The climatic conditions factor is obtained from the heating and cooling degrees for each state, treating the energy needed for heating and cooling proportionately. The residential energy expenditure factor is an approximation of the financial cost burden that energy use places on low-income households. In the event of funding cuts below a minimum threshold level, DOE program rules specify how cuts would be carried out. The rule provides funding according to four priority levels. In descending order, the priorities are: national training and technical assistance (TTA) activities, TTA for state and local levels, base allocation to states, and—if the funds remaining after TTA exceed a threshold of $209.7 million—then a formula is used to spread the remainder among the states. Table 1 illustrates these priorities. In the other case—if the funds remaining after the total TTA allocation are less than $209.7 million—then there is no formula allocation and the base allocation is reduced proportionally. Funding continuity has been elusive for this program. Over its history, WAP program funding has followed an up-and-down pattern, framed by occasional funding spikes and proposals to eliminate program funding and operations. The chart in Figure B -1 of Appendix B, and the data in Table A -1 of Appendix A, show the variation in the program's historical funding trend, calibrated in constant 2010 dollars. Table A -1 shows that the accumulated congressional appropriations for the 32-year period from FY1977 through FY2008 reached a sum of nearly $8.7 billion. For FY2009, the Recovery Act made a special one-time appropriation of $5.0 billion, which added about 57% to the sum of all previous appropriations through the end of FY2008. Figure B -1 shows the alternating pattern of support, characterized by occasional agreements—and periods of marked differences—between administration and congressional funding viewpoints. A few observations on this history: Funding Range. Except for the FY2009 Recovery Act, single-year program funding has ranged between a high of about $500 million in FY1979 to a low of about $150 million in FY1996 (constant FY2010 dollars); Funding Trend. Except for the FY2009 Recovery Act appropriation, program funding has been on a long-term downtrend since FY1979 (constant FY2010 dollars); Past Requests for Termination. In 8 out of 34 years (from FY1978 through FY2011), the administration requested zero funding (program termination): FY1982, FY1983, FY1984, FY1987-FY1990, and FY2009; Administration-Congress Agreements. In 7 years of the 35-year funding history from FY1977 through FY2011, Congress approved nearly the same funding (less than 6% difference) level as the administration requested: FY1979, FY1980, FY1981, FY1985, FY2001, FY2006, and FY2010; Request-Appropriation Percent Differences. Including the 8 years of zero funding requests, in 20 out of 35 years, the final congressional appropriation differed (plus or minus) from the administration request by more than 20%; Request-Appropriation Differences Larger than $50 Million. In 20 out of 35 years (since FY1977), the final congressional appropriation differed (plus or minus) from the administration request by more than $50 million; Appropriation Exceeded Request by $200 Million. In 10 out of 35 years (since FY1977), Congress appropriated a funding level that exceeded the administration request by more than $200 million (in 2010 dollars): FY1982-FY1984, FY1987–FY1992, and FY2009. Congress started the Weatherization Program in FY1977, during the Ford Administration. Prodded by the second oil import crisis, funding was driven rapidly upward during the Carter Administration through FY1980. For FY1981, the Carter Administration requested $428.2 million (in constant 2010 dollars), which the 96th Congress approved. In January 1981, the outgoing Carter Administration issued a DOE FY1982 budget request that sought $402.8 million (in constant 2010 dollars) for the Weatherization Program. Shortly after coming into office in January 1981, the incoming Reagan Administration reversed the previous trend by requesting that $26.2 million be rescinded from the FY1981 appropriation. The 97th Congress approved the rescission, bringing program funding down to $376.6.0 million (in constant 2010 dollars) . In March 1981, the Reagan Administration issued an FY1982 request for zero funding, noting that it planned to restructure WAP as a block grant program under the Department of Housing and Urban Development. In DOE's FY1983 request, the Reagan Administration again proposed to terminate the Weatherization Program and other DOE grant programs: The Energy Conservation Grants account consolidates financial and technical assistance programs carried out under the Energy Conservation appropriation which are proposed for termination in FY1983 in support of the Administration's proposal to dismantle DOE. These programs include State and Local Assistance.... The budget reductions are in response to the fact that motivated by rising energy cost and federal tax policies, individuals, businesses and other institutions have undertaken major conservation efforts. The President's economic recovery program, in conjunction with oil price decontrol and increasing natural gas prices will accelerate this trend. Public awareness of energy conservation benefits and the high level of private investment in energy conservation clearly show that the State/Local grant programs do not warrant further federal support. Despite the zero request, Congress approved nearly $473 million in 2010 dollars for FY1983. The Reagan Administration sought zero funding again in FY1984, FY1987, FY1988, and FY1989. Following FY1983, appropriations trailed downward steadily—and stood at about $258 million in 2010 dollars in FY1989. In parallel to the Reagan Administration requests for zero funding in FY1987, FY1988, and FY1989, the George H.W. Bush Administration sought zero funding for FY1990 and only relatively small amounts for FY1991 ($22 million, in 2010 dollars) and FY1992 ($35 million, in 2010 dollars). In its first request, the Clinton Administration sought a major increase for FY1994 ($332 million, in 2010 dollars), and sustained the request at about that level for FY1995. Congress approved most of those two requests. For FY1996, the Administration came back with a request at nearly the same level (about $306 million, in 2010 dollars), but Congress approved only about $150 million (in 2010 dollars)—less than half the request. In real dollar terms, this was the lowest appropriation since FY1977. For FY1997 through FY2001, the Administration's requests hovered in a range from about $190 million to $200 million, in 2010 dollars. Congress generally approved $20 million to $40 million less than those requests, in 2010 dollars. For FY2001, Congress approved about $187 million (in 2010 dollars), which was just about $1 million less than was requested by the outgoing Clinton Administration. In May 2001, President George W. Bush's National Energy Policy Development (NEPD) Group released the National Energy Policy Report. In regard to improving national energy security, that report stated: Energy security also requires preparing our nation for supply emergencies, and assisting low-income Americans who are most vulnerable in times of supply disruption, price spikes, and extreme weather. The report cited the cost-effectiveness of the program: Currently, each dollar spent on home weatherization generates $2.10 worth of energy savings over the life of the home; with additional economic, environmental, health, and safety benefits associated with the installation and resulting home improvements. Typical savings in heating bills, for a natural gas heated home, grew from about 18 percent in 1989 to 33 percent today. As one part of the plan to assist low-income people with high energy costs, the report indicated that the Bush Administration was committed to increasing support for DOE's program over the long-term. Specifically, the NEPD Group recommended that: ... the President increase funding for the Weatherization Assistance Program by $1.2 billion over ten years. This will roughly double the spending during that period on weatherization. Consistent with that commitment, the FY2002 Budget includes a $120 million increase over 2001. As Table A -1 and Figure B -1 show, the Congress responded to the President's funding initiative by approving a nearly 50% increase for FY2002—raising funding from about $187 million to about $277 million, in constant 2010 dollars. The requests—and appropriations—climbed steadily for the next four years, reaching $261 million in FY2006. After that, the requests turned sharply downward and appropriations dropped slightly, standing at $232 million in FY2008. The FY2009 request observed that a 2003 assessment had rated the program as "moderately effective," and that: the program coordinates effectively with other related government programs in its efforts to meet interrelated Departmental goals and achieves its goals of a favorable benefit-cost ratio and other performance goals, based on internal programmatic assessments. DOE also noted that a new evaluation of the program's benefits and costs was underway. However, in a reversal of its previous requests, the George W. Bush Administration requested that funding for the Weatherization Program be terminated in FY2009. The main rationale given for program termination was that the energy efficiency technology programs operated by DOE's Office of Energy Efficiency and Renewable Energy (EERE) provided a much higher benefit-to-cost ratio than that for the Weatherization Program. Specifically, the narrative for the EERE in DOE's FY2009 Congressional Budget Request stated that: In FY2009, Weatherization Assistance Program funds are redirected to R&D programs which deliver greater benefits. EERE's Energy Efficiency portfolio has historically provided approximately a 20 to 1 benefit to cost ratio. In comparison, Weatherization has a benefit cost ratio of 1.53 to 1. Under the Obama Administration, the American Recovery and Reinvestment Act of 2009 (Recovery Act, P.L. 111-5 ) identified the program as one avenue to help address the recession and provided the program with a major one-time increase—$5 billion to weatherize an estimated 600,000 homes. This objective aimed to help achieve the President's goal of weatherizing one million homes per year. In addition to the funding increase, some amendments to the original authorizing law were enacted. The amendments allowed more cost-effective measures to be installed in more homes. One amendment raised the ceiling on cost per dwelling from $2,500 to $6,500. The Recovery Act aimed to stimulate the U.S. economy, create jobs, and make infrastructure investments in energy and other areas. During congressional consideration of the Recovery Act, and following its enactment, the conventional wisdom was that DOE's Weatherization Program was about as close to meeting the definition of "shovel ready" as virtually any program in DOE's portfolio. Specifically, the Recovery Act weatherization effort had the following attributes: an existing programmatic infrastructure, including processes and procedures, which had been in place for many years. DOE's Inspector General observed that: The techniques for weatherization tasks were well known and comparatively uncomplicated, and the requisite skills were widely available; performance metrics were relatively easy to establish and understand; the potential benefits for low income citizens were easily recognized; and, the potential beneficial impact on energy conservation was obvious. With that well-entrenched program structure, there was a strong expectation that the $5 billion in Recovery Act funds would have a prompt and easily measurable impact on job creation and economic stimulation. The Recovery Act modified the program to incorporate a new labor requirement for "prevailing wage" and to embrace new training requirements. The Recovery Act required that state and local recipients of weatherization funds ensure that laborers be paid at least the "prevailing wage" as determined under the Davis-Bacon Act. This requirement had not been previously applied to weatherization program activities. As a result, grantees lacked information on which to base wage rates. Many grantees chose not to begin work until the prevailing wage rates were formally established by the Department of Labor (DOL). Even after DOL's work was complete, additional delays occurred while grantees prepared guidance for sub-recipients on how to apply the wage rates. Thus, the delivery of Recovery Act-funded weatherization activities did not reach full momentum until after guidance was completed in October 2009. To ensure successful implementation of program criteria under the Recovery Act, DOE required that program personnel at state and community action agencies receive additional training. The aim of the training was to ensure that recipients understood Davis-Bacon Act requirements, new income eligibility requirements, increased allowable costs per unit, and monitoring of work performed by sub-recipients. As with other state and local activities, recession-driven budget shortfalls and staff furloughs delayed many required state training initiatives. Recession-driven state budget shortfalls caused certain states to administer hiring freezes that applied to all employees regardless of the source of their funding, including those tasked with weatherization-related work. In some other states, progress was impacted because personnel involved with the program were subjected to significant state-wide furloughs. Further, the approval of state budgets was delayed in states such as Pennsylvania, as legislators deliberated over how to address overall budget shortfalls. Lacking staff, states were unable to perform required implementation tasks necessary to handle the large infusion of Recovery Act funding for DOE's weatherization program. Without adopted budgets, states did not have any spending authority. As a result, many states were not able to obligate or expend any weatherization program funds. DOE had taken a number of proactive steps to foster timely implementation of the program. In spite of those efforts, grantees had made little progress in weatherizing homes by the beginning of 2010. As of February 2010, the one-year anniversary of the Recovery Act, only a small percentage of Recovery Act weatherization funds had been spent and few homes had actually been weatherized. Only $368.2 million (less than 8%) of the total award of $4.73 billion had been drawn by grantees. With the low spending rates, state and local grant recipients fell significantly short of goals to weatherize homes. The lack of progress by state and local grantees to implement the weatherization program funding alarmed the DOE Inspector General (IG). In early 2010, the IG found that the nation had not realized the potential economic benefits of the $5 billion in Recovery Act funds allocated to the program. In particular, the job creation impact of what many considered to be one of DOE's most "shovel ready" projects had not materialized. Further, the IG observed that modest income residents had not enjoyed the benefits of reduced energy use and better living conditions that had been promised as part of the Recovery Act weatherization effort. The IG's report found: Department officials worked aggressively with the states and other responsible agencies to mitigate these challenges.... However, as a practical matter, program challenges, such as those identified in this report, placed the Recovery Act-funded Weatherization Program "on hold" for up to nine months. Thus, the Recovery Act goals proved to be much more difficult to achieve than originally envisioned. The IG report noted: The results of our review confirmed that as straight forward as the program may have seemed, and despite the best efforts of the Department, any program with so many moving parts was extraordinarily difficult to synchronize. In this case, program execution depended on the ability of the Federal government (multiple agencies, in fact), state government, grant sub-recipients and weatherization contractors, working within the existing Federal and state regulatory guidelines, to respond to a rapid and overwhelming increase in funding. Further, anticipated stimulus impact was affected by certain conditions and events clearly outside of Departmental control including state budget difficulties; availability of trained and experienced program staff; and, meaningful changes in regulatory requirements. Thus, despite the assumption that the program was "shovel ready," the IG uncovered several key administrative and intergovernmental barriers to delivery of Recovery Act funded weatherization services. This part of the report reviews a selection of key studies that examined Weatherization Program management processes, performance, and economic (energy and non-energy) impacts. Performance assessments and evaluation studies are related activities within a family of research on performance measurement and program evaluation. Both activities support the Government Performance and Results Act (GPRA) and the Office of Management and Budget's (OMB's) concerns for federal program management. In general, a performance assessment employs anecdotal data that is collected over a shorter time-frame, with a focus on management responsibilities and budget processes. In contrast, an evaluation study employs survey research methods to gather comprehensive data that is collected over a longer time-frame, with a focus on revealing the net impacts and cost-effectiveness of program operations. The Government Performance and Results Act of 1993 (GPRA, P.L. 103-62 ) established requirements for federal agencies to conduct regular performance assessments based on general methods of management by objectives and strategic planning. The law directs OMB to lead GPRA implementation, in cooperation with federal agencies. OMB describes this responsibility in Part 6 of its Circular A-11: GPRA provides the foundation for performance planning, reporting, and budgeting for Federal agencies. GPRA requires agencies to prepare strategic plans, related performance budgets/annual performance plans, and annual performance reports (31 U.S.C. §1115). The legal requirements for an annual performance plan are met by a performance budget. The annual performance report requirement (APR) will be fulfilled by either the annual performance and accountability report (PAR) or by the congressional budget justification for agencies that choose to produce a separate annual financial report (AFR) and APR. Among more specific GPRA purposes, Circular A-11 identifies a key GPRA purpose to: Improve Congressional decision-making by providing more objective information on achieving statutory objectives, and on the relative effectiveness and efficiency of Federal programs and spending.... Over the years, DOE has integrated its responses to GPRA requirements into its strategic plan, annual performance report, annual performance and accountability report, and annual budget request. DOE notes that it has, since 2002, been working with OMB to assess its programs with the Performance Assessment Rating Tool (PART). Evidently, PART had become the main vehicle for reporting of GPRA assessment requirements. PART is described in greater detail in the next section of the report. Circular A-11 defines program assessment: A determination, through objective measurement and systematic analysis, of the manner and extent to which Federal programs achieve intended objectives. It also defines program evaluation: Program and practice evaluation is an assessment, through objective measurement and systematic analysis, of the manner and extent to which programs or practices achieve intended results. Program and practice evaluations should be performed with sufficient scope, quality, and independence. Although agencies may cite rigorous evaluations commissioned independently by organizations such as the Government Accountability Office, Office of the Inspector General, or other groups, these evaluations should not completely supplant rigorous evaluations commissioned by the agencies themselves. DOE's Weatherization Program has been assessed through a combination of assessment and evaluation methods. DOE's GPRA-driven program assessment tools—strategic plan, annual performance plan, performance and accountability report, and performance budget—tend to be quite broad, focused on the larger agency missions of R&D, science, and defense. Those documents tend to mention the program incidentally, mainly citing achievements in terms of annual number of units weatherized. For a more in-depth examination of program operations, DOE has a history of directing the Oak Ridge National Laboratory (ORNL) to conduct evaluation impact studies. In 1993, DOE published a major evaluation report, the first "scientific" study of program performance, impact, and cost-effectiveness. That report established impact evaluation studies as a key feedback component that promoted program design changes and improvements. However, its cost, complexity, and lag time led DOE to subsequently rely on aggregations of available state-level evaluations. Also, in 1993, GPRA stimulated the emergence of a second track of less in-depth performance assessments that had a shorter-term budget focus. Both tracks of analysis—performance assessments and evaluation studies—have the same general goals of providing feedback that can be used to improve program operations. So both types of studies were selected for review. A performance audit is an assessment tool used to examine the performance and management of a program against objective criteria. It is designed to facilitate oversight and may serve several objectives, including the assessment of program effectiveness and results. From late 2002 through early 2003, DOE's Office of the Inspector General (IG) conducted a performance audit of the program. The audit period included Program Year 2000 (PY2000), PY2001, and planned activities for PY2002. The total DOE budget for the audit review period was $518 million. The purpose of the audit was to "determine whether the program was properly administered and was achieving its goals." The audit was conducted in accordance with Government Auditing Standards for performance audits. The IG observed that the program has a long-established structure for transferring funds to state and local agencies and that improvements over the years had made use of the funds more efficient and effective. As further background, the IG observed that, in addition to DOE funds, state and local agencies also obtain funding for weatherization from the Department of Health and Human Services' (HHS) Low-Income Home Energy Assistance Program (LIHEAP) and other programs funded by utilities, states, and other sources. Local agencies report to DOE annually through state weatherization offices on expenditures, number of units completed, and other performance-related measures. For PY2001, the IG noted that " about 900 agencies received funding that ranged from as low as a few thousand dollars to as high as $4 million." The IG found two local government reporting issues: administrative costs and number of households weatherized. Regarding the first concern, it identified instances where local agencies reported administrative-type expenses as program operating costs: Specifically, we observed that certain organizations inappropriately charged expenses such as administrative staff, office rent, and administrative supplies as direct program costs and thus understated total administrative costs. Public laws and federal regulations limit the amount of weatherization grant funds that may be used for administrative purposes. If local agencies continue to under report administrative costs, states could ultimately exceed statutory limitations for administrative expenses over the life of the grant. DOE advised the IG that it is often difficult for local agencies to operate within the limits for administrative costs. The IG concluded that the DOE Program Office should work more closely with states and local agencies to ensure that administrative costs are minimized and that the costs incurred are reported accurately and consistently. Regarding the concern about local agency reporting on the number of households weatherized, the IG found that: ... data regarding the number of households weatherized was not reported on a consistent basis. For example, data reported by some states related strictly to the number of homes weatherized using Department funds. Other states, however, combined the results of weatherization efforts funded by the HHS LIHEAP with those completed with Departmental funds. Merging performance data for such states distorts program results and could make it appear program efficiencies and energy savings are greater than that actually achieved with available funding. A recent OMB program assessment found that DOE had addressed the IG's concern about distorted efficiency (benefit-cost) measures: Average cost per home employed in the calculation of benefit/cost ratios now reflects total costs (including non-DOE funds) expended per unit in the states whose evaluations were used in the energy savings estimates. This substantially raises the per-unit investment from a DOE-only level making the benefit/cost ratio more conservative. The Performance Assessment Rating Tool (PART) was developed by the Office of Management and Budget (OMB) in 2002 as a key component for implementing GPRA and the President's Management Agenda (PMA), particularly the Budget and Performance Integration initiative. PART was designed to assess program planning, management, and performance against quantitative, outcome-oriented goals. It can inform funding and management decisions aimed at improving program effectiveness. As a diagnostic instrument for evaluating efficiency and effectiveness, PART aims to help managers identify, anticipate, and rectify performance problems. PART was designed to provide a basis for DOE and OMB to agree upon meaningful annual and long-term targets. The PART assessment process aims to unify annual performance targets and goals with long-term goals. PART was designed to be an iterative process, capable of tracking the evolution of program performance over time through periodic reassessments. OMB's recommendations to foster program improvement are central to the PART process. Program offices track actions taken to implement PART recommendations and report those actions to OMB semi-annually. According to OMB, the ongoing cycle of reviewing and implementing PART recommendations, coupled with the use of performance data from assessments and periodic reassessments, signify the perception of PART as an integral process for planning and budget decision-making, as distinguished from a set of one-time program evaluations. PART assessments help inform budget decisions and identify actions to improve results. Agencies are held accountable for implementing PART follow-up actions and working toward continual improvements in performance. PART asks a series of questions that cover four areas: program purpose and design, performance measurement, evaluation, and strategic planning, program management, and program results. To earn a high PART rating, a program must use performance assessment to manage, justify its resource requests on expected (projected) performance, and continually improve efficiency. All of those activities are goals of the Budget and Performance Integration Initiative. The PART performance rating scale is shown below: The summary of a PART report on the DOE Weatherization Program found that it was performing at the "moderately effective" level. The assessment defines the moderately effective rating as follows: In general, a program rated Moderately Effective has set ambitious goals and is well-managed. Moderately Effective programs likely need to improve their efficiency or address other problems in the programs' design or management in order to achieve better results. The PART assessment cited three findings to explain the "moderately effective" rating. First, it noted that the program met its annual performance target for the number of homes weatherized. Second, OMB stated that the program lacked an assessment of performance that was current, comprehensive, and independent. It noted that the program reported on "internal assessments" that showed a favorable benefit-cost ratio. However, OMB found that those assessments relied in part on old data and were conducted by Oak Ridge National Lab (ORNL), which it says is not an "independent" source. Third, OMB noted that the DOE Inspector General identified issues with the way state and local agencies report on program management. DOE responded that it was conducting an independent analysis of the cost-effectiveness of the program and addressing the IG's audit recommendations. The detailed PART assessment report presented trend data for key performance measures, including number of homes weatherized, cost per home, and the overall benefit-cost ratio. Also, it described and rated strategic program features, such as goals, objectives, design, targets, and budgeting. The PART Assessment defined the benefit-cost ratio as a long-term measure of program efficiency. OMB stated that the benefit-cost ratio represents the value of energy saved, divided by program costs. The ratio depended in part on estimated long-term energy prices at the time of the assessment and on an average energy savings per household of 29.1 million British thermal units (MBtu). PART reported that estimates of the benefit-cost ratio for energy savings under various price scenarios ranged from 1.19 to values greater than 2.00, never measuring less than 1.00. PART assessment question number 4.3 asked: Does the program demonstrate improved efficiencies or cost effectiveness in achieving program performance goals each year? The response was: Benefit-cost ratio rose from 1.06 in 1989 to 1.79 in 1996, and then declined to 1.51 and 1.30 in 1999 and 2002, respectively. These estimates depend largely on EIA estimated long-term energy prices. PART question number 2.6, on strategic planning, asked: Are independent and quality evaluations of sufficient scope and quality conducted on a regular basis or as needed to support program improvements and evaluate effectiveness and relevance to the problem, interest, or need? The response touched upon several aspects of the evaluation strategy, including frequency of studies, measurement of non-energy benefits, and independence of the evaluator. It stated: The program does not conduct annual evaluations on a national basis because of the high cost of such evaluation and the limited amount of change that occurs in program activities from year to year. The program has contracted with Oak Ridge National Laboratory (ORNL) to devise evaluation methodologies and report periodically on program results based on state grantee-level performance evaluation. ORNL has also conducted selective evaluation activities designed to inform program management of performance characteristics in areas in which the program performance has been below average (hot climate zones) or in areas in which there has been growing strategic program interest but little evaluation data. The latter includes base load electric measures as well as non-energy benefits. To assure independence, the program should consider using an alternative contractor in future assessments, or at least having future ORNL reports assessed by a third party. As evidence of its evaluation activities, DOE's response included references to several ORNL program metaevaluations and other evaluation studies. Some key ORNL studies are described in the next section. The Government Accountability Office (GAO) defines a performance audit broadly: Performance audits provide objective analysis so that management and those charged with governance and oversight can use the information to improve program performance and operations, reduce costs, facilitate decision making by parties with responsibility to oversee or initiate corrective action, and contribute to public accountability. According to GAO, a performance audit may embrace a wide variety of objectives, including: an analysis of the "relative cost-effectiveness of a program or activity," and/or a determination of the "current status or condition of program operations or progress in implementing legislative requirements." Thus, by GAO's definition, a performance audit may include activities with the same purposes as those of an impact and/or process evaluation study. The Recovery Act directed GAO to conduct bimonthly reviews and reporting on selected states and localities' use of the funds it provided, including the funds for the DOE Weatherization Program. GAO describes these bimonthly review as performance audits. In addition to the bimonthly audits, GAO's response to the directive has included one performance audit that covered only the Weatherization Program. For example, in December 2009, GAO published a performance audit report on Recovery Act funds used by states and localities. The DOE Weatherization Program was one of many programs covered. For the weatherization component, GAO covered 16 states and 24 localities. GAO found that, as of the end of FY2009, states had outlaid about 2% ($113 million) of weatherization funds and had completed about 1% (7,300) of the targeted number of homes to be weatherized. Many contracts between states and local agencies had been delayed due to concerns about staff capacity and new labor requirements. As another example, in May 2010, GAO published another audit report on Recovery Act funds that covered DOE Weatherization Program funds. As of the mid-point in FY2010, states had outlaid about 13% ($659 million) of weatherization funds and had completed about 13% of the targeted number of homes to be weatherized. GAO made several observations about the status of program implementation and offered some recommendations for program improvement. In January 2011, the GAO initiated a performance audit focused solely on Recovery Act funding for the DOE Weatherization Program. The report was released in late December 2011. The study aimed to examine: (1) status of funds, (2) implementation challenges facing recipients, (3) achievement of energy and cost savings, and (4) changes in the quality of employment data reported by recipients. To address the four objectives, GAO conducted a web survey of all 58 recipients and received 55 responses. GAO also interviewed officials from DOE and selected national associations, conducted site visits in seven states, and conducted telephone interviews with two other state agencies. Selected findings, as of the end of FY2011, included: (1) recipients had spent about $3.46 billion (73%) of the $4.75 billion allocated, (2) recipients reported that implementation challenges were declining, (3) the average cost per home was about $4,900, about 563,000 homes had been weatherized, and DOE projected it would exceed the original target of 607,000 homes by the deadline set for the end of March 2012; and (4) GAO found that the quality of employed data reported by recipients had improved. Several DOE reports, prepared primarily by staff of the Oak Ridge National Laboratory (ORNL), have assessed the energy cost savings and non-energy benefits of the DOE Weatherization Program. In particular, a comprehensive evaluation of the PY1989 program was published in 1993. In 1993, DOE issued a report entitled National Impacts of the Weatherization Assistance Program in Single Family and Small Multifamily Dwellings . The reporting project was an exhaustive five-year, first-of-its-kind, comprehensive evaluation study of the energy savings and cost-effectiveness of the program during PY1989. A letter accompanying the report noted that the program is "the nation's largest residential conservation program, and one of its oldest." The letter captures the highlights: The report evaluates the national and regional energy savings and cost effectiveness of the program in single-family dwellings, mobile homes, and small (2-unit to 4-unit) multifamily dwellings. It is based upon a representative national sample of nearly 15,000 dwellings weatherized by 368 local weatherization agencies, and a control group of homes waiting to be weatherized by the same agencies. The report estimated an overall program benefit-cost ratio of 1.09 for the entire program. Adding estimates of non-energy benefits—such as comfort, employment, reduced environmental impacts, and preservation of affordable housing—yielded a societal benefit-cost ratio of 1.72. After the 1993 National Evaluation report, DOE relied upon "metaevaluations" of state evaluation studies as the main tool to assess program energy savings and cost effectiveness. All of the metaevaluations were conducted by ORNL. Compared with the 1993 National Evaluation, metaevaluations became a low-cost way for DOE to update energy savings and cost-effectivness. This section reviews three key metaevaluations, covering program operations from 1990 through 2005. DOE asked ORNL to prepare the 1997 metaevalution. The study involved locating, assembling, and summarizing the results of all state-level evaluations that had become available since 1990. ORNL found 17 state-level evaluation studies from 15 states that it used to cover program operations during the period from 1990 through 1995. Energy savings were expected to be higher than those found in the 1993 National Evaluation, which was based on 1989 data. Typical savings ranged from 18% to 24%, which was greater than the range from 12% to 16% found in the 1993 National Evaluation. Key reasons for the expected improvement included some advances in weatherization procedures, such as the use of advanced audits and blower-door directed air sealing. The study concluded that program performance had improved significantly over that seven-year period. The 1997 metaevaluation study used three perspectives to estimate cost-effectiveness. The program perspective compared energy benefits to total program costs. The installation perspective compared energy benefits to installation costs. The societal perspective compared the summed value of energy and non-energy benefits to total costs. ORNL reported that the metaevaluation calculations employed the same procedures and assumptions used in the 1993 National Evaluation. The values of 1.79 (program perspective), 2.39 (installation perspective), and 2.40 (societal perspective), respectively, are shown in Table 3 . The study found that the synthesis of state-level evaluations offered a reasonable characterization of national program performance: Although national level evaluation efforts are sometimes needed to definitively demonstrate program performance, reviews of state-level evaluations provide useful, and inexpensive, benchmarks of progress during the years between such large-scale national assessments. As a follow-up to the 1996 metaevaluation, ORNL performed another metaevaluation, which was published in 1999. The report synthesized results from 10 individual evaluation studies of state weatherization efforts that were completed between April 1996 and September 1998. The stated objectives of the 1999 study were (1) to identify average energy savings of households in the states that provided information; (2) to identify key variables that explain the magnitude of those weatherization-induced savings; and (3) to use the findings from the state studies to estimate average household energy savings that could be expected nationwide. The study reported that program-induced savings continued at a higher rate than those found in the 1993 national evaluation. However, the study found no dramatic changes were made in the structure or practices of the program during the period after the 1996 study. Thus, no major increases in savings were expected above those found in the 1996 study. To make the benefit-cost ratios in the 1999 study comparable to those in the 1996 metaevaluation and the 1993 national evaluation, ORNL used the same assumptions and procedures. In particular, the average measure lifetime was assumed to be 20 years and the discount rate used was 4.7%. Cost-effectiveness was calculated for the weatherization program nationwide. As in past evaluations, three different benefit-cost perspectives (program, installation, and societal) were examined. Because higher average national energy savings were estimated in the 1996 and 1999 metaevaluations, the benefit-cost ratios for those years were higher than the ones reported in the 1993 National Evaluation. The benefit-cost ratios for the three perspectives are shown in Table 3 . The most recent metaevaluation, published in 2005, estimated average household energy savings at 30.5 million British thermal units (MBtu) per year with a benefit/cost ratio from the program perspective estimated at 1.34 with 2003 prices. Costs were based on those derived from the state evaluations themselves. Like the previous metaevaluations, ORNL undertook this one to update the findings from the 1993 national evaluation. This metaevaluation was based on data from 38 evaluation studies of weatherization programs in 19 states, published between 1993 and 2005. The overall method of the 2005 metaevaluation paralleled that of the previous metaevaluations, but ORNL describes some improvements: 1. Expanded Range of Time and Geography. The overall similarity of results across the various studies led ORNL to include findings from a 2003 study that covered all post-1992 state-level studies. ORNL found that this approach increased sample size, improved the ability to cover all major U.S. climate regions, and added to the statistical rigor of the results. 2. States as the Unit of Analysis. ORNL aggregated data from the 38 studies by state. This aspect contrasts with previous metaevaluations, which had treated multiple studies of the same state as separate empirical observations. 3. Studies Combined into a Single State Value. For each relevant variable (e.g., energy savings per gas-heated household), a single average value was used to represent the entire state. ORNL says this procedure prevents overall study results from being skewed due to the presence of multiple studies with similar results in a single state. 4. Weighted Average Used to Account for Multiple Studies. Where there were multiple studies, the average values computed in each study were used to determine a weighted average for each variable, with the weighting done by sample size. Under this revised approach, those states that represent a larger part of the national program contribute more heavily to the analysis and findings. This is appropriate because the purpose of the study is to estimate energy savings nationwide. Table 3 shows the benefit-cost values in the various ORNL metaevaluations. The similarity among the values is not surprising because those meta analyses used data from many of the same state-level studies. ORNL states that all three of the metaevaluations, including the 2005 study, focused primarily on energy savings in homes heated by natural gas because the large majority of state-level studies addressed that fuel. ORNL found a statistically significant difference between the natural gas savings per household in the 2005 metaevaluation and the savings reported in the 1993 national evaluation. However, the 2005 study noted that the other two-thirds of the states were not included in the metaevaluation, and thus did not provide data for the study, which raises the possibility that the sample examined may not fully represent the nation as a whole. ORNL found that actual benefit-cost values are likely to be higher than those reported for natural gas savings, as shown in Table 3 . This was due to the fact that reported expenditures also included the cost of installing measures to reduce baseload electricity use, but only the benefits of natural gas savings were used in those benefit-cost calculations. Overall, the study found significant program improvements since 1989 (as reported in the 1993 national evaluation) and a generally higher benefit-cost ratio. However, it also acknowledged the shortcomings of the metaevaluation method and called for a new national evaluation: While the metaevaluations performed over the last decade have consistently shown higher natural gas savings per household than those reported in the national evaluation, there is a need to corroborate those findings through a rigorous examination of Weatherization Program efforts nationwide. Even the current metaevaluation is based on studies performed in only a third of the states, and those may not be fully representative of the entire Weatherization Program. Also, the value for preweatherization energy consumption, which is a major input for the calculation of national savings, is based on 1989 data. In addition, while state-level evaluations have put a strong emphasis on gas-heated houses, few studies have been conducted on electrically heated dwellings. And it is important to note that the biggest recent change to the Weatherization Program – the addition of baseload measures such as highly efficient refrigerators, water heaters, and light bulbs – has barely been addressed by state-level studies. For all these reasons, there is a strong need for a new national evaluation to thoroughly explore the current operations and achievements of the Weatherization Program across the entire nation. DOE has engaged APPRISE, a nonprofit analytical organization, to conduct the second national evaluation. The status of plans for that evaluation are described in the section below, entitled "Evaluation Plan for the Regular Program." The Recovery Act provided a large infusion of funding and prescribed major new requirements for the program. In response to concerns about these major changes, ORNL prepared a technical memorandum to update estimates from the metaevaluations. The memo only attempted to make preliminary projections based on an audit; it did not attempt to generate empirical data from an impact evaluation study. Specifically, the memo recounted results from an engineering modeling approach that used the National Energy Audit Tool (NEAT) to estimate the performance of the program by using typical homes in each state. These homes varied by building type, primary heating fuel and prices, and local weather conditions. ORNL employed the Weatherization Assistant residential audit package to estimate annual energy savings under new parameters set by the Recovery Act. The estimated annual savings for heating and cooling projected for FY2010 were 29.0 MBtu per household. In comparison, the 2005 metaevaluation estimated savings at 30.5 MBtu over the period from 1993 through early 2005. The Recovery Act raised the average per-unit investment cost ceiling from $2,500 to $6,500. The likely increase in investment per unit was expected to increase total energy savings. However, the higher funding level was accompanied by a shift in formula allocation that allowed proportionally more funding for states in warmer climates. ORNL projected a 2010 benefit-cost ratio of 1.80 (from the program perspective). Most of the increase relative to the 2005 benefit-cost ratio of 1.54 was attributed to the change in energy prices from 2003 to 2010. Costs were based on the Recovery Act ceiling of $6,500 for average costs. However, the ceiling for cost-effective expenditures varied from state to state, based on the requirement that the savings-to-investment ratio (SIR) reach one (1.0) or greater for each of three factors: the last measure installed, energy intensity, and local energy prices. Traditionally, the program benefit-cost ratio has been expressed in terms of estimated national energy cost savings per dollar of investment for homes heated with natural gas, with cost savings based on national average residential natural gas prices. ORNL's estimates in the memo differ somewhat, due to reliance on state-by-state energy savings and investment numbers used to generate the energy savings estimates. This aspect allowed the dollar savings estimates to vary by region, by fuel type, by housing type, and with the adjusted average cost ceiling provided under the Recovery Act. The projected 2010 societal benefit/cost ratio (all benefits divided by all costs) is 2.51. This is almost identical to the societal benefit/cost ratio of 2.53 computed in the 2005 metaevaluation. ONRL reflected on the limits of the data used to make estimates, noting again the need for a new national evaluation: The methods used here are more complex and hopefully better at reflecting current reality than those used in previous years. Nonetheless, one needs to keep in mind the limitations of available input data that constrain an analysis such as this. There is no nationally available data on energy-related housing characteristics of weatherized households, nor is there data on the variations in the cost of measures installed from one locale to another. There is also no way of knowing at this point the exact characteristics of the housing stock and housing types that will actually get weatherized with the greatly expanded revenues available. Making these estimates more precise requires populating the methodology with more accurate data that will flow from the National Evaluation effort. ONRL noted that the memo's estimates were derived from a different methodology than that used in the metaevaluations. There are several reasons that a change in method was needed. First, the metaevaluation estimates are dated and do not reflect recent changes in program operations that materially impact household savings. These include a major change in the program's average cost ceiling, from $2,500 to $6,500, an expansion in allowable measures to include electricity measures such as refrigerator replacement and lighting changeout, and a major increase in program funding impacting the allocation of resources among different regions and climate zones. Second, the 2005 metaevaluation results describe only homes heated with natural gas and do not reflect the diversity of heating fuels used in treated homes nor do the results reflect potential cooling savings. The method used for the metaevaluations reflected only savings in single-family homes and those savings were never adjusted for variations in the treated housing stock. Finally, the estimates in the metaevaluations were based on national average energy prices and were not varied to reflect the diversity of energy prices weighted by the location of the weatherization work being performed. ONRL states that the methodology used to prepare statistics for the memo corrects for many of the above-noted deficiencies. However, it acknowledges that the findings do not present a statistically valid representation of the program's performance and results: There are too many assumptions and uncertainties incorporated in it to allow that to be the case. Much of this is the result of a lack of up-to-date information on program operations, particularly regarding measures installed and their cost as well as the energy-related characteristics of the homes weatherized. Rather, the results should be treated as the best currently available estimate that can serve until more rigorous results are provided by the new National Evaluation. Three activities are underway to assess and evaluate DOE's Weatherization program: a DOE (Deloitte) strategic assessment, a DOE (APPRISE) impact study for PY2007 through PY2008, and a DOE (APPRISE) impact evaluation for the Recovery Act period of PY2009 through PY2011. Table 4 provides a brief overview of the goals and target dates for the three activities. Descriptions of the activities follow. In November 2008, DOE's Weatherization Assistance Program Office announced that it had contracted with Deloitte Limited Liability Partnership (LLP) to perform a strategic assessment of the program. Deloitte is tasked with conducting a fundamental analysis of the program's objectives, impact metrics, market delivery vehicles, and finance mechanisms. The study aims to identify fundamental improvements in program design and delivery, in contrast to the more traditional evaluation of program benefits and costs that ORNL has conducted in the past. DOE acknowledges that OMB's PART review and the IG's report have highlighted the need for an updated comprehensive evaluation of the program to ensure that objectives are being met and that estimates of energy savings, bill reductions, program costs, and program benefits are valid. Since the first national evaluation was published in 1993, there have been several changes made to program policies, procedures, technologies, and techniques. DOE notes that it is important to assess how well these changes have worked. For example, there is a need to assess how well new policies—such as whole-house weatherization—are impacting the program. In response to the growing need for updated and valid program data, the program moved forward in FY2005 to begin planning another national evaluation. With a committee comprised of state and local weatherization staff, the program office started planning the evaluation and identifying areas where the program might be improved. DOE states that the 1993 national evaluation brought about major program changes such as computerized audits, less use of door and window measures, and increased emphasis on hot climate opportunities. DOE anticipates that the second national evaluation will have a similar effect on future program policy and performance. In February 2007, ORNL released a plan for a second national retrospective evaluation, which would use data collected during PY2006. ORNL says that the program has been changed by findings from the 1993 study, a strategic planning process, and other initiatives that had caused the program to change significantly. The program has incorporated new funding sources, management principles, audit procedures, and energy efficiency measures. ORNL is supervising a competitively selected independent contractor team to conduct the evaluation. The team is led by the Applied Public Policy Research Institute for Study and Evaluation (APPRISE). The study will assess program performance for PY2007 and PY2008, the period immediately preceding the Recovery Act. Performance measures will include program costs and benefits. In order to conduct a comprehensive savings analysis, the design includes collection of a full year of post-weatherization billing data. The evaluation is expected to be completed by Fall 2012. DOE's central evaluation question is: How much energy did the weatherization program save in 2007 and 2008? DOE plans to use well-known analytical approaches to answer this question. Electricity and natural gas billing histories will be collected pre- and post-weatherization for a sample of weatherized homes (the treatment group) and a sample of comparable homes that were not weatherized (the comparison group). The comparison group for the 2007 treatment group will be homes weatherized in 2008. The comparison group for the 2008 treatment group will be homes weatherized in 2009. A national sample of 400 local weatherization agencies will be selected to provide information on about one-third of their weatherized homes. Billing history data will be normalized using three different analytic methods, including the Princeton Scorekeeping Method (PRISM). DOE will also address an important complementary evaluation question: How cost-effective were those energy savings? In principle, all measures should be cost-effective, because each one is required to meet the savings-investment ratio (SIR) test. Evaluations are conducted to compare expectations with measured values. DOE says it will collect cost information associated with each weatherized home included in the treatment sample. Total projected energy cost savings over the lifetime of the measures will be divided by total costs to estimate a benefit-cost ratio for the program. The study will attempt to quantify nonenergy benefits, which will be sorted into three categories—utility benefits, occupant benefits, and societal benefits. Utility providers benefit because weatherization reduces arrearages and service shutoffs. Occupants benefit because weatherization makes homes more comfortable, healthier, safer, and more valuable. Society benefits because weatherization curbs greenhouse gas emissions, reduces other forms of pollution, and conserves water. Further, it increases local employment and it increases local economic activity caused by the multiplier effect. DOE intends that the Second National Retrospective Evaluation also examine program processes. To do that, it plans to survey all program grantees and subgrantees to collect data about program operations, training and client education activities, and quality assurance procedures. That survey data will be used to provide a program snapshot for PY2008. Case studies and a field study will be incorporated into the process evaluation design to furnish additional insights on program implementation. The Recovery Act committed $5 billion over two years to an expanded weatherization program. This large sum greatly heightened interest in the program, the population served, its energy and cost savings, and its cost-effectiveness. Solid answers to many of the questions about the program and its performance require a comprehensive evaluation. DOE is funding an evaluation by APPRISE in order to ascertain program effectiveness and to improve program performance. The evaluation project has a budget of $19 million. GAO reviewed the plan's design for evaluating energy cost-effectiveness and found it methodically sound. DOE observes that the weatherization program has changed considerably. In particular, it notes that there are four key differences between the pre-Recovery Act program and the post-Recovery Act program. First, to expend $5 billion and to increase weatherization activity by 300%, a greatly expanded weatherization workforce was recruited, trained, organized, and sent into the field. To support that expansion, the percentage of program funds allowed for training and technical assistance was raised from 10% to 20%. Second, all states and U.S. territories received large funding increases, and some states and local agencies struggled with weatherization budgets several times larger than previous ones. Faced with that major program expansion, many states and local agencies chose to implement innovations in program delivery and management. Third, DOE also has made provisions to set aside substantial sums to support innovations in program funding and design. Fourth, to accommodate the Recovery Act funding expansion, major changes were incorporated into the program: The definition of the threshold for a low- income household was raised from 150% to 200% of the federal poverty income guidelines; The ceiling on average cost per unit—that is, the average amount of money that grantees can spend to weatherize their homes—was increased from $2,500 to $6,500; and Wages for weatherization workers were subjected to Davis-Bacon Act prevailing wage requirements for the first time. DOE/ORNL says that many features of the 2009-2011 evaluation will parallel those of the retrospective evaluation for 2007-2008, as described in the previous section. Analyses of energy savings and cost-effectiveness will be similar, although billing histories may be collected to also assess the effects of certain program innovations. The main difference between the retrospective evaluation of 2007-2008 and the evaluation of 2009-2011 will be the process evaluation component. DOE says that funding and associated provisions have had a significant impact on the weatherization community and program operations. Thus, it plans two special process evaluation studies as part of the Recovery Act evaluation project. One would focus on Davis-Bacon requirements and the other would address changes in the composition of the national weatherization community. In May 2011, ORNL published a plan for the Recovery Act evaluation that includes details about both the impact and the process components of the assessment. The schedule for the evaluation activities covers the period from the second quarter of calendar year (CY) 2011 through the first quarter of CY2014. Congress directed that weatherization projects funded with Recovery Act appropriations must follow Davis-Bacon labor rules. The Department of Labor is responsible for identifying prevailing wages in the construction industry. These wages are identified for a set of construction industry jobs and are estimated for each county in the United States. Two possible questions DOE has identified for this part of the evaluation research are: (1) What were the actual, monetary administrative costs for complying with Davis-Bacon? (2) Overall, how did application of Davis-Bacon influence the cost-effectiveness of WAP? DOE observes that the large flow of Recovery Act funds into low-income weatherization changed the national weatherization network. The weatherization labor force grew larger and new stakeholders were drawn into the network. The increased funding had both positive and negative effects on long-standing leveraging relationships. DOE is considering several possible research questions. Four of the questions are: (1) How have relationships between state weatherization offices and local weatherization agencies changed? (2) Did the Recovery Act change the way that local agencies use contracts to procure weatherization services? (3) What approaches did local agencies and/or contractors use to recruit and train new qualified, reliable, and trustworthy weatherization crew members, and how effective were these approaches? (4) Did the expanded weatherization workforce find work opportunities in the energy efficiency field outside of the DOE weatherization program? The evaluation design is expected to produce a variety of new information and findings about the program. Basic results are expected to include estimated energy savings for 2007 through 2011, along with estimates of cost-effectiveness and non-energy benefits. The design aims to uncover insights into energy savings attributable to particular measures and the strengths and weaknesses of computer audits, versus priority lists, as a way to select appropriate weatherization measures. Also, the design is expected to produce program operational data for two levels of average home investments ($2,500 and $6,500) and two levels of home eligibility (150% and 200% of the poverty level). Findings are expected to yield some indication of the impact on program benefits attributable to changing the federal grant formula in a way that distributes more funds to states in warmer climates. The OMB Inspector General has criticized DOE for depending almost exclusively on "in-house" ORNL staff to conduct evaluation studies. The core issue is whether an "in-house" evaluation effort can be sufficiently objective or neutral in its conduct of research. This issue is part of a quite spirited debate over federal program evaluation that goes far beyond the DOE weatherization program. A key assumption of the debate is that a separation of evaluation duties from program implementation duties would increase the "independence" of the evaluating organization. In response to criticism regarding ORNL, DOE engaged a competitive process to retain an outside contractor to conduct the second national evaluation (PY2007-PY2008) and the evaluation of the Recovery Act period (PY2009-PY2011). As noted previously, the competition led to the selection of the APPRISE contracting firm. A recent debate between professors Charles Metcalf and David Reingold focused on the extent to which the use of "outside" contractors to conduct federal program evaluations can significantly improve research independence and objectivity. In a separate study, Professor Jacob Klerman continues the dialogue, adding further perspectives to the debate. All three professors suggest ways to strengthen the independence of evaluations conducted with contractors. Charles Metcalf speaks from experience as both a professor and an evaluation contractor. He says the central issue for evaluation independence is control over research processes and reporting. Metcalf acknowledges that outside pressures can affect a contractor's objectivity. In particular, he contends that client (agency/program staff) authority to accept or reject the evaluation findings and report—and to time its release—can give it significant control over evaluation content. Metcalf argues that the independence and objectivity of contractor evaluations are promoted by four main conditions: maturity of the contractor organization, contractor reputation and longevity, formal agency-contractor agreements, and research transparency. First, he claims that, over the past 40 years, the methods and practices of federal program evaluation have matured to the point where major evaluation contractor organizations have become generally objective and independent: Mathematica Policy Research (MPR), and others such as Abt Associates, MDRC, and RAND ... have established objectivity and independence as core values, and by and large have successfully defended these values in their conduct with funding organizations. Our track record establishes that government supported policy research can be and is independent, with proper safeguards. Second, Metcalf claims that the ability of a contractor organization to establish a reputation for objectivity enables it to enjoy longevity. In turn, this longevity helps the contractor to be independent from any single administration: If we define the client to be the current administration, the contractor and often the contract outlive the current client. For contract research institutions that regard themselves as doing policy research for a sequence of clients with differing policy agendas, the institutions' reputation for objectivity (as well as the quality of their work) is their primary currency in maintaining their longevity. Third, Metcalf argues that the agency's ability to influence content is largely constrained by the evaluation contract: For contract research, the researcher and his or her employing institution are collecting data and conducting research on an issue defined and paid for by a client. In this environment, two questions must be answered: (1) Who owns the research product? and (2) Who controls the content and the dissemination of the research product? These questions are typically defined by the contract, and the rights no longer lie intrinsically with the institution nor, by extension, with the researchers it employs to conduct the research. Further, he claims that there is an increased tendency for researchers and clients to agree explicitly, in advance, on the research methodology and the scope of reports. This process tends to protect the client (agency) from unexpected surprises, and protects the researcher (contractor) by allowing less "wiggle room" for the client to reinterpret results. Fourth, Metcalf contends that research transparency is a key factor for contract evaluation independence. In this regard, he draws a parallel to academic research: [T]he basic guardian of both quality and objectivity in the conventional world of scholarly research is the required openness to the examination of others. If you don't adhere to this rule, your research is presumptively not credible. Metcalf argues that openness in the various phases of federal program evaluations is guaranteed by the government's competitive procurement process and by the Freedom of Information Act (FOIA). In procurement, the agency makes the request for proposals (RFP) publicly available. After the contract is awarded, the public can submit a FOIA request to obtain both the contract document (including the statement of the work) and the winning proposal: Regardless of internal contract restrictions, the contractor has the implicit nonexclusive right to request its own report under the FOIA, and to release it freely without restriction. Thus, while the government owns the research products it purchases through contract, the FOIA protects the researcher's right to disseminate his or her results—and, indeed, the right of anyone else to disseminate the results. Metcalf further claims that, in practice, the right of evaluation contractors to disseminate research results through conference participation and publication parallels the rights of researchers in academic institutions. Also, in parallel to academic peer review, he notes that third parties often have a role in evaluations: First, we have already stressed the importance of the ultimate availability of research reports to the public, time delays notwithstanding. Second, most large-scale studies engage advisory panels and other forms of peer review at both the design and report stages. Thus, he observes that third party involvement is an integral aspect of transparency. While acknowledging that threats to independence persist, Metcalf contends that the contracting environment has had a positive effect on evaluation. He concludes that the practice of using external evaluation contractors has shown an ability to enhance research credibility and independence. Professor Reingold starts from the same assumptions as Professor Metcalf. Reingold says separation of the evaluation activity is assumed to establish evaluator independence which—along with quality research techniques—allows program evaluation to serve an accountability function: [U]nlike other services frequently contracted out by governmental and nongovernmental organizations, the rationale for contracting out program evaluation rests largely in its ability to establish independence by creating a clear division of labor between those conducting evaluations and those responsible for managing programs being evaluated. He elaborates further that the process for selecting a contractor is vital to independence: [T]he perception of independence is typically established via the selection process used to identify and hire the person or organization responsible for designing and implementing the evaluation. For many organizations that purchase evaluation services, independence is established by selecting someone who is external to the organization or program being evaluated and who is free from financial self-interest or ideology that may bias the evaluation to produce a desired outcome, and where the evaluator has control (or ownership) over the evaluation design and its intellectual property (data and findings). Reingold argues that all of the "safeguards" to independence that Metcalf identified are overwhelmed by three main factors: (1) agency funding control gives it influence over evaluation content, (2) contractor organizations have financial self-interests in accommodating agency wishes, and (3) their mutual self-interests undermine the competitiveness of the selection process. First, Reingold argues that an agency's control over evaluation funding allows it to retain a strong influence over evaluation content: [W]hen purchasing evaluation services via contracts, the purchasing agency has total control over all aspects of the services to be provided ... [thus] ... [i]t is inconsistent to argue that contracted program evaluation can be independent when the agency purchasing the evaluation owns (or controls) the research question and design, the method of data collection, the strategy of analysis, the data, the final report, and the rules governing the dissemination of results. Second, Reingold contends that contractor organizations have a financial self-interest in accommodating agency wishes: [E]valuation contractors view their relationships with those responsible for running programs and funding evaluations as clients where satisfaction with the deliverable will influence the likelihood of securing additional business in the form of more evaluation contracts. In other words, he argues, independence can be lost when experts that are expected to produce independent facts also have a substantial incentive to acquiesce to a client's interests. Third, Reingold claims that self-interests may begin to erode the contractor selection process, which underpins the independence sought by separating evaluation activity from program management: When program staff are allowed to strongly influence the selection of a firm to conduct an evaluation of their program, they frequently select firms that will "work with them" to produce a "helpful" evaluation. This is code for selecting a firm that will tailor and implement an evaluation design that will likely provide positive findings for the program under study. Over time, this threat to independence can deepen. Ultimately, he says, the complementary self-interests of agency and contractor may undermine the competitive foundation of the selection process: When a firm has established itself as a reliable partner that will cooperate with the demands of a particular client, the selection process has virtually eliminated any real competition that would allow for a truly independent evaluation. In sum, Reingold argues that threats to independence and objectivity can enter from both sides—a program's interest in self-protective control and a contractor's interest in preserving a business relationship. He concludes that: Unfortunately, there are signs this arrangement [the effort to achieve greater independence through external contracting] is not working. To address the problem, Reingold suggests two policy options to improve the independence of evaluation contracting. One option is to substitute grants for contracts, as the grants confer greater independence to the recipient. However, grants typically allow less oversight than contacts, which means that quality could suffer. Another option is to expand third party involvement. This option is described in the last section of the report. Since the Metcalf-Reingold debate, there has continued to be a focus on means to reduce threats to evaluation independence. For example, Professor Jacob Klerman echoes some points from both Metcalf and Reingold in describing his view of the challenges to contractor evaluation independence. Klerman stresses two key threats to independence: the mutually reinforcing self-interests of funder and contractor and the self-interests of third parties. Also, he offers two ways to improve independence by modifying formal contract agreements. First, Klerman characterizes the main threat to independence as an "inherent tension" between funder and contractor. Beyond stated goals for quality and objectivity, he claims that both parties bring "unstated goals" involving pre-set policy opinions and organizational survival interests that can color an evaluation project's process and findings. He echoes Reingold's argument that self-interests pose a key threat to independence: [E]valuation is sometimes politics (or business) by other means. For the funder, showing that the current administration's programs "work" (and those of the previous administration did not "work") yields political benefits. Sometimes the concerns are quite direct. A negative evaluation result might cause shrinking of a program, loss of budget for the funder's organization, in the extreme even loss of jobs for the funder's lead evaluation staff. For the contractor, this is a business. The "right answer"—that is, the answer that the funder "wants to hear"—now is likely to lead to more evaluation business in the future; the "wrong answer" now is likely to lead to less evaluation business in the future. Second, Klerman proposes that when seeking a balance point between funder and contractor over evaluation content, one option is to involve a third party. However, "[e]ven nominating some third party leaves open the question of the third party's policy and organizational goals." From his perspective, all three parties to an evaluation—funder, contractor, and third party—are propelled by self-interests that pose threats to independence. However, Klerman raises the question of whether there may be an "appropriate balance" of these interests that could actually reinforce independence. In conclusion, Klerman—like Metcalf—claims that independence may be improved by augmenting, or otherwise improving, formal contract agreements. He describes one strategy for improvement: The challenge is to devise contractual mechanisms that assure satisfaction of the stated goal—a high-quality and independent evaluation. Ideally, a contract would give the funder enough authority to handle standard contractual issues while preventing either side from deviating from the stated goals to further policy or organizational goals. As a starting point for this strategy, Klerman suggests that a clear separation be established between an official evaluation report and a contractor's own publication of analysis from the underlying evaluation. He recommends that: The funder would retain almost unfettered rights to the official contract report. Those rights would include the right never to officially release the document but not the right to change the contractor's text while continuing to list the contractor and its individual staff members as authors. The contractor would retain clearly defined rights to publish any findings from the evaluation. Klerman's main strategy for improving independence encompasses 19 approaches to modify evaluation contracts, which are grouped into three categories: (1) approaches applied when a funder retains the right to specify the final report text, specify the report release, and control discussion of the process; (2) approaches that limit the funder's right to specify the final text, and (3) approaches that limit the funder's right to specify report release. Table 5 summarizes the main points of the Metcalf-Reingold debate, including the points contributed by Klerman. Agencies of other national governments are also concerned about program evaluation independence. An example is the United Kingdom's Department for International Development (DFID). An assessment of DFID's evaluation function addressed many of the same issues of control over the research process and findings that were the focus of the Metcalf-Reingold debate. The study observed that independence is important, a critical aspect of evaluation credibility and reliability: To be sure, independence on its own does not guarantee quality (relevant skills, sound methods, adequate resources and transparency are also required) but there is no necessary trade-off between independence, quality or credibility. Indeed, evaluation quality without independence does not assure credibility. Furthermore, in open and accountable working environments, evaluation independence induces credibility, protects the learning process and induces program managers and stakeholders to focus on results. Thus, evaluation independence, quality and credibility are complementary characteristics that together contribute to evaluation excellence. The DFID assessment of evaluation function suggests that the quest for independence—if taken too far—could lead to dysfunction. The report suggests that there may be limits to evaluation independence: Optimum independence is not maximum independence. Accurate and fair evaluations combine intellectual detachment with empathy and understanding. The ability to engage with diverse stakeholders and secure their trust while maintaining the integrity of the evaluation process is the acid test of evaluation professionalism. This is why diminishing returns set in when evaluation independence assumes extreme forms of disengagement and distance. Independence combined with disengagement increases information asymmetry, ruptures contacts with decision makers and restricts access to relevant sources of information. It leads to isolation, a lack of leverage over operational decision making and a chilling effect on learning. Thus, the basic challenge of evaluation governance design consists in sustaining full independence without incurring isolation. That finding appears to be a more elaborate expression of a key conclusion that Klerman makes in regard to achieving an "appropriate balance" of the three potential parties to a contract evaluation: [N]o single party—not the funder, not the contractor, and not some third parties—will always be without bias. Different approaches shift the relative power of the three groups. Furthermore, different approaches have different costs—in dollars, in the formality of the funder–contractor relationship, and in time to complete the study. The appropriate balance will vary with the particular situation, and, in particular, with the prevalence of problematic behaviors on all sides—funder, contractor, and third parties. As noted previously, Klerman proposes several means to modify the client-contractor relationship to address the inherent tension and reduce—but not eliminate—the threats to objectivity and independence. DOE is aware of the concern about contractor independence for impact evaluations. It has published guidance for program staff that addresses the issue: Evaluation should be conducted by outside independent experts. This means that, even if staff commission a study (fund an evaluation contractor) that contractor should have some degree of independence from the program office that is being evaluated. Also, the contractor should have no real or perceived conflict of interest. Although the program staff person may work with the contractor during the consultation phase to clarify information needs and discuss potential evaluation criteria and questions, the staff should establish some line of separation from the contractor for much of the remainder of the evaluation study—i.e., put up a firewall after the initial consultation period is concluded. Also, in order to address remaining concerns about outside contractor independence, DOE guidance further recommends the establishment of a third party group of experts to critique the contractor's work: It is further highly recommended that a panel of external evaluation experts who are not part of the contractor's team be assembled to serve as reviewers of the contractor's work. This would include the Evaluation Plan, and the draft and final reports. Having the work of the contractor's team itself evaluated helps ensure the evaluation methodology is sound and the study is carried out efficiently. It also sets up a second firewall that raises the credibility of the study to even a higher level (important for those who remain skeptical of evaluation studies commissioned by the program being evaluated). DOE has addressed the first point of the independence debate. It separated the evaluation activity from the program activity by choosing outside contractors to perform a strategic assessment and two major evaluation studies. Additional comments and questions may focus on the other three points of the independence debate: • Contractor Selection. All three debaters stressed that the selection process is critical to evaluation independence. Was the selection of Deloitte and APPRISE competitive? What objective indicators should be used to gauge the competitiveness of the selection process? Is there an optimum degree of selection process competitiveness? • Transparency. Metcalf argued that transparency helps guarantee evaluation independence. Will this dimension be fulfilled by the public release of the three final reports? Otherwise, what objective indicators should be used to gauge transparency for each evaluation? Is there an optimum degree of transparency? • Third Party Involvement. Klerman described the possibility of an "appropriate balance" that included a third party. Related to the ongoing evaluation of the Recovery Act period (2009-2011), the DOE IG issued a progress report and GAO has contributed a major performance audit. Is that sufficient third party involvement? Otherwise, what objective indicators should be used to gauge the sufficiency of third party involvement for each evaluation? Is there an optimum degree of third party involvement? The debate between Metcalf and Reingold produced some other ideas for establishing independence of the evaluation function. One notable strategy suggests using other (third party) organizations to play a more central role in managing the program evaluation process. Reingold suggests: Ideally, Congress, the GAO, and perhaps the National Academy of Sciences [National Research Council] could play a more active role in screening and selecting evaluation plans and firms. Three variations on this strategy, in increasing order of dependence on the outside agency are: (1) Have the DOE Office of the Inspector General (DOE IG) or GAO or Congressional Budget Office (CBO) ensure that the third party contractor evaluation work is performed in an independent manner. (2) Move the contractor (evaluator) selection process from the agency to the Office of the Inspector General, GAO, CBO, or the National Research Council (NRC). (3) Transfer full responsibility for conduct of the evaluation to the DOE IG, GAO, CBO, or NRC. Appendix A. DOE Weatherization Program: Historical Data Appendix B. DOE Weatherization Funding Chart Figure B -1 , below, shows the entire history of annual requests and appropriations for the DOE Weatherization Assistance Program (WAP). Requested amounts for FY1977, FY1978, and FY1979 were not available. A final FY2012 appropriation figure had not yet been determined at the time this report was prepared.
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This report analyzes the Department of Energy's (DOE's) Weatherization Assistance Program. (WAP, the "program"). It provides background—a brief history of funding, program evolution, and program activity—and a review of program assessments and benefit-cost evaluations. Budget debate over the program is focused on a $5 billion appropriation in the Recovery Act of 2009, a report that state and local governments have yet to commit about $1.5 billion of that total, and concerns about the quality of weatherization projects implemented with Recovery Act funding. During the debate over FY2011 funding, the House Republican Study Committee called for program funding to be eliminated. In April 2011, Congress approved $171 million for the program in the final continuing resolution for FY2011 (P.L. 112-10). For FY2012, DOE requested $320 million, the House approved $30 million, the Senate Appropriations Committee recommended $171 million, and the Conference Committee approved $68 million. The budget debate provides the context for this report, but details of the current debate are beyond the scope of this report, which is focused on evaluations of program cost-effectiveness. WAP is a formula grant program: funding flows from DOE to state governments and then to local governments and weatherization agencies. Over the 32 years from the program's start-up in FY1977 through FY2008, Congress appropriated about $8.7 billion (in constant FY2010 dollars). The $5 billion provided by the Recovery Act added more than 50% to the previous spending total. Over the program's history, DOE's Oak Ridge National Laboratory (ORNL) and the Office of Management and Budget have used process and impact evaluation research methods to assess WAP operations and estimate cost-effectiveness. Virtually all the studies conducted through 2005 showed that the program was moderately cost effective. The studies included measures of operational effectiveness, energy savings, and non-energy benefits. The timing of past studies was a bit sporadic, driven mainly by new statutory requirements and program audits. Performance assessments have alternately identified improvements in program operations or identified operational problems that subsequently stimulated program improvements. Only the intensive evaluation study of program year 1989 (published in 1993) was designed to directly draw a national sample to produce empirical data on program cost-effectiveness. Such in-depth evaluations are costly and time-consuming. Most other "metaevaluations" were much less costly, using available state-level evaluation studies as the basis to infer national-level program impacts. The large infusion of Recovery Act funding—and attendant changes in program structure—heightened interest in conducting a fresh assessment of operations and new scientifically based evaluations of program impacts. Unforeseen recession-driven events delayed use of Recovery Act funding. For example, the DOE Inspector General (DOE IG) found that recession-driven budget shortfalls, state hiring freezes, and state-wide planned furloughs delayed program implementation—and created barriers to meeting spending and home weatherization targets. In December 2011, the Government Accountability Office (GAO) released a performance audit which found that the Recovery Act phase of the program was successfully addressing most goals and the challenges identified by the DOE IG. Recently-launched evaluation studies by DOE aim to determine whether Recovery Act funding was used cost-effectively and whether it fulfilled goals for job creation. The report concludes by reviewing the debate over the use of "outside" contractors to improve the objectivity and independence of weatherization program evaluations.
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The Securities Investor Protection Corporation (SIPC) is a nonprofit, nongovernmental corporation created by Congress in 1970. SIPC ensures that customers recover cash and securities when its members-securities firms become incapable of performing their custodial obligations to their customers. There are roughly 5,000 SIPC-member firms. The impetus for congressional action came during the late 1960s, when a marked rise in securities trading volume that exposed major inadequacies in the systems that processed securities trades and provided centralized clearing. A host of problems existed: bottlenecks and paralysis plagued the trade processing and there were significant accounting and reporting abuses. The subsequent stock market decline pushed many securities firms into financial difficulties and many firms merged, failed, or ceased operating. Some firms used customer property for their own trading, while others experienced procedural breakdowns in the managing customer accounts, resulting in customer losses of millions of dollars. In 1970, to avoid a recurrence of these events and accompanying negative consequences for investor confidence in the securities markets, Congress enacted the Securities Investor Protection Act of 1970 (SIPA), and significantly changed it via the Securities Investor Protection Act Amendments of 1978. With SIPA's enactment in 1970, Congress created SIPC to recover and return customers' cash, stocks, and other securities when their brokerage firm closed due to bankruptcy or other financial problems. The Securities and Exchange Commission (SEC) has oversight over SIPC, which was established by SIPA, and its bylaws. SIPA also gives the SEC authority to review, disapprove, adopt, amend, or repeal SIPC's bylaws and rules. SIPC, which is not a regulatory authority and is funded by securities broker-dealers, has a seven-member public board of directors. The Secretary of the Treasury and the Federal Reserve Board each appoint one, and the President appoints the remaining five, subject to Senate confirmation. Of the President's appointees, three must be from the securities industry and two must represent the general public. The latter become SIPC's chairman and vice chairman. Under SIPA, any entity that is registered as a broker-dealer with the SEC under the Securities Exchange Act of 1934 or who is a member of a national securities exchange must be a SIPC member. Also under SIPA, members are required to pay an annual assessment to SIPC. This report provides an overview of various issues related to SIPC, including policy issues highlighted by the Madoff fraud, SIPC reforms in the Dodd-Frank Wall Street Reform and Consumer Protection Act, and pending legislation. With a mandate to help maintain investor confidence in the securities markets, SIPC provides protection to customers for missing securities and cash left with failed securities firms. It protects customer assets (securities and cash) against losses of up to $500,000 at the time of a firm's collapse. Under the Dodd-Frank Act ( P.L. 111-203 ) enacted on July 21, 2010, up to $250,000 may be for cash losses, in contrast to the historical amount of up to $100,000. Noncash assets that are covered include stocks, bonds, notes, and mutual funds. Through SIPA, Congress designed SIPC to oversee the recovery and distribution to customers of missing customer cash and securities. Customer cash and securities collected by the SIPA trustee administering the liquidation become part of a fund of customer property that is shared on a prorated basis by customers. Such securities will have been held by the broker for the customer in "street name" (the normal convention in which a security is held in the name of a broker on behalf of a customer). Subject to statutory limits, SIPC then makes advances to the trustee out of the SIPC Fund so that the trustee can satisfy, in cash or securities, the remaining amounts of allowed-customer claims. Typically, customer claims evolve through the following process: First, the SEC or a self-regulatory organization, such as the New York Stock Exchange or the Financial Industry Regulatory Authority (FINRA, the principal securities broker-dealer self-regulator), alerts SIPC when a SIPC member is in serious financial difficulty. Then the SIPC normally responds by filing an application or complaint in a federal district court to liquidate the firm. The court usually appoints a SIPC-designated trustee, although the SIPC will sometimes be the trustee when liabilities are limited and a collapse affects fewer than 500 customers. Once liquidation proceedings are moved to a U.S. bankruptcy court, the trustee notifies the firm's customers and attempts to sell or transfer customer accounts to viable SIPC members. To recover funds or securities owed them from the firm, customers must file claims, which the trustee either allows or denies. To the extent that failed firms are unable to fully satisfy allowed-customer claims, SIPC advances funds to up to the statutory amounts identified above. SIPC does not protect customers against losses in commodities, precious metals, derivatives, unregistered investment contracts or limited partnerships, or other transactions that are not defined as "securities" under SIPA. For example, suppose a SIPC-member firm fails and goes through the liquidation procedure. Suppose that the failed firm has an aggregate total of $5 billion in allowed claims, and that the trustee has been able to recover $4.5 billion, or 90% of those claims, through the firm's assets. This means that 90% of each former client's allowed claim will be covered through assets that have been recovered from the firm. Now suppose that there is a former customer, Client A, who has an allowed claim for $5 million against the firm. In this SIPA customer proceeding, Client A would receive 90% of the $5 million claim, or $4.5 million, from assets recovered from the firm, and $500,000 from a SIPC advance, making the client whole. If, however, the claim was $6 million, Client A would receive 90% of that, or $4.5 million from the recovered funds and $500,000 from SIPC, for a total of $5.9 million This would leave the client with a total of $100,000 in uncovered losses. The SIPC funds that are used to make advances for customers and to supplement the recovered assets to satisfy customer claims derive from what is known as the SIPC Fund, sometimes known as the SIPC reserves. The Fund is also used to cover the administrative expenses of liquidation proceedings to the extent the debtor's general estate is insufficient. The Fund's assets come from interest on investments in U.S. government securities and an annual assessment on SIPC-member firms. Historically, the assessment rate has been periodically adjusted by SIPC's Board with the SEC's approval. In the event that the SIPC reserves have become or threaten to become insufficient for carrying out SIPA's mission, SIPC has the authority to indirectly borrow up to $2.5 billion from the U.S. Treasury, an amount mandated by the Dodd-Frank Act, which replaced the historical amount of $1 billion. Formally, the SEC would borrow the funds from the Treasury and then would relend them to SIPC. Until recently, SIPC also had access to a $1 billion line of credit with a consortium of banks. During the 1970s, 1980s, and 1990s, SIPC members were subject to changing rates. The annual rates, which are the same for all members, fluctuated as SIPC's Board has reportedly attempted to meet declines in the Fund's balance with rises in the assessment rate so that years with high expenditures would be followed by higher assessments. Members have alternately been levied an annual percentage of their revenues (which was as low as 0.065% during periods of the 1990s) or have been assessed flat fees, such as between 1997 and 2009, when each member paid a flat annual rate of $150, the statutory "maximum minimum." The Fund's target level was initially established in 1970 by SIPA at $150 million. Through the years, due to inflation, changes in the securities markets and securities industry, and rising levels of perceived monetary risk to SIPC, the Corporation's Board set the Fund level well above the original $150 million. For example, in 1991, the board adopted a policy to increase the Fund to $1 billion by 1997, a level that was reached in 1996. Between 1996 and 2001, the size of the SIPC Fund ranged between $1.0 billion and $1.2 billion. From 2002 to 2006, the Fund hovered in the $1.2 billion to the $1.4 billion range. In 2007, the SIPC Fund ranged from $1.4 billion to $1.52 billion. In 2008, the Fund peaked at $1.7 billion, then fell to slightly more than $1 billion in 2009. By 2009, after the liquidations of Lehman Brothers and Madoff's firm, the consortium of banks that provided SIPC with a line of credit informed the SIPC that the credit line was not being renewed. Subsequently, SIPC's Board decided on a $2.5 billion target for the SIPC Fund (more than double the existing $1 billion). In addition, the board decided that SIPC also needed to boost its line of contingency credit from the Treasury Department from $1 billion to $2.5 billion, a change that required a legislative act. In 2009, with the SEC's approval, the SIPC amended its bylaws to incorporate a $2.5 billion target for its Fund. To reach the significantly higher target level, SIPC also increased its member assessments from a flat $150 annual rate for all members to a rate that is now 0.25% of each member's net operating revenue. One major criticism of SIPC's approach to funding the SIPC Fund through its current membership assessment protocol is that it does not price the assessments on a risk-adjusted basis in which members would be assessed in accordance with their perceived risk to SIPC. A practical concern is that the current system may result in SIPC effectively subsidizing and thus implicitly encouraging high-risk member broker-dealers. Proposals to address this perceived problem include (1) giving SIPC a regulatory watchdog role with respect to members' safety and soundness, which would likely require a major rewriting of SIPA, and involve a bigger SIPC with a larger budget; and (2) requiring that SIPA be amended to require SIPC-member fees be risk-adjusted so that members who are seen to pose greater risks would be assessed accordingly, which would likely require an expanded SIPC and could raise questions over the accuracy with which broker-dealer firm risks can be assessed. The notion of a risk-based pricing system was criticized in a 2003 report by Fitch Risk Management, the credit rating agency, which SIPC had requested. The report argued that adopting a tiered fee schedule based on a member's perceived risk would pose two major problems: (1) to gauge fee levels for its members, SIPC would have to evaluate their creditworthiness, which could be a very costly exercise that lacks clear benefits; and (2) firms deemed to pose particular risks might experience significant stress as a result of the assessment, possibly contributing to their failure. On December 11, 2008, the SEC sued Bernard L. Madoff and his firm, Bernard L. Madoff Investment Securities LLC, for securities and investment advisory fraud in connection with allegations that a Ponzi scheme had resulted in substantial losses to investors in the United States and other countries. The Madoff fraud case has generated interest in several controversial policy issues involving SIPC, including the following: Net Equity. SIPC officials, and the court-appointed Madoff trustee, have indicated that SIPA provides protection based on an investor's actual net investment, or net equity, which should represent the difference between an investor's invested cash minus the cash that was withdrawn from an account. A number of Madoff's investors objected to this approach, saying that the trustee should use the "last statement method" and simply look at the value of their portfolio on their last statement to calculate their net equity because that statement showed significant earnings on their initial cash investments. On March 1, 2010, a bankruptcy judge from the United States Bankruptcy Court for the Southern District of New York approved the trustee's net investment method of determining customer claims. In doing so, the court rejected the Madoff investors' contention that customer claims must be allowed in the amounts shown on final customer statements. The decision has been criticized by various investors and members of Congress, including Representative Scott Garrett, chairman of the House Financial Services Committee Subcommittee on Capital Markets and Government-Sponsored Enterprises. Siding with the trustee and SIPC, officials at the SEC, which filed a brief in support of the cash in/cash out method, argued that the Madoff customer account statements "showed the results of securities transactions selected by Madoff and 'executed' at prices calibrated after the fact to produce predetermined favorable returns, returns that were possible only because they were entirely divorced from the uncertainty and risk of actual market trading." Among other things, H.R. 6531 , which Chairman Garrett introduced in the 111 th Congress and which could be reintroduced in the 112 th Congress, would have amended SIPA to determine a customer's net equity based on the customer's last statement. Indirect Investors. SIPA does not cover indirect investors. Known as "claimants without an account," these investors invested money with Madoff's operation through investment vehicles that included family partnerships, pension plans, 401(k) plans, hedge funds, and other broker-dealers. Reports indicate that North Americans who invested with Madoff did so largely as indirect investors via money managers, feeder funds, and other hedge funds. SIPA defines a customer to be an entity who has direct investments with a failed broker-dealer, which means that many indirect investors are not eligible for the $500,000 SIPC protection. They are only eligible for a diluted, prorated portion of the $500,000 protection that would be paid to the direct investor with an account with the failed firm. As a consequence, many indirect investors have criticized the restrictions on indirect investors as being unfair. H.R. 5032 (Ackerman, 111 th Congress ), which could be reintroduced in the 112 th Congress, would have required SIPC to provide up to $100,000 worth of protection to indirect investors in "Ponzi schemes." This would have applied retroactively to trustees appointed to liquidate assets in previously discovered Ponzi schemes with customer investments totaling more than $1 billion, including the Madoff liquidation. To qualify for the benefit, the provision would require recipients to waive their right to sue a feeder fund, which some have said is unfair because the funds are presumed to have a fiduciary duty to exercise reasonable care for such investors and when they do not, investors should be able to retain the right to sue them. Moreover, while the bill would apply to the indirect investors of all such feeder funds, some criticize such an indiscriminate payout policy, arguing that SIPC's funds are limited and that payments to indirect investors should prioritize investors in smaller pension funds and other investment vehicles, which are often said to be the kind of feeder funds that have failed to inform the applicable broker-dealers of all of the individual accounts that they hold. Another criticism of providing such unqualified payouts to indirect investors is that some of the Madoff feeder funds appear to have been guilty of reckless behavior and failed to heed signals that there were problems at the company. Clawbacks. Under bankruptcy law, court-appointed bankruptcy trustees are entitled to "clawbacks," or recover, payments that were made out of a corrupt fund before the scheme was discovered and then return them to the bankruptcy estate for distribution to the scheme's victims. There are statutory limits on how far back a trustee can go in seeking such clawbacks. The court-appointed trustee in the Madoff case has been attempting to claw back funds from such investors, many of whom reportedly withdrew all of their funds from the operation years before Mr. Madoff's arrest. This policy has been criticized by investors and by some members of Congress. Under H.R. 5032 (Ackerman), the trustee would have been prohibited from clawing back any money from victims unless the bilked investor was proven in bankruptcy court to be complicit or negligent in their participation in a Ponzi scheme. It would have also applied retroactively to trustees appointed to liquidate assets in discovered Ponzi schemes with total investments in excess of $1 billion, including the Madoff case. In support of the status quo, John Coffee, Jr., a Columbia University law professor and a frequent panelist at congressional hearings, has spoken of the long-standing principle that investors who are aided or allowed by a fraudulent manager to redeem their investments should not be allowed to benefit from their association with such a fraudulent entity. Professor Coffee has also indicated that under the existing bankruptcy code, the trustee can recover the payments made from a corrupt fund (which he calls "fictitious" profits), and place them in a fund whereby they will benefit all of a Ponzi's scheme's victims in a prorated fashion. He has also noted that the interests of net winners (investors who make profits from a Ponzi scheme) will conflict with net losers (investors who lose money from a Ponzi scheme). Thus, he argues that reform efforts such as H.R. 5032 that attempt to benefit net winners would invariably do so at the expense of net losers. In February 2009, the SEC charged Robert Allen Stanford and three of his companies with orchestrating a fraudulent, multi-billion dollar investment scheme centering on an $8 billion certificate of deposit (CD) program. Among Mr. Stanford's companies were the Antigua-based Stanford International Bank (SIB) and the Stanford Group Company (SGC), an investment adviser. The CDs were issued by SIB and marketed by SGC to investors worldwide, including to many Americans. SIPC officials have indicated that under SIPA, SIPC is obligated to repay up to certain amounts of accepted customer claims from failed broker-dealers when their securities are missing from the firm's accounts. However, according to the officials, the protection does not extend to investors who physically received their CDs, as was the case with the holders of the Stanford CDs. The officials also noted that if fraudulent securities are issued by an SIPC non-member such as the Antigua-based SIB, no SIPC protection exists. Finally, they observed that when securities are rendered worthless by fraudulent conduct, as was alleged in the Stanford case, SIPC provides no protection for loss of value. Many holders of the now virtually worthless Stanford CDs criticized as unfair SIPC's determination that they were not eligible for its protections. Several Stanford victims joined forces with Madoff's victims to lobby members of Congress for legislation aimed at improving SIPC's treatment of victims like them. The SIPC perspective that SIPA only authorizes it to cover the physical loss or theft of a security by a broker-dealer member, not a security's loss in value, has long been a source of controversy. Some observers note that the entrance of many relatively unsophisticated investors into the securities markets appears to have led to increased brokerage fraud, which they say argues for broadening SIPC's mandate to include loss of value due to fraud. In mid-2010, noting that the "last significant amendments to the Securities Investor Protection Act … were in 1980," SIPC formed a Modernization Task Force whose mission is to conduct a major review of SIPA. The task force is chaired by SIPC's chairman and its vice chairman and includes representatives from the securities industry, investors, government regulators, and academia. Its specific duties are to propose to the SIPC Board "such statutory amendments, as may be necessary, useful, or appropriate, given the passage of time, changes in the securities industry, and judicial precedents construing SIPA." The board is expected to review the task force's findings, conclusions, reports, and proposals with an eye toward possible legislative changes and other potential reforms to SIPA. Major areas of concern for the task force include (1) the adequacy of the SIPC Fund, (2) no account claimants, (3) investor education, (4) clawbacks and recovery issues, (5) the level of SIPC protection, (6) net equity, and (7) excess SIPC insurance. The Dodd-Frank Wall Street Reform and Consumer Protection Act ( P.L. 111-203 , 124 Stat. 1376) was signed into law on July 21, 2010. The comprehensive financial regulatory reform law contains several provisions that amend SIPA and apply to all SIPA liquidations filed on or after July 22, 2010. The provisions are as follows: Changes in the Minimum Assessment Amount. Section 929V amends the minimum assessment amount for SIPC-member firms. The highest amount that SIPC can impose as a minimum assessment is changed from $150 per annum to 0.02% of the gross revenues from the securities business of SIPC member. Increases in the Line of Credit Available from the Treasury Department. Section 929C increases the amount of money that SIPC can borrow from the Treasury Department (through the SEC) from $1 billion to $2.5 billion. Increase in the Standard Maximum Cash Advance Amount for Each Customer. Section 929H increases the amount of SIPC protection available for claims for cash from $100,000 to $250,000. Section 929H also provides that the amount of protection for cash claims may be indexed to inflation in accordance with the terms of the statute and with the approval of SIPC's Board. Criminalization of Misrepresentation of SIPC Membership and Increase in Fines for Other Crimes Under SIPA. Section 929V criminalizes the misrepresentation of SIPC membership by making such misrepresentation punishable by a fine of $250,000 or imprisonment for not more than five years. The maximum fine for other prohibited acts under SIPA is increased from $50,000 to $250,000. Provision of SIPC Protection to Customers with Futures Contracts. Section 983 amends the definition of a SIPC protected customer to include those with futures and options on futures in portfolio margin accounts carried as a securities account under a portfolio margining program approved by the SEC.
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The Securities Investor Protection Corporation (SIPC) is a nonprofit, nongovernmental corporation that was established in 1970 through the Securities Investor Protection Act (SIPA) to protect securities investors in the event of a broker-dealer failure. Except as otherwise provided in SIPA, the provisions of the Securities Exchange Act of 1934 (1934 act) apply as if SIPA were an amendment to, and included as a section of, the 1934 act. A court-appointed trustee generally presides over a SIPC member broker's liquidation and returns the remaining cash and securities to the firm's former customers. If the returned customer assets do not make customers whole, SIPC advances additional cash and securities to the customers. With the broad goal of helping to maintain investor confidence in the securities markets, SIPC has historically provided up to $500,000 per customer, of which up to $100,000 could be in satisfaction of claims for cash only (as opposed to claims for recovered securities). Signed into law on July 21, 2010, and in effect the next day, the Dodd-Frank Wall Street Reform and Consumer Protection Act (P.L. 111-203) expanded SIPC protection available for cash claims up to $250,000 of the maximum customer protection of $500,000. The SIPC funds that are used for such customers derive from the SIPC Fund. The Fund's assets come largely from annual assessments on SIPC broker-dealer members, at a rate that has been adjusted by SIPC. From 1997 to 2009, SIPC charged a flat rate of $150 per member. In September 2008, immediately before the start of the Lehman Brothers liquidation, the size of the SIPC Fund was $1.5 billion. Beginning in April 2009, following the commencement of large liquidations of firms like Lehman Brothers and Bernard L. Madoff Investment Securities LLC, SIPC re-instituted assessments on a percentage basis. At that time, the Fund stood at $1.6 billion. SIPC increased the SIPC Fund level target from $1 billion to $2.5 billion, and increased annual member assessments from $150 to 0.25% of each member's net operating revenue. On January 31, 2010, the size of the Fund reached a low point of $1.07 billion. As of August 31, 2010, the Fund stood at $1.31 billion. The Dodd-Frank Act increases from $1 billion to $2.5 billion the amount that SIPC can borrow from the Treasury Department if the SIPC Fund is insufficient, and it imposes a minimum assessment on SIPC members not to exceed 0.02% of the gross revenues from the securities business of each SIPC member. The Madoff case drew public attention to a number of public policy concerns. One concern is that SIPA does not cover so-called indirect investors, individuals invested in investment pools such as family partnerships or pension plans (also known as "feeder funds"), who have SIPA coverage as single entities. Under SIPA, each feeder fund is treated as an individual investor whose maximum SIPC protection is $500,000. Investors in feeder funds are thus entitled to a prorated and hence diluted portion of the payment to such a fund. Various observers say this is unfair. H.R. 5032 (Ackerman, 111th Congress), which could be reintroduced in the 112th Congress, would have required SIPC to provide up to $100,000 worth of protection to indirect investors in Ponzi schemes, including those involving Madoff. In addition, under H.R. 6531 (Garrett, 111th Congress), which also could be reintroduced in the 112th Congress, a victim's losses would be determined by the last amount on the individual's account statement. Currently, trustees use the last statement minus any amounts that have already been withdrawn by a customer, which is another concern. This report will be updated as events warrant.
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The Trickett Wendler, Frank Mongiello, Jordan McLinn, and Matthew Bellina Right to Try (RTT) Act of 2017 became federal law on May 30, 2018. Over the preceding five years, 40 states had enacted related legislation. The goal was to allow individuals with imminently life-threatening diseases or conditions to seek access to investigational drugs without the step of procuring permission from the Food and Drug Administration (FDA). Another goal—held by the Goldwater Institute, which led the initiative toward state bills, and some of the legislative proponents—was focused more on the process: to eliminate government's role in an individual's choice. The effort to publicize the issue and press for a federal solution involved highlighting the poignant situations of individuals who sought access. For example, in March 2014, millions of Americans heard about the plight of a seven-year-old boy with cancer. He was battling an infection no antibiotic had been able to tame. His physicians thought an experimental drug might help. Because the Food and Drug Administration (FDA) had not yet approved that experimental drug, it was not available in pharmacies. But FDA did have the authority to permit the use of an unapproved drug in certain circumstances—a process referred to as expanded access or compassionate use . For FDA to grant that permission, however, the manufacturer must have agreed to provide the drug. The manufacturer, which was still testing the drug that the boy sought, declined. Other stories often pointed toward FDA as an obstacle. Until FDA approves a drug or licenses a biologic, the manufacturer cannot put it on the U.S. market. During this time, Congress faced pressure to act, encouraged by the Goldwater Institute, which framed the issue as one of individual freedom—a right to try. The institute, which news accounts frequently refer to as a libertarian think tank, circulated model legislation. The bill's preface describes its scope: A bill to authorize access to and use of experimental treatments for patients with an advanced illness; to establish conditions for use of experimental treatment; to prohibit sanctions of health care providers solely for recommending or providing experimental treatment; to clarify duties of a health insurer with regard to experimental treatment authorized under this act; to prohibit certain actions by state officials, employees, and agents; and to restrict certain causes of action arising from experimental treatment. After 33 states enacted legislation reflecting the Goldwater Institute-provided model bill, in January 2017, legislators introduced a bill ( S. 204 ) designed to address the issue. Their Trickett Wendler, Frank Mongiello, Jordan McLinn, and Matthew Bellina Right to Try Act of 2017—named for several individuals facing amyotrophic lateral sclerosis (ALS, Lou Gehrig's disease) or Duchenne muscular dystrophy—sought to remove what proponents saw as FDA obstacles to patient access. On May 30, 2018, President Trump signed the bill into law ( P.L. 115-176 ). This report discusses FDA's expanded access program, which many refer to as the compassionate use program, through which FDA allows manufacturers to provide to patients investigational drugs—drugs that have not completed clinical trials to test their safety and effectiveness; obstacles—perceived as the result of FDA or manufacturer decisions—to individuals' access to experimental drugs; a summary of the provisions in the Right to Try (RTT) Act and how they are meant to ease those obstacles; a discussion of selected provisions in the RTT Act and what questions remain unresolved; and comments about the broader implications of the RTT Act. In general, a manufacturer may not sell a drug or vaccine in the United States until FDA has reviewed and approved its marketing application. That application for a new drug or biologic includes data from clinical trials as evidence of the product's safety and effectiveness for its stated purpose(s). After laboratory and animal studies have identified a potential drug or vaccine, a sponsor, usually the manufacturer, may submit an investigational new drug (IND) application to FDA. With FDA permission, the sponsor may then start the first of three major phases of clinical—human—trials. ( Figure 1 illustrates the general path of a pharmaceutical product.) Once the IND application is approved, researchers test in a small number of human volunteers the safety they had previously demonstrated in animals. These trials, called Phase I clinical trials, attempt "to determine dosing, document how a drug is metabolized and excreted, and identify acute side effects." If a sponsor considers the product still worthy of investment based on the results of a Phase I trial, it continues with Phase II and Phase III trials. Those trials look for evidence of the product's effectiveness —how well it works for individuals with the particular characteristic, condition, or disease of interest. Phase II is a first attempt at assessing effectiveness and its experience helps to plan the subsequent Phase III clinical trial, which the sponsor designs to be large enough to statistically test for meaningful differences attributable to the drug. A manufacturer may distribute a drug or vaccine in the United States only if FDA has (1) approved its new drug application (NDA) or biologics license app lication (BLA) or (2) authorized its use in a clinical trial under an IND. Under standard procedures, individuals outside of the sponsor-run clinical trials do not have access to the investigational new drug. The Federal Food, Drug, and Cosmetic Act (FFDCA), however, permits FDA in certain circumstances to allow access to an unapproved drug or to an approved drug for an unapproved use. One such mechanism is expanded access , commonly referred to as compassionate use , through individual or group INDs. The primary route for an individual to obtain an investigational drug is to enroll in a clinical trial testing that new drug. However, an individual may be excluded from the clinical trial because its enrollment is limited to patients with particular characteristics (e.g., in a particular stage of a disease, with or without certain other conditions, or in a specified age range), or because the trial has reached its target enrollment number. Through FDA's expanded access procedure, a person, acting through a licensed physician, may request access to an investigational drug—through either a new IND or a revised protocol to an existing IND—if a licensed physician determines (1) the patient has "no comparable or satisfactory alternative therapy available to diagnose, monitor, or treat" the serious disease or condition; and (2) "the probable risk to the person from the investigational drug or investigational device is not greater than the probable risk from the disease or condition"; the Secretary (FDA, by delegation of authority) determines (1) "that there is sufficient evidence of safety and effectiveness to support the use of the investigational drug" for this person; and (2) "that provision of the investigational drug ... will not interfere with the initiation, conduct, or completion of clinical investigations to support marketing approval"; and "the sponsor , or clinical investigator, of the investigational drug ... submits" "to the Secretary a clinical protocol consistent with the provisions of" FFDCA Section 505(i) and related regulations. FDA makes most expanded access IND and protocol decisions on an individual-case basis. Consistent with the IND process under which the expanded access mechanism falls, it considers the requesting physician as the investigator. The investigator must comply with informed consent and institutional review board (IRB) review of the expanded use. The manufacturer must make required safety reports to FDA. FDA may permit a manufacturer to charge a patient for the investigational drug, but "only [for] the direct costs of making its investigational drug available" (i.e., not for development costs or profit). Expanded access could apply outside of the clinical trial arena in these situations: (1) use in situations when a drug has been withdrawn for safety reasons, but there exists a patient population for whom the benefits of the withdrawn drug continue to outweigh the risks; (2) use of a similar, but unapproved drug (e.g., foreign-approved drug product) to provide treatment during a drug shortage of the approved drug; (3) use of an approved drug where availability is limited by a risk evaluation and mitigation strategy (REMS) for diagnostic, monitoring, or treatment purposes, by patients who cannot obtain the drug under the REMS; or (4) use for other reasons. The widespread use of expanded access is limited by an important factor: whether the manufacturer agrees to provide the drug, which—because it is not FDA-approved—cannot be obtained otherwise. FDA does not have the authority to compel a manufacturer to participate. Many highly publicized accounts of specific individuals' struggles with life-threatening conditions and efforts by activists influenced public debate over access. Another development was the model bill circulated in 2014 by the Goldwater Institute. Examples of public attitudes included news accounts of specific individuals' struggles with life-threatening conditions. Some found the process of asking FDA for a treatment IND too cumbersome. Others question FDA's right to act as a gatekeeper at all. Some point to manufacturers' refusal to provide their experimental drugs. Most critics, therefore, see solutions as within the control of FDA or pharmaceutical companies. This section lays out key perceived obstacles and issues—both FDA- and manufacturer-related. Have FDA's procedures discouraged patients and their physicians from seeking treatment INDs? For example: Does FDA ask for so much information that physicians or patients do not begin or complete the application? Does the FDA application process take too much time given the urgent need? In February 2015, FDA issued draft guidance (finalized in June 2016) on individual patient expanded access applications, acknowledging such difficulties. It developed a new form that a physician could use when requesting expanded access for an individual patient. It reduced the amount of information required from the physician by allowing reference (with the sponsor's permission) to the information the sponsor had already submitted to FDA in its IND. When a patient needs emergency treatment before a physician can submit a written request, FDA can authorize expanded access for an individual patient by phone or email, and the physician or sponsor must agree to submit an IND or protocol within 15 working days. Coincident with discussions preceding passage of the RTT Act, FDA had commissioned an independent report on its expanded access program. Citing that report, in November 2018, the commissioner announced several actions to improve its program. These include an enhanced webpage to help applicants navigate the application process and establishing an agency-wide Expanded Access Coordinating Committee. Regarding the RTT Act's new pathway to investigational drug access, FDA has established a work group and set up a Right to Try webpage. In August 2014, a USA Today editorial called the FDA procedures that patients must follow for compassionate use access "bureaucratic absurdity," "daunting," and "fatally flawed." Echoing much of the criticism that FDA had received regarding the issue, it called for one measure that would "cut out the FDA, which now has final say." The solution the editorial proposed involved what proponents term "right-to-try" laws . By January 2018, 3 9 states had passed right to try l aws in the absence of federal legislation. These laws were intended to allow a manufacturer t o provide an investigational drug to a terminally ill patient if the case met certain conditions: the drug has completed Phase I testing and is in a continuing FDA-approved clinical trial; all FDA-approved treatments have been considered; a physician recommends the use of the investigational drug; and the patient provides written informed consent. The state laws account for anticipated obstacles to the new arrangement. For example, they provide that insurers may, but are not required to, cover the investigational treatment, and that state medical boards and state officials may not punish a physician for recommending investigational treatment. The laws vary on the detail required in the informed consent and liability issues of the manufacturer and the patient's estate. However, several experts had suggested that this state law approach is unlikely to directly increase patient access. Before passage of the federal RTT Act, analysts raised questions about how federal law (the FFDCA), which required FDA approval of such arrangements, might preempt this type of state law. With the federal RTT Act now in place, some legal analysts suggest that the issue of federal preemption of state laws "will likely be determined on a case-by-case basis." Second—and also relevant to the federal RTT Act—for a patient who follows FDA procedures, FDA action is not the final obstacle to access. During FY2010 through FY2017, FDA received 10,482 expanded access requests and granted 10,429 (99.5%) of them. Before the passage of the RTT Act, several bills were introduced at the federal level in the 113 th , 114 th , and 115 th Congresses. Although the stated goal of these laws—allowing seriously ill people to try an experimental drug when other treatments have failed—may be understandable, provisions in the laws may be subject to legal, logistical, ethical, and medical obstacles. Do these laws actually increase such access? Provisions in the federal and state right-to-try laws allow certain patients to obtain—without the FDA's permission—an investigational drug that has passed the Phase 1 (safety) clinical trial stage. A key obstacle to patients' obtaining investigational drugs nonetheless remains: FDA does not have "final say" because it cannot compel a manufacturer to provide the drug. Why would a manufacturer not give its experimental drug to every patient who requests it? The manufacturer faces a complex decision. Certainly profit plays a role: companies think about public relations problems and the opportunity costs of limited staff and facility resources, but companies must also consider the available supply of the drug, liability, safety, and whether adverse event or outcome data will affect FDA's consideration of a new drug application in the future. If a manufacturer has only a tiny amount of an experimental drug, that paucity may limit distribution, no matter what the manufacturer would like to do. Sponsors of early clinical research make small amounts of experimental products for use in small Phase I safety trials, and progressively more for Phase II and III trials. Although one or two additional patients may not cause supply problems, a manufacturer does not know how many expanded access requests it will receive. Investment in building up to large-scale production usually comes only after reasonable assurance that the product will get FDA approval. For a company to redirect its current manufacturing capacity involves financial, logistic, and public relations decisions. A solution—though not immediately effective—might be committing additional resources to increase production. In discussing expanded access, some manufacturers have raised liability concerns if patients report injury from the investigational products. In the state right-to-try laws, there are some attempts to protect manufacturers or clinicians from state medical practice or tort liability laws. If there are legitimate concerns, Congress could consider acting as it has in past, choosing diverse approaches to protect manufacturers, clinicians, and patients in a variety of situations. Whether these concerns become illustrated by court cases and how any issues may be resolved in future laws are beyond the scope of this discussion. Any energy put into setting up and maintaining a compassionate use program could take away from a company's focus on completing clinical trials, preparing an NDA, and launching a product into the market. While this delay would have bottom-line implications, one CEO, in denying expanded access, portrayed the decision as an equity issue, saying, "We held firm to the ethical standard that, were the drug to be made available, it had to be on an equitable basis, and we couldn't do anything to slow down approval that will help the hundreds or thousands of [individuals]." Pointing to ways granting expanded access might divert them from research tasks and postpone approval, he said, "Who are we to make this decision?" By distributing the drug outside a carefully designed clinical trial, it may be difficult, if not impossible, to collect the data that would validly assess safety and effectiveness. Without those data, a manufacturer could be hampered in presenting evidence of safety and effectiveness when applying to FDA for approval or licensure. Clinical trials are structured to assess the safety of a drug as well as its effectiveness. The trial design may exclude subjects who are so ill from either the disease or condition for which the drug is being tested or another disease or condition. This allows, among other reasons, the analysis of adverse events in the context of the drug and disease of interest. The patients who would seek a drug under a right-to-try pathway are likely to be very ill and likely to experience serious health events. Those events could be a result of the drug or those events could be unrelated. They would present difficulties both scientific and public relations-wise to the manufacturer. A manufacturer would avoid those risks by choosing to not provide a drug outside a clinical trial. It is unclear how many people request and are denied expanded access to experimental drugs. This lack of information makes devising solutions to manufacturer-based obstacles difficult. Although FDA reports the number of requests it receives, manufacturers do not (nor does FDA require them to do so). The number of individuals who approach manufacturers is unknown, although some reports suggest that it is much larger than the number of successful requests that then go to FDA. For example, one report indicated that the manufacturer of an investigational immunotherapy drug, which does not have a compassionate use program, received more than 100 requests for it. For the past several Congresses, Members have introduced bills with varying approaches to increasing patient access to investigational drugs. Some followed the Goldwater Institute model (to take FDA out of the process) and some proposed requiring manufacturers to publicize their compassionate use policies and decisions or requiring that the Government Accountability Office (GAO) study the patterns of patient requests and manufacturer approvals and denials, barriers to drug sponsors, and barriers in the application process. Congress enacted two larger bills that each included sections on expanded access: the 21 st Century Cures Act (Section 3032, P.L. 114-255 ) and the FDA Reauthorization Act of 2017 (Section 610, P.L. 115-52 ). In December 2016, the 21 st Century Cures Act added a new Section 561A to the FFDCA: "Expanded Access Policy Required for Investigational Drugs." It required "a manufacturer or distributor of an investigational drug to be used for a serious disease or condition to make its policies on evaluating and responding to compassionate use requests publicly available." In August 2017, the FDA Reauthorization Act of 2017 amended the date by which a company must post its expanded access policies and required the Secretary to convene a public meeting to discuss clinical trial inclusion and exclusion criteria, issue guidance and a report, issue or revise guidance or regulations to streamline IRB review for individual patient expanded access protocols, and update any relevant forms associated with individual patient expanded access. It also required GAO to report to Congress on individual access to investigational drugs through FDA's expanded access program. On January 24, 2017, Senator Johnson introduced S. 204 , the Trickett Wendler Right to Try Act of 2017, and the bill had 43 cosponsors at that time. On August 3, 2017, the Senate Committee on Health, Education, Labor, and Pensions discharged the bill by unanimous consent. The same day, the Senate passed S. 204 , the Trickett Wendler, Frank Mongiello, Jordan McLinn, and Matthew Bellina Right to Try Act with a substantial amendment also by unanimous consent. On March 13, 2018, Representative Fitzpatrick introduced a related bill, H.R. 5247 , the Trickett Wendler, Frank Mongiello, Jordan McLinn, and Matthew Bellina Right to Try Act of 2018, and the bill had 40 cosponsors at that time. On March 21, the House passed the bill (voting 267-149). The House accepted the Senate bill on May 22, 2018 (voting 250-169), and the President signed it into law on May 30, 2018. This section of the report first summarizes the provisions in the Right to Try Act. It then discusses how those provisions address the obstacles described in the previous section. The Right to Try Act adds to the FFDCA a new Section 561B, Investigational Drugs for Use by Eligible Patients. It has a separate paragraph that is not linked to an FFDCA section to limit the liability to all entities involved in providing an eligible drug to an eligible patient. It concludes with a "Sense of the Senate" section. The new FFDCA Section 561B has several provisions that mirror many steps in FDA's expanded access program. A major difference is that the new section is designed to exist wholly outside the jurisdiction and participation of FDA. These provisions define an eligible patient as one who (1) has been diagnosed with a life-threatening disease or condition, (2) has exhausted approved treatment options and is unable to participate in a clinical trial involving the eligible investigational drug (as certified by a physician who meets specified criteria), and (3) has given written informed consent regarding the drug to the treating physician; define an eligible investigational drug as an investigational drug (1) for which a Phase 1 clinical trial has been completed, (2) that FDA has not approved or licensed for sale in the United States for any use, (3) that is the subject of a new drug application pending FDA decision or is the subject of an active investigational new drug application being studied for safety and effectiveness in a clinical trial, and (4) for which the manufacturer has not discontinued active development or production and which the FDA has not placed on clinical hold; and exempt use under this section from parts of the FFDCA sections regarding misbranding, certain labeling and directions for use, drug approval, and investigational new drugs regulations; The new FFDCA Section 561B has provisions that had not been necessary when access had been granted under FDA auspices. These provisions prohibit the Secretary from using clinical outcome data related to use under this section "to delay or adversely affect the review or approval of such drug" unless the Secretary determines its use is "critical to determining [its] safety," at which time the Secretary must provide written notice to the sponsor to include a public health justification, or unless the sponsor requests use of such clinical outcome data; require the sponsor to submit an annual summary to the Secretary to include "the number of doses supplied, the number of patients treated, the uses for which the drug was made available, and any known serious adverse events"; and require the Secretary to post an annual summary on the FDA website to include the number of drugs for which (1) the Secretary determined the need to use clinical outcomes in the review or approval of an investigational drug, (2) the sponsor requested that clinical outcomes be used, and (3) the clinical outcomes were not used. The act has an uncodified section titled "No Liability," which does not correspond to actions in FDA's expanded access program. It states that, related to use of a drug under the new FFDCA Section 561B, "no liability in a cause of action shall lie against ... a sponsor or manufacturer; or ... a prescriber, dispenser, or other individual entity ... unless the relevant conduct constitutes reckless or willful misconduct, gross negligence, or an intentional tort under any applicable State law"; and no liability, also, for a "determination not to provide access to an eligible investigational drug." Will the RTT Act result in more patients getting access to investigational drugs? Will it ease hurdles for those who would have gone through FDA's expanded use process? This report discusses several provisions in the RTT Act that Congress could consider as it oversees the law's implementation. The RTT Act defines eligibility, in part, as a person diagnosed with a "life threatening disease or condition." That definition differs from many of the state-passed laws, as well as from what FDA preferred: that the definition make clear patients were eligible only if they faced a "terminal illness." The commissioner noted that "[many] chronic conditions are life-threatening, but medical and behavioral interventions make them manageable." Examples of such diseases or conditions are diabetes and heart disease. Speaking in support of right to try bills, supporters told of people facing death who, with no alternatives remaining, would be willing to risk an experimental drug that might even hasten their death. By not limiting eligibility to those at the end of options, the RTT Act could allow people with chronic conditions to take extreme risks rather than live a normal lifespan with treatments now available. Because of the broad eligibility, manufacturers could see a significant increase in requests. If a new Congress revisits the RTT Act, Members might consider the definition and clarify what they want for patients and manufacturers. The RTT Act makes it mandatory that before eligible patients receive an investigational drug, they give the treating doctor their informed consent in writing—but it does not define "informed consent." Other right-to-try bills, including the House-passed H.R. 5247 , included more specific direction for consent, such as criteria already laid out in 21 CFR Part 50. The new law neither provides nor requires the development of such criteria. It thus may weaken patient protections that FDA's expanded use policy provides. The RTT Act also seems to eliminate the requirement that an IRB review the investigational use of a drug. If Congress decides to revisit RTT, it may seek to create a more explicit informed consent requirement and some outside oversight to reduce the risk to patients either by well-meaning but less knowledgeable physicians or by unscrupulous actors some RTT opponents anticipate. Is a drug effective—does it do what it is meant to do? Is a drug safe—do the potential benefits outweigh the potential risks? Neither of these questions can be discussed without data on what happened to those who used the drug. It sometimes takes thousands of patients to establish an accurate evaluation of a drug's safety and effectiveness. Researchers exclude from the clinical trial patients who—for reasons other than the drug's efficacy—may not show evident benefit from the drug. Those are the patients who would get access through the RTT pathway. The RTT Act appears to protect the drug sponsor: it prohibits the Secretary from using clinical outcome data related to use under this section "to delay or adversely affect the review or approval of such drug." This might make a sponsor more likely to approve the use of its investigational drug under this RTT pathway. The RTT Act, however, includes an exception. It allows FDA to use those data if the Secretary determines their use is "critical to determining [the drug's] safety." If drug sponsors find that this remains an obstacle to their permitting RTT access to investigational drugs, Congress could work with them, FDA, and patient advocacy groups to devise another approach. The RTT Act requires the manufacturer to report once a year to the Secretary, including an account of all serious adverse events that occurred in the preceding 12 months. It does not require immediate reporting of adverse events. This is less than what FDA requires of sponsors of approved and investigational drugs. All must periodically inform FDA of such events—and immediately if the event is "serious and unexpected." An adverse event may not be clearly attributable to a drug. A clustering of such reports, though, could signal FDA that this might be something worth exploring. If Congress were to reconsider the RTT Act, it could explore with stakeholders—FDA, drug sponsors, and physicians and patients who use the RTT pathway—ways to make data available to advance the goal of developing safe and effective drugs while protecting the legitimate business interests of manufacturers and the access of seriously ill individuals to try risky drugs. FDA's expanded use process permits a manufacturer to charge a patient for the investigational drug, but "only [for] the direct costs of making [it] available." That means it cannot charge for development costs or to make a profit. The RTT Act does not address what a drug manufacturer may charge such patients. Insurers have not announced whether they would pay for the drug—or pay for doctor office visits or hospital stays associated with its use. Congress might examine that question. It might be useful in assessing the effect of the RTT Act to see whether patients could lose coverage for palliative or hospice care because the investigational drug is a potentially curative treatment. Manufacturers see liability costs as an obstacle to providing an investigational drug to patients. The no-liability provision in the RTT Act seems to remove that obstacle. It also seems to leave the patient with no legal recourse. In the past, Congress has sometimes tried to protect both recipients and the manufacturer from harm (e.g., the National Childhood Vaccine Injury Act of 1986 and the Smallpox Emergency Personnel Protection Act of 2003). In those cases, where Congress felt the public health benefit to the larger group outweighed the smaller risk to some, the federal government accepted responsibility for compensating injured patients and indemnifying manufacturers from lawsuits. That has not been the motivating force behind the RTT Act. Discussions of earlier versions of RTT liability protections raised concerns that they might not fully protect the manufacturer. As patients begin using drugs under the RTT Act pathway, it is possible that they will test such protections in the courts. This is yet another issue that Congress might pursue. What role could Congress play now that the RTT Act is law? It could answer three questions at the core of measuring its effect on FDA, drug manufacturers, and patients. First: Will more patients get investigational drugs? The RTT Act requires manufacturers to report each year on the number of doses supplied and patients treated as a result of the law. It also reports on what the drugs were used for. It might examine the effect on costs incurred by patients. Over time—and perhaps with requesting other data—Congress could determine whether the law has had the effect its sponsors intended. Second: Has the law removed the obstacles to access to investigational drugs? While the RTT Act achieves proponents' objective of removing the FDA application step in a patient's quest for an investigational drug, it does not address many of the obstacles—such as a limited drug supply or limits on staff and facility resources—that could lead a manufacturer to refuse access to its drugs. And it is not clear whether it sufficiently deals with the obstacles it does address—use of clinical outcomes data and liability protection. The reporting required by the RTT Act was not designed to answer those questions. But Congress could turn to the Government Accountability Office for help. It could also encourage manufacturers, patient advocates, and FDA to collaborate in the search for answers. Third: How will this affect FDA? One news article referred to the RTT Act's "bizarre twist," as FDA must determine its role in implementing a law whose function is to remove FDA from the situation. Commissioner of Food and Drugs Gottlieb and Senator Johnson, the sponsor of the Senate bill, have exchanged statements that potentially foretell conflict if FDA issues rules that would limit the law's scope. Finally, is the RTT Act a harbinger of reduced authority for FDA? Writing in opposition to the bill, four former FDA commissioners warned that it would "create a dangerous precedent that would erode protections for vulnerable patients." That is something future Congresses may choose to address. By trying to help one set of ill patients, does Congress wear down the health of the institution meant to protect the public's health? The RTT Act concludes with a "Sense of the Senate" section that appears to acknowledge that this legislation offers minimal opportunity to patients. It is explicit in asserting that the new law "will not, and cannot, create a cure or effective therapy where none exists." The legislation, it says, "only expands the scope of individual liberty and agency among patients." The drafters realistically end that phrase with "in limited circumstances."
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The Trickett Wendler, Frank Mongiello, Jordan McLinn, and Matthew Bellina Right to Try (RTT) Act of 2017 became federal law on May 30, 2018. Over the preceding five years, 40 states had enacted related legislation. The goal was to allow individuals with imminently life-threatening diseases or conditions to seek access to investigational drugs without the step of procuring permission from the Food and Drug Administration (FDA). Another goal—held by the Goldwater Institute, which led the initiative toward state bills, and some of the legislative proponents—was focused more on the process: to eliminate government's role in an individual's choice. The RTT Act (P.L. 115-176) offers eligible individuals and their physicians a pathway other than FDA's expanded access procedures to acquiring investigational drugs. It defines an eligible patient as one who (1) has been diagnosed with a life-threatening disease or condition, (2) has exhausted approved treatment options and is unable to participate in a clinical trial involving the eligible investigational drug (as certified by a physician who meets specified criteria), and (3) has given written informed consent regarding the drug to the treating physician. It defines an eligible investigational drug as an investigational drug (1) for which a Phase 1 clinical trial has been completed, (2) that FDA has not approved or licensed for sale in the United States for any use, (3) that is the subject of a new drug application pending FDA decision or is the subject of an active investigational new drug application being studied for safety and effectiveness in a clinical trial, and (4) for which the manufacturer has not discontinued active development or production and which the FDA has not placed on clinical hold. The RTT Act also has provisions that limit how the Secretary of Health and Human Services (through the FDA) can use data regarding clinical outcomes of patients who get these drugs through the RTT pathway; require drug sponsors (usually the manufacturers) to report annually to the Secretary on use of the pathway; and require the Secretary to post certain annual summaries. Finally, the RTT Act states that the sponsor or manufacturer has "no liability" for actions under the RTT provisions. The no-liability provision applies also to a prescriber, dispenser, or "other individual entity" unless there is "reckless or willful misconduct, gross negligence, or an intentional tort." Before the RTT Act, observers discussed several obstacles to access to investigational drugs. These included some that were FDA-related: the difficult process to request FDA permission and the role of FDA as gatekeeper. Some related to why a manufacturer might decline to provide an investigational drug: limited available supply, liability, limited staff and facility resources, and concerns about use of outcomes data. The RTT directly eliminates some of these concerns, addresses some others, and leaves others alone. Future Congresses could look at the RTT Act's effect on FDA, drug manufacturers, and terminally ill patients. Will more patients get investigational drugs? Congress could look at whether the law sufficiently removed obstacles to access. And how will the changes affect FDA? Four former FDA commissioners warned that the bill would "create a dangerous precedent that would erode protections for vulnerable patients." The first clue may come from how the current commissioner interprets FDA's role in the implementation of the new law.
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This report focuses on FY2017 appropriations for Interior, Environment, and Related Agencies. At issue for Congress is d etermining the amount of funding for agencies and programs in the bill and the terms and conditions of such funding. This report first presents a brief overview of the agencies in the bill. It then provides a description of the appropriations requested by President Obama for FY2017. Next, it compares the President's request for FY2017 with appropriations enacted for FY2016. It then compares the FY2017 House-passed and Senate-committee reported appropriations with each other, with FY2016 enacted appropriations, and with FY2017 appropriations requested by the President. Finally, it summarizes the continuing appropriations enacted for FY2017, first through December 9, 2016 (under Division C, P.L. 114-223 ), and then through April 28, 2017 (under Division A, P.L. 114-254 ). Appropriations are complex. Budget justifications for requests for some agencies are large, generally several hundred pages long and containing numerous funding, programmatic, and legislative changes for congressional consideration. Further, appropriations laws provide funds for numerous accounts, activities, and sub-activities, and the accompanying explanatory statements provide additional directives and other important information. This report does not provide information at the account and sub-account levels, nor does it detail budgetary reorganizations or legislative changes enacted in law or proposed by the President. For information on a particular agency or individual accounts, programs, or activities administered by a particular agency, contact the key policy staff listed at the end of this report. In addition, for selected reports related to appropriations for Interior, Environment, and Related Agencies, such as individual agencies (e.g., National Park Service) or cross-cutting programs (e.g., Wildland Fire Management), see the "Interior & Environment Appropriations" subissue under the "Appropriations" Issue Area page on the Congressional Research Service (CRS) website. The annual Interior, Environment, and Related Agencies appropriations bill includes funding for agencies and programs in three separate federal departments as well as for numerous related agencies. The Interior bill typically contains three primary titles. Title I provides funding for most Department of the Interior (DOI) agencies, many of which manage land and other natural resource or regulatory programs. Title II contains appropriations for the Environmental Protection Agency (EPA). Title III currently funds 20 agencies in other departments, such as the Forest Service in the Department of Agriculture and the Indian Health Service in the Department of Health and Human Services; arts and cultural agencies, such as the Smithsonian Institution; and various other entities. Title III of the bill is referred to as "Related Agencies." Selected major agencies in the Interior bill are briefly described below. DOI's mission is to protect and manage the nation's natural resources and cultural heritage; provide scientific and other information about those resources; and exercise trust responsibilities and other commitments to American Indians, Alaska Natives, and affiliated island communities. There are eight DOI agencies and two other broad accounts funded in the Interior bill that carry out this mission. These agencies and broad accounts are referred to collectively hereinafter as the 10 DOI "agencies." DOI agencies funded in the Interior bill include the following: The Bureau of Land Management administers about 248 million acres of public land, mostly in the West, for diverse uses such as energy and mineral development, livestock grazing, recreation, and preservation. The agency is also responsible for about 700 million acres of federal onshore subsurface mineral estate throughout the nation and supervises the mineral operations on about 56 million acres of Indian trust lands. The Fish and Wildlife Service administers 91 million acres of federal land within the National Wildlife Refuge System and other areas, including 77 million acres in Alaska. It also manages several large marine refuges and marine national monuments, sometimes jointly with other federal agencies. In addition, the Fish and Wildlife Service is the primary agency responsible for implementing the Endangered Species Act (16 U.S.C. §§1531 et seq.) through listing of species; consulting with other federal agencies; collaborating with private entities and state, tribal, and local governments; and other measures. It is also the primary agency responsible for promoting wildlife habitat; enforcing federal wildlife laws; supporting wildlife and ecosystem science; conserving migratory birds; administering grants to aid state fish and wildlife programs; and coordinating with state, international, and other federal agencies on fish and wildlife issues. The National Park Service administers 80 million acres of federal land within the National Park System, which includes 417 diverse units in the 50 states, District of Columbia, and U.S. territories. Roughly two-thirds of the system's lands are in Alaska. The National Park Service has a dual mission—to preserve unique resources and to provide for their enjoyment by the public. The agency also supports and promotes some resource conservation activities outside the Park System through grant and technical assistance programs and cooperation with partners. The U.S. Geological Survey is a science agency that provides physical and biological information related to geological resources; climate and land use change; natural hazards; and energy, mineral, water, and biological sciences and resources. In addition, it is the federal government's principal civilian mapping agency and a primary source of data on the quality of the nation's water resources. The Bureau of Ocean Energy Management manages development of the nation's offshore conventional and renewable energy resources in the Atlantic, the Pacific, the Gulf of Mexico, and the Arctic. These resources are in areas covering approximately 1.7 billion acres located beyond state waters, mostly in the Alaska region (more than 1 billion acres) but also off all coastal states. The Bureau of Safety and Environmental Enforcement provides regulatory and safety oversight for resource development in the outer continental shelf. Among its responsibilities are oil and gas permitting, facility inspections, environmental compliance, and oil spill response planning. The Office of Surface Mining Reclamation and Enforcement works with states and tribes to reclaim abandoned coal mines. The agency also regulates active coal mines to minimize environmental impacts during mining and to reclaim affected lands and waters after mining. Indian Affairs agencies provide and fund a variety of services to federally recognized American Indian and Alaska Native Tribes and their members. Historically, these agencies have taken the lead in federal dealings with tribes. The Bureau of Indian Affairs is responsible for programs that include government operations, courts, law enforcement, fire protection, social programs, roads, economic development, employment assistance, housing repair, irrigation, dams, Indian rights protection, implementation of land and water settlements, and management of trust assets (real estate and natural resources). The Bureau of Indian Education funds an elementary and secondary school system, institutions of higher education, and other educational programs. EPA's mission is to protect human health and the environment. Primary responsibilities include the implementation of federal statutes regulating air quality, water quality, pesticides, toxic substances, management and disposal of solid and hazardous wastes, and cleanup of environmental contamination. EPA also awards grants to assist states and local governments in implementing federal law and complying with federal requirements to control pollution. There are 20 agencies, organizations, and other entities funded by Title III of the Interior bill, collectively referred to hereinafter as the 20 "Related Agencies." Among the Related Agencies funded in the Interior bill, roughly 95% of the funding is typically provided to the following: The Forest Service in the Department of Agriculture manages 193 million acres of the National Forest System—consisting of national forests, national grasslands, and other areas—in 43 states, the Commonwealth of Puerto Rico, and the Virgin Islands. It also provides technical and financial assistance to states, tribes, and private forest landowners and conducts research on sustaining forest resources for future generations. The Indian Health Service in the Department of Health and Human Services provides medical and environmental health services for more than 2 million American Indians and Alaska Natives. Health care is provided through a system of facilities and programs operated by the agency, tribes and tribal organizations, and urban Indian organizations. The agency operates 26 hospitals, 59 health centers, and 32 health stations. Tribes and tribal organizations, through Indian Health Service contracts and compacts, operate another 19 hospitals, 284 health centers, 79 health stations, and 163 Alaska Native village clinics. Urban Indian organizations operate 34 ambulatory or referral programs. The Smithsonian Institution is a museum and research complex consisting of 19 museums and galleries, the National Zoo, and nine research facilities throughout the United States and around the world. Established by federal legislation in 1846 with the acceptance of a trust donation by the institution's namesake benefactor, the Smithsonian is funded by both federal appropriations and a private trust. The National Endowment for the Arts and the National Endowment for the Humanities make up the National Foundation on the Arts and the Humanities. The National Endowment for the Arts is a major federal source of support for all arts disciplines. Since 1965, it has awarded more than 145,000 grants, which have been distributed to all states. The National Endowment for the Humanities generally supports grants for humanities education, research, preservation, and public humanities programs; creation of regional humanities centers; and development of humanities programs under the jurisdiction of state humanities councils. Since 1965, it has awarded approximately 63,000 grants. It also supports a Challenge Grant program to stimulate and match private donations in support of humanities institutions. For FY2017, President Obama requested $33.18 billion for the approximately 30 agencies and entities typically funded in the annual Interior, Environment, and Related Agencies appropriations bill. For the 10 major DOI agencies in Title I of the bill, the request was $12.24 billion, or 36.9% of the total requested. For EPA, funded in Title II of the bill, the request was $8.27 billion, or 24.9% of the total. For the 20 agencies and other entities currently funded in Title III of the bill, the request was $12.67 billion, or 38.2% of the total. The President's request included a proposal for a new adjustment to the discretionary spending limits in law that would provide an additional $1.15 billion for wildfire suppression for FY2017. Of the total proposed adjustment for FY2017, $290.0 million was for DOI Wildland Fire Management and $864.1 million was for Forest Service Wildland Fire Management. Appropriations for agencies vary widely for reasons relating to the number, breadth, and complexity of agency responsibilities; alternative sources of funding (e.g., mandatory appropriations); and Administration and congressional priorities, among other factors. Thus, although the President's FY2017 request covered approximately 30 agencies, funding for a small subset of these agencies accounted for most of the total. For example, the requested appropriations for three agencies—EPA, Forest Service, and Indian Health Service—were nearly three-fifths (57.9%) of the total request. Further, more than three-quarters (76.0%) of the request was for these three agencies and two others, National Park Service and Indian Affairs. For DOI agencies, the FY2017 requests ranged from $80.2 million for the Bureau of Ocean Energy Management to $3.10 billion for the National Park Service. The requests for 6 of the 10 agencies exceeded $1 billion. Nearly half (49.3%) of the $12.24 billion requested for DOI agencies was for two agencies—Indian Affairs ($2.93 billion) and the National Park Service. For Related Agencies in Title III, the requested funding levels exhibited even more variation. The President sought amounts ranging from $1.4 million for grants under National Capital Arts and Cultural Affairs to $5.74 billion for the Forest Service. The Indian Health Service would be the only other agency to receive more than $5 billion. The next-largest request was for the Smithsonian Institution, at $922.2 million. By contrast, 14 agencies would receive less than $80 million each, including 5 with appropriations of less than $10 million each. Figure 1 identifies the share of the President's request for particular agencies in the Interior bill. Table 1 , at the end of this report, contains the amount requested by the President for FY2017 for each agency, FY2016 enacted appropriations for each agency, the percentage change between FY2016 enacted appropriations and the President's request for FY2017, the appropriations included in H.R. 5538 (114 th Congress) as passed the House, and the appropriations contained in S. 3068 (114 th Congress) as reported by the Senate Appropriations Committee. The President's request of $33.18 billion for FY2017 would have been an increase of $250.6 million (0.8%) over the total FY2016 enacted appropriations of $32.93 billion. This FY2016 total includes $700.0 million in emergency funding for Wildland Fire Management by the Forest Service ( P.L. 114-53 , Section 135). These funds were provided for urgent fire suppression, but also could be transferred to other accounts to repay monies that had been borrowed for fire suppression. Unlike the President's FY2017 request, the FY2016 enacted appropriations did not include a cap adjustment to discretionary spending limits in law (for Wildland Fire Management). The FY2016 appropriations included $452.0 million for the Payments in Lieu of Taxes (PILT) program, whereas the President did not seek discretionary funding for PILT for FY2017. Instead, the President supported mandatory funding for PILT for FY2017, which would require a change in law. PILT compensates counties and local governments for nontaxable lands within their jurisdictions. Under the President's proposal, the total for two of the three titles of the bill would have increased by different amounts. DOI agencies would have received an increase of $225.8 million (1.9%) and funding for EPA would have increased by $127.3 million (1.6%). However, the total for all Related Agencies in Title III would have decreased by $102.5 million (0.8%). With regard to DOI, the President proposed increases above FY2016 enacted levels for 8 of the 10 agencies. The increases varied in dollar amount and percentage of appropriations, with the lowest dollar increase of $6.0 million (8.0%) for the Bureau of Ocean Energy Management and the highest of $250.2 million (8.8%) for the National Park Service. Some of the National Park Service increase was intended to enhance park units in light of the agency's 2016 centennial. Activities receiving additional funds included repair, rehabilitation, and maintenance of facilities; line item construction; visitor services for young people and families; historic preservation; and the Centennial Challenge program (a federal matching program to leverage donations for park units). In addition to the National Park Service, three other DOI agencies would have received increases of more than $100.0 million under the President's request. Proposed increases were as follows: Department-Wide Programs, $170.3 million (15.8%); Indian Affairs, $137.6 million (4.9%); and U.S. Geological Survey, $106.8 million (10.1%). Under Department-Wide Programs, Wildland Fire Management on DOI lands received the largest increase. The second-largest increase was for the Working Capital Fund, primarily for cybersecurity and DOI compliance with the Digital Accountability and Transparency Act of 2014 (DATA Act, P.L. 113-101 ). For Indian Affairs, the President requested increases for many activities, among them education, natural resource management, and social services. For the U.S. Geological Survey, the President requested additional funds across agency activities, including ecosystems, climate and land use change, natural hazards, water resources, and facilities. Two DOI agencies, Departmental Offices and the Office of Surface Mining Reclamation and Enforcement, would have received decreased appropriations under the President's FY2017 request. For Departmental Offices, the decrease was primarily because the President did not seek discretionary funding under this account for PILT, as noted. For the Office of Surface Mining Reclamation and Enforcement, the decrease was primarily because the President did not request to continue the FY2016 appropriation of $90.0 million for grants to three states for reclamation of abandoned mine lands, together with economic and community development activities. Within the overall increase for EPA, the President sought additional funds for each of the agency's accounts except State and Tribal Assistance Grants. The $239.2 million (9.2%) increase for the Environmental Programs and Management account was the largest overall dollar increase proposed for EPA accounts. This account funds a broad array of activities supporting EPA's development and enforcement of pollution-control regulations and standards, technical assistance, and administrative and operational expenses. The $40.2 million (3.7%) increase for the Hazardous Substance Superfund account was the second-largest overall dollar increase for EPA accounts. This account supports the assessment and cleanup of sites contaminated from the release of hazardous substances. EPA administers these activities under the Superfund program, as authorized in the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA; 42 U.S.C. §§9601 et seq.). The President also sought $50.0 million for the Water Infrastructure Finance and Innovation Program, through a proposed new account to consolidate resources for loans to improve water infrastructure. The overall decrease from FY2016 enacted levels proposed for EPA's account for State and Tribal Assistance Grants ($237.8 million, or 6.8%) included both decreases and increases for programs within the account. For instance, grants to states for wastewater infrastructure projects through the Clean Water State Revolving Fund would have declined by $414.4 million (29.7%), whereas funding for drinking water infrastructure grants to states through the Drinking Water State Revolving Fund would have increased by $157.3 million (18.2%). Thirteen of the 20 Title III agencies would have received increases over FY2016 enacted levels under the President's FY2017 proposal, and two of the three largest agencies would have received the biggest dollar increases. Specifically, the President sought an additional $377.4 million (7.9%) for the Indian Health Service and $82.0 million (9.8%) for the Smithsonian Institution. The Indian Health Service increases were for many programs and activities, including hospitals and health clinics, mental health, alcohol and substance abuse, contract support costs, and construction of health care and other facilities. The Smithsonian Institution's additional funds were to be directed to facilities maintenance, operations, security, and construction, among other purposes. By contrast, two Title III agencies would have received level funding and five agencies would have received decreases. The President proposed the largest dollar decrease for the Forest Service—a $623.9 million (9.8%) reduction—primarily through lower funding for Wildand Fire Management for FY2017. This was largely because the FY2016 total reflects the enactment of additional emergency appropriations for Wildland Fire Management H.R. 5538 , as passed by the House on July 14, 2016, would have provide d $32.1 5 billion for Interior, Environment, and Related Agencies for FY201 7 . S. 3068 , as reported by the Senate Appropriations Committee on June 16, 201 6 , would have provide d $3 2.76 billion for Interior, Environment, and Related Agencies. Both bills included $480.0 million for PILT. The House - passed bill included this funding in the DOI Departmental Offices account, with funding for the Office of the Secretary. The Senate included PILT funding in the Department-Wide Programs account. See Table 1 for the House - passed and Senate committee -reported funding levels for each title and agency in the Interior bill . The bills differed in the amount and type of funding for addressing wildland fires. Overall, the Senate bill contained $521.6 million (13.3%) more than the House bill. The Senate bill contained a total of $4.45 billion for Wildland Fire Management , composed of $1.1 1 billion for DOI and $3.33 billion for the Forest Service. The S enate total included $ 661.3 million in emergency appropriations for managing wildland fires , with $171.3 million for DOI and $490.0 million for the Forest Service. Such emergency funding typically does not count toward a subcommittee ' s allocation for the bill. The House-passed bill did not include emergency appropriations , but instead provided a portion of the funding through the FLAME Wildfire Suppression Reserve Accounts . It contained a total of $3.92 billion for managing w ildland f ire s, with $943.9 million for DOI and $ 2.98 billion for the Forest Service. The inclusion of emergency appropriations in the Senate committee-reported bill contributed to a larger overall appropriation in S. 3068 than in H.R. 5538 . The Senate bill was $615.7 million (1.9%) more than the House-passed bill. Similarly, the emergency funding was a factor in the larger appropriations in S. 3068 for DOI agencies ($151.1 million, 1.2% higher), the Forest Service ($307.3 million, 5.7% higher), and Title III agencies overall ($224.0 million, 1.8% higher). The Senate committee-reported bill also contained higher amounts than H.R. 5538 for some other major agencies, including EPA ($240.6 million, 3.1% higher). While the measures included differing amounts for many EPA accounts, more funding in the Senate bill for the Environmental Programs and Management account and the Clean Water State Revolving Fund (SRF, in the State and Tribal Assistance Grants account) contributed to the overall higher Senate bill total. However, the House bill provided higher funding for some agencies than the Senate measure. For instance, it would have funded the Indian Health Service at $5.08 billion, which was $84.9 million (1.7%) more than the $4.99 billion in S. 3068 . The House bill had higher appropriations for clinical services, among other Indian Health Service programs. Both H.R. 5538 as passed by the House and S. 3068 as reported from the Senate Appropriations Committee would provide lower appropriations than enacted for FY2016 ($32.93 billion). One contributor to the lower overall bill totals was lower funding for wildland fires relative to the FY2016 enacted level ($4.90 billion). As noted, the FY2016 total appropriation included $700.0 million in additional, emergency funding for Forest Service Wildland Fire Management. For both DOI and Forest Service wildfires, H.R. 5538 had $978.4 million (20.0%) less than FY2016 appropriations, whereas S. 3068 contained $456.8 million (9.3%) less than the FY2016 level. Like the FY2016 appropriation, the House and Senate bills contained discretionary funding for PILT. PILT would have received a $28.0 million (6.2%) increase under both bills, from $452.0 million in FY2016 to $480.0 million in FY2017. The $32.15 billion for FY2017 in H.R. 5538 , as passed by the House, was $779.3 million (2.4%) less than the FY2016 appropriation of $32.93 billion. DOI agencies, however, would have received an overall increase of $112.7 million (0.9%) for FY2017, with 6 of the 10 DOI agencies sharing in the increase. The largest recommended dollar increase was $78.8 million (2.8%) for the National Park Service, with increases for facility operations and maintenance, construction, the Historic Preservation Fund, the Centennial Challenge federal matching program, and other activities. The next largest dollar increase was $73.8 million (2.6%) for Indian Affairs, with increases for human services, elementary and secondary education programs, and other programs. H.R. 5538 would have reduced EPA funding by $271.8 million (3.3%) relative to FY2016 appropriations. The account with the largest dollar decline was Environmental Programs and Management, with $207.2 million (7.9%) less than FY2016. Programs in the account that would have been reduced included clean air and climate; enforcement; information exchange and outreach; and legal, science, regulatory, and economic review. The EPA account with the second-largest reduction was State and Tribal Assistance Grants, with $147.4 million (4.2%) less than FY2016, largely from lower funds for grants to states through the Clean Water SRF. In contrast, the House bill increased appropriations for the Drinking Water SRF, and provided $50.0 million for a new account to fund the Water Infrastructure Finance and Innovation Act (WIFIA) Program. Title III agencies would have received an overall decrease of $620.2 million (4.9%) for FY2017 under H.R. 5538 . The largest dollar reduction—of $926.6 million (14.6%)—was to go to the Forest Service, largely from lower funding for Wildland Fire Management. A total of three agencies would have received lower amounts than enacted in FY2016, and eight others would have received level funding. Funds for nine agencies would have increased, with the largest dollar amount—$271.0 million (5.6%)—for the Indian Health Service. Additional funds were included for clinical services, such as hospital and health clinics, contract support costs, and construction of health care and other facilities. With regard to the Senate bill, the $32.76 billion for Interior, Environment, and Related Agencies was $163.6 million (0.5%) less than FY2016 appropriations of $32.93 billion. DOI agencies, however, would have received an overall increase of $263.8 million (2.2%) for FY2017, with 6 of the 10 DOI agencies sharing in the increase. The largest recommended dollar increase in S. 3068 was $600.2 million (55.6%) for Department-Wide Programs, whereas the largest recommended dollar decrease was $449.9 million (41.7%) for Departmental Offices. These differences primarily resulted from funding PILT through different accounts—under Departmental Offices in FY2016 but under Department-Wide Programs in S. 3068 . Within the Department-Wide Programs account, the Senate bill also contained an additional $120.2 million (12.1%) for DOI Wildland Fire Management. The Senate bill also included increases over the FY2016 level of $62.7 million (2.2%) for the National Park Service and $58.5 million (2.1%) for Indian Affairs. S. 3068 would have funded EPA at $31.2 million (0.4%) less than the FY2016 appropriation. The EPA account with the largest dollar decrease was Environmental Programs and Management, with $75.1 million (2.9%) less than FY2016. As with the House bill, programs in the account that were reduced included clean air and climate; enforcement; information exchange and outreach; and legal, science, regulatory, and economic review. Funding in the account for water quality protection also declined. The EPA account with the largest dollar increase in S. 3068 was State and Tribal Assistance Grants, with $95.2 million (2.7%) more than FY2016 appropriations. While funding for some programs in the account would have increased, such as for the Drinking Water SRF and certain categorical grants, funding for other programs would have been reduced, such as for the Clean Water SRF, diesel emission grants, and multi-purpose grants. The Senate bill also provided $30.0 million for a new account to fund the WIFIA Program. Title III agencies would have decreased by $396.2 million (3.1%) in FY2017 under S. 3068 . The largest dollar reduction—of $619.4 million (9.7%)—was for the Forest Service, largely from lower funding for wildland fires. A total of three agencies would have received lower amounts than enacted in FY2016, and eight others would have received level funding. Funds for nine agencies would have increased, with the largest amount—of $186.2 million (3.9%)—for the Indian Health Service. Additional funds were included for clinical services (such as hospital and health clinics, mental health, and alcohol and substance abuse), contract support costs, and construction of facilities. Both the House-passed and Senate committee-reported bills contained lower funding for FY2017 than sought by the President. This was the case although the President's request did not include discretionary appropriations for PILT, whereas the House and Senate bills contained $480.0 million for the program. As noted, the Administration instead sought mandatory funding for PILT. Among other differences, the President sought at least $100.0 million more than either bill provided for each of the following agencies: National Park Service, EPA, and Indian Health Service. The President and the House and Senate bills proposed somewhat different ways of funding wildland fires in FY2017. Neither the House nor the Senate legislation included funding for Wildland Fire Management through a new adjustment to the discretionary spending limits in law, as proposed by the President. However, the Senate bill contained provisions (Title V) to enact such a structure, and the House Appropriations Committee expressed support for such a budgetary adjustment mechanism. Only the House bill provided a portion of wildland fire funding through the FLAME Wildfire Suppression Reserve Accounts, and only the Senate bill provided a portion of wildfire funding as emergency appropriations. The $32.15 billion for FY2017 in H.R. 5538 , as passed by the House, was $1.03 billion (3.1%) lower than the President's FY2017 requested appropriations of $33.18 billion. The House bill contained less funding than the request for each of the three titles of the bill. DOI agencies would have received $113.1 (0.9%) less, with lower appropriations for 8 of the 10 agencies. The largest dollar decrease was $220.1 million (17.6%) for Department-Wide Programs, with each major activity in the account accorded lower funding. The next largest dollar decrease in the House bill—$171.4 million (5.5%)—was for the National Park Service. However, the House-passed bill would have provided $440.3 million (68.1%) more than sought by the President for Departmental Offices, due to the inclusion of funding for PILT in this account. H.R. 5538 also contained $93.7 million (59.3%) more than requested for the Office of Surface Mining Reclamation and Enforcement. The House bill, unlike the President's request, would have funded grants to states for reclamation of abandoned mines with economic and community development and reuse purposes. EPA funding would have been $399.1 million (4.8%) lower under the House bill than requested by the President for FY2017. H.R. 5538 provided the Environmental Programs and Management account with $446.4 million (15.6%) less than the President's request. Programs in the account that would have received lower funding included clean air and climate; enforcement; information exchange and outreach; IT, data management, and security; legal, science, regulatory, and economic review; and operations and administration. Not all accounts would have received less funding under the House bill. For instance, the State and Tribal Assistance Grants account would have been funded at $90.3 million (2.8%) more under H.R. 5538 , with higher amounts for a variety of infrastructure assistance grants—the Drinking Water and Clean Water SRFs, diesel emission grants, and targeted air shed grants. Under H.R. 5538 , Title III agencies would have been funded at $517.7 million (4.1%) less for FY2017 than sought by the President. While the bill contained level funding for 8 agencies and increases for 3, 9 of the 20 agencies in Title III would have received lower funds, with the largest dollar reductions for the three largest agencies. For the Forest Service, the House bill included $302.7 million (5.3%) less than the Administration requested, primarily from lower funding for Wildland Fire Management. H.R. 5538 would have funded the Indian Health Service at $106.4 million (2.1%) less than the request, with lower amounts for clinical services, including hospital and health clinics, and construction of health care facilities. The House bill contained $58.9 million (6.4%) less than the request for the Smithsonian Institution, mainly due to lower funding for salaries and expenses for museums and research institutes, and for facilities-related programs, including maintenance; operations, security, and support; and planning and design. Additionally, the House bill would not have funded the Dwight D. Eisenhower Memorial Commission, for which the President requested a total of $44.8 million, primarily to construct a memorial. The $32.76 billion total in S. 3068 was $ 414.2 million ( 1.2 %) less than the Administration's request of $33.18 billion. Nevertheless, S. 3068 would have increase d DOI agencies by $ 38.0 million ( 0.3 %) for FY2017, primarily because the bill contained discretionary funding for PILT whereas the President's request did not. Specifically, for the account that would fund PILT—Department-Wide Programs— S. 3068 contained $429.9 million (34.4%) more than the President sought. S. 3068 also included $78.9 million (50.0%) more than requested for the Office of Surface Mining Reclamation and Enforcement. Like the House bill, S. 3068 would have fund ed grants to states for reclamation of abandoned mines with economic and community development and reuse purposes; the President did not request funds for this purpose. The other eight agencies in Title I would have receive d lower appropriations under S. 3068 than requested by the President . The largest dollar decrease in the Senate bill—$187.5 million (6.0%)—was for the National Park Service , with lower appropriations than requested for visitor services, facility operations and maintenance, the Historic Preservation Fund, construction , and other programs . The Senate bill contained $158.5 million (1.9%) less for EPA than the President sought for FY2017. The EPA account with the largest dollar decrease was Environmental Programs and Management, with $314.3 million (11.0%) less than the Administration's request. As with the House bill, programs in the account that received lower funding under S. 3068 included clean air and climate; enforcement; information exchange and outreach; IT, data management, and security; legal, science, regulatory, and economic review; and operations and administration. Some accounts would have received more funds under S. 3068 than requested. As with the House bill, the EPA account with the largest dollar increase was State and Tribal Assistance Grants, with $332.9 million (10.1%) more than requested by the President for FY2017. Higher funding would have been directed to the Clean Water SRF and other infrastructure assistance grants, among other programs. Title III agencies would have received $293.6 million (2.3%) less for FY2017 under S. 3068 than under the President's request for FY2017. Nine of the 20 agencies in Title III would have received lower funding. The largest dollar difference was with regard to the Indian Health Service. S. 3068 provided $191.2 million (3.7%) less than requested, with lower funds for clinical services, including hospital and health clinics, and construction of health care facilities, among other programs. The Senate bill also contained $62.0 million (6.7%) less than the request for the Smithsonian Institution, mainly due to lower funding for various facilities-related programs, including maintenance; operations, security, and support; revitalization; and planning and design. Additionally, S. 3068 did not fund construction of a memorial to Dwight D. Eisenhower, while continuing appropriations for salaries and expenses of the memorial commission. The President had sought $43.0 million for capital construction, in addition to funding for salaries and expenses of the commission. S. 3068 contained higher funds than requested for four agencies, and the bill and the request included the same amount for another seven agencies. Only the Senate bill contained funding ($2.0 million) for the Women's Suffrage Centennial Commission, which would have been established by the bill. Continuing funds were provided for FY2017 through April 28, 2017, under the Further Continuing Appropriations Act, 2017 (CR; Division A, P.L. 114-254 ). Continuing appropriations were provided because no regular appropriations for Interior, Environment, and Related Agencies were enacted before the start of the 2017 fiscal year on October 1, 2016. The CR generally provided funding at the FY2016 level (in Division G, P.L. 114-113 ), minus an across-the-board reduction of 0.1901% for the period covered. It also generally provided funds for continuing projects and activities, under the same authority and conditions and to the same extent and manner, as for FY2016. An earlier CR, the Continuing Appropriations Act, 2017 (Division C, P.L. 114-223 ), provided continuing appropriations through December 9, 2016. That CR also generally provided funding for Interior, Environment, and Related Agencies at the FY2016 level, but with an across-the-board reduction of 0.496%. The first and the second CR each contained five exceptions related to Interior, Environment, and Related Agencies. These 10 "anomalies" changed the purposes or amounts of funds, extended expiring provisions of law, or made other changes in existing law, as follows: Section 133 extended, through September 30, 2018, the authority in the Federal Lands Recreation Enhancement Act for five agencies to establish, collect, and retain recreation fees on federal recreational lands and waters. Section 134 extended, through the duration of the CR, the Dwight D. Eisenhower Memorial Commission's authorization to establish a "permanent" memorial to President Eisenhower in the District of Columbia. It also suspended language in the FY2016 appropriations law that prohibits the Secretary of the Interior, during FY2016, from issuing a construction permit to build the Eisenhower Memorial until 100% of the necessary funds are raised. Section 135 provided $26.0 million for the Bureau of Land Management to process, at the start of FY2017, new applications for permits to drill on federal and Indian land. The $26.0 million in up-front revenue would be offset by an equal amount later, as application fees are collected throughout the year. Section 136 increased funding for the National Park Service by $4.2 million to support security and visitor safety activities related to the presidential inaugural ceremonies in January 2017. Section 137 provided EPA with an additional $3.0 million for FY2017, within the Environmental Programs and Management account, for operations and necessary expenses of activities as defined in §26(b)(1) of the Toxic Substances Control Act (TSCA). It also authorized fees collected in FY2017 and credited to the TSCA Service Fee Fund to be counted as discretionary offsetting receipts toward the $3.0 million appropriation. Section 164 authorized the apportionment of appropriations that are provided by the CR up to the rate that is necessary for staffing, maintenance, security, and administrative expenses of recently reopened galleries of the National Gallery of Art. Section 165 authorized the apportionment of appropriations that are provided by the CR up to the rate that is necessary for maintenance and operation of facilities, security, and support at the new National Museum of African American History and Culture. Section 166 authorized the apportionment of appropriations that are provided by the CR up to the rate that is necessary for operating and staffing newly constructed Indian Health Service facilities. It allowed for higher rates of funding than otherwise would be provided under the CR to operate and provide health services at newly constructed facilities (e.g., at new medical facilities). Section 196(a) provided an additional $100 million within EPA's State and Tribal Assistance Grants account for making capitalization grants for the Drinking Water State Revolving Fund (DWSRF) pursuant to Section 2201 of the Water and Waste Act of 2016. Section 2201 authorized funding to be made available to a state—subject to a presidential emergency declaration regarding lead or other contaminants in drinking water—to provide assistance to an eligible water system to address such contamination (e.g., Flint, Michigan). Section 196(b) amended Division G of P.L. 114-113 to allow states to use DWSRF funding to provide additional subsidies (e.g., grants and forgiveness of principal) to water systems for debt incurred prior to the enactment of P.L. 114-113 , under specified terms and conditions. Section 197 appropriated $20 million to EPA for the cost of direct loans and guaranteed loans for water infrastructure projects as authorized under the Water Infrastructure Finance and Innovation Act (WIFIA) of 2014, which authorized EPA's WIFIA program. Additionally, Section 197 required fees collected pursuant to Sections 5929 and 5030 of WIFIA to be credited to the appropriations made by this section.
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The Interior, Environment, and Related Agencies appropriations bill includes funding for approximately 30 agencies and entities. They include most of the Department of the Interior (DOI) as well as agencies within other departments, such as the Forest Service within the Department of Agriculture and the Indian Health Service within the Department of Health and Human Services. The bill also provides funding for the Environmental Protection Agency (EPA), arts and cultural agencies, and other entities. At issue for Congress is determining the amount, terms, and conditions of funding for FY2017 for agencies and programs within the bill. Because no regular appropriations were enacted before the start of FY2017, continuing funds were provided through April 28, 2017, under the Further Continuing Appropriations Act, 2017 (CR; Division A, P.L. 114-254). The CR generally provided funding at the FY2016 level (in Division G, P.L. 114-113), minus an across-the-board reduction of 0.1901% for the period covered. Funding was provided for continuing projects and activities, under the same authority and conditions, and to the same extent and manner, as for FY2016. An earlier CR (Division C, P.L. 114-223), and P.L. 114-254, contained a total of 10 exceptions for Interior, Environment, and Related Agencies. These "anomalies" pertained to recreation fees, the Dwight D. Eisenhower Memorial, receipts from applications for permits to drill, presidential inaugural costs, certain EPA programs, the National Gallery of Art, the Smithsonian Institution, and the Indian Health Service. In earlier action, for FY2017, President Obama had requested $33.18 billion for the agencies and entities typically funded in the annual bill. H.R. 5538 (114th Congress), as passed by the House on July 14, 2016, contained $32.15 billion for FY2017, whereas S. 3068 (114th Congress), as reported by the Senate Appropriations Committee on June 16, 2016, included $32.76 billion. President Obama's request would have been an increase of $250.6 million (0.8%) over the FY2016 total of $32.93 billion, including $700.0 million in additional, emergency appropriations for wildland fires. By contrast, both H.R. 5538 as passed by the House and S. 3068 as reported from the Senate Appropriations Committee would have provided lower appropriations than enacted for FY2016. The House bill was $779.3 million (2.4%) less than FY2016, whereas the Senate bill contained $163.6 million (0.5%) less than FY2016. The FY2016 appropriation, and FY2017 appropriations requested, approved by the House, and reported by the Senate Appropriations Committee, differed in a number of ways. For instance, only the President's request did not include discretionary appropriations for the Payments in Lieu of Taxes (PILT) program, as the President proposed mandatory funds for this program. PILT compensates counties and local governments for nontaxable lands within their jurisdictions. The total amounts also represented different levels of funding for wildland fires on DOI and Forest Service lands, as well as varied approaches to providing funds. The President proposed a new adjustment to the discretionary spending limits in law for wildfire suppression, the House bill included funding for the FLAME Wildfire Suppression Reserve Accounts, and the Senate bill provided some wildfire funds as emergency appropriations. The FY2016 appropriation included FLAME and emergency funding, but not a discretionary cap adjustment. Other differences related to the amount of funds proposed for particular agencies. For example, whereas the President sought an increase in funds over FY2016 for EPA, the House and Senate bills provided lower funding. In other cases, the President, House, and Senate Committee proposed increased funds of varying amounts over the FY2016 level, as for the National Park Service, Indian Affairs bureaus, Indian Health Service, and Smithsonian Institution, among other agencies. In still other cases, decreased funds relative to FY2016 were included in the President's, House, and Senate Committee proposals, as in the case of the Forest Service.
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The public, private, and tribal forests of the United States are crisscrossed by thousands of miles of logging roads. When it rains or snow melts, the runoff from those roads can be environmentally harmful, depositing large amounts of sediment and other pollutants into streams and rivers. How, under the federal Clean Water Act (CWA), should logging road runoff be addressed? On March 20, 2013, the Supreme Court answered a key aspect of that question. In Decker v. Northwest Environmental Defense Center , the Court held that EPA had permissibly construed a prior version of its Industrial Stormwater Rule to exempt stormwater runoff from logging roads that is channeled—that is, collected in ditches, culverts, or other channels—from the discharge permit scheme in the Clean Water Act (CWA). The decision below, by the Ninth Circuit, was reversed. That court had held that when water running off logging roads is channeled, CWA regulations require that a discharge permit be obtained. The Ninth Circuit decision had prompted immediate reaction in Congress, which enacted legislation barring EPA from requiring discharge permits for logging road runoff until September 30, 2013, and now has enacted permanent legislation to that effect (the 2013 farm bill, H.R. 2642 , P.L. 113-79 ). As a measure of the interest in the case, 24 states and many county organizations and forestry trade associations filed amicus briefs asking the Supreme Court to reverse the Ninth Circuit decision. This report gives the statutory and regulatory background of Decker , describes the Supreme Court decision, lays out some legal and programmatic implications of the decision, and describes congressional response. Clean Water Act . Congress enacted the modern version of the CWA in 1972, adding regulatory teeth to a statute first enacted in 1948. As amended in 1972, the CWA prohibits the "discharge of any pollutant," defined as "any addition of any pollutant to navigable waters from any point source"—unless, among other exemptions, one has a discharge permit. Discharge permits are issued under the National Pollutant Discharge Elimination System created by CWA Section 402, hence are known popularly as NPDES permits. NPDES permits are issued by EPA or, far more often, by a state agency under an EPA-approved state program, and impose effluent standards and other conditions on the discharger. To reiterate, NPDES permits are required only for point sources of water pollution, defined by the CWA as "any discernible, confined, and discrete conveyance, including … any pipe, ditch, channel.... " They are not required for "nonpoint sources" of pollution, which the CWA does not define though the term is understood to mean pollution that comes from many diverse sources caused by rainfall or snowmelt moving over and through the ground. The legal issue in the Decker litigation is whether logging road runoff channeled through ditches, culverts, or channels falls under the point source definition, and, if so, whether the resulting NPDES permit requirement is circumvented by any other provision in the CWA or EPA regulations. EPA's Silvicultural Rule . In 1976, EPA attempted by rule to distinguish silvicultural activities deemed silvicultural point sources subject to NPDES permits from silvicultural nonpoint sources not subject to such permits, but rather governed by state management programs. In this "Silvicultural Rule" (last amended in 1980), EPA defined the phrase "silvicultural point source" as: any discernible, confined, and discrete conveyance related to rock crushing, gravel washing, log sorting, or log storage facilities which are operated in connection with silvicultural activities and from which pollutants are discharged into waters of the United States. The term does not include non-point source silvicultural activities such as nursery operations, site preparation, reforestation … thinning, prescribed burning, pest and fire control, harvesting operations, surface drainage, or road construction and maintenance from which there is natural runoff . As is evident, the rule lists four silvicultural activities that EPA deems point sources (rock crushing, gravel washing, log sorting, and log storage facilities) and determines that stormwater runoff from roads and road maintenance is a nonpoint source discharge outside the permitting process. Though the italicized phrase does not explicitly extend to road runoff that is channeled before reaching jurisdictional waters, that is how EPA interpreted it in the Decker litigation. Clean Water Act Stormwater Amendments and EPA Regulations. The final item of pertinent law was added in 1987 when Congress, recognizing the special difficulties posed by stormwater runoff, amended the NPDES section of the CWA. New CWA Section 402(p) established a two-phase process for regulating stormwater discharges from point sources—commonly called Phase I and Phase II. Phase I requires NPDES permits for five listed categories of stormwater discharges, including "[a] discharge associated with industrial activity." EPA defines "discharge associated with industrial activity" to include: [f]or the categories of industries identified in this section … stormwater discharges from … immediate access roads … used or traveled by carriers of raw materials.... The following categories of facilities are considered to be engaging in "industrial activity" …: … Facilities classified as Standard Industrial Classifications 24 [lumber and wood products] (except 2434). Phase II directs EPA to conduct a study of stormwater discharges not covered by Phase I, and then "establish a comprehensive program to regulate such designated sources." The program "may include performance standards, guidelines, guidance, and management practices and treatment requirements, as appropriate." Phase II is a more flexible regulatory authority than Phase I: EPA is authorized to require NPDES permits for discharges under Phase II, but is not required to do so. The Decker case, originally styled Northwest Environmental Defense Center v. Brown , was filed in federal district court by NEDC against Oregon state officials and timber companies, under the CWA citizen suit provision. The suit claimed that the defendants violated the CWA by not obtaining NPDES permits for stormwater runoff that flows from two state-owned logging roads in the Tillamook State Forest into ditches, culverts, and channels and thence into streams and rivers. NEDC argued that sending the runoff through such ditches, culverts, and channels creates point sources of pollutant discharge, triggering the NPDES permit requirement, and that nothing in the CWA exempts logging road runoff categorically. In 2007, the district court dismissed the environmental group's complaint on the ground that under EPA's Silvicultural Rule, runoff from logging operations does not constitute a point source. As a nonpoint source, such runoff required no NPDES permit. On appeal, the Ninth Circuit in 2011 reversed. On a preliminary jurisdictional issue, the court found the suit to have been properly filed in the district court as a citizen suit. On the merits, the court rejected the state's and timber companies' two arguments—that EPA's Silvicultural Rule, as construed by EPA, exempts logging road runoff collected in ditches, culverts, and channels from the NPDES permit requirement, and, alternatively, that the 1987 stormwater amendments to the CWA exempt such discharges. In short, channeled logging road runoff, in the Ninth Circuit's view, requires a NPDES permit. On March 20, 2013, with the case renamed Decker v. Northwest Environmental Defense Center , the Supreme Court reversed again on the permit question. Before the Court was the version of EPA's Industrial Stormwater Rule addressed by the decisions below—that is, before the agency amended it on November 30, 2012, three days prior to oral argument. The Court held that EPA's interpretation of the rule to exempt discharges of channeled stormwater runoff from logging roads from the NPDES permit scheme was a permissible one. At the outset, the Court brushed aside two jurisdictional issues. First, the Court agreed with the Ninth Circuit that use of the CWA citizen suit provision was proper here. NEDC's claim, in the Court's view, sought to enforce its permissible reading of the Silvicultural Rule, and citizen enforcement is precisely the function of citizen suits. The suit was not an effort to challenge the rule, initial jurisdiction over which lies solely in the circuit courts of appeal. Second, the Court found the claim not to have been mooted by EPA's November 2012 amendment to the rule. A live controversy still existed, ruled the Court, as to whether the timber companies might be held liable for unlawful discharges under the pre-amendment version of the rule before the Court. On the merits, recall that the CWA requires timber companies to have NPDES permits for channeled logging road runoff only if the discharges are, in the words of the CWA, "associated with industrial activity"—as that phrase is defined in EPA's Industrial Stormwater Rule. EPA had long interpreted this rule definition not to reach logging road runoff, and the Supreme Court concluded 7-1 in Decker that EPA's interpretation of its rule was a permissible one. The rule's references suggested to the Court that its natural reading was confined to traditional industrial buildings, and so did not extend to logging operations. Moreover, EPA had espoused this reading for a long time; it had not been adopted recently in response to this litigation. In light of these factors, the Court viewed the precept that courts owe deference to agency interpretations of their own rules as applying in full force. Finally, the state of Oregon had invested much effort in developing best management practices for stormwater runoff from logging roads, so EPA, as the Court saw it, could reasonably have concluded that further federal regulation would be unnecessary. Accordingly, the Supreme Court reversed the Ninth Circuit and remanded the case. Aftermath. On August 30, 2013, the Ninth Circuit in turn vacated the decision of the district court and remanded to that court for proceedings consistent with the Supreme Court's opinion. In the remand order, the Circuit noted that the Supreme Court expressly disavowed ruling on its holding that channeled stormwater runoff constitutes a CWA "point source," and therefore, in the Circuit's view, left it intact. This may be important to the district court's ruling if that court turns its attention to the amended stormwater rule now in effect (see " EPA's Response " below). A joint motion to dismiss has been filed by the defendants, but has not yet been ruled on. According to data reported by states to EPA, silviculture and related activities, including forest and logging roads, are among the top 12 probable sources of impairment for rivers, streams, and coastal shorelines in the United States. Improperly designed or maintained forest roads can affect watershed integrity through three primary mechanisms. First, they can intercept water falling as rainfall directly on road surfaces as well as subsurface water moving underground. Second, they can concentrate flow on the road surface and in adjacent ditches and channels. And third, they can divert surface and subsurface water from unaltered flow paths. Impacts from these processes will vary and often may be negligible, but they can include increased loading of sediment, suspended solids, and turbidity; altered streamflow; pollution from chemicals associated with forest roads; and impaired aquatic habitat. The majority of such impacts may be attributed to a relatively small subset of forest roads and often a small portion of those roads, according to EPA. Since Decker affirmed EPA's reading of a version of the Phase I stormwater regulations no longer in effect, no agency response will be necessary. In any event, the rule as amended in November 2012 clarifies that stormwater discharges from logging roads do not constitute stormwater discharges "associated with industrial activity" and, accordingly, that a NPDES permit is not required. For the purpose of assessing whether stormwater discharges are "associated with industrial activity," the only facilities that are industrial, as pertinent here, are rock crushing, gravel washing, log sorting, and log storage. Notwithstanding, a few legal observations about the Supreme Court ruling can be made. First, since Decker affirmed EPA's interpretation of its rule to exempt channeled logging road runoff from NPDES permit requirements, the amended rule's clearer statement of that same exemption is unlikely to offer any fresh ground for judicial challenge. As noted above, however, a petition for review of the amended rule has been filed. Second, the Supreme Court's approval of a citizen suit here effectively allowed the use of a citizen suit to challenge EPA's interpretation of a regulation promulgated 36 years ago. Arguably, this opens the door for citizen-suit challenges to other long-standing agency regulations in the right circumstances. Most of EPA's statutes bar petitions for review of the agency's regulations when filed more than a certain number of days (60, 90, or 120) after the regulation is promulgated, unless based on grounds arising after the deadline. These judicial review deadlines are separate from citizen-suit authorities. But according to Decker , a citizen suit asserting a violation of an agency rule is acceptable long after those deadlines when based on a permissible reading of an ambiguous statute, even though such reading is different than the agency's. In this circumstance, the citizen suit may require the court to resolve which interpretation, the citizen plaintiff's or the agency's, is correct. Arguably this is a form of judicial review, but without the customary deadline. Third, the Supreme Court in Decker was unmoved by an amicus brief urging it to reconsider the doctrine that courts generally should defer to an agency's interpretation of its own rules. The Court's majority opinion reaffirms this long-established deference principle. And indeed, in another decision two months later, the Court affirmed its first cousin: that courts should defer to agency interpretations of the statutes they administer—in that case, even when those interpretations relate to the scope of an agency's jurisdiction. For the moment, then, judicial deference to federal agencies in these contexts appears to be alive and well. In Decker , however, Justice Scalia in dissent called for doing away with deference to agency interpretation of rules and two other Justices indicated that reconsideration of such deference might be warranted, even if not in the present case. Parenthetically, it was Justice Scalia's view that NEDC's reading of the pre-amendment Industrial Stormwater Rule was the fairest one, and that had there been no deference principle, the Court's decision should have gone in the environmental group's favor. As an aside, Decker is not the only CWA case decided by the Supreme Court in its 2012-2013 term. In Los Angeles County Flood C ontrol District v. Natural Resources Defense Council, Inc . , the Court held that water flowing from a natural portion of a river covered by the CWA, through a man-made improvement constructed as part of a municipal separate storm sewer system, into a lower natural portion of the same river, is not a "discharge" into that lower portion under the act. For that reason, it requires no NPDES permit. There are other parallels between Decker and Los Angeles : both cases (1) were brought by an environmental group or groups; (2) sought to require NPDES permits in a circumstance occurring frequently nationwide; (3) were decided by the Ninth Circuit in favor of the environmental group or groups; and (4) were decided by the Supreme Court against the environmental group or groups. Had the Supreme Court not reversed the Ninth Circuit, EPA would have faced the challenge of developing a mechanism to manage the large number of logging roads that could have become subject to permits—estimated to potentially be hundreds of thousands of sources. The agency likely would have chosen to do so through the mechanism of an NPDES general permit. General permits cover categories of point sources having common elements and that discharge the same types of wastes. General permits allow the permitting authority to provide timely permit coverage and to allocate resources efficiently, especially where there is potentially a large number of permittees, thus minimizing the regulatory burden on permit seekers and permit issuers. EPA may also issue permits on a case-by-case basis taking into account local environmental conditions (called an individual permit). Both general and individual permits are issued for no more than five years and may be renewed thereafter. The statute allows EPA to authorize qualified states to administer the NPDES program; 46 states have been so authorized. EPA issues discharge permits in the remaining jurisdictions. In the four decades since the CWA was enacted, the universe of NPDES permittees has increased from fewer than 100,000 to nearly 1 million sources. Currently, individual NPDES permits regulate approximately 46,000 facilities nationwide, while the remainder are regulated by general permits. EPA has increasingly used the general permit mechanism, especially as new categories of dischargers have become subject to NPDES permit requirements, either through statutory or regulatory modification or as a result of judicial rulings. Importantly, an EPA general permit provides coverage for authorized discharges only where EPA is the NPDES permitting authority. For discharges in NPDES-authorized states, in most cases, state (or in some cases sub-state regional) authorities issue permits that typically are modeled on the EPA general permit. However, even before the Supreme Court's ruling, EPA indicated that it would not begin development of a general permit in response to the Ninth Circuit ruling. Initially, in July 2011, EPA indicated to a Member of Congress that the existing stormwater Phase II Multi-Sector General Permit (MSGP) for discharges associated with industrial activities is available to logging road operators who want NPDES permit coverage. The MSGP covers stormwater discharges from approximately 4,100 industrial facilities in 29 sectors. It allows permit holders to select their own methods for reducing discharges to meet narrative effluent limitations and could apply to groups of roads. EPA's statement was intended to alleviate industry's and states' practical concerns about permitting. However, the MSGP is only available in states where EPA is the permitting authority; other states would need to make available a similar general permit. In a May 23, 2012, Federal Register notice, EPA announced regulatory options that were then under consideration. First, the agency said that it would "move expeditiously" to propose a revision to the Phase I stormwater rules, discussed above, to specify that stormwater discharges from logging roads are not included in the definition of stormwater discharge associated with industrial activity, which governs Phase I regulated activities. The agency presented this proposal on August 24, 2012, and finalized it without change on November 30, 2012. As expected, the rule is intended to get around the Ninth Circuit ruling by specifying that logging roads do not need CWA pollution discharge permits for stormwater runoff. The language, EPA said, clarifies the agency's long-standing intent that logging roads should not be regulated as industrial facilities. Second, EPA said that the agency is considering designating a subset of stormwater discharges from forest roads under CWA Section 402(p)(6), the authority for the Phase II stormwater program. As described previously, Section 402(p)(6) allows for a broad range of regulatory and non-regulatory approaches as to which stormwater discharges, if any, should be designated and do not require the use of NPDES permits. Thus, EPA might determine that regulation is appropriate for a subset of stormwater discharges from forest roads, such as roads used for logging, or might address discharges based on the contribution of the discharge to water quality problems. Before proceeding, EPA plans to study the impacts of stormwater discharges from forest roads, available management approaches, and the effectiveness of existing management programs, so no timetable for further action was announced. In the November 2012 rule, EPA indicated that the range of flexible approaches available under Section 402(p)(6) may be well-suited to address the complexity of forest road ownership, management, and use. Following EPA's August 24, 2012, release of the proposed rule to nullify the Ninth Circuit ruling, some timber interest groups urged the agency to withhold a final version of the regulation until the Supreme Court ruled on the matter. The National Alliance of Forest Owners said that a final rule prior to a Supreme Court decision would cause legal confusion that could provide opportunities for taking the issue back to the Ninth Circuit. EPA disagreed with this view, stating that the November 30, 2012, rule would end any uncertainty created by the Ninth Circuit's holding. By reaffirming the agency's long-standing regulatory position, the new rule cancels out any on-the-ground impact of the Ninth Circuit's decision, according to EPA. EPA's announced intention, following the Ninth Circuit decision, to move quickly to revise the Phase I stormwater regulations was in part a response to strong congressional concern about implications of the decision for silvicultural activities throughout the United States. Following the circuit court ruling in 2011, a number of Members opposed to it urged the agency to defend its existing regulations "in all appropriate proceedings and by taking the steps necessary to limit the scope of this ruling to the extent possible." The issue of permits for logging roads has drawn legislative interest in the 112 th and 113 th Congresses. First, Congress enacted a temporary measure in the Consolidated Appropriations Act, 2012 ( P.L. 112-74 ), with a provision that barred EPA from requiring a permit for stormwater runoff associated with silvicultural activities until September 30, 2012. Congress twice extended this moratorium, until January 15, 2014, in P.L. 113-6 and P.L. 113-46 . Second, companion bills were introduced in the 113 th Congress, H.R. 2026 and S. 971 , to amend the CWA to exempt the discharges of any silvicultural activity (not just those associated with logging roads) from CWA permitting requirements. A provision similar to H.R. 2026 / S. 971 for a permanent NPDES permit exemption for silvicultural activities was included in H.R. 2642 , the 2013 farm bill that the House passed on July 11, 2013. The final farm bill, enacted in February 2014 ( P.L. 113-79 ), includes a provision similar but not identical to the House-passed language. Section 12313 of the final bill states that no CWA NPDES permit shall be required for a discharge of runoff from specified silviculture activities (such as nursery operations, thinning, prescribed burning, or pest and fire control) that are conducted in accordance with standard industry practice. It also states that discharges from silvicultural activities are not exempted from permitting requirements under CWA Section 404 (the act's dredge and fill permit program), existing permitting requirements under Section 402, or from any other federal law. The provision leaves EPA authority to take measures regarding silviculture activities if future circumstances demonstrate the need to do so, for example, pursuant to CWA Section 402(p)(6) (see " EPA's Response " above). However, the legislation precludes any program adopted by EPA under CWA Section 402(p)(6) for the specified silvicultural activities from citizen enforcement action under CWA Section 505.
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U.S. forests are crisscrossed by thousands of miles of logging roads. When it rains or snow melts, runoff from these roads can be environmentally harmful, so how to address this runoff under the Clean Water Act (CWA) has long been an issue. On March 20, 2013, the Supreme Court in Decker v. Northwest Environmental Defense Center addressed one aspect of this issue: logging road runoff that is discharged into CWA-covered waters from ditches, culverts, or other channels. Such conveyances arguably make the runoff a "point source" under the CWA, which normally means that a permit under the act's National Pollutant Discharge Elimination System (NPDES) is required. Special CWA provisions, however, exempt stormwater runoff, unless, as relevant here, it is "associated with industrial activity." In Decker, the Supreme Court upheld 7-1 EPA's long-standing reading of its Industrial Stormwater Rule that logging road runoff, even if channeled, is not "associated with industrial activity" and so does not require a NPDES permit. This reversed the Ninth Circuit and affirmed EPA's view that logging road runoff is subject only to a requirement of best management practices. In upholding EPA's reading of its rule as exempting logging road runoff from the NPDES program, the Court observed that references in the Industrial Stormwater Rule suggest that its natural reading should be confined to traditional industrial buildings, and so does not extend to logging operations. Moreover, EPA had espoused this reading for a long time; it had not been adopted recently in response to this litigation. In light of these factors, the Court viewed the precept that courts owe deference to agency interpretations of their own rules as applying in full force. Finally, the state of Oregon had invested much effort in developing best management practices for stormwater runoff from logging roads, so EPA, as the Court saw it, could reasonably have concluded that further federal regulation would be unnecessary. EPA's response to the Ninth Circuit ruling was to amend the Industrial Stormwater Rule. The amended rule, issued in November 2012 three days prior to the oral argument before the Supreme Court, makes explicit the agency's long-standing position that logging roads do not need CWA discharge permits for stormwater runoff. The Supreme Court opinion actually deals with EPA's reading of the prior, less explicit version of the Industrial Stormwater Rule. The amended rule may or may not be resurrected on remand to the district court. For the moment, however, the status quo is unchanged: NPDES permits have never been required for logging road runoff, and they are not required as of now. EPA also is considering designating a subset of stormwater discharges from forest roads for regulation under flexible mechanisms available in the CWA, including non-permitting approaches, but the agency has not issued a proposal or announced a timetable for further action. Congressional interest in responding to the Ninth Circuit ruling has been strong. Congress enacted temporary measures that barred EPA until September 30, 2013, from requiring a permit for stormwater runoff associated with silviculture activities. The 2013 farm bill reauthorization (H.R. 2642, P.L. 113-79) includes a provision stating that discharges resulting from specified silviculture activities shall not require CWA discharge permits.
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Technological advancement in U.S. industry often has been supported by congressional initiatives over the past 30 or more years. This approach has involved both direct measures that concern budget outlays and the provision of services by government agencies (such as the now terminated Advanced Technology Program (ATP) and the Technology Innovation Program (TIP), as well as the existing Manufacturing Extension Partnership (MEP) of the National Institute of Standards and Technology) and indirect measures that include financial incentives and legal changes. Many of these efforts, however, have been revisited over the past several congresses. Congressional legislation appears to have favored indirect strategies such as tax policies, intellectual property right protection, and antitrust laws to promote technological advancement and government support for basic research over direct federal funding for private sector technology commercialization initiatives. Interest in technology development and industrial innovation increased as concern mounted over the economic strength of the nation and over competition from abroad. For the United States to be competitive in the world economy, U.S. companies must be able to engage in trade, retain market shares, and offer high quality products, processes, and services while the nation maintains economic growth and a high standard of living. Technological advancement is important because the commercialization of inventions provides economic benefits from the sale of new products or services; from new ways to provide a service; or from new processes that increase productivity and efficiency. It is widely accepted that technological progress is responsible for up to one-half the growth of the U.S. economy, and is one principal driving force in long-term growth and increases in living standards. Technological advances can further economic growth because they contribute to the creation of new goods, new services, new jobs, and new capital. The application of technology can improve productivity and the quality of products. It can expand the range of services that can be offered as well as extend the geographic distribution of these services. The development and use of technology also plays a major role in determining patterns of international trade by affecting the comparative advantages of industrial sectors. Since technological progress is not necessarily determined by economic conditions—it also can be influenced by advances in science, the organization and management of firms, government activity, or serendipity—it can have effects on trade independent of shifts in macroeconomic factors. New technologies also can help compensate for possible disadvantages in the cost of capital and labor faced by firms. American companies have faced increased competitive pressures in the international marketplace from firms based in countries where governments actively promote commercial technological development and application. In the United States, the generation of technology for the commercial marketplace is primarily a private sector activity. The federal government traditionally becomes involved only for certain limited purposes. Typically these are activities which have been determined to be necessary for the "national good" but which cannot, or will not, be supported by industry. To date, the U.S. government has funded research and development (R&D) to meet the mission requirements of the federal departments and agencies. It also finances efforts in areas where there is an identified need for research, primarily basic research, not being performed in the private sector. Federal support reflects a consensus that basic research is critical because it is the foundation for many new innovations. However, any returns created by this activity are generally long term, sometimes not marketable, and not always evident. Yet the rate of return to society as a whole generated by investments in research is significantly larger than the benefits that can be captured by the firm doing the work. Many past government activities to increase basic research were based on a "linear" model of innovation. This theory viewed technological advancement as a series of sequential steps starting with idea origination and moving through basic research, applied research, development, commercialization, and diffusion into the economy. Increases in federal funds in the basic research stage were expected to result in concomitant increases in new products and processes. However, this linear concept is no longer considered valid. Innovations often occur that do not require basic or applied research or development; in fact many innovations are incremental improvements to existing products or processes. In certain areas, such as biotechnology, the distinctions between basic research and commercialization are small and shrinking. In others, the differentiation between basic and applied research is artificial. The critical factor is the commercialization of the technology. Economic benefits accrue only when a technology or technique is brought to the marketplace where it can be sold to generate income or applied to increase productivity. Yet, while the United States has a strong basic research enterprise, foreign firms appear equally, if not more, adept at taking the results of these scientific efforts and making commercially viable products. Often U.S. companies are competing in the global marketplace against goods and services developed by foreign industries from research performed in the United States. Thus, there has been increased congressional interest in mechanisms to accelerate the development and commercialization processes in the private sector. The development of a governmental effort to facilitate technological advance has been particularly difficult because of the absence of a consensus on the need for an articulated policy. Technology demonstration and commercialization have traditionally been considered private sector functions in the United States. While over the years there have been various programs and policies to facilitate such activities (such as tax credits, technology transfer to industry, and patents), the approach had been ad hoc and uncoordinated. Many of the programs implemented were based upon what individual committees judged appropriate for the agencies over which they have jurisdiction. Despite the importance of technology to the economy, technology-related considerations often have not been integrated into economic decisions. There have been attempts to provide a central focus for governmental activity in technology matters. P.L. 100 - 519 created within the Department of Commerce a Technology Administration headed by a new Under Secretary for Technology. However, this office was abolished as of the end of FY2007 by the America Competes Act. To date, technological issues and responsibilities remain shared among many departments and agencies. This diffused focus has sometimes resulted in actions which, if not at cross purposes, may not have accounted for the impact of policies or practices in one area on other parts of the process. Technology issues involve components which operate both separately and in concert. While a diffused approach can offer varied responses to varied issues, the importance of interrelationships may be underestimated and their usefulness may suffer. Several times, Congress has examined the idea of an industrial policy to develop a coordinated approach on issues of economic growth and industrial competitiveness. Technological advance is both one aspect of this and an altogether separate consideration. In looking at the development of an identified policy for industrial competitiveness, advocates argue that such an effort could ameliorate much of the uncertainty with which the private sector perceives future government actions. Some commentators maintain that consideration and delineation of national objectives could encourage industry to engage in more long-term planning with regard to R&D and to make decisions as to the best allocation of resources. Such a technology policy could generate greater consistency in government activities. Because technological development involves numerous risks, efforts to minimize uncertainty regarding federal programs and policies may help alleviate some of the disincentives perceived by industry. The development of a technology policy, however, is a contentious issue. There is widespread resistance to what could be and has been called national planning, due variously to doubts as to its efficacy, to fear of adverse effects on our market system, to political beliefs about government intervention in our economic system, and to the current emphasis on short-term returns in both the political and economic arenas. Opponents of a national industrial policy may see this approach as government interference in the marketplace to "pick winners and losers." Instead, it is argued, measures that would occasion a better investment environment for industry to expand innovation-related efforts would be preferable to government decisionmaking in technological advancement. Consideration of what constitutes government policy (both in terms of the industrial policy and technology policy) covers a broad range of ideas from laissez-faire to special government incentives to target specific high-technology, high-growth industries. Suggestions have been made for the creation of federal mechanisms to identify and support strategic industries and technologies. Various federal agencies and private sector groups have developed critical technology lists. However, others maintain that such targeting is an unwanted, and unwarranted, interference in the private sector which will cause unnecessary dislocations in the marketplace or a misallocation of resources. From their perspective, the government does not have the knowledge or expertise to make business-related decisions. Instead, they argue, the appropriate role for government is to encourage innovative activities in all industries and to keep market related decisionmaking within the business community that has ultimate responsibility for commercialization and where such decisions have traditionally been made. The relationship between government and industry often is a major factor affecting innovation and the environment within which technological development takes place. This relationship can be adversarial, with the government acting to regulate or restrain the business community, rather than to facilitate its positive contributions to the nation. However, this may be changing as the benefits of industry/government cooperation become more apparent. There are an increasing number of areas where the traditional distinctions between public and private sector functions and responsibilities are becoming blurred. Many assumptions have been questioned, particularly in light of the increased internationalization of the U.S. economy. The business sector is no longer viewed in an exclusively domestic context; the economy of the United States is often tied to the economies of other nations. The technological superiority long held by the United States in many areas has been challenged by other industrialized countries in which economic, social, and political policies and practices foster government-industry cooperation in technological development. The approach taken by the former Clinton Administration was a divergence from the past. Articulated in two reports issued in February 1993 ( A Vision of Change for America and Technology for America's Economic Growth, A New Direction to Build Economic Strength ), the proposal called for a national commitment to, and a strategy for, technological advancement as part of a defined national economic policy. This detailed strategy offered a policy agenda for economic growth in the United States, of which technological development and industrial competitiveness were critical components. The approach initially recommended and subsequently followed by the Clinton Administration provided a wide range of options while for the most part reflecting then current trends in congressional efforts to facilitate industrial advancement. This policy, backed by congressional legislation, increased federal coordination and augmented direct government spending for technological development. While many past activities focused primarily on research, the new initiatives shifted the emphasis toward development of new products, processes, and services by the private sector for the commercial marketplace. In addition, a significant number of the proposals aimed to increase both government and private sector support for R&D leading to the commercialization of technology. Recent congresses and the Bush Administration questioned this approach. Instead, policies appeared more supportive of indirect strategies such as tax incentives, intellectual property protection, and antitrust laws to promote technology advancement, increased government support for basic research, and decreased direct federal funding for private sector technology activities. In the 2006 State of the Union Address, former President Bush announced the "American Competitiveness Initiative" to facilitate innovation and provide "our nation's children a firm grounding in math and science." To achieve these goals, the President called for doubling over the next 10 years the amount of federal funding for basic research, particularly in the National Science Foundation, the Office of Science in the Department of Energy, and in the core programs of the National Institute of Standards and Technology, Department of Commerce. In addition, the Initiative would increase the number of math and science teachers and make permanent the research and experiment tax credit. In April 2009, President Obama indicated his decision to double the budget of the key science agencies, as identified by former President Bush, over the next 10 years. In President Obama's FY2011 budget the timeframe for doubling slipped to 11 years; his FY2012 budget was intentionally silent on a timeframe for doubling. In a speech before the National Academy of Sciences, President Obama put forth a goal of increasing the national investment in R&D to more than 3% of the U.S. gross domestic product (GDP), but did not provide details on how this goal might be achieved. Despite the continuing debate on what is the appropriate role of government and what constitutes a suitable government technology development policy, it remains an undisputed fact that what the government does or does not do affects the private sector and the marketplace. The various rules, regulations, and other activities of the government have become de facto policy as they relate to, and affect, innovation and technological advancement. Legislative initiatives have reflected a trend toward expanding the government's role beyond traditional funding of mission-oriented R&D and basic research toward the facilitation of technological advancement to meet other critical national needs, including the economic growth that flows from new commercialization and use of technologies and techniques in the private sector. An overview of congressional legislation shows federal efforts aimed at (1) encouraging industry to spend more on R&D; (2) assisting small high-technology businesses; (3) promoting joint research activities between companies; (4) fostering cooperative work between industry and universities; (5) facilitating the transfer of technology from the federal laboratories to the private sector; and (6) providing incentives for quality improvements. These initiatives tend toward removing barriers to technology development in the private sector (thereby permitting market forces to operate) and providing incentives to encourage increased private sector R&D activities. While most focus primarily on research, some also involve policies and programs associated with technology development and commercialization. To foster research in the private sector, Congress created a temporary tax credit for incremental increases in qualified research spending. The 1981 Economic Recovery Tax Act ( P.L. 97 - 34 ) provided a 25% tax credit for the increase in a firm's qualified research costs above the average expenditures for the previous three tax years. Qualified costs included in-house expenditures such as wages for researchers, material costs, and payments for use of equipment; 65% of corporate grants towards basic research at universities and other relevant institutions; and 65% of payments for contract research. The credit applied to research expenditures through 1985. While never made permanent, the Research and Experimentation Tax Credit has been extended many times. Several changes have been made to the rate and to the definition of qualified expenses. Most recently, the credit expired at the end of calendar year 2011. In 1982, the Small Business Development Act ( P.L. 97 - 219 ) established Small Business Innovation Research (SBIR) programs within the major federal R&D agencies designed to increase participation of small, innovative companies in federally funded research and development. Extended several times, the program requires that a set percentage of each agency's applicable extramural R&D budget is to be used to support mission-related work in small companies. Funding is, in part, dependent on companies obtaining private sector support for the commercialization of the resulting products or processes. The program had been reauthorized through September 30, 2017. Based on the success of the SBIR initiative, a pilot effort, the Small Business Technology Transfer (STTR) program, was created in 1992 to encourage firms to work with universities or federal laboratories to commercialize the results of basic research performed within these institutions. Also funded by a set-aside, the STTR program has been reauthorized several times and is currently scheduled to sunset on September 30, 2017. The Omnibus Trade and Competitiveness Act of 1988 ( P.L. 100 - 418 ) created the Advanced Technology Program (ATP) at the Department of Commerce's National Institute of Standards and Technology (NIST). ATP provided seed funding, matched by private sector investment, for companies or consortia of universities, industries, and/or government laboratories to accelerate development of generic technologies with broad application across industries. The first awards were made in 1991. As of the end of 2007, when ATP was terminated and replaced by the Technology Innovation Program, 824 projects had been funded representing approximately $1.6 billion in federal dollars matched by $1.5 billion in private sector financing. About 68% of the awardees were small businesses or cooperative efforts led by such firms; 227 projects were joint ventures. The Technology Innovation Program was created by P.L. 110 - 69 , the America COMPETES Act. Until funding for the program ended in FY2012, TIP was similar to ATP in the intent to promote high-risk R&D that would be of broad-based economic benefit to the nation. However, there were several differences in the operation of the new activity. Awards under TIP were limited to small and medium-sized businesses whereas grants under ATP were available to companies regardless of size. In addition, in the Advanced Technology Program, joint ventures were required to include two separately owned for-profit firms and could include universities, government laboratories, and other research establishments as participants in the project but not as recipients of the grant. In the TIP initiative, a joint venture could involve two separately owned for-profit companies but could also have been comprised of one small or medium-sized firm and a university (or other non-profit research organization). A single company could receive up to $2 million for up to three years under ATP; under TIP, the participating company (which must be a small or medium-sized business) could have received up to $3 million for up to three years. In ATP, small and medium-sized companies were not required to cost share (large firms provided 60% of the total cost of the project), while in TIP there was a 50% cost sharing requirement which, again, only applied to the small and medium-sized businesses that are eligible. There were no funding limits for the five-year funding available for joint ventures under ATP; the TIP limited joint venture funding to $9 million for up to five years. The Advisory Board that was created to assist in the Advanced Technology Program included industry representatives as well as federal government personnel and representatives from other research organizations. The Advisory Board for the Technology Innovation Program was comprised of only private sector members. In January 2009, nine awards were announced for "new research projects to develop advanced sensing technologies that would enable timely and detailed monitoring and inspection of the structural health of bridges, roadways and water systems that comprise a significant component of the nation's public infrastructure." According to TIP, $42.5 million in federal money was expected to be matched by $45.7 million in private sector support. Twenty more awards were announced in December 2009 totaling almost $71.0 million in NIST financing with approximately $145.7 million in funding from other sources. Of the projects selected for the two solicitations, thirteen were in the area of monitoring and inspection of civil infrastructure; four were in the area of advanced repair of civil infrastructure; eleven were in the area of process scale up for advanced materials; and one was in the area of predictive modeling for advanced materials. Nine additional projects in various areas including biopharmaceuticals, electronics, nanotechnology, renewable energy, and energy sources received awards of more than $22 million in December 2010. Federal funding for these projects was expected to be matched by approximately $24 million in private sector support. According to NIST, no new TIP awards were made in FY2011. The $44.8 million appropriated for the program in P.L. 112-10 was used for the continued support of ongoing TIP and ATP projects. No FY2012 funds were appropriated for TIP. The promotion of cooperative efforts among academia and industry is aimed at increasing the potential for the commercialization of technology. Traditionally, basic research has been performed in universities or in the federal laboratory system while the business community focuses on the manufacture or provision of products, processes, or services. Universities are especially suited to undertake basic research. Their mission is to educate and basic research is an integral part of the educational process. Universities generally are able to perform these activities because they do not have to produce goods for the marketplace and therefore can do research not necessarily tied to the development of a commercial product or process. Subsequent to World War II, the federal government supplanted industry as the primary source of funding for basic research in universities. It also became the principal determinant of the type and direction of the research performed in academia. This resulted in a disconnect between the university and industrial communities. The separation and isolation of the parties involved in the innovation process is thought by many observers to be a barrier to technological progress. The difficulties in moving an idea from the concept stage to a commercial product or process may be compounded when several entities are involved. Legislation to stimulate cooperative efforts among those involved in technology development has been viewed as one way to promote innovation and facilitate the international competitiveness of U.S. industry. Several laws have attempted to encourage industry-university cooperation. Title II of the Economic Recovery Tax Act of 1981 ( P.L. 97 - 34 ) provided, in part, a 25% tax credit for 65% of all company payments to universities for the performance of basic research. Firms were also permitted a larger tax deduction for charitable contributions of equipment used in scientific research at academic institutions. The Tax Reform Act of 1986 ( P.L. 99 - 514 ) kept this latter provision, but reduced the credit for university basic research to 20% of all corporate expenditures for this over the sum of a fixed research floor plus any decrease in non-research giving. The 1981 act also provided an increased charitable deduction for donations of new equipment by a manufacturer to an institution of higher education. This equipment must be used for research or research training for physical or biological sciences within the United States. The tax deduction is equal to the manufacturer's cost plus one-half the difference between the manufacturer's cost and the market value, as long as it does not exceed twice the cost basis. Extended numerous times, with certain changes, the research and experimentation tax credit expired at the end of calendar year 2011. An additional legislative initiative to foster interaction between academia and the business community is contained in amendments to the patent and trademark laws, commonly referred to as the "Bayh-Dole Act." This law is intended to use patent ownership as an incentive for private sector development and commercialization of federally supported R&D. Title to inventions made by contractors receiving federal research funds is to be vested in the contractor if they are small businesses, universities, or not-for-profit institutions. Certain rights to the patent are reserved for the government and these organizations are required to commercialize within a predetermined and agreed upon time frame. Providing universities with patent title is expected to encourage licensing to industry where the technology can be manufactured or used thereby creating a financial return to the academic institution. University patent applications and licensing have increased significantly since this law was enacted. Subsequently, the CREATE Act, P.L. 108 - 453 , made changes in the patent laws to further promote cooperative research and development among universities, government, and the private sector. The bill amends Section 103(c) of title 25, United States Code, such that certain actions between researchers under a joint research agreement will not preclude patentability. Private sector investments in basic research are often costly, long term, and risky. Although not all advances in technology are the result of research, it is often the foundation of important new innovations. To encourage increased industrial involvement in research, legislation was enacted to allow for joint ventures in this arena. It is argued that cooperative research reduces risks and costs and allows for work to be performed that crosses traditional boundaries of expertise and experience. Such collaborative efforts make use of existing and support the development of new resources, facilities, knowledge, and skills. The National Cooperative Research Act ( P.L. 98 - 462 ) encourages companies to undertake joint research. The legislation clarifies the antitrust laws and requires that a "rule of reason" standard be applied in determinations of violations of these laws; cooperative research ventures are not to be judged illegal "per se." It eliminates treble damage awards for those research ventures found in violation of the antitrust laws if prior disclosure (as defined in the law) has been made. P.L. 98 - 462 also makes changes in the way attorney fees are awarded. Defendants can collect attorney fees in specified circumstances, including when the claim is judged frivolous, unreasonable, without foundation, or made in bad faith. However, the attorney fee award to the prevailing party may be offset if the court decides that the prevailing party conducted a portion of the litigation in a manner which was frivolous, unreasonable, without foundation, or in bad faith. These provisions were included to discourage frivolous litigation against joint research ventures without simultaneously discouraging suits of plaintiffs with valid claims. Between 1985 (when the law went into effect) and August 2009, 1,343 joint ventures have filed with the Justice Department. P.L. 103 - 42 , the National Cooperative Production Amendments Act of 1993, amended the National Cooperative Research Act by, among other things, extending the original law's provisions to joint manufacturing ventures. These provisions are only applicable, however, to cooperative production when (1) the principal manufacturing facilities are "located in the United States or its territories, and (2) each person who controls any party to such venture ... is a United States person, or a foreign person from a country whose law accords antitrust treatment no less favorable to United States persons than to such country's domestic persons with respect to participation in joint ventures for production." Another approach to encouraging the commercialization of technology involves the transfer of technology from federal laboratories and contractors to the private sector where commercialization can proceed. Because the federal laboratory system has extensive science and technology resources and expertise developed in pursuit of mission responsibilities, it is a potential source of new ideas and knowledge which may be used in the business community. At the time legislation relating to technology transfer was considered by Congress in the late 1970s, the commercialization level of the results of federally funded R&D remained low despite the potential offered by the resources of the federal laboratory system. Studies indicated that only approximately 10% of federally owned patents were ever utilized. There were many reasons for this low level of usage, one of which is the fact that some technologies and/or patents have no market application. However, industry unfamiliarity with these technologies, the "not-invented-here" syndrome, and perhaps more significantly, the ambiguities associated with obtaining title to or exclusive license to federally owned patents also contribute to the low level of commercialization. Over the years, several governmental efforts have been undertaken to augment industry's awareness of federal R&D resources. The Federal Laboratory Consortium for Technology Transfer was created in 1972 (from a Department of Defense program) to assist in moving technology from the federal government to state and local governments and the private sector. To expand on the work of the Federal Laboratory Consortium, and to provide added emphasis on the commercialization of government technology, Congress passed P.L. 96 - 480 , the Stevenson-Wydler Technology Innovation Act of 1980. Prior to this law, technology transfer was not an explicit mandate of the federal departments and agencies with the exception of the National Aeronautics and Space Administration. To provide "legitimacy" to the numerous technology activities of the government, Congress, with strong bipartisan support, enacted P.L. 96 - 480 which explicitly states that the federal government has the responsibility, "to ensure the full use of the results of the nation's federal investment in research and development." Section 11 of the law created a system within the federal government to identify and disseminate information and expertise on what technologies or techniques are available for transfer. Offices of Research and Technology Applications were established in each federal laboratory to distinguish technologies and ideas with potential applications in other settings. Several amendments to the Stevenson-Wydler Technology Innovation Act have been enacted to provide additional incentives for the commercialization of technology. P.L. 99 - 502 , the Federal Technology Transfer Act, authorizes activities designed to encourage industry, universities, and federal laboratories to work cooperatively. It also establishes incentives for federal laboratory employees to promote the commercialization of the results of federally funded research and development. The law amends P.L. 96 - 480 to allow government-owned, government-operated laboratories to enter into cooperative R&D agreements (CRADAs) with universities and the private sector. This authority is extended to government-owned, contractor-operated laboratories by the Department of Defense FY1990 Authorization Act, P.L. 101 - 189 . Companies, regardless of size, may be allowed to retain title to inventions resulting from research performed under cooperative agreements. The federal government retains a royalty-free license to use these patents. The Technology Transfer Improvements and Advancement Act ( P.L. 104-113 ), clarifies the dispensation of intellectual property rights under CRADAs to facilitate the implementation of these cooperative efforts. The Federal Laboratory Consortium is given a legislative mandate to assist in the coordination of technology transfer. To further promote the use of the results of federal R&D, certain agencies are mandated to create a cash awards program and a royalty sharing activity for federal scientists, engineers, and technicians in recognition of efforts toward commercialization of this federally developed technology. These efforts are facilitated by a provision of the National Defense Authorization Act for FY1991 ( P.L. 101 - 510 ), which amends the Stevenson-Wydler Technology Innovation Act to allow government agencies and laboratories to develop partnership intermediary programs to augment the transfer of laboratory technology to the small business sector. Amendments to the Patent and Trademark law contained in Title V of P.L. 98-620 made changes which are designed to improve the transfer of technology from the federal laboratories—especially those operated by contractors—to the private sector and increase the chances of successful commercialization of these technologies. This law permits the contractor at government-owned, contractor-operated laboratories (GOCOs) to make decisions at the laboratory level as to the granting of licenses for subject inventions. This increased the potential for effecting greater interaction between laboratories and industry in the transfer of technology. Royalties on these inventions are also permitted to go back to the laboratory contractor to be used for additional R&D, awards to individual laboratory inventors, or education. While there is a cap on the amount of the royalty returning directly to the lab in order not to disrupt the agency's mission requirements and congressionally mandated R&D agenda, the establishment of discretionary funds gives contractor-operated laboratories added incentive to encourage technology transfer. Under P.L. 98 - 620 , private companies, regardless of size, are allowed to obtain exclusive licenses for the life of the patent. Prior restrictions allowed large firms use of exclusive license for only 5 of the 17 years (now 20 years) of the life of the patent. This was expected to encourage improved technology transfer from the federal laboratories or the universities (in the case of university operated GOCOs) to large corporations which often have the resources necessary for development and commercialization activities. In addition, the law permits GOCOs (those operated by universities or nonprofit institutions) to retain title to inventions made in the laboratory within certain defined limitations. Those laboratories operated by large companies are not included in this provision. P.L. 106 - 404 , the Technology Transfer Commercialization Act, altered practices concerning patents held by the government to make it easier for federal agencies to license such inventions. The law amends the Stevenson-Wydler Technology Innovation Act and the Bayh-Dole Act to decrease the time delays associated with obtaining an exclusive or partially exclusive license. Previously, agencies were required to publicize the availability of technologies for three months using the Federal Register and then provide an additional 60 day notice of intent to license by an interested company. Under this legislation, the time period was shortened to 15 days in recognition of the ability of the internet to offer widespread notification and the necessity of time constraints faced by industry in commercialization activities. Certain rights are retained by the government. The bill also allows licenses for existing government-owned inventions to be included in CRADAs. The Omnibus Trade and Competitiveness Act created a program of regional centers to assist small manufacturing companies use knowledge and technologies developed in the government research establishment. Federal funding for the centers is matched by non-federal sources including state and local governments and industry. Originally, seven Regional Centers for the Transfer of Manufacturing Technology were selected. The initial program was expanded in 1994 to create the Manufacturing Extension Partnership (MEP) to meet new and growing needs of the community. In a more varied approach, the Partnership involves both large centers and smaller, more dispersed affiliated organizations. Centers now operate in all 50 states and Puerto Rico. Since the manufacturing extension activity was created in 1989, awards made by NIST have resulted in the creation of approximately 400 regional offices. [It should be noted that the Department of Defense also funded 36 centers through its Technology Reinvestment Project (TRP) in FY1994 and FY1995. When the TRP was terminated, NIST took over support for 20 of these programs in FY1996 and funded the remaining efforts during FY1997.] A new NIST program of partnerships between industry and other educational or research institutions to develop new manufacturing processes, techniques, or materials was authorized (but not funded) by the American COMPETES Act. In addition, the COMPETES Act authorized a manufacturing fellowship program with stipends available for post-doctoral work at NIST that has not been instituted to date. In October 2010, NIST announced the award of $9.1 million in cooperative agreements for 22 projects "designed to enhance the productivity, technological performance and global competitiveness of U.S. manufacturers." The funding was granted on a competitive basis to non-profit organizations that will work with the MEP centers and address one or more of the areas that have been identified by NIST as critical to U.S. manufacturing. These activities differ from the established MEP effort in which no new manufacturing research is conducted and funded as existing manufacturing technology is applied to the needs of small and medium-sized firms. As indicated above, the laws affecting the R&D environment have included both direct and indirect measures to facilitate technological innovation. In general, direct measures are those which involve budget outlays and the provision of services by government agencies. Indirect measures include financial incentives and legal changes (e.g., liability or regulatory reform; new antitrust arrangements). Supporters of indirect approaches argue that the market is superior to government in deciding which technologies are worthy of investment. Mechanisms that enhance the market's opportunities and abilities to make such choices are preferred. Advocates further state that dependency on agency discretion to assist one technology in preference to another will inevitably be subjected to political pressures from entrenched interests. Proponents of direct government assistance maintain, conversely, that indirect methods can be wasteful and ineffective and that they can compromise other goals of public policy in the hope of stimulating innovative performance. Advocates of direct approaches argue that it is important to put the country's scarce resources to work on those technologies that have the greatest promise as determined by industry and supported by its willingness to match federal funding. In the past, participants in the debates generally did not make definite (or exclusionary) choices between the two approaches, nor consistently favor one over the other. For example, some proponents of a stronger direct role for the government in innovation also have supported enhanced tax preferences for R&D spending, an indirect mechanism. Opponents of direct federal funding for specific projects may have nevertheless backed similar activities focused on more general areas such as manufacturing or information technology. However, in recent congresses, legislators directed many of their efforts toward eliminating or curtailing some of the programs that previously had enjoyed bipartisan support. Initiatives to terminate the Advanced Technology Program and the Technology Innovation Program reflected concern over the role of government in developing commercial technologies. While appropriations for several programs decreased, and both ATP and TIP are no longer funded, support for several ongoing activities has continued. How the debate over federal funding evolves in the Congress may serve to redefine thinking about the government's efforts in promoting technological advancement in the private sector.
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There is ongoing interest in the pace of U.S. technological advancement due to its influence on U.S. economic growth, productivity, and international competitiveness. Because technology can contribute to economic growth and productivity increases, congressional attention has focused on how to augment private-sector technological development. Legislative activity over the past 30 or more years has created a policy for technology development, albeit an ad hoc one. Because of the lack of consensus on the scope and direction of a national policy, Congress has taken an incremental approach aimed at creating new mechanisms to facilitate technological advancement in particular areas and making changes and improvements as necessary. Congressional action has mandated specific technology development programs and obligations in federal agencies. Many programs were created based upon what individual committees judged appropriate within the agencies over which they had authorization or appropriation responsibilities. However, there has been recent legislative activity directed at eliminating or significantly curtailing many of these federal efforts. Several programs have been terminated and the budgets for other initiatives have declined. The proper role of the federal government in technology development and the competitiveness of U.S. industry continues to be a topic of congressional debate. Legislation affecting the research and development (R&D) environment has included both direct and indirect measures to facilitate technological innovation. In general, direct measures are those which involve budget outlays and the provision of services by government agencies. Indirect measures include financial incentives and legal changes (e.g., liability or regulatory reform; new antitrust arrangements). As the Congress develops its appropriation priorities, the manner by which the government encourages technological progress in the private sector again may be explored and/or redefined.
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The U.S. Post Office Department, the predecessor to the U.S. Postal Service, did not officially address the naming of post offices until 1891. Until then, the names of post offices were derived from a number of sources, including the name of the town or township in which the post office was located, certain neighborhoods, crossroads, local landmarks, and even the postmaster's name or place of residence. On February 18, 1891, Postmaster Miscellaneous Order 87 instructed the clerks of post offices nationwide to utilize the post office names published in the bulletins of the United States Board on Geographic Names when naming post offices. The next year, Postmaster Miscellaneous Order 48 instructed the fourth assistant Postmaster General not to "establish any post office whose proposed name differed from that of the town or village in which it was to be located." The goal of this policy was to facilitate the expeditious and efficient delivery of mail by avoiding confusion over the location of a post office. Congress first honored an individual by naming a post office through freestanding legislation in 1967. It named a combined post office and federal office building in Bronx, NY, as the "Charles A. Buckley Post Office and Federal Office Building" in honor of the late Representative Charles A. Buckley (P.L. 90-232; 81 Stat. 751). Courthouses and federal buildings, some no doubt containing postal facilities, had been named before that. The United States Postal Service (USPS) came into being in 1971 with its own separate real estate authority (39 U.S.C. 401(5)). All legislation to name USPS facilities then was referred to the House and Senate Post Office and Civil Service Committees, and when these committees were abolished, to the House Oversight and Government Reform and Senate Homeland Security and Governmental Affairs Committees. As Table 1 indicates, the number of post office naming bills made law rose and fell between the 108 th and 112 th Congresses. During this period, post office naming acts were a very common form of legislation, comprising almost 20% of all statutes enacted. Many of the persons honored by post office naming acts were individuals of local renown. For example, the 110 th Congress named a Kansas City, MO, post office for the Reverend Earl Abel ( P.L. 110-353 ; 122 Stat. 3983). Other honorees, though, were nationally recognized persons, such as Gerald R. Ford, Jr. (twice), Ronald Reagan (three times), Bob Hope, Cesar Chavez, Nat King Cole, Mickey Mantle, and Buck Owens. During the recent Congresses, many post offices have been named for U.S. soldiers killed in the wars in Iraq and Afghanistan. Usually, these bills honor individual soldiers. Congress also has named at least one post office for all of a locality's fallen soldiers. The first step normally considered in preparing a post office naming bill is the selection of an appropriate post office. Most congressional districts contain many postal facilities. A few factors might be examined in selecting a post office, such as the proposed honoree's ties to the area served by the post office and the condition of the building to ensure that it is aesthetically adequate. Another factor is whether the facility is owned by the USPS or is leased from a private owner. In the latter case, the building's owner might be consulted. Finally, a search might be done to determine whether a proposed post office already has been named for someone. The USPS has compiled a comprehensive list of all the statutes enacted since 1967 to name post offices, including the addresses, name of the honoree, and reason(s) for the post office dedication. During this process, it can be helpful to work with the USPS's designated government relations person for a Member's home state. Once a post office has been selected, two pieces of information are needed to draft the legislation. One is the precise address of the facility, and a second is the precise form and spelling of the name of the person who is to be honored. Wording of post office naming legislation shows little variation. A statute ( P.L. 108-17 ; 117 Stat. 623) signed by then President George W. Bush on April 23, 2003, is typical: Most post office naming acts originate in the House. In the past, the House Oversight and Government Reform Committee had a policy (though not a formal rule) that a post office naming bill would not be approved unless and until all Members from the state where the post office is located have signed on as cosponsors of the bill. In the 113 th Congress, the committee adopted a rule which states: "The consideration of bills designating facilities of the United States Postal Service shall be conducted so as to minimize the time spent on such matters by the committee and the House of Representatives." At the time of the publication of this report, no additional committee guidance had been issued. In recent years, the committee has generally not marked up or otherwise formally approved naming bills in a committee meeting. Rather, committee staff keep a list of naming bills and other measures appropriate for consideration under suspension of the rules, or by unanimous consent, to be taken up when opportunities appear. Negotiations between the majority and minority leaders determine when and how the bills are to be considered on the floor. Passage by the House has almost always been routine, commonly by voice vote or on a roll call vote that is unanimous. An exception occurred on the House floor on September 27, 2005, when the motion to suspend the rules and pass H.R. 438 was defeated on a 190 to 215 roll call vote. The bill, which would have designated a post office in Berkeley, CA, as the Maudelle Shirek Post Office Building, was intended to recognize a community activist and long-time member of the Berkeley City Council. During the debate, opposition was expressed based on her attributed espousal of "principles that would be running contrary to American values." Under both Democratic and Republican leadership in the 107 th , 108 th , and 109 th Congresses, the committee of jurisdiction—the Committee on Governmental Affairs, later the Committee on Homeland Security and Government Affairs—required both Senators from a state to agree to a naming bill, though formal co-sponsorship was not required. After the first session of the 109 th Congress, the committee adopted a policy (not a formal rule) that it would no longer consider post office naming bills that honor living persons. In the 111 th Congress, the committee adopted the rule stating that it— will not consider any legislation that would name a postal facility for a living person with the exception of bills naming facilities after former Presidents and Vice Presidents of the United States, former Members of Congress over 70 years of age, former state or local elected officials over 70 years of age, former judges over 70 years of age, or wounded veterans. The committee re-adopted this policy in the 112 th Congress and the 113 th Congress. It is not uncommon for post office naming bills that have passed the House to wait several months for action by the Senate Homeland Security and Governmental Affairs Committee and the full Senate. To clear this backlog of legislation, the Senate sometimes considers these bills en bloc, passing them all by unanimous consent without debate. As in the House, postal naming bills tend to be uncontroversial in the Senate. However, in 2008 there was some concern over H.R. 4774 , which proposed to name a post office after a lobbyist. The House passed the bill; the Senate did not. The practical effect of legislation renaming a post office is less than might be imagined. For operational reasons, post offices retain their geographical designations in the USPS addressing system, and there is no change in the way renamed post offices are identified in the USPS's listings of post offices. The tangible effect of naming a post office is the installation of a dedicatory plaque in "a prominent place in the facility's lobby, preferably above the post office boxes." The plaque, which is purchased locally at USPS expense running from $250 to $500, measures about 11 inches by 14 inches and contains the following inscription: USPS, working with the sponsor of the legislation, may take responsibility for organizing a dedication ceremony. The protocol includes inviting the honored individual and his or her family, an honor guard, a religious figure for an invocation, media notification, and light refreshments such as cake and punch. Costs for these expenses may be borne by USPS from its contingency funds or shared with local community interests. During the 111 th Congress, Representative Darrell E. Issa, the Committee on Oversight and Government Reform's ranking minority Member, introduced H.R. 3137 on July 9, 2009. This bill would require the USPS to provide for a suitable plaque ... no later than 120 days after the date as of which—(1) a law has been enacted providing for the designation of the postal facility involved; and (2) sufficient amounts have been received ... to provide for such plaque. Federal law authorizes the USPS "to accept gifts or donations of services or property, real or personal, as it deems, necessary or convenient in the transaction of its business" (39 U.S.C. 401(7)). H.R. 3137 also would amend 39 U.S.C. 404(7) to read, [The USPS shall have the power to] accept gifts or donations of services or property, real or personal, as it deems, necessary or convenient in the transaction of its business including monetary donations made (in such manner as the Postal Service may prescribe) for the funding of plaques in connection with the commemorative designation of postal facilities. The House Oversight and Government Reform Committee reported the bill on July 10, 2009. No further action was taken on the bill.
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Legislation naming post offices for persons has become a very common practice. During the 108th through 112th Congresses, almost 20% of all statutes enacted were post office naming acts. This report describes how the practice of naming post offices through public law originated and how it is commonly done today. It also details the House and Senate committee policies for considering such legislation and the U.S. Postal Service's procedures for implementing post office naming acts. Unanimity of a state's congressional delegation is required for the movement of naming bills to the floor of the House or Senate. Additionally, the Senate committee of jurisdiction has adopted the rule that it "will not consider any legislation that would name a postal facility for a living person with the exception of bills naming facilities after former Presidents and Vice Presidents of the United States, former Members of Congress over 70 years of age, former state or local elected officials over 70 years of age, former judges over 70 years of age, or wounded veterans." The cost of dedicating a post office in the name of an individual is modest. Renaming a post office through legislation does not change either the U.S. Postal Service's or the public's identification of the facility by its geographic location. Rather, a small plaque is installed within the post office. In the 111th Congress, H.R. 3137 was introduced to amend current postal law to clarify that the U.S. Postal Service may accept financial donations toward the cost of providing a commemorative plaque. This bill did not become law. This report will be updated early in the 114th Congress or in the event of significant legislative action in the 113th Congress.
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This report tracks and provides an overview of actions taken by the Administration and Congress to provide FY2016 appropriations for trade-related agencies under the Commerce, Justice, Science, and Related Agencies (CJS) appropriations process. It also provides an overview of the enacted FY2015 appropriations for the International Trade Administration (ITA), the U.S. International Trade Commission (USITC), and the Office of the United States Representative (USTR), as a part of the annual appropriation for CJS. This report provides only an overview of the appropriations for the three trade-related agencies under the CJS appropriations process. For a more detailed review of the appropriations for all CJS agencies, see CRS Report R43918, Overview of FY2016 Appropriations for Commerce, Justice, Science, and Related Agencies (CJS) , by [author name scrubbed]. On December 16, 2014, President Obama signed into law the Consolidated and Further Continuing Appropriations Act, 2015 ( P.L. 113-235 ). The act provided a total of $61.753 billion for the agencies and bureaus funded by the annual CJS appropriations act in FY2015, including $600.8 million for three trade-related agencies. The Administration requested a total of $66.382 billion for CJS for FY2016. The Administration's request was 7.5% more than what Congress appropriated for FY2015. For the three trade-related agencies, the Administration requested $684.6 million for FY2016, an increase of 13.9% over the FY2015 amount. The House recommended $597.8 million for the three CJS trade-related agencies for FY2016, an amount 12.7% less than the Administration's request and 0.5% less than the enacted amount for FY2015. The Senate committee-reported bill recommended $601.8 million for the three CJS trade-related agencies, an amount 0.2% greater than the FY2015 enacted amount, 12.1% less than the Administration's FY2016 request, and 0.7% greater than the House-passed amount. On December 18, 2015, President Obama signed into law the Consolidated Appropriations Act, 2016 ( P.L. 114-113 ). Division B of the act (the Commerce, Justice, Science, and Related Agencies Appropriations Act, 2016) provides $626.0 million for the three CJS trade-related agencies, an amount 4.2% greater than the FY2015 appropriation, but 8.6% less than the Administration's request. The FY2016-enacted appropriation is 4.7% greater than the amount recommended by the House and 4.0% greater than the amount recommended by the Senate. Table 1 shows the FY2015-enacted appropriations, the Administration's FY2016 request for these agencies, and the FY2016-enacted appropriations. ITA is a part of the Department of Commerce, whose mission is to promote "job creation, economic growth, sustainable development and improved standards of living ... by working in partnership with businesses, universities, communities and ... workers." ITA's mission is to improve U.S. prosperity by strengthening the competitiveness of U.S. industry, promoting trade and investment, and ensuring compliance with trade laws and agreements. ITA provides export promotion services, works to ensure compliance with trade agreements, administers trade remedies such as antidumping and countervailing duties, and provides analytical support for ongoing trade negotiations. ITA went through a major organizational change in October 2013 in which it consolidated four organizational units into three more functionally-aligned units, which include (1) Global Markets; (2) Industry and Analysis; and (3) Enforcement and Compliance. ITA also has a fourth organizational unit, the Executive and Administrative Directorate, which is responsible for providing policy leadership, information technology support, and administration services for all of ITA. Table A-1 shows budget amounts for ITA by unit between FY2005 and FY2015. The FY2015 CJS Appropriations Act provided $462.0 million for ITA in direct funding, with an additional $10.0 million in user fees, for a total of $472.0 million in available funds. The Administration's request for FY2016 was $496.8 million, an increase of 7.5% over the FY2015 enacted amount (not including user fees). The request included an additional $10.0 million in user fees, the same amount as in FY2015, which would have raised total available funds to $506.8 million for FY2016. The House recommended $457.0 million in direct appropriations for ITA, an amount 8.0% less than the Administration's request and 1.1% less than the enacted amount for FY2015. The House anticipated the collection of $10.0 million in user fees, which would have raised total available funds to $467.0 million. The Senate Committee on Appropriations recommended $463.0 million for ITA in direct funding, $1.0 million above the FY2015 enacted level, $33.8 million, or 6.8%, below the FY2016 budget request, and 1.3% above the House recommendation. The Senate committee report anticipated the collection of $10.0 million in user fees, which would have raised total available funds to $473.0 million. The FY2016 appropriation for ITA is $483.0 million, with an additional $10.0 million in user fees, for a total of $493 million in available funds. The FY2016 appropriation is 4.5% more than the FY2015-enacted amount and 2.8% less than the Administration's FY2016 request. ITA's Global Markets unit combines country and regional experts, both overseas and domestically, and specific trade promotion programs to provide U.S. firms with country-specific export promotion services and market access advocacy. The unit also promotes the United States as an investment destination. It is designed to advance U.S. commercial interests by engaging with foreign governments and U.S. businesses, identifying and resolving country-specific market barriers, and leading interagency efforts that advocate for U.S. firms with foreign governments. It also is also designed to help promote U.S. exports by developing and implementing policies and programs to increase market access in foreign countries for U.S. goods and services and by providing various types of direct assistance to U.S. firms, especially small and medium-sized enterprises. For FY2016, ITA requested $334.4 million and 1,122 full time employees (FTEs) for the Global Markets unit, a net increase of $4.7 million and 9 FTEs over the previous year. ITA's Industry and Analysis unit brings together ITA's industry, trade, and economic experts to advance the competitiveness of U.S. industries through the development and execution of international trade and investment policies, export promotion strategies, and investment promotion. It develops economic and international policy analysis in an effort to improve market access for U.S. businesses, and designs and implements trade and investment promotion programs. The unit serves as the primary liaison between U.S. industries and the government on trade and investment promotion. It administers programs that support small and medium-sized enterprises, such as the Market Development Cooperator Program. For FY2016, ITA requested $58.3 million and 248 FTEs for the Industry and Analysis unit, a net increase of $1.0 million and the same number of FTEs compared to the previous year. The mission of ITA's Enforcement and Compliance unit is to enforce U.S. trade laws and ensure compliance with negotiated international trade agreements. It promotes the administration of U.S. antidumping and countervailing trade law remedies; addresses trade-distorting practices; promotes disciplines and practices by U.S. trading partners that enhance transparency and impartiality; and administers the Foreign Trade Zone program and other U.S. import programs. It represents and advocates on behalf of U.S. industries on issues regarding trade enforcement and compliance. For FY2016, ITA requested a total of $80.7 million and 348 FTEs for Enforcement and Compliance, an increase of $6.2 million and 18 FTEs over the previous year. USITC is an independent federal agency with broad investigative responsibilities on matters related to international trade. The mission of the agency is to "(1) administer U.S. trade remedy laws within its mandate in a fair and objective manner; (2) provide the President, USTR, and Congress with independent analysis, information, and support on matters of tariffs, international trade, and U.S. competitiveness; and (3) maintain the Harmonized Tariff Schedule of the United States." USITC's activities include investigating the effects of dumped and subsidized imports on domestic industries; conducting global safeguard investigations; and adjudicating disputes involving imported goods that allegedly infringe U.S. intellectual property rights. Through such proceedings, the agency helps to facilitate a rules-based international trading system. USITC also serves as a federal resource for trade data and other trade policy information. It provides such information and analysis to Congress, the President, and USTR to facilitate the development of U.S. trade policy. USITC also makes most of this information available to the public to promote understanding of competitiveness, international trade issues, and the role that international trade plays in the U.S. economy. As a matter of policy, its budget request is submitted to Congress by the President without revision. USITC received $84.5 million for FY2015. The Administration's request for USITC for FY2016 was $131.5 million, of which $42.7 million was a one-time cost related to the transition to a new office plan. The FY2016 request was 55.6% more than the FY2015 enacted amount. The House recommended $86.5 million in direct appropriations for USITC, an amount 34.2% less than the Administration's request and 2.4% more than the enacted amount for FY2015. The Senate Committee on Appropriations recommended $84.5 million for the USITC, the same as the FY2015 enacted amount, 35.7% less than the FY2016 request, and 2.3% less than the House passed bill. The FY2016 appropriation for USITC is $88.5 million, 4.7% more than the FY2015-enacted amount and 32.7% less than the Administration's FY2016 request. USTR, located in the Executive Office of the President, is responsible for developing and coordinating U.S. international trade and direct investment policies. USTR is the President's chief negotiator for international trade agreements, including commodity and direct investment negotiations. It negotiates directly with foreign governments to create trade agreements, resolve disputes, and participate in global trade policy organizations such as the World Trade Organization. It also meets with business groups, policymakers, and public interest groups on trade policy issues. USTR was leading free trade agreement (FTA) negotiations for the United States for the proposed Trans-Pacific Partnership agreement (TPP) and is currently leading the negotiations for the proposed Transatlantic Trade and Investment Partnership (T-TIP). It is also monitoring the implementation of existing FTAs such as the U.S.-South Korea and U.S.-Colombia FTAs. The FY2015 CJS Appropriations Act provided $54.3 million for USTR. The Administration's request for FY2016 was $56.3 million and an estimated 240 FTEs, a proposed increase of 3.7% and 7 FTEs over the FY2015 enacted amount. The House recommended $54.3 million in direct appropriations for USTR, an amount 3.6% less than the Administration's request and equal to the enacted amount for FY2015. The Senate committee-reported bill recommended $54.3 million for USTR, an amount equal to the FY2015 enacted amount and the House recommended amount for USTR. The Senate Committee on Appropriations recommended that USTR be consolidated into the Department of Commerce and that USTR funding be moved under the Department of Commerce heading. The FY2016 appropriation for USTR is $54.5 million, 0.5% more than the FY2015-enacted amount and 3.1% less than the Administration's FY2016 request. Over the past decade, Congress has provided funding for specific trade-related programs under the CJS trade-related agencies. These programs have sought to address areas of congressional interest, including China trade enforcement and compliance activities; trade promotion and attracting foreign direct investment to the United States through ITA's SelectUSA program; and the Interagency Trade Enforcement Center (ITEC) established by the President in 2012. Since 2004, Congress has dedicated some of ITA's funding to antidumping and countervailing duty enforcement and compliance activities with respect to China and other non-market economies. ITA's Office of China Compliance was established on January 23, 2004, under the Consolidated Appropriations Act of 2004 ( P.L. 108-199 ). Its primary role was to enforce U.S. antidumping and countervailing duty laws and to develop and implement other policies and programs aimed at countering unfair foreign trade practices in China. ITA's China Countervailing Duty Group was established in FY2009 to accommodate the workload that resulted from the application of countervailing duty law to imports from non-market economy countries. The House-passed bill and the Senate Committee on Appropriations report both recommended $16.4 million in appropriations for FY2016 for China antidumping and countervailing duty enforcement and compliance activities. See Table A-3 for FY2006 through FY2016 budget authority for ITA's China antidumping and countervailing duty enforcement and compliance activities—including the Office of China Compliance and the China Countervailing Duty Group. The enacted FY2016 appropriation includes $16.4 million for China antidumping and countervailing duty enforcement and compliance activities, the same amount as the House and Senate recommendations. Created in 2011, SelectUSA is part of ITA's Global Markets unit. It coordinates investment-related resources across more than 20 federal agencies to promote the United States as an investment market and to address investor climate concerns that may impede investment in the United States. It serves as an information resource for international investors and advocates for U.S. cities, states, and regions. ITA requested $20.0 million for FY2016 to implement further the SelectUSA program, an increase of $10.0 million over the FY2015 amount. The Senate Committee on Appropriations recommended that up to $10.0 million be provided for SelectUSA for FY2016, except that none of the funds provided may be used to facilitate foreign direct investment in the United States unless a protocol to ensure that SelectUSA activities do not encourage such investments in the United States by state-owned entities is delivered to the committee within 30 days of enactment of the CJS bill for FY2016. Table A-3 shows SelectUSA funding levels for FY2012 through FY2015. On February 28, 2012, President Barack Obama signed Executive Order 13601 establishing the ITEC to advance U.S. foreign trade policy through strengthened and coordinated enforcement of U.S. trade rights under international trade agreements and enforcement of U.S. trade laws. The President's goal is to take a "whole-of-government" approach to monitoring and enforcing U.S. trade rights around the world by using expertise from across the federal government. The ITEC is led by a Director designated by USTR and a Deputy Director designated by the Secretary of Commerce. The ITEC coordinates interagency trade enforcement matters among USTR and the Departments of Commerce, State, Treasury, Justice, Agriculture, and Homeland Security, as well as the Office of the Director of National Intelligence, and other agencies that the President or USTR may designate. ITA works closely with the ITEC to identify issues and develop information in areas of economic importance to U.S. industries. Funding for the ITEC is appropriated through ITA. The FY2016 budget request for the ITEC was $15.0 million, an increase of $6.0 million over the FY2015 funding amount. The Senate Committee on Appropriations recommended up to $10.0 million for the ITEC, an amount $1.0 million above the FY2016 enacted amount and $5.0 million less than the FY2016 request. See Table A-3 for FY2012 through FY2016 budget authority for the ITEC. Issues that Congress may have considered while debating the FY2016 funding levels for the three CJS trade-related agencies may have included the following: Whether to approve a one-time 55.6% increase in funding for USITC for costs associated with securing office space for the agency following the expiration of its current lease in August 2017. Whether to consider consolidating commercial and trade-related agencies in order to increase efficiency. Whether to provide an additional $10.0 million (100% increase), as requested by the Administration, for ITA's SelectUSA program to help attract foreign investment to the United States. Whether to provide an increase of $6.0 million (67% increase), as requested by the Administration, for ITA to support the ITEC led by USTR and ITA. Whether Congress should continue to provide funding for ITA's China antidumping and countervailing duty enforcement and compliance activities.
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This report tracks and describes actions taken by the Administration and Congress to provide FY2016 appropriations for the International Trade Administration (ITA) of the U.S. Department of Commerce, the U.S. International Trade Commission (USITC), and the Office of the United States Trade Representative (USTR). These three trade-related agencies are part of the Commerce, Justice, Science, and Related Agencies (CJS) appropriations process. The report also provides an overview of three trade-related programs that are administered by ITA, USITC, and USTR. The Consolidated and Further Continuing Appropriations Act, 2015 (P.L. 113-235) provided a total of $600.8 million for the three agencies, including $462.0 million for ITA, $84.5 million for USITC, and $54.3 million for USTR. For FY2016, the Administration requested $684.6 million for FY2016 for the three agencies, an amount 13.9% greater than what Congress appropriated for FY2015. The request included a one-time increase of $83.8 million (55.6%) in funding for USITC for costs associated with securing space for the agency following the expiration of its current lease in August 2017. The House passed the FY2016 CJS appropriations bill (H.R. 2578) on June 3, 2015. The House-passed bill included $597.8 million for CJS trade-related agencies, an amount 0.5% less than the FY2015 enacted amount and 12.7% less than the Administration's FY2016 request. The Senate Committee on Appropriations approved its FY2016 CJS appropriations bill, which was offered as an amendment in the nature of a substitute to H.R. 2578, on June 16, 2015. The Senate committee-reported bill recommended $601.8 million for the three CJS trade-related agencies, an amount 0.2% greater than the FY2015 enacted amount, 12.1% less than the Administration's FY2016 request, and 0.7% greater than the House-passed amount. The Senate Committee on Appropriations recommended that USTR be consolidated into the Department of Commerce and that funding for this agency be moved to the Department of Commerce heading. On December 18, 2015, President Obama signed into law the Consolidated Appropriations Act, 2016 (P.L. 114-113). Division B of the act provides $483.0 million for ITA, $88.5 for USITC, and $54.5 million for USTR. The FY2016 appropriation for the three CJS trade-related agencies is $626.0 million, an amount 4.2% greater than the FY2015 appropriation, but 8.6% less than the Administration's request.
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The 109 th Congress may consider issues related to the World Trade Organization (WTO). Under the Uruguay Round Agreements Act ( P.L. 103-465 ), which is the law that implemented the agreements reached during the Uruguay Round of multilateral trade negotiations (1986-1994), the U.S. Trade Representative (USTR) must submit to the Congress every five years a report that analyzes the costs and benefits of continued U.S. participation in the WTO. Once Congress receives this comprehensive report, any Member of Congress may introduce a joint resolution withdrawing congressional approval of the Agreement establishing the WTO. On March 2, 2005, the Administration submitted the report on U.S. participation in the WTO, and on the same day, Representative Bernard Sanders introduced withdrawal resolution H.J.Res. 27 . H.J.Res. 27 was privileged and was considered under expedited legislative procedures. On May 26, 2005, the House Ways and Means Committee reported the resolution adversely ( H.Rept. 109-100 ). On June 9, 2005, the House defeated H.J.Res. 27 by a vote of 338-86. A similar withdrawal resolution was introduced five years ago ( H.J.Res. 90 ; H.Rept. 106-672 ) and was voted down in the House by a 363-56 vote and not introduced in the Senate. The withdrawal resolution offered the opportunity for Members to examine the costs and benefits of WTO participation, express the degree of satisfaction with WTO dispute decisions, or debate other aspects of WTO membership. In addition to considering the withdrawal resolution, the 109 th Congress will monitor WTO disputes involving U.S. interests and U.S. laws. Congress might also consider whether or not to change U.S. laws where WTO panels have decided against the United States. Members of Congress may debate whether the WTO dispute process and individual decisions support U.S. interests. At the same time, the United States and the other members of the WTO are participating in a multilateral round of trade negotiations. The talks began in November 2001 in Doha, Qatar, and are called the Doha Development Agenda, or Doha Round. The purpose of this report is to analyze the main issues in the debate on U.S. participation in the WTO. To put the issue in perspective, the report begins with a brief history of the WTO, including its purpose and functions, followed by an examination of the economic benefits and costs of the WTO. The main body of the report addresses selected issues for the United States: the economic costs and benefits to the United States, decisionmaking in the WTO and national sovereignty; the WTO dispute process; arguments on whether or not to include labor, environmental, and food safety standards in the WTO; and the WTO and developing countries. It ends with a brief discussion of alternatives to participation in the WTO. Following World War II, nations throughout the world, led by the United States and several other developed countries, sought to establish an open and nondiscriminatory trading system with the goal of raising the economic well-being of all countries. Aware of the role of trade barriers in contributing to the economic depression in the 1930s, the countries that met to discuss the new trading system considered open trade as essential for economic stability and peace. The intent of these negotiators was to establish an International Trade Organization, which would address not only trade barriers but other issues indirectly related to trade, including employment, investment, restrictive business practices, and commodity agreements. Unable to secure approval of such a comprehensive agreement, however, they reached a provisional agreement on tariffs and trade rules, called the General Agreement on Tariffs and Trade (GATT). The GATT went into effect in 1948. This provisional GATT became the principal set of rules governing international trade for the next 47 years. The World Trade Organization (WTO) succeeded the GATT in 1995. It was established as a result of the Uruguay Round of multilateral trade negotiations that were held under GATT auspices. The WTO encompassed the former GATT agreements with newly negotiated reforms, new trade issues such as services and trade-related intellectual property, a stronger dispute resolution procedure, a mechanism to review members' trade policies regularly, and other duties. In contrast to the GATT, the WTO was created as a permanent structure. The WTO has three broad functions. First, the governments of the member countries agree on a set of multilateral rules and principles for trade, which provide a stable and predictable basis for trade. The economic effects of agreed-on rules and principles are difficult to quantify precisely, but are likely substantial and attractive to countries, since membership in the GATT/WTO has grown from 23 countries in 1948 to 148 countries at present (with about 30 more countries waiting to join). Also, world trade over the past half century, by growing more rapidly than world production, has served as an engine of economic growth for many countries. The second function of the WTO is to provide a mechanism to enforce the rules. The dispute settlement procedure provides a way in which disagreements among countries over the interpretation of the rules can be resolved. Broadly, a country with a complaint requests a consultation and, if the dispute is not resolved during the consultation, the complaining country may request establishment of a panel. After the panel issues its decision, both disputing parties have the right to appeal. After the conclusion of all such proceedings, the Dispute Settlement Body (representatives of all the WTO members) adopts the report or reports, unless it decides by consensus to reject them. Third, the WTO provides a forum for negotiations to reduce trade barriers. Countries meet periodically in "rounds" to consider changes in rules on trade barriers. In the first five rounds (late 1940s to early 1960s), negotiations focused on reducing tariffs, which are now low. As tariffs were reduced, countries sometimes turned to non-tariff barriers (for example, subsidies, government procurement regulations, antidumping procedures) to restrict imports. Negotiations since the mid-1960s have covered non-tariff barriers as well. Today, negotiations might extend to measures that involve what once were exclusively domestic policy issues, such as health, safety, or environmental standards. Some WTO rules have been agreed on to prevent countries from using such standards as disguised protectionism, although each country retains the right to set its own standards. Decisions within the WTO are made by member countries, not by WTO staff, and they are made by consensus, not by formal vote. The highest level body in the WTO is the Ministerial Conference, which is the body of political representatives (trade ministers) from each member country. The body that oversees the day-to-day operations of the WTO is the General Council, which consists of a representative from each member country. Many other councils and committees deal with particular issues, and members of these bodies are also national representatives. One question that Congress may consider as it debates continued participation in the WTO is its effect on the economy and prosperity of the United States. In one sense, this is a difficult question to answer as the prosperity of the 10 years of WTO existence occurred along with the information technology boom in the United States in the 1990s, the rise of China as an economic power, and macroeconomic and other factors. U.S. involvement in the WTO did not happen in a vacuum. Much of the increased trade may have occurred anyhow, or in the case of our two largest partners, Canada and Mexico, may have occurred as a consequence, in part, of the implementation of the North American Free Trade Agreement (NAFTA), which was approved by Congress in 1993, more than because of the WTO. Many economists believe that, over the past 50 years, the more predictable environment for trade as well as the reduction in trade barriers, which were a result of multilateral trade rules, have contributed to unprecedented economic prosperity for the majority of countries. For example, the WTO reports that world exports in 2003 were 126 times those in 1948, while world gross domestic product (GDP) in 2003 was 7 times that of world GDP in 1950. Looked at another way, the average annual rate of growth in the volume of world exports was higher than growth in GDP during the period. Such rapid growth in world exports has been attributed to the progressive reduction of trade barriers caused by successive rounds of GATT/WTO trade liberalization, and may have contributed to the growth in world GDP. In the report that the President submitted to Congress on March 2, 2005, on the costs and benefits of U.S. participation in the WTO, the Administration has equated U.S. economic success with WTO membership through a variety of trade and non-trade statistics. For example, the report notes that during the 1994-2004 period (the WTO was established in 1995): U.S. GDP rose 38%, industrial production rose 35%, productivity rose at an annual rate of 2.9%, (compared with 1.8% in the 1984-1994 period), business investment rose 78% (compared with a 38% increase in the 10 years before the WTO was established), real compensation doubled to 1.8% per year, and 17.2 million new jobs were created. The President's report also cites trade statistics. For example, bound tariff rates were lowered an average of 40% for developed countries and 25% for developing countries by the Uruguay Round. U.S. exports of goods and services increased 63% from 1994-2004, from $703 billion to $1.1 trillion. U.S. exports increased 76% to developing countries and 48% to developed countries. Imports of goods and services increased 120%, from $801 billion to $1.764 trillion during the WTO period. These statistics are used to bolster the case for continued U.S. participation in the WTO. However, saying that this economic activity occurred during the existence of the WTO is different than saying it happened because of the WTO. Aside from the time period correlation, the report does not conduct rigorous analysis on the value of U.S. participation. Because the WTO's rules and principles for trade, trade liberalization, and dispute settlement procedures are all designed to encourage trade, it is often taken as self-evident that it accomplishes these goals. However, other factors have been in play in the past decade such the information and communications technology revolution, productivity advances in the United States, decreasing shipping costs, and other developments. Nonetheless, economists argue that increased trade will have a net positive effect on economies: specialization from trade strengthens the most competitive and productive sectors of a nation's economy by reallocating resources from less efficient economic activities. Increased trade benefits consumers by offering a greater selection of goods, often at lower prices, which in turn would increase the real income of consumers. Trade liberalization increases the rate of economic growth through such dynamic effects as the introduction of new products, access to specialized goods, skills transfers and human capital accumulation. Recently, a pair of econometric studies have attempted to measure the effect of the WTO on the world economy. In both studies, a gravity model (an econometric model in which different phenomena such as GDP, population, distance, common language, or membership in trade arrangements are isolated to attempt to determine the importance of each to trade flows) was used to attempt to isolate the effect of WTO membership on the trade flows of various countries, both members and non-members. The first study , using some 50 years of trade statistics from 175 countries, found that the existence of the GATT/WTO, by itself, did not have a significant positive effect on trade flows. However, a second study by two economists of the International Monetary Fund using much the same data, suggests that if the aforementioned gravity model is designed to differentiate between developed and developing countries, then the effects of the GATT/WTO membership on world trade flows can be positively identified, at least for developed countries. The authors postulate that this result is due to developing countries largely being given a "free ride," due to special and differential treatment provisions that has exempted them from GATT/WTO obligations. These studies show that the potential exists for WTO liberalization to have a beneficial effect on trade, but the differences in their findings show that this issue has not been settled. Studies also abound on the value of prospective WTO liberalization to the United States and the world economy. Recently, the Institute for International Economics (IIE) released a report attempting to quantify the gains from global integration using trade liberalization as a proxy for globalization. The study compiled different studies measuring the increased income resulting from increased exposure to trade, the 'sifting and sorting' effects of competition resulting from open trade, potential lost trade from not implementing trade liberalization in the post-war period, and the use of intermediate imports. From this, IIE estimates that the present benefit of all past trade liberalization to the U.S. economy is on the order of $1 trillion annually, and this translates to a U.S. per capita income gain of $2,800 to $5,000. However, this study refers to all trade liberalization, not just that resulting from the GATT/WTO. Another study uses the Michigan Model, a multi-country, multi-sector, general equilibrium model to analyze various trade policy changes and scenarios. In this case, the model was used to measure the welfare effects of a 33% reduction in agricultural tariffs and export and production subsidies, in tariffs on manufactures, and on service barriers. The model estimates that U.S. net welfare would be increased by $164 billion (1.81% increase in GDP). It found that the United States would gain primarily from services liberalization ($135 billion), would receive some net welfare benefit from manufacturing tariff liberalization ($36.5 billion), but would actually suffer a net welfare loss of $7.23 billion from the agricultural liberalization envisioned by the model. There is a consensus that in general consumers gain from trade in the form of lower prices and increased choice. The President's report states the number of wage/hours required to buy various consumer goods has decreased during the period of WTO, and postulates that is due to trade openness promoted by the WTO. Workers in export sectors also gain to the extent that the WTO opens foreign markets to trade. Employees engaged in export sectors are generally more highly skilled than those of import-competing sectors and are generally more highly paid. However, some labor, particularly unskilled labor, likely has lost out from free trade. The income gap between high and low skilled labor, and between labor and other factors of production (land, capital) is consistent with international trade theory. This theory suggests that in terms of factors of production (land, labor, capital), trade between two countries will result in the relatively scarce factor in each country being made worse off by trade relative to other factors. In the United States, labor, and especially unskilled labor, arguably may be the relatively scarce factor in a country otherwise rich in capital, land and educational opportunities. However, reallocating factors of production to their most efficient use has real human costs. Closing a local plant due to import competition is devastating for workers and communities alike, especially if no comparable employer exists to absorb the labor force. Although trade theory holds that labor and capital will eventually be redeployed in a more productive manner, eventually can be a long time coming for workers who have lost their livelihood. An important question related to the WTO is who are the decisionmakers in the organization. There are many different claims about who sets the rules. A second question is, once the decisionmakers within the WTO have agreed on rules, what do the rules mean with regard to national sovereignty of WTO members. Questions of governance and power are often at the heart of the debate over the WTO. Some critics of the WTO portray the WTO as an undemocratic, elitist organization operating in non-transparent fashion, mostly for the benefit of multinational corporations from rich countries. By contrast, some supporters say that the WTO is a body of nations that set their own domestic trade policies and represent the interests of all their citizens in their decisions. The WTO itself consists of highly trained support staff (economists, lawyers, and other public policy professionals) that assist the member states in their activities. This relatively small international organization had 601 employees in 2004, and a budget of $161.8 million. Its Secretariat provides administrative and technical support to the WTO's councils, committees, working parties, and negotiating groups; provides technical support to developing countries; undertakes trade policy analysis of individual member countries; provides legal assistance in the resolution of trade disputes; and assists in accession negotiations for potential new members. The WTO describes itself as a "member-driven" organization. Major decisions at the WTO are made by representatives of the 148 member governments. Member states proffer negotiating positions, build alliances with other nations, file dispute settlement cases, and implement their verdicts. Rule-making power is not delegated to a board of directors or an executive board in the WTO, but is exercised by the member countries as a whole. While major economies have had greater power within the WTO than smaller economies for many years, blocs of developing countries have become much more influential at WTO meetings. Some experts argue that country representatives have not resolved all questions about rules through negotiation. They point to some questions being resolved through the dispute process, where WTO rules are being interpreted not by member countries but by appointed panelists. Critics who may acknowledge the limited nature of the WTO's power, contend the WTO is overly influenced by commercial concerns of member states and by the organization to the exclusion of other important issues. This argument reflects in part the power of national-level interests such as corporations to shape country negotiating positions. But this influence is effected primarily at the national level through domestic institutions. Multinational corporations have no direct participation in WTO decision-making and cannot file dispute settlement actions on their own. Decisions are usually reached through consensus among all of the WTO member countries. Consensus has been the hallmark of WTO decisionmaking since the founding of the GATT in 1947. It was much easier to reach consensus when the GATT was an organization of developed countries, or when the developing-country members were quiescent. The increased membership of developing countries in the organization and the larger role developing countries are playing in WTO affairs have provoked some to question the continued viability of the consensus approach to WTO decisionmaking. These changes also have implications for the United States, which in earlier years did not have to compromise with large blocs of developing countries. Consensus decision-making has been attacked as undermining the progress of trade liberalization. Trade liberalization, it is claimed, is doomed to proceed at a snail's pace if each country, no matter how economically small, can veto any trade deal. Some critics characterize this as undemocratic and threatening to the will of the majority. Some argue this results in the lengthy duration of trade negotiations and in dilution of benefits derived therefrom. However, alternatives to consensus are also problematic. Voting at the WTO, authorized for certain limited procedural circumstances, could be expanded. The choice of voting instruments—one-country-one-vote, voting power based on trade flows, or voting power based on population—would each have adherents or detractors, and would favor some countries or country blocs to the detriment of others. For this reason, any move to voting at the WTO would prompt serious resistance from countries that stand to lose from such a change. Currently the United States has considerable influence on WTO decisions because of its economic size, but if a voting system were used in the WTO, depending on the type of voting system, it is unclear what level of influence the United States would maintain. Aside from voting, another method of dealing with the short-comings of consensus is through the use of "a la carte" agreements (such as the plurilateral agreement on government procurement), which would allow countries to opt in or out of certain agreements, or even to certain conditions within adopted agreements. This would allow willing member states to undertake commitments on a reciprocal basis within areas in which universal commitments are unlikely, at least in the near term. It would allow for more ambitious trade liberalization in certain areas among like-minded-countries. Member states could judge whether they were able or willing to take on commitments, and could join later if appropriate. This method has been used primarily in terms of sectoral liberalization. More extensive use of sectoral liberalization, including in the non-agricultural market access (NAMA) negotiations, is favored by the United States. This method arguably would undercut the process of the "single undertaking," which is now part of the current Doha Round. The single undertaking posits that negotiations for the Round are only finished when all the agreements are completed. The rationale for the single undertaking serves to reinforce the consensus principle; all agreements must have universal support. The single undertaking acts to prevent the concerns of some members from being ignored in the rush to agreement on other issues. It also is a way to encourage countries to participate in the talks, since there should be something for everyone in the final deal. The primary justification for consensus approach is that it provides legitimacy to WTO decisions, and it reinforces national sovereignty. Tedious though achieving consensus is, such an agreement is more likely to be implemented, or at least less openly flaunted, if it is agreed by all members. A recent report on the WTO observed, "it must remain for sovereign governments to decide, at every point, their national interests and to demand that those interests are reflected in everything the WTO decides." As long as the WTO remains an organization of sovereign governments, the tension between unwieldy decisionmaking and more legitimacy is likely to continue. Part of the critique of the WTO is that it is an opaque organization that operates substantially behind closed doors. Meetings of the General Council and of the negotiating groups are not open to the public. Dispute settlement proceedings are likewise closed, and supporting briefs are not automatically available to the public, but can be released at the discretion of the authoring government. Members who are not party to a dispute may not attend dispute panel or Appellate Body proceedings. According to the Sutherland Report, this confidentiality is seen as damaging to the WTO as an institution, and it recommends that dispute settlement proceedings be opened to the public "as a matter of course." However, many of the most egregious examples of WTO secrecy have been addressed over the years. Most submissions or interventions in negotiations have been available immediately online since 2002, and summaries of meeting are available sometime after. While some groups have sought total transparency in all phases of WTO operations, other commentators consider a measure of secrecy necessary in sensitive negotiations. Article V:2 of the Marrakesh Agreement, which established the WTO in 1994, authorizes cooperation and consultation between the General Council of the WTO and non-governmental organizations (NGOs). The nature and extent of that role have remained unsettled during the life of the WTO. Some argue for a greater role for NGOs as a way of increasing the transparency of the organization, or providing a voice within the WTO for non-commercial concerns. Presenting amicus briefs at WTO dispute proceedings, and participating in WTO negotiations through written submissions or actual participation in negotiating sessions are examples of ways that NGOs could be included in WTO proceedings. NGOs themselves represent a wide variety of interests (for example, the National Wildlife Federation and the Chambers of Commerce are NGOs) and themselves possess varying attributes of transparency and accountability. The interests of the NGOs are especially important to consider in light of their activities assisting developing countries to formulate negotiating positions. Increasingly critics charge that "international bureaucrats" at the WTO can override laws enacted in the United States. The broad scope of WTO obligations, coupled with strong dispute settlement procedures contained in the WTO dispute settlement understanding, have led some to argue that the WTO has undue influence on domestic laws and regulations, as well as on the process of law-making itself. As a member of the WTO, the United States does commit to act in accordance with the rules of the multilateral body. Article XVI(4) of the Agreement Establishing the World Trade Organization states, "Each Member shall ensure the conformity of its laws, regulations and administrative procedures with its obligations as provided in the annexed Agreements." Governments accept these obligations in order to obtain assurance that other governments will not restrict trade in certain ways, and, in return, commit themselves to abide by the same rules. Countries participate in trade agreements because the gains from the predictability of other countries' actions exceed the costs of refraining from such actions themselves, but if governments determine that the costs of being a member of the WTO outweigh the benefits, they may withdraw from the WTO. Article XV(1) of the Agreement establishing the WTO states that any country may withdraw, and the withdrawal takes effect six months after written notice is received by the Director-General of the WTO. WTO disputes are member-driven, and the WTO itself has no independent enforcement authority. Thus, the organization cannot make a member country amend, alter, or repeal its laws or regulations, even in the event a dispute settlement panel has determined them to be inconsistent with WTO obligations. In other words, WTO agreements leave it to the individual member to decide how it will respond to an adverse WTO decision. However, if a country does not comply within a reasonable period of time, the WTO may authorize retaliation such as the withdrawal of tariff concessions by the complaining party determined to be equivalent to the economic effects of the offending statute. In some instances, a member state will accept the withdrawal of tariff concessions instead or repealing a popular law or policy. For example, rather than allow imports of hormone-treated beef, the EU offered compensation, but the United States refused the compensation and eventually imposed retaliatory tariffs on EU products. Another issue is the relationship between WTO agreements and state laws and regulations. The National Conference on State Legislatures sent a letter to the USTR asking for meaningful consultations on future negotiations of international trade agreements. This follows the Maryland legislature's repeal of the state's adherence to the WTO government procurement agreement on April 11, 2005. Utah also has expressed its concerns over how the WTO's recent internet gambling decision might affect its state laws. Some Members of Congress have criticized the operation of the WTO dispute settlement process. The procedures for resolving disputes in the international trading system were greatly strengthened by the Uruguay Round, which created the WTO in 1995. Before 1995, the procedures under the GATT had been broadly criticized as being ineffective. Under those procedures, a panel finding would not be accepted unless there was a consensus among member states to impose the finding. Given that the party losing the dispute was unlikely to accept the finding, dispute decisions often did not result in an end to the challenged practice. In the Uruguay Round, the United States was a principal proponent for a stronger dispute settlement process with a greater likelihood of ensuring compliance. The WTO's dispute settlement procedure was strengthened by imposing stricter deadlines and by making it easier to establish panels, adopt panel reports, and authorize retaliation, if necessary. Decisions are made by member country representatives to the WTO General Council who gather also as the Dispute Settlement Body (DSB). The first stage of the dispute settlement process is consultation between the governments involved. If consultation is not successful, the complainant may ask the Dispute Settlement Body to establish a dispute panel. The dispute panel hears the case and issues its report to the disputing parties and then to the members in general. The report may be appealed, and once the panel and any appellate proceedings are completed, the reports are presented for adoption by the DSB under its reverse consensus rule. If the complaining party prevails, the respondent may choose to change its practice or try to negotiate an agreeable resolution; if the respondent chooses not to act, or its responsive action is not acceptable to the complaining country, the complainant may request that the DSB authorize suspension of obligations, thereby giving permission for the complainant to retaliate. Procedures are clearly set out with specific timetables at each stage. So far under the WTO dispute settlement procedure, the United States has had more success as a complainant than as a respondent. According to USTR lists of disputes involving the United States, as of March 21, 2005, the United States had filed 74 complaints (including compliance proceedings), and 48 of those had been concluded. Those 48 were resolved thus: 22—resolved to U.S. satisfaction without completing litigation; 22—U.S. won on core issues; and 4—U.S. did not prevail on core issues. The USTR lists indicate that the United States has won overwhelmingly in the cases that it has brought to the WTO. The United States has not fared as well, however, when other countries challenged U.S. practices. The USTR reports that as of March 21, 2005, the United States was a responding party in 103 complaints and compliance proceedings. Of those, 49 have been concluded (almost the same number of cases as those with the United States as complainant). Those 49 cases were resolved thus: 14—resolved without completing litigation (uncertain whether or not to U.S. satisfaction); 10—U.S. won on core issues; and 25—U.S. did not prevail on core issues. According to the USTR lists, the United States did not prevail on at least half of the cases where another country brought the case. The question of whether or not the United States should withdraw from the WTO raises another question of how the United States would do without the WTO dispute mechanism. The United States is a party to a number of free-trade agreements that include dispute procedures. Where a violation of those agreements is alleged, the United States or other party to the agreement could turn to those procedures. Such instances, however, might be limited. For practices not covered by those agreements, which would include actions by most countries of the world, there would be no comparable rules or forum. Absent the WTO, countries can always try to settle a trade dispute through negotiations, as can happen under Section 301 of the Trade Act of 1974, even though there is no underlying trade agreement involved. Trade disputes would have to settled by other means. There have been complaints that countries have not adhered to dispute panels' findings. An example is the U.S. complaint against European Union (EU) trade restrictions on imports of beef produced with hormones. The United States was granted permission by the DSB to impose retaliatory tariffs on imports from the EU. In spite of higher tariffs on its products, the EU has not withdrawn the challenged practice. Likewise, a WTO panel found against the U.S. Continued Dumping and Subsidy Offset Act, commonly known as "the Byrd Amendment," which returns antidumping duties to a domestic industry. A WTO panel gave permission to the EU and seven other WTO members to retaliate, and the United States has not changed its law. The WTO does not have the power to force a country to change its law. These results show that countries may choose not to abide by decisions in the WTO. The WTO as an institution, however, is only as strong as its members' adherence to its rules. Other complaints center around challenges to U.S. trade remedy laws. In the last few years, the United States has lost a number of these cases, including cases involving steel safeguards, the U.S. Antidumping Act of 1916, and the Byrd Amendment. In response, Members of Congress and others have questioned the expertise underlying certain WTO dispute decisions, whether the panels are making rules through their decisions and thus bypassing negotiations, and whether the panels are extending appropriate deference to domestic laws. In the 108 th Congress, Senator Baucus introduced a bill ( S. 676 ) to establish a WTO Dispute Settlement Review Commission to review all reports of dispute settlement panels or the Appellate Body of the World Trade Organization (WTO) in proceedings initiated by other parties to the WTO that are adverse to the United States and that are adopted by the Dispute Settlement Body. In such cases, the Commission would determine whether the WTO panel or Appellate Body deviated from the applicable standard of review, including in antidumping, countervailing duty, and other unfair trade remedy cases. It can be noted that in general, the United States tends not to challenge trade-remedy laws of other countries in the WTO, but rather challenges product-specific foreign barriers, such as barriers to dairy products, or other nontariff barriers. Although there are many complaints about the WTO dispute process, especially after a major WTO dispute decision against the United States, some Members of Congress look to the WTO dispute process as an important way to challenge the trade practices of other nations. In a number of instances, Members have protested the actions of a foreign country and proposed that if the situation cannot be resolved, then the United States should file a dispute in the WTO. In these instances, Members have viewed WTO dispute resolution as a legitimate and possibly effective way to cause the countries to change their actions. A case in point is the petition filed by a coalition of 35 Members of Congress under Section 301 asking that the USTR initiate a WTO dispute against China's policy of pegging the yuan to the dollar. Similar legislation has been introduced in the 109 th Congress to urge the USTR to initiate WTO dispute action against OPEC members who are also WTO members for their oil export quotas ( S. 752 ) and against the EU for its support of Airbus ( S.Con.Res. 25 ). In the debate on U.S. participation in the WTO, an issue that often arises is whether U.S. laws and regulations establish certain standards that increase costs for U.S.-based businesses, and whether foreign-based companies then have an advantage because they do not have to meet the same standards. Related to this is the question of whether or not such standards should be part of the WTO rules. Another question is whether or not the WTO should influence how countries set their domestic standards. These questions have been raised specifically in discussions on standards for labor, the environment, and health and food safety. Critics of current WTO trade rules argue that the rules should also include minimum levels (and enforcement) of labor standards, and possibly trade sanctions to enforce the rules. They contend that low or weak foreign labor standards effectively lower costs abroad, and that internationally enforced rules are needed to "level the playing field." They also state that low standards abroad might lead to declining standards in the United States if producers (and governments), in order to maintain competitiveness, become less committed to established labor standards. Others maintain that the issue is more complicated. For example, child labor is closely related to poverty, they argue, and economic policies to raise family incomes might be more effective than requiring higher labor standards. Further, others contend that there is no evidence that labor standards in the United States have been lowered by foreign standards. Some argue that, rather than dealing with labor standards in the WTO, a better course of action might be to strengthen the International Labor Organization, especially in the area of enforcement of agreed-on rules. In 1996, WTO members recognized the ILO as the competent body to set and deal with those standards. Others contend that the ILO is not taken seriously because it has no enforcement mechanism, and that the only way to ensure effective policy on labor rights is to place it in negotiations along with tariffs, services, and intellectual property rights. For their part, most developing countries are dead-set against including labor rights in the WTO, considering them an invitation to developed-country protectionism. Some of the same issues are raised with environmental standards (or lax enforcement). In April 1994, WTO members established a Committee on Trade and the Environment (CTE). The purposes of the CTE are to study the relationship between trade and environmental measures and to make recommendations as to whether modifications of the WTO are required. Environmentalists, however, have been disappointed that the CTE has not made more progress. They are concerned that the goals of multilateral environmental treaties or domestic regulations might be undone by the dispute process of the WTO. They also are concerned that lower environmental standards abroad might contribute to lower standards in the United States. Supporters of the WTO argue that no multilateral environmental agreement has ever been challenged in the WTO. They contend that in the relatively few cases where environmental measures have been at issue, WTO dispute panels have ruled on narrow aspects of these laws or regulations. They also argue that environmental protection in the United States has not been compromised. In the case of food safety, some WTO critics have argued that the standards set by U.S. food safety laws are being jeopardized by WTO panel rulings. Some claim that WTO panelists are able to, or have, overturned U.S. and other countries' food safety laws. Or, other critics argue, WTO panels are superceding judgments by the public in regard to their desired level of food safety. WTO supporters maintain food safety laws are not being overturned, but that countries have agreed in the WTO to administer such laws in a nondiscriminatory way. At issue is usually the WTO Agreement on Sanitary and Phytosanitary Standards (SPS), which established criteria that countries must meet in order to show that a law is not a disguised trade restriction. Broadly, the criteria are that sanitary and phytosanitary standards should be based on science, a risk assessment, or relevant international standards. The precautionary principle is a notable point of disagreement. The principle says that where long-term health effects are uncertain or unknown, a country should have the right to ban a product. Several environmental groups have argued that the SPS Agreement should be amended to specifically incorporate the precautionary principle, while others argue that such a principle would be used as a trade barrier, and that only science should dictate. The role of the WTO in fostering development among the lesser developed nations of the world may play a part in this debate. This is because the Doha round, known officially as the Doha Development Agenda, has put issues of development front and center on its agenda. The concerns of developing nations at WTO have affected U.S. policy in two ways. First, the aim of the United States and other developed countries has been to increase developing country participation in the GATT/WTO process in order to strengthen the process and to ensure that the economic benefits of open trade reach all countries. Second, and somewhat at odds with the first, the United States and other developed countries must also adjust to the growing influence of developing countries both within the WTO and in the international trading system. The developing countries have become increasingly vocal about the need for export markets for their agriculture and textile products. The United States and other developed countries have made trade a key component of development policy and a focus of WTO activity. Policymakers recognize that trade has a role to play in alleviating poverty and increasing growth in the developing world. Problems of causality have made it difficult to delineate the contribution of international trade, or the impact of WTO membership, on developing country poverty reduction or growth. However, one estimate has been that global free trade (more than that contemplated by the WTO Doha Round) would increase the income of developing countries by $90 billion annually in static terms and by up to $200 billion after dynamic gains were considered over time. These figures, if realized, would dwarf the amount of annual foreign aid (approximately $69 billion in 2003 ) given by the developed world. Developed countries at the WTO have attempted to include developing countries in the WTO/GATT system by the use of special and differential treatment (SDT). SDT provisions include the principle of less than full reciprocity of tariff commitments, the protection of infant industries, and a commitment to the reduction of barriers on products of interest to developing countries and for the reduction of barriers which differentiate between the primary and processed form of a good (tariff escalation). SDT provisions have allowed developing countries to largely exempt themselves from reciprocal tariff cuts made by developed countries. (SDT does not permit wholesale exemption from other WTO agreements, such as TRIPS or GATS.) These provisions are generally conceded to have been the political price extracted for developing countries' support of successive rounds of trade liberalization. WTO members reaffirmed their commitment to SDT in the on-going Doha Round. Some proponents of free trade argue that the SDT treatment has impeded the progress of developing countries. They say that the refusal of some developing countries to lower import tariffs has left many countries with an inefficient, protected, economic base that is unable to compete with the outside and is using resources potentially better deployed elsewhere in the domestic economy. By exempting them from WTO obligations, they have also exempted them from the benefits of the multilateral trading system. According to this view, developing countries should be encouraged to put their tariffs on the table as a way of extracting greater concessions on developed country tariffs of importance to them: agriculture, textiles/apparel, and other labor intensive products. In addition to SDT, developed countries have tried to include developing countries in the multilateral trade community through trade capacity building (TCB). TCB refers to activities such as assisting developing countries to comply with their WTO obligations, building the capacity for countries to negotiate in the Doha Round, aiding in the development of WTO compliant customs administrations, regulatory procedures, sanitary and phytosanitary standards, and infrastructure related activity. The Doha Round has made the provision of TCB a part of the negotiations through the establishment of a negotiating group on SDT and implementation issues. A Global Trust Fund was established in July 1999 to receive extra-budgetary donations from WTO members to finance technical cooperation activities carried out by the WTO. This Fund had $19.7 million at year-end 2003 available for technical assistance and capacity building purposes. On its own the United States reported spending $34.7 million in WTO-related trade capacity building in 2004. While the United States has an interest in the economic benefits of WTO participation by developing countries, it also must respond to the increased clout of these countries within the WTO. Developing countries now make up a majority of members, and because of the consensus-based approach to WTO decision-making, they can block policies and negotiations perceived to be against their interests. Developing countries blocked negotiations on certain new issues at the 1999 Seattle ministerial meeting, leading to the ministerial's collapse, and a group of developing countries known as G-20 rejected the joint U.S.-EU agricultural proposals at the Cancun ministerial in 2003. Since the Cancun ministerial, the United States has engaged in consultations with the Five Interested Parties (FIPS), which include Brazil and India, and has sided, on occasion, with developing countries seeking agricultural liberalization. However, the United States has also indicated that it is seeking concessions from developing countries in tariff negotiations and substantive service-sector offers. In Doha negotiations, the United States has favored SDT provisions that emphasize longer implementing periods, rather than a general release from commitments.
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The World Trade Organization (WTO) is of interest to the 109th Congress for several reasons. First, House Members considered a joint resolution (H.J.Res. 27) to withdraw congressional approval of the agreement establishing the WTO. The House Ways and Means Committee reported the resolution adversely on May 26, 2005, and the full House disapproved the resolution by a vote of 338-86 on June 9, 2005. Debate on the resolution offered Members an opportunity to examine the costs and benefits of WTO participation and examine other aspects of WTO membership. Second, the 109th Congress will monitor WTO disputes involving U.S. interests and possibly consider whether or not to amend U.S. laws to address WTO dispute panel findings. Members have criticized the WTO dispute process for several reasons, but the process does offer a stable multilateral forum for trade disputes. Third, the United States and other WTO members are actively engaged in a multilateral round of trade negotiations in the WTO. The 109th Congress is monitoring those negotiations. Final agreements are not expected until 2006 or later. In a report submitted to Congress on March 2, 2005, on the costs and benefits of continued participation in the WTO, the Administration cited a number of statistics that show growth in the U.S. and world economies since establishment of the WTO. Whether the growth cited was the result exclusively or mainly of activity in the WTO is arguable. Academic studies indicate that the United States would gain substantially from broad reductions in trade barriers worldwide. At the same time, some workers and industries might not share in those gains. Questions of governance and power are among the issues at the heart of the debate on the WTO. Major decisions in the WTO are made by member governments, who determine their negotiating positions, file dispute challenges, and implement their decisions. However, some challenge the claim that the WTO is democratic in nature by arguing that smaller countries are left out of the decision-making and that governments tend to represent large commercial interests only. The United States has been a frequent participant in WTO dispute proceedings, both as a complainant and as a respondent. There have been many complaints of the WTO dispute process, including the arguments that countries do not adhere to decisions and that U.S. trade remedy laws have not been judged properly. On the other hand, this multilateral trade dispute forum is unique, and the United States has been successful in many of its challenges. Other issues include (1) the relationship between WTO rules and a country's right to establish domestic standards for labor, the environment, food safety, and other areas; and (2) U.S. policy toward developing countries, including a balance between providing assistance to those countries in the WTO and addressing their demands in trade negotiations.
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S ection 1332 of the Patient Protection and Affordable Care Act (ACA; P.L. 111-148 , as amended) allows states to apply for waivers of specified provisions of the ACA. Under a state innovation waiver, a state is expected to implement a plan (in place of the waived provisions) that meets certain minimum requirements. The Centers for Medicare & Medicaid Services' (CMS's) initial interpretation of these requirements was published in guidance released in 2015 but has since been superseded, as with other aspects of the waiver process, in updated guidance released by the agency on October 24, 2018. Under current guidance, the state's plan must provide health insurance coverage to as many state residents as would be covered absent the waiver and must make available to a comparable number of residents coverage that is both as affordable and as comprehensive as it would be absent the waiver. However, applications do not need to demonstrate that the affordable and comprehensive health insurance coverage will be purchased by a comparable number of state residents. Additionally, the state's plan cannot increase the federal deficit. This report answers frequently asked questions about how states can use and apply for state innovation waivers. It also addresses recent changes to the Section 1332 waiver process, as made by the 2018 CMS guidance. A state may apply to waive any or all of the ACA provisions listed below for plan years beginning on or after January 1, 2017. Part I of S ubtitle D of the ACA : Part I of Subtitle D comprises Sections 1301-1304. In general, the provisions in Part I relate to the establishment of qualified health plans (QHPs). Part II of S ubtitle D of the ACA : Part II of Subtitle D comprises Sections 1311-1313, which largely include provisions related to the establishment of health insurance exchanges and related activities. Section 1402 of the ACA : This section includes the provision of cost-sharing reductions to eligible individuals who purchase individual market coverage through a health insurance exchange. Section 36B of the Internal Revenue Code (IRC) : This section includes the provision of premium tax credits to eligible individuals who purchase individual market coverage through a health insurance exchange. Section 4980H of the IRC: This section includes the shared responsibility requirement for large employers (often called the employer mandate ). Section 5000A of the IRC: This section includes the requirement for individuals to maintain health insurance coverage (often called the individual mandate ). Each part noted above is comprised of many provisions, which makes the scope of the provisions that can be waived under a state innovation waiver quite broad. For example, Part I of Subtitle D of the ACA includes provisions that outline requirements for health plans to be certified as QHPs. It defines the essential health benefits (EHB) package that each QHP must offer, places limitations on the enrollee cost sharing that QHPs may impose, and requires that QHPs provide coverage meeting a minimum level of actuarial value. Additionally, Part I of Subtitle D establishes requirements for catastrophic health plans and determines eligibility for such plans. The Secretary of the Department of Health and Human Services (HHS) is to review and grant waiver requests for provisions not included in the IRC; the Secretary of the Treasury is to review and grant requests to waive provisions in the IRC (the availability of premium tax credits and the application of the employer and individual mandates). The Secretary of HHS or the Treasury is to assess a waiver application to determine whether the state's plan meets the requirements related to coverage, affordability, comprehensiveness, and federal-deficit neutrality outlined in statute and further described in guidance. These requirements are described in Table 1 . The Secretary or Secretaries (as appropriate) may grant a request for a state innovation waiver if a state's application meets the requirements. In making this determination, the Secretaries will "consider favorably" any waiver that incorporates some or all of the following principles: provide increased access to affordable private market coverage, encourage sustainable spending growth, foster state innovation, support and empower those in need, and promote consumer-driven health care. In guidance, HHS and the Treasury note that their assessment of a state's waiver application considers changes to the state's health care system that are contingent only upon approval of the waiver. Their assessment does not consider policy changes that are dependent on further state action or other federal determinations. For example, the Secretary's or Secretaries' (as appropriate) assessment of a state innovation waiver application would not consider changes to Medicaid or the state Children's Health Insurance Program (CHIP) that require approval outside of the state innovation waiver process, and savings accrued as a result of changes to Medicaid or CHIP would not be considered when determining whether the state innovation waiver meets the deficit-neutrality requirement. HHS and the Treasury indicate that this is the case regardless of whether a state's application for a state innovation waiver is submitted alone or in coordination with another waiver application. (For more information about the coordinated waiver process, see " May States Submit State Innovation Waiver Applications in Coordination with Other Federal Waiver Applications? ") Although not possible initially, HHS and the Treasury indicated in the updated guidance released in October 2018 that technical enhancements have made it feasible for CMS to support some federally facilitated health insurance exchange (FFE) variation. For example, waivers that would require a state to create its own website to replace the consumer-facing aspects of HealthCare.gov also can incorporate CMS's enrollment functionalities (e.g., account creation, application, enrollment and coverage maintenance experience for consumers). States are asked to work with HHS early in the waiver application process to determine whether specific modifications can be accommodated. States are responsible for funding all FFE modifications and associated operational support. Therefore, these costs are not considered when determining whether a waiver application satisfies the deficit neutrality requirement; however, any other changes to CMS administrative processes are taken into account. In guidance issued in October 2018, HHS and the Treasury describe some federal operational considerations that may limit the scope of the waivers. Specifically, the Internal Revenue Service (IRS) generally is not able to accommodate any state-specific changes to tax rules. The IRS may be able to accommodate small changes to the administration of federal tax provisions, in particular when such changes overlap with the IRS's current capabilities. For example, waivers that would require the IRS to expand premium tax credit eligibility to individuals with household income under 100% of the federal poverty level may be feasible, because it incorporates a similar special rule that the IRS currently administers. States are responsible for funding all changes to IRS administrative processes associated with wavier implementation. These costs are incorporated into the assessment of whether a waiver application satisfies the deficit neutrality requirement. A state seeking a state innovation waiver must enact a law that allows the state to carry out the actions under the waiver prior to submitting an application for a waiver. In certain circumstances, a state can be considered to have enacted such a law by coupling a state law that enforces ACA provisions and/or the state plan with administrative or executive actions. Prior to submitting an application, a state must provide a public notice and comment period and conduct public hearings regarding the state's application. Upon conclusion of these activities, a state may submit its application to the Secretary of HHS. The Secretary of HHS is to transmit any application seeking to waive requirements in the IRC to the Secretary of the Treasury for review. The Secretary or Secretaries (as appropriate) are to review a state's application to determine whether it is complete. A state's application is not considered complete unless it includes the materials identified in regulations. The materials include, but are not limited to, information about the enacted state legislation allowing the state to carry out the actions under the waiver, a description of the plan or program the state expects to implement in place of the waived provisions, and analyses showing that the state's plan or program meets the requirements for granting a waiver. If a state's application is not complete, the state is to be notified about the missing elements and given an opportunity to submit them. Once the Secretary or Secretaries (as appropriate) make a preliminary determination that a state's application is complete, the entire application is to be made available to the public for review and comment. The final decision of the Secretary or Secretaries on a state's application must be issued no later than 180 days after the determination that the Secretary of HHS received a complete application from a state. It is possible for a state to receive federal funding under an approved waiver. A state's receipt of a state innovation waiver could result in the residents of the state not receiving the "premium tax credits, cost-sharing reductions, or small business credits under sections 36B of the Internal Revenue Code of 1986 or under part I of subtitle E for which they would otherwise be eligible." If this occurs, the state is to receive the aggregate amount of subsidies that would have been available to the state's residents had the state not received a state innovation waiver—this is referred to as pass-through funding . The amount of pass-through funding is to be determined annually by the appropriate Secretary and may be updated at any time to account for changes in state or federal law. The state is to use the pass-through funding for purposes of implementing the plan or program established under the waiver. State innovation waivers cannot extend longer than five years unless a state requests continuation and such request is not denied by the appropriate Secretary. Requests for continuation are to be deemed granted if they are not denied by the appropriate Secretary within 90 days of submission. The Secretaries are required to develop a process for coordinating applications for state innovation waivers and applications for other existing waivers under federal law relating to the provision of health care, including waivers available under Medicare, Medicaid, and CHIP. Under the coordinated process, a state must be able to submit a single application for a state innovation waiver and any other applicable waivers available under federal law. The single application must comply with the procedures described for state innovation waiver applications and the procedures in any other applicable federal law under which the state seeks a waiver. As discussed in the answer to the question " What Are the Minimum Requirements for a Successful Application? ," HHS and the Treasury have indicated that an application for a state innovation waiver will be assessed on its own terms and that assessment of the state innovation waiver will not consider the impact of changes that require separate federal approval. This is the case even if the state submits a single application for multiple waivers. As of the date of this report, 14 states have submitted applications for state innovation waivers—Alaska, California, Hawaii, Iowa, Maine, Maryland, Massachusetts, Minnesota, New Jersey, Ohio, Oklahoma, Oregon, Vermont, and Wisconsin. HHS and the Treasury have approved eight applications, from Alaska, Hawaii, Maine, Maryland, Minnesota, New Jersey, Oregon, and Wisconsin. All of these waivers were considered and approved under the initial state innovation waiver guidance, and all but one of the approved waivers implement a variant of a statewide individual market reinsurance program. Massachusetts, Ohio, and Vermont received notification from HHS and the Treasury that their applications were incomplete, and it does not appear that any of these states has modified its application in response to the notification. If one of these three states does take action, any further review of its waiver application would be under the updated state innovation waiver guidance. California, Iowa, and Oklahoma have withdrawn their applications. See Table 2 for more details.
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Section 1332 of the Patient Protection and Affordable Care Act (ACA; P.L. 111-148, as amended) provides states with the option to waive specified requirements of the ACA. In the absence of these requirements, a state is to implement its own plan to provide health insurance coverage to state residents that meets the ACA's terms. Under a state innovation waiver, a state can apply to waive ACA requirements related to qualified health plans, health insurance exchanges, premium tax credits, cost-sharing subsidies, the individual mandate, and the employer mandate. The state can apply to waive any or all of these requirements, in part or in their entirety. To obtain approval for a waiver application, a state must show that the plan it will implement in the absence of the waived provision(s) meets certain requirements. Under current guidance, the state's plan must provide coverage to as many state residents as would be covered absent the waiver and must make available to a comparable number of residents coverage that is both as affordable and as comprehensive as would be absent the waiver. However, applications do not need to demonstrate that the affordable and comprehensive coverage will be purchased by a comparable number of state residents. Additionally, the state's plan cannot increase the federal deficit. The Secretary of the Department of Health and Human Services (HHS) and the Secretary of the Treasury share responsibility for reviewing state innovation waiver applications and deciding whether to approve applications. The earliest a state innovation waiver could have gone into effect was January 1, 2017. In October 2018, the Centers for Medicare & Medicaid Services (CMS) released updated guidance regarding the state innovation waiver process that superseded previously issued CMS guidance from December 2015. In general, the updated guidance attempts to make it easier for a state plan to be approved. The updated guidance applies to all waiver applications that had not been approved prior to the date of the guidance's release. Waivers approved under the previously issued guidance did not require reconsideration. As of the date of this report, eight states—Alaska, Hawaii, Maine, Maryland, Minnesota, New Jersey, Oregon, and Wisconsin—have approved state innovation waivers. All of these waivers were considered and approved under the initial state innovation waiver guidance, and all but one of the approved waivers implement a variant of a statewide individual market reinsurance program. Massachusetts, Ohio, and Vermont have submitted applications and received notification that their applications were incomplete. It does not appear that any of these states has modified its application in response to the notification (as of the date of this report). If these states take action, any further review of their waiver application would be under the updated state innovation waiver guidance. Three states—California, Iowa, and Oklahoma—submitted waiver applications and have since withdrawn their applications.
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RS20365 -- Taiwan: Annual Arms Sales Process Updated June 5, 2001 The Taiwan Relations Act (TRA) ( P.L. 96-8 ) has governed arms sales to Taiwan since 1979, when the United States recognized the People's Republic of China(PRC) instead. Sec. 3(a) states that "the United States will make available to Taiwan such defense articles anddefense services in such quantity as may benecessary to enable Taiwan to maintain a sufficient self-defense capability." Sec. 3(b) stipulates that both thePresident and the Congress shall determine thenature and quantity of such defense articles and services based solely upon their judgment of the needs of Taiwan. The TRA set up the American Institute inTaiwan (AIT), a nonprofit corporation, to handle relations with Taiwan. AIT implements U.S. policy, with directionfrom the Departments of Defense and Stateas well as the National Security Council (NSC) of the White House, and organizes the meetings on arms sales inTaipei or Washington. SuccessiveAdministrations used a process in determining arms sales to Taiwan that became institutionalized as annual roundsof talks with Taiwan authorities consisting ofseveral phases leading up to final meetings usually in April. In 1999, U.S.-Taiwan arms sales talks took place onApril 27-28, in Washington, and the ClintonAdministration confirmed that a Taiwan military delegation was still in Washington on April 29, 1999. (1) On the positive side, the process used in determining arms sales to Taiwan has evolved over the last two decades into a routine, rather than ad hoc, one whereTaiwan's evolving defense needs can be expected to be considered carefully every year by the United States at a highlevel. Official Taiwan media say that in thelast 20 years, Taiwan's armed forces have procured "a lot of defensive weapons and equipment" from the UnitedStates. (2) Quoting a Taiwan military source, aTaiwan newspaper reports that the military there believes the Pentagon, rather than the State Department, is "quitesupportive" of Taiwan's needs, and thesituation is thus "favorable." (3) This regular processallows for more predictable planning by Taiwan authorities in charge of the defense budget and potentiallyreduces the chance that developments in U.S. relations with the PRC could influence arms sales to Taiwan. Moreover, Taiwan could send senior militarydelegations to Washington. Through the 1990s, the arms talks were low-profile, reducing the opportunities forgreater U.S.-PRC friction. Indicating securitybenefits of arms sales for Taiwan, China objects to the TRA and argues that Washington is not observing the August17, 1982 U.S.-PRC communique (onreducing arms sales to Taiwan). (4) Testifying beforethe Senate Foreign Relations Committee on August 4, 1999, Deputy Assistant Secretary of Defense KurtCampbell declared that the TRA "has been the most successful piece of legislative leadership in foreign policy inrecent history." Indeed, despite the unofficial nature of relations, U.S. arms sales to Taiwan have been significant. From 1991 to 1998, arms deliveries (primarily U.S.) to Taiwantotaled $20 billion -- the second highest (after arms transfers to Saudi Arabia). (5) Contracts are signed under the Foreign Military Sales (FMS) program, withnotification to Congress as required by the Arms Export Control Act. Moreover, beginning after tensions in theTaiwan Strait in 1996, the Pentagon, under theClinton Administration, is said to have quietly expanded the sensitive military relationship with Taiwan to levelsunprecedented since 1979. The broaderexchanges reportedly have increased attention to "software," including discussions over strategy, military thinking,and plans in the event of an invasion. (6) InSeptember 1999, to enhance cooperation, a Pentagon team visited Taiwan to assess its air defense capability andmake recommendations on upgrading it. (7) Criticisms within the United States of the arrangements in determining arms sales might include observations on the lack of a strategic, longer-range U.S.approach, rather than currently looking at Taiwan's defense needs narrowly on a year-by-year, weapon-by-weaponfashion, that has involved intense inter-agencydifferences. Some defense industry observers say that the arms sales talks have "generally ended in disappointmentfor Taiwan because its requests for dieselsubmarines, long-range surveillance radars, and other defensive items have been rejected in deference to Beijing." (8) In 1999, some in Congress introduced theTaiwan Security Enhancement Act ( S. 693 , Helms; H.R. 1838 , Delay), arguing that "pressures to delay,deny, and reduce arms sales toTaiwan have been prevalent since the signing of the August 17, 1982 communique." Other comments both within and outside the Administration criticize a perceived traditional overemphasis on selling military equipment. Some would prefergreater attention to diplomatic solutions, including efforts to ease tensions in the Taiwan Strait. In 1998, formerAssistant Secretary of Defense for InternationalSecurity Affairs Chas. Freeman argued that increasing military tensions in the Taiwan Strait "call for a reevaluationof arms sales to Taiwan." (9) Susan Shirk,Deputy Assistant Secretary of State for East Asian and Pacific Affairs, is quoted as saying in a speech on April 14,1999, that "neither the PRC or Taiwan wouldbe served by overemphasis on military hardware, while neglecting the art of statesmanship." (10) Others who urge greater support for Taiwan'smilitary have calledfor more attention to "software," including absorption of new equipment, military contacts, training, and advice forTaiwan's military, especially broader trainingprograms on C4I, combined arms, and joint warfare operations -- rather than narrow training tied to particularweapon systems. (11) Some critics are concerned that the White House might secretly negotiate with Beijing over arms sales to Taiwan. An authoritative weekly magazine reported that,during the June 1998 summit in Beijing, the PRC requested a U.S. promise to deny theater missile defense (TMD)technology to Taipei, in return for a PRCpledge not to provide missiles to Iran; but no agreement was reached. (12) Finally, some on Capitol Hill contend that successive Administrations have neglected a congressional role in determining arms sales as outlined in the TRA, and some Members are seeking to increase their say. Representative Gilman, Chairman of the House InternationalRelations Committee, wrote President Clinton onApril 19, 1999, to urge approval for the sale of long-range early warning radars to Taiwan. He also wrote Secretaryof State Albright on April 22, 1999, sayingthat if the Administration did not approve the sale, he would introduce legislation to do so. (13) In the end, the Clinton Administration decidedin principle to sellearly warning radars to Taiwan (see below). The process for arms sales talks between Washington and Taipei generally has included four stages, culminating in an arms sales meeting in Washington eachApril. 1. Pre-Talks. Taiwan's various military services request items for procurement to be decided by their Ministryof National Defense (MND). The MND decides on an official list of about 5-15 major items to request from theUnited States. The list may include hardware,technical assistance, and professional military education courses. This list is usually presented to the U.S. sidetowards the end of each year. In recent years, Taiwan has requested items such as P-3 anti-submarine reconnaissance aircraft and AIM-120 Advanced Medium Range Air-to-Air Missiles(AMRAAM). (14) For the 1999 talks, Taiwan'srequest reportedly totaled $1.7 billion and included: (15) four Aegis-equipped destroyers (or technology); (16) 6-10 diesel-electric submarines (including training, technical assistance, and logistical support possiblyfor assembly inTaiwan); (17) two Patriot Advanced Capability (PAC)-3 missile defense systems; (18) two AN/BOND long-range, early-warning radars for missile defense; (19) satellite early-warning reconnaissance. (20) 2. Working-Level Talks in Taiwan. At the beginning of the following year, a few small working-level teamsorganized by AIT travel to Taiwan to collect information and discuss the request in greater detail with Taiwan'smilitary. Composed mainly of Pentagon staff, theteams may visit various sites in Taiwan to obtain a better understanding of its defense needs. After the visits, the Office of the Assistant Secretary of Defense for International Security Affairs (ISA) formulates the Pentagon's position, including the views ofthe various services and the joint staff. Meanwhile, the State Department and NSC formulate their own positionson the requests from Taiwan. The agencies mayformulate decisions based on different priorities involving several factors, including: implications for regional stability; military balance in the Taiwan Strait (including assessments of the PRC threat against Taiwan andprospects for a peaceful resolution of theTaiwan question); U.S.-PRC relations; U.S. policy on technology transfer; offensive vs. defensive capabilities of the items; the value of arms called the "bucket." (21) 3. Resolution of Disagreements Within U.S. Government. From March to April, U.S. policymakers work toresolve any disagreements with the Defense Department's position at the level of the Under Secretary of Defensefor Policy, Under Secretary of State for ArmsControl and International Security Affairs, and the Deputy National Security Advisor at the NSC. If disagreementspersist, they are then elevated to the highestlevels at the various agencies. For example, in the case of the 1999 decision on early-warning radars, toppolicymakers at the NSC, State Department, and thePentagon reportedly agreed to approve the sale, overruling mid-level NSC and State officials who opposed the saleout of concerns that it might provoke the PRCand increase already heightened tensions between Washington and Beijing. (22) 4. Annual Talks. The talks between Washington and Taipei on U.S. arms sales to Taiwan take place everyyear, usually in April. The U.S. side, as represented by AIT and the Defense Department, presents the finaldecisions on the requested items. A militarydelegation from Taiwan usually visits for a few days of scheduled meetings and social functions. The formalmeetings on approved sales may take place on oneday. There may also be trips outside of Washington to visit military bases, inspect pilots from the Taiwan Air Forcetraining to fly F-16 fighters, and watchdemonstrations of equipment for possible acquisition. During the April 1999 talks, the State Department, which prefers to avoid public discussion of the talks, nonetheless confirmed that a Taiwan delegation was inWashington at the end of April. It also confirmed that, in providing defensive weapons and services to Taiwanunder the TRA, "periodic consultations take placethat include Taiwan military representatives" and that there was a "frank and broad exchange of views on issuesrelated to Taiwan self-defense needs, but bothsides agreed not to discuss the details of this process." (23) On the sale of long-range early-warning radars to Taiwan urged by some in Congress, the State Department spokesperson confirmed that the United States agreedon the request in principle and acknowledged that under the TRA, "the President and Congress determined whichdefense articles and services Taiwan needs." (24) The Pentagon spokesperson also confirmed that the United States "agreed to work with the Taiwanese to evaluatetheir early warning radar needs, and that willtake place over the next year or so, but there is no specific agreement on a specific type of radar, specific sale, orspecific terms of sale at this time." (25) For the 1999 talks, Taiwan's military was reportedly represented by its new Vice Chief of General Staff, Lieutenant General Teng Tzu-lin, accompanied by deputydefense ministers in charge of intelligence, operations, logistics, and planning. (26) The director of the Taipei Economic and Cultural Representative Office(TECRO), Stephen Chen, also participated in the talks. (27) The U.S. side, sponsored by AIT, was said to include the Deputy Assistant Secretary of Defense(International Security Affairs) on Asian and Pacific Affairs. This representative was apparently accompanied bythose from the Defense Security CooperationAgency (DSCA) and the State Department's Office of Taiwan Coordination in the East Asian and Pacific AffairsBureau.
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This CRS Report discusses the low-profile annual arms talks process that successiveAdministrations used from theearly 1980s to 2001 in determining arms sales to Taiwan, which are governed by the Taiwan Relations Act. Thediscussion is based on interviews in 1998 and1999 with U.S. and Taiwan observers as well as U.S. and Taiwan news reports. This report on the process will notbe updated. (On April 24, 2001, PresidentGeorge W. Bush announced that he would drop this annual arms talks process in favor of one with considerationson an "as-needed basis." See also CRS Report RL30957, Taiwan: Major U.S. Arms Sales Since 1990.)
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World leaders agreed in 2009 at a summit of the Group of Twenty (G-20) major economies to review the capital adequacy of the multilateral development banks (MDBs), following several years of elevated MDB lending since the 2008 financial crisis. Shareholder nations, including the United States, subsequently agreed to increase the capital stock of the World Bank's main lending arm, the International Bank for Reconstruction and Development (IBRD); the World Bank's private-sector loan facility, the International Finance Corporation (IFC); the African Development Bank (AfDB); the Asian Development Bank (AsDB); the European Bank for Reconstruction and Development (EBRD); and the Inter-American Development Bank (IDB). The fact that all of the MDBs were requesting capital increases presented an opportunity for the Obama Administration and Congress to collectively evaluate U.S. participation and leadership in the MDBs, debate whether the MDBs are using their existing capital effectively, and decide whether to participate in any or all of the capital increases, and if so, whether to seek additional reforms. Key issues regarding the MDBs include: the comparative effectiveness of bilateral and multilateral aid, and the responsibilities of the MDBs to assess and pursue effectiveness; the scope of MDB activity, and whether that scope serves U.S. national security, economic, and foreign policy interests; MDB lending to emerging economic powers, and whether lending to China and other dynamic economies should continue to be encouraged; the increasing role of emerging economic powers at the MDBs, and its implications for U.S. influence and role; MDB-funded procurement, and potential U.S. export and commercial opportunities; and anti-corruption efforts, and the responsibility of the MDBs to promote development in poor countries prone to corruption while safeguarding MDB resources and ensuring an open and fair bidding process for MDB procurement. For the purposes of this report, the term "Multilateral Development Bank," or "MDB," refers to the World Bank Group (including the International Bank for Reconstruction and Development (IBRD) and the International Finance Corporation (IFC), as well as several other facilities), and four regional development banks: the African Development Bank (AfDB), the Asian Development Bank (AsDB), the European Bank for Reconstruction and Development (EBRD), and the Inter-American Development Bank (IDB). These international institutions finance development projects and economic policy reform in developing countries. Table 1 provides additional information on the MDBs. MDBs (with the exception of the IFC and the EBRD) have two main lending "windows." The first type of window is to make loans at near market-based interest rates, primarily to middle-income developing countries. To finance these loans, MDBs borrow money from capital markets, much like private financial institutions. MDBs are able to borrow from international capital markets on excellent terms because of their AAA ratings, which in turn reflect in large part their strong capital positions and the financial backing of their member country governments. The second type of window is to provide concessional-rate loans (low interest rates and long repayment periods) to the world's poorest countries using money contributed periodically by the MDBs' member country governments. MDBs borrow in world capital markets at market rates, but the rates they are required to pay reflect their very high creditworthiness. Because these rates are typically much lower than those paid by private borrowers, the banks are able to relend this money to their borrowers at much lower interest rates. As such, the MDBs' non-concessional lending windows are self-financing and generate net income for the institutions, and they help subsidize concessional lending to the poorest countries. Furthermore, by borrowing to finance their lending, the MDBs' capital (and hence, increases in capital) is leveraged, allowing them to lend more than the amount of their capital. The capital that shareholders contribute comes in two forms (with the exception of the IFC): "paid-in capital," which generally requires the payment of cash to the MDB; and "callable capital," which is funds that shareholders agree to provide, but only when necessary to avoid a default on a borrowing or payment under a guarantee. Only a small portion (typically less than 5%) of the value of these capital shares is actually paid to the MDB. The vast bulk is callable capital. Callable capital serves as ultimate backing for the MDBs borrowing in capital markets, though the MDBs have never had to call upon those resources. Callable capital cannot be used to finance loans, but only to pay off bondholders if the MDB is insolvent and unable to pay its bondholders. Two key factors distinguish MDBs from private sector banks: (1) the MDBs' multilateral shareholding structure and preferred creditor status; and (2) capitalization, including callable capital, that is generally much higher than that of commercial lenders. This strong capital position facilitates the AAA rating of these institutions. Thus, the MDBs can offer loans to developing countries at rates lower than many private banks. After the 2008 financial crisis, there was a sharp contraction in capital flows to emerging economies. Although private capital flows are recovering, they remain below pre-crisis levels. Net private-sector inflows to emerging market countries now represent around 4% of world GDP, compared to almost 7% during 2006. Capital from other governments (bilateral aid) and the MDBs has become essential for many countries, both as a source of development finance and as a means of leveraging remaining available private capital, through political risk insurance, bond guarantees, and bridge financing. Since 2008, lending has increased across all MDBs, but most dramatically at the World Bank. Its commitments increased from $13.5 billion in 2008 to $32.9 billion in 2009; this is the largest annual amount ever committed and it significantly exceeds the $22 billion the World Bank lent in 1999 during the Asian financial crisis. Figure 1 shows annual MDB lending to developing countries since 2000. Table 2 provides total outstanding MDB commitments. An across-the-board increase in all members' shares of MDB capital, increasing the amount the MDB can lend through its non-concessional window, is called a general capital increase (GCI). This funding is not to be used to directly increase concessional financial assistance to low-income countries , but rather to increase the capital base of the non-concessional window, allowing the MDB to increase its borrowings on the international capital markets and thus increase the size of its lending operations to market-eligible countries. While Congress appropriates funds annually to help fund the MDBs' concessional lending facilities, capital increases of the main lending windows are rare. U.S. participation in MDB capital increases is especially important, as the United States is the largest shareholder in the MDBs and U.S. funding commitments often spur additional contributions from other member countries. The Center for Global Development estimates that every $1 the United States contributes to the World Bank as part of a GCI enables at least $30 in new World Bank lending and $70 in new AfDB lending. The process for proposing and implementing a GCI is roughly similar for all institutions. New funding plans for an MDB capital increase are discussed informally among member country governments before they are considered by member countries. A supermajority vote of the membership is required to approve capital increases and funding plans for each institution. Only for the World Bank's IBRD, though, does U.S. law require that Congress give its assent before the United States can vote in favor of a new MDB funding plan. Following increased lending after the financial crisis, the United States and other governments agreed to substantial capital increases at the MDBs. Collectively, these capital increases are worth around $348 billion. Assuming full U.S. participation, the total U.S. share of new subscribed capital would be $57 billion. While congressional authorization is required for the full amount, appropriations are required only for paid-in capital, which would total $2.17 billion. The pay-in period for paid-in capital ranges from three to eight years, depending on the MDB. Detailed information on the current GCI requests is provided in Table 3 . While the executive branch manages the day-to-day U.S. participation in the MDBs, Congress decides the overall terms of U.S. involvement by setting the level of U.S. contributions, and it influences, through legislation, how the United States votes on policies and projects. Congress can influence MDB policy by: fully funding or limiting the annual amounts appropriated for U.S. participation; enacting conditions attached to new funding agreements; enacting specific goals and priorities the United States will emphasize; and exercising its oversight responsibilities. This was the first time that capital increases for so many MDBs were considered by Congress at the same time. It also provided an opportunity for the Administration and Congress to evaluate U.S. participation in the institutions, debate whether the MDBs are using their existing capital effectively, and decide whether participation in any or all of the capital increases is in the interest of the United States and what additional policy reforms, if any, the United States should seek. On March 10, 2010, the Senate Foreign Relations Committee's minority staff prepared a report on reforming the MDBs, stating that "the Administration and the other donor countries of the G-20 should be firm in demanding that needed reforms are secured before committing additional funds." The report includes a number of recommendations, including strengthening anti-corruption efforts, improving evaluation frameworks, and improving oversight of budget support lending, among others. During its GCI negotiations with other MDB shareholder governments, the Obama Administration gained support for many of these reforms, according to testimony delivered before the Senate Committee on Foreign Relations in September 2010 (see text box below). Secretary Geithner reiterated these efforts, and stressed the importance of the MDBs to the Administration at additional hearings before the Senate Committee on Foreign Relations in February 2011. At the hearings, he stated that U.S. investments at the MDBs "are a critical and cost-effective component of the United States' global economic leadership." Compared to other advanced economies, the United States provides a smaller percentage of its development assistance through multilateral organizations, such as the MDBs, than other countries. According to data from the Organization for Economic Cooperation and Development (OECD), 12% of U.S. official development assistance in 2009 was disbursed through multilateral institutions. By contrast, 21% of Japan's, 37% of Germany's, and 33% of the United Kingdom's 2009 development aid was provided through multilateral institutions. Recent public polling data suggest that far less than a majority of the American public supports multilateralism in U.S. foreign aid despite some research pointing to the superior effectiveness of multilateral aid. Supporters of providing U.S. development assistance multilaterally argue that because the MDB charters forbid lending for political purposes, it is easier for the banks to secure politically difficult economic policy reforms in recipient countries. In addition, multilateral contributions from the United States leverage funds from other donors (private and public) to address certain issues/sectors. For example, the United States designated a portion of U.S. Global Food Security Initiative Funds to the multilateral food trust fund administered by the World Bank to encourage other donors to do the same. While other donors have made commitments, they are waiting for the United States to appropriate funds before making their contributions. By contrast, some analysts argue that the United States cedes control over its aid programs when a multilateral approach is used. First, critics argue, it is difficult for donors to specify uses when funds are contributed multilaterally. If other donors are not in broad support of the U.S. aid agenda, they argue, the United States might be able to achieve its foreign policy objectives more directly by providing bilateral aid. Second, because the United States does not have veto power on MDB lending, MDBs sometimes provide assistance to countries despite strong U.S. opposition. A purely bilateral approach might ensure that no U.S. funds are used to support aid programs seen as running counter to U.S. foreign policy or national security interests. However, it might also eliminate whatever influence U.S. participation has on MDB assistance. For example, by having the option of abstaining rather than opposing a recent vote on an MDB-financed coal-fired power plant in South Africa, the United States was able to influence the negotiations to secure a better environmental outcome, including a larger energy component for the project and increased commitments from the South African government to further scale up renewable energy. A defining feature of the contemporary international development assistance is the proliferation of agencies providing development finance. While MDBs remain the primary source of multilateral development finance, over the past half-century many new sources of development finance have been created. This is especially evident in the proliferation of targeted funds such as the Global Environment Facility and the Global Fund to Fight AIDS, Tuberculosis, and Malaria (Global Fund). More than 200 international development agencies exist, according to the OECD. Given the concerns of some Members about the size of the federal budget, Congress may explore further the degree to which U.S. interests are served by enlarging the MDBs, who have expanded their mandates to include a broader range of global issues, potentially diluting their expertise. In addition to expanding the range of projects for which the banks lend, the MDBs are increasingly providing greater amounts of funding in the form of policy loans (i.e., budget support) compared to project loans. Policy-based lending accounted for almost 49% of the World Bank's total disbursements in 2009, compared to about 33% in 2008. Across the MDBs, policy-based lending accounted for up to 25% (in the case of the IDB) in 2008. Increased MDB government budget-support lending may raise oversight concerns, since measuring effectiveness is more difficult than it is for traditional MDB project loans. Congress and the Administration may also determine whether elevated MDB assistance since 2008 represents a fundamental shift in demand for MDB assistance or a short-term spike caused by the 2007–2009 economic crisis. In the case of the IMF, its resources had not kept pace with the growth of global capital flows over the past two decades. Thus, it was not prepared to meet the demand for countries seeking balance of payments support during the crisis. Increasing the resources of the MDBs would likely enable them to disburse increased amounts of money in future years without expanding their staff involved with the design and implementation of projects. Some might question, however, whether the operational efficiency of the MDBs and continued growth of their volume of lending are appropriate goals. If Members of Congress determine that MDB financing needs are temporary, short-term financing facilities, or making the GCIs temporary, might be considered rather than permanent capital increases. Members may consider the necessity of capital increases that would support higher levels of lending to emerging market countries such as Brazil, China, and India, who have access to international capital markets and large foreign exchange reserves. Critics argue that the availability of official credit, when private credit is a viable alternative, may crowd out private investment and create inefficiencies in the allocation of global capital, or divert capital away from more-needy countries that lack financial resources. In addition to their borrowing, many of these emerging economies are increasing their shares and leadership roles in the institutions, as a result of recent G-20 agreements. Others argue that the largest percentage of the global population in poverty resides in these rapidly growing economies and that access to capital is insufficient in meeting the needs of the poor. Thus, countries do not borrow from the MDBs solely for the financing but also for the technical expertise offered as a part of MDB lending projects. Furthermore, interest earned through the MDBs' market rate-lending operations supports funding for grants and concessional lending to the poorest countries. Limiting MDB market rate operations would reduce the size of MDB annual income, and may thus require higher levels of donor contributions to maintain current levels of concessional lending to the poorest countries. The MDBs provide opportunities for U.S. firms by funding projects in developing countries in a range of sectors. According to some estimates, MDB lending and grants between 2011 and 2015 could exceed $500 billion. These contracts are awarded primarily through international competitive bidding processes. However, most MDBs allow the borrowing country to give some preference to domestic firms in awarding contracts for MDB-financed projects in order to help spur development, and increasingly, more contracts are being awarded domestically, on a non-competitive basis. At current funding levels, procurement results at the World Bank amount to about $20 billion in contracts each year. Of the 20,000-30,000 contracts awarded each year, about 7,000 are reviewed by World Bank staff prior to contract award (Prior Review Contracts). Prior Review Contracts comprise the largest World Bank loans and can be used as a guide to determine the distribution of MDB contracts among member countries. Brazil, China, India, and other emerging economies are increasingly claiming a large share of MDB contracts ( Table 4 and Table 5 ). U.S. firms were awarded $93.1 million of World Bank contracts in 2010 compared to $225.2 million worth in 2000, though both years had roughly the same total value of procurement contracts signed. Since the data do not include all World Bank projects and do not identify all subcontractors, they may under-represent U.S. procurement. Given that some decline in the share of contracts won by U.S. firms appears to be evident, Members may explore reasons for the decline and consider whether additional efforts are called for to promote procurement opportunities at the MDBs. MDB-supported procurement opportunities offer U.S. companies potential export opportunities to several rapidly growing developing economies in sectors where the United States is leading and/or competitive. At the same time, several countries, including Singapore, Korea, India, Austria, and Germany, are implementing strategic and targeted efforts to increase the share of MDB contracts awarded to their firms. The Omnibus Trade and Competitiveness Act of 1988 (1988 Trade Act) requires the Secretary of Commerce to staff a part-time or full-time procurement officer at all of the MDBs to assist U.S. businesses in bidding on MDB projects. The Jobs Through Exports Act of 1992 increased the staffing requirement by directing the Secretary of Commerce to assign at least one additional full-time procurement officer at every MDB. Several of these positions are unfilled. Creating more export opportunities by supporting the GCIs, and further supporting U.S. firms in securing MDB contracts, could help toward the President's goal of doubling exports by 2015. Members of Congress may also decide to examine recent efforts to improve anti-corruption policies across the MDBs. For example, in April 2010, all of the MDBs discussed in this report agreed that a company or an individual debarred by one MDB for more than one year may, with certain exceptions, be debarred from carrying on business with all five MDBs. The anti-corruption measures at the MDBs are relatively recent. The need for anti-corruption policies became evident in the late 1990s, when scandals involving corruption became public and the activities of the MDBs were more closely scrutinized. Development specialists recognized the importance of combating corruption to achieve economic development, and in response, the MDBs began to provide technical assistance in corruption prevention and governance to member countries. They recognized that improving the anti-corruption mechanisms within their own organizations would complement governance activities in developing countries and increase development effectiveness, in addition to improving their own credibility on governance issues. Some analysts are concerned, however, that other recent MDB policies, primarily the use of country-based procurement standards rather than international best practices on procurement and a country-systems approach, may be counterproductive to the MDBs' anti-corruption efforts. The MDBs argue that country systems will strengthen national institutions in developing countries for public expenditures, whether they come from MDB funds, taxes, or other donors. On the other hand, critics note that harmonization of procedures within countries would likely come at the expense of creating a set of international best practices on procurement. The country systems approach, they argue, may lead to lower standards, weaker MDB oversight, and increased corruption of the procurement process. The Obama Administration requested that contributions to the AsDB GCI be included in the FY2011 budget, P.L. 112-10 , signed by the President on April 15, 2011, authorized to be appropriated $13.3 billion for U.S. participation in the AsDB GCI. The act also appropriated $106.59 million for the first payment toward the U.S. paid-in capital. Authorization and appropriations for the remaining GCI requests were included in the FY 2012 budget. P.L. 112-74 , which includes authorizations for U.S. participation in the IBRD, AfDB, EBRD, and IBRD replenishments, as well as appropriations for the initial contribution. In the conference report accompanying the legislation authorizing U.S. participation if the GCIs, Congress required Treasury to report to the Committees on Appropriation that substantial progress was being made on several reforms prior to any funds being disbursed. These include: reforms agreed to by the World Bank and the AfDB at the Pittsburgh G20 Summit concerning "sound finances, effective management and governance, transparency and accountability, focus or core mission, and results;" annual transfers of at least $200,000,000 from the resources of the IDB to a grant facility for Haiti; implementing best practices for the protection of whistleblowers from retaliation; requiring that candidates for budget support from the MDBs provide an assessment of reforms needed to budgetary and procurement processes to encourage transparency; increased disclosure of MDB performance and financial audits of its loan projects; and adopting policies concerning the World Bank's proposed Program for Results (P4R).
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For the first time in the history of the institutions, each of the major Multilateral Development Banks (MDBs) are simultaneously seeking increases in their capital bases to fund the continued expansion of their development lending programs. The requests come after several years of increased lending by the banks. If the increases are fully funded, the resources of the World Bank, African Development Bank (AfDB), European Bank for Reconstruction and Development (EBRD), Asian Development Bank (AsDB), and Inter-American Development Bank (IDB) would increase by between 31% and 200%. Collectively, the requested capital increases are worth around $348 billion. U.S. authorization to participate in the GCIs was provided in the FY2011 and FY2012 budget measures. Key issues regarding U.S. participation in the GCIs include: Comparative effectiveness of bilateral and multilateral aid. Compared to other advanced economies, the United States provides a smaller proportion of development assistance through multilateral organizations, such as the MDBs, than other countries. Is multilateral assistance more effective, and if so, should greater amounts of U.S. foreign aid be channeled through the MDBs by supporting the capital increases? Scope of MDB activity. The MDBs have expanded the range of activities that they engage in to include issues such as climate change and food security. Members may wish to evaluate whether the benefits of MDB engagement on these issues outweigh potential costs. Some argue that a consequence of working through the MDBs is duplication of efforts across a range of multilateral institutions, which can be costly and inefficient. Others argue that this approach leverages resources and provides common approaches. Role of emerging economic powers. Many rapidly growing economies, including Brazil, China, and India, among others, borrow from the MDBs despite having access to international capital markets and substantial holdings of foreign exchange reserves. Supporting capital increases at the MDBs would allow higher rates of lending to these quickly growing economies. Members may assess whether the development-impact of increased MDB lending to credit-worthy countries outweighs any potential crowding-out effect. At the same time, these countries are increasing their shares and leadership roles in the institutions, with important implications for the United States. U.S. bidding for MDB-funded projects. Firms located in large emerging economies are winning a larger share of MDB procurement projects. Are U.S. firms competing effectively for MDB projects? If not, since the general capital increases (GCIs) would increase the amount of MDB projects, are policy options available to better position U.S. firms to capture a larger share of MDB projects, creating additional jobs for U.S. workers? Anti-corruption policies. The MDBs have different approaches to anti-corruption measures. In procurement, for example, these range from international best practices to country-based approaches, which, some analysts argue, may increase the risk of monies being diverted for corrupt purposes. Congressional legislation on capital increases may be seen as a potential opportunity for seeking further reform.
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Since August, four major storms have directly struck or passed close to Haiti, killing hundreds and affecting hundreds of thousands of people. The storms have caused flooding in all ten of the country's departments. Tropical Storm Fay struck Haiti on August 16 while Hurricane Gustav struck on August 26 with heavy rains and winds. In the first days of September, Tropical Storm Hanna brought more torrential rain, causing floods as deep as almost ten feet in Gonaives. Hurricane Ike did not directly strike Haiti, but significantly increased water levels in areas that were already flooded. Overall, almost 500 people have died. Haiti was already experiencing a food crisis; the impact of the storms has greatly exacerbated the problem, mainly due to flooding. The storms destroyed approximately one-third of the country's rice crop. Haiti's rice crop is essentially used for domestic consumption, and reportedly is a lifeline for many Haitians. Livestock, other crops, seeds, and farm equipment were destroyed as well. The storms hit during harvest season, meaning that farmers will not have capital from this crop to reinvest in future crops. Some observers worry that additional food shortages and price increases could again lead to riots, like the ones in April of this year that killed several people and contributed to the dismissal of the Prime Minister. Nearly 70% of the internally displaced persons living in shelters in the wake of the storms were in the Department of Artibonite, known as Haiti's rice bowl. In the departmental capital of Gonaives, at least 80% of the city's 300,000 residents were affected. Nearly half of those affected by the storm are reportedly children. Almost half of the shelters across the country are located in schools. The Haitian Ministry of Education is working with international organizations to clean and rehabilitate schools and find alternative shelters. The number of internally displaced people living in shelters dropped from just over 111,000 in mid-September to an estimated 35,000 to 40,000 in mid-October. Nonetheless, some schools will share their space with displaced people until they are able to return to their homes. Moreover, many families who have lost their homes and possessions will not be able to afford school costs for their children. Even though damage to schools delayed the start of the school year by over a month, the UN World Food Program has already resumed school feeding programs throughout most of the country. Prior to the storms, the Haitian Office for Disaster Preparedness issued warnings through radio and television, although not all citizens have access to those media. After the storms, the Haitian government declared eight departments to be under a state of emergency, allowing for the release of extra funding from the national budget for relief efforts in those areas. The government is coordinating emergency response through the Civilian Protection Unit of the Ministry of the Interior. The Ministry of the Interior is coordinating the distribution of relief assistance, working with the United Nations Stabilization Mission in Haiti (MINUSTAH), the Red Cross, and a U.S. ship with hospital capability, the USS Kearsarge, all of which are providing helicopters for delivering food and water aid to remote and inaccessible areas. The Minister of Finance has lifted regulations on incoming aid for several months so that disaster relief assistance will not be subject to the usual customs delays. All government ministers were dispatched around the country to help assess needs and compose lists of assistance requirements for international donors. The U.S. Ambassador to Haiti, Janet Sanderson, issued a disaster declaration on September 2, 2008, in response to the flooding throughout the country caused by Hurricane Gustav. Subsequently, U.S. officials from the State Department, USAID, and the Department of Defense (DOD) met with Haitian President René Préval, who said that infrastructure and transportation were key priorities; many roads and bridges were washed away or heavily damaged by the storms. Préval also requested general assistance for the next six months. As of October 21, 2008, the U.S. government has either provided or pledged over $31 million in humanitarian assistance to affected Haitian populations in response to the storms. This includes: $10 million, USAID/Office of U.S. Foreign Disaster Assistance (OFDA), including support to the American Red Cross, the International Organization for Migration, the U.N. Office for the Coordination of Humanitarian Affairs (OCHA), and the Pan American Health Organization; $14 million, USAID/Food for Peace (FFP) assistance provided through the U.N. World Food Program; $5 million, USAID/Haiti assistance, re-directing regular U.S. foreign aid funding toward food and other humanitarian assistance; $2.6 million, Department of Defense assistance (helicopter transport); and (still to be determined), Department of Homeland Security, for Coast Guard transportation and logistics. USAID's OFDA also authorized the deployment of a three-member support team to Haiti to supplement a U.N. disaster team based in the city of Gonaives. The USS Kearsarge has delivered almost 2 million pounds of supplies, with supplies ferried by helicopters and boats to affected areas. OFDA has been providing assistance in disaster preparedness and mitigation, including training in disaster management, to the Caribbean since 1991. From FY2005 to FY2007, OFDA worked in conjunction with the UN Development Program to reduce the risks faced by vulnerable Haitian populations due to natural hazards. A number of observers, including some Members of Congress, are calling for significantly more assistance to help Haiti in its recovery and reconstruction efforts. Representative Maxine Waters has called for at least $300 million in appropriations in assistance for Haiti. The FY2009 continuing resolution signed into law on September 30, 2008 ( P.L. 110 - 329 ) provides not less than $100 million for hurricane relief and reconstruction assistance for Haiti and other Caribbean countries subject to prior consultation with, and the regular notification procedures of, the Committees on Appropriations. At a hearing of the House Subcommittee on the Western Hemisphere on "Hurricanes in Haiti: Disaster and Recovery" on September 23, 2008, several Members of Congress called for the Administration to grant Temporary Protected Status (TPS) to Haitians living in the United States to give Haiti time to deal with the effects of the recent hurricanes. Haiti's Ambassador to the United States, Raymond Joseph, maintains that his country is ill-prepared to receive deportees. Bureau of Western Hemisphere Affairs Deputy Assistant Secretary Kirsten Madison said the State Department had not made a recommendation, but did not wish to encourage an exodus of Haitians from the island to the U.S. by granting TPS, saying that could create another humanitarian disaster. The State Department also noted that the final decision lies with the Department of Homeland Security. Members expressed concerns that the devastation from the storms, if insufficiently addressed, could lead to famine and widespread waterborne diseases, which in turn could contribute to an increase in the number of Haitians fleeing their country. Haitian Ambassador Joseph stated at a Capitol Hill forum on September 18 that Haiti would need $400 million over the next 18 months for hurricane recovery and reconstruction, and that so far the international community had committed $145 million. It is unclear how much of the $400 million reflects short-term humanitarian needs as opposed to longer-term development needs. At the request of the Haitian government, the World Bank and other international partners are conducting a Post-Disaster Needs Assessment that will be the basis for early recovery and strategic planning for Haiti. In the aftermath of the hurricanes, the U.N. OCHA issued an international flash appeal for $108 million for Haiti's recovery. As of October 23, contributions and commitments of funds amounted to almost $25 million, while another $16.9 million has been pledged, but not yet committed, by the United States, the European Union, and 12 other countries—Canada, Japan, the United Kingdom, Switzerland, Norway, Austria, Luxembourg, Ireland, Greece, Andorra, Italy, and the Netherlands. The aid is channeled through a variety of U.N. agencies such as the Food and Agriculture Organization (FAO), the International Organization for Migration (IOM), U.N. Development Program (UNDP), and the United Nations Children's Fund (UNICEF). The U.S. contribution equals 42.8% of that funding. MINUSTAH is also helping to coordinate disaster assistance, providing support for relief deliveries, and has been involved in rescuing Haitians from the floods. In addition to assistance contributed to the flash appeal, OCHA reports that another $25 million in humanitarian assistance has been pledged or provided by the United States and other countries and international organizations. P.L. 110 - 329 ( H.R. 2638 ). Consolidated Security, Disaster Assistance, and Continuing Appropriations Act, 2009. Provides not less than $100 million for hurricane relief and reconstruction assistance for Haiti and other Caribbean countries subject to prior consultation with, and the regular notification procedures of, the Committees on Appropriations. Introduced June 8, 2007, signed into law September 30, 2008. H.R. 522 (Hastings). Would require the Secretary of Homeland Security to designate Haiti as a country whose qualifying nationals may be eligible for temporary protected status for an initial 18-month period. Introduced January17, 2007, referred to House Judiciary Committee's Subcommittee on Immigration, Citizenship, Refugees, Border Security, and International Law February2, 2007. H.Con.Res. 438 (Lee). Expressing the sense of Congress with regard to providing humanitarian assistance to countries of the Caribbean devastated by Hurricanes Gustav and Ike and Tropical Storms Fay and Hanna. Introduced and referred to the House Committee on Foreign Affairs September 27, 2008.
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In August and September 2008, four major storms directly hit or passed close to Haiti, causing widespread devastation. As of early October, 2008, the U.S. government has either provided or pledged just over $30 million in humanitarian assistance to affected Haitian populations in response to the hurricanes in Haiti. Congress provided not less than $100 million for hurricane relief and reconstruction assistance for Haiti and other Caribbean countries in the FY2009 continuing appropriations resolution (P.L. 110-329) signed into law September 30, 2008. The Haitian government says it needs $400 million over the next 18 months for hurricane recovery and reconstruction, and that so far the international community has committed $145 million. For more information, see CRS Report RL34687, The Haitian Economy and the HOPE Act, by [author name scrubbed]; CRS Report RS22879, Haiti: Legislative Responses to the Food Crisis and Related Development Challenges, by [author name scrubbed] and [author name scrubbed]; CRS Report RS21349, U.S. Immigration Policy on Haitian Migrants, by [author name scrubbed]; and CRS Report RS20844, Temporary Protected Status: Current Immigration Policy and Issues, by [author name scrubbed] and [author name scrubbed].
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The Midwestern Disaster Tax Relief Act of 2008 ( S. 3322 / H.R. 6587 ), introduced by Senator Grassley and Representative Loebsack, provides temporary tax relief intended to assist with the recovery from the severe storms, tornadoes, and flooding that occurred during the summer of 2008 in the Midwest. The relief would be available in the presidentially declared disaster areas in Arkansas, Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, and Wisconsin, primarily in the areas determined by the President to warrant individual or individual and public assistance. The Jobs, Energy, Families, and Disaster Relief Act of 2008 ( S. 3335 ), introduced by Senator Baucus, contains some temporary tax provisions intended to assist in disaster recovery generally. Its provisions are not limited to the Midwest disaster—in general, the provisions would be effective after December 31, 2007, and apply to any federally declared disaster occurring before January 1, 2010. S. 3335 has fewer relief provisions than S. 3322 / H.R. 6587 . The ones it does contain are generally similar to those in S. 3322 / H.R. 6587 , accounting for the differences that are due to the fact that S. 3335 is not limited to the Midwest disaster. Section 2(e)(1) of the Grassley/Loebsack bill would allow affected states to issue tax-exempt bonds to finance (1) qualified activities involving residential rental projects, nonresidential real property, and public utility property located in the disaster area; and (2) below-market-rate mortgages for low- and moderate-income homebuyers whose principal residences were damaged by the disaster. Among other requirements, the bonds would have to be designated by the appropriate state authority on the basis of providing assistance to where it was most needed. Bonds would have to be issued prior to January 1, 2013, and the maximum face amount of bonds each state could issue would be capped at $1,000 multiplied by the portion of the state's population in the disaster area. The Baucus bill does not include a similar provision. Both the Grassley/Loebsack bill (§ 2(a)(1)(G), (e)(1)) and the Baucus bill (§ 504) would provide similar, although not identical, modifications to temporarily ease the restrictions on mortgage revenue bond financing under IRC § 143 for areas or taxpayers affected by the Midwest disaster or federally declared disasters, respectively. The Grassley/Loebsack bill would also allow operators of low-income residential rental projects financed by IRC § 142(d) bonds to rely on the representations of displaced individuals regarding their income qualifications so long as the tenancy began within six months of the displacement. The Baucus bill does not include a similar provision. The low-income housing tax credit in IRC § 42 allows owners of qualified residential rental property to claim a credit over a 10-year period that is based on the costs of constructing, rehabilitating, or acquiring the building attributable to low-income units. Owners are allocated the credit by a state. Each state's allocation is limited to the greater of $2,000,000 or $1.75 times its population, with both amounts adjusted for inflation (they are $2,325,000 and $2.00 for 2008). For 2009, 2010, and 2011, the Grassley/Loebsack bill (§ 2(e)(2)) would permit affected states to allocate additional amounts for use in the disaster area of up to $4.00 multiplied by the state's disaster area population. The Baucus bill has no similar provision. IRC § 168(k), as amended by the Economic Stimulus Act of 2008 ( P.L. 110-185 ), allows taxpayers who acquire certain types of property in 2008 to claim an additional depreciation amount equal to 50% of the property's adjusted basis for the year the property is placed in service. The Grassley/Loebsack bill (§ 2(e)(3)) includes a 50% bonus depreciation provision for taxpayers who suffered an economic loss due to the Midwest disaster. Among other requirements, the property would have to rehabilitate or replace property damaged by the severe weather and be similar to and located in the same county as such property. The property would have to be placed in service no later than December 31, 2011 (December 31, 2012, for nonresidential real and residential rental property). The Baucus bill has no similar provision. In general, capital expenditures must be added to the property's basis rather than being expensed (deducted in the current year). IRC § 179 provides an exception so that a business may expense the costs of certain property in the year it is placed in service. In general, the total cost of the § 179 property cannot exceed $125,000, and the deduction is decreased by one dollar for every dollar that the total cost of all property the business placed in service during the year exceeds $500,000—both numbers are adjusted for inflation and would be $128,000 and $510,000 for 2008; however, the Economic Stimulus Act of 2008 ( P.L. 110-185 ) increased the 2008 limitations to $250,000 and $800,000. IRC § 198, meanwhile, allows taxpayers to expense environmental remediation costs paid or incurred prior to January 1, 2008, for the abatement or control of hazardous substances at a qualified contaminated site. The Grassley/Loebsack bill (§ 2(e)(4)) would increase the § 179 limitations for taxpayers who suffered an economic loss due to the Midwest disaster by $100,000 and $600,000 for qualified disaster area property. Sections 2(e)(5) and (6) would extend § 198 expensing through 2010 for qualified sites and permit taxpayers to expense 50% of pre-2011 qualified clean-up costs for the removal of debris or the demolition of structures on business-related real property in the Midwest disaster area. The Baucus bill (§ 502) would permit full expensing (subject to depreciation recapture) of qualified expenditures for the abatement or control of hazardous substances released on account of a federally declared disaster, the removal of debris or the demolition of structures on business-related real property damaged by such a disaster, and the repair of business-related property damaged by such a disaster. Under IRC § 47, taxpayers rehabilitating qualified buildings may claim a credit equal to 10% of the qualifying expenditures (20% for a certified historic structure). The Grassley/Loebsack bill (§ 2(e)(7)) would increase this to 13% and 26% for expenditures made no later than December 31, 2010, to rehabilitate buildings and structures damaged by the disaster. The Baucus bill has no such provision. Under IRC §§ 172 and 56, net operating losses (NOLs) are generally carried back for two years and, for purposes of the alternative minimum tax, the NOL deduction is limited to 90% of alternative minimum taxable income. Section 2(e)(8) of the Grassley/Loebsack bill would extend the carryback period to five years and suspend the 90% limitation for qualified Midwest disaster losses. Section 503 of the Baucus bill appears intended to provide similar treatment for qualified disaster losses. Section 2(e)(9) of the Grassley/Loebsack bill would permit affected states to issue tax credit bonds to pay the principal, interest, or premiums on qualified governmental bonds or to make loans to political subdivisions to make such payments. Bondholders would claim a credit based on a credit rate and the bonds' outstanding face amount. Among other requirements, the bonds would have to be issued between December 31, 2008, and January 1, 2010, and could not have a maturity date beyond two years. The maximum amount of bonds that could be issued by states with disaster area populations of at least 2 million would be $100,000,000; the cap would be $50,000,000 for states with disaster area populations between 1 million and 2 million; and the other states could not issue any bonds. The Baucus bill has no similar provision. Under IRC § 25A, individuals with eligible tuition and related expenses may claim the Hope Scholarship or Lifetime Learning credit. The Hope credit is 100% of the first $1,000 of eligible expenses plus 50% of the next $1,000 of eligible expenses, both adjusted for inflation ($1,200 for 2008). The Lifetime Learning credit equals 20% of up to $10,000 of eligible expenses. For students attending school in the Midwest disaster area, the Grassley/Loebsack bill (§ 2(e)(10)) would allow any qualified higher education expenses to qualify for the credits, double the adjusted $1,000 limitation, and increase the 20% to 40%. The Baucus bill has no similar provision. The Grassley/Loebsack bill (§ 2(e)(11)) would exclude the value of employer-provided temporary housing, limited to $600 per month, from the employee's income and allow the employer to claim a credit equal to 30% of that amount. The employee must have had a principal residence in the disaster area and perform substantially all employment services for the employer in that area. The employer must have a trade or business in the disaster area. The provision would only apply during a six-month period. The Baucus bill has no such provision. Section 2(e)(12) of the Grassley/Loebsack bill would waive the 10% early withdrawal penalty in IRC § 72(t) on qualifying distributions made before January 1, 2010, of up to $100,000 for individuals with a principal place of abode in the Midwest disaster area who sustained an economic loss due to the disaster. The funds could be re-contributed to a qualified plan over a three-year period and receive tax-free rollover treatment. Any taxable portion of a distribution could be included in income over a three-year period. Section 505 of the Baucus bill includes a similar provision, applicable to distributions made within the 15-month period after a disaster. Section 2(e)(12) would also increase the amount that qualifying individuals could borrow from their plans without immediate tax consequences. Under IRC § 72(p), the maximum amount that may be borrowed without being treated as a taxable distribution is generally the lesser of (a) $50,000 or (b) the greater of $10,000 or 50% of the present value of the employee' nonforfeitable accrued benefit. For loans made between July 30, 2008, and December 31, 2009, the Grassley/Loebsack bill would increase this to the lesser of (1) $100,000 or (2) the greater of $10,000 or 100% of the accrued benefit's present value. Certain loan repayment dates would be extended by one year. The Baucus bill includes a similar provision, applicable to loans made within 18 months after a disaster. Under the Grassley/Loebsack bill, individuals who had received a qualifying distribution to buy or construct a principal residence in the Midwest disaster area and were unable to buy or construct the home due to the disaster could re-contribute the funds to a qualified plan without tax consequences. The distribution must have occurred during the six-month period ending on the disaster date. The Baucus bill has a similar provision for distributions received during the six-month period prior to a disaster. The Grassley/Loebsack bill (§ 2(e)(13)) would provide a credit for disaster-damaged businesses that continued to pay their employees' wages, regardless of whether they performed services. Eligible employers would be those who (1) had active businesses in the disaster area that were rendered inoperable due to damage caused by the severe weather and (2) generally employed no more than 200 employees per day during the year before the disaster. Eligible employees would be those whose principal place of employment at the time of the disaster was with the eligible employer in the disaster area. The credit would equal 40% of the employee's first $6,000 in wages paid between the date the business became inoperable and the date it resumed significant operations, but before January 1, 2009. Section 505 of the Baucus bill has a similar provision that is applicable during the four-month period after a disaster. In general, a charitable contribution deduction may not exceed a specified percentage of an individual's contribution base or a corporation's taxable income (computed with adjustments). The Grassley/Loebsack bill (§ 2(e)(14)) would allow a larger deduction for substantiated cash contributions made in 2008 to qualifying charities for Midwest disaster relief. The deduction would be allowed to the extent it did not exceed the difference between the taxpayer's contribution base/taxable income and the deduction for other charitable contributions. It would not count for purposes of the overall limitation on itemized deductions. The Baucus bill (§ 505) has a similar provision for contributions made during the 18-month period after a disaster. Under IRC § 165, individuals may deduct losses of property not connected to a trade or business if due to a casualty or theft. In addition to losses arising from actual damage done by the casualty, an individual in a presidentially-declared disaster area has a casualty loss if ordered, within 120 days of the area's designation, by a state or local government to demolish or relocate his or her home because it is unsafe due to the disaster. There is no loss to the extent an individual is reimbursed through insurance or other means. There are several limitations, including that losses are deductible only to the extent that (1) the amount of the loss from each event exceeds $100 and (2) the amount of all losses (after applying the $100 limitation) exceeds 10% of adjusted gross income (special rules apply if the taxpayer has both personal casualty losses and gains). The deduction is claimed in the year of the loss, although a loss in a presidentially-declared disaster area may be deducted in the year prior to the disaster. The Grassley/Loebsack bill (§ 2(e)(15)) would waive the $100 and 10% floors for Midwest disaster casualty losses. Section 2(b) would permit taxpayers who claimed a deduction for a principal residence casualty loss and later received reimbursement under a federal or state program to file an amended return to reduce the deduction by the amount of the reimbursement (thus, the tax benefit doctrine, which would otherwise require the taxpayer to include the reimbursement in income, would not apply). The Baucus bill (§ 501) would waive the 10% floor for net disaster losses and include the losses in the standard deduction. It would also increase the $100 floor to $500 for post-2008 taxable years, not limited to casualties that are federally declared disasters. The Grassley/Loebsack bill (§ 2(e)(16)) appears intended to allow qualifying disaster victims to compute this year's child tax and earned income credits using last year's earned income. The Baucus bill has no similar provision. Section 2(e)(17) of the Grassley/Loebsack bill would authorize the Treasury Secretary to make adjustments in the application of the tax laws for 2008 and 2009 so that temporary relocations due to the disaster would not cause taxpayers to lose dependency exemptions or child credits or to have a change of filing status. No similar provision is in the Baucus bill. The Grassley/Loebsack bill (§ 2(f)(1)) would allow individuals who housed, without charge, displaced Midwest disaster victims in their homes for at least 60 consecutive days to claim a $500 personal exemption for each person, limited to $2,000. The exemptions could be claimed in 2008 and 2009 (a person could only be claimed once by the taxpayer). Among other requirements, the displaced person's principal place of abode must have been in the disaster area. Section 505 of the Baucus bill includes a similar provision, applicable to the two years after a disaster. Under IRC § 170(i), individuals using their personal vehicles for charitable purposes may claim a deduction equal to 14 cents per mile. Section § 2(f)(2) of the Grassley/Loebsack bill would set the rate for 2008 at 70% of the standard business mileage rate (rounded to the next highest cent) for vehicles used for Midwest disaster relief. That rate is currently 58.5 cents per mile. Section 505 of the Baucus bill has a similar provision that is applicable during the 18-month period after a disaster. Section 2(f)(3) of the Grassley/Loebsack bill would exclude from a volunteer's gross income any qualifying mileage reimbursements received for the operating expenses of his or her passenger automobile from a charity helping with disaster recovery, applicable until December 31, 2008. Section 505 of the Baucus bill includes a similar provision applicable to the 18-month period following a disaster. When all or part of a debt is forgiven, the amount of the cancellation is ordinarily included in income in the year of discharge, although deferral or permanent exclusion may be available under IRC § 108. Section 2(f)(4) of the Grassley/Loebsack bill would allow affected individuals to exclude non-business debt that was forgiven by a governmental agency or certain financial institutions if the discharge occurred between the date of the disaster and January 1, 2010. The individual must have had a principal place of abode in the Midwest disaster area (if the home was in an area determined by the President to only warrant public assistance, then he or she must also have suffered an economic loss due to the severe weather). The Baucus bill (§ 505) has a similar provision for discharges occurring in the 18-month period after a disaster. An involuntary conversion occurs when property is converted to cash or other property because of, for example, its complete or partial destruction. The taxpayer has a gain if the cash or property received is worth more than the basis of the converted property. Under IRC § 1033, the gain is not immediately taxable if the property is converted to property that is similar or related in service or use. However, if the property is converted to cash or dissimilar property, the taxpayer must recognize any gain unless he or she purchases similar property within a certain time period, in which case he or she may elect to only recognize gain to the extent that the amount realized from the involuntary conversion exceeds the cost of the new property. The time period generally ends two years after the close of the first taxable year in which any gain is realized, but is increased in certain situations (e.g., to three years if the converted property is business real property and four years if it is the taxpayer's principal residence or its contents that were involuntarily converted due to a presidentially-declared disaster). The Grassley/Loebsack bill (§ 2(f)(5)) would increase the time period to five years for Midwest disaster area property that was converted due to the severe weather so long as substantially all of the use of the replacement property is in the disaster area. The Baucus bill (§§ 505, 501) has a similar provision for federally declared disasters and clarifies existing law regarding property damaged by such disasters. Under IRC § 170(e)(3), while donors of inventory may claim a charitable deduction equal to their basis in the inventory (typically its cost), C corporations may claim an enhanced deduction equal to the lesser of (1) basis plus 50% of the property's appreciated value or (2) two times basis. A special rule permitted other businesses that donated wholesome food inventory to claim the enhanced deduction if donated no later than December 31, 2007. Another special rule allowed C corporations to claim an enhanced deduction for donations of book inventory to public schools if made no later than December 31, 2007. The Grassley/Loebsack bill (§§ 3, 4) would extend the two inventory provisions until December 31, 2009, and create a special temporary rule for food donations made by qualified farmers and ranchers. The Baucus bill (§§ 236, 237) would extend the inventory provisions through 2008 and has the special rule. Both the Grassley/Loebsack bill (§ 5) and the Baucus bill (§ 512) would require that § 501(c)(3) organizations provide information regarding their disaster relief activities and contributions on the annual information return (Form 990). The provisions would be applicable to returns due after December 31, 2008.
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The Midwestern Disaster Tax Relief Act of 2008 (S. 3322 and H.R. 6587) is intended to assist with the recovery from the severe weather that affected the Midwest during the summer of 2008. The Jobs, Energy, Families, and Disaster Relief Act of 2008 (S. 3335) includes some similar provisions, but these are not limited to the Midwest disaster. The disaster relief in the three bills is similar to that provided to assist with the recovery from the 2005 hurricanes and the 2007 Kansas tornadoes. This report broadly discusses the disaster relief provisions in S. 3322/H.R. 6587 and S. 3335.
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Democracy promotion has been a long-standing element of U.S. foreign policy. In recent years, however, it has become a primary component. Under the George W. Bush Administration, efforts to spread freedom to Iraq and around the world have been viewed as a tool to end tyranny and fight terrorism, as the way to promote stability in troubled regions, and as a mechanism to increase prosperity in poor countries. The democracy promotion ideal continues to be under close scrutiny, particularly with recent unsettled election events in Kenya and Pakistan, and with a landslide victory in Taiwan for the opposition party that supports closer ties with Mainland China. While some observers believe that spreading democracy is a key foreign policy priority, others argue that democracy promotion is but one of a number of U.S. strategic objectives and not necessarily the overriding one. The issue among Members of Congress, presidential hopefuls, and in the wider foreign policy community may not be whether democracy promotion is worthwhile, but rather when, where, and how to apply it effectively. This report provides background information on democracy promotion policy and activities, discusses the difficulties involved in such efforts, and presents perspectives on the benefits and costs of such efforts. It also provides information on congressional efforts to assist other parliaments in democratizing countries. This report will be updated as warranted. Since World War I, when the United States fought "to make the world safe for democracy," administrations have been interested, to varying degrees, in promoting democracy around the world. Recent Presidents Reagan, George H.W. Bush, and Clinton viewed democracy promotion as an important component of their foreign policy efforts. More broadly, the current Bush Administration has viewed democracy promotion as an instrument for promoting peace and combatting terrorism. He identified it as a central focus to the "war on terrorism" and national security in his second inauguration address on January 20, 2005: Now it is the urgent requirement of our nation's security.... So it is the policy of the United States to seek and support the growth of democratic movements and institutions in every nation and culture, with the ultimate goal of ending tyranny in our world. Also in January 2005, Dr. Condoleezza Rice before the Senate Foreign Relations Committee listed three top priorities for her administration's diplomacy: First, we will unite the community of democracies in building an international system that is based on shared values and the rule of law. Second, we will strengthen the community of democracies to fight the threats to our common security and alleviate the hopelessness that feeds terror. And third, we will spread freedom and democracy throughout the globe. That is the mission that President Bush has set for America in the world and is the great mission of American diplomacy today. One of President George W. Bush's stated reasons for starting the war in Iraq was to bring democracy to that country: "[We] are committed to a strategic goal of a free Iraq that is democratic, that can govern itself, defend itself and sustain itself." The Bush Administration continued to stress democracy promotion as a key element in its foreign policy when Secretary of State Rice announced her transformational diplomacy plan in January 2006. The Secretary's objective of transformational diplomacy is to "work with our many partners around the world to build and sustain democratic, well-governed states that will respond to the needs of their people and conduct themselves responsibly in the international system." This goal was restated in the State Department's October 2006 briefing on the Secretary's foreign assistance reform. Increasingly, others are voicing opinions about spreading democracy as a key component of U.S. foreign policy. In a recent survey, Americans weighed in on U.S. democracy promotion efforts. In the 2007 poll, American voters reacted to various strategies to fight terrorism. Options included "make America energy independent; use diplomacy to bring our allies into the struggle; use military force to defeat terrorists and the states that harbor them; provide economic assistance to poor countries to prevent them from becoming terrorist havens; and promote freedom and democracy in the Islamic world." The least-supported option among respondents was "to promote freedom and democracy in the Islamic world." The same poll asked participants to agree or disagree with the following statement: "The U.S. cannot impose democracy by force on another country." Eighty-three percent agreed with the statement and 15% disagreed. Similar sentiments have been expressed by people in Arab countries. In 2007, Dr. James J. Zogby, President of the Arab American Institute, testified before Congress that recent years of polling among Arab populations indicates that "even [Arabs] who value freedom and democracy did not want our [U.S.] assistance in promoting democracy in their country." Lawmakers and presidential candidates will likely address their views on democracy promotion as they debate U.S. foreign policy issues in the coming months. Some candidates may feel compelled to reject democracy promotion entirely, in reaction to the policy of a controversial President who elevated it to a high level of importance in his foreign policy. However, a more important question to be answered may be how to determine when, where, and how democracy promotion should be applied to be most effective. Dating back to about 500 B.C.E., democracies existed in both Greece and Italy. The term democracy comes from the Greek words demos , the people, and craits , to rule. Today, democracy is an abstract term that is difficult to define and can have different meanings, depending on the speaker and context. In the most common understanding, democracy generally refers to a political system with certain minimum elements: effective participation by the people (either directly or through representation) under a constitution, respect for human rights, and political equality before the law for both minorities and the majority. The lack of a clear definition of democracy and a comprehensive understanding of its basic elements may have created multiple problems for U.S. policy making, according to some. Arguably, the lack of clear definition has hampered the formulation of democracy promotion policy and effective prioritizing of democracy promotion activities over the years. Also the lack of definition can complicate coordination of democracy programs and the assessment of U.S. government activities and funding. Further, without a consensus on the definition of democracy, what criteria will determine when a country has attained an acceptable level of democratic reform and no longer needs American assistance? According to Richard Haass, former State Department official and current President of the Council on Foreign Relations, democracy is more than elections; it is a diffusion of power where no group within a society is excluded from full participation in political life. Democracy requires checks and balances within the government, among various levels of government (national, state and local), and between government and society. Elements such as independent media, unions, political parties, schools, and democratic rights for women provide checks on government power over society. Individual rights such as freedom of speech and worship need to be protected. Furthermore, a democratic government must face the check of electable opposition and leaders must hand over power peacefully. One scholar, Laurence Whitehead, discusses the various academic attempts to define democracy, pointing out that the definition has varied over time, and among cultures (with even subtle differences in British and American understandings of key elements of democracy), and arguing that the "outer boundaries" of the concept of democracy are "to a significant ... extent malleable and negotiable.... " "Democracy has some indispensable components, without which the concept would be vacuous, but these indispensable elements are skeletal and can in any case be arranged in various possible configurations," Whitehead posits. He argues that democracy requires the minimal procedural conditions (safeguarding free and fair elections, freedom of speech and association, and the integrity of elective office) as described by other scholars. Yet, he cautions, these minimal procedures only establish "contingently and for the present period ... a rather coherent and broad-based exposition of the predominant view." He notes that the meaning of democracy "is likely to remain contested, and even to some extent unstable, as current processes of democratization unfold." "Democratization," he thus writes, "is best understood as a complex, long-term, dynamic, and open-ended process. It consists of progress towards a more rule-based, more consensual and more participatory type of politics. Like 'democracy' it necessarily involves a combination of fact and value, and so contains internal tensions." Lack of a generally accepted view of democracy is evident in multilateral organizations, such as Freedom House and the Community of Democracies, dedicated to the cause of good governance. Freedom House, an independent nongovernmental organization (NGO) founded in the 1940s, supports freedom worldwide, rating countries' level of freedom rather than defining or measuring democracy. Freedom House rates countries as free, partly free, or not free via numerical assessments of a country's political rights and civil liberties. Political rights enable people to participate freely in the political process, including the right to vote freely for distinct alternatives in legitimate elections, compete for public office, join political parties and organizations, and elect representatives who have a decisive impact on public policies and are accountable to the electorate. Civil liberties allow for the freedoms of expression and belief, associational and organizational rights, rule of law, and personal autonomy without interference from the state. Freedom House states that it is not enough that a country has elections to be considered free; it must have a competitive multi-party political system, universal adult suffrage for all citizens, regularly contested elections with secret ballots, and public access to major political parties. According to the Freedom House mission statement, "Freedom is possible only in democratic political systems in which the governments are accountable to their own people, the rule of law prevails; and freedoms of expression, association, belief and respect for the rights of minorities and women are guaranteed." The Community of Democracies consists of over 100 nations that first met in 2000 to form a coalition of countries that are committed to promoting and strengthening democracies worldwide. This organization does not define democracy, but does provide criteria for participation in the Community. (See Appendix A for its stated criteria.) Congress has demonstrated its concern for the lack of a consistent definition for democracy. The Senate Foreign Operations Appropriation Committee Report for FY2006 ( S.Rept. 109 - 96 / H.R. 3057 ) stated, "The Committee remains concerned that the State Department and USAID do not share a common definition of a democracy program. For the purposes of this Act, 'a democracy program' means technical assistance and other support to strengthen the capacity of democratic political parties, governments, non-governmental institutions, and/or citizens, in order to support the development of democratic states, institutions and practices that are responsive and accountable to citizens." The following year, the Senate Appropriations Committee Report for FY2007 ( S.Rept. 109 - 277 / H.R. 5522 ) asserted, "to ensure a common understanding of democracy programs among United States Government agencies, the Committee defines in the act 'the promotion of democracy' to include programs that support good governance, human rights, independent media, and the rule of law, and otherwise strengthen the capacity of democratic political parties, NGOs, and citizens to support the development of democratic states, institutions and practices that are responsible and accountable to citizens." Further complicating defining democracy are the various designations for differing types of systems that call themselves democracies. While numerous (and at times overlapping) labels exist, typical references among the various terms for limited democracies include electoral democracies, liberal democracies, pseudo-democracies, and semi-authoritarian governments. Adding confusion to the debate on democracy promotion is whether recipients of democracy promotion assistance attain what is judged to be a complete or incomplete democratic transition. Electoral democracy, according to Larry Diamond, is a civilian, constitutional system in which the legislative and chief executive offices are filled through regular competitive multiparty elections with universal suffrage. Electoral process is a minimum requirement for a government to be referred to as a democracy. Most experts agree, however, that elections are not enough. Liberal democracy has all of what an electoral democracy has plus a constitution that directs government institutions, rule of law, and civil liberties equally to all citizens, including the state and its agents. It also has an independent judiciary that protects liberties. Freedom House uses this set of requirements to describe its category of "free." Pseudo-democracies, non-democracies, and illiberal democracies are categories of governments that are minimally democratic. They are marginally different from authoritarian regimes as they contain some aspects of electoral democracies such as the existence of multiple parties, but hold little real competition for power among those political parties. Pseudo-democracies include "'hegemonic party systems' in which a relatively institutionalized ruling party makes extensive use of coercion, patronage, media control, and other features to deny formally legal opposition parties a fair and authentic chance to compete for power." Non-democracies include semi-authoritarian and authoritarian regimes. These types of governments may have a certain level of freedom or may even appear to hold elections. Conversely, however, they may be totalitarian regimes—rigidly closed governments. Illiberal democracies have free and fair elections but do not provide civil liberties and political rights to the masses. Some critics and democracy experts argue that past democracy promotion efforts were focused too heavily on free elections, ignoring some of the necessary underpinnings of democracy, such as tolerance for minority views, rule of law, and freedom of the press. When U.S. administrations have encouraged democratic reform, they have claimed that benefits for the country, its neighbors, the United States, and the world will result. Many experts believe that extending democracy can reduce terrorism while encouraging global political stability and economic prosperity. In its 2006 National Strategy for Combating Terrorism , the George W. Bush Administration cites democracy promotion as a long-term solution for winning the War on Terror. In contrast, others claim that, in some instances, promoting democracy can be a destabilizing factor in a country, as well as its region, and have documented a backlash to democracy promotion, including restrictions on freedom in some countries where democracy promotion has taken place. The benefits and costs of democracy promotion may vary, depending on the circumstances in which the programs are carried out. For example, costs could be starkly different if democracy is militarily imposed on a country as opposed to the country itself taking the initiative. On the other hand, some scholars believe that democracy promotion can succeed even in seemingly inhospitable environments. While Whitehead points out the difficulties of achieving democracy, he also notes the widespread aspirations for democracy. Comparative evidence, he states, "is clear that in a surprisingly wide range of countries and regions ... both elite and popular opinion can be energized" by the democracy promotion programs of the established powers of the post-war international system. "The desire to participate can generate democratizing aspirations that extend beyond the boundaries of any single nation, and that may drive cumulative long-term change even in the face of intervening disappointments and distortions." "Durable democracies," he concludes, "can be regarded as regimes that have slowly evolved under pressure from their citizens, and that have therefore been adapted both to the structural realities and to the social expectations of the societies in which they have become established." A common rationale offered by proponents of democracy promotion, including former Secretary of State Madeleine Albright and current Secretary of State Condoleezza Rice, is that democracies do not go to war with one another. This is sometimes referred to as the democratic peace theory. Experts point to European countries, the United States, Canada, and Mexico as present-day examples. According to President Clinton's National Security Strategy of Engagement and Enlargement : "Democracies create free markets that offer economic opportunity, make for more reliable trading partners, and are far less likely to wage war on one another." Some have refined this democracy peace theory by distinguishing between mature democracies and those in transition, suggesting that mature democracies do not fight wars with each other, but that countries transitioning toward democracy are more prone to being attacked (because of weak governmental institutions) or being aggressive toward others. States that made transitions from an autocracy toward early stages of democracy and were involved in hostilities soon after include France in the mid-1800s under Napoleon III, Prussia/Germany under Bismarck (1870-1890), Chile shortly before the War of the Pacific in 1879, Serbia's multiparty constitutional monarchy before the Balkan Wars of the late 20 th Century, and Pakistan's military-guided pseudo-democracy before its wars with India in 1965 and 1971. The George W. Bush Administration asserts that democracy promotion is a long-term antidote to terrorism. The Administration's Strategy for Winning the War on Terror asserts that inequality in political participation and access to wealth resources in a country, lack of freedom of speech, and poor education all breed volatility. By promoting basic human rights, freedoms of speech, religion, assembly, association and press, and by maintaining order within their borders and providing an independent justice system, effective democracies can defeat terrorism in the long run, according to the Bush White House. Another reason given to encourage democracies (although debated by some experts) is the belief that democracies promote economic prosperity. From this perspective, as the rule of law leads to a more stable society and as equal economic opportunity for all helps to spur economic activity, economic growth, particularly of per capita income, is likely to follow. In addition, a democracy under this scenario may be more likely to be viewed by other countries as a good trading partner and by outside investors as a more stable environment for investment, according to some experts. Moreover, countries that have developed as stable democracies are viewed as being more likely to honor treaties, according to some experts. According to some critics, pushing democracy promotion as a primary objective of U.S. national security and foreign policy has reduced support, and generated a skepticism around the world, for democracy promotion activities. According to one study: "[T]he rhetorical conflation by the Bush Administration and its allies of the war in Iraq and democracy promotion has muddied the meaning of the democracy project, diminishing support for it at home and abroad.... Some of those opposed to the invasion of Iraq, Americans and others, appear to have been alienated from democracy promotion more generally and this is to be regretted." While most U.S. democracy promotion does not involve the military, the high military and opportunity cost of some activities currently associated with democracy promotion is criticized by many observers, especially when democracy is imposed by outsiders rather than initiated by local citizens. Democracy promotion expenditures compete with domestic spending priorities. Critics note that using the various tools to promote democracy abroad—foreign aid, military intervention, diplomacy, and public diplomacy—can be very expensive and may provide little assurance that real long-term gains will be made. They add that it involves a high probability of sustaining costly long-term nation-building programs down the road. At some point, Americans could view the opportunity cost of spending these funds overseas rather than on domestic programs or other pressing global concerns, such as infectious disease and extreme poverty, as being too great. Another concern about democracy promotion is that it can have a destabilizing effect on an entire region. A 2005 Harvard Study concluded that "[Our] research shows that incomplete democratic transitions—those that get stalled before reaching the stage of full democracy—increase the chance of involvement in international war in countries where governmental institutions are weak at the outset of the transition." At times, the region can become unstable because the transitioning country initiates cross-border attacks, or may be the victim of these attacks, particularly if it has weak democratic institutions or a weak military. While many democracy promotion proponents assert that democracies "don't war with each other," a critic on the democracy peace theory, Joanne Gowa of Princeton, contends that this theory has more to do with the alignment of interests and the bipolar balance in the world after World War II than democracy/peace characteristics that many today claim exist. She says that democratic peace is a Cold War phenomenon; that is, the available data show that democratic peace is limited to the years between 1946 and 1980. She additionally points out that there are nondemocracies that do not war with each other and may be able to constrain their leaders from embarking on military actions abroad about as effectively as democracies. Some view democracy programs as inappropriately interfering in the domestic politics of foreign countries, often producing a backlash (sometimes citing Russia) against the organizations—both foreign and domestic—that carry them out. In recent years, the United States has invested effort and money in democracy promotion in Russia, Eastern Europe, and the Middle East. The recent backlash against democratic reform in Russia, the elections of anti-American governments in the Palestinian Territories, and the rise to elected office of Hezbollah in Lebanon have caused some to question the value of U.S. democracy promotion investments. U.S. government and NGO assistance for civil society strengthening also can lead to human rights repercussions, triggering some governments to react by clamping down on NGO activities and on the local citizens. Nevertheless, a 2006 USAID-commissioned study concluded that U.S. democracy and governance assistance does have a positive effect on democracy growth worldwide. A perfect democracy where all citizens have equal say in their government and where the government is responsive equally to each of its citizens does not exist. Just as democracies can evolve and grow more democratic, so too can they devolve and become abusive, corrupt, unresponsive and unaccountable to their population. Moreover, populations can become disinterested in working to maintain a democracy. At what point can a country be declared a successful democracy? A small number of successful transitions to democracy that began in the 1980s and that have endured provide promise and hope for the success of ongoing and future efforts. For example, four transitions—Chile, the Philippines, Poland, and South Africa—are often cited as full successes, the first two of which were transitions from authoritarian regimes, the third from a communist regime, and the last from a racial apartheid. Other successful cases are sometimes characterized as democracies still tainted by their state corporativist legacies, for instance Taiwan and South Korea. These and other, perhaps less long-standing, examples—for instance, Mozambique and Mali—illustrate the variety of circumstances from which democracy can emerge. In addition, several transitions from conflict have been recently viewed by some experts as demonstrating a fair degree of success (i.e., Algeria, Bosnia, El Salvador, Liberia, Serbia, and Sierra Leone), although interpretations differ depending on the factors emphasized. Despite the successes, democratization has proved to be a highly uncertain venture. One recent study showed that only 23% of transitions from authoritarian governments over the three decades from 1972 to 2003 resulted in democratic governments, while the great majority (77%) resulted in another authoritarian regime. Often, as in the cases listed above as demonstrating some success, transitions are incomplete and subject to backsliding under adverse political and economic strains. Indeed, there are several countries where backsliding has been notable, including Russia and countries in Central Asia. December 2007 post-election violence in Kenya also demonstrates backsliding. There is some evidence that democratization across the globe has slowed or stagnated over the past decade, and that many countries "in transition" are now resisting international democratization efforts. The United States provides democracy assistance to many countries in a variety of circumstances and with mixed degrees of success. Analysts categorize country circumstances and affects of assistance in different ways. Generally, analysts have viewed U.S. democracy aid as facilitating transitions either from authoritarian or communist rule, as in Latin America and Central Europe, or from conflict, as in Bosnia and African nations such as Sierra Leone and Liberia. The range of U.S. democracy promotion activities and programs also varies greatly, from assistance for elections to aid in developing institutions and to funding of civil society groups. (These types of assistance are discussed below.) Thus far, there is little agreement among experts and practitioners on the circumstances in which democracy promotion success may be achieved; the appropriate emphasis, sequencing, and mix of programs to achieve it; and the time frame necessary for an enduring democracy to take hold. Beyond the lack of consensus on what programs work best in certain circumstances, the countries themselves have obstacles preventing their success in attaining a democratic government. Many interests and emotions come into play during such political transitions. Thomas Carothers of the Carnegie Endowment for International Peace warns of some fundamental impediments: "The truth that politics involves harshly competing interests, bitter power struggles, and fundamentally conflicting values—not to mention greed, stupidity, and hatred—is downplayed until it asserts itself, unwanted, at some later stage." Generally, post-conflict situations are considered more difficult and the success rate is considered lower, although even where transitions have been seen as relatively smooth and successful, as in Central Europe, recent events suggest that democratic change in post-authoritarian circumstances can be difficult. Backsliding in some countries, such as Kenya, increases the difficulty of determining not only when success has been achieved, but consolidating lessons learned to refine the means of achieving success. The view that democracy would be achieved if political leaders could be persuaded to govern democratically, or when reasonably free and fair elections are held, has given way to a range of other conditions that must be met for a country to be considered a sustainable democracy. The idea that elections are a sufficient measure of success was discarded as analysts realized that this measure "ignores the degree to which multiparty elections (even if they are competitive and uncertain in outcome) may exclude significant portions of the population from contesting for power or advancing and defending their interests, or may leave significant arenas of decision making beyond the control of elected officials." Subsequently, two other means to establish a democracy have become recognized as essential, although opinion is divided as to which is the more important. One is the promotion of strong democratic institutions. Diamond argues that the political institutionalization—the establishment of "capable, complex, coherent and responsive" formal institutions of democracy is the "single most important and urgent factor in the consolidation of democracy.... " "If it is a liberal democracy that we have in mind, then the political system must also provide for a rule of law, and rigorously protect the right of individuals and groups to speak, publish, assemble, demonstrate, lobby, and organize." He lists a full range of institutions (i.e, "political parties, legislatures, judicial systems, local government, and the bureaucratic structures of the state more generally"). Carothers points to "troubled political parties" as an "ubiquitous institutional deficiency" in "the global landscape of attempted democratization," examines their problems, and suggests new approaches to political party assistance. Democracy assistance efforts may well face a wide range of impediments to the establishment of viable institutions, however. According to Carothers, those promoting transitions may often encounter "entrenched concentrations of political power ... deeply rooted habits of patronage and corruption ... mutually hostile socioeconomic or ethnic groups ..." (i.e., the underlying interests and power relationships that are most often resistant to change). He suggests that democracy assistance programs will be more effective by "building the underlying interests and power relationships into [them]," but warns that effective programs "require much deeper knowledge about the recipient society than most aid providers have or want to take the trouble to acquire." The other means to promoting democracy is the creation of a vibrant civil society, which many argue is the sine qua non for a functioning democracy. Karatnycky views "an active and dynamic civil society" as "the crucial agent in ensuring a durable, democratic outcome.... [T]he evidence from dozens of post-conflict and post-authoritarian transitions shows that the best way for advanced democracies to increase the chances for successful support of democratic openings is by maximizing the resources devoted to the development of civic nonviolent forces." In a study published in 2002, he cited East Timor as a "case of international intervention where it appears that things are going right" with major credit because of the international community's "major investment ... for independent civil life, which bodes well for the future." Reinforcing his judgment on the importance of civil society is his view that "civic empowerment appears to be more significant in determining democratic outcomes than whether or not a society suffered wrenching violence." Although some experts, such as Carothers and Diamond, believe that political institutionalization is more critical, Diamond points to civil society as promoting not only a transition to democracy, but also its "deepening" and consolidation once democracy is established. While in Diamond's view, civil society does not play the central role initially, "the more active, pluralistic, resourceful, institutionalized, and internally democratic civil society is ... the more likely democracy will be to emerge and endure." A lack of funding is often viewed as the most significant obstacle for the creation of civil society non-governmental organizations in developing and even middle-income countries. Many of these countries, including the upper-middle-income countries such as Chile and Argentina where international donors are likely to withdraw support, are "weak in the social capital and public-spiritedness which enable civil society organizations to raise substantial funds from the private sectors of their own countries," according to Diamond. Without help from abroad, the only recourse for such organizations is to turn to the state for funding, which creates its own problems. The importance of any one of these three means to democracy is a subjective judgment, as analysts' opinions can differ and may well vary by type and even over time. In a comparative study, Karatnycky views two countries torn by conflict in the 1980s (i.e., Nicaragua and El Salvador) as two success stories, which are "now relatively stable democracies with competitive multiparty systems." Although he attributes success to strengthening of democratic civil society in Nicaragua and to centrist and reform movements in El Salvador that helped build "vibrant civic sectors," Karatnycky also judges another factor as important (i.e., that both countries had multiparty electoral structures during the periods of conflict that were conducive to the use of elections as vehicles for eventual national reconciliation). Democracy promotion is a highly uncertain art. In an era of constrained resources, the policy and budgetary implications of identifying the most appropriate modes and settings for democracy assistance, and the means to success, can be profound. Even basic concepts are far from settled. Many analysts, for instance, view transitions from conflict as a much greater challenge than the transition from authoritarian regimes. While transitions from authoritarian and communist regimes involve creating an entirely new political order, and in communist regimes in particular a new economic order, post-conflict transitions involve overcoming bitterly divided societies and economic devastation. Many analysts suggest that post-conflict settings have special needs, especially because ethnic loyalties and divisions may complicate the implementation of peace settlements. For instance, "the danger of holding elections too early in a peace process, the need to blend them with broader negotiations setting the political rules, and the importance of avoiding winner-take-all scenarios" are important considerations in post-conflict transitions, according to Carothers, who argues that democracy promotion should be supplemented by other efforts. "Aid providers are also focusing on reconciliation as an essential element of democratization in such situations, an element that should be supported by aid efforts that consciously combine democracy and conflict resolution methodologies." Some analysts suggest that success and difficulties in democracy promotion in post-conflict settings can vary by the nature of the conflict, however. "Success in such settings tends to be found in situations where the conflict is based on politics rather than on ethnic or religious differences," according Karatnycky, who cites El Salvador and Nicaragua as two successes of the former sort. In addition to the widespread view of ethnic differences as an impediment to democracy building, most analysts believe that democracy is more likely to succeed in areas with previous experience in and cultures adapted to democracy. "It is clear that countries with no history of democracy, with desperate economic conditions and powerful internal divisions are having a much harder time making democracy work than countries with some pluralistic traditions, a growing economy, and a cohesive social and cultural makeup," according to Carothers. "Democracy promoters are just beginning to relate democracy aid to the full range of factors bearing on democracy beyond the political institutions and immediate problems of political life" including economic conditions, educational levels, historical traditions, and social and cultural divisions. Democracy promoters are gaining "an appreciation of the varied political paths, each requiring different approaches for democracy aid." Other analysts, however, discount ethnic differences and cultural factors as a special impediment to democracy promotion. A 2003 RAND study on nation-building concluded that "it is the level of effort the United States and the international community put into the democratic transitions of Germany, Japan, Bosnia, and Kosovo that led to relative success versus Somalia, Haiti, and Afghanistan, not the latter's levels of Western culture, economic development, or cultural homogeneity." "Nation-building ... is a time- and resource-consuming effort," the authors contend. "The United States and its allies have put 25 times more money and 50 times more troops, on a per capita basis, into postconflict Kosovo than into postconflict Afghanistan. This higher level of input accounts in significant measure for the higher level of output measured in the development of democratic institutions and economic growth." The RAND analysts argue that democracy promotion efforts may succeed in spite of specific difficulties: "The spread of democracy in Latin America, Asia, and parts of Africa suggests that this form of government is not unique to Western culture or to advanced industrial economies: Democracy can, indeed, take root in circumstances where neither exists." Differences in expectations and opinion regarding the circumstances and causes of success may reflect the time frame, as well as factors examined. Bosnia-Herzegovina is a prime example of the many lenses through which a transition can be viewed and the factors that come into play in bringing about success. For instance, in a study published in 2002, Karatnycky views democracy promotion in Bosnia, an ethnically divided country, as unpromising, and faulted the 1995 Dayton Accord that ended the civil conflict there as freezing the country "in an ethno-political deadlock." On the other hand, the RAND study, published a year later, views Bosnia as achieving "a number of important successes," including helping to "ensure a united, multiethnic Bosnia." It cites this outcome as evidence for its conclusion that ethnic divisions and a lack of democratic antecedents and democratic culture are not necessarily impediments to a transition to democracy. In addition to the level of international effort that the study pointed to, Bosnia's geographic "neighborhood" may contribute to its relative success. Some analysts have cited the prospect and requirements of European Union (EU) and the North Atlantic Treaty Organization (NATO) membership as encouraging democratization in the Balkans and Central Europe, and some believe that Bosnia's proximity to, and the prospect of membership in, the European Union is an important incentive to democratization there. Actual measurement of the effect of democracy promotion projects on democratization is, in the words of the National Endowment for Democracy (NED), "an overwhelming, if not impossible, task." In a March 2006 report to Congress, the NED pointed out that success could have many definitions, ranging from "whether the democratization of a country was the result of efforts made by a particular action or set of actions to whether a single action moved forward one building block within a much larger democratization effort." NED notes that it does not believe "that democratic progress can be quantified in any meaningful way," and even if it were possible to reliably assess outcomes quantitatively, the cost would be prohibitive. Even qualitative measures can be misleading, according to the NED report, if they do not take into account a wide variety of criteria on a case-by-case basis. Among other factors, even qualitative assessments must take into account whether a case is high-risk, whether sponsored groups operate under limiting or deteriorating conditions, and whether projects are sponsored as "long-term investments" in countries where democratization is not expected to occur for many years. Measuring the effects of democracy efforts as a whole, however necessary, can be even more problematic. In an appendix to the 2006 NED report to Congress, Stanford University's Michael McFaul points to the need for a comprehensive assessment of the global results of democracy promotion and suggests a detailed project design for such a study. The lack of such an assessment, as well as a lack of derivative materials for practitioners, is, in his judgment, an important policy problem: Currently, there is a scarcity of literature to inform and guide the decisions of senior policymakers.... Every day, literally tens of thousands of people in the democracy promotion business go to work without training manuals or blueprints in hand. Even published case studies of previous successes are hard to find in the public domain, which means that democracy assistance efforts are often reinventing the wheel or making it up as they go along, as was on vivid display in both Afghanistan and Iraq. Even basic educational materials for students seeking to specialize in democracy promotion do not exist. For years, the U.S. government has supported numerous bilateral and multilateral activities that promote democracy around the world. Both the executive and congressional branches of government are involved. The Bush Administration has been heavily invested in promoting democracy to other countries. A theme in Secretary Rice's Transformational Diplomacy, announced in January 2006, is her plan to reform U.S. diplomacy and foreign assistance activities with a key objective of promoting democracy in other countries. Specific executive branch bilateral government activities that support democracy reform include providing aid to support election procedures and good governance practices, assisting in building the legal system, assisting in military and police training, and teaching the importance of a free press. Public diplomacy programs such as U.S. international broadcasting, exchanges, and international information programs promote democracies overseas by showcasing American democracy and culture. Some exchanges provide foreign participants with training and experience in broadcast or print media techniques. The Millennium Challenge Account (MCA), a foreign assistance program proposed by President Bush in 2002 and authorized by Congress in 2004, was designed to provide foreign aid to countries that make progress toward democratic and economic reform. The Department of State is considered to be the lead policy agency for democracy promotion activities; others involved with democracy promotion include the U.S. Agency for International Development (USAID), which usually takes the lead on implementation, as well as the Departments of Defense and Justice, and the Broadcasting Board of Governors. In addition, numerous NGOs, including the National Endowment for Democracy (NED) and The Asia Foundation, are fully involved in democracy promotion abroad. They receive congressionally appropriated funds that are passed to them through the Department of State's budget. U.S. government funding for democracy programs is primarily within the State Department/Foreign Operations budget. Referred to as the Governing Justly and Democratically strategic objective, this funding is allocated by account and by region. (See Table 1 below.) Governing Justly and Democratically includes four elements: Rule of Law and Human Rights. Funding under this heading supports constitutions, laws and legal systems, justice systems, judicial independence, and human rights. Good Governance. Funding under this supports legislative functions and processes, public sector executive functions, security sector governance, anti-corruption reforms, local governance, and decentralization. Political Competition and Consensus-Building. This category supports elections and political processes, political parties, and consensus-building processes. Civil Society. Funding focuses on media freedom, freedom of information, and civic participation. In addition to funds for Governing Justly and Democratically , the Department of State budget contains funds that are transferred to the National Endowment for Democracy (NED) and The Asia Foundation. NED's FY2008 total request is $80 million, of which about $70 million will go for democracy program support. The Asia Foundation's FY2008 total budget request is $10 million, of which about $8.8 million will support democracy promotion. Therefore, the total estimated funding request for democracy promotion activities in FY2008 was over $1.5 billion out of a total foreign affairs budget request of $36.2 billion. The U.S. government also contributes to a number of multilateral efforts to promote or monitor democratic reform around the world. Included are the United Nations Development Program, the U.N. Democracy Fund, the Community of Democracies, and Freedom House, as well as the World Bank and the Organization of American States (OAS). An indication of the level of importance Secretary Rice places on democracy promotion is her announcement to establish the Advisory Commission on Democracy Promotion to "help us think about the issues of democracy promotion, to from time to time give us constructive criticism on what it is that we're doing, as well as constructive suggestions about what more we might do." What the Commission will not do, however, which many foreign policy observers say is needed, is coordinate all the many facets of democracy promotion activities in which the U.S. government is involved. A coordination mechanism, experts say, would contribute to improving the effectiveness and efficiency of ongoing programs and would help to minimize the possibility of democracy promotion programs and U.S. tax dollars working at cross purposes. Furthermore, some observers note, there is a lack of global coordination among developed countries supporting democracy promotion throughout the world. From their perspective, improved communication among developed democracies and letting each specialize in its area of comparative advantage, whether economic, cultural, or geographical, could further democracy promotion effectiveness worldwide while keeping costs down. Congress also plays a role in democracy promotion. Setting funding levels and providing oversight of Administration democracy promotion programs are typically how Congress influences U.S. democracy promotion programs. The House of Representatives also created the House Democracy Assistance Commission (HDAC) to help other governments' legislative branches evolve. (See below and Appendix B for a history of congressional democracy promotion activities.) From the 101 st Congress through the first session of the 110 th Congress, numerous pieces of legislation were introduced and passed to authorize and appropriate funds for democracy promotion in specific countries and regions, and to press governments of non-democratic countries to begin a process of democratization. Significant sums were appropriated for democracy programs through the annual State Department and Foreign Operations Appropriations. In FY2006, Congress created the Democracy Fund in the Foreign Operations Appropriations for Fiscal Year 2006 ( P.L. 109 - 102 , Title III), which provided $94.1 million for various democracy promotion activities in FY2006 and the same amount for FY2007. In addition, Congress passed the Implementation of the 9/11 Commission Act ( P.L. 110 - 53 / H.R. 1 ), which includes Title XXI, Advancing Democratic Values, Subtitle A—Activities to Enhance the Promotion of Democracy. In the first session of the 110 th Congress, several bills involving democracy promotion were introduced. The ADVANCE Democracy Act of 2007 ( H.R. 982 ), introduced on February 12, 2007, by Representative Tom Lantos (D-CA) and others, contains provisions to promote democracy in foreign countries, calls for specific State Department actions and reports with regard to non-democracies, aims to strengthen the "Community of Democracies," and authorizes funding for democracy assistance for FY2008 and FY2009. Other bills introduced in the 110 th Congress address democracy in individual countries, including the Ukraine, Venezuela, Afghanistan, Vietnam, and Serbia. Building on a long tradition of supporting the development of democracies and democratic institutions around the world in many ways, Congress currently carries out its own program to support legislatures in new democracies. The House Democracy Assistance Commission (HDAC) was created in March 2005, in effect the successor effort to previous congressional legislative assistance programs in the 1990s. HDAC was established to enable Members, officers, and staff of the House of Representatives and congressional support agencies to provide expert advice to fledgling legislatures on subjects such as committee operations, oversight, constituent relations, parliamentary procedures, and the establishment of support services. To date, the HDAC has assisted legislatures of 12 countries throughout the world. The democracy promotion rubric encompasses a wide range of policies and activities. As noted in the previous section on measuring success, experts have yet to carry out the type of comprehensive studies that can reliably establish a cause-and-effect relationship between efforts and outcomes. Nevertheless, there is a general sense that some types of situations are harder to influence than others and require considerable debate over the appropriate balance of U.S. interests and risks to the domestic populations in the high cost-high stakes cases. The following provides an overview of perceptions of different types of cases and the debate about the circumstances in which assistance is appropriate. At the low cost-low risk end of the spectrum are programs whose distinctive feature is that assistance is targeted to countries that have already embarked on democratic transitions independently and with strong domestic popular support, as in Central Europe, the Baltic countries, and some countries of Latin America, Asia, and Africa. Such assistance has been requested and embraced by the receiving countries. Most of these countries were committed to democratic reforms, with or without foreign assistance, and might have succeeded without it. It is difficult to document and quantify the value added of U.S. and other assistance programs. However, the general belief in donor and recipient countries, alike, is that democracy promotion activities, largely consisting of training and technical assistance, have had a positive impact at a relatively modest cost. Even where governments have seemingly retreated from their democratic course, as many would argue is the case in Russia today, such programs are seen as worth the investment and possibly having a longer-term positive impact. Medium cost-medium risk efforts include programs to help bring stability and democracy to postconflict societies in which an intrastate conflict has resulted in a brokered peace agreement. The challenges are often greater and the prospects more uncertain because the populations have only begun a process of reconciliation. Often, new systems are being imposed from outside as part of a peace settlement, without buy-in, necessarily, from all parties. These transitions frequently require international enforcement and monitoring with civilian officials and military forces on the ground, making such efforts much more costly but with the potential for a substantial payoff if they can bring stability to a crisis region, bolster potential failed states, and deny terrorist sanctuaries. The road to success may be significantly longer, and the outcome much less certain, than where democracy was launched from within under relatively stable circumstances. Such efforts have been seen as achieving positive results in countries of the former Yugoslavia, East Timor, and elsewhere. The debate among policy makers has centered on the high-cost, high-risk, high-stakes cases (i.e., efforts to foster domestically driven transitions from authoritarian regimes and the imposition of regime change through military intervention). Experts and policy makers are still wrestling with the challenges of whether and how to promote democracy in authoritarian states that are key allies and of strategic importance to the United States. In these cases, applying a principled approach consistent with our rhetoric by pressuring governments to ease repression and instituting real democratic reform could unleash forces far worse than what now exists in these countries, some believe. Often, authoritarian governments that the United States needs and that need the United States, especially in the fight against terrorism, are unwilling to liberalize and warn that to do so would risk bringing extremist forces to the fore. On the other hand, some argue, the failure to oppose regimes viewed as corrupt and ruthless by their own people has been pointed to as one of the major factors impeding U.S. success in the larger battle for "hearts and minds," especially in the Islamic World from which terrorists seek to draw recruits and support. The imposition of democracy through military intervention, with the ultimate goal of imposing a new democratic system, is, if possible, even more problematic. Regime change through military force has worked in some cases, such as Grenada in 1983 and Panama in 1989, where the goal was to restore a pre-existing constitutional order. In more recent military interventions in Afghanistan and Iraq to oust existing despotic regimes, the goal of building democracy initially was secondary, but later became primary. The difficulties of establishing democracy in those cases is reminiscent of other cases of military intervention by the United States and other countries, such as Somalia, Lebanon, and Vietnam, where questions were raised as to whether the cultural or institutional basis for democracy exists, and whether such conditions could be fostered through intervention. While some doubt that even limited democracy is possible in such cases, others argue that U.S. interests in promoting democracy in Afghanistan and Iraq, as models for Middle Eastern development, is so high that the United States would be making a serious error if it did not try. Even if democracy becomes clearly defined, can administrations investing in democracy promotion ever rest assured that a country transitioning toward democratic reform will not backslide? According to a leading democracy expert, "Democracy can deteriorate at any point in its development; its quality and stability can never be taken for granted." Some question if—once the United States has been involved in democracy promotion in a particular country—it can ever withdraw. And others wonder how many countries can the U.S. government push toward democracy before the American taxpayer says "enough." By clearly identifying, targeting, and coordinating assistance to countries that have the greatest potential for succeeding to become democracies, the U.S. taxpayers stand the best chance of benefitting from a foreign policy that includes funding democracy reform overseas. Appendix A. Requirements for the Community of Democracies While the Community of Democracies does not define what a democracy is, it has established a list of requirements that countries must meet to become members. To become a member of the Community of Democracies, governments must have the following characteristics: Free, fair and periodic elections, by universal and equal suffrage, conducted by secret ballot. The freedom to form democratic political parties that can participate in elections. A guarantee that everyone can exercise his or her right to take part in the government of his or her country, directly or through freely chosen representatives. The rule of law. The obligation of an elected government to protect and defend the constitution, refraining from extra-constitutional actions and to relinquish power when its legal mandate ends. Ensuring equality before the law and equal protection under the law, including equal access to the law. Separation of powers, separation of the judiciary, legislative and executive independence of the judiciary from the political or any other power and ensuring that the military remains accountable to democratically elected civilian government. The respect of human rights, fundamental freedoms and the inherent dignity of the human being, notably. Freedom of thought, conscience, religion, belief, peaceful assembly and association, freedom of speech, of opinion and of expression, including to exchange and receive ideas and information through any media, regardless of frontiers: free, independent and pluralistic media. The right of every person to be free from arbitrary arrest or detention from torture or any other cruel, inhuman or degrading treatment or punishment. The right to a fair trial, including to be presumed innocent until proven guilty and to be sentenced proportionally to the crime, free from cruel, inhuman, or degrading punishment. The right to full and non-discriminatory participation, regardless of gender, race, colour, language, religion or belief, in the political, economical and cultural life. The promotion of gender equality. The rights of children, elderly, and persons with disabilities. The rights of national, ethnic, and religious or linguistic minorities, including the right to freely express, preserve, and develop their identity. The right of individuals to shape their own destiny free from any illegitimate constraint. Governments are to defend and to protect all of these rights and to provide the appropriate legislation for this purpose. The observance of international law, as well as of internationally accepted democratic principles and values, and respect for universally accepted labour standards, is required. Appendix B. Background on Congressional Democracy Promotion Activities Congressional interest in U.S. policies aimed at protecting, strengthening, or reestablishing democracy in other parts of the world has a long history. After World War II, Congress was at first skeptical about further aid to Europe but eventually supported Administration policies to help war-torn western Europe and Japan on a bipartisan basis. The Marshall Plan and other economic aid programs were endorsed in the belief that U.S. security and prosperity would be furthered by the emergence of stable and prosperous democracies in Western Europe and Japan. During the Cold War, this approach was not always followed. Authoritarian regimes were supported by both Congress and the executive branch, for example, during certain periods in Spain, Portugal, Greece, and Turkey, as a perceived bulwark against the expansion of communism. At the same time, Congress took a strong interest in U.S. policies aimed at fostering liberalization and advancing individual freedom and loosening Moscow's control in Soviet-dominated communist countries. Through the 1950s and 1960s, much of this support was rhetorical, as containment of Soviet power within its existing sphere of influence remained the dominant U.S. strategy. However by the "detente" period of the 1970s, Congress saw real opportunities for fostering liberalization in Eastern Europe. Following the conclusion of the Conference on Security and Cooperation in Europe (CSCE) and the signing of the CSCE Final Act in 1975, Congress established a Commission (the Commission on Security and Cooperation in Europe or "Helsinki" Commission) in 1976, as a joint congressional-executive body to oversee U.S. efforts to implement provisions that would help to ease government repression and enhance human rights in the Soviet sphere. Today, the renamed Organization for Security and Cooperation in Europe (OSCE) has a core mission to support democratic development in all 56 member states, including the countries of the Caucasus and Central Asia. Members of Congress are directly engaged in that effort through their participation in the OSCE Parliamentary Assembly, established in 1991. The CSCE continues to function as a largely congressional organization to support and monitor the activities of the OSCE. With the fall of communism in central and eastern Europe and the collapse of the Soviet Union between 1989 and 1991, Members of Congress took a strong interest in the evolution of the region. They supported and promoted U.S. government democracy assistance programs through the authorization, appropriations, and oversight process, first in Poland, Hungary, and Czechoslovakia, and then in the Baltic states and other countries of central and eastern Europe. Major legislation supporting democratic assistance to the region included the Support for East European Democracy (SEED) Act of 1989 ( P.L. 101 - 179 ) and the FREEDOM Support Act (FSA) of 1991 ( P.L. 102 - 511 ), the latter directed at the newly independent countries of the former Soviet Union. A portion of the assistance provided under these acts has gone to the strengthening of democratic institutions. As the democratic tide spread to other parts of the world from the early 1990s on, congressional interest in democracy promotion also became more universal. In some instances, Congress has supported democracy-focused conditionality in international agreements, measures granting trade benefits to foreign countries, and admission to certain multilateral organizations. So called "democracy clauses" have been included in a number of treaties and international agreements. The use of democracy clauses, while not widespread, has generated growing interest in recent years with the expansion of the number of democracies in the world. Some of the most effective regional security and trade organizations include democracy criteria among their explicit or implicit membership requirements. The most far-reaching democracy clauses are contained in provisions of North Atlantic, European, and Inter-American organizations. Enforcement mechanisms vary. Few explicitly require expulsion of a country that abandons democracy. A "Community of Democracies" Ministerial Conference of 107 nations in Warsaw, Poland, June 2000, had on its discussion agenda the topic of incorporating democracy clauses in charter documents for multinational organizations and assessing the value of enforcement mechanisms against member states where democracy is overthrown. NATO was established in 1949 with strong congressional backing as a security alliance of countries with "shared values." Beyond this statement of principles, no specific criteria for membership were spelled out, and not all members were democracies throughout the history of the organization. However, in the NATO enlargement process and the NATO Partnership for Peace established in the 1990s, commitment to democracy became an explicit criterion for participation, with the approval of Congress. When the first new countries were formally accepted as full members in 1999 (Poland, Hungary, the Czech Republic, and Slovenia), it was on the basis that they were recognized as full-fledged democracies. The European Union (EU) requires implicitly that member countries be democracies. Given the level of political and economic integration, the EU probably could not function if member countries did not have a real convergence of political systems. Democracy criteria are more clearly spelled out in the requirements for accession of new members. The EU also has stressed principles of democracy in its agreements with other countries and regions, thereby using its significant economic leverage to strengthen democracy and human rights in other countries. One factor widely credited for the relatively smooth and successful democratic transitions of the countries of central and eastern Europe is that the associations they sought to ensure their future security and prosperity, namely NATO and EU membership, were attainable only with the consolidation of democratic institutions and processes. With this benefit in mind, many Members of Congress are pressing for further NATO enlargement and urging the EU to accept other new members. Similar bills introduced in the House and Senate, H.R. 987 and S. 494 , the "NATO Freedom Consolidation Act of 2007," seek admittance of new NATO members. Congress has a history of relations with other democratic parliaments. Members of Congress have attached importance to maintaining a legislative dimension to U.S. relations with key neighbors, allies, and organizations. The U.S. Congress has long been involved in multilateral parliamentary groups that hold regular exchanges and meetings. Current groups in which Congress participates include the NATO Parliamentary Assembly, the Parliamentary Assembly of the Organization for Security and Cooperation in Europe, and the Transatlantic Dialogue (the U.S. Congress-European Assembly inter-parliamentary group). Formal and regular bilateral parliamentary exchanges have long been held between the U.S. Congress and the Parliaments of Canada, Mexico, and Britain. Other congressional groups have been formed to focus on relations with other individual legislatures, including Germany, Japan, South Korea, China, and the Baltic States. Inter-parliamentary meetings have given Members an opportunity to establish contacts with their counterparts, to compare best practices, and to address specific issues of concern to the Congress and constituents, including human rights in particular. The United States was a founding member of the worldwide organization of parliaments, the Interparliamentary Union (IPU), although it withdrew from the organization in 1999, after not having participated in meetings since 1994. Over the years, Congress has taken a particular interest and on occasion become directly involved in democracy programs to strengthen legislatures in new democracies. After the fall of the Berlin wall in 1989 and the democratic transitions that began in Poland and Hungary, many Members of the House and Senate traveled to Central Europe to see developments firsthand. Several Members came back with a sense that the U.S. Congress should do something, as a body, to show solidarity with and to help strengthen democratic parliaments in the region. In 1990, Congress took the unprecedented step of establishing its own program to assist new democracies develop strong legislatures. The first congressional initiative to help the new democratic parliaments of central and eastern Europe was directed to Poland by the U.S. Senate. Senate Concurrent Resolution 74 (101 st Congress, 1989) established a congressional "Gift of Democracy" to Poland. The program provided computers, library materials, and training from the U.S. Senate to the Polish Senate, with the help of the Congressional Research Service (CRS), Library of Congress, and other support agencies. The second such initiative was launched by the House of Representatives. In April 1990, House Speaker Thomas Foley appointed a bipartisan Task Force of Members of Congress to provide support for the new democratic parliaments of central and eastern Europe on the initiative of Representative Martin Frost (D-Texas). He appointed Representative Frost as Chairperson; Representative Gerald B. Solomon (R-NY) became the ranking minority member. The House Special Task Force on the Development of Parliamentary Institutions in Eastern Europe initially focused its efforts on Poland, Hungary, and Czechoslovakia. In 1991, the Task Force began a program of assistance to the Bulgarian National Assembly. Estonia, Latvia, and Lithuania were added to the program in 1992. Albania was included in 1993, as were the Czech Republic and Slovakia, after the Czechoslovak split, and Romania. With the backing of congressional leadership and the Joint Committee on the Library, the Congressional Research Service undertook additional programs of cooperation with the Russian and Ukrainian legislatures. At the time of these congressional initiatives, there were few U.S. foreign aid programs directed at developing legislative infrastructures. Congress initiated its parliamentary development efforts in Eastern Europe without any preconceived notion of what was needed. The intent was to offer practical assistance, without trying to impose American or other models or suggesting specific solutions to given problems. The objective was to provide comparative information on how the United States and other countries have approached legislative tasks and solved particular problems. It was understood that West European parliamentary models were more relevant to many of the new democracies than was the American congressional model, particularly with regard to structures and procedures. The Task Force established a legislature-to-legislature program, on a non-partisan basis. The programs provided technical assistance to strengthening parliamentary infrastructure, especially the research and information services, streamlining work with modern automation and office systems, and providing training to Members of Parliament and staff. The programs aimed to help improve the efficiency of the legislatures, enhance the professionalism of Members and staff, and increase transparency and accountability. These programs, conceived from the start as short-term jump starts for nascent democratic parliaments, were completed by the end of 1996. By that time, legislative strengthening programs had become a major focus and priority of other USAID-funded projects building on the Frost Task Force program. The U.S. House of Representatives program was judged by outside observers, including aid evaluators and recipients of the aid in the assisted parliaments, to have played a unique and important role in helping to strengthen the legislatures of new democracies. Perhaps most importantly, the program provided the direct involvement of Members of Congress with MPs that was seen as giving recognition and a boost to the new legislatures at a critical time. In the recipient parliaments and among the public in those countries, there was awareness and appreciation that the U.S. Congress was the first legislature to immediately reach out with a gesture of support and practical help to the new parliaments. The programs were seen as bringing considerable good will toward the United States. After a hiatus of many years, Members of the 109 th Congress launched a new initiative to directly help strengthen legislative institutions in other new democracies. The House Democracy Assistance Commission (HDAC) was created by the House of Representatives on March 14, 2005 ( H.Res. 135 , 109 th Congress). Representative David Dreier (R-CA) was named Chairman, and Representative David Price (D-NC) was named the ranking Member. When House Speaker Dennis Hastert announced the formation of the Commission, he stated, "For many of our global neighbors, democracy is still a new concept.... It is my hope that this initiative will help the United States generate constructive dialogue where communication is needed most. With this commission, we're sending them the expertise of the premier democratic body in the world, the United States House of Representatives." Accepting the appointment, Chairman Dreier said that the importance of promoting democracy worldwide is at an all-time high. But we know that the real work of democracy begins only after the election. Central to success of any democracy is a functional, strong, independent legislature which can act as a check on the executive branch. Through this Commission, the House will be able to advise its counterparts in subjects like committee operations, oversight, constituent relations, parliamentary procedure, and the establishment of services like the CRS and the Congressional Budget Office (CBO). This effort will be good for America as well, spreading goodwill in countries where it is sorely needed. When the 2006 elections brought Democrats into the majority, legislation ( H.Res. 24 ) was introduced to reauthorize the Commission in January 2007, with Representative David Price as Chairman and Representative David Dreier as ranking Member. In all, 20 Members (11 Democrats and 9 Republicans) were appointed to serve on the Commission in the 110 th Congress. The Commission's stated mission is to strengthen democratic institutions by assisting parliaments in emerging democracies. The focus of the Commission's work is to provide technical expertise to enhance accountability, transparency, legislative independence, and government oversight in partner parliaments. Specifically, HDAC aims to (1) work with the parliaments of selected countries that have established or are developing democratic parliaments that would benefit from assistance; (2) enable Members, officers, and staff of the House of Representatives and congressional support agencies to provide expert advice to members and staff of the parliaments of such countries, including visits to the House and support agencies to observe their operations firsthand; and (3) make recommendations to the Administrator of the USAID regarding the provision of needed material assistance to such parliaments to improve the efficiency and transparency of their work. The Commission selects partner countries based on their democratic transitions, their interest in a program of cooperation with the U.S. House of Representatives, with attention to geographic diversity and, over time, including countries from Africa, Asia and the Pacific, Europe, the Middle East, Central Asia, and the Western Hemisphere. To date, the Commission has selected 12 countries in which to conduct programs: Afghanistan, Colombia, East Timor, Georgia, Haiti, Indonesia, Kenya, Lebanon, Liberia, Macedonia, Mongolia, and Ukraine. Iraq is also a candidate country. HDAC transfers funds to USAID to manage the programs, according to USAID officials.
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The Bush Administration has viewed democracy promotion as key element in its foreign policy agenda and an instrument for combatting terrorism. Given unsettled events related to elections in Pakistan and Kenya, and a recent landslide election in Taiwan for a party advocating closer ties with Mainland China, democracy promotion objectives will continue to be of interest in the American presidential campaigns and in the second session of the 110th Congress. Arguably, the lack of a clear definition of democracy and a comprehensive understanding of its basic elements may have hampered the formulation of democracy promotion policy and effective prioritizing of democracy promotion activities over the years. Also, the lack of definition may have complicated coordination of democracy programs and the assessment of U.S. government activities and funding. Further, without a consensus on democracy definition and goals, what criteria will determine when, if ever, a country has attained an acceptable level of democratic reform and no longer needs American assistance? Both the U.S. executive and legislative branches of government support democracy promotion in other countries. The Bush Administration has implemented both bilateral and multilateral programs to promote democracy, such as the Millennium Challenge Account (MCA), and requested about $1.5 billion for democracy promotion out of a total foreign affairs budget request of $36.2 billion in FY2008. Also, the Administration identified "governing justly and democratically" as a key objective of its foreign aid policies. Congress appropriates funds, authorizes programs, and is responsible for oversight. In 2007, Congress considered, among other democracy promotion bills, the ADVANCE Democracy Act of 2007 (H.R. 982). It contains provisions to promote democracy overseas, calls for specific State Department actions and reports, aims to strengthen the "Community of Democracies," and authorizes funding for democracy assistance for FY2008 and FY2009. Congress is currently carrying out its own program through the House Democracy Assistance Commission (HDAC), which was established in 2005. The Commission provides expert advice to fledgling legislatures. To date, 12 countries have received assistance from the Commission. The issue among Members of Congress, presidential hopefuls, and in the wider policy community is not whether democracy promotion is worthwhile in general, but rather when, where, and how it is to be applied to get the desired results and the most for the taxpayer's dollar. In addition, coordination of democracy promotion activities is lacking among developed countries and within the U.S. government. The 110th Congress may scrutinize U.S. democracy promotion in Iraq and elsewhere. Whether or not "victory in Iraq" includes establishing an independent democratic Iraqi government will be important in evaluating the human and financial costs and benefits of U.S. involvement in Iraq and could affect other U.S. democracy promotion agendas. This report will be updated as warranted.
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Secret, or closed, sessions of the House and Senate exclude the press and the public. They may be held for matters deemed to require confidentiality and secrecy—such as national security, sensitive communications received from the President, and Senate deliberations during impeachment trials. Although Members usually seek advance agreement for going into secret session, any Member of Congress may request a secret session without notice. When the House or Senate goes into secret session, its chamber and galleries are cleared of everyone except Members and officers and employees specified in the rules or designated by the presiding officer as essential to the session. When the chamber is cleared, its doors are closed. Authority for the House and Senate to hold secret sessions appears in Article I, Section 5, of the Constitution: "Each House may determine the Rules of its Proceedings.... Each House shall keep a Journal of its Proceedings, and from time to time publish the same, excepting such Parts as may in their Judgment require Secrecy.... " Both chambers have implemented these constitutional provisions through rules and precedents. In the House, Rule XVII, clause 9 governs secret sessions. A secret session may be held when the House has received confidential communications from the President or when a Member informs the House that the Member has communications that should be kept secret. A secret session may occur pursuant to a special rule or by a motion to resolve into a secret session made in the House. The House has also agreed on one occasion to a unanimous consent request authorizing the chair to resolve the House into secret session pursuant to this rule. A motion to resolve into secret session is in order in the House; it is not in order in the Committee of the Whole. A Member who offers such a motion announces the possession of confidential information and moves that the House go into a secret session. The motion is not debatable, and no point of order is available to require the communication at issue to be disclosed before the vote. If the motion is agreed to by a simple majority (a quorum being present), the chamber and galleries are cleared. When the only persons present are Members, officials allowed under Rule XVII, clause 9, and staff designated by the Speaker as essential to the proceedings, the chamber doors are closed, and the House begins the secret session. The Member making the motion is then recognized under the hour rule for debate. In addition, under Rule X, clause 11, paragraphs (g)(2)(D) through (g)(2)(G), the House Select Committee on Intelligence may move that the House hold a secret session to determine whether classified information held by the committee should be made public. This procedure is invoked only if the committee desires such a disclosure and the President personally objects to it. In the Senate, any Senator may make a motion that the Senate go into closed session, and, if seconded by another Senator, the Senate will immediately proceed into a secret session. Under Senate Rule XXI, the presiding officer exercises no discretion about going into secret session if the motion is made and seconded. The motion is not debatable. A Senator may interrupt another Senator to make the motion and may cause the other Senator to lose the floor. Once in a secret session, the Senate operates under applicable portions of Senate Rules XXIX and XXXI. Rule XXIX specifies which of the Senate's officers and staff may stay during the closed session and authorizes the presiding officer to include other staff at his discretion. Rule XXXI requires Senate business to be transacted in open session, but states that the Senate by majority vote may determine that a specific treaty, nomination, or other matter may be considered in secret session. A motion to return to open session is in order at any time, is not debatable, and requires a simple majority vote, a quorum being present. When the Senate is conducting an impeachment trial, it may hold deliberations behind closed doors. During this time, Senate standing rules are supplemented by additional rules, called "Rules of Procedure and Practice in the Senate when Sitting on Impeachment Trials." Members and staff of both houses are prohibited from divulging information from secret sessions. In the Senate, staff are sworn to secrecy, whereas in the House, staff must sign an oath not to reveal what happens in the secret session, unless the House decides to make its actions public. Violations of secrecy are punishable by the disciplinary rules of a chamber. A Member may be subject to a variety of punishments, including loss of seniority, fine, reprimand, censure, or expulsion. An officer or employee may be fired or subject to other internal disciplinary actions. The proceedings of a secret session are not published unless the relevant chamber votes, during the meeting or at a later time, to release them. Then, those portions released are printed in the Congressional Record . Under Rule XVII, if the House decides not to release the transcript of a secret session, the Speaker refers the proceedings to the appropriate committee(s) for evaluation. The committees are required to report to the House on their ultimate disposition of the transcript. If a committee decides not to release the transcript, it becomes part of the committee's noncurrent records (pursuant to House Rule VII, clause 3) and is transferred to the Clerk of the House for transmittal to the Archivist of the United States at the National Archives and Records Administration. Transcripts may be made available to the public after 30 years unless the Clerk of the House determines that such availability "would be detrimental to the public interest or inconsistent with the rights and privileges of the House" (Rule VII, clauses 3 and 4). If the Senate does not approve release of a secret session transcript, it is stored in the Office of Senate Security and ultimately sent to the National Archives and Records Administration. The proceedings remain sealed until the Senate votes to remove the injunction of secrecy. The Senate met in secret until 1794, its first rules reflecting a belief that the body's various roles, including providing advice and consent to the executive branch, compelled it to act behind closed doors. Although legislative sessions were generally open after 1795, the Senate's executive sessions (to consider nominations and treaties) were usually closed until 1929. Since 1929, the Senate has held 57 secret sessions, generally for reasons of national security or for consideration of impeachment questions. On December 20, 2010, for example, the Senate met in closed session to discuss the ratification of the New Start Treaty with Russia (Treaty Doc. 111-5). On December 7, 2010, the Senate met in closed session to debate the impeachment of federal judge G. Thomas Porteous, Jr., of Louisiana. Six secret sessions were held during the impeachment trial of President William J. Clinton in 1999. In 1997, the Senate met in secret to consider the Chemical Weapons Convention Treaty and, in 1992, to debate the "most favored nation" status of China. Table 1 identifies the 57 secret sessions of the Senate since 1929. The House met frequently in secret session through the end of the War of 1812, mainly to receive confidential communications from the President, but occasionally for routine legislative business. Subsequent secret meetings were held in 1825 and in 1830. Since 1830, the House has met behind closed doors four times: in 1979, 1980, 1983, and 2008. Table 2 identifies secret House sessions since 1825.
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Secret, or closed, sessions of the House and Senate exclude the press and the public. They may be held for matters deemed to require confidentiality and secrecy—such as national security, sensitive communications received from the President, and Senate deliberations during impeachment trials. Although Members usually seek advance agreement for going into secret session, any Member of Congress may request a secret session without notice. When the House or Senate goes into secret session, its chamber and galleries are cleared of everyone except Members and officers and employees specified in the rules or designated by the presiding officer as essential to the session. After the chamber is cleared, its doors are closed. Authority for the House and Senate to hold secret sessions appears in Article I, Section 5, of the Constitution: "Each House may determine the Rules of its Proceedings…. Each House shall keep a Journal of its Proceedings, and from time to time publish the same, excepting such Parts as may in their judgment require Secrecy.... " Both chambers have implemented these constitutional provisions through rules and precedents. In the House, Rule XVII, clause 9 governs secret sessions, including the types of business to be considered behind closed doors. In addition, House Rule X, clause 11 authorizes the House Permanent Select Committee on Intelligence to bring before the House material to help it determine whether classified material held by the committee should be made public. In the Senate, under Senate Rule XXI, the presiding officer exercises no discretion about going into secret session. Any Senator may make a motion that the Senate go into closed session, and, if seconded, the Senate will immediately proceed into a secret session. Once in a secret session, the Senate operates under applicable portions of Senate Rules XXIX and XXXI. The Senate met in secret until 1794, its first rules reflecting a belief that the body's various special roles, including providing advice and consent to the executive branch, compelled it to conduct its business behind closed doors. Since 1929, when the Senate began debating nominations and treaties (referred to as executive business) in open session, the Senate has held 57 secret sessions, most often for reasons of national security or for consideration of impeachment proceedings. The House met frequently in secret session through the end of the War of 1812, mainly to receive confidential communications from the President, but occasionally for routine legislative business. Subsequent secret meetings were held in 1825 and in 1830. Since 1830, the House has met behind closed doors four times: in 1979, 1980, 1983, and 2008. A chamber's rules apply during a secret session. The proceedings of a secret session are not published unless the relevant chamber votes, during the meeting or at a later time, to release them. Then, those portions released are printed in the Congressional Record. This report will be updated as events warrant.
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In June 2008, the Supreme Court issued its decision in District of Columbia v. Heller , holding by a 5-4 vote that the Second Amendment to the Constitution of the United States protects an individual right to possess a firearm, unconnected with service in a militia, and to use that firearm for traditionally lawful purposes such as self-defense within the home. In Heller , the Court affirmed the lower court's holding that declared three provisions of the District of Columbia's Firearms Control Regulation Act to be unconstitutional. The decision in Heller marked the first time in almost 70 years that the Supreme Court addressed the nature of the right conferred by the Second Amendment. Although the Court conducted an extensive analysis of the Second Amendment to interpret its meaning, the decision left unanswered other significant constitutional questions, including the standard of scrutiny that should be applied to laws regulating the possession and use of firearms, and whether the Second Amendment applies to the states. This latter issue was subsequently addressed by the Supreme Court in McDonald v. City of Chicago . Accordingly, this report first provides a historical overview of judicial treatment of the Second Amendment and a discussion of the Court's decision in Heller . It then examines the issue of incorporation, which was the focus of the McDonald decision. Lastly, this report concludes with an analysis that focuses on the potential impact of the Court's decisions in Heller and McDonald on such legislation pertaining to the use and possession of firearms at the federal, state, and local levels. The Second Amendment to the Constitution states that "A well regulated Militia, being necessary to the security of a free State, the right of the people to keep and bear Arms, shall not be infringed." Despite its brevity, the nature of the right conferred by the language of the Second Amendment has been the subject of great debate in the political, academic, and legal spheres for decades. Generally, it can be said that there are two opposing models that govern Second Amendment interpretation. On one side of the debate, there is the "individual right model," which maintains that the text and underlying history of the Second Amendment clearly establishes that the right to keep and bear arms is committed to the people, that is, an individual, as opposed to the states or the federal government. On the other end of the spectrum is the "collective right model," which interprets the Second Amendment as protecting the authority of the states to maintain a formal organized militia. A related interpretation, commonly called the "sophisticated collective right model," posits that individuals have a right under the Second Amendment to own and possess firearms, but only to the extent that such ownership and possession is connected to service in a state militia. The text of the amendment is often raised to both support and contravene the argument that there is an individual right to keep and bear arms. The individual right model places great weight on the operative clause of the amendment that states "the right of the people to keep and bear arms shall not be infringed." Accordingly, it is argued that this command language clearly affords a right to the people, and not simply to states. To support this notion, it is argued that the text of the Tenth Amendment, which clearly distinguishes between "the states" and "the people," makes it evident that the two terms are, in fact, different, and that the Founders knew to say "state" when they meant it. Under this reading, it may be argued that if the Second Amendment did not confer an individual right, it simply would have read that the right of the states to organize the militia shall not be infringed. Supporters of the collective right model, by contrast, often counter with the argument that the dependent clause, which refers to "a well regulated militia," qualifies the rest of the amendment, thereby limiting the right of the people to keep and bear arms and investing the states with the authority to control the manner in which weapons are kept, and to require that any person who possesses a weapon be a member of the militia. An outgrowth of the rationale used by the collective right proponents has been the argument that the militia, in modern times, is embodied by the National Guard, and that the realities of modern warfare have negated the need for the citizenry to be armed. Individual right theorists have countered these arguments by noting that the militia of the Founders' era consisted of every able-bodied male, who was required to supply his own weapon. These theorists also point to 10 U.S.C. § 311, which as part of its express definition of the different classes of militia states that in addition to the National Guard, there is an "unorganized militia" that is composed of all able-bodied males between the ages of 17 and 45 who are not members of the National Guard or naval militia. Moreover, proponents of the individual right model deride the notion that an individual right to keep and bear arms can be read out of the Constitution as a result of technological advancements or shifting societal mores. As illustrated below, various federal appellate courts gave effect to each of these interpretive models, contributing to the uncertainty that characterized the debate over the meaning of the Second Amendment prior to the Court's decision in Heller . Despite the heated debate regarding the meaning of the Second Amendment, the Supreme Court had decided only one case touching upon its scope prior to the decision in Heller . That case, United States v. Miller , considered the validity of a provision of the National Firearms Act in relation to the Second Amendment. An interesting aspect of the decision in Miller , as illustrated below, is that it was commonly cited in subsequent lower court decisions as supportive of the proposition that the Second Amendment confers a collective right to keep and bear arms. However, the Court's discussion and actual holding, while giving effect to the dependent clause, could nonetheless be taken to indicate that the Second Amendment confers an individual right limited to the context of the maintenance of the militia. In Miller , the Court upheld a provision of the National Firearms Act that required the registration of sawed-off shotguns. In discussing the Second Amendment, the Court noted that the term "militia" was traditionally understood to refer to "all males physically capable of acting in concert for the common defense," and that members of the militia were primarily civilians and, on occasion, soldiers too, who when called upon "were expected to appear bearing arms supplied by themselves and of the kind in common use at the time." This kind of language throughout the Miller Court's brief discussion of the meaning and expectations of those in a militia during the Founding-era, though subsequently cited as supporting a collective right interpretation, also lent itself to the possible interpretation that the Second Amendment confers an individual right to keep and bear arms limited to the context of the maintenance of a militia. Despite this language, the Court in Miller held: In absence of any evidence tending to show that possession or use of a "shotgun having a barrel of less than 18 inches in length" at this time has some reasonable relationship to the preservation or efficiency of a well regulated militia, we cannot say that the Second Amendment guarantees the right to keep and bear such an instrument. Certainly it is not within judicial notice that this weapon is any part of the ordinary military equipment or that its use could contribute to the common defense. The Miller holding focuses on and appears to suggest that the applicability of the Second Amendment depends upon the type of weapon possessed by an individual and that the weapon, in order to be protected under the amendment, must have some reasonable relationship to the preservation or efficiency of a well-regulated militia. Yet, the decision in Miller is perplexing because while it indicated a connection between the right to keep and bear arms and the militia, the Court did not explore the logical conclusions of its holding; thus the question remained as to what point the regulation or prohibition of firearms would violate the strictures of the amendment. After Miller , the cases decided in the following decades departed from this rather undefined test, with each succeeding decision arguably becoming more attenuated such that judicial treatment of the Second Amendment for the remainder of the 20 th century almost summarily concluded that the amendment conferred only a collective right to keep and bear arms. The process of departure from, and the attenuation of, Miller began with the 1942 decision in Cases v. United States . The U.S. Court of Appeals for the First Circuit (First Circuit) stated its view on the holding in Miller and found it to suggest that "the federal government can limit the keeping and bearing of arms by a single individual as well as by a group of individuals but it cannot prohibit the possession or use of any weapon which has any reasonable relationship to the preservation or efficiency of a well regulated militia." The First Circuit pointed out that a general application of the test in Miller could, as a consequence, prevent the government from regulating the possession or use by private persons, not connected with a militia, of machine guns and similar weapons, which clearly serve military purposes. Beginning its departure from Miller , the court in Cases simply stated that it doubted the Founders intended for citizens to be able to possess weapons like machine guns, and further declared that Miller did not formulate any sort of general test to determine the limits of the Second Amendment. The court then applied a new test of its own formulation, focusing on whether the individual in question could be said to have possessed the prohibited weapon in his capacity as a militiaman. Applying that rationale to the case at hand, the First Circuit declared that the defendant possessed the firearm "purely and simply on a frolic of his own and without any thought or intention of contributing to the efficiency of [a] well regulated militia." While Cases acknowledged that the Federal Firearms Act "undoubtedly curtails to some extent the right of individuals to keep and bear arms," the court upheld its constitutionality, stating that the act "does not conflict with the Second Amendment" because as suggested by the court's new test, the government can regulate individuals from possessing a weapon (that could be viewed as a weapon of common militia use) if such an individual is not in fact using that weapon in his capacity as a militiaman or for the purpose of common militia use. The court in Cases further cited the Supreme Court's decision in United States v. Cruikshank and Presser v. Illinois , (both of which were decided prior to the advent of modern incorporation doctrine principles) as support for the proposition that the Second Amendment does not confer an individual right: "The right of the people to keep and bear arms is not a right conferred upon the people by the federal constitution. Whatever rights the people may have depend upon local legislation; the only function of the Second Amendment being to prevent the federal government and the federal government only from infringing that right." The concept of the Second Amendment as a collective protective mechanism rather than a conferral of an individual right was reinforced by the U.S. Court of Appeals for the Third Circuit's (Third Circuit) decision that same year in United States v. Tot . In that case, the Third Circuit declared that it was "abundantly clear" that the right to keep and bear arms was not adopted with individual rights in mind. The court's support for this statement was brief and conclusory, and did not address any of the relevant, competing arguments. It was this type of holding that became the norm for the remainder of the century in cases addressing the Second Amendment, with courts increasingly referring to others' holdings to support the determination that there is no individual right conferred under the Second Amendment, without engaging in any appreciable substantive legal analysis of the issue. The traditional, albeit highly undefined, balance among the federal appellate courts with regard to judicial treatment of the Second Amendment changed with the 2001 decision in United States v. Emerson . In Emerson , the U.S. Court of Appeals for the Fifth Circuit (Fifth Circuit) became the first federal appellate court to hold that the Second Amendment confers an individual right to keep and bear arms. The court in Emerson specifically addressed the constitutionality of 18 U.S.C. § 922(g)(8), which prevents those under a domestic violence restraining order from possessing a firearm. The district court had ruled this provision to be unconstitutional on grounds that it allows the existence of a restraining order, even if issued "without particularized findings of the threat of future violence, to automatically deprive a citizen of his Second Amendment rights." The Fifth Circuit agreed with the district court's conclusion that the Second Amendment confers an individual right after it engaged in an extensive analysis of the text and history of the amendment. It further stated that "the history of the Amendment reinforces its plain text, namely that it protects individual Americans in their right to keep and bear arms whether or not they are a member of a select militia or performing active military service or training." In making this determination, the Fifth Circuit explicitly acknowledged that it was repudiating the position of every other circuit court that had previously addressed the meaning of the Second Amendment, stating: "[W]e are mindful that almost all of our sister circuits have rejected any individual rights view of the Second Amendment. However, it respectfully appears to us that all or almost all of these opinions seem to have done so either on the erroneous assumption that Miller resolved that issue or without sufficient articulated examination of the history and text of the Second Amendment." The court in Emerson stated: "We reject the collective rights and sophisticated collective rights models for interpreting the Second Amendment. We hold, consistent with Miller , that it protects the rights of individuals, including those not then actually a member of any militia or engaged in active military service or training, to privately possess and bear their own firearm ... that are suitable as personal, individual weapons and are not of the general kind or type excluded by Miller ." Although the Emerson court adopted the individual right model, it nonetheless reversed the district court decision, determining that rights protected by the Second Amendment are subject to reasonable restrictions: Although, as we have held, the Second Amendment does protect individual rights, that does not mean that those rights may never be made subject to any limited, narrowly tailored specific exceptions or restrictions for particular cases that are reasonable and not inconsistent with the right of Americans generally to individually keep and bear their private arms as historically understood in this country. Indeed, Emerson does not contend, and the district court did not hold, otherwise. As we have previously noted, it is clear that felons, infants and those of unsound mind may be prohibited from possessing firearms. Applying this standard to the challenged provision, the Emerson court noted that while the evidence before it did not establish that an express finding of a credible threat had been made by the local state court, the nexus between firearm possession by an enjoined party and the threat of violence was sufficient to establish the constitutionality of 18 U.S.C. § 922(g)(8). The decision in Emerson was accompanied by a special concurrence arguing that "[t]he determination whether the rights bestowed by the Second Amendment are collective or individual [was] entirely unnecessary to resolve this case and has no bearing on the judgment we dictate by this opinion." Although the decision in Emerson did not result in the invalidation of any laws, the decision was quite significant as it marked the first time a circuit court adopted an individual rights interpretation of the Second Amendment, which in turn led to the most substantive exposition of the collective rights model by a sister circuit. In Silveira v. Lockyer , the U.S. Court of Appeals for the Ninth Circuit (Ninth Circuit) rejected a Second Amendment challenge to California's Assault Weapons Ban, specifically repudiating the analysis in Emerson and adopting the collective right model interpretation of the Second Amendment. It stated, "Our court, like every other federal court of appeals to reach the issue except for the Fifth Circuit, has interpreted Miller as rejecting the traditional individual rights view." The Silveira decision was particularly significant because the Ninth Circuit essentially picked up the gauntlet thrown down in Emerson . The court engaged in its own substantive analysis of the text of the amendment, but reached the opposite conclusion than that of the Fifth Circuit, which is important because the opinion in Silveira acknowledged and purported to rectify the deficiencies in prior cases that have summarily interpreted Miller as precluding an individual rights interpretation. In particular, the Ninth Circuit began its analysis by expressly acknowledging that "the entire subject of the meaning of the Second Amendment deserves more consideration than we, or the Supreme Court, have thus far been able (or willing) to give it." After engaging in an extensive consideration of the same historical and textual arguments that were addressed in Emerson , the court in Silveira stated, "The amendment protects the people's right to maintain an effective state militia, and does not establish an individual right to own or possess firearms for personal or other use. This conclusion is reinforced in part by Miller 's implicit rejection of the traditional individual rights position." The court later reemphasized this position, declaring: In sum, our review of the historical record regarding the enactment of the Second Amendment reveals that the amendment was adopted to ensure that effective state militias would be maintained, thus preserving the people's right to bear arms. The militias, in turn, were viewed as critical to preserving the integrity of the states within the newly structured national government as well as to ensuring the freedom of the people from federal tyranny. Properly read, the historical record relating to the Second Amendment leaves little doubt as to its intended scope and effect. Upon determining that the collective right model controls Second Amendment analysis, the Ninth Circuit held that the amendment "poses no limitation on California's ability to enact legislation regulating or prohibiting the possession or use of firearms, including dangerous weapons such as assault weapons." Like the Emerson decision, the opinion in Silveira was accompanied by a special concurrence that argued that the court's "long analysis involving the merits of the Second Amendment claims," and its adoption of the "collective rights theory" was "unnecessary and improper" in light of existing precedent mandating the dismissal of such claims for a lack of standing. A request for rehearing en banc was denied by the full court, resulting in the dissent of six judges. The holdings in Emerson and Silveira , for the first time, presented the Supreme Court with two contemporaneous circuit court decisions that reached fundamentally different conclusions with regard to the protections afforded by the Second Amendment. While this dynamic led to a great deal of speculation as to whether the Court would grant a petition for certiorari in Silveira to resolve this split, the Court ultimately denied the application. This was presumably due to the fact that even though the decisions constituted a concrete split between the two circuit courts on this issue for the first time, no firearms laws were actually invalidated. In light of the split interpretations of the meaning of the Second Amendment in the circuit court decisions Emerson and Silveira , both of which were denied certiorari by the Supreme Court, the stage for just such a conflict was set in 2007 in Parker v. District of Columbia . The decision in Parker , which eventually made its way to the Supreme Court, marked the first time that a federal appellate court struck down a law regulating firearms on the basis of the Second Amendment. In Parker , six residents of the District of Columbia challenged three provisions of the District's 1975 Firearms Control Regulation Act: DC Code § [phone number scrubbed].02(a)(4), which generally barred the registration of handguns, thus effectively prohibiting of possession of handguns in the District; § 22-4504(a), which prohibited carrying a pistol without a license (to the extent the provision would prevent a registrant from moving a gun from one room to another within his or her home); and § [phone number scrubbed].02, which required all lawfully owned firearms be kept unloaded and disassembled or bound by a trigger lock or similar device. The Parker court first dismissed the claims of five of the six plaintiffs upon determining that the District's general threat to prosecute violations of its gun control laws did not constitute an injury sufficient to confer standing on citizens who had only expressed an intention to violate the District's gun control laws but had not suffered any injury in fact. The remaining plaintiff, Dick Heller, was found to have standing due to the fact that he had applied for, and had been denied, a license to possess a handgun. Based on this, the court determined that the denial of a license "constitutes an injury independent of the District's prospective enforcement of its gun laws." The court also allowed Heller's claims challenging § 22-4504(a) (prohibiting the carriage of a pistol without a license) and § [phone number scrubbed].02 (requiring firearms be kept unloaded and disassembled or bound by a trigger lock) to stand, as they "would amount to further conditions on the [right] Heller desires." The court then turned to its substantive consideration of the Second Amendment, engaging in a textual and historical analysis that largely mirrored the approach of the Fifth Circuit in Emerson . The court placed particular importance on the "word[s] ... the drafters chose to describe the holders of the right—'the people.'" Stating that the phrase "the people" is "found in the First, Fourth, Ninth, and Tenth Amendments," and that "[i]t has never been doubted that these provisions were designed to protect the rights of individuals ," the court stated that it necessarily follows that the Second Amendment likewise confers an individual right. The court also rejected the contention that the prefatory clause of the amendment ("A well regulated Militia, being necessary to the security of a free State") qualified the effect of its operative clause ("the right of the people to keep and bear Arms, shall not be infringed"), based on its characterization of the historical factors at play. According to the court, early Congresses recognized that the militia existed as all "able-bodied men of a certain age," independent of any governmental creation, but also that a militia nevertheless required governmental organization to be effective. This interpretation enabled the court to dispose of the District's argument that "a militia did not exist unless it was subject to state discipline and leadership." By specifically rejecting the notion that there is a state organization requirement for the creation of a militia, the court was able to interpret the prefatory clause as encompassing a broad swath of the populace, irrespective of a state's right to raise a collective protective force. The court concluded its analysis by stating: "The important point, of course, is that the popular nature of the militia is consistent with an individual right to keep and bear arms: Preserving an individual right was the best way to ensure that the militia could serve when called." The Parker court also addressed the District's argument that it was not subject to the restraints of the Second Amendment because it is a purely federal entity. This argument was predicated on the supposition that since the District is not a state, no federalism concerns are posed within the context of the Second Amendment as there is no possibility that the exercise of legislative power would unconstitutionally encumber the organization of a state militia, that is, "interfere with the 'security of a free State.'" The court, in rejecting the District's argument, referred to it as an "appendage of the collective right position" and made note that "the Supreme Court has unambiguously held that the Constitution and Bill of Rights are in effect in the District." The final argument addressed by the court in Parker was the District's contention that "even if the Second Amendment protects an individual right and applies to the District, it does not bar the District's regulation, indeed, its virtual prohibition, of handgun ownership." Engaging in a historical analysis, the court determined that long guns (such as muskets and rifles) and pistols were in "common use" during the era when the Second Amendment was adopted. While noting that modern handguns, rifles, and shotguns are "undoubtedly quite improved over [their] colonial-era predecessors," the court held that the "modern handgun ... is, after all, a lineal descendant" of the pistols used in the Founding-era and that they "certainly bear 'some reasonable relationship to the preservation or efficiency of a well regulated militia,'" thereby meeting the standard delineated in Miller . The court further rejected the argument that the Second Amendment applies only to colonial era weapons, stating that "just as the First Amendment free speech clause covers modern communication devices unknown to the Founding generation, e.g., radio and television, and the Fourth Amendment protects telephonic conversation from a 'search,' the Second Amendment protects the possession of the modern-day equivalents of the colonial pistol." The court stressed that its conclusion should not be taken to suggest that "the government is absolutely barred from regulating the use and ownership of pistols," stating that "the protections of the Second Amendment are subject to the same sort of reasonable restrictions that have been recognized as limiting, for instance, the First Amendment." The court stated that its holding did not conflict with earlier Supreme Court determinations that existing laws prohibiting the concealed carriage of weapons or depriving convicted felons of the right to keep and bear arms "[do] not offend the Second Amendment." According to the court, regulations of this type "promote the government's interest in public safety consistent with our common law tradition. Just as importantly, however, they do not impair the core conduct upon which the right was premised." It went on to state other "[r]easonable regulations also might be thought consistent with a 'well regulated Militia,'" including but not necessarily limited to, the registration of firearms (on the basis that it would give the government an idea of how many would be armed for militia service if called upon), or reasonable firearm proficiency testing (as this would promote public safety and produce better candidates for service). Applying these standards to the provisions of the DC Code at issue, the court ruled that each challenged restriction violated the protections afforded by the Second Amendment. With regard to § [phone number scrubbed].02(a)(4) (prohibiting the registration of a pistol), the court stated: "Once it is determined—as we have done—that handguns are 'Arms' referred to in the Second Amendment, it is not open to the District to ban them." Turning to § 22-4504(a) (prohibiting the carriage of a pistol without a license, inside or outside the home), the court stated: "[J]ust as the District may not flatly ban the keeping of a handgun in the home, obviously it may not prevent it from being moved throughout one's house. Such a restriction would negate the lawful use upon which the right was premised—i.e., self defense." Finally, with respect to § [phone number scrubbed].02 (requiring that all lawfully owned firearms be kept unloaded and disassembled or bound by a trigger lock or similar device), the court stated: "[L]ike the bar on carrying a pistol within the home, [this provision] amounts to a complete prohibition on the lawful use of handguns for self-defense. As such, we hold it unconstitutional." On November 20, 2007, the Supreme Court granted the District of Columbia's petition for certiorari , though limiting it to the question of "[w]hether the following provisions, DC Code §§ [phone number scrubbed].02(a)(4), 22-4504(a), and [phone number scrubbed].02, violated the Second Amendment rights of individuals who are not affiliated with any state-regulated militia, but who wish to keep handguns and other firearms for private use in their homes?" On March 18, 2008, the Supreme Court heard oral argument for Heller , considering in detail many of the issues raised by the decision in Parker . Based on the questions and comments of the Justices, it was widely assumed that the Court would hold that the Second Amendment does in fact confer an individual right to keep and bear arms. In particular, Chief Justice Roberts and Justices Alito and Scalia all made statements indicating that they support an individual right interpretation. For instance, responding to the Petitioner's assertion that the prefatory clause of the amendment confirms that the right is militia related, Chief Justice Roberts stated: "[I]t's certainly an odd way in the Second Amendment to phrase the operative provision. If it is limited to State militias, why would they say 'the right of the people'? In other words, why wouldn't they say 'State militias have the right to keep arms'?" Likewise, Justice Scalia declared: I don't see how there's any, any, any contradiction between reading the second clause as a—as a personal guarantee and reading the first one as assuring the existence of a militia, not necessarily a State-managed militia because the militia that resisted the British was not State-managed. But why isn't it perfectly plausible, indeed reasonable, to assume that since the framers knew that the way militias were destroyed by tyrants in the past was not by passing a law against militias, but by taking away the people's weapons—that was the way militias were destroyed. The two clauses go together beautifully: Since we need a militia, the right of the people to keep and bear arms shall not be infringed. Additionally, Justice Kennedy indicated that he would support an individual right interpretation, suggesting that the purpose of the prefatory clause was to "reaffirm the right to have a militia," with the operative clause establishing that "there is a right to bear arms." Justice Kennedy's questioning further indicated that he might view a right to self-defense as being of a constitutional magnitude, suggesting that the Framers may have also been attempting to ensure the ability of "the remote settler to defend himself and his family against hostile Indian tribes and outlaws, wolves and bears and grizzlies." While Justice Thomas remained silent during the oral argument, he had made statements in the past indicating support for an individual right interpretation of the Second Amendment. On June 26, 2008, the Supreme Court issued its decision, holding by a vote of 5-4 that the Second Amendment protects an individual right to possess a firearm, unconnected to service in a militia, and protects the right to use that arm for traditionally lawful purposes such as self-defense within the home. The opinion engaged in an extensive analysis of the text of the amendment. It first focused on the operative clause of the amendment ("the right of the people to keep and bear Arms, shall not be infringed"), finding that the textual elements of this clause and the historical background of the amendment "guarantee the individual right to possess and carry weapons in case of confrontation." With regard to the prefatory clause ("A well regulated Militia, being necessary to the security of a free State,") the Court held that the term "militia" refers to all able-bodied men, as opposed to state and congressionally regulated military forces described in the Militia Clauses of the Constitution. The Court further held that "the adjective 'well-regulated' implied nothing more than imposition of proper discipline and training," and that the phrase "security of a free State" refers to the security of a free polity as opposed to the security of each of the several states. After analyzing the operative and prefatory clause, the Court then addressed the issue of whether the prefatory clause "fits" with the operative clause that "creates an individual right to keep and bear arms." The Court declared that the two clauses "fit[] perfectly" when viewed in light of the historical backdrop that motivated adoption of the Second Amendment. In particular, the Court pointed to the concern, raised by Justice Scalia in oral argument, of the Founding generation's knowledge that the federal government would disarm the people in order to disable the citizens' militia rather than banning the militia itself, which would then enable a politicized standing army or a select militia to rule. According to the Court, the amendment was thus designed to prevent Congress from abridging the "ancient right of individuals to keep and bear arms, so that the ideal of a citizens' militia would be preserved." After reaching this conclusion, the Court examined its prior decisions relating to the Second Amendment in order to ascertain "whether any of [its] prior precedents foreclose[] the conclusions [it] reached about the meaning of the Second Amendment." The Court first considered its ruling in United States v. Cruikshank , which held that the Second Amendment does not by its own force apply to anyone other than the federal government. There, the Cruikshank Court vacated the convictions of a white mob for depriving blacks of their right to keep and bear arms. Whereas past lower courts interpreted Cruikshank to support the proposition that the Second Amendment does not confer an individual right, the Heller Court stated that the decision in Cruikshank "supports, if anything, the individual-rights interpretation." The Court stressed that their decision in Cruikshank described the right protected by the Second Amendment as the "bearing [of] arms for a lawful purpose," and that "the people must look for their protection against any violation by their fellow-citizens of the rights it recognizes to the States' police power." This discussion in Cruikshank , according to the Court in Heller , "makes little sense if it is only a right to bear arms in a state militia." The Court then turned to its prior ruling in Presser v. Illinois , which held that the right to keep and bear arms was not violated by a law that prohibited groups of men "to associate together as military organizations, or to drill or parade with arms in cities and towns unless authorized by law." The Heller Court stated that this holding in Presser "[did] not refute the individual-rights interpretation of the Amendment," and has no bearing on the Second Amendment's "meaning or scope, beyond the fact that it does not prevent the prohibition of private paramilitary organizations." Regarding the holding in United States v. Miller , the Heller Court rejected the assertion that the decision in Miller established that the "Second Amendment 'protects the right to keep and bear arms for certain military purposes, but ... does not curtail the legislature's power to regulate the nonmilitary use and ownership of weapons.'" The Court declared that " Miller did not hold that and cannot be possibly read to have held that," given that the decision in Miller was predicated on the determination that the " type of weapon was not eligible for Second Amendment Protection." According to the Heller Court, the holding in Miller "is not only consistent with, but positively suggests, that the Second Amendment confers an individual right to keep and bear arms (though only arms that 'have some reasonable relationship to the preservation or efficiency of a well regulated militia')." The Court went on to note, "[h]ad the [ Miller ] Court believed that the Second Amendment protects only those serving in the militia, it would have been odd to examine the character of the weapon rather than simply note that the two crooks were not militiamen." The Court concluded its consideration of this issue by stating, " Miller stands only for the proposition that the Second Amendment right, whatever its nature, extends only to certain types of weapons." Having determined that the Second Amendment confers an individual right and that precedent supports such an interpretation, the Court stressed, "like most rights, the right secured by the Second Amendment is not unlimited." The Court noted that the right at issue had never been construed as allowing individuals "to keep and carry any weapons whatsoever in any manner whatsoever and for whatever purpose," and that "the majority of the 19 th century courts to consider the question held that prohibitions on carrying concealed weapons were lawful under the Second Amendment or state analogues." Moreover, the Court's opinion appears to indicate that current federal firearm laws are constitutionally tenable: [N]othing in our opinion should be taken to cast doubt on longstanding prohibitions on the possession of firearms by felons and the mentally ill, or laws forbidding the carrying of firearms in sensitive places such as schools and government buildings, or laws imposing conditions and qualifications on the commercial sale of arms. [fn 26: We identify these presumptively lawful regulatory measures only as examples; our list does not purport to be exhaustive.] The Court further stressed: We also recognize another important limitation on the right to keep and carry arms. Miller said, as we have explained, that the sorts of weapons protected were those "in common use at the time." [citation omitted] We think that limitation is fairly supported by the historical tradition of prohibiting the carrying "dangerous and unusual weapons." [citations omitted] The Court in Heller ultimately affirmed the holding in Parker v. District of Columbia , ruling unconstitutional the three relevant provisions of the DC Code. The Court then declared that the inherent right of self-defense is central to the Second Amendment right, and that the District's handgun ban amounted to a prohibition of an entire class of arms that has been overwhelmingly utilized by American society for that purpose. It did not specify a governing standard of review for Second Amendment issues, but stated that the District's handgun ban violates "any of the standards of scrutiny that we have applied to enumerated constitutional rights." The Court also struck down as unconstitutional the District's requirement that any lawful firearm in the home be disassembled or bound by a trigger lock, as such requirement "makes it impossible for citizens to use arms for the core lawful purpose of self-defense." However, the Court's opinion did not address the District's licensing requirement (§ 22-4504), making note of Heller's concession that such a requirement would be permissible if enforced in a manner that is not arbitrary and capricious. Subsequent to the Supreme Court decision, the District of Columbia amended its firearms laws to be in compliance with the ruling. However, there has been much legislative movement with respect to the District's firearms laws. For more information on DC gun laws, see CRS Report R40474, DC Gun Laws and Proposed Amendments , by [author name scrubbed]. Although the decision in Heller marked the first time in almost 70 years that the Supreme Court addressed the nature of the right conferred by the Second Amendment, the Court itself noted that its decision did not constitute "an exhaustive historical analysis ... of the full scope of the Second Amendment." Consequently, while the Court's opinion is extremely important simply by virtue of its determination that the Second Amendment protects an individual right to possess a firearm, it left unanswered many questions of significant constitutional magnitude. The Court acknowledged the criticism that its ruling leaves "so many applications of the right in doubt," and that "it does not provid[e] extensive historical justification for those regulations of the right," which the Court described as constitutionally permissible. In response to such criticism, the Court explained: [S]ince this case represents this Court's first in-depth examination of the Second Amendment, one should not expect it to clarify the entire field.... And there will be time enough to expound upon the historical justifications for the exceptions we have mentioned if and when those exceptions come before us. A significant question left open by the Court centers on the standard of scrutiny that should be applied to laws regulating the possession and use of firearms. In Heller , the Court refused to establish or identify any such standard, declaring instead that the challenged provisions were unconstitutional "[u]nder any of the standards of scrutiny that we have applied to enumerated constitutional rights." Yet, the Court did reject a test grounded in rational basis scrutiny, stating that "if all that was required to overcome the right to keep and bear arms was a rational basis, the Second Amendment would be redundant with the separate constitutional prohibitions on irrational laws, and would have no effect." And, the Court explicitly rejected Justice Breyer's argument, raised in his dissent, that an "interest-balancing inquiry" that "asks whether the statute burdens a protected interest in a way or to an extent that is out of proportion to the statute's salutary effects upon other important governmental interests" should be applied. Responding to Justice Breyer's suggesting, the Court stated: We know of no other enumerated constitutional right whose core protection has been subjected to a freestanding "interest-balancing" approach. The very enumeration of the right takes out of the hands of government—even the Third Branch of Government—the power to decide on a case-by-case basis whether the right is really worth insisting upon. A constitutional guarantee subject to future judges' assessments of its usefulness is no constitutional guarantee at all. Another issue that was unresolved by the Court is whether the Second Amendment applies to the states. However, this issue was soon settled in the 2009 term of the Supreme Court when it decided McDonald v. City of Chicago , subsequently discussed. On June 28, 2010, the Supreme Court issued its decision in McDonald v. City of Chicago . The issue before the Court in McDonald was whether the Second Amendment applies to, or is incorporated against, the states. An incorporation analysis generally asks whether the protections provided for in the first eight amendments of the Bill of Rights apply to state governments in the same manner that they directly apply to the federal government. Judicial treatment of incorporation has evolved over time, with the Court inquiring: (1) if the first eight amendments apply directly to the states; (2) if the Privileges or Immunities Clause of the Fourteenth Amendment guarantees these rights; and (3) if the Due Process Clause of the Fourteenth Amendment incorporates the protections provided for in the first eight amendments. These three inquiries are explained below. Initially, in the early 19 th century, the Supreme Court had ruled in Barron v. Mayor & City Council of Baltimore that the protection of individual liberties in the Bill of Rights applied only to the federal government, not to state or local governments. Chief Justice John Marshall, writing for the Court, stated: "The constitution was ordained and established by the people of the United States for themselves, for their own government, and not for the government of the individual states." He further stated that had the framers intended the Bill of Rights to apply to the states, "they would have declared this purpose in plain and intelligible language." Although application of the Bill of Rights solely to the federal government would mean that state and local governments could then be free to infringe upon these individual protections, Chief Justice Marshall observed that "[e]ach state established a constitution for itself, and in that constitution, provided such limitations and restrictions on the power of its particular government, as its judgment dictated." Although the argument continued to be made that the Bill of Rights applied directly to the states, the Court rejected this contention time and time again. It was not until after the Civil War when the Fourteenth Amendment was ratified that claimants resorted to the Privileges or Immunities Clause of Section 1 of the amendment for judicial protection. The Privileges or Immunities Clause provides: "No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States." Five years after the Fourteenth Amendment was ratified, the Supreme Court, in Slaughter-House Cases , rejected the plaintiffs' assertions that a state law, which granted a monopoly to the City of New Orleans, was in violation of the U.S. Constitution because it created involuntary servitude, denied them equal protection of the laws, and abridged their privileges or immunities as citizens under the Thirteenth and Fourteenth Amendments. In rejecting the plaintiffs' challenge, the Court narrowly construed all of these provisions. With respect to the Privileges or Immunities Clause, the Court held that this Clause was not meant to protect individuals from state government actions and was not meant to be a basis for federal courts to invalidate state laws. In doing so, the Court first acknowledged: "It is quite clear, then, that there is a citizenship of the United States, and a citizenship of a state, which are distinct from each other, and which depend upon different characteristics or circumstances in the individual." After making this distinction, the Court specifically stated that "it is only the [privileges and immunities of the citizens of the United States] which are placed by this clause under the protection of the Federal Constitution, and that the [privileges and immunities of the citizen of the State] whatever they may be, are not intended to have any additional protection by the paragraph of this amendment." Furthermore, the Court stated that "privileges and immunities relied on in the argument are those which belong to the citizens of the States as such, and that they are left to State governments for security and protection, and not by this article [the Fourteenth Amendment] placed under the special care of the Federal government." While this ruling has never been expressly overturned, and therefore generally continues to preclude use of the Privileges or Immunities Clause to apply the Bill of Rights, Justice Thomas addressed the Clause as it applies to the Second Amendment at length in his concurring opinion in McDonald (see infra ). In the early 20 th century, the Supreme Court in Twining v. New Jersey recognized the possibility that the Due Process Clause of the Fourteenth Amendment incorporates provisions of the Bill of Rights, thereby making them applicable to state and local governments. The Due Process Clause of the Fourteenth Amendment provides: "[N]or shall any State deprive any person of life, liberty, or property, without due process of law." In Twining , the Court observed that [I]t is possible that some of the personal rights safeguarded by the first eight Amendments against National action may also be safeguarded against state action, because a denial of them would be a denial of due process of law ... not because those rights are enumerated in the first eight Amendments, but because they are of such nature that they are included in the conception of due process of law. Although the Court acknowledged that the Due Process Clause included "principles of justice so rooted in the tradition and conscience of our people as to be ranked fundamental," and therefore "implicit in the concept of ordered liberty," the Court, despite debate, has never endorsed total incorporation of all of the Bill of Rights. Rather, the Court embraced what has become known as the doctrine of "selective incorporation," which holds that the Due Process Clause incorporates the text of certain provisions of the Bill of Rights. It was in Gitlow v. New York that the Supreme Court for the first time said that the First Amendment's protection of freedom of speech applies to the states through its incorporation into the Due Process Clause of the Fourteenth Amendment. Although the Court held that New York's criminal anarchy statute did not violate the Fourteenth Amendment because the state was properly exercising its police power, the Court, in finding incorporation, stated, "[F]reedom of speech and of the press ... are among the fundamental personal rights and 'liberties' protected by the due process clause of the Fourteenth Amendment from impairment by the States." Prior to McDonald , the Supreme Court had found the following provisions of the Bill of Rights to be incorporated: The First Amendment's establishment clause, free exercise clause, and protection of speech, press, assembly, and petition. The Fourth Amendment's protection against unreasonable searches and seizures and the requirement for a warrant based on probable cause; also the exclusionary rule, which prevents the government from using evidence obtained in violation of the Fourth Amendment. The Fifth Amendment's prohibition of double jeopardy, protection against self-incrimination, and requirement that the government pay just compensation when it takes private property for public use. The Sixth Amendment's requirements for speedy and public trial, by an impartial jury, with notice of the charges, and for the chance to confront adverse witnesses, to have compulsory process to obtain favorable witnesses, and to have assistance of counsel if the sentence involves possible imprisonment. The Eight Amendment's prohibition against excessive bail and cruel and unusual punishment. Over time, the Court has articulated various tests for deciding whether a provision of the Bill of Rights is incorporated through the Due Process Clause of the Fourteenth Amendment. The Supreme Court in Duncan v. Louisiana summarized these formulations, stating, "the question has been asked whether a right is among those 'fundamental principles of liberty and justice which lie at the base of all our civil and political institutions ...' whether it is 'basic in our system of jurisprudence ...' and whether it 'is a fundamental right, essential to a fair trial.' " The Court also noted, in discussing state criminal processes, that "the question ... is ... whether given this kind of [common-law] system a particular procedure is fundamental—whether, that is, a procedure is necessary to an Anglo-American regime of ordered liberty." Over 100 years ago, the Supreme Court held in United States v. Cruikshank that the Second Amendment does not act as a constraint upon state law. In its brief treatment of the Second Amendment, the Court in Cruikshank stated that "this is one of the amendments that has no other effect than to restrict the powers of the national government." This holding was reaffirmed in Presser v. Illinois , where the Court further commented that because "all citizens capable of bearing arms constitute the reserved military force or reserve militia of the United States as well as of the States," the "States cannot, even laying the constitutional provision [aside], prohibit the people from keeping and bearing arms, so as to deprive the United States of their rightful resource for maintaining the public security, and disable the people from performing their duty to the general government." In other words, the Court seemed to be of the opinion that there was no need to rely upon the Second Amendment to act as a constraint upon state law, because states could not go so far as to prohibit the people from owning firearms as doing so would interfere with the United States' ability to rely on its reserved military force—defined as "citizens capable of bearing arms"—to maintain the public security. Both of these decisions were decided shortly after the Slaughter-House Cases decision, and prior to the advent of modern incorporation principles (discussed above). In Heller , the Court commented upon the issue of incorporation, stating: With respect to Cruikshank 's continuing validity on incorporation, a question not presented by this case, we note that Cruikshank also said that the First Amendment did not apply against the States and did not engage in the sort of Fourteenth Amendment inquiry required by our later cases. Our decisions in Presser v. Illinois (citation omitted) and Miller v. Texas , 153 U.S. 535, 538, 14 S.Ct. 874, 38 L.Ed. 812 (1894), reaffirmed that the Second Amendment applies only to the Federal Government. At the time, this statement seemed to leave open the possibility that were the issue of incorporation to come before the Supreme Court, the Court would either support the application of modern incorporation doctrine principles to the Second Amendment or continue with the precedents found in Cruikshank and Presser that the Second Amendment does not apply to the states. After the Heller decision, three courts of appeals addressed whether the Second Amendment applies to the states, that is, via direct application or via incorporation through the Due Process Clause of the Fourteenth Amendment. The U.S. Courts of Appeals for the Second Circuit and Seventh Circuit both held that the Second Amendment does not apply to the states, whereas the Court of Appeals for the Ninth Circuit in Nordyke v. King held that the Second Amendment is applicable to the states, though it later vacated its decision in light of McDonald . The U.S. Court of Appeals for the Second Circuit (Second Circuit) was the first to address this issue in Maloney v. Rice. In Maloney , the plaintiff sought a declaration that a New York penal law that punishes the possession of nunchukas was unconstitutional. On appeal, the plaintiff argued that the state statutory ban violates the Second Amendment because it infringes on his right to keep and bear arms. The court, citing Presser , held that the state law did not violate the Second Amendment because "it is settled law ... that the Second Amendment applies only to limitations the federal government seeks to impose on this right." The court noted that, although Heller might have questioned the continuing validity of this principle, Supreme Court precedent directed them to follow Presser because "[w]here, as here, a Supreme Court precedent 'has direct application in a case, yet appears to rest on reasons rejected in some other line of decisions, the Court of Appeals should follow the case which directly controls, leaving to the Supreme Court the prerogative of overruling its own decisions.'" Similarly, in National Rifle Association v. City of Chicago , the U.S. Court of Appeals for the Seventh Circuit (Seventh Circuit) held that the Second Amendment does not apply to the states. Here, the National Rifle Association (NRA) appealed the decision of the lower court to dismiss its suits against two municipalities on the ground that Heller dealt with law enacted under the authority of the national government, while the City of Chicago and Village of Oak Park are subordinate bodies of a state. Although the NRA case was decided after the Ninth Circuit's decision in Nordyke v. King , which held the opposite, the Seventh Circuit stated that the Supreme Court's decisions in Cruikshank , Presser , and Miller still control, as they have direct application in the case. The court noted that, although Heller questioned Cruikshank , this "[did] not license inferior courts to go their own ways.... If a court of appeals may strike off on its own, this not only undermines the uniformity of national law but also may compel the Justices to grant certiorari before they think the question ripe for decision." On April 20, 2009, the U.S. Court of Appeals for the Ninth Circuit in Nordyke v. King held that the Due Process Clause of the Fourteenth Amendment incorporated the Second Amendment and applied it against the states and local governments. However, the Chief Judge issued an order on July 29, 2009, stating that the Ninth Circuit would rehear the case en banc and that the three-judge panel decision issued in April 2009 was not to be cited as precedent by or to any court of the Ninth Circuit. Following the McDonald decision, the Ninth Circuit vacated the panel decision and remanded the case for further consideration. Despite these developments, this report examines the April 2009 opinion, as the Court in McDonald followed a similar analysis when it examined the Second Amendment through the Due Process Clause of the Fourteenth Amendment. Nordyke stated that there are three doctrinal ways the Second Amendment could apply to the states: (1) direct application, (2) guaranteed as a right by the Privileges or Immunities Clause of the Fourteenth Amendment, or (3) incorporation by the Due Process Clause of the Fourteenth Amendment. Citing precedent, the court held that it was precluded from finding incorporation through the first two options. The court then embarked on an analysis under the Due Process Clause of the Fourteenth Amendment. It began by noting that "[s]elective incorporation is a species of substantive due process, in which the rights the Due Process Clause protects include some of the substantive rights enumerated in the first eight amendments of the Constitution." The court stated that addressing either selective incorporation, which addresses enumerated rights, or substantive due process, which addresses unenumerated rights, requires the court to answer if "a right is so fundamental that the Due Process Clause guarantees it." To answer this, the Ninth Circuit, although acknowledging other standards used in selective incorporation analyses, applied another standard the Supreme Court used "outside the context of incorporation" to determine whether an individual right unconnected to criminal or trial procedures is a fundamental right protected by substantive due process. Specifically, the Ninth Circuit inquired "whether the right to keep and bear arms ranks as fundamental, meaning 'necessary to an Anglo-American regime of ordered liberty' ... [which compelled them] to determine whether the right is 'deeply rooted in this Nation's history and tradition' (emphasis added)." The inquiry "deeply rooted in this Nation's history and tradition" stems from Moore v. City of East Cleveland , where the Supreme Court recognized a fundamental right to keep family together that includes an extended family. Noting that "incorporation is logically a part of substantive due process," the court in Nordyke applied the standard from Moore because that case noted "the similarity between ... general substantive due process and the incorporation inquiry stated in Duncan [ v. Louisiana ]." As will be seen infra , the Supreme Court in McDonald generally abstained from addressing that its past decisions had linked the Due Process Clause with a substantive due process analysis even though it also utilized the "deeply rooted in our Nation's history" standard. However, Justice Stevens, dissenting, conducted his own substantive due process analysis and concluded that the right is not incorporated. After engaging in a historical analysis of the right during the Founding era, the post-Revolutionary years, and the post-Civil War era, and drawing from some of the Supreme Court's findings in Heller , the Ninth Circuit concluded that the Second Amendment is incorporated and applies against state and local governments because "the crucial role [of this] deeply rooted right ... compels us to recognize that it is indeed fundamental [and] necessary to the Anglo-American conception of the ordered liberty that we have inherited." Typically, when a right is deemed fundamental, the court must use the strict scrutiny test as the standard of review, meaning that "a law will be upheld if it is necessary to achieve a compelling government purpose." Although the Ninth Circuit concluded that the Second Amendment was a fundamental right, it did not apply the strict scrutiny test to the challenged county ordinance. Rather, it noted that the Supreme Court in Heller did not announce a standard of review and held that the challenged ordinance, which prohibited the possession of firearms or ammunition on county property, "fits within the exception from the Second Amendment for 'sensitive places' that Heller recognized." On June 28, 2010, the Supreme Court issued its decision in McDonald v. City of Chicago . The petitioners, Otis McDonald and other residents of Chicago and the Village of Oak Park, Illinois, asserted that certain municipal ordinances prevented them from keeping handguns in their homes for self-defense. The Chicago ordinance provided: "No person ... shall ... possess ... any firearm unless such person is the holder of a valid registration certificate of such firearm." The Chicago Code, however, prohibited the registration of most handguns, which "effectively ban[s] handgun possession by almost all private citizens who reside in the City." Similarly, Oak Park made it "unlawful for any person to possess ... any firearm," a term that included "pistols, revolvers, guns and small arms ... commonly known as handguns." Petitioners advocated for incorporation of the Second Amendment against the states either under the Fourteenth Amendment's Privileges or Immunities Clause or under the Fourteenth Amendment's Due Process Clause. It is worth noting that the petitioners devoted much of their brief and oral argument for application of the Second Amendment via the Privileges or Immunities Clause of the Fourteenth Amendment. On the other hand, the NRA, who was recognized by the Court as a "respondent" in support of the petitioners' (McDonald) group, primarily argued for incorporation of the Second Amendment via the Due Process Clause of the Fourteenth Amendment. Although five Justices agreed that the Second Amendment applies to the states, these Justices came to different conclusions as to how the amendment is incorporated, resulting in a fractured opinion. Justice Alito delivered the opinion of the Court and concluded that the Due Process Clause of the Fourteenth Amendment incorporates the Second Amendment. This opinion was joined by Chief Justice Roberts, and Justices Scalia and Kennedy. Justice Thomas, however, filed a concurring opinion in which he concluded that the Privileges or Immunities Clause of the Fourteenth Amendment guarantees the right to keep and bear arms. Two dissenting opinions were filed. Justice Stevens opined that whether the Second Amendment applies should be analyzed under a substantive due process analysis, and that "the analysis should depend on whether there is a constitutionally protected liberty to keep handguns in the home ... which he [consequently] did not believe existed due to the 'fundamentally ambivalent relationship' of firearms to liberty." The second dissenting opinion was authored by Justice Breyer, joined by Justices Ginsburg and Sotomayor, who opined that the history of the right is so uncertain that it does not support incorporation; that determining the constitutionality of a particular state gun law is outside the Court's scope and expertise; and that incorporation would intrude significantly upon state police power. Justice Alito, writing for the Court, revisited the precedents in Barron and Slaughter-House Cases , which precluded application of the Bill of Rights either by direct application or the Privileges or Immunities Clause of the Fourteenth Amendment, respectively. Although Justice Alito, writing for the plurality, declined to disturb these holdings, and further acknowledged that the Court's decisions in Cruikshank , Presser , and Miller held that the Second Amendment applies only to the federal government, he stated that those decisions "do not preclude us from considering whether the Due Process Clause of the Fourteenth Amendment makes the Second Amendment right binding on the States." Before analyzing how the Fourteenth Amendment incorporates the Second Amendment, the Court first examined the evolution of its Due Process Clause analysis. It noted five features of its earlier approach to a Due Process Clause analysis, which included viewing "the due process question as entirely separate from the question whether a right was a privilege or immunity of national citizenship"; the use of "different formulations in describing the boundaries of due process," which included looking to "immutable principles of justice which no member of the Union may disregard," or protecting rights that are "so rooted in the traditions and conscience of our people as to be ranked fundamental," and that are "the very essence of a scheme of ordered liberty ... and essential to 'a fair and enlightened system of justice'"; asking whether any other "civilized system could be imagined" as not affording a particular procedural safeguard before compelling a state to recognize a particular right; recognizing that some rights set out in the Bill of Rights failed to meet the test for inclusion within the protection of the Due Process Clause; and holding that even if a right was protected against state infringement that "the protection or remedies afforded against [the state] sometimes differed from the protection or remedies provided against abridgment by the Federal Government." Out of these five features, the Court pointed out that later cases, which selectively incorporated certain rights, abandoned three of the previously noted characteristics. The Court, instead of examining " any civilized system," now asks "whether a particular guarantee is fundamental to our scheme of ordered liberty and system of justice." The second feature the Court has shed was any prior "reluctance to hold that rights guaranteed by the Bill of Rights met the requirements for protection under the Due Process Clause," stating that the Court has incorporated almost all of its provisions, as discussed above. Lastly, the Court has "abandoned 'the notion that the Fourteenth Amendment applies to the States only a watered-down, subjective version of the individual guarantees of the Bill of Rights,' stating that it would be 'incongruous' to apply different standards 'depending on whether the claim was asserted in a state or federal court.'" With some exceptions, the Court has held that incorporated Bill of Rights protections "'are all to be enforced against the States under the Fourteenth Amendment according to the same standards that protect those personal rights against federal encroachment.'" With this modern framework for analyzing if a right comes under the protection of the Due Process Clause, the Court turned to the issue of whether the Second Amendment was just such a right that was incorporated in the concept of due process. The Court, similar to the Ninth Circuit, analyzed whether "the right to keep and bear arms is fundamental to our scheme of ordered liberty, (citation omitted) or as [it has] said in a related context, whether this right is 'deeply rooted in this Nation's history and tradition' Washington v. Glucksberg , 521 U.S. 702, 721 (1997) (internal quotation marks omitted)." Turning back to its decision in Heller , the Court emphasized self-defense as a basic right that is the "central component" of the Second Amendment right. It reiterated that it had found "the need for defense of self, family, and property [as] most acute" in the home and that the right applies to handguns because they are "the most preferred firearm in the nation to 'keep' and use for protection of one's home and family." Thus, the Court's decision appeared to concentrate on whether the Fourteenth Amendment's Due Process Clause incorporated the Second Amendment as it was defined in Heller , that is, the right to keep and bear arms for a lawful purpose such as self-defense and that it protects those weapons typically possessed by law-abiding citizens for lawful purposes. In the Court's review of historical evidence from both the Framing-era of the Bill of Rights and the ratifying era of the Fourteenth Amendment, it believed it to be "clear that the Framers and ratifiers ... counted the right to keep and bear arms among those fundamental rights necessary to our system of ordered liberty." According to the Court, both Federalists and Antifederalists of the Framing-era considered the right to keep and bear arms as fundamental to the newly formed system of government, but differed as to whether the right was sufficiently protected. Federalists believed that the right was adequately protected due to the limited powers assigned to the federal government, while Antifederalists, who feared that the new federal government would infringe on traditional rights, insisted on the adoption of the Bill of Rights as a condition of ratification. By the mid-19 th century, the Court found that the Second Amendment "was still highly valued for the purposes of self-defense" even though the perceived threat of the federal government's intrusion had faded. According to the Court, in the aftermath of the Civil War, southern states and militia members made "systematic efforts" to disarm African Americans, to which the 39 th Congress decided that legislative action was necessary. The legislative actions included the Freedmen's Bureau Act and the Civil Rights Act of 1866, both of which the Court found demonstrated that the right to keep and bear arms was still recognized as fundamental. Specifically, Section 14 of the Freedmen's Bureau Act provided that "the right ... to have full and equal benefit of all laws and proceedings concerning personal liberty, personal security, and the acquisition, enjoyment, and disposition of estate, real and personal, including the constitutional right to bear arms , shall be secured to and enjoyed by all citizens ... without respect to race or color, or previous condition of slavery (emphasis added)." Section 1 of the Civil Rights Act, similarly, guaranteed the "full and equal benefit of all laws and proceedings for the security of person and property, as is enjoyed by white citizens." Although the Civil Rights Act does not explicitly define the meaning of "all laws and proceedings," the Court stated that Representative Bingham, one of the drafters of the Fourteenth Amendment, believed the act "protected the same rights as enumerated in the Freedmen's Bureau bill." Based on this evidence, the Court concluded that "the Civil Rights Act, like the Freedmen's Bureau Act, aimed to protect 'the constitutional right to bear arms' and not simply to prohibit discrimination" and that "[t]oday, it is generally accepted that the Fourteenth Amendment was understood to provide a constitutional basis for protecting the rights set out in the Civil Rights Act." In addition, the Court presented excerpts of the congressional debates on the Fourteenth Amendment, and from the period immediately following ratification of the amendment, as well as emphasized the number of state constitutions that recognized the right, as evidence that the right to keep and bear arms was considered fundamental. Although the Court found incorporation under the Due Process Clause, the plurality chose to address an argument made by respondents concerning the Privileges or Immunities Clause, specifically that the historical record provides no basis for imposing the Second Amendment on the states, and that Section 1, presumably in its entirety, was "overwhelmingly" viewed by Members of the U.S. House of Representatives as an antidiscrimination rule. The respondents' end point seemed to be that mixed understanding and divided views among 19 th century legislators and legal scholars alike demonstrate that the public could not have understood the reach of the Privileges or Immunities Clause or understood that the Clause incorporated the Bill of Rights. The Court, however, focused on the assertion that Section 1 would only outlaw discriminatory measures and stated five reasons as to why such a construction would be "implausible." These reasons included (1) that if Section 1 did no more than prohibit discrimination, it would be plausible that "the Fourth Amendment, as applied to the states, would not prohibit all unreasonable searches and seizures, but only discriminatory searches and seizure"; (2) that the Freedmen's Bureau Act must be read as more than a simple prohibition of racial discrimination because it would have been nonsensical for Congress to guarantee "the full and equal benefit" of "the constitutional right to bear arms," if it did not exist; and (3) that if the 39 th Congress and the ratifying public had simply prohibited racial discrimination with respect to the bearing of arms, opponents of the Black Codes, laws that deprived blacks of their rights, would have been left without the means of self-defense. Although the plurality declined to find incorporation under the Privileges or Immunities Clause, Justice Thomas in his concurring opinion proceeded with his own analysis of the Second Amendment's application through the Clause, because he could "not agree that it is enforceable against the States through a clause that speaks only to 'process.'" Justice Thomas took to task the Court's precedent where it has determined that the Due Process Clause applies to unenumerated rights against the states, believing that "neither its text nor its history suggests that it protects the many substantive rights this Court's cases now claim it does." In acknowledging the numerous cases founded upon the substantive due process framework and the importance of stare decisis , Justice Thomas stated that his only task at hand is to decide "to what extent, [a] particular clause in the Constitution protects the particular right at issue" and that the objective of his inquiry is to "discern what 'ordinary citizens' at the time of ratification would have understood the Privileges or Immunities Clause to mean." First, Justice Thomas found that "the terms 'privileges' and 'immunities' had an established meaning as synonyms for 'rights.'" Second, in tracing the English roots, he concluded that the "[F]ounding generation generally did not consider many of the rights identified in [the] amendments as new entitlements, but as inalienable rights of all men," and that "both the States and Federal Government had long recognized the inalienable rights of state citizenship." Third, he concluded that Article IV, § 2, which provides that "[t]he Citizens of each State shall be entitled to all Privileges and Immunities of Citizens in the several States," protected traveling citizens against state discrimination with respect to the fundamental rights of state citizenship. Noting textual similarity between Article IV, § 2 and that of the Privileges or Immunities Clause (§ 1) of the Fourteenth Amendment, Justice Thomas stated that "it can be assumed that the public's understanding of the latter was informed by its understanding of the former." Therefore, to determine whether the Second Amendment was one of the rights guaranteed in the Fourteenth Amendment's Privileges or Immunities Clause, he explored two remaining questions. First, he asked if "the privileges or immunities of 'citizens of the United States' recognized by § 1 [are] the same as the privileges and immunities of 'citizens in the several States' to which Article IV, § 2 refers?" To a certain extent, Justice Thomas implicitly answered this question by referring to some instances where politicians debating the Fourteenth Amendment and legal commentators equated the privileges and immunities of § 1 to those referred to in Article IV, § 2. However, much of Justice Thomas's analysis focused on presenting evidence, such as treaties, congressional speeches, and legislation of the era. From these various sources, Justice Thomas concluded that the "evidence overwhelmingly demonstrates" that "the ratifying public understood the Privileges or Immunities Clause to protect constitutionally enumerated rights, including the right to keep and bear arms." The second question asked is if "§ 1 [of the Fourteenth Amendment], like Article IV, § 2 prohibits only discrimination with respect to certain rights if the State chooses to recognize them, or does it require States to recognize those rights?" Or, more specifically applied to the right at issue, "whether the Privileges or Immunities Clause merely prohibits States from discriminating among citizens if they recognize the Second Amendment's right to keep and bear arms, or whether the Clause requires States to recognize the right." In his analysis, Justice Thomas seemed to answer this question by stating "it was understood that liberty would be assured little protection if §1 left each State to decide which privileges or immunities of United States citizenship it would protect." However, a greater part of his discussion to this second question was devoted to why the Privileges or Immunities Clause protects against more than just state discrimination and establishes a "minimum baseline of rights for all American citizens." First, Justice Thomas pointed out that the Privileges or Immunities Clause uses the verb "abridge" rather than "discriminate," to describe the limit it imposes on state authority ("[n]o State shall"). He referred to the dictionary which defines the word "abridge" to mean "[t]o deprive; to cut off ... as, to abridge one of his rights." Thus, a plain reading of the Clause indicates that it is meant to impose a limitation on state power to infringe upon pre-existing substantive rights and does not indicate that the Framers of the Clause used "abridge" to prohibit only discrimination. Second, Justice Thomas presented several reasons as to the lack of discussion on this Clause and Section 1 to rebut the "typical" argument that because there was no extensive public discussion on the Clause, that it must "not have been understood to accomplish such a significant task of subjecting States to federal enforcement of minimum baseline of rights." He, instead, looked to historical events that "underscored the need for, and wide agreement upon, federal enforcement of constitutionally enumerated rights against the States, including the right to keep and bear arms." Chronicling the many instances prior to, and after, the Civil War where pro-slavery forces and southern legislatures enacted laws that "repressed virtually every right recognized in the Constitution" including prohibiting blacks from carrying or possessing firearms, Justice Thomas, reiterating the Court, stated that "if the Fourteenth Amendment 'had outlawed only those laws that discriminate on the basis of race or previous condition of servitude, African-Americans in the South would likely have remained vulnerable to attack by many of their worst abusers: the state militia and state peace officers.'" In other words, because evidence demonstrates that the intent was to protect blacks from such abuses, the Clause, contrary to respondents' claim, cannot simply be about protection from discriminatory state laws, as a nondiscriminatory law banning firearm possession outright would have still "left firearms in the hands of militia and local peace officers." Building upon his Privileges or Immunities Clause analysis, Justice Thomas concluded that "history confirms what the text of the ... Clause most naturally suggests: ... that '[n]o State shall ... abridge' the rights of United States citizens, the Clause establishes a minimum baseline of federal rights, and the constitutional right to keep and bear arms plainly was among them." Justice Stevens began his dissent by rephrasing the question presented. Rather than asking if the Fourteenth Amendment incorporates the Second Amendment, a question he believed to be settled by the Cruickshank , Presser , and Miller decisions, the question he posed was "whether the Constitution 'guarantees individuals to a fundamental right,' enforceable against the States, 'to possess a functional, personal firearm, including a handgun, within the home.'" He stated that the Court's decisions that render procedural guarantees in the Bill of Rights enforceable against the states have little impact on the meaning of the word "liberty" in the Clause or about the scope of its protection of nonprocedural rights, such as the Second Amendment. Asserting that a substantive due process analysis must be used to determine if the Second Amendment should be applied to the states, his dissent provided a "fresh survey of this old terrain." Justice Stevens presented three general principles elicited from the Court's substantive due process case law. First, he stated "that the rights protected by the Due Process Clause are not merely procedural in nature." A second principle made clear by case law is that substantive due process is fundamentally a matter of personal liberty, in which it must be asked if the interest asserted is "compromised within the term liberty." The third principle derived from case law is that "the rights protected against state infringement by the Fourteenth Amendment's Due Process Clause need not be identical in shape or scope to the rights protected against Federal Government infringement by the various provisions of the Bill of Rights." He also forewarned that "the costs of federal courts' imposing a uniform national standard may be especially high when the relevant regulatory interests vary significantly across localities, and when the ruling implicates the States' core police powers." Justice Stevens disagreed with the plurality that the historical pedigree of a right is dispositive of its status under the Due Process Clause, and its suggestion "that only interests that have proved 'fundamental from an American perspective,' ... or 'deeply rooted in this Nation's history and tradition,' to the Court's satisfaction, may qualify for incorporation into the Fourteenth Amendment." He stated that although the tests have varied, the Court "has been largely consistent in its liberty-based approach to substantive interests outside of the adjudicatory system," and that the focus has been "not so much on the historical conceptions of the guarantee as on its functional significance within the States' regimes." With this framework, Justice Stevens believed it necessary to examine the "nature of the right that petitioners have asserted," and "whether [the right asserted] is an aspect of Fourteenth Amendment 'liberty.'" Finding the gravamen behind petitioners' complaint plainly to be "an appeal to keep a handgun or other firearm of one's choosing in the home," Justice Stevens stated that the petitioners' argument "has real force" but felt that a number of factors supported the respondents. First, Justice Stevens stated that "firearms have a fundamentally ambivalent relationship to liberty." On the one hand, "[g]uns may be useful for self-defense, as well as hunting and sport, but they also have a unique potential to facilitate death and destruction and thereby to destabilize ordered liberty." Second, "the right to possess a firearm of one's choosing is different in kind from the liberty interests [the Court] has recognized under the Due Process Clause" and that is "not the kind of substantive interest ... on which a uniform, judicially enforced national standard is presumptively appropriate." Third, the experience of other advanced democracies undermines "the notion that an expansive right to keep and bear arms is intrinsic to ordered liberty." Fourth, Justice Stevens reasoned that the Second Amendment differs from the other Amendments in that it is a federalism provision and that "it is directed at preserving the autonomy of the sovereign States, and its logic therefore 'resists' incorporation by a federal court against the States." In other words, because the Second Amendment, like the Tenth Amendment, exists for the vitality of the states, one cannot argue that it applies to the states. Furthermore, Justice Stevens stated the reasons that motivated the Framers or Reconstruction Congress to act "have only a limited bearing on the question that confronts the homeowner in a crime-infested metropolis today." Fifth, he emphasized that the "idea that States may place substantial restrictions on the right to keep and bear arms short of complete disarmament, is in fact, far more entrenched than the notion that the Federal Constitution protects any such right." Agreeing with the Seventh Circuit that "[f]ederalism is a far 'older and more deeply rooted tradition than is a right to carry,' or to own, 'any particular kind of weapon,'" Justice Stevens noted that the Court's ruling in particular will take a "heavy toll in terms of state sovereignty." Lastly, due to the varying patterns of gun violence and traditions and cultures of lawful gun use across the states and localities, among other things, Justice Stevens asserted that even if the Court could assert a plausible constitutional basis for intervening, that it should not necessarily do so. Justice Scalia also wrote a concurring opinion, which takes issue with the substantive due process, or "liberty clause" analysis espoused by Justice Stevens. Justice Scalia primarily critiqued the subjective nature of the standard proposed by the dissent, stating that any of the guideposts or constraints listed by Justice Stevens still leaves too much power in the hands of judges, ultimately depriving people of power. Justice Breyer issued a separate dissenting opinion, in which Justices Ginsburg and Sotomayor joined. Noting Justice Stevens's conclusion that the Fourteenth Amendment's guarantee of substantive due process does not include a general right to keep and bear firearms for purposes of self-defense, Justice Breyer chose to consider separately the question of "incorporation" as the Court had done so when it asked "if the Second Amendment right to private self-defense is 'fundamental' so that it applies to the States through the Fourteenth Amendment." In short, Justice Breyer concluded that he could "find nothing in the Second Amendment's text, history, or underlying rationale that could warrant characterizing it as 'fundamental' insofar as it seeks to protect the keeping and bearing of arms for private-self-defense purposes." First, Justice Breyer revisited the Heller decision by stating that the Court had based its conclusion "almost exclusively upon its reading of history." Yet, he cited numerous articles by historians, scholars, and judges that the history underlying the Heller decision is far from clear. Given the Court's emphasis on the historical pedigree of the right, he thus posited "where Heller 's historical foundations are so uncertain, why extend its applicability?" However, Justice Breyer expressed that the Court "has never stated that the historical status of a right is the only relevant consideration," but rather it has asked if the "right in question has remained fundamental over time." Furthermore, he opined that the Court should look to other factors where history does not provide a clear answer. These factors include "the nature of the right; any contemporary disagreement about whether the right is fundamental; the extent to which incorporation will further other ... constitutional aims; and the extent to which incorporation will advance or hinder the Constitution's structural aims, including its division of powers among different governmental institutions." Justice Breyer applied these factors to the "private right of self-defense" as it is considered "the central component" of the Second Amendment by the Court in Heller . With respect to these factors, he found (1) that there is disagreement, or no consensus, that the private right of self-defense is fundamental; (2) that there is no reason to believe that incorporation will further any broader constitutional objectives; and (3) that incorporation of the right will disrupt the constitutional allocation of decision-making authority. Justice Breyer gave several reasons in support of this last factor, including that incorporation of the right recognized in Heller "would amount to an incursion on a traditional and important area of state concern, altering the constitutional relationship between the States and the Federal Government." Additionally, because "determining the constitutionality of a particular state gun law requires finding answers to complex empirically based questions," he made the case that the courts are not suited with either the expertise or the tools to weigh the constitutional right to bear arms "against the 'primary concern of every government—a concern for the safety and indeed the lives of its citizens'" (citation omitted). In light of these factors, he suggested that the Court could proceed in examining state gun regulation by "adopting a jurisprudential approach similar to the many state courts that administer a state constitutional right to bear arms." However, he noted that the Court has not only not done so, but also rejected an "interest-balancing approach" similar to that utilized by the states. Second, Justice Breyer returned to examine history after determining that none of the factors supported incorporation. Because the Court examined whether the interests the Second Amendment protects are "deeply rooted in this Nation's history and tradition," Justice Breyer declared that the question, thus, is not whether there are references to the right to bear arms for self-defense throughout the Nation's history as there naturally would be, but rather "whether there is a consensus that so substantial a private self-defense right as the one described in Heller applies to the States." Although the Court in Heller collected much evidence, Justice Breyer stated that he found "no more than ambiguity and uncertainty" when he supplemented the findings in Heller with additional historical facts from the 18 th , 19 th , 20 th , and 21 st centuries. He declared that "a historical record that is so ambiguous cannot itself provide an adequate basis for incorporating a private right of self-defense and applying it against the States." The plurality opinion criticized Justice Breyer's dissent on four grounds. First, it did not approve of his assertion that "there is no popular consensus" that the right is fundamental, stating that the Court has never used "popular consensus" as a rule for finding incorporation. Second, the plurality did not agree with his argument that "the right does not protect minorities or persons holding political power" when he argued that incorporation should not be found because the right at issue does not further any broader constitutional objective. The plurality countered by citing petitioners' and other supporting briefs' claims that the right is especially important for women and members of groups vulnerable to crime as evidence that the Second Amendment right protects "the rights of minorities and other residents of high-crime areas whose needs are not being met by elected public officials." Third, the plurality agreed with Justice Breyer that incorporation will limit the legislative freedom of the states, but it was not convinced that this argument was persuasive in finding a lack of incorporation, given that a limitation on the states always exists when a provision is incorporated. Last, the plurality disagreed with Justice Breyer's argument that "incorporation will require judges to assess the costs and benefits of firearms restrictions," because "[t]he very enumeration of the right takes out of the hands of government ... the power to decide on a case-by-case basis whether the right is really worth insisting upon"(emphasis in the original). Although holding that the Second Amendment as recognized in Heller applies to the states, the Court did not decide whether the challenged municipal ordinances were in violation of the amendment, leaving the question for the lower court to examine. Because the McDonald decision was thus limited, a number of questions unanswered by the Court in Heller still remain, most of which are concerned with the scope of the Second Amendment. First, what standard of judicial scrutiny will be used to decide if a firearms law is in violation of the Second Amendment? As discussed above, the Court in Heller did not specify a particular level of scrutiny, instead stating that the three challenged District of Columbia firearms provisions were unconstitutional "[u]nder any of the standards of scrutiny that we have applied to enumerated constitutional rights." The Court in Heller rejected a rational basis standard as well as Justice Breyer's proposed "interest-balancing" inquiry, which would have examined "whether the statute burdens a protected interest in a way that is out of proportion to the statute's salutary effects upon other important governmental interests." (For more of the Court's discussion of the standard of scrutiny in Heller , see " The Second Amendment Post- Heller "). Since McDonald , the U.S. Court of Appeals for the Third Circuit (Third Circuit), in United States v. Marzzarella , attempted to draw a framework for how to approach such cases when it held that a federal ban on possession of unmarked firearms was constitutional. The Third Circuit noted that Heller suggested a two-pronged approach: First, we ask whether the challenged law imposes a burden on conduct falling within the scope of the Second Amendment's guarantee (citations omitted). If it does not, our inquiry is complete. If it does, we evaluate the law under some form of means-end scrutiny. If the law passes muster under the standard, it is constitutional. If it fails, it is invalid. With respect to the challenged federal statute, the defendant argued that because firearms in common use in 1791 did not have serial numbers, the Second Amendment must protect firearms without serial numbers. The court was not convinced by this argument because it found that "it would make little sense to categorically protect a class of weapons bearing a certain characteristic wholly unrelated to their utility. ... The mere fact that some firearms possess a nonfunctional characteristic should not create a categorically protected class of firearms on the basis of that characteristic." The court was further skeptical of the defendant's argument that "possession in the home is conclusive proof that § 922(k) regulates protected conduct." Nonetheless, the court assumed that 18 U.S.C. § 922(k) burdened the defendant's Second Amendment right. Looking to First Amendment jurisprudence for guidance, the court noted that even an enumerated, fundamental right may be subjected to varying levels of scrutiny depending on the circumstances. The court noted that § 922(k) "does not severely limit the possession of firearms," and still pass muster because the statute is narrowly tailored to achieve the government's compelling interest in preserving serial numbers for tracing purposes. Second, does the Second Amendment right for purposes of lawful self-defense extend only to the home? In both Heller and McDonald , the provisions challenged were those that prevented handgun possession in the home, and in each case the Supreme Court stressed the right of self-defense within the home as being central component of the right to keep and bear arms. However, the Court did not make clear if this similar protective right extend to a vehicle, a temporary living space, a place of business, or in public places? Heller mentioned the possibility that the self-defense right has the potential to extend further upon "future evaluation." Third, what types of regulations would be burdensome enough to infringe on the Second Amendment right? Both Heller and McDonald emphasized that the right to keep and bear arms is not "a right to keep and carry any weapon whatsoever in any manner whatsoever and for whatever purpose." The Court further repeated assurances that its holding "does not imperil every law regulating firearms," and "[does] not cast doubt on [] longstanding regulatory measures [such] as 'prohibitions on the possession of firearms by felons and the mentally ill,' 'laws forbidding the carrying of firearms in sensitive places such as schools and government buildings, or laws imposing conditions and qualifications on the commercial sale of arm.'" Heller indicated that mere regulation of a right would not sufficiently infringe upon, or burden, the Second Amendment right, when it pointed out that certain colonial-era ordinances did not "remotely burden the right of self-defense as much as an absolute ban on handguns." In other words, it appears that to be burdensome, a regulation must also substantially burden the self-defensive right. Fourth, what types of weapons will fall within the protection of the Second Amendment? Heller determined that the Second Amendment protection extends to weapons that are "in common use at the time," and not those that are "dangerous and unusual." The Court in Heller made clear that the Second Amendment protects handguns, as it found them to be a common weapon "overwhelmingly chosen by American society" for purposes of self-defense, but not other weapons such as machine guns, short-barreled rifles and shotguns, or grenade launchers. However, it is unclear if other types of so-called "assault" weapons, martial arts weapons, and clubs will be protected under the Second Amendment. There have been recent challenges to state and local "assault weapons" bans, which have been upheld. In 2009, the California Court of Appeals in People v. James considered Heller 's impact on California's Roberti-Roos Assault Weapons Control Act of 1989, which several localities like the District of Columbia and Cook County, Illinois have mirrored. In James , the court declared that the prohibited weapons on the state's list "are not the types of weapons that are typically possessed by law-abiding citizens for lawful purposes such as sport hunting or self-defense; rather these are weapons of war." It concluded that the relevant portion of the act did not prohibit conduct protected by the Second Amendment as defined in Heller and therefore the state was within its ability to prohibit the types of dangerous and unusual weapons an individual can use. It is highly likely that these last three questions, which center on the scope of the Second Amendment, will result in future litigation. As courts begin to tackle these questions, they may draw from the Third Circuit's framework or develop their own standards. For example, since the Marzzarella decision, the U.S. Court of Appeals for the Seventh Circuit in United States v. Skoien rejected a Second Amendment challenge to 18 U.S.C. § 922(g)(9)—prohibiting persons convicted of misdemeanor crimes of domestic violence from possessing firearms—on the basis that "logic and data" demonstrate "a substantial relation between § 922(g)(9) and [an important governmental] objective." Faced with evaluating the same federal provision as in Skoien , the U.S. Court of Appeals for the Fourth Circuit (Fourth Circuit) in United States v. Chester issued a decision to provide district courts in its circuit guidance on the framework for deciding Second Amendment challenges. The Fourth Circuit followed the two-pronged approach delineated in Marzzarella , that is, the first, a historical inquiry "seeks to determine whether the conduct at issue was understood to be within the scope of the right at the time of ratification," and second, if the regulation burdens the conduct that was within the scope of the Second Amendment as historically understood, "then we move up to the second step of applying the appropriate form of means-end scrutiny." Although the Fourth Circuit remanded the case to the district court, it noted that § 922(g)(9), like § 922(g)(1)—prohibiting convicted felons from possession—requires the court to evaluate whether a person, rather than a person's conduct, is unprotected by the Second Amendment, and that "the historical data is not conclusive on the question of whether the Founding era understanding was that the Second Amendment did not apply to felons." Thus, as in Mar zza rella , the Fourth Circuit assumed, due to lack of historical evidence, that the defendant was entitled to some Second Amendment protection to keep and possess firearms in his home for self-defense. For this defendant and other similarly situated persons, the court declared that the government, upon remand, must meet the intermediate scrutiny standard and not strict scrutiny, because the defendant's claim "was not within the 'core right' identified in Heller —the right of a law-abiding , responsible citizen to possess and carry a weapon for self-defense—by virtue of [the defendant's] criminal history as a domestic violence misdemeanant." (emphasis in the original).
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In District of Columbia v. Heller, the Supreme Court of the United States ruled in a 5-4 decision that the Second Amendment to the Constitution of the United States protects an individual right to possess a firearm, unconnected with service in a militia, and the use of that firearm for traditionally lawful purposes, such as self-defense within the home. The decision in Heller affirmed the decision of the Court of Appeals for the District of Columbia, which declared three provisions of the District of Columbia's Firearms Control Regulation Act unconstitutional. The provisions specifically ruled on were: DC Code § [phone number scrubbed].02, which generally barred the registration of handguns; DC Code § 22-4504, which prohibited carrying a pistol without a license, insofar as the provision would prevent a registrant from moving a gun from one room to another within his or her home; and DC Code § [phone number scrubbed].02, which required that all lawfully owned firearms be kept unloaded and disassembled or bound by a trigger lock or similar device. In noting that the District's approach "totally bans handgun possession in the home," the Supreme Court declared that the inherent right of self-defense is central to the Second Amendment right, and that the District's handgun ban amounted to a prohibition of an entire class of arms that has been overwhelmingly utilized by American society for that purpose. The Court in Heller conducted an extensive analysis of the Second Amendment to interpret its meaning, but the decision left unanswered other significant constitutional questions, including the standard of scrutiny that should be applied to laws regulating the possession and use of firearms, and whether the Second Amendment is incorporated, or applies to, the states. After Heller, three federal Courts of Appeals addressed the question of incorporation. Two of these decisions, from the U.S. Courts of Appeals for the Second Circuit and the Seventh Circuit, held that the Second Amendment did not apply to the states, whereas the Court of Appeals for the Ninth Circuit held that the Second Amendment is incorporated under the Due Process Clause of the Fourteenth Amendment, although this decision has since been vacated. In McDonald v. City of Chicago, the Court reversed the decision of the Court of Appeals for the Seventh Circuit, and held that the Second Amendment applies to the states. With respect to the Heller decision, this report provides an overview of judicial treatment of the Second Amendment over the past 70 years in both the Supreme Court and federal appellate courts. With respect to the McDonald decision, this report presents an overview of the principles of incorporation, early cases that addressed the application of the Second Amendment to state governments, and the federal appellate cases that addressed incorporation of the Second Amendment since the Heller decision. Lastly, this report provides an analysis of the Court's opinions in Heller and McDonald and the potential implications of these decisions for firearms legislation at the federal, state, and local levels.
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Many U.S. policymakers have viewed the resumption of all U.S. beef exports to South Korea—the third-largest U.S. beef export market in 2003—as essential, but not necessarily all that is required, before the U.S. Congress considers legislation to implement the Korea-U.S. Free Trade Agreement (KORUS FTA). To facilitate this, in April 2008 the U.S. and Korean governments agreed on (but subsequently modified) the rules that Korea will apply to U.S. beef imports to ensure that shipments meet Korean human health standards. South Korea's aim was to improve the prospects so that the Bush Administration would send the KORUS FTA to Congress before the end of 2008. This did not occur, however, for the reasons explained below. In late June 2010, President Obama directed U.S. trade officials to work with their South Korean counterparts to resolve outstanding matters related to U.S. beef access and the agreement's automobile provisions by the time he met with South Korean President Lee in Seoul in mid-November 2010. In the talks that led to the December 2010 supplemental agreement, the issue of full U.S. beef access was not resolved because of its political sensitivity in South Korea. This report describes the beef provisions in the KORUS FTA and the separate bilateral protocols that the United States has negotiated in order to secure the lifting of South Korea's ban on U.S. beef imports, imposed after the discovery of mad cow disease in late 2003. It also summarizes U.S. beef export developments to this key market before and after the ban and since these protocols took effect and lays out the outstanding issues on U.S. beef access that have been raised in advance of expected congressional consideration of the KORUS FTA this fall. Beginning in the late 1990s, South Korea became a growing and important market for major beef exporters, particularly the United States. In 2003, beef imports accounted for nearly 75% of South Korean beef consumption. U.S. shipments that year alone supplied half of all of the beef consumed by Korean consumers. By 2003, South Korea had become the third-largest export market for U.S. beef. That year, U.S. beef exports to South Korea totaled $815 million ( Figure 1 ), or 246,595 metric tons (MT) ( Figure 2 ), and accounted for 21% of the $3.9 billion in U.S. beef products shipped worldwide. Beef exports represented 28% of all U.S. agricultural exports to Korea. Boneless beef products accounted for $449 million (55% of the total). Bone-in beef exports totaled $292 million (36%). Sales of beef variety meats (primary offals—tongue, liver, heart, and other edible cattle parts) were $65 million (8%). Processed beef product shipments were valued at $9 million (1%). The U.S. market share of Korea's beef imports reached 69% ( Figure 3 ). After the first U.S. case of bovine spongiform encephalopathy (BSE), or mad cow disease, was discovered in a Canadian-born cow in Washington State in December 2003, South Korea and many other countries banned imports of U.S. beef. BSE is a fatal, neurodegenerative disease of cattle thought to arise from the consumption of animal-derived protein supplements added to feed. Scientists believe that this disease can be transmitted to humans who eat the brain, spinal cord, or other high-risk tissues of BSE-infected cattle, which causes a variant form of Creutzfeldt-Jakob disease (CJD). This is a very rare and incurable degenerative neurological disorder (brain disease) that is ultimately fatal. U.S. government efforts to regain partial access to the key Korean market took two years to negotiate. In January 2006, South Korea agreed to a protocol that allowed imports of U.S. boneless beef only from cattle less than 30 months old . At that time, the under-30-months-old criterion was based on the widely held view that cattle younger than 30 months were less susceptible to mad cow disease. U.S. negotiators had signaled that some opening on the beef issue was necessary before negotiations with South Korea on a comprehensive FTA could begin. Difficulties experienced in exporting beef later that year to Korea under this first agreement, however, began to affect the negotiating dynamics of the overall FTA, even though this issue was not on the formal agenda. Separate bilateral discussions on this sensitive issue moved from the technical level to high-level meetings as both sides raced to conclude the KORUS FTA by the end of the March 2007 deadline set by then-in-effect trade promotion authority. However, the beef issue was not resolved by the time both countries concluded this trade agreement. Then-South Korean President Roh Moo-hyun, in a national address on April 1, 2007, stated he had personally promised President Bush that his government would "uphold the recommendations" of the World Organization for Animal Health (OIE) on the BSE risk status of the United States and "open the Korean [beef] market at a reasonable level." The OIE is the international scientific body recognized by the World Trade Organization as the reference for matters of animal disease and health. On May 22, 2007, the OIE formally found that the United States is a "controlled risk" country for the spread of mad cow disease. The U.S. Department of Agriculture's (USDA's) top official on this matter commented that this "risk classification recognizes that OIE-recommended, science-based measures are in place to effectively manage any possible risk of BSE in the [U.S.] cattle population" and "provides strong support that U.S. regulatory controls are effective and that U.S. cattle and products from cattle of all ages can be safely traded in accordance with international guidelines, due to our interlocking safeguards." USDA immediately requested that South Korea amend its import requirements for U.S. beef within a specified time frame to reflect this risk determination and to reopen its market to all U.S. cattle and beef products. In response, South Korea's animal health regulatory agency began an eight-step process to assess the BSE risks of the U.S. beef sector in light of the OIE finding, with the intent to negotiate a revised bilateral agreement that would lay out import rules applicable to U.S. beef. Against this backdrop, U.S. boneless beef exports resumed in late April 2007, with occasional breaks when Korean inspectors refused entry to some shipments that contained bones or did not meet other requirements laid out in the January 2006 agreement. With the third discovery of prohibited bones on October 5, 2007, South Korean authorities announced they would not conduct any more inspections of U.S. beef until both sides concluded formal negotiations to revise the 2006 protocol. Minimal U.S. beef offal exports occurred in 2004, 2005, and 2006 ( Figure 1 and Figure 2 ), due to South Korea's ban on imports after the first U.S. BSE-infected cow was discovered in December 2003. Though some U.S. boneless beef sales occurred in the last few months of 2006 after South Korea agreed to implement the January 2006 agreement, Korean inspectors rejected these shipments after discovering small bone fragments in a few boxes. From 2004 to 2006, beef shipments from Australia and New Zealand increased substantially to cover South Korean demand that had previously been met by U.S. beef exporters ( Figure 3 ). In 2007, both countries accounted for 92% of South Korea's beef imports, compared to 29% in 2003. U.S. boneless beef exports to South Korea resumed in late April 2007 and continued through early October 2007, when bone fragments again were found. During this period, Korea's quarantine regulatory agency inspected and cleared for retail sale most U.S. boneless beef shipments, applying its interpretation of the January 2006 agreement. Even with partial-year exports, South Korea ranked as the fourth-largest market for U.S. beef in 2007, with sales of $119 million ( Figure 1 ), or 25,165 MT ( Figure 2 ). The long-standing U.S. negotiating position had been to press for full access in one step for all U.S. beef into South Korea's market. This meant expanding the scope of the 2006 agreement to include exports of bone-in beef and coverage of all U.S. beef from cattle, regardless of age , as long as BSE-risk materials are removed during processing. U.S. trade officials maintained that U.S. beef is safe, pointing out that it is consumed by millions of Americans. They frequently noted that the U.S. measures in place to prevent the introduction of BSE in U.S. cattle herds already meet international scientific standards as spelled out by the OIE. South Korea argued for a "two-phased" approach to a full opening. The first step would allow imports of both boneless and bone-in beef cuts from U.S. cattle less than 30 months old. Cattle parts identified by the OIE as agents that can transmit BSE to cattle and in turn, potentially harm humans, would have to be removed from imported beef. Korea's trade minister argued this first step would give the United States about 80% of the market share it had before the ban on U.S. beef took effect in late 2003. The second step to take effect later would permit imports of beef from older cattle, as long as risk materials are removed according to OIE's standards. Just hours before newly elected Korean President Lee met President Bush at Camp David on April 18, 2008, U.S. and South Korean negotiators reached agreement on the sanitary rules that Korea will apply to beef imports from the United States. It allows for imports of all cuts of U.S. boneless and bone-in beef and other beef products from the edible parts of cattle, irrespective of age , as long as specified risk materials (SRMs) known to transmit mad cow disease are removed and other conditions are met. However, both sides revised this deal in a late-June private-sector arrangement that will for an unspecified time period limit sales of U.S. beef (boneless and bone-in) only to cattle less than 30 months old when slaughtered. Combined, these terms significantly expanded upon the products covered by the January 2006 protocol, which only permitted imports of boneless beef from cattle under 30 months old. The April 2008 agreement requires the removal of specified risk materials (SRMs) during meat processing, and prohibits the entry of (1) all mechanically recovered and mechanically separated meat and (2) advanced meat recovery (AMR) product from the skull and vertebral column of cattle 30 months of age and over at the time of slaughter. These prohibitions reflect scientific conclusions that these materials can harbor the BSE agent in cattle and in turn infect humans if product from such cattle is consumed. Other provisions detail which other beef products can enter, or are prohibited from entering, South Korea. The agreement also prescribes the steps that South Korea's quarantine inspection agency can take if banned cattle parts or other problems are found in a shipment from a U.S. meat firm, and specifies what its counterpart U.S. agency (USDA's Food Safety and Inspection Service) must do to address the matter. These are intended to serve as a map for handling specific problems in a way that does not stop altogether the flow of all U.S. beef exports to South Korea. Other rules spell out the requirements that U.S. beef processing plants and the FSIS must meet, in order for beef and beef products to be sold to South Korea. The private-sector deal announced on June 21, 2008, reflects a "commercial understanding" reached between Korean beef importers and U.S. exporters, that as "a transitional measure," only U.S. beef from cattle under 30 months of age will be sold to Korea. The U.S. Trade Representative (USTR), in acknowledging the request made by the U.S. meat industry for Korea's beef importers, stated that the U.S. government will meet this request under a Quality System Assessment (QSA) program that will verify that beef destined for Korea will be from cattle less than 30 months old. This program will be voluntary—operating only at those beef processing plants that seek to sell beef and beef products to that market. (See " Implementation of 2008 Beef Access Agreement " for status of this QSA program.) While the U.S. beef industry and U.S. policymakers welcomed the April deal, Korean TV coverage of the issue and Internet-spread rumors that questioned the safety of U.S. beef sparked large candlelight vigils in South Korea to protest the beef agreement. Opposition political parties soon joined these protests, advocating that the government renegotiate or scrap the agreement. Farmers also called for the National Assembly (Korea's parliament) to reject the KORUS FTA when considered during a special session later in May 2008. Opponents argued that the Korean government moved too quickly to strike a deal, and did not secure enough safeguards against the dangers of mad cow disease. These developments, in turn, adversely affected the political standing of Korea's new president and his government's inability to pursue his ruling political party's policy agenda—one item being the approval by the National Assembly of the KORUS FTA. To respond to mounting public pressure, the Korean government twice pursued talks with the United States to find ways to defuse public concerns without "renegotiating" the beef agreement. A May 19, 2008, exchange of letters affirms that South Korea has the right under international agreements to take steps to protect its citizens from health and safety risks (i.e., suspend U.S. beef imports if a BSE-infected cow is discovered in the United States). On June 21, 2008, both governments confirmed a "voluntary private sector" arrangement that allows Korean firms to import U.S. beef produced only from cattle less than 30 months old, and announced some changes to the April agreement. Although South Korea secured the application of the under-30-months-old criterion with respect to U.S. beef imports, the OIE in contrast makes no age distinction in assessing the risk level of cattle slaughtered for beef. Instead, its recommendation is that importing countries, to prevent the introduction of BSE, ensure that beef of any age meet certain conditions, such as the removal of those cattle tissues suspected of transmitting BSE and the implementation of effective safety controls for cattle feed. Though the United States for some time has argued that it is in full compliance with OIE guidelines, U.S. negotiators appear to have had little choice but to compromise in a way that would allow some sales to resume. Publicly, both countries presented this arrangement as a transitional step to improve Korean consumer confidence in U.S. beef, and did not commit to any timetable for revisiting this matter. Some Members of Congress responded cautiously or skeptically to the "voluntary commercial agreement," noting that it changes the April protocol by allowing Korea to reject U.S. beef from cattle over 30 months of age, disregards international standards that affirm the safety of all U.S. beef regardless of age, and sets an "unfortunate" or "dangerous" precedent in negotiating the terms of beef access into other countries. South Korean government officials portrayed the June-negotiated arrangement as going far to allay public concerns about the safety of U.S. beef. However, the political fallout of the controversy continued through the summer of 2008. Three high-ranking Korean officials (including the agriculture minister and his deputy) resigned because of their involvement in the agreement's negotiations. The Korean National Assembly completed an inconclusive parliamentary inquiry on the strategy and process followed by two successive governments on negotiating this agreement. It also debated a controversial livestock sector bill that includes a ban on beef imports from any country whenever a new case of a BSE-infected cattle is discovered. As adopted, the measure reportedly exempts the bilateral beef agreement reached with the United States from being subject to its coverage. Under the KORUS FTA, South Korea would eliminate over a 15-year period its 40% tariff on beef muscle meats imported from the United States. South Korea also would have the right to impose additional tariffs on a temporary basis in response to any surges in imports of U.S. beef meats above specified levels. The trigger for this additional tariff would be 270,000 metric tons (MT) in year 1, and would increase 2% annually. In year 15, the trigger would be 354,000 MT. In year 16, this protective safeguard mechanism would no longer apply. Separately, the 18% tariff on imports of beef offals (tongues, livers, tails and feet), and tariffs ranging from 22.5% to 72% on other beef products, would also be eliminated in 15 years. Assuming that South Korea fully lifts its restrictions on U.S. beef, and bilateral beef trade returns to normal, the U.S. International Trade Commission (USITC) estimates that the phase-out of South Korea's beef tariff and safeguard could increase U.S. beef exports by about $600 million to $1.8 billion (58% to 165%) above what would be the case without this agreement. In another analysis, the American Farm Bureau Federation (AFBF) projects that U.S. beef sales would be $265 million higher than otherwise as the United States recaptures its historic share of the South Korean market. However, the AFBF notes that the market share of U.S. beef likely will not increase over time, because South Korean tastes have developed a preference for grass-fed Australian beef, which will continue to be competitive in price against U.S. beef even if the current 40% tariff is removed. A more recent analysis by USDA's Economic Research Service estimates that U.S. beef exports would be $563 million higher under KORUS than without a trade agreement, and would account for almost one-third of the growth in additional U.S. agricultural imports. Key U.S. interest groups have frequently acknowledged that the full benefits associated with the KORUS FTA's beef market access provisions can only be attained if both countries work through the issue of addressing South Korea's lingering concerns about the safety of U.S. beef exports. Cattle producers are divided on their support for the KORUS FTA. The National Cattlemen's Beef Association (NCBA) and the U.S. Cattlemen's Association (USCA) are in favor. The Ranchers-Cattlemen Action Legal Fund, United Stockgrowers of America (R-CALF USA) opposes it. Beef processors and packers, represented by the American Meat Institute (AMI) and the National Meat Association (NMA), support this agreement. In accordance with the April 2008 beef protocol, as modified by the June 2008 private-sector arrangement, South Korea on June 26, 2008, published rules to put the beef agreement into effect, and began to inspect U.S. beef shipments held in cold storage in Korea since the fall of 2007. Shortly thereafter, USDA agencies began implementing the procedures adopted to ensure that U.S. beef meets Korea's import requirements. Under these terms, each U.S. beef shipment to Korea must be accompanied by an export certificate issued by USDA's Food Safety and Inspection Service (FSIS) that confirms the U.S. beef establishment participates in two programs administered by USDA's Agricultural Marketing Service (AMS). The first is that beef and products destined for South Korea must be produced under an approved Export Verification (EV) program. This details the specific product requirements that a supplier must meet in order for an export shipment to be eligible to enter Korea. Currently, AMS lists 58 suppliers as covered by the EV program for Korea. The second is the voluntary Quality System Assessment (QSA) program that verifies that beef from a participating plant is from cattle under 30 months of age. Currently, AMS has approved 54 exporting establishments as eligible to ship beef product that can be certified as meeting this requirement. To meet initial consumer demand following the reopening of South Korea's market to U.S. beef, shipments accelerated from mid-July 2008 through early October 2008 to supply regional wholesale markets and such retail sales outlets as local traditional butcher shops and online stores. With the build-up among importers of unsold inventories, export shipments then fell through year-end 2008. Perceiving a change in consumer sentiment towards U.S. beef, three large Korean discount retail chains began selling U.S. beef in late November 2008. Sales of U.S. beef in these major sales outlets were strong in December, largely due to discount pricing ( Figure 4 and Figure 5 ). For 2008 as a whole, U.S. beef exports to South Korea totaled $294 million ( Figure 1 ) or 57,269 MT ( Figure 2 ). Of this total, sales of bone-in beef products (previously prohibited) were $118 million. Compared to 2007, these U.S. beef exports were 148% higher in value and 128% greater in quantity. Even though sales occurred for only half the year, South Korea ranked as the fourth-largest market for U.S. beef. For 2008 as a whole, the U.S. market share of all of Korea's beef imports rose to 15%, up from 6% in 2007 ( Figure 3 ). In 2009 , U.S. beef sales to South Korea totaled $216 million ( Figure 1 ) or 55,633 MT ( Figure 2 ). Compared to 2008, these exports were lower by nearly 27% in value and 3% in quantity. South Korea again ranked as the fourth-largest destination for U.S. beef in dollar terms. The U.S. market share further increased to 26%, at the expense of Australia and New Zealand ( Figure 3 ). Exports fell in the first quarter of 2009, as importers worked down their inventories of frozen U.S. beef that had entered earlier. One positive development was the decision of large department store chains (another major marketing outlet) to resume sales. This reflected an acknowledgment by these other retailers that public opposition to U.S. beef had eased, with no significant problems reported since sales had begun at the discount retail stores. In the second and third quarters of 2009, U.S. beef exports to South Korea stabilized at a lower level, in part due to household decisions to tighten spending (i.e., less restaurant dining, where U.S. beef would frequently be consumed) in response to the uncertainty caused by Korea's economic recession ( Figure 4 and Figure 5 ). The availability of cheaper Australian beef because of the Australian dollar's more favorable exchange rate against the Korean won also reduced the price-competitiveness of U.S. beef during this period. USDA reported that imports were slowed by the difficulties that importers experienced in securing credit due to the financial squeeze and the weak won relative to the U.S. dollar, and by "ample" inventories of U.S. beef sitting in cold storage. It also attributed the slower pace of sales to the lingering negative image of U.S. beef among Korean consumers. For 2010 , U.S. beef exports to South Korea totaled $518 million, or 112,757 MT, a 140% increase in value and a 103% increase in quantity over 2009. U.S. beef shipments constituted 32% of total South Korean beef imports, a noticeable increase from the 26% share posted in 2009 ( Figure 3 ). Promotional efforts to rebuild consumer confidence in U.S. beef and much lower retail prices for imported beef than for Korean beef contributed to the continued growth in U.S. beef sales throughout the year ( Figure 4 and Figure 5 ). Since December 2009, the U.S. Meat Export Federation (USMEF) has conducted a "Trust Campaign" to rebuild consumer confidence in U.S. beef using television and newspaper advertisements and other promotional activities. Major Korean "hypermarkets"—superstores that combine a supermarket with a department store—have engaged in aggressive marketing efforts that are reported to have increased U.S. beef's share of imported beef sold by these stores. Retail prices for Korean-produced beef on average were 2 to 2½ times more expensive than imported beef. Though U.S. beef sales have increased, USDA reported that "there are still a sizeable percentage of fence sitting consumers who haven't started buying U.S. beef again." To win these consumers back, marketing efforts are being targeted toward this group. Also, while the more upscale restaurants are selling U.S. beef, smaller establishments "are still a bit reluctant to include it on their menus for fear of losing customers." To respond, the USMEF plans additional marketing efforts to reach these smaller restaurants. During the first five months of 2011 , U.S. beef exports to South Korea totaled $331 million ( Figure 1 ) or 76,208 MT ( Figure 2 ), a 103% (in value) and a 105% (in quantity) increase over the same period in 2010. U.S. beef shipments represented 37% of Korea's beef imports, another noticeable increase from the 30% share posted in the January-May 2010 period ( Figure 3 ). The surge in beef imports not only from the United States but also from Australia responded to the outbreak of foot and mouth disease late in 2010. With hog herds culled significantly, together with some cattle, to prevent its spread, available Korean meat supplies fell. Importers moved quickly to meet demand. U.S. exports increased quickly during the first quarter ( Figure 4 and Figure 5 ). Shipments have since fallen back to the levels seen in the last three quarters of 2010. An industry representative remains "quite bullish" on the Korean market because of strong demand, noting that the strong export sales pace "was not really sustainable." Although the protests against the beef agreement subsided in the summer of 2008, they have had lingering effects on U.S.-South Korean relations because of their erosion of President Lee's standing early in his term and because of their possible effects on the ratification of the KORUS FTA. The protests damaged the president's political strength and boosted the position of opposition groups that had been demoralized before the candlelight vigils. In the late summer of 2008, Lee's approval ratings recovered from the trough they entered at the height of the protests, but for months they remained at a low level (in the mid-20% to 30% range). Thus, the uproar over Lee's decisions on beef effectively ruined his "honeymoon" period to push many of his policy goals. It was not until late 2009 that Lee's poll numbers began to exceed 40% fairly consistently. Perhaps most significantly for the United States, the beef protests meant that President Lee has lacked the political capital and/or the political will to completely eliminate the beef ban, as the Obama Administration and various Members of Congress have asked. Perhaps for this reason, the remnants of Korea's beef ban were not linked to the 2010 KORUS FTA negotiations that culminated in the December 3 supplementary agreement. The domestic uproar in Korea following the April 2008 beef deal had increased the perception among many South Koreans that Lee was overly solicitous toward the United States. Had he compromised again on the beef issue in late 2010, it is possible that securing passage of the KORUS FTA through Korea's National Assembly would have become more difficult. Concluding the 2008 bilateral beef agreement was considered a significant step forward in the U.S. government's 4½-year effort to regain access to South Korea's lucrative beef market for the U.S. cattle and beef processing sectors. It was intended to resolve an issue that some Members of Congress said stood in the way of congressional consideration of legislation to implement the KORUS FTA. While Korea's lifting of the beef ban was widely regarded as a politically necessary condition for the Bush Administration to send this trade agreement to Congress, it has since become a less sufficient condition, because of other opposition that was expressed against the KORUS FTA, particularly over its auto trade provisions. Following President Obama's announcement on June 26, 2010, of his intent to present implementing legislation for the KORUS FTA to Congress "in the few months" after the November 2010 G-20 meeting in Seoul, the Administration consulted with Congress and stakeholders on how to resolve outstanding matters related to access for U.S. beef in the South Korean market. Discussions focused on what would constitute full access for U.S. beef, as spelled out in the signed April 2008 protocol. The issue that U.S. negotiators faced was how and at what pace the United States could get South Korea to accept all U.S. beef, irrespective of the age of the cattle when slaughtered. However, the requirement that U.S. exporters remove specified risk materials suspected of causing mad cow disease during processing was not at issue. At the same time, U.S. negotiators faced pressure to balance this objective with similar negotiating initiatives to expand upon or regain market access for U.S. beef in such important Asian markets as Japan, Taiwan, and China. Administration officials continued to state that their objective is "to eventually secure full market access for U.S. beef " that reflects South Korea's recognition that the United States meets OIE standards. However, public statements made by U.S. Trade Representative Ron Kirk and then-USDA Under Secretary Jim Miller raised the possibility that the Administration might not require achieving this objective before the KORUS FTA is sent to Congress, and instead might seek to secure commitments from South Korea to move in steps toward that goal. Senator Baucus, chairman of the Senate Finance Committee (which will consider the Administration's bill to approve and implement the KORUS FTA) stated that he wanted access for all U.S. beef and cuts from cattle of any age as a condition for considering and ratifying the KORUS FTA. His statements stressed that the OIE has determined that U.S. beef from cattle irrespective of age can be safely imported, and that 60 countries now recognize this in accepting U.S. beef. Baucus has continued to reiterate that his objective is to see that U.S. beef access in all markets be based on internationally accepted rules, arguing that allowing an FTA partner such as Korea not to follow OIE guidelines would set a "dangerous precedent." Another approach laid out by Senator Grassley, then ranking Member of the Finance Committee, would be to pursue efforts to secure additional beef access "in parallel to the FTA approval process." Much of the U.S. cattle and beef industry wants to see the KORUS FTA take effect soon in order to realize the benefit of the reduction in South Korea's 40% tariff on beef muscle cut imports. The industry points to the fact that U.S. beef exports continue to grow, and that the U.S. market share of Korea's beef import market is increasing. Industry spokesmen expressed some apprehension about losing these gains, if U.S. negotiators push South Korea too quickly for full beef access. Their stance likely reflected a desire to avoid a repeat of the street protests that occurred in May 2008, to preclude a public and official perception that the United States is again pressuring South Korea for a policy change. The U.S. beef sector would view such a scenario as undercutting the aggressive market promotion efforts made since late 2008 to assure Korean consumers of the safety of U.S. beef, which it views as having contributed to the increase in U.S. beef exports. Others also have mentioned that securing tariff reductions for U.S. beef would provide a price advantage with respect to beef supplied by Australia and New Zealand, which are seeking similar tariff cuts as both countries negotiate FTAs with South Korea. In the negotiations on the supplemental agreement concluded on December 3, 2010, the beef issue reportedly received little discussion as both sides focused on revising the auto provisions. President Obama, in discussing this outcome the next day, indicated that the United States will continue to work toward "ensuring full access for U.S. beef to the Korean market." Congressional reaction to this outcome was mixed. Senator Baucus expressed "deep disappointment" that the supplemental deal "fails to address Korea's significant barriers to American beef exports." He stated his commitment to "right this wrong" and to work with the Administration to ensure that ranchers "are not left behind." Two months later, Senator Baucus said he will not support the KORUS FTA until South Korea opens up its beef market. A few other Senators, though concerned with the lack of progress on beef, viewed the deal positively and welcomed the prospect for considering the KORUS FTA in 2011. Meat industry groups again expressed support for this trade agreement that they expect over time will significantly increase their exports to South Korea, and urged Congress to move quickly to ratify it. Beef interests, also supportive, called for continued efforts to secure full market access. Memories of the size and intensity of the 2008 anti-beef agreement protests in South Korea appear to have directly influenced the position taken on the beef issue by Korean negotiators. Reflecting this political sensitivity, they reportedly rejected any discussion on this matter in the negotiations held in early November leading up to the summit between Presidents Obama and Lee and in the final talks leading to the supplemental agreement. Their position was that this issue "did not fall under" the FTA concluded in 2007. Since then, South Korea's trade minister has confirmed that there will be no more discussions on ending the age limits of U.S. cattle slaughtered for beef. This stance was affirmed by South Korea's ambassador to Washington in late January 2011. Seeking to move closer toward submitting the KORUS FTA to Congress for consideration, the Administration on May 4, 2011, announced two measures it will take on the U.S. beef access issue. In a letter to Senator Baucus, USTR's Ron Kirk committed to request consultations with South Korea on the "full implementation" of the protocol (e.g., opening Korea's market "to all ages and all cuts of U.S. beef") as soon as this trade agreement takes effect. The letter referenced one specific provision stipulating that bilateral consultations on the interpretation or application of the protocol's terms "shall be held within seven days" of a request. USDA also announced a $1 million award to the U.S. Meat Export Federation (USMEF) to be used in 2011 to promote U.S. beef sales in South Korea, and its intent to consider future funding requests from the USMEF to implement its planned five-year market beef promotion strategy in this key market. Senator Baucus welcomed both steps, stating that he will support the KORUS FTA and will work with the Administration on a package of trade measures that includes all three FTAs and renewing trade adjustment assistance and trade preference programs.
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The Obama Administration had been pressed to resolve the terms of U.S. beef access to South Korea before the Korea-U.S. Free Trade Agreement (KORUS FTA) goes to Congress for debate. While Korea committed in the FTA to reduce its 40% tariff on imported U.S. beef over a 15-year period, its limits on such imports for human health reasons threatened to undercut this preferential benefit for U.S. exporters. In 2003, South Korea was the third-largest market for U.S. beef exports, prior to the ban its government imposed after the first U.S. cow infected with mad cow disease, or BSE (bovine spongiform encephalopathy), was discovered. U.S. efforts to regain full access became intertwined with the subsequent KORUS negotiations, but did not yield results by the time those talks concluded in April 2007. In reaction, some Members of Congress stated their consideration of, and support for, KORUS depends on South Korea fully opening its market to U.S. beef. On April 18, 2008, U.S. and South Korean negotiators signed a protocol, or agreement, on sanitary rules that Korea will apply to beef imports from the United States. It allows for imports of all cuts of U.S. boneless and bone-in beef and certain beef products from cattle, irrespective of age, as long as specified risk materials known to transmit mad cow disease are removed and other conditions are met. Though the U.S. beef industry and U.S. policymakers welcomed this deal, Korean TV coverage and Internet-spread rumors that questioned the safety of U.S. beef resulted in escalating protests and calls for the beef agreement to be renegotiated or scrapped. U.S. officials countered that measures already in place to prevent the introduction of BSE in U.S. cattle herds meet international scientific standards. To address rising public pressure, the Korean government twice pursued talks with the United States to find ways to defuse these concerns without "renegotiating" the beef protocol. This culminated in the June 21, 2008, confirmation by both governments of a "voluntary private sector" arrangement that allows Korean firms to import U.S. beef produced from cattle only under 30 months of age. Both governments view this as a transitional step until Korean consumer confidence in the safety of U.S. beef improves. Since the resumption of U.S. beef exports in July 2008, U.S. exporters have worked to recapture this key overseas market. Beef exports to South Korea in 2010 totaled $518 million, about two-thirds of the record 2003 level. In 2011's first five months, exports (at $331 million) were twice the level recorded in the same period the year before. Promotional efforts to rebuild consumer confidence in U.S. beef, aggressive marketing efforts by large store chains, and much lower retail prices for imported beef than for Korean beef account for the continued growth in U.S. beef sales. Following President Obama's mid-2010 decision to present the KORUS FTA to Congress in 2011, Administration officials worked to resolve the beef and auto issues with South Korea. By the time bilateral talks concluded on December 3, 2010, the beef issue reportedly had received little discussion as both sides focused on revising the auto provisions. Korea's position was shaped by the memory of the size and intensity of the 2008 anti-beef agreement protests. President Obama, in discussing this outcome, stated that the United States will continue to work toward "ensuring full access for U.S. beef to the Korean market." To address lingering congressional concerns, the Administration in early May 2011 committed to request consultations with South Korea on the "full implementation" of the protocol as soon as KORUS takes effect, and to provide additional funds for U.S. beef promotion activities in the Korean market. Beef and meat industry groups have welcomed the steps made since to submit KORUS to Congress, have expressed their support, and have urged Congress to move quickly to ratify it.
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Boko Haram, a violent Islamist insurgent group originally based in northeast Nigeria, continues to wage a deadly campaign in Nigeria and neighboring countries in the Lake Chad Basin region. A State Department-designated Foreign Terrorist Organization since November 2013, the group drew widespread international attention for its April 2014 abduction of almost 300 schoolgirls as well as its subsequent pledge of allegiance to the Islamic State (IS, also known as ISIL or ISIS) in March 2015. More than 15,000 people are estimated to have been killed in Boko Haram violence—including more than 6,500 in 2015 alone—and the conflict has caused a humanitarian emergency around Lake Chad, displacing more than 2.4 million people and cutting off humanitarian access to thousands. Operations by regional forces, most notably those from Chad and Nigeria, reversed the territorial advances that Boko Haram made from mid-2014 into early 2015, when it took nominal control of large swathes of territory in northeastern Nigeria under a self-described Islamic caliphate. The group has since reverted to asymmetric attacks, largely against soft targets in northeastern Nigeria and northern Cameroon. Despite its loss of territory, Boko Haram maintains the ability to move and conduct attacks in an area that stretches from southern Niger's Diffa region south into northern Cameroon. The group has also demonstrated its ability to attack the Chadian capital, N'djamena, killing scores in multiple bombing incidents. Notably, there has been a significant increase over the past year in the use of suicide bombers, most of them women and children. Many observers assess that Nigeria's new head of state, Muhammadu Buhari, has taken a more proactive approach toward countering Boko Haram than his predecessor, President Goodluck Jonathan, who was widely criticized for what has been described as a mismanaged and heavy-handed response to Boko Haram. Nonetheless, the extent to which Nigerian security forces "control" territory reclaimed from the group remains subject to debate, and Nigeria and Cameroon have drawn criticism from human rights groups for alleged abuses against civilians by security forces during counterinsurgency operations. In view of the growing impact Boko Haram has had on neighboring Cameroon, Niger, and Chad, U.S. officials have increasingly sought to support programs to improve regional counterterrorism capabilities and coordination. This support is channeled through various regional programs and funding mechanisms, including the Global Security Contingency Fund (GSCF) and the Counterterrorism Partnership Fund (CTPF), as well as through bilateral security assistance. In total, Boko Haram-related counterterrorism assistance has totaled more than $400 million to date. The U.S. military has deployed surveillance assets and related personnel to the region to support regional efforts, and advisory support by U.S. military personnel is now reportedly under consideration for Nigeria. Additionally, the United States supports programs to counter violent extremism in the region, including more than $30 million in activities managed by the USAID Office of Transition Initiatives (OTI). The United States also provides substantial humanitarian aid for the Lake Chad Basin area, totaling almost $200 million in FY2015 and FY2016 to date. Congress and Obama Administration officials continue to weigh additional options for strengthening U.S.-Nigerian security relations in a manner that will curtail Boko Haram's violent campaign. This report explores several questions that have been often asked in relation to the group, the impact of its attacks, and the response of the Nigerian government and other international actors, including the United States. Boko Haram emerged in the early 2000s as a small Sunni Islamic sect advocating a strict interpretation and implementation of Islamic law for Nigeria. Calling itself Jama'a Ahl as-Sunna Li-da'wa wa-al Jihad (roughly translated from Arabic as "People Committed to the Propagation of the Prophet's Teachings and Jihad"), the group is more popularly known as Boko Haram (often translated as "Western education is forbidden"), a nickname given by local Hausa-speaking communities to describe the group's view that Western education and culture have been corrupting influences that are haram ("forbidden") under its conservative interpretation of Islam. In 2015, after pledging allegiance to the self-proclaimed Islamic State, the group sought to rebrand itself as the Islamic State's West Africa Province (ISWAP). While the sect's original leadership did not initially call for violence, its followers engaged in periodic skirmishes with Nigerian police during its formative years. At that time the group's activities were limited in scope and contained within several highly impoverished states in Nigeria's predominately Muslim northeast. In July 2009, at least 700 people were killed during an effort by Nigerian security forces to suppress the group. In the course of that violence, the group's leader, Mohammed Yusuf, a charismatic young cleric who had studied in Saudi Arabia, was killed in police custody. The group subsequently appeared to dissipate, but reemerged a year later under new leadership, orchestrating a large prison break in September 2010 that freed hundreds, including its own members. Some Boko Haram militants may have fled to insurgent training camps in the Sahel in 2009-2010. It is widely rumored that certain northern Nigerian politicians may have provided support and/or funding to the group in its early years, reportedly using them to exert influence or threaten rivals. The group built ties with transnational extremist groups in the region, notably Al Qaeda in the Islamic Maghreb (AQIM), which reportedly provided training and access to increasingly sophisticated weaponry. Boko Haram attacks since 2011 have featured improvised explosive devices (IEDs), car bombs, and suicide attacks, but fighters also continue to inflict a heavy toll using small arms and arson. The use of women and children as suicide bombers has become an increasing tactic since 2014, as is discussed below. By many accounts, Boko Haram is not a monolithic organization. Beyond its core militants, who appear to ascribe to a violent Sunni extremist ideology, the group appears to draw support from a broader group of followers, predominantly young men from northeast Nigeria and the border areas of southeast Niger and northern Cameroon. Experts speculate that some of the group's supporters may be driven by frustration with perceived disparities in the application of laws (including sharia ); the lack of development, jobs, and investment in the north; and/or the abusive response of security forces in the region. As such, observers contend that despite the group's nickname and expressed rejection of Western culture, Boko Haram's ideology encompasses a broader worldview that combines an exclusivist interpretation of Islam—which rejects not only Western influence but also democracy, constitutionalism, and more moderate forms of Islam—with "politics of victimhood" that resonate in Nigeria's underdeveloped northern states. Some of its fighters have reportedly been drawn into the group by financial incentive or under threat. U.S. officials have estimated in press reports that Boko Haram may have between 4,000 and 6,000 "hardcore" fighters, while other sources contend its force could be larger. By some accounts, the group may have lost some 30 percent of its fighting force during the 2015 regional offensive to reclaim territory from the insurgents. Boko Haram is reportedly led by a shura council, under the direction of Abubakar Shekau, who, like Yusuf, is an ethnic Kanuri (the predominant ethnic group in Borno state, where Boko Haram originated). What role Islamic State representatives may now play in the leadership structure is unclear. Some observers speculate that Shekau has been sidelined by IS central leadership and possibly replaced by a Libyan-based IS official from outside the region, although there has yet to be a noticeable shift in the group's tactics or targeting to suggest a leadership change. The emergence of a splinter faction, Ansaru, in early 2012 contributed to speculation about divisions within the group (see below). Ansaru's leaders, some of whom reportedly had direct links to AQIM and Al Qaeda, allegedly differed with Shekau in their interpretation of Islamic law and criticized his leadership and approach. Shekau led a purge against the faction in 2013 and some of its members reportedly reintegrated into Boko Haram; other Ansaru members may continue to work with other extremist groups in the Sahel region. Boko Haram has demonstrated significant operational flexibility in its nearly seven year insurgency. In July 2014, the group shifted from a tactical focus on asymmetric attacks (unconventional guerilla-style or terrorist strikes) against government and civilian targets, toward a conventional offensive to seize and hold territory. Estimates on the amount of territory held by Boko Haram vary, but press reports suggest that by early 2015 the Nigerian government may have lost between 40%-70% of Borno state and some territory in neighboring Yobe and Adamawa states, including border areas near Cameroon. Operations by regional forces, most notably those from Chad and Nigeria, reversed these territorial advances, retaking much of Boko Haram's self-described Islamic caliphate. The group has since reverted to asymmetric attacks, largely against soft targets in northeastern Nigeria and northern Cameroon, and maintains the ability to move and conduct attacks in an area that stretches from southern Niger's Diffa region south into northern Cameroon. The group has also demonstrated its ability to attack the Chadian capital, N'djamena, killing scores in multiple bombing incidents. Notably, there has been a significant increase over the past year in the use of suicide bombers, most of them women and children (see below). The area affected by Boko Haram is home to an estimated 30 million people. The violence has caused a humanitarian emergency around Lake Chad, displacing more than 2.4 million people and cutting off humanitarian access to thousands. The U.N. Children's Fund (UNICEF) reports that 1.3 million of the displaced are children. By U.N. estimates, more than 9.2 million people in the region are in need of humanitarian assistance and almost 3 million are severely food insecure. Most of the displaced have sought shelter with host communities and do not live in camps. More than one million displaced Nigerians have fled to the Borno state capital of Maiduguri, which continues to be subject to bombings, despite the expanded presence of the Nigerian army. According to UNHCR, "sweeping operations carried out by the Nigerian military have an equally disruptive effect on every-day life." Boko Haram attacks have damaged health centers, markets, roads, homes, and schools, deterring the return of the displaced. According to UNICEF, the violence has forced more than 1,800 schools in northeast Nigeria and Cameroon to close and disrupted the education of more than a million children. Human Rights Watch reports that Boko Haram has destroyed more than 910 schools and killed more than 600 teachers. Casualty counts, which are based on press reports, suggest that more than 15,000 people have been killed by the group since 2009—including more than 6,500 in 2015 alone. The toll in 2015, if relatively accurate, would represent a slight decline from 2014, when Nigeria witnessed the largest increase in terrorist deaths ever recorded by a country (of over 300 percent, to more than 7,500 fatalities), with Boko Haram reportedly overtaking the Islamic State as the world's deadliest terrorist group. According to the Council on Foreign Relations' Nigeria Security Tracker data set, the number of deaths attributed to Boko Haram in recent months is down from the large numbers of early/mid-2015 to a level not seen since early 2013, though still averaging more than 100 per month. Boko Haram's attacks have increased substantially in frequency, reach, and lethality since 2010, occurring almost daily in parts of northeast Nigeria, and with increasing frequency in Cameroon, Chad, and Niger. Boko Haram initially focused primarily on state and federal targets, such as police stations, but it has also targeted civilians in schools, churches, mosques, markets, bars, and villages. Cell phone towers and media outlets have also been attacked, likely for both tactical and ideological reasons. The group has assassinated local political leaders and moderate Muslim clerics. Its deadliest recent attacks in Nigeria include an assault on a northeastern village, Gamboro, that may have killed more than 300 people in May 2014, and a January 2015 massacre in Baga, near Lake Chad, that may have killed as many as 2,000 people. Prominent attacks outside of Nigeria include a February 2015 assault on the northern Cameroonian town of Fotokol, which killed over 90 civilians and wounded more than 500 others, and coordinated suicide attacks in western Chad that killed a total of 47 people in October 2015. Beyond casualties, Boko Haram attacks and associated fighting between militants and security forces have exacted a heavy toll on the Lake Chad Basin region. Nigeria's neighbors have struggled to contend with an escalating humanitarian and refugee crisis related to the insurgency. The situation is particularly dire in Niger, where an influx of Nigerian refugees has exacerbated an already-severe humanitarian situation in the country's southeastern Diffa region. Few relief agencies are present in the remote area, given the risk of attack or kidnapping, and thousands of displaced people have little access to food, clean water, or healthcare. Cameroon has drawn criticism from advocacy groups and aid agencies who suggest that its military has forcibly returned Nigerian refugees to Nigeria. The conflict has also disrupted farming, limited the transit of basic goods to local markets, and deterred investment in the region. In August 2011, a Boko Haram suicide bomber attacked a U.N. building in the capital, Abuja, killing more than 20 people and injuring over 80. It was the group's first lethal attack on a foreign target. Boko Haram spokesmen claimed in press reports that the U.N. attack was retribution for the state's harsh security response against its members, referencing U.S. and international "collaboration" with the Nigerian security forces. The group has since conducted several smaller attacks against foreign targets, including kidnappings, but nothing on the scale of the U.N. attack. The increasing lethality and sophistication of Boko Haram's attacks on local targets has nevertheless raised its profile among U.S. national security officials, as have suspected and expressed ties between Boko Haram and other violent extremist groups, particularly the Islamic State (IS, also known as ISIS or ISIL). On March 7, 2015, Boko Haram leader Abubakar Shekau released a statement pledging loyalty to Abu Bakr al Baghdadi, leader of the Syria/Iraq-based IS. An IS spokesman welcomed the pledge, urging followers to travel to West Africa and support Boko Haram. In late March, the Islamic State's English-language magazine, Dabiq , heralded the alliance, declaring that "the mujahidin of West Africa now guard yet another frontier of the Khilāfah (caliphate)." Shekau had previously voiced support for both Al Baghdadi and Al Qaeda's leader Ayman al Zawahiri, but had not pledged allegiance to either. Branding itself as part of the Islamic State may provide recruitment and fundraising opportunities, but Boko Haram's area of operations is geographically removed from the Islamic State's core territory, and the extent to which affiliation has facilitated operational ties remains unclear. Reported links between Boko Haram and Islamist militants in North Africa, including other IS "affiliates" in Libya, may be of more immediate concern. Some reports suggest that Boko Haram militants have been sighted in with IS factions in Libya. Analysts question what impact Shekau's pledge has had on relations with Al Qaeda in the Islamic Maghreb (see below) and associated groups in the region. In the near term, the pledge may prove most effective as a propaganda tool, increasing the profile of both groups. Boko Haram's videos have, to date, been the most tangible public evidence of collaboration with the Islamic State—experts suggest that their improved quality in 2015 showed signs of IS expertise. Newer videos appear aimed at a more international audience and are more often delivered through social media platforms and IS media outlets. Prior to its pledge to IS, Boko Haram was allegedly cooperating with another Foreign Terrorist Organization (FTO), Al Qaeda in the Islamic Maghreb (AQIM), a regional criminal and terrorist network operating in the Sahel and North Africa. U.S. military officials had identified Boko Haram as a "threat to Western interests" in the region, referencing indications in 2013 that the group and AQIM were "likely sharing funds, training, and explosive materials," and suggesting that "there are elements of Boko Haram that aspire to a broader regional level of attacks, to include not just in Africa, but Europe and aspirationally to the United States." The commander of U.S. Special Operations Command reiterated this in 2014, stating "we see Boko Haram beginning to conflate with AQIM in North Africa." At that time, the commander of U.S. Africa Command (AFRICOM) nevertheless described the group's focus as primarily "a local effort," in comparison to the regional operations of the groups in North Africa like AQIM and the transnational focus of Al Shabaab in Somalia. There has been speculation for years that Boko Haram may have acquired weapons from former Libyan stockpiles through AQIM ties. The State Department identified two of three individuals linked to Boko Haram—Khalid al Barnawi and Abubakar Adam Kambar—who were named in June 2012 as Specially Designated Global Terrorists (SDGTs), as having close links to AQIM. (Kambar was reportedly killed in 2012.) Nigerian officials announced the capture of Barnawi in early April 2016. His arrest appears to be one of the most high-profile detentions of a Boko Haram figure since Mohammed Yusuf. In November 2013, the State Department designated Boko Haram, along with its splinter faction, Ansaru, as a Foreign Terrorist Organization (FTO). Boko Haram currently appears to pose a threat primarily to civilian and state targets in Nigeria and the Lake Chad Basin area, and to international targets, including Western citizens, in the region. Boko Haram's leader has issued direct threats against the United States, but to date no American citizens are known to have been kidnapped or killed by the group. In March 2016, AFRICOM Commander David Rodriguez stated, "we are watching carefully for signs that the threat posed by Boko Haram to U.S. persons is growing as a result of the group's alignment with ISIL." More broadly, the recruitment of Nigerians by transnational terrorist groups other than Boko Haram continues to be of concern to U.S. officials. In 2015, a Nigerian national, Lawal Olaniyi Babafemi, was sentenced to 22 years in a U.S. prison for providing material support to Al Qaeda in the Arabian Peninsula (AQAP). Babafemi, who had been extradited from Nigeria, had pled guilty to participating in AQAP media and recruitment campaigns aimed at attracting English-speaking Nigerian recruits. Another Nigerian AQAP recruit, Umar Farouk Abdulmutallab, pled guilty in 2011 to the attempted bombing of a Detroit-bound airliner on Christmas 2009; he faces a life sentence. There is no evidence linking Abdulmutallab to Boko Haram. On April 14-15, 2014, Boko Haram kidnapped more than 270 schoolgirls from the northeast town of Chibok. Boko Haram fighters, reportedly numbering more than 200, overpowered security forces based in the town. According to Amnesty International, the main headquarters of the army division tasked with countering Boko Haram, located 80 miles away in the state capital Maiduguri, was warned of the attack hours before it happened, but did not deploy forces. According to press reports, just over 50 of the girls were able to escape during or shortly after the incident. A video released by Boko Haram weeks later showed a group of about 130 girls, many of whom were subsequently identified as abductees, in conservative Muslim dress in an unidentified rural location. Boko Haram leader Abubakar Shekau, who had threatened to sell the girls as slaves or brides in a previous video, announced that the girls, most of whom were Christian, had been converted to Islam and suggested that they would be released if Boko Haram fighters held by the government were freed. Many analysts speculate that the girls were separated into smaller groups after their abduction. The United States offered support to Nigerian efforts to find and rescue the young women abducted from Chibok. The Obama Administration deployed a multi-disciplinary, interagency team to Abuja to provide support to Nigerian efforts in early May 2014, and later that month, President Obama notified Congress that he was deploying approximately 80 U.S. military personnel to neighboring Chad "as part of the U.S. efforts to locate and support the safe return" of the schoolgirls, "in furtherance of U.S. national security and foreign policy interests." The personnel supported the operation of unmanned surveillance aircraft operating over northern Nigeria and the surrounding area. The mission reportedly ended in late 2014; in March 2015, a Pentagon spokesman stated that "we don't have any troops in Chad right now," remarking that the number of surveillance missions requested by the Nigerian government "had dropped to the point that we were able to cover it through other means." In January 2016, President Buhari approved a new investigation into the kidnapping and the government's response. While the military has freed hundreds of Boko Haram captives in the past year, the Chibok families report that none of their daughters have been returned, and the Buhari Administration has acknowledged that it does not know whether the girls are still alive. In late March 2016, a young woman who was arrested in northern Cameroon while carrying explosives claimed to be one of the abducted girls from Chibok. Her claim has yet to be verified. Since 2012, Boko Haram has increasingly claimed responsibility for setting fire to schools and attacking universities in northern Nigeria, and its violence has forced more than one million children out of school. Initial attacks appeared to focus primarily on property destruction, occurring mostly at night when the schools were empty. But in 2013 the group's assaults became more brutal, increasingly targeting students and teachers. In July 2013, Boko Haram's leader publicly threatened to burn secular schools and kill their teachers, describing the schools as a "plot against Islam." The threat has deterred thousands of children from attending school in a region that already had low attendance rates and literacy levels, especially among women and girls. National statistics show huge disparities within Nigeria in the percentage of girls who attend school, with attendance lowest in the north. In response to the Chibok attack and the broader impact of Boko Haram violence on school attendance, the Nigerian government and international aid agencies, under the leadership of U.N. Special Envoy for Global Education [author name scrubbed] and the U.N. Children's Fund (UNICEF), launched a Safe Schools Initiative in late May 2014, with more than $23 million in initial donor pledges. According to UNICEF, as of April 2016, over 1,800 schools in Nigeria, Cameroon, Chad, and Niger are closed due to the conflict. The Chibok kidnapping was not the first time Boko Haram had abducted women. In May 2013, the group released a video announcing that it had taken women and children hostage in response to the arrest of its members' wives and children. That incident was followed by a prisoner/hostage exchange. According to press reports, the kidnapping of Christian women in the north by Boko Haram members became an increasing trend in 2013. Victims of other abductions have reportedly been forced to convert to Islam and/or have been used as sex slaves by fighters. Amnesty International estimated in April 2015 that more than 2,000 women and girls had been abducted since early 2014. Human Rights Watch has sought to highlight the abduction of as many as 300 children in November 2014 from a primary school in Damasak, also in Borno state, which has received little press attention in comparison to the Chibok incident. They also remain missing. Troublingly, there has been a significant increase over the past two years in the use of suicide bombers, most of them women and children. According to analysis from the Chicago Project on Security and Terrorism, 41.2% of all Boko Haram-related incidents in 2014 were reportedly carried out by female suicide bombers, many of whom were children under the age of 18. UNICEF estimated in April 2016 that nearly 1 in every 5 of its suicide bombers since January 2014 has been a child; three-quarters of those children have been girls. It reported that at least a further 18% of the bombers have been women (45% were men and another 18% unidentified). Experts contend that explanations for this trend may be multiple: while some women and girls may be coerced into participating in suicide attacks, others may choose to do so willingly as adherents to Boko Haram's message. Others have reportedly been sacrificed by their families to Boko Haram, either out of support for the group or in exchange for money or other goods. Nigeria's former President Goodluck Jonathan was widely criticized during his last year in office for his administration's response to the Boko Haram crisis, which some observers described as ineffective, insufficient, and marred by high-level corruption within the security sector. The presidential campaign of Nigeria's new head of state, Muhammadu Buhari, who defeated Jonathan in the country's April 2015 elections, centered on pledges to improve the security situation and to tackle corruption in the country. Among his earliest acts in office was to replace the heads of the army, navy, and air force. The new army chief and the commanding officer in charge of operations against Boko Haram both hail from northern Nigeria, and by many accounts they have taken a more proactive approach than their predecessors toward countering the group. For example, they moved the army's operational headquarters from Abuja to Maiduguri and have deployed more long-range patrols in the region. Experts suggest that the army is now conducting more strategically-focused operations, such as those that target Boko Haram's logistics routes. According to reports, morale within the army has improved under the new leadership. The government has arrested several former senior officials on corruption charges, including former President Jonathan's National Security Advisor, who has been charged with fraud over a $2 billion arms deal for equipment that was reportedly never delivered. Jonathan's former chief of defense has been accused of stealing $20 million from the air force, and, as of late March 2016, some 300 individuals, including army officers, and companies were under investigation for the embezzlement between 2011 and 2015 of an estimated $240 million in fraudulent or overpaid defense contracts. Like his predecessor, President Buhari set an ambitious agenda in his public rhetoric for defeating Boko Haram, pledging to rout the group by the end of 2015 and then declaring the group "technically defeated" in late December (in a speech to the armed forces weeks later he suggested less assertively that the group had been "degraded."). In comments to the press, Buhari suggested that Boko Haram was no longer capable of carrying out conventional attacks against security forces or population centers, and had instead reverted to bombings. Many analysts challenge the government's assessment that Boko Haram's asymmetric attacks are a sign of a diminishing threat, contending that soft targets in the region remain extremely vulnerable and suicide bombings still allow the group to have an immense psychological impact. Additionally, the extent to which the military "controls" territory reclaimed from Boko Haram also remains subject to debate. Creating conditions for the safe return of the more than two million people displaced by Boko Haram's violence will likely be among the Buhari Administration's greatest challenges. Prolonged insecurity, combined with the impact of low oil prices on the Nigerian and Chadian governments' revenues, has had a devastating impact on local economies in the Lake Chad Basin area. In early January 2016, President Buhari appointed a new committee, led by a retired general, to oversee its ambitious reconstruction and development program for the northeast; Nigerian billionaire and philanthropist Aliko Dangote is among its members. According to the State Department's most recent terrorism report (issued in early 2015, prior to Buhari taking office), among the various dynamics limiting the Nigerian government's response to Boko Haram were a lack of coordination and cooperation between security agencies; corruption; misallocation of resources; limited requisite databases; the slow pace of the judicial system; and lack of sufficient training for prosecutors and judges to implement anti-terrorism laws. Reports of serious abuses by military forces in some parts of the country, including but not limited to the northeast, continue to constrain greater donor support and collaboration. The army's raids against a Shia Muslim community in the northern city of Zaria in December 2015, during which more than 300 people may have been killed, may, to some extent, dampen donor interest in deepening security cooperation (see below). Outside of the official government response, some local communities formed informant networks and vigilante groups in 2013 to protect themselves, in part due to reportedly ineffective responses by security forces. In Borno, some of these groups have worked with the state government and security forces to rout Boko Haram cells. Press reports suggest that the groups, who collectively call themselves the "Civilian Joint Task Force" or Civilian-JTF (C-JTF), have had some positive impacts on security in the Borno state capital of Maiduguri, but have been occasionally targeted in retaliatory attacks by Boko Haram. Local NGOs have accused the C-JTF of recruiting children and committing extrajudicial killings of suspected Boko Haram members, further aggravating the human rights situation. The government still appears to sometimes rely on such forces , and has yet to transfer the responsibilities of these groups to formal institutions, such as the police or the army, or formally recruit their members into the ranks of those institutions. Boko Haram has expanded its operations into neighboring Cameroon, Chad, and Niger—since early 2014, these countries have increasingly been subject to attacks by the group. Chad suffered its first attacks in February 2015, shortly after it commenced military operations against the group inside Nigerian territory. The Chadian government has declared its Lake Region under a state of emergency. Chad tightened its terrorism laws in 2015, conducting its first executions of Boko Haram suspects in August. Chad was the first in the Lake Chad region to ban Muslim women from wearing burqas or full veils, in June 2015 after a series of attacks by female suicide bombers: Niger and Cameroon subsequently banned veils in Boko Haram-affected regions (Nigeria has yet to implement a ban). Chad hosts the headquarters of the Multinational Joint Task Force (MNJTF), authorized by the African Union with over 8,700 troops. Its operational status is subject to debate, despite officially commencing operations in October 2015. By many accounts the national forces of its troop contributors continue to operate largely independently under their own respective national commands rather than under the direction of the Nigerian general in charge of the Task Force. Among Nigeria's neighbors, Cameroon has been subject to the largest number of suicide bombings and guerilla-style attacks, totaling more than 80 in 2015, and resulting in at least 1,200 deaths, by U.N. estimates. Cameroon's military response to Boko Haram has drawn some criticism from human rights groups—among other incidents, in March 2015, Cameroonian forces were accused of torturing and summarily executing Boko Haram suspects; in November, the army forcibly returned more than 17,000 Nigerian refugees to Nigeria; and in December, Nigerian villagers accused Cameroonian army units of killing more than 150 residents in one incident and more than 70 in another attack weeks later. As in Nigeria, some local communities in Cameroon have formed "self-defense groups" to patrol Boko Haram-affected areas. The Cameroonian government has repeatedly praised such groups, but has urged them to focus on monitoring their villages and to leave more dangerous activities, such as landmine removal, to the security services. Obama Administration officials have viewed Boko Haram primarily as a locally focused, but potentially regional extremist threat in West Africa. U.S. policy toward the group is guided by its humanitarian impact and by an assessment of the extent to which it poses a direct threat to the United States and U.S. interests, and it is also influenced by U.S.-Nigeria relations. The State Department has designated five individuals linked to Boko Haram as Specially Designated Global Terrorists (SDGTs), including Boko Haram leader Abubakar Shekau, and in 2013 it issued a $7 million reward for information on the location of Shekau through its Rewards for Justice program. In November 2013, the State Department designated Boko Haram and a splinter faction, Ansaru, as Foreign Terrorist Organizations (FTOs). International attention to Boko Haram's abduction of the young women in Chibok elevated the group's status among U.S. policymakers, and the U.S. government has provided advisors, intelligence, training, equipment, and logistical assistance to support regional efforts to counter the group. AFRICOM's theater campaign plan for 2016-2020 includes containing Boko Haram among its five planned "lines of effort" over the next five years. Successive U.S. Administrations have viewed Nigeria, a top recipient of U.S. foreign aid, as a critically strategic country on the African continent. It is Africa's largest economy and its most populous country, with more than 180 million people, roughly divided between Muslims and Christians. Its Muslim population, concentrated in the north, is among the world's largest. Many U.S. officials, while stressing the importance of the U.S-Nigeria relationship and the gravity of security threats within and emanating from the country, remain concerned about reported abuses by Nigerian security services, and about the government's limited efforts to address perceived impunity for such abuses. For their part, Nigerian officials have been described in the past as wary of perceived U.S. interference in internal affairs and dismissive of certain training offers. These factors have constrained security cooperation, despite shared concerns over terrorism and other regional security threats. Assistant Secretary of State for African Affairs Linda Thomas-Greenfield has long urged the Nigerian government to take a more "holistic" approach to terrorism, suggesting that regional and socioeconomic disparities have contributed to Boko Haram recruitment. In February 2016, she noted that the United States was exploring options to enhance security cooperation with Nigeria, but reiterated that "the fight cannot be won just on the battlefield," and suggested that "equipment and training are only useful when employed by professional forces that respect human rights and earn the respect of the population." In those public comments, she reiterated that "Nigeria and Lake Chad Basin countries must address the drivers of extremism that gave rise to Boko Haram." Other regional experts have similarly urged Nigeria to take a "more multifaceted approach that prioritizes civilian protection and engagement," and pursues greater cooperation with its neighbors and international partners. In view of the growing impact Boko Haram has had on neighboring Cameroon, Niger, and Chad, U.S. officials have increasingly sought to support programs to improve counterterrorism coordination between Nigeria and its neighbors, and to improve each country's capacity to contain the group. In September 2015, Secretary of State John Kerry declared during a visit to Nigeria that he and President Buhari had pledged to "join together in an effort to do a better job of taking on Boko Haram," tacitly acknowledging tensions and challenges in U.S.-Nigeria counterterrorism cooperation during the Jonathan Administration. U.S. security assistance to the Lake Chad Basin countries has increased significantly in recent years—all four countries benefit from a $40 million Global Security Contingency Fund (GSCF) program that began in FY2014, and the region is a focal area for the Administration's new Counterterrorism Partnership Fund (CTPF). Under the CTPF, DOD plans to allocate $105 million for the Lake Chad Basin region in FY2016, and has requested $125 million for FY2017. The State Department has provided additional counterterrorism assistance, primarily through its Peacekeeping Operations (PKO) account. In September 2015, the Secretary of State also authorized the use of up to $45 million in defense articles and services, including military training, to support the efforts of the countries participating in the MNJTF to counter Boko Haram. In total, Boko Haram-related counterterrorism assistance has totaled more than $400 million to date. Niger, which faces multiple terrorism threats, is the largest recipient of U.S. security assistance in the region, and the U.S. military's footprint there is growing. Chad and Cameroon were not significant security assistance recipients until in 2014—military aid has increased substantially since then. Counterterrorism assistance to Nigeria's military has been comparatively small, based on human rights and other policy concerns, although the Obama Administration has expressed its intent to increase cooperation. Nigeria recently received more than two dozen Mine Resistant Ambush Protected (MRAP) vehicles through the Excess Defense Articles (EDA) program. In addition to military aid, the United States supports programs to counter violent extremism in the region, including more than $30 million in activities managed by the USAID Office of Transition Initiatives (OTI) and other programs funded through the Trans-Sahara Counterterrorism Partnership (TSCTP). U.S. humanitarian aid for the Lake Chad Basin area totaled almost $168 million in FY2015 and more than $27 million to date in FY2016. The U.S. counter-Boko Haram strategy has also included deploying U.S. military advisers to the region. As noted above, the United States deployed approximately 80 U.S. military personnel to Chad to assist in the effort to locate the kidnapped Nigerian schoolgirls; that mission reportedly ended in late 2014. In October 2015, Administration officials announced that the United States would send as many as 300 U.S. troops, along with surveillance drones, to Cameroon to conduct Intelligence, Surveillance, and Reconnaissance (ISR) operations in the region. According to President Obama, it is a noncombat operation, and troops "are equipped with weapons for the purpose of providing their own force protection and security." As of late February 2016, roughly 250 troops had deployed. According to The New York Times , the Department of Defense is also considering sending dozens of military advisers to Maiduguri, Nigeria, to serve in noncombat advisory roles. Reports of serious abuses by Nigerian military forces in some parts of the country, including but not limited to the northeast, have constrained greater donor support and counterterrorism collaboration. U.S. legal provisions, popularly known as the Leahy Laws, that prohibit assistance to foreign security force units implicated in gross violations of human rights have had a significant impact on U.S.-Nigerian security cooperation. DOD officials have further described Nigeria as "an extremely challenging partner to work with," and "slow to adapt with new strategies, new doctrines, and new tactics." Nevertheless, the State Department has cleared more than 1,000 members of the Nigerian security forces, and several hundred military and police units, for U.S. assistance in recent years. The State Department's 2014 country report on human rights practices in Nigeria notes that "in its response to Boko Haram, and at times to crime in general, security services perpetrated extrajudicial killings and engaged in torture, rape, arbitrary detention, mistreatment of detainees, and destruction of property." By some accounts, these abuses are not isolated incidents but part of a set of informal rules of engagement that have been condoned by the government. Amnesty International has reported that thousands of people suspected of links to Boko Haram have been extra-judicially executed or unlawfully killed by security forces, and thousands of suspects have died in military or police custody. Allegations of torture by the Nigerian security forces in the context of counterterrorism operations in the northeast have been common. In 2015, the State Department listed Nigeria among eight countries identified in its annual Trafficking in Persons (TIP) Report as having government-supported armed groups that recruit or use child soldiers, and in September President Obama determined that it was in the national interest to waive the application of restrictions on foreign aid established Child Soldier Prevention Act of 2008 (CSPA, 22 U.S.C. 2370c-1) in order to continue assistance "to professionalize Nigeria's military;" enhance its ability to counter terrorism, piracy, and oil bunkering; and contribute to peacekeeping. Nigerian officials have acknowledged some abuses by security forces in the context of the fight against Boko Haram, but few security personnel have been prosecuted. Some officials reportedly object to these comments regarding human rights abuses as perceived U.S. interference in internal affairs, and are dismissive of certain training offers. Nigerian frustration also appears in part driven by unsuccessful efforts to acquire certain major U.S. defense equipment; the country has turned to Russia and China in recent years for helicopters, jets, and unmanned aerial platforms. Media reports suggest that these factors have strained the relationship between U.S. defense officials and certain branches of the Nigerian armed forces. In November 2014, Nigeria suspended advanced infantry training by U.S. Special Forces for an elite Nigerian army unit that had been cleared for assistance. While stressing the importance of the U.S.-Nigeria relationship and the gravity of security threats in, and potentially emanating from, the country, many U.S. officials remain concerned about these reported abuses, and about the role they may play either in tainting the military's credibility among the population in the north or in fueling support for the insurgency. One of the primary aims of DOD engagement is to "convince the Nigerians to change their tactics, techniques, and procedures toward Boko Haram," and toward that end the U.S. military team deployed to Nigeria will seek to analyze the Nigerian operations and identify gaps for which international experts can provide assistance. The DOD team includes several U.S. military advisors who were recently deployed in Central Africa to help regional forces, primarily from Uganda, counter the Lord's Resistance Army (LRA), another brutal group that has long terrorized civilians. As in the counter-LRA operations, for which the United States has provided military advisors, logistical support, equipment, and ISR assets, the U.S. team could provide advice that might help the Nigerians act on intelligence about Boko Haram movements. At the same time, DOD officials indicate they are being "exceedingly cautious when it comes to sharing information with the Nigerians because of their unfortunate record" and have sought assurances from Nigerian officials that they would use any shared U.S. intelligence "in a manner consistent with international humanitarian and human rights law." Recent reports of abuses by Cameroonian troops—including torture and summary executions of Boko Haram suspects—may have repercussions for U.S. assistance. According to the State Department's 2014 human rights report, security force torture and abuse ranked among "the most important human rights problems" in Cameroon, and impunity for such crimes remains widespread. Several Members of Congress have sought to elevate public awareness of the Boko Haram threat in recent years, and some have engaged in deliberations with the Administration about the extent to which the group may pose a threat to the United States and how the United States should calibrate its response. In November 2011, the House Homeland Security Subcommittee on Counterterrorism and Intelligence held the first congressional hearing on the group; subsequent hearings have been held by the House Foreign Affairs Committee and the Senate Foreign Relations Committee. Committee leadership have repeatedly raised concerns about the amount of information available on Boko Haram and the potential to underestimate its threat to U.S. interests. Selected relevant legislation includes the following: Legislation introduced in both the 112 th and 113 th Congresses to press the State Department to designate the group as a Foreign Terrorist Organization (see below); P.L. 112-239 (FY2013 National Defense Authorization Act, 112 th Congress), directing the Director of National Intelligence to provide an assessment of the Boko Haram threat to Congress; S.Res. 433 and H.Res. 573 (113 th Congress), condemning Boko Haram's attacks on civilian targets and expressing support for the Nigerian people and the families of the girls abducted from Chibok, for efforts to hold the group accountable, and for U.S. offers to assist in the search for the girls ; H.R. 2027 (114 th Congress), directing the President to develop and submit to Congress a regional strategy to guide U.S. support for multilateral efforts to eliminate the threat of Boko Haram and enforce the rule of law and ensure humanitarian access in Boko Haram-affected areas; and S. 1632 (114 th Congress), requiring the Department of Defense and the Department of State to jointly develop a regional strategy to address the threat posed by Boko Haram. Deliberations within the U.S. government over whether to designate Boko Haram as an FTO concluded in November 2013, when the State Department designated both Boko Haram and Ansaru as FTOs under Section 219 of the Immigration and Nationality Act, as amended, and as Specially Designated Global Terrorists (SDGTs) under Executive Order 13224 (2001). The FTO designations aim to assist U.S. and other law enforcement agencies in efforts to investigate and prosecute suspects associated with the group, and have been described by U.S. officials as an important step in supporting the Nigerian government's effort to address the threat. The FTO designation triggers the freezing of any assets a group might have in U.S. financial institutions, bans FTO members' travel to the United States, and criminalizes transactions (including material support) with the organization or its members. FTO status may serve to help prioritize greater U.S. security and intelligence resources toward a group, but this is not a legal requirement of the designation. The prioritization of such assets is based on intelligence assessments and policy direction from the Administration or authorizations and appropriations from Congress. An FTO designation does not convey statutory authorization for direct U.S. military action against a terrorist group. The FTO designation does not appear to have had an impact on Boko Haram financing yet—the extent to which the group raises funds from abroad is unclear, and to date there have been no charges filed in U.S. courts related to support for the group. Boko Haram appears to fund its operations largely through criminal activity, including bank robberies, kidnapping for ransom, assassinations for hire, trafficking, and various types of extortion. The group was also reportedly able to seize sizable amounts of military equipment and ammunition in 2014-2015 from the Nigerian army. In early 2016, Nigeria closed several cattle markets in the northeast where Boko Haram was suspected of selling stolen cattle. Those closures have reportedly had a devastating impact on the local economy. It remains unclear what impact, if any, Boko Haram's pledge of allegiance to the Islamic State has had on its financing. Local kidnapping operations reportedly provide funding, as do ransoms paid for some of Boko Haram's foreign victims. According to press reports, Boko Haram may have received more than $3 million in ransom for a French family that was kidnapped in northern Cameroon in 2013. Cameroon also reportedly freed several Boko Haram detainees as part of that deal; France and Cameroon both deny that any ransom was paid. Other prominent kidnappings include the abduction in 2014 of ten Chinese construction workers in Cameroon and the kidnapping of the wife of Cameroon's deputy prime minister. Ransoms were reportedly paid in both cases. The expansion of international sanctions against the group in recent years may have implications for its kidnapping operations. The Nigerian government formally designated Boko Haram and Ansaru as terrorist groups in 2013. The British government named Ansaru as a "Proscribed Terrorist Organization" in November 2012 (after the group kidnapped and murdered a British construction worker), describing it as broadly aligned with Al Qaeda, and designated Boko Haram as such in July 2013. Boko Haram was added to the U.N. Al Qaeda sanctions list on May 22, 2014, after the Nigerian government reversed its prior reservations about the group being listed.
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Boko Haram, a violent Nigerian Islamist movement, has grown increasingly active and deadly in its attacks against state and civilian targets in recent years, drawing on narratives of religious exclusivism, victimization, and vengeance for state abuses to elicit sympathizers and recruits. The group's April 2014 abduction of almost 300 schoolgirls drew particular international attention, including from the Obama Administration and Members of Congress. Boko Haram's high death toll and its pledge of allegiance to the Islamic State (IS, aka ISIL or ISIS) in March 2015 have further raised the concern of U.S. policymakers. The group has sought to rebrand itself as the Islamic State's West Africa Province (ISWAP), though it remains more popularly known by its original nickname. The State Department has named several individuals linked to Boko Haram, including its leader, Abubakar Shekau, as Specially Designated Global Terrorists; the group was designated as a Foreign Terrorist Organization (FTO) by the State Department in November 2013. More than 15,000 people are estimated to have been killed by Boko Haram, including more than 6,500 in 2015 alone, making it one of world's deadliest terrorist groups. By U.N. estimates, roughly 2.4 million people have been displaced by Boko Haram-related violence in the Lake Chad Basin region, where approximately 9.2 million are in need of humanitarian aid. Boko Haram has focused on a wide range of targets, but civilians in Nigeria's impoverished, predominately Muslim northeast have borne the brunt of the violence. Since 2014, Boko Haram has also staged attacks in neighboring Cameroon, Chad, and Niger with increasing frequency. Nigeria has struggled to respond to the growing threat posed by Boko Haram. Former Nigerian President Goodluck Jonathan was widely criticized for his administration's response to the crisis, which some observers described as ineffective, heavy-handed, and marred by high-level corruption in the security sector. Some observers suggest Nigeria's new head of state, Muhammadu Buhari, has taken a more proactive approach than his predecessor toward countering the group, including by directing new military leadership to conduct more strategically-focused operations and undertaking measures to address security sector corruption. Nonetheless, concerns over the Nigerian response—in particular, over reported human rights abuses by security forces—continue to constrain some donor support and collaboration. In view of the growing impact Boko Haram has had on neighboring Cameroon, Niger, and Chad, U.S. officials have increasingly sought to support programs to improve counterterrorism coordination between Nigeria and its neighbors, and to improve each country's capacity to contain the group. U.S. security assistance to the Lake Chad Basin countries has increased significantly in recent years—all four countries benefit from a $40 million Global Security Contingency Fund (GSCF) program that began in FY2014, and the region is a focal area for the Administration's new Counterterrorism Partnership Fund (CTPF). In total, Boko Haram-related counterterrorism assistance to the region has totaled more than $400 million to date, though support for Nigeria's military has been constrained by human rights and policy concerns. In October 2015, the Obama Administration announced the deployment of up to 300 U.S. troops, along with surveillance drones, to Cameroon to assist in regional counter-Boko Haram effort. Boko Haram has attracted increasing attention from Members of Congress. Relevant legislation includes S.Res. 433 and H.Res. 573 ("Condemning the abduction of female students by armed militants from the terrorist group known as Boko Haram") in the 113th Congress; and H.Res. 46 ("Condemning the recent terrorist attacks in Nigeria that resulted in the deaths of over 2,000 innocent persons"); H.R. 2027 ("Boko Haram Disarmament and Northeast Nigeria Recovery Act of 2015"); and S. 1632 ("To require a regional strategy to address the threat posed by Boko Haram") in the 114th Congress.
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Global climate change is a widespread and growing concern that has led to extensive congressional and international discussions and negotiations. Climate change mitigation strategies have focused on reducing emissions of greenhouse gases (GHGs), especially carbon dioxide (CO 2 ). One significant source of CO 2 emissions is deforestation. Reducing deforestation to lower CO 2 emissions is seen as one of the least costly methods of mitigating climate change. Forests are carbon sinks in their natural state (i.e., they store more carbon than they release). Trees absorb CO 2 and convert carbon into leaves, stems, and roots, while releasing oxygen. Forests account for more than a quarter of the land area of the earth, and store more than three-quarters of the carbon in terrestrial plants and nearly 40% of soil carbon. When forests are cleared, some of their carbon is released to the atmosphere—slowly through decay or quickly through burning. One estimate shows that land use change, primarily deforestation, releases about 5.9 GtCO 2 (gigatons or billion metric tons of CO 2 ) annually, about 17% of all annual anthropogenic GHG emissions. This contribution to GHG emissions makes efforts to reduce deforestation significant in international strategies to mitigate climate change. There has also been some discussion of the relationship between forests and methane (CH 4 ), a less prominent but far more potent GHG than CO 2 . However, the evidence of the relationship is still limited. It generally shows forests to be net CH 4 sinks, except in water-saturated soils (i.e., forested wetlands), and it is unclear whether activities that modify forest cover (e.g., deforestation) affect CH 4 absorption and release. Thus, this report addresses only the relationship between forests and carbon as it affects climate change. The loss of tropical forests is of particular concern. The existing data show little, if any, net deforestation in boreal and temperate forests, and thus the carbon consequences of deforestation in these ecosystems might not be significant. In contrast, the loss of tropical forests is substantial and continuing. Tropical deforestation has significant climate impacts because of the large amount of CO 2 sequestered in the vegetation—nearly half of all the carbon in terrestrial plants. Thus, the lowest cost and largest carbon benefit of reducing deforestation is with tropical forests. In the United States, tropical forests are largely limited to Hawaii and Puerto Rico. Congress has addressed international deforestation through laws that authorize funding to conserve forests and in proposed climate change legislation that would provide resources to reduce deforestation in developing countries. The Tropical Forest Conservation Act of 1998 (22 U.S.C. §2431 et seq.), for example, authorizes the United States to conduct debt-for-nature swaps with developing countries to conserve their tropical forests. Under pending climate change legislation (e.g., H.R. 2454 , the American Clean Energy Act of 2009, and S. 1733 , the Clean Energy Jobs and American Power Act), Congress is considering providing resources for developing countries to establish programs and implement projects to reduce deforestation and forest degradation, and creating policy mechanisms to establish standards and markets for international offsets to reduce GHGs. Three deforestation issues are likely to be of particular importance to Congress. The first two are geographic variation in the causes and the consequences of deforestation. These then suggest approaches for efforts to reduce deforestation. The third issue is the poor quality of information about forests generally, which might point to needed research and infrastructure as well as suggesting caution in relying on existing data for decision-making. Congressional interest in reducing deforestation to lower CO 2 emissions parallels several international initiatives that aim to accomplish the same objective. International proposals focus on reducing emissions from deforestation and forest degradation (REDD) in developing countries. These proposals were discussed and debated in climate meetings associated with the United Nations Framework Convention on Climate Change (UNFCCC) in Copenhagen in December 2009. Forests cover more than a quarter of the land area in the world but are not uniformly distributed. They account for less than 5% of the land in many countries—such as Greenland, Egypt, Pakistan, and Haiti—but cover more than 90% of the land in a few places such as Suriname and French Guiana. Some countries have naturally low forest cover (Greenland and Egypt), whereas others have diminished forest cover because of deforestation, possibly centuries ago (e.g., United Kingdom and Algeria). Forests store enormous quantities of carbon, and contain more biomass per hectare in vegetation than other biomes. Carbon sequestration and release vary by forest type, although generalizations can be made about the three major forest biomes—boreal, temperate, and tropical forests. Table 1 shows global average carbon levels in the vegetation and soils for major terrestrial biomes, including the forest biomes. The quantities shown in Table 1 should be recognized as global averages, with substantial variation of carbon stocks within each biome; for example, wetlands can be dominated by trees (a swamp) or by grasses (a marsh), while tropical forests can be very wet (rainforests) or quite dry (trees in a savannah). There are also continuous gradations across biomes (e.g., warm, humid temperate forests—subtropical forests—have traits in common with both temperate forests and tropical forests). Deforestation is the loss of tree cover, usually as a result of forests being cleared for other land uses such as farming or ranching. Some limit the definition of deforestation to the permanent conversion of forests to another habitat. Others add to this definition by including the conversion of natural forests to artificial forests such as plantations. Deforestation activities affect carbon fluxes in the soil, vegetation, and atmosphere. The effects of these activities can vary, depending on the type of activity. For example, logging can lead to carbon storage if trees are converted to wood products (e.g., lumber) and deforested areas are restored. (The issues surrounding tree planting to offset deforestation are discussed below.) However, logging can also lead to carbon emissions if the surrounding trees and vegetation are damaged, and if not all woody biomass is processed into products. Other activities that alter the carbon cycle in forests and affect climate are discussed below. The impact of deforestation on soils, and the release of soil carbon, depends on the magnitude of soil disturbance and the type of soil. Soil carbon content is related to the lifecycle of the vegetation it supports. When vegetation dies, it decomposes and releases carbon. Some carbon is deposited in the soil; some is dissolved and leaches into surface waters or groundwater; and some is released directly to the atmosphere as CO 2 . Deforestation exposes soils to sunlight, which increases soil temperature and the rate of soil carbon oxidation. This process increases the rate of CO 2 release to the atmosphere. Soil carbon can also be released at high rates if soils are disturbed, for example, by logging operations or tillage. Peat soils are particularly important for climate because of their very high carbon content (as well as CH 4 content and release). Peat soils generally occur in forests where natural decomposition rates are low, such as in periodically flooded forests or forests with a short growing (and thus decomposition) season. Peat soils may partly account for the high soil carbon levels of boreal forests, but some occur in temperate and tropical forests. Peat soils are considered major carbon sinks, and could potentially be large sources of carbon emissions, if disturbed. Deforestation can lead to carbon emissions from decomposing vegetation left on the forest floor. However, wood converted into products—such as lumber and plywood—could store carbon for many years, ranging from an average of 10 years for shipping pallets to 100 years or more for lumber. Paper products store carbon for a brief duration, often less than a year. The proportion of a tree converted to products varies widely, and depends on the size (diameter) and form (taper and branching) of the tree as well as the particular species. The purpose of the tree cutting also affects utilization and waste. Harvesting pulpwood for paper production, for example, can include much more of the woody biomass than harvesting veneer bolts for plywood or sawlogs for lumber. Cutting to clear a site for agriculture yields much more waste, as the woody biomass is generally burned to prepare the site for crop or pasture production. In addition, the harvest method can affect wood utilization and waste. Selective logging, where certain trees or species are harvested, can lead to large quantities of wood waste because more roads are needed and because the harvest and extraction procedures often damage the remaining trees. Clear-cutting can reduce wood waste, when the majority of the trees can be removed for wood products, but can increase biomass waste if done to clear land for agriculture. One technique—reduced impact logging (RIL)—has been developed to reduce timber harvest damage to soils and residual trees. Descriptions of RIL are typically either lacking in details or highly site-specific with limited general applicability, because the practices that will reduce logging damages depend on a variety of site conditions, such as soil type and water content, and tree species diversity. Nonetheless, one source reported that RIL reduces wood waste by more than 60% and soil disturbance in roads, landings, and skid trails by almost 50%. However, a major barrier to increased use of RIL is illegal logging in the tropics. Biomass not removed for products remains on the site and decomposes. Some of the carbon is deposited in the soil and some is released into the atmosphere. If the remaining biomass is burned, as is common in clearing lands for agriculture and in preparing sites for reforestation, the carbon is quickly released to the atmosphere. For unburned on-site biomass, the rate of decomposition (and hence of carbon emissions) varies due to moisture (many fungi and bacteria grow better in moist environments), temperature (higher temperatures also improve fungi and bacteria growth), and type of wood (some species contain chemicals that inhibit decomposers), among other things. Forest fires—both natural and anthropogenic—can kill some or all of the trees in a forest. Forested ecosystems have evolved with a variety of natural fire regimes. Some ecosystems have rare natural fires; others are "fire-prone." The nature and extent of natural fires are related to the evolutionary development of the natural fire regimes, to climatic conditions such as drought, and to the amount of woody fuels in some ecosystems. Fire affects climate by releasing large quantities of CO 2 to the atmosphere in short periods, and thus extensive burning can affect the global climate. Fires also produce large quantities of fine particulates and aerosols. These pollutants can be hazardous to human health, but they also absorb and reflect sunlight, which creates cooler temperatures in the forest. Anthropogenic burning is a greater concern for carbon emissions than natural fires. For example, fire is commonly used to clear land in the tropics. Studies report that anthropogenic ignitions are the predominant factor in starting wildfires in tropical forests. Man-made fires in areas not prone to natural fires can lead to a positive feedback loop, where increasing fire frequency can alter plant regrowth until forests do not regenerate and the areas are converted to brush fields. In contrast, natural fires are part of the carbon cycle, with carbon emissions balanced by plant regrowth over the long run. According to some, this balance justifies not controlling natural fires to mitigate climate change. Others contend that natural fires could exacerbate the ecological effects of anthropogenic fires on forest ecosystems, and argue that both should be regulated and controlled, depending on the location and fire history of the site. Four other relationships between deforestation and climate change are discussed in the literature: Disturbance s Other Than Fire. Forests are disturbed by insect infestations, disease, drought, invasive species, wind and ice storms, and landslides, among other things. Understanding of how these disturbances relate to climate change is generally incomplete. An exception is the relationship between increased pine beetle infestations in the Rocky Mountains and warmer temperatures. Warmer temperatures allow pine beetles to increase their seasonal reproductive rate and expand their range among pine stands. Some are concerned that climate change will exacerbate forest disturbances, leading to further climate change (i.e., creating a positive feedback loop). Albedo Effect. Albedo is a measure of the reflectivity of surfaces (e.g., vegetation, soils, and water)—darker surfaces absorb more sunlight (e.g., fir forests), while light-colored surfaces reflect more sunlight (ice or snow). Darker surfaces heat the surrounding atmosphere more than lighter surfaces, making albedo important for climate. Climate models have shown that the reduced surface heating from the very high albedo of snow-covered boreal forest openings more than offsets the warming from the CO 2 released in creating those openings. For temperate forests, where the openings are snow-covered for a briefer period, the albedo effect is relatively minor. For tropical forests, where there is no snow and where the vegetation is a broader mix of species, there is no significant difference in albedo between the forest canopy and forest openings. Carbon Di oxide Fertilization of Forests. Because CO 2 is critical to vegetative growth, some have hypothesized that elevated CO 2 levels will increase forest growth. Studies of temperate forests report that excess carbon in the atmosphere can increase photosynthesis and plant growth in trees for short periods, particularly for young stands. Long-term effects are unknown because experiments need more time to collect data. Other researchers note that sustained enhanced growth due to high CO 2 levels may be limited by factors such as drought and nitrogen availability. For tropical forests, some suggest that carbon saturation by leaves of tropical trees may limit response to CO 2 enrichment, and decreased productivity could result from periods of higher temperatures and drought. Hydrological Patterns. Climate change can directly alter precipitation patterns, sometimes causing drought in some areas. Researchers report that higher CO 2 levels and temperatures increase water use by plants. The combination of drought and demand for greater water could stress forests and cause changes in the ecosystem. In contrast, broad-scale deforestation has been shown to reduce evapotranspiration (water loss to the atmosphere) by plants, which reduces cloud formation and downwind precipitation. The combination of changes in precipitation patterns, plant water use, and evapotranspiration could have significant synergistic effects. Boreal forests, or taiga , generally occur north of about 50" north latitude, as shown in Figure 1 . Although boreal forests account for about a third of the world's forests (see Table 1 ), relatively few countries have boreal forests. Countries with boreal forests include Russia, Canada, the United States (in Alaska), Sweden, Finland, and Norway. There are few boreal forests in the Southern Hemisphere, including minor acreages on scattered mountaintops in southern Argentina, Chile, and New Zealand (not shown in Figure 1 ). Boreal forests are dominated by relatively few tree species, such as spruce, fir, larch, and pine. They commonly grow in expanses of trees with relatively similar sizes, generally as a result of infrequent broad-scale destructive events, particularly wildfires. These conifer forests often contain substantial volumes of timber, but they generally are not managed for timber production, because of slow growth rates. Boreal forests are important for carbon sequestration because of their high carbon storage in forest soils. (See Table 1 .) Carbon in vegetation is slightly greater than for temperate forests, and about half of the level in tropical forests. However, soil carbon levels in boreal forests are high—more than for any other biome except wetlands. Carbon accumulates to high levels in boreal soils because of slow decomposition rates, which are depressed by short summers and acidic soils. The primary driver of boreal deforestation has historically been land clearing for agriculture, primarily along the southern borders of boreal forests. It is unclear whether forest clearing for agriculture is continuing, although warming from global climate change might make some boreal ecosystems ideal for some types of agriculture. Another possible cause of boreal deforestation is timber harvesting. Some contend that logging is a significant driver of deforestation in boreal forests; others suggest that logging is secondary to the effects of increased wildfires and insect and disease infestations. Boreal forests are not typically managed intensively for timber production, but the substantial volumes of standing timber are harvested extensively for wood products in some regions such as Scandinavia, western Russia, and parts of Canada. Limited evidence of continuing permanent deforestation in boreal forests is inconclusive. Some research has found virtually no regeneration of the boreal forests in eastern Canada following wildfires over the past 900 years, with a commensurate decline in forest cover. These findings are contrary to the "widespread belief of northward expansion of forests due to recent warming" and suggest that boreal forests might not migrate northward in response to climate change, as many believe. Others have noted "enhanced conifer recruitment" (forest regeneration) in Russian boreal forests in the 20 th century. Thus, it is difficult to draw conclusions about the extent of deforestation in boreal forests. The loss of boreal forests could have several possible consequences for climate. When boreal forest trees are lost—through wildfire, insect or disease infestation, or timber harvest—at least some of the carbon contained in the trees and soils is emitted to the atmosphere. The amount of carbon released depends on many factors. However, because about five-sixths of boreal forest carbon is stored in the soil, soil disturbance is the most important factor for carbon release. The loss of forest cover from deforestation may accelerate the oxidation of carbon near the soil surface and cause increased emissions. Timber harvesting and the associated road construction disturb soils, and can release substantial amounts of soil carbon to the atmosphere. On the other hand, winter harvesting over packed snow can significantly reduce soil disturbance, although it is more costly than traditional timber harvesting. Another factor that reduces the climate impacts of boreal deforestation is the high level of wood utilization and relatively low wood waste. Because of the relatively low tree species diversity of boreal forests, clearcutting is common and most trees can be used for wood products, including those killed by wildfire or by insects and diseases, both of which reduce wood waste. Furthermore, pulpwood harvesting for paper production (short-term wood products) is especially common in boreal forests, also leading to less wood waste in the forest to decompose and release carbon. Another possible climate impact of boreal deforestation is related to the albedo effect. The dominant species in boreal forests—firs, spruces, larches, and pines—are relatively dark-colored, and thus absorb much of the incoming sunlight. When these species are cleared, different species take their places, primarily broadleaf species such as aspen, alder, and birch. These trees are lighter in color and reflect much of the incoming sunlight. Furthermore, snow accumulates in clearings, and reflects more sunlight than snow under the trees. Thus, boreal forest clearings are cooler than the surrounding forest, which could create a local cooling effect and slow decomposition. Some models have suggested that the cooling from the albedo effect more than offsets the warming from the carbon released, even from wildfires. Other researchers, however, have calculated that the increased transpiration of light-colored broadleaf forests as they displace tundra more than offsets the albedo effect, resulting in additional warming. Temperate forests generally occur in the mid-latitudes, typically from the Tropic of Cancer (23½" north latitude) to about 50" north latitude, and south of the Tropic of Capricorn (23½" south latitude), as shown in Figure 2 . Temperate forests account for about a quarter of global forests. The most extensive temperate forests are in the United States and southern Canada, Europe, China, and Australia. There is a wide variety of temperate forests—oak, maple, pine, and more—but the species diversity within temperate forests, while greater than in boreal forests, is substantially lower than in tropical forests. As with boreal forests, temperate forests commonly have extensive areas covered by a few tree species with similar sizes, often the result of destructive events—wildfires and major storms (hurricanes, tornadoes, wind or ice storms, etc.). Many temperate forests are managed for commercial wood production, because of the modest species diversity, moderate tree growth rates, and desirable wood characteristics of many of the dominant conifer trees. Temperate forests are less significant for carbon release than tropical or boreal forests, because of the lower levels of carbon stored in vegetation and soils. However, they take on added significance because of the more intensive management of these forests for wood products. The disturbances in temperate forests parallel those of boreal forests. Clearing forests for agriculture is a historical cause of deforestation in many areas, although much of this occurred more than a century ago. Clearing land for agriculture might still be a cause of deforestation in temperate developing countries. A more common cause of temperate deforestation, particularly in developed countries, is conversion of land to non-agricultural uses, notably residential and commercial development and infrastructure (e.g., roads). While research has suggested that no net loss of temperate U.S. forests is anticipated, changes in forest cover are likely to fragment remaining forestland. The implications of such changes for carbon sequestration and climate are unclear. Timber harvesting and natural disasters are also causes of temperate deforestation. In many areas, timber harvesting is followed by reforestation, resulting in no net deforestation over time. Similarly, most areas affected by natural disasters are usually reforested, either naturally or through tree planting. Nonetheless, reforestation of cleared areas is not always successful, because of drought and invasion by competing species (native brush, plants used for erosion control, invasive exotics, etc.). In some areas, natural succession may require years or decades to reestablish tree cover, and climate change may prevent such "normal" recovery. Deforestation of temperate forests generally has less severe consequences for climate than tropical or boreal deforestation because of the lower carbon levels in soils and vegetation. However, insect outbreaks and fires in Canadian temperate forests have transformed these forests since 2000 from a carbon sink to a projected carbon source, a status expected to continue for the next two to three decades. In the western United States, historic fire suppression policies have increased biomass, but have also increased the risk of catastrophic fires. More recently, policies have focused on reducing biomass fuels, through prescribed burning and mechanical treatments. These activities release carbon, but increase tree growth (and carbon sequestration) and reduce CO 2 released from wildfires in some areas. Thus, the net effects of wildfires and of efforts to reduce wildfire damages are unclear. Disturbance of temperate soils can be a factor in carbon emissions depending on its intensity. Natural disasters typically do not disturb the soils, although the loss of forest cover may accelerate erosion and the oxidation of soil carbon. Timber harvesting and its associated road construction disturb soils and can release substantial amounts of soil carbon. Logging could also affect carbon emissions from temperate forests directly. Large-scale clearing, followed by burning and decomposition, could increase carbon emissions; however, wood utilization from timber harvesting (including salvage of trees killed by fire, insects, and diseases) will increase carbon storage, and reforestation provides additional carbon sequestration. The net effect is unclear. (See " Tree Planting to Offset Deforestation? " below.) Tropical forests are generally defined by their location—between the Tropic of Cancer and the Tropic of Capricorn, 23½" north and south of the equator, respectively. Tropical forests occur in many settings, from very wet to quite dry locations. Tropical rainforests, shown in Figure 3 , are the dominant form, characterized by heavy rainfall, dense vegetation, and an enormous diversity of plant and animal species. Tropical rainforests are considered to be among the earth's most biologically diverse ecosystems; indeed, some claim that tropical rainforests hold nearly 50% of the earth's biodiversity. Dry tropical forests have sparser tree cover and less species variability, typically with grasses and other herbaceous vegetation growing underneath. Tropical countries account for about 42% of global forestlands. Rainforests are common in Central and South America, southern and Southeast Asia, and the Congo Basin and Madagascar in Africa. The countries with the most extensive tropical rainforests include Brazil, the Democratic Republic of Congo, and Indonesia. About half of dry tropical forests occur in a band from the easternmost part of Brazil southwest into Paraguay and eastern Bolivia, and scattered elsewhere in Latin America (e.g., in Mexico). Other dry tropical forests occur in a band across Africa, south of the Sahara Desert, southward through East Africa, and south of the Congo Basin, as well as scattered in southern Asia and in northern Australia. Tropical forests have an enormous diversity of plant and animal species. In contrast to boreal and temperate forests, tropical forests generally have been free from infrequent, broad-scale destructive events. Thus, the trees (and other species) on each site can respond to minor localized climatic differences that, over thousands of years, can lead to diversification. As a result, tropical areas are generally not well suited for intensive forest management or plantations, although teak and mahogany (as well as coffee, oil palms, and bananas) are sometimes grown in plantations. Many of the desired species have narrow habitat requirements, often making it difficult for them to grow near other trees of the same species or requiring a variety of species to provide the necessary micro-climatic conditions. Further, modest soil carbon levels and rapid decomposition effectively prevent sustained intensive management over extended periods without substantial and continuing applications of fertilizers. The wide variety of trees also leads to a wide variety of insects and diseases, so pest management is an issue for tropical plantations. Tropical forests are important for carbon sequestration. They contain substantial amounts of carbon in vegetation—double the level in other forests, and four times more carbon than the global average. (See Table 1 , above.) In contrast to the vegetative carbon, tropical forest soils contain only average levels of carbon. In tropical rainforests, the carbon is quickly depleted when vegetation is cut, because the warm, humid conditions cause rapid decomposition and the high rainfall leaches minerals from the soils. Compared to boreal and temperate deforestation, tropical deforestation is expected to have more significant climate consequences because of the higher rate and amount of CO 2 released. Policy mechanisms that address deforestation are related to drivers of deforestation. In the tropics, drivers of deforestation vary among regions, and thus a single solution for reducing deforestation in the tropics might be insufficient. This section discusses some common anthropogenic drivers of tropical deforestation. There are direct anthropogenic drivers of tropical deforestation, such as clearing for agriculture, as well as underlying causes, such as road construction, market forces, and government policies. Underlying drivers of deforestation are generally coupled with direct drivers of deforestation. Tropical forest losses from anthropogenic causes can be exacerbated by natural events, such as drought and fire, as discussed earlier. Some have identified the drivers of tropical deforestation in several categories . There are direct drivers—agriculture, including shifting cultivation and small-scale and large-scale permanent agriculture; and wood extraction, including logging and fuelwood harvests. In addition, there are two principal underlying causes of deforestation—road building and governmental policies. The anthropogenic drivers of deforestation vary among regions, and differ between rainforests and dry tropical forests. Drivers of deforestation seldom act independently of other drivers and in many cases follow a progression. For example, in some regions of the Amazon Basin, selective logging for high-value timber species leads to road building through virgin tracts of forests. After logging, farmers use logging roads to access forested areas. Farmers cut trees and burn them to prepare areas for planting crops or forage for ranching. Another example is the coupling of deforestation with population increases, a sequence common for tropical regions in Asia and Africa. As population levels rise, demand for agricultural products increases. This demand can lead to expanding agricultural fields into areas previously occupied by forests. Building roads into forested areas is the major underlying cause of deforestation in the tropics. Road building increases access to forested land and is the first step toward developing forested regions, often for agriculture. Thus roads often initiate the deforestation process. Two scales of road building commonly occur. Roads may be built on small scales into virgin forests, typically to access trees for selective logging. Roads are also built by governments on large scales to connect regions within a country. Newly built roads provide access to forested areas to initiate logging, agriculture, and ranching, and provide return access to markets to sell products. Roads can also stimulate development, leading to infrastructure and market development at the forest frontier. They make transportation cheaper and can encourage migration to forest frontiers, which increases pressure on forests. In many tropical areas, the ecological and economic consequences and construction methods of road-building are rarely considered in planning. Agriculture in the tropics is diverse, but is traditionally associated with shifting cultivation, also known as slash-and-burn farming or swidden agriculture. This practice involves clearing a site by cutting down and burning trees, growing crops until soils are depleted of nutrients (a few years), and then moving to a new site and repeating the process. The process is associated with about a third of agriculture-related deforestation throughout the tropics. Shifting cultivation is being displaced by small-scale permanent agriculture, where the same site is farmed indefinitely. As with shifting cultivation, small-scale agriculture begins with cutting and burning the trees. Permanent small-scale agriculture in the tropics requires greater investment in the land (e.g., use of fertilizer for fortifying soils) and increases land tenure, thereby slowing the rate of deforestation after initially contributing to deforestation. Several factors enter the decision-making process when farmers consider whether to practice swidden agriculture or permanent agriculture, including the cost of maintaining a plot, the cost of acquiring new land, access to roads and infrastructure, and land rights. Permanent agriculture is a driver of deforestation as the number and size of plots expand due to increased demand for food and biofuels. Permanent small-scale agriculture is associated with about another third of agriculture-related tropical deforestation. Large-scale permanent agriculture is a third variety of tropical agriculture associated with deforestation. Some of these operations involve traditional crops such as bananas and coffee; others involve crops such as soybeans and oil palm that meet the demands of emerging markets (e.g., biofuels). Large-scale permanent agriculture also covers large-scale ranching operations and forest plantations. Large-scale agriculture and cattle ranching roughly account for the remaining third of agriculture-related deforestation in tropical countries. Logging and fuelwood consumption are primary causes of tropical deforestation associated with wood extraction. Commercial logging in the tropics is largely selective. Tropical forests have a large diversity of tree species per acre, of which a few are valuable in commercial markets. Logging crews often create roads and trails through forests to access select valuable species (i.e., selective logging), often leaving cut and damaged trees. For a few particular species, the unused woody biomass can have more mass than the timber collected. While logging might not be a significant direct cause of deforestation, it can be a significant underlying cause. As discussed above, logging often opens forests to agricultural expansion. Reduced impact logging (RIL) can reduce timber harvest damage to tropical soils and residual trees significantly. RIL involves mapping desired trees and planning extraction strategies such as building roads efficiently and minimizing damaged woody biomass associated with logging. However, RIL is not widely implemented and faces several barriers in the tropics, including higher costs and illegal logging. Fuelwood extraction is done largely for subsistence. Indigenous peoples and small farmers harvest fuelwood for cooking and heat. In some areas, large-scale harvesting is used to produce charcoal for subsistence and markets. In contrast to commercial logging, tree species used for fuel are largely irrelevant. Thus, there is less waste, but more complete clearing, which can lower the prospect for forest regeneration. Government action (or inaction) can be an underlying cause of deforestation in several ways. For example, governments can fund and determine where roads are built; determine land rights and uses that affect forest clearing; influence enforcement of forest laws; and affect deforestation through tax policies, production subsidies, and other institutional choices (immigration and development policies). Infrastructure developmen t. Government policies determine road building in forested areas. If roads are constructed without regard for environmental or development considerations, they can exacerbate deforestation. Policies can also temper deforestation stemming from new roads by restricting land uses in proximity to roads, or by creating forest reserves to manage logging and agriculture. Land Rights /Tenure . Secure title to land is important for implementing land use policies affecting deforestation. For example, farmers and ranchers with secure title to their land are more inclined to make investments on their land to practice permanent agriculture. Secure title can also provide an incentive for landowners to participate in programs that preserve forests. If landowners know they will receive long-term benefits from programs that pay for forest preservation on their land, they are more likely to join. Indeed, many advocate improved land tenure arrangements to assure that landowners can capture the benefits of forest management, including forest carbon sequestration. In many tropical countries, the government holds title to the land—about two-thirds of all tropical forest area is government-owned. Clear and secure private title to land can also reduce the practice of deforestation to acquire title. In several tropical countries, establishing ownership required "productive use of the land," most readily demonstrated by clearing the forest; this contributed significantly to tropical deforestation. Forest clearing to obtain title also indirectly prevented land ownership for native peoples who use the forests for subsistence. Enforcement . The enforcement of laws directly or indirectly related to forested lands can affect deforestation. Weak enforcement can result in widespread degradation or deforestation and undermine the effectiveness of forest policies and laws. Weak enforcement might stem from lack of resources (money and trained personnel) or from bribes or collusion. One consequence of weak law enforcement is illegal logging, which has become a multi-billion dollar enterprise. Illegal logging affects market prices for timber, depressing returns to legitimate landowners (including the government) and often leading to additional logging to generate the same level of revenues. In some places, illegal logging is rampant, accounting for as much as 80% to 90% of timber harvesting regionally. Institutional Factors . Government policies related to market signals can be an underlying cause of tropical deforestation. Agricultural subsidies are commonly cited, and include tax expenditures, import tariffs, fertilizer assistance, and other policies that alter market signals to encourage agricultural production, particularly for export. A relationship between agricultural commodity prices and deforestation is strongly indicated by the roughly 50% decline in Amazonian deforestation in Brazil between 2008 and 2009, when global beef prices fell substantially. Similarly, deforestation in Cameroon was shown to be strongly correlated with the price of cash crops, notably coffee and cacao. Growth in demand for biofuels could induce landowners in tropical countries to clear forests to grow corn, soybeans, sugarcane, or palm oil to satisfy the world's demand for alternative fuels. Policies related to population and economic stability can affect deforestation, too. For example, Indonesia's transmigration policy—encouraging people to move from densely populated areas to rural areas by giving them land for agriculture—has indirectly led to deforestation. Government policies that address population, economic development, and international trade can have significant effects on deforestation rates. Drivers of deforestation in the tropics have varying characteristics and intensities that make them different among tropical regions. Differences are related to forest type, demand for agricultural products and biomass, access to forests, urbanization patterns, historic and cultural relations to forests and forestlands, and other factors. Differing regional drivers of deforestation are important to understand, because they influence the framework of policies to reduce deforestation rates. For example, pending climate change legislation in the U.S. Congress would authorize funds and other incentives (e.g., carbon offsets) to assist developing countries to reduce deforestation. Some of these programs are expected to be operated at the national level in developing countries. Understanding the connection between their national policies and deforestation could make deforestation-reduction efforts more targeted and efficient. Other programs are contemplated at the project level. Understanding regional and local drivers of deforestation could facilitate implementation of these projects. The tropical forests of Latin America stretch from Mexico to southern Brazil and Bolivia. The 588 million hectare Amazon River basin dominates discussions about tropical forests, since it accounts for about two-thirds of tropical forests in Latin America. About 62% of the Amazon basin is in Brazil, with tracts in Peru, Bolivia, Columbia, and other countries. In 2006, the trees in the Amazon basin were estimated to contain one-fourth to one-half of all terrestrial carbon in vegetation. Some have suggested that the Brazilian Amazon alone may contain as much as 40% of all remaining tropical rainforest. An estimated average of 1.8 million hectares of Brazilian Amazon rainforest was lost annually between 1988 and 2008, about a third of global tropical deforestation. Anthropogenic drivers of deforestation in Latin America and especially the Amazon are generally centered on agricultural expansion, including both large-scale and small-scale agriculture. The primary driver of deforestation has been cattle ranching. Some estimate that cattle ranching in the Amazon is associated with four-fifths of Amazon deforestation. High global beef prices in the early 1990s led to an estimated 11% annual increase in the cattle herd from 1997 to 2003 and a surge in deforestation in 2002 to 2004. Soybean production and more recently sugarcane and other crops for biofuels are also significant drivers of deforestation; in general, production of these biofuels is not directly causing deforestation, but rather is displacing cattle ranching, forcing cattle production further into forested areas. The emergence of agriculture as a driver of deforestation in Brazil was initially tied to government incentives in the 1960s that promoted migration and development in the Amazon. Cheap land and equipment were used to motivate settlers to colonize the Amazon and stake claim to borderlands. Major highways connecting the south of Brazil to parts of the Amazon were also built to facilitate this effort. Roads and highways provided access to forests and enabled farmers and loggers to transport their goods to markets. Farmers practiced swidden agriculture because they found it cheaper to clear new land for planting crops than to maintain their original tracts. Their old land was generally abandoned or converted to pastureland for ranching. In recent years, market forces, particularly global beef prices, have been identified as a significant underlying driver of deforestation. Agricultural products coming out of the Amazon are entering the global market, and changes in domestic and global market conditions have been correlated to rates of deforestation. Deforestation in the Amazon is exacerbated by forest fires. Some contend that the frequency of drought is a prime determinant of how often forest fires occur and how extensive they become in the tropical forests of the Amazon. Combined with land use activities and drought conditions, successive fires in the same area can prevent regeneration in the Amazon. The tropical forest ecosystems of Africa are centered around the Congo River basin, the second largest river basin in the world (after the Amazon), and the coast of the Gulf of Guinea. The Congo basin spans six countries in Central Africa, covering about 369 million hectares. It is the world's second-largest area of contiguous tropical rainforest, with more than 24 million people living in or around the forest and relying on it for agriculture, food, medicine, fuel, and construction materials. The Congo Basin is surrounded by a band of dry tropical forests; sometimes classified as savannahs because of their relatively low tree cover. Deforestation rates in tropical Africa are considerably lower than in Asia and Latin America. However, high population growth rates, coupled with the demand for agricultural land and woody biomass for fuel, could double the rate of deforestation in the next 20 years. Deforestation in both the wet and dry tropical forests of Africa is driven largely by small-scale agriculture, both shifting cultivation and permanent production of such crops as cassava, yams, plantains, and millet. However, conversion to large-scale agriculture is an emerging threat to forests in the region, and accounts for about a third of deforestation in tropical Africa. Cattle ranching is a much less significant driver of deforestation in Africa than in Latin America. Fuelwood, both for local use and for charcoal for urban use, has been a major cause of deforestation in Africa. An estimated 90% of the continent's population uses fuelwood for cooking, and in sub-Saharan Africa, firewood and brush supply about 50% of all energy sources. Some have noted that only 7.5% of rural households in sub-Saharan Africa have access to electricity, so demand for fuelwood is likely to continue to be a cause of deforestation in tropical Africa for the foreseeable future. Commercial logging is less significant in tropical Africa than elsewhere in the tropics. Nonetheless, the effects of logging can still be significant by degrading forests and providing access for farmers. The annual clearing of dense forest is related to the rural population density near the forest, suggesting that proximity of the populations and their access to forests is a major cause of deforestation in the region. Some use the access argument to contend that creating forest reserves in the middle of contiguous or unoccupied forests might be detrimental to conservation. They argue that roads built to access reserves for protection might also stimulate deforestation in areas surrounding the reserve, potentially resulting in greater forest loss than what the reserve would protect. Some underlying causes of deforestation in tropical Africa are related to governance. Examples include a low priority (which may translate into little funding) for forest conservation; poor enforcement of forest conservation laws; few incentives to conserve forests; treatment of forests as a commons areas; and lack of defined property rights. These factors are magnified in Africa, since approximately 98% of tropical forests are managed by governments. Poor law enforcement particularly affects forest reserves in tropical Africa. Reserves are exposed to poachers, wood gatherers, and logging. Some contend that, with an increasing population and diminishing forest area, failure to enforce laws for protected areas and ensure land rights for local communities will impede efforts to check deforestation. Political instability, including wars and civil disturbances, in parts of Africa also weakens law enforcement, leading to greater rates of deforestation by the refugees and displaced persons as well as through commercial logging to finance the conflicts. However, instability due to conflict may also restrict investment and infrastructure expansion, thus limiting deforestation in parts of the Congo basin. Southeast Asia includes the Indochinese Peninsula and the islands of Indonesia and the Philippines, as well as many other nearby islands. The entire region contains tropical rainforests. Approximately a third of the tropical forest area in the world is in Southeast Asia. Indonesia alone reportedly contains approximately 9% of the world's tropical forest area. Deforestation in Southeast Asia is largely driven by agriculture. In many areas, deforestation is similar to tropical Africa, being driven substantially by small-scale shifting and permanent agricultural plots. Also, like Africa and unlike Latin America, cattle ranching is a minor factor in deforestation. Another parallel to tropical Africa is that, except for Malaysia and Indonesia, commercial logging is a relatively modest cause of deforestation. However, in Papua New Guinea, logging is a major driver in lowland forests, with subsistence agriculture causing deforestation throughout the rest of the country. Deforestation in Indonesia and Malaysia differ from most of the rest of Southeast Asia. Forests are extensive, and deforestation rates have been relatively high. Indonesia accounts for nearly 13% of global tropical deforestation. Extensive commercial logging has been a major contributor to high rates of deforestation in both Indonesia and Malaysia. However, in recent years, large-scale commercial agriculture is the predominant cause of deforestation. Oil palm is the major commercial crop in both countries, and extensive areas have been cleared for oil palm plantations. Deforestation also occurs for rubber plantations, which have been planted extensively in Thailand as well as in Malaysia. Some underlying drivers of deforestation in Southeast Asia include government policies and market forces. In Indonesia, for example, federal policies encouraged resettlement from urban centers into forested areas in the 1980s. More recently, deforestation in Indonesia has been more enterprise-driven, primarily caused by conversion to agriculture (e.g., oil palm plantations). Some also argue that industrial expansion and development in China is also an underlying force driving deforestation in Southeast Asia. Increasing demand for tropical hardwoods, palm oil, and rubber for consumption in China are thought to be driving deforestation in Indonesia and Malaysia. An expanding Chinese economy could sustain this demand and lead to greater deforestation in Southeast Asia, despite government policies and incentives to reduce deforestation. Most scientists agree that, in the past two decades, tropical deforestation has been responsible for the largest share of CO 2 released to the atmosphere from land use changes. At current rates of deforestation, clearing tropical forests could release an additional 87 to 130 GtC of CO 2 to the atmosphere by 2100. Tropical deforestation can quickly deplete the moderate levels of soil carbon. In rainforests, heavy precipitation leaches carbon (and other minerals) into the surface waters and the groundwater. This is, in part, why shifting agriculture is a common practice in tropical areas—soil nutrients (including carbon) are quickly depleted, reducing vegetative growth and requiring farmers to find new land. This carbon depletion also hinders regrowth of the forest after croplands are abandoned. The soil carbon impacts of tropical deforestation are particularly important for Indonesia, because of its relatively extensive peatlands. Peat soils have a very high carbon content, typically because they oxidize very slowly as a result of often being flooded. Deforestation, and drainage for commercial oil palm plantations, releases large amounts of carbon in a relatively short period. Thus, deforesting and draining peat forests have particularly significant impacts on global carbon sequestration. Commercial logging in the tropics also affects climate through the relatively large release of carbon, compared to logging in temperate and boreal forests. The emphasis of commercial wood production on only a relatively few tree species in tropical forests often results in substantial waste—harvests may take as little as 10% of the wood volume, and many non-target trees are killed or damaged. Furthermore, commercial logging usually includes roads for removing the timber, the first step in general access for agricultural expansion and other developmental (forest-clearing) activities. Fire can exacerbate the climate impacts of tropical deforestation. The natural burning regime in tropical rainforests differs from that of boreal and temperate forests. Natural fires are relatively rare in moist tropical forests, with natural fire cycles measured in hundreds or even thousands of years. However, fire is commonly used (often following commercial logging) to clear lands for agriculture—crops or pastures. This releases the carbon from the vegetation that is cut down. Much of this is released to the atmosphere, but some temporarily adds nutrients to the soils, increasing plant growth for a few years. However, land-clearing fires often escape and burn surrounding forests. Fires in the tropics are harmful in three ways: (1) they release substantial quantities of CO 2 to the atmosphere; (2) they generate substantial volumes of smoke, causing "brown clouds" and regional health problems; and (3) they create a positive feedback loop by opening and drying the adjoining forests. This perpetuates a cycle of burning, since post-fire habitats (other than crop and pasture lands) are usually dominated by flammable grasses and vines that make the area susceptible to more destructive and more extensive fires. Finally, tropical deforestation has also been shown to be linked to decreased evapotranspiration, which lessens atmospheric moisture and precipitation levels. As noted above, this could reduce precipitation and increase surface temperatures regionally. Warming in tropical regions could increase the susceptibility of tropical forests to fires and increase tree mortality due to drought, as discussed earlier. In addition, reduced precipitation might reduce agricultural productivity, leading to increased deforestation simply to maintain agricultural output levels. The drivers of deforestation suggest various approaches to reducing deforestation: adjusting markets and assisting tropical countries with infrastructure and governance. For a description of U.S. programs that address deforestation, see the Appendix . In addition, the net effect of deforestation might, in some circumstances, be offset by afforestation or reforestation—planting trees on the cleared sites. Two related forestry practices are sometimes proposed to mitigate deforestation: afforestation (establishing trees on sites that have long been cleared of forests, such as crop, pasture, and brush lands); and reforestation (establishing tree stands on areas recently cleared or partially cleared of forest through timber harvesting or natural causes). Afforestation of crop or pasture land has been one focus of attention for carbon sequestration by domestic stakeholders. Some have suggested that the additional carbon sequestration from afforestation and reforestation could offset the carbon release from deforestation. They assert that harvesting "over-mature" forests sequesters additional carbon, because (1) very old forests sequester little additional carbon (the amount stored is large, but the annual addition is small or even negative); (2) wood products made from the timber continue to store carbon for decades; and (3) newly established stands grow vigorously, sequestering large amounts of carbon. Others dispute these claims, asserting that harvesting old-growth forests (commonly described by foresters as "over-mature") results in a net release of carbon. Researchers have determined that carbon continues to accumulate in old-growth forests for centuries, long after the traditional definition of over-mature. Other research has found that some old-growth forests continue to accumulate carbon in the soil. Finally, the limited research evidence has shown that intact (uncut) natural forests store much greater volumes of carbon than do mature plantations—as much as three times as much carbon. Both of these conclusions may be valid in certain circumstances, depending on factors such as which products are manufactured, how those products are used, how much carbon is left on the site, and what happens to it. There are, of course, other considerations (e.g., the impacts on ecosystem services and on local economies) associated with discussions of harvesting old-growth forests. It should be recognized that these arguments have been made with respect to old-growth forests in temperate and boreal regions. Timber harvesting (and other forest clearing) in these regions likely contribute relatively modest carbon emissions to the atmosphere, because fewer species dominate temperate and boreal forests, and reforestation commonly follows the harvests. In addition, relatively few old-growth forests remain in these regions. The situation differs in tropical forests. Because of the wide diversity of plant species and the emphasis of commercial wood production on relatively few tree species, timber harvesting in tropical forests often results in substantial waste, with a smaller portion of the wood volume removed and substantial damage to many non-target trees. Furthermore, as noted above, commercial logging often opens the forests for agriculture, and the soil depletion and burning associated with agriculture may prevent effective forest recovery in the tropics. Naturally regrown (second-growth) forests in the tropics have been shown to contain less biological diversity and less total biomass (carbon) than intact forests, and forest plantations in the tropics have far less diversity and biomass than second-growth forests. Thus, under many circumstances, deforestation in tropical forests emits substantial quantities of carbon that cannot be adequately compensated by reforestation except in the very long term (several decades to centuries). There are basically three market approaches to reducing deforestation: specific markets for forest carbon; general markets for ecosystem services and non-timber forest products; and certified sustainable forestry. These approaches are not entirely independent or mutually exclusive choices; for example, the carbon benefits from certified sustainable forestry practices might be salable in forest carbon markets. Carbon markets have formed to encourage voluntary efforts to reduce GHG emissions as well as to fulfill mandatory or regulatory GHG emission reductions. Forestry activities, including reduced deforestation, might generate carbon credits or offsets—reductions in GHG emissions or increases in carbon sequestration that regulated entities (or volunteers) can purchase to offset the GHGs for which they are responsible. Various forestry practices have been considered for carbon credits. Each practice has carbon benefits, but there are also concerns and limitations in allowing these offsets for mandatory GHG reduction programs. Concerns include: Would the forest activity add to the effort to reduce CO 2 emissions, or would the activity have occurred anyway under existing laws and practices? (This issue is referred to as "additionality.") How much carbon would have been released if no action (e.g., to prevent deforestation) had occurred? (This issue is referred to as defining or determining "the baseline.") Can the carbon sequestration benefits of a project be verified? Verifying project benefits for every project and monitoring benefits over time can be expensive, and can be further restricted because of lack of access to forests. (This issue is referred to as "measurement, monitoring, and verification.") If a GHG reduction project is implemented, will the GHG-emitting practice or activity (e.g., deforestation) shift to a different location or country with no GHG reduction policies? (This issue is referred to as "leakage.") Will the project result in permanent reductions in GHG concentrations, or will the effects be temporary? (This issue is referred to as "permanence.") Avoided tropical deforestation offers a mixture of benefits and difficulties associated with implementation. Areas already legally protected (e.g., national parks and reserves) would generally not qualify, because their carbon sequestration would not be additional. However, they might be susceptible to leakage from poachers and squatters that practice illegal deforestation. Also, natural disasters (wildfires, hurricanes, etc.) can effectively destroy forests, releasing their carbon, and accounting for such releases complicates efforts to assure the "permanence" of forest carbon. Ecosystem or environmental services encompass a wide variety of benefits, including carbon storage. Forests and other undeveloped lands provide a host of environmental services, such as climate regulation, soil retention, waste remediation, and clean water. Landowners generally are not compensated for these services. Some have sought ways to provide such compensation as an incentive to landowners to keep their lands forested. Forest carbon markets are special ecosystem services markets that could compensate landowners for the carbon storage services their forests provide. Payments for ecosystem services (PES) is an approach where beneficiaries of the services are identified and then charged to pay landowners to maintain their forests. A PES program was established in Costa Rica in the 1990s. About half of the country was deforested from the 1950s through the 1980s. Tax-funded subsidies to prevent deforestation were initially successful, but were not politically and financially sustainable. The subsidy program was then replaced with a legal framework banning deforestation and requiring users of forest services to pay to restore and protect Costa Rican forests. Initially, user fees were established for wood fuel, then expanded for water supplies. Public support for the PES program was generated by clearly establishing the linkage between the services and the users, and by setting the fees to not only compensate the landowners for not deforesting their lands but also cover administrative costs (e.g., inventory and monitoring costs). While the program has reduced deforestation, it has not been sufficient to eliminate forest losses. A long-standing U.S. example is buying duck stamps (essentially a federal duck-hunting permit) in order to hunt ducks; money from the stamps is used to conserve duck habitat, which makes more hunting possible. The concept of creating ecosystem services markets is being pursued by the USDA under authority provided in the 2008 farm bill ( P.L. 110-246 , the Food, Conservation, and Energy Act of 2008). To the extent that ecosystem or environmental services markets develop more broadly, with or without federal support, they will likely encompass forest (and perhaps also soil) carbon sequestration among the services for which landowners are compensated. A related market is for harvesting non-timber forest products without cutting down the trees. Such products include exotic nuts and berries, wild mushrooms (e.g., morels), natural rubber, floral greenery, and more. Markets for non-traditional, non-timber products harvested from forests have been growing around the world. While non-timber products will probably never supplant commercial timber values, the products can often be harvested with minimal impact on the forest and with virtually no carbon release. Encouraging additional growth in the markets for non-timber forest products can provide landowners with incentives to keep their forests intact, thereby contributing to long-term carbon sequestration. Certified sustainable forestry is a market approach to reduce carbon release from net deforestation through sustainable forest management. Several certification systems exist, with significant differences in the parameters that must be met. Certification can be based on management practices that allow for sustainable logging to maximize carbon stores and minimize collateral damage to neighboring trees. Landowners could benefit from consumer willingness to pay higher prices for wood products grown and harvested using sustainable practices. Most systems require chain-of-custody reporting to assure that wood products claiming to be from sustainable forests actually come from certified forest lands. While many forestland owners believe that the costs of becoming and remaining certified are less than the benefits of higher prices and consumer awareness, it is not yet clear that the price differential for certified wood products will be sufficient in the long run to maintain the certification systems. Presuming that a developing country wants to reduce deforestation—for domestic benefits and/or to participate in forest carbon markets—various governance issues might need to be addressed. Countries have different needs and capacities, and thus might need to address a few or many governance issues, and the effort required might be modest or substantial. As discussed above, as well as extensively in the literature, the array of governance issues that could be addressed to reduce deforestation includes: Agricultural subsidies and policies. Various government programs and policies keep input prices artificially low, provide tax incentives for cash crops, and otherwise alter market signals. Eliminating or reducing programs that encourage agricultural production at the expense of forests could reduce deforestation. Roads and infrastructure. Roads and other public services (e.g., water and power) are critical for human expansion into forests. Roads provide access, which can contribute to deforestation. Infrastructure planning and development can reduce the level of deforestation by concentrating development (agriculture, forestry, and other activities) in already accessible areas. Land tenure and property rights. Many studies have identified ill-defined tenure and property rights as a cause of deforestation, and have proposed explicit, clearly defined private land ownership as a means of reducing deforestation by giving individuals an ownership interest in the condition of their forestland. This could reduce illegal logging and clearing by squatters (especially for swidden agriculture). Forest-dependent communities and indigenous peoples. Most observers recognize that, to reduce deforestation, the people who derive their living from forest resources must be involved. While this may include land tenure and property rights, it also goes beyond, by responding to the interests and concerns of people affected by decisions about deforestation. Enforcement. Enforcement of deforestation policies is critical to effect change. This includes enforcing land tenure and property rights, protecting forest communities and indigenous peoples from squatters and other interlopers, halting construction of unplanned roads, preventing illegal logging, and more. Increased enforcement and oversight could also reduce corruption by increasing the transparency and visibility of forestland transactions. The capacity of tropical countries to address these governance issues varies widely. Some countries have already taken many steps; others are limited by poverty, population growth, and other factors. Financial and technical assistance from developed nations can help developing countries to establish and expand their capacities to address these governance issues. (See the Appendix for a description of existing U.S. programs that provide financial and technical forestry assistance.) In addition, developed countries can encourage improved governance in developing tropical countries through other methods, such as conditional loans (e.g., loans requiring actions by the borrower), debt relief (e.g., exchanging foreign debt for conservation actions), and demand management (e.g., banning illegally harvested timber). Various sources report data on forest area and deforestation. However, the data differ, sometimes substantially. Sources have noted the discrepancies among reported data. Why are the data discrepancies so substantial, even in relatively developed areas (e.g., the United States), where one might expect relatively high-quality data? There are two principal reasons: the classification of forest lands, and the measurement and reporting systems used. Table 2 presents data from two sources that cover most of the world's forests. The U.N. Food and Agriculture Organization (FAO) has been assessing global forests for decades; its most recent report is the Global Forest Resources Assessment 2005 . The World Resources Institute (WRI), in cooperation with the U.N. Development Programme, the U.N. Environment Programme, and the World Bank, has also published data on global forests, in World Resources, 2002-2004: Decisions for the Earth: Balance, Voice, and Power . Table 2 shows that, although generally similar, the data do not match. For example, for the two most forested countries in the world, Russia and Brazil, WRI reported more forest area (5% and 14% more, respectively) than FAO reported. In contrast, FAO reported substantially more forest area in the United States (34% more) and Canada (27% more) than WRI reported. Similarly, data on deforestation amounts and rates differ widely. For example, the FAO data show Brazil accounting for 27% of tropical forests and 24% of tropical deforestation. Other data, limited to humid tropical forests (and thus excluding many African and Brazilian tropical forests), also show Brazil accounting for 27% of tropical forests, but 48% of tropical deforestation. In addition, the FAO and WRI data by biome differ from the forest biome area data from the IPCC, shown in Table 1 . The accuracy of the FAO data, especially deforestation rates, has particularly been questioned. One observer has noted "inconsistencies" in "three successively corrected declining trends" in FAO reports on forested areas. This researcher argues that measurement errors, as well as changes in the statistical design and new data sources, raise serious questions about the reliability of the reported trends. FAO has acknowledged changes in reported acreages because of changes in standards for measuring forests. Since climate impacts vary by forest biome, classifying forests by biome is useful for assessing possible effects. One difficulty with forest classification is determining in which biome a forest belongs. While some of this may seem apparent—tropical forests can be defined as those between the Tropic of Cancer and the Tropic of Capricorn—the reality is that forests fall across a gradient of characteristics. For example, the subtropical forests of south Florida exhibit many traits in common with the tropical forests that, technically, occur a few degrees closer to the equator. Similarly, the distinction between temperate and boreal forests, while apparent through "classical" types, can be imprecise, with the typically temperate northern hardwood (maple-beech-birch) ecosystem mixing with the traditional boreal spruce-fir (mixed with birch) in the northern Lake States and New England and in southern Canada. This biome classification is further complicated by forest area data being reported by country. Many countries can readily be assorted into particular biomes, such as the tropical forests of Brazil, the Democratic Republic of Congo, and Indonesia. However, many other countries straddle the imperfect boundaries between biomes. Russia, for example contains more than 800 million hectares of forest; most are the vast boreal forests of Siberia, but many are temperate forests in Europe. The more than 200 million hectares of forest in the United States is largely temperate, but includes extensive boreal forests in Alaska (perhaps a quarter of the total) as well as some tropical forests in Hawaii and Puerto Rico. Australia, with 30 million hectares, is similarly largely temperate, but the northern third or so is tropical forests. Thus, aggregating forest lands by biome is imprecise at best. A more significant, but perhaps less obvious, classification problem is determining what constitutes a forest. Numerous definitions are used by different organizations in various places for a variety of purposes. The relevant measures include: Trees. The plants must be considered trees for the area to be considered a forest. There is no precise, botanical definition of a tree. Trees are perennial plants that typically grow with a single woody stem. Some sources specify minimum heights and/or diameters at maturity. In contrast, bushes and shrubs commonly have multiple woody stems. However, these distinctions are imprecise, at best; for example, aspen trees in a stand are commonly clones, with dozens of stems from a single rootstock, while bamboo is biologically a grass. Tree height. The plants must be tall enough to be considered trees, at least at maturity. This might seem obvious, but in some settings (e.g., near timberline or at desert edges), trees can be quite short (1-2 meters tall). The FAO 1990 Global Forest Resources Assessment defined forests as having trees at least 7 meters (23 feet) tall, while the 2000 Global Forest Resources Assessment required trees at least 5 meters (16 feet) tall. Canopy closure. A portion of the area must be covered by trees. While this could be measured by number of trees per hectare, a minimum percentage of the area covered by tree canopy is more common. The 1990 Global Forest Resources Assessment defined forestlands as having at least 20% canopy cover (i.e., at least 20% of the area covered by tree crowns), while the 2000 Global Forest Resources Assessment used 10% canopy cover. In assessing forest habitats for the northern spotted owl (an admittedly narrow definition of "forest"), one group recommended 40% canopy closure in trees of at least 11 inches in diameter. This also leads to questions of whether canopy cover is, and should be, a distinction between forests and woodlands (areas with some trees typically growing in arid or semi-arid grasslands). Growth rate. The site must be capable of growing trees (on human time scales). The U.S. Forest Service has long used a forest standard of lands capable of growing at least 20 cubic feet of commercially usable wood per acre per year (nearly 50 cubic feet of usable wood per hectare per year). One source reported that more than 650 definitions of forest were used in compiling the 2000 Global Forest Resources Assessment . While the definitions were similar in many ways, their application could alter forest area in a country by as much as 10%. The classification of forest lands is further complicated by plantations and orchards. Apples, peaches, rubber, and coffee can be classified as perennial crops—agricultural lands, rather than forests. But what about plantations for lumber—pine, mahogany, teak, and the like? Many such plantations could be classified as forests, especially if the tree species are native to the area and relatively few efforts are required to control undesirable competing vegetation. Pulp and woody biomass energy plantations are more problematic—sometimes native species are used, but the plants might not be grown to tree sizes. The other primary cause of discrepancies in reports on forest acreage lies in the ways forests are measured and reported. Forest area is typically determined from maps, generated by on-site census or surveys or from aerial or satellite images. For all but a few forest areas, censuses are too expensive for practical use. Surveying, even with current technologies, can be cumbersome and expensive, especially if forests are extensive and/or inaccessible. Geographic information systems (GIS) can facilitate gathering and organizing survey data into electronic maps, but add to the total cost of data measurement. Remote sensing from aircraft or satellites can be used for measuring forests. Because of the extent of forests and the sometimes difficult access, remote sensing has for decades been used to map and calculate forest area, density, and other measures. What can be measured and how it is measured has changed as imaging technologies have evolved. Current imaging technologies use an array of wavelengths for developing images, including radio waves (radar) and light waves (lidar), and some technologies rely on multiple wavelengths to develop a more complete image. Imaging technologies also differ in resolution (measurement scale of the "pixels" used for recording and displaying data). High-resolution imagery can distinguish areas as small as one square meter on the ground (each pixel is thus one square meter). Moderate-resolution images are commonly 30 meters on a side, or 900 square meters (nearly a tenth of a hectare per pixel), while coarse-resolution images may be 100 meters on a side (each pixel is a hectare). Remote sensing has limitations—the cost of the technology to gather and use the data. Two aspects of remote sensing significantly affect the cost: Remote sensing platform. Satellites are multi-billion-dollar investments to develop and launch. The data they provide are quite useful, but their high investment cost necessarily means data collection and reporting for multiple purposes, of which forest measurement may be a relatively low priority. Aircraft can also be used, but because they fly at much lower altitudes, many more overflights of an area are needed to generate a comprehensive picture. Data resolution . Higher resolution increases the cost to construct the imaging equipment, might increase the number of overflights needed, and significantly increases the amount of data collected. At the coarse (one hectare per pixel) resolution, the world's tropical forests encompass 1.8 billion pixels; at the fine (one meter per pixel) resolution, they encompass 18 trillion pixels (with multiple data streams for each pixel). In addition, clear conditions are required for many remote sensors, as clouds interfere with the images; sensors that can "see" through clouds exist, but are not yet widely deployed. This can be problematic for tropical rainforests, since clouds and rain are common phenomena. Thus, multiple overflights/satellite passes may be needed to generate a comprehensive picture. Once the data have been collected, they must be aggregated into the comprehensive picture. This requires that pixels from adjoining overflights/satellite passes be matched to assure complete, non-duplicated coverage. Also, the data streams must be converted from the images (heights, texture, infrared heat signature, etc.) into usable information on land use (e.g., intact forests, degraded forests, pastures, or cropland) and other relevant matters (e.g., biomass quantities or soil carbon levels). The data conversions (algorithms) are generally proprietary information, so users develop their own or purchase an existing conversion package. The resulting information must then be "ground-truthed"—the results for a particular site must be compared to actual forest conditions of that site to assure that the algorithm produces accurate information. Developing and ground-truthing the data conversion algorithms is, as with everything else, expensive and time-consuming, and more ground-truthing is more expensive, but increases trust in the validity of the results. Ground-truthing is also particularly problematic for remote or inaccessible forests. The variation in data conversion algorithms is one of the sources of differences in the reported forest area data. As noted above, what is a tree and what is a forest are not always easy to define, especially at the edges of forest biomes. Thus, one might expect different algorithms to result in different forest data, even from the same remotely sensed data streams. Significant costs can be incurred in acquiring the technology and technical expertise to generate and use remotely sourced forest data. Developing countries can be in a particularly difficult position in obtaining accurate, current forest data. They often lack both the technology and the technical expertise to generate and use remotely sensed data, and often lack the funding to acquire the technology and expertise. Developing countries may even lack the funding to acquire the results. The results of remote sensing raise interesting issues of proprietary rights and national sovereignty. Clearly, organizations that develop and deploy the remote sensing technology and the data conversion algorithms have a financial interest in the remotely sensed data, and their sale of that information is the reward for investing time, money, and people in developing the technology. However, some question whether data about forests is public information that should be available to anyone. At one extreme, some argue that data about publicly owned resources, such as forests, should also be public, and that the owners of the resources (the public) should not be required to pay for the data. At the other extreme, some countries argue that their forests do not belong to the world, and the world has no right to information about their forests. The question: when public (e.g., U.S. or U.N.) resources are used to support data collection on forests, should those data be globally public? Would this still be true if the forest data are collected without the support or approval of the country where the forests are located? In other words, if the United States has the satellites and technology to assess another country's forests, does the United States have the right and/or the responsibility to make that information available for the public good? Lowering CO 2 emissions is a central focus of U.S. and international climate change policy. An estimated 75%-80% of global CO 2 emissions stem from industrial sources, specifically burning fossil fuels. About 20% of emissions are attributed primarily to deforestation. Some contend that reducing deforestation is one of the least costly methods of reducing CO 2 emissions , and that "forestry can make a significant contribution to the low-cost global mitigation portfolio." One study found that a 10% reduction in deforestation between 2005 and 2030 could provide emissions reductions of 0.3-0.6 GtCO 2 per year (about 5%-10% of U.S. emissions) at a cost of $0.4 billion-$1.7 billion annually. Forests occur around the globe, at many latitudes. Many are concerned with the possible impacts of losing boreal and temperate forests. However, existing data show little, if any, net deforestation in these ecosystems, and the carbon consequences of boreal and temperate deforestation are relatively modest. In contrast, the loss of tropical rainforests is substantial and ongoing, with significant climate impacts because of the large amount of CO 2 currently stored in vegetation in the tropics—40%-50% of the carbon in all terrestrial vegetation. Thus, the largest cost and carbon benefit of reducing deforestation is with tropical forests. Measuring forests is complicated. Definitions differ. Forests are extensive and often inaccessible. Technologies to assess forests remotely exist, but are expensive and their availability is limited. Monitoring deforestation adds to the difficulty and complexity, because forest areas must be measured repeatedly, using consistent definitions and technologies. Compensating landowners and/or countries for reducing deforestation requires that measuring and monitoring forests become more standardized. Existing forest area data, and especially the data on forest area changes, should be used with caution, perhaps seen more as indicative than as precise, accurate measurements. The causes of tropical deforestation are manifold, and vary regionally around the globe. In some places, the drivers are commercial logging, followed by slash-and-burn agriculture that may prevent regrowth of tropical forests. Elsewhere, the major cause of deforestation is large-scale commercial agriculture, especially for cattle ranching, soybeans, and oil palm. Deforestation may also result from weak land tenure and/or weak or corrupt governance to protect the forests. Nonetheless, there is a broad consensus that the highest potential for reduced deforestation is in tropical regions where forests are abundant, carbon stocks are high, and the threat of deforestation is high. Further, reducing deforestation in the tropics would likely have ancillary benefits, including preserving biodiversity, providing livelihoods for rural poor, and sustaining indigenous communities and their cultures, among other things. Policies and practices to reduce emissions from deforestation and degradation (REDD) vary considerably and depend on several factors that are particular to the regions they address. Some forestry practices can reduce the impacts of net deforestation, and several market approaches are evolving that could compensate landowners for not deforesting their lands. Existing U.S. programs provide overseas development assistance to conserve forests, but funding levels have been modest. Also, the programs are relatively narrow in their approach to forest conservation, and in some cases, require outstanding debt to the United States to generate funding. Some of the challenges for implementing REDD programs include accurately and effectively monitoring REDD activities and projects and improving the capacity of developing countries to implement REDD programs and to ensure compliance. Evidence from past efforts to reduce deforestation as well as from existing data on forests and deforestation suggest this might be a significant challenge. Congress is considering REDD in pending climate legislation (e.g., H.R. 2454 and S. 1733 ). Also, REDD was discussed in Copenhagen in December 2009 at a Conference of the Parties to the United Nations Framework Convention on Climate Change (UNFCCC), and is expected to continue to be significant in future UNFCCC negotiations. Options being discussed include funding to improve developing country capacity (e.g., inventories to establish national baselines, training for law enforcement to combat illegal logging, and improvements in governance and land tenure systems) and mechanisms to fund national and subnational deforestation reduction activities. Federal Agency Activities United States Agency for International Development The U.S. Agency for International Development (USAID) is an independent federal agency established to administer international economic and humanitarian assistance programs, in conjunction with the Department of State. USAID has international and regional programs that address international forest conservation. In particular, the Biodiversity Program (22 U.S.C. §2151q) aims to help developing countries maintain biological diversity, wildlife habitats, and environmental services. The program funds projects and activities throughout the world, emphasizing sustainable development and community-based conservation. The program began in the 1970s to address the conservation of forests, and later expanded to address biological diversity and tropical deforestation in the 1980s. USAID also coordinates with six U.S.-based nongovernmental organizations through the Global Conservation Program. This program was initiated in 1999 to promote landscape-scale conservation in high-priority ecosystems, where partner organizations work toward reducing conservation threats (e.g., wildlife poaching and illegal logging) and building capacity in local groups. This program is being implemented to conserve forests in Indonesia and Papua New Guinea, in the Democratic Republic of the Congo, and in Bolivia, Colombia, Ecuador, and Peru. In addition, USAID administers region-specific programs related to forest conservation, such as the Amazon Basin Conservation Initiative and U.S. participation in the Congo Basin Forest Partnership. The Amazon Initiative aims to conserve biodiversity (which includes forests) managed by indigenous and traditional groups, and to promote regional cooperation for sharing knowledge and improving governance to help conserve resources of the Amazon basin. Objectives of this program include maintaining forest cover and maximizing use of non-timber forest products (e.g., fruits and nuts). The Congo partnership is similar, but involves several additional countries. The United States financially supports the Congo Partnership through the USAID Central African Regional Program for the Environment (CARPE), which began as a regional initiative in 1995. The Congo Partnership and CARPE focus on projects to support a network of managed protected areas, to improve forest governance, and to develop sustainable management practices for resource use in the Congo basin. U.S. Forest Service The U.S. Forest Service (FS), within the Department of Agriculture, administers the National Forest System; conducts research on forest management, protection, and use; and provides financial and technical assistance to other forestland owners. FS has an International Program that promotes sustainable international forest management and biodiversity conservation. The program supports specific activities that include managing protected areas, protecting migratory species, engaging in landscape-level forest planning, providing fire management training, curbing invasive species, preventing illegal logging, promoting forest certification, and reducing the impacts of forest use. U.S. Department of the Interior The U.S. Department of the Interior has two agencies that assist with global forest conservation: the National Park Service (NPS) and the U.S. Fish and Wildlife Service (FWS). NPS has an International Program that helps other nations establish and manage park systems. This program helps poorer countries benefit from conservation, cultural heritage, and recreation opportunities. NPS has provided technical assistance and training to foreign agencies that manage park systems containing forests. FWS addresses international wildlife conservation and trade and implements relevant U.S. wildlife laws through its International Affairs office. FWS implements the Convention on International Trade in Endangered Species of Wild Flora and Fauna (CITES), to which the United States is a party. CITES indirectly promotes forest conservation by regulating the trade of several tropical timber species that are listed in appendices to the agreement. The FWS International Affairs office coordinates programs that address forest conservation indirectly by supporting the conservation of species and ecosystems. It is responsible for supporting wildlife conservation initiatives around the globe. For example, it implements the Multinational Species Conservation Fund (MSCF), supporting conservation efforts (including habitat protection) for tigers, the six species of rhinoceroses, Asian and African elephants, marine turtles, and apes (gorillas, chimpanzees, bonobos, orangutans, and the various species of gibbons). The fund provides grants to foreign countries to help build law enforcement capacity, mitigate human-animal conflicts, conserve habitat, conduct population surveys, and support public education programs. The program is active on the islands of Borneo and Sumatra, as well as in Russia, India, Indonesia, Nepal, and several African countries. Further, FWS implements the Wildlife Without Borders Program. This program funds conservation activities through four regional initiatives: (1) Latin America and the Caribbean; (2) Mexico; (3) Russia and East Asia; and (4) Near East and South Asia. The program funds projects for training wildlife managers and conserving species of international concern, including tree species and forest habitats for animal species. These projects could also include habitat management training, education, information and technology exchange, and networks and partnerships for professionals in developing countries. U.S. Department of State The international conservation programs of the U.S. Department of State assist in negotiating global treaties, promoting treaty enforcement, developing international initiatives addressing sustainable development and conservation, and creating a foreign policy framework addressing U.S. interests. Specifically, the Office of Ecology and Natural Resource Conservation coordinates the development of U.S. foreign policy approaches for managing ecologically and economically important ecosystems, including forests, wetlands, coral reefs, and the species that depend on these areas. The office also advances U.S. interests in a variety of international organizations, institutions, treaties, and other forums, including the United Nations Forum on Forests. Bilateral Efforts Debt-for-Nature Swaps Under the Tropical Forest Conservation Act Congress enacted the Tropical Forest Conservation Act (TFCA; P.L. 105-214 ; 22 U.S.C. §2431) in 1998 to protect tropical rainforests for preserving biological diversity, reducing atmospheric carbon dioxide, and regulating hydrological cycles. TFCA authorizes "debt-for-nature" transactions, where developing country debt is exchanged for local conservation funds to conserve tropical forests. To be eligible, a developing country must contain at least one tropical forest with unique diversity, or a tropical forest tract that is representative of a larger tropical forest on a global, continental, or regional scale. Conservation funds (in local currency) from these exchanges are deposited in a tropical forest fund for each country. Interest earned from the principal balance, as well as the principal itself, is usually given as grants to fund tropical forest conservation projects. Eligible conservation projects include (1) establishing, maintaining, and restoring forest parks, protected reserves, and natural areas, as well as the plant and animal life within them; (2) training to increase the capacity of personnel to manage reserves; (3) developing and supporting communities near or within tropical forests; (4) developing sustainable ecosystem and land management systems; and (5) identifying the medicinal uses of tropical forest plants and their products. Free Trade Agreements The United States has developed free trade agreements (FTAs) with many countries, and is negotiating FTAs with other countries. Some of the negotiations have addressed illegal logging, which is a significant contributor to tropical deforestation in some areas. For example, in 2006, the United States and Indonesia signed a memorandum of understanding (MOU) to enhance bilateral efforts to combat illegal logging and associated trade. The United States committed $1 million with this agreement to fund projects that would reduce illegal logging in Indonesia, such as using remote sensing to identify illegally logged tracts of land. The MOU also set up a working group to assist in implementing the initiative under a pending U.S.-Indonesia Trade and Investment Framework Agreement. Similarly, a third-party agreement within the U.S.-Peru FTA is expected to increase awareness of illegal logging in Peru and add additional mechanisms to address illegal logging. The third-party agreement requires each country to effectively enforce its own environmental laws that affect trade between the parties. Further, it establishes a policy mechanism to address public complaints that a party is not effectively enforcing its environmental laws, regardless of whether the failure is trade-related. U.S. Involvement in International Programs Global Environmental Facility The Global Environment Facility (GEF) was established in 1991 to fund international environmental needs in four areas: climate change, stratospheric ozone depletion, biological diversity, and international waters. In recent years, GEF has also addressed land degradation—particularly deforestation and desertification—and persistent organic pollutants. The GEF is designed to provide incremental funding to cover additional costs for development projects needed to provide environmental benefits connected to issues on the GEF agenda. However, GEF has evolved into funding a variety of activities for planning, including national action plans, in addition to providing incremental funding for specific projects. Some 176 donor and recipient nations , including the United States, are participants in GEF, and meet every four years in a General Assembly to agree on funding levels. International Tropical Timber Organization The International Tropical Timber Organization (ITTO) was founded in 1986 under the auspices of the United Nations because of concerns over tropical deforestation. The organization was derived from the International Tropical Timber Agreement, which provides a framework for tropical timber producing and consuming countries to consult on issues related to international trade of tropical timber, and methods of improving forest management to promote conservation. The ITTO has 60 members (including the United States), which together have about 80% of the world's tropical forests and conduct 90% of the global tropical timber trade. The ITTO promotes sustainable forest management and forest conservation strategies, and assists tropical member countries in adopting such strategies in timber harvesting projects. The ITTO also collects, analyzes, and disseminates data on the production and trade of tropical timber. United Nations Reduction in Deforestation and Forest Degradation Program (UNREDD) The United States provides expertise to the United Nations and other countries for developing global forest carbon accounting systems through UNREDD and advancing carbon markets. FS experts in forest inventory and monitoring technology and in carbon cycle modeling have been working with the FAO to develop carbon accounting methods for forests worldwide. These experts are helping international communities determine how governments can be paid for the service of carbon sequestration in forests. Other U.S. agencies are working with the FS to track forest cover worldwide. In the Department of the Interior, the U.S. Geological Survey's data acquisition platform, Landsat, provides remotely sensed data that are interpreted using FS forest inventory and monitoring information. This information can be used by UNREDD in worldwide applications.
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Efforts to mitigate climate change have focused on reducing carbon dioxide (CO2) emissions into the atmosphere. Some of these efforts center on reducing CO2 emissions from deforestation, since deforestation releases about 17% of all annual anthropogenic greenhouse gas (GHG) emissions and is seen as a relatively low-cost target for emissions reduction. Policies aimed at reducing deforestation are central points of a strategy to decrease carbon emissions, reflected in pending legislation in Congress (e.g., H.R. 2454 and S. 1733) as well as in international discussions, such as the December 2009 negotiations in Copenhagen. Forests exist at many latitudes. Many are concerned about the possible impacts of losing boreal and temperate forests, but existing data show little, if any, net deforestation, and their loss has relatively modest carbon consequences. In contrast, tropical deforestation is substantial and continuing, and releases large amounts of CO2, because of the carbon stored in the vegetation and released when tropical forests are cut down. There are many causes of tropical deforestation—commercial logging, large-scale agriculture (e.g., cattle ranching, soybean production, oil palm plantations), small-scale permanent or shifting (slash-and-burn) agriculture, fuelwood removal, and more. Often, these causes combine to exacerbate deforestation; for example, commercial logging often includes road construction, which in turn opens the forest for subsistence farmers. At times, tropical deforestation results from weak land tenure and/or weak or corrupt governance to protect the forests. Congress and international bodies are discussing various policies to reduce carbon emissions from deforestation and forest degradation (REDD). Reducing deforestation in the tropics is likely to have additional benefits as well, such as preserving biological diversity and sustaining livelihoods for the rural poor and for indigenous communities and cultures. Proposals may be adapted to address local and regional causes of deforestation. Various forestry practices can reduce the impacts of deforestation, and several market approaches are evolving to compensate landowners for preserving their forests. Many challenges remain for implementing REDD programs, particularly internationally, including monitoring REDD projects and improving developing-country capacity to ensure compliance. Existing evidence on forests and deforestation suggest the difficulties might be significant. Measuring forests is complicated, with multiple definitions, inaccessible sites, and expensive, complicated, and imperfect measurement technologies. This report provides basic information on forests and climate change. The first section discusses the linkages between forests and climate. The next three describe the characteristics of the three major forest biomes, with an overview of deforestation causes and impacts. This is followed by an overview of approaches to reducing deforestation. The final section examines issues related to forest and deforestation data.
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Congress's role in the United States' relationship with Sri Lanka is not limited exclusively to oversight of the Administration's policy. Congress's role also includes decisions on a range of legislative issues including foreign assistance funding for democracy promotion, good governance, ethnic and religious reconciliation, demining, foreign military financing, and other measures. In this context, Sri Lanka may be of increasing interest to Members as the country's progress on constitutional and democratic reforms and ethnic reconciliation unfolds in the year ahead. One question that may trigger increased congressional interest, for example, is whether what some observers may see as inadequate progress in furthering ethnic reconciliation should inhibit the United States' further developing bilateral relations, especially at a time when China has been seeking to develop and expand its trade, investment, and geopolitical influence in Sri Lanka and the broader Indian Ocean region. This report provides the context within which Congress will make both programmatic and oversight decisions, covering questions such as: What is the nature and direction of Sri Lanka's political landscape and democratic reform process? What is Sri Lanka's geopolitical position in the Indian Ocean region? What are the primary considerations Congress should have in mind as it addresses decisions related to Sri Lanka? Should Congress place requirements on the new Administration as it develops its policy toward Sri Lanka? The Democratic Socialist Republic of Sri Lanka, known as Ceylon until 1972, is a constitutional democracy in South Asia with relatively high levels of development. It is an island nation located in the Indian Ocean off the southeastern tip of India's Deccan Peninsula. Sri Lanka was settled by successive waves of migration from India beginning in the 5 th century BC. Indo-Aryans from northern India established Sinhalese Buddhist kingdoms in the central part of the island. Tamil Hindus from southern India also settled in northeastern coastal areas and established a kingdom on the Jaffna Peninsula. Beginning in the 16 th century, Sri Lanka was colonized in succession by the Portuguese, Dutch, and English. Although Ceylon gained its independence from Britain peacefully in 1948, succeeding decades were marred by ethnic conflict between the country's Sinhalese majority, clustered in the densely populated south and west, and a largely Hindu Tamil minority living in the northern and eastern provinces. Following independence, the Tamils increasingly found themselves as objects of discrimination by the Sinhalese-dominated government, which made Sinhala the sole official language and gave preferences to Sinhalese in university admissions and government jobs. The Sinhalese, who had deeply resented British favoritism toward the Tamils, saw themselves not only as a domestic majority, however, but also as a minority in a larger geographic context that includes over 60 million Tamils across the Palk Strait in India's southern state of Tamil Nadu and elsewhere in India. From 1983 to 2009, Sri Lanka's political, social, and economic development was constrained by ethnic conflict and war between the government and the Liberation Tigers of Tamil Eelam (LTTE), also known as the Tamil Tigers. The war claimed over an estimated 70,000 lives. The LTTE rebels had sought to establish a separate state or internal self-rule in the Tamil-dominated areas of the islands' north and east, and the United States designated the LTTE as a Foreign Terrorist Organization in 1997. After a violent end to the civil war in May 2009, when the military crushed LTTE forces and precipitated a humanitarian emergency in Sri Lanka's Tamil-dominated north, significant international attention turned to whether the government had the ability and intention to build a stable peace in Sri Lanka. President Mahinda Rajapaksa, elected in 2005, faced criticism for what political opponents deemed to be an insufficient response to reported war crimes, a nepotistic and ethnically biased government, increasing restrictions on media, and uneven economic development. In January 2015 presidential elections he was challenged from within his own party and defeated by now President Maithripala Sirisena. This result was affirmed in parliamentary elections later in 2015 that led to the formation of the National Unity Government. (See below for more information on political parties.) President Sirisena has pledged to reduce the authority of the executive presidency and has ushered in a period of constitutional and political reform. Sri Lanka ("the resplendent island" in Sanskrit) has an executive presidency with a unicameral 225-member parliament. Members of Parliament (MPs) are elected for five-year terms under a modified proportional electoral system. The next parliamentary and presidential elections are due in 2020. The president is elected for a five-year term by universal suffrage. The president may serve a maximum of two terms. The president may also dissolve parliament four-and-a-half years after the start of the current parliamentary session. The 13 th amendment to the constitution, passed in 1987, calls for devolution of central powers to nine directly elected provincial councils. This amendment, which was designed to meet Tamil demands for autonomy, has not been fully implemented. Sri Lanka is in the midst of a constitutional reform process that has the potential to transform its political system and reinvigorate its democracy. Freedom House, a U.S.-based nongovernmental organization focused on democracy and human rights, noted in 2016 improved civil liberties and political rights. It gave Sri Lanka an upward trend arrow "due to generally free and fair elections for president in January and parliament in August [2015], and improved conditions for freedom of expression, religious freedom, civil society, and judicial independence under the new administration." Sri Lankan politics is dominated by the right-of-center United National Party (UNP) and the socialist Sri Lanka Freedom Party (SLFP). The current government is a national unity government of Prime Minister Ranil Wickremesinghe's UNP and President Sirisena's SLFP. The SLFP is expected to split, as a rival faction within the party loyal to former President Rajapaksa has formed the Sri Lanka Podujana Peramuna (Sri Lanka People's Front). Observers expect this development to place strains on the coalition and weaken the president. The Tamil National Alliance (TNA) is the main umbrella political organization representing Tamil interests, and favors greater devolution of power to the provinces. The People's Liberation Front, or Janatha Vimukthi Peramuna (JVP), is a Marxist-Leninist party, and the smaller Sri Lanka Muslim Congress party represents Sri Lankan Muslims who are generally located in the country's east. The United Peoples Freedom Alliance (UPFA) is a political alliance that includes the SLFP and a number of smaller political parties. The national unity government was initially declared in 2015 for a period of two years, but in July 2016 this was extended to the full five-year term. Some observers see a high likelihood that, over the next year, political tensions will rise over a lack of devolution of power to the provinces. Figure 2 and Table 1 identify the vote received and parliamentary seats for each party. Buddhist religious and Sinhalese ethnic identity are key components of political ideology in Sri Lanka: "Buddhism was highlighted as the essence of the Sinhala identity by the ideologues of the [Buddhist] revival" of the mid-19 th century. According to this ideology, all of Sri Lanka is considered the homeland of the Sinhalese Buddhists. The ideology, according to one prominent analyst, emphasizes "the need to guard Sinhalese people and Buddhism against alien forces." Today, Buddhist-Sinhalese nationalism remains a powerful political force in Sri Lanka. While many Sinhalese "are amenable to sharing power with the minorities, nationalistic forces within the community continue to subsume moderate voices." Many observers in the West, whose understanding of Buddhism may be shaped at least in part by exposure to the teachings of Buddhist leaders such as the Dalai Lama among others, may be unfamiliar with ethno-nationalistic, and at times militant, forms of Buddhism that are used as a mobilizing ideology in Sri Lanka among other places. Contemporary Sinhalese-Buddhist nationalist groups, such as Sinha Le ("Lion's Blood") and Bodu Bala Sena (BBS "Buddhist Power Force"), continue to exert political influence in Sri Lanka. This is of importance to the current political scene, as the presence of such groups may make it more difficult to achieve reconciliation with the Tamil community. Sinha Le reportedly plays on fears in the Sinhalese community that Sinhalese-Buddhist culture is under threat and that the Tamil agenda represents an existential threat to Sri Lanka. In the words of one analyst, [I]t is imprudent, perhaps even dangerous, to ignore Sinha Le's appeal among some within Sri Lanka's Sinhala-Buddhist majority. Sinha Le's burst of popularity, combined with BBS's outspokenness on a range of concerns, speak to an undercurrent of ethnic tension that, if left unheeded, may present a greater obstacle to Sri Lanka's tenuous road to reconciliation and the government's transitional justice commitments. This tension becomes apparent when considering the contentious subject of power sharing or devolution in Sri Lanka's post war environment and the government's reconciliation agenda. Within this context, Congress may consider the view of some observers that applying pressure on Sri Lanka for rapid accommodation of Tamil demands as part of the transitional justice agenda may prove to be counterproductive by undermining political support for the Sirisena government from within the Sinhalese community. From this perspective, such a situation might open the way for another government that could prove to be less open to ethnic reconciliation or political reform. President Sirisena campaigned on a promise of reducing the powers of the executive presidency and returning Sri Lanka to a parliamentary democracy. In April 2015, the Sri Lankan parliament passed the 19 th amendment to the Constitution, which reduces the powers of the executive presidency. The amendment reduces the terms of office for the president and parliament to five years, from six previously. It also reintroduces the two-term limit for president and allows the president to dissolve parliament only after four-and-a-half years instead of after one year, as was previously the case. The amendment also revives the Constitutional Council and allows the establishment of independent commissions. The Constitutional Council appoints members to the independent commissions. Sirisena has indicated he favors further devolution of presidential powers to the parliament. In March 2016, the Parliament adopted a resolution to take on the role of Constitutional Assembly to draft a new constitution. It is considering a number of reforms, including the abolition of the executive presidency. The Prevention of Terrorism Act, under which police can detain suspects for extended periods without filing charges against them, is also under review. The Tamil National Alliance is looking for a "federal solution within an undivided Sri Lanka based on a merger of the north and eastern provinces." Opposition to the constitutional resolution led to the removal of a preamble that discussed providing a constitutional resolution of the Tamil question. In June 2016, Parliament passed the Right to Information Bill, which gives citizens access to public information in Sri Lanka. This increased transparency in government has been a key objective of civil society and the media for many years. Many observers hope it will aid in the fight against corruption. Passage of the bill was also one of President Sirisena's 2015 campaign pledges. In August 2016, the Sri Lankan Parliament passed legislation to allow the creation of an Office of Missing Persons. This step is viewed by many observers as one of the key pillars of transitional justice in Sri Lanka. According to one report, there may be as many as 16,000 to 22,000 people who went missing during the civil war and its aftermath. Reportedly there was a campaign to block passage of the missing persons bill, with former President Rajapaksa reportedly stating that those who support the legislation would betray the armed forces of the country. By the end of 2016, it appeared that Tamil reconciliation measures and the abolition of the executive presidency remained politically contentious. The Constitutional Assembly (CA) will consider reports from the six CA subcommittees on Fundamental Rights, Judiciary, Finance, Public Service, Law and Order, and Centre-Periphery Relations. The subcommittee on center-periphery relations proposed on November 22, 2016, that land and police powers should be devolved to the provinces in the new constitution. This recommendation, which is consistent with the 13 th amendment, would likely be supported by the Tamil minority as an effort toward reconciliation. Despite this, it is not clear if the measure has sufficient political support to be included in the final draft of the constitution, which must be passed by a two-thirds majority in parliament and be approved in a national referendum to be adopted. Some observers believe the UNP could opt to retain some aspects of the executive presidency in the new constitution. While some reforms have been achieved, some analysts have observed that "the moderate consensus" to effect further reforms "remains deeply vulnerable." Former President Rajapaksa, who continues to have a strong following among SLFP Members of Parliament, remains a divisive figure. For some, he is seen as the leader who brought victory over the Tamil insurgency, while others consider him leader of a corrupt and nepotistic government that committed human rights abuses. Future constitutional reforms require a two-thirds majority vote in Parliament as well as passage in referendum. According to one analyst, the Rajapaksa faction "cannot be ignored in matters of state because of its parliamentary strength and thus its potential ability to stall the implementation of basic reforms in constitutional governance." Sri Lanka cosponsored a U.N. Human Rights Council resolution on accountability for human rights abuses during the Sri Lanka civil war that was adopted in October 2015. The resolution followed the September 2015 publication of the Report of the Office of the High Commissioner for Human Rights Investigation on Sri Lanka, which undertook an investigation into alleged serious violations and abuses of human rights and related crimes by both parties in Sri Lanka, and was viewed by many observers as a positive step to advance justice in Sri Lanka. Since the adoption of the resolution, President Sirisena has appeared to back away from what seemed to be his earlier support for the involvement of international judges in a special judicial mechanism to prosecute war crimes. He reportedly has stated that, "This investigation should be internal.... I believe in the judicial system ... we have more than enough specialists, experts and knowledgeable people in our country to solve our internal issues." According to Human Rights Watch, however, "While the proposed resolution does not specifically call for a hybrid national-international justice mechanism, if fully implemented it offers a greater hope for justice than past failed promises by the Sri Lankan government on justice for human rights abuses." In June 2016, High Commissioner for Human Rights Zeid Ra'ad Al Hussein noted steps taken by Sri Lanka, as mentioned above, but also called for a transitional justice mechanism to deal with past human rights abuses. The civil war left a great rift in Sri Lankan society, and the previous Rajapaksa regime did little to heal the wounds left by the war. The Sirisena government has done more, such as allowing the national anthem to be sung in Tamil, returning some lands taken from Tamils during the war, lifting a ban on Tamil groups, and creating an office of missing persons. Tamil groups, however, are demanding more. Many observers believe long-term peace and harmony between the Sinhalese majority and the Tamil minority necessitates a reconciliation of grievances. In a general sense, the Tamil community seeks recognition of its place within Sri Lankan society. Many Tamils would like increased autonomy, implementation of the 13 th amendment (which would devolve power to the provinces), the return of all Tamil lands taken during the civil war, an inquiry into human rights abuses by the government during the war, and expanded government assistance with missing persons. While observers have credited the Sirisena government with opening up political debate, ending the authoritarian rule that pervaded under Rajapaksa, and limiting some presidential powers, one source notes that "... the depths of nationalist sentiment and party politics have put sharp limits on what they [the Sirisena government] have been willing to do to address key matters, including the concerns of Sri Lankan Tamils and Muslims." The United Nations, the international nongovernmental organization community, and the international media have focused considerable attention on obtaining international participation in a war crimes tribunal process. U.S assistance to Sri Lanka seeks to assist the government of Sri Lanka in its efforts to "broaden and accelerate economic growth, develop democratic institutions, and promote the reconciliation of multi-ethnic and religious communities in Sri Lanka." The challenges facing Sri Lanka today are not limited to the political realm. Deforestation has been a serious problem with negative implications for global climate change and biodiversity. Deforestation is responsible for an estimated 10%-12% of all global warming emissions. According to one source, Sri Lanka's forest cover was depleted from 31.2% of the island in 1999 to 29.7% in 2010 with actual rates of forest depletion slowing to 0.23% of forest cover annually. The Forest Department has set a goal of 35% forest cover for Sri Lanka by 2020. Sri Lanka is one of the most biologically diverse nations in Asia, and an estimated one-quarter of tourists visiting the country visit one of Sri Lanka's national parks. Sri Lanka instituted a ban on logging of natural forests in 1990. Sri Lanka also was devastated by the December 26, 2004, tsunami caused by a 9.1 magnitude earthquake off Sumatra that affected 14 countries in the Indian Ocean region. As many as 40,000 people may have died in Sri Lanka as a result of the tsunami. The economic damage and loss to Sri Lanka was estimated to be as much as $1.45 billion, and an estimated 400,000 workers in Sri Lanka lost their means of livelihood as fishing boats as well as banana, rice, and mango plantations, and houses and infrastructure were destroyed. The Sri Lankan economy is on less solid footing in 2016 than it was previously. Sri Lanka experienced high rates of economic growth in the immediate post-war period due to increased investment and high rates of remittances from Sri Lankans working abroad. Interest payments on government debt accounted for 35% of government revenue and the budget deficit widened to 7.4% of GDP in 2015. Government debt was also 76% of GDP in 2015. GDP growth is projected to be 5.1% in 2016 and average an annual rate of 5.2% for the period 2016-2020. The government's policies of increasing salaries and pensions for public servants and cutting taxes despite a slowing economy contributed to the balance of payments crisis. Sri Lanka requested IMF support and received an IMF bailout package of $1.5 billion in March 2016. This package will require the government to increase tax revenues and cut the budget deficit. In June 2016, it was reported that the government will seek to raise the tax-to-GDP ratio from 10.8% in 2014 to 15% by 2020 through a new Inland Revenue Act, reform of the value added tax, and the customs code. Remittances are a significant part of Sri Lanka's economy. Remittance growth declined from 9.5% in 2014 to 0.8% in November 2015. One possible explanation for this was optimism for investment immediately following the end of the war. An estimated 55% of Sri Lanka's $3.8 billion in remittances in 2014 came from the Middle East. Approximately one-quarter of Sri Lanka's total migrant workers are employed in Saudi Arabia. Sri Lanka is situated near strategically important sea lanes that transit the Indian Ocean. These sea lanes link the energy-rich Persian Gulf with the economies of Asia. The inaugural United States Sri Lanka Partnership Dialogue in February 2016 discussed Sri Lanka's "pivotal geo-strategic location within the Indian Ocean region and how to strengthen cooperation on issues of regional importance." More than 60,000 ships carrying 66% of the world's oil and 50% of the world's container shipments transit the sea lanes near Sri Lanka and the Maldives each year. Sri Lanka and India share close, long-standing historical, cultural, and religious ties. India became entangled in the counterinsurgency against the LTTE following the signing of the Indo-Sri Lanka Agreement of 1987. Between 1987 and 1990, India, which originally intended to operate in a peacekeeping role, lost over 1,200 soldiers in this conflict. Prime Minister Rajiv Gandhi was later killed by a LTTE suicide bomber in 1991. The Sri Lanka-India relationship was strengthened by President Sirisena's February 2015 visit to New Delhi, his first foreign visit as President, and also by Indian Prime Minister Narendra Modi's March 2015 visit to Colombo, the first by an Indian prime minister in 29 years. During his visit, Modi articulated his government's desire that the Tamil community in Sri Lanka have a just and dignified life in a unified Sri Lanka. Modi also pledged India's help to Sri Lanka in its efforts to develop an oil-shipping hub and construct a power plant, and to provide access to $300 million in funding to improve railways. India's native Tamil populations feel kinship with Sri Lanka's Tamils. India, along with the United States, has been an active voice for reconciliation and fair elections. India has also played host to large numbers of Tamil refugees both during and after the Sri Lankan civil war. Some observers in India have expressed concern over Sri Lanka's relationship with China, including past Chinese submarine visits to Sri Lanka. Sri Lanka and China issued a joint statement at the conclusion of Prime Minister Wickremesinghe's April 2016 visit to China. In the statement, the two nations declared their commitment to "mutually beneficial cooperation" and expressed their "willingness to maintain close relations between the two countries in the area of defense." Sri Lanka also "reiterated its active participation in the Belt and Road initiative put forward by China." China's activities in Sri Lanka are considered to be part of what it calls its 21 st Century Maritime Silk Road, which is part of its One Belt One Road initiative, aimed in part at gaining access to ports in the Indian Ocean to help secure China's interests along vital sea lanes. For its part, Sri Lanka seeks to become a key Indian Ocean regional economic hub. The scale of Sri Lanka's indebtedness to China may give China a degree of leverage over Sri Lanka that could translate into support for Chinese foreign policy initiatives. Such support will likely be balanced against Indian and Western concerns. China's relations with former President Rajapaksa deepened in the final years of the civil war as Sri Lanka's relationship with India and the West became strained. One analyst argued, "China's weapons support to Sri Lanka was critical to the government's defeat of the LTTE when Western countries and India refused to supply arms." China supplied ammunition and ordinance, as well as six F-7 jet fighters, antiaircraft guns, a radar system, and other assistance. This bilateral relationship continued to grow under President Rajapaksa in the post-war period. The visit by Chinese submarines in 2014 to Colombo raised concerns in New Delhi. The submarines reportedly docked at a terminal designed and operated by the Chinese. The Rajapaksa regime had relied heavily on China for investment and military equipment. During the Rajapaksa years, China became Sri Lanka's biggest donor, provided fighter jets, weapons, and radars to the Sri Lankan military, invested in a major $1.4 billion Port City Project in Colombo, and pledged to invest $1 billion to develop the port at Hambantota. Sri Lanka's willingness to allow Chinese submarines to dock at Colombo's port twice in late 2014 alarmed Indian officials, who are wary of China's increasing influence in its backyard. India fears that Chinese investment in South Asian ports not only serves Chinese commercial interests, but also facilitates Chinese military goals. Upon coming to office, the Sirisena government sought to rebalance Sri Lanka's relations with India and China. His government suspended the Chinese-backed Colombo Port City project. After the government's review, the project is now going ahead with some modification. The $1.5 billion Port City project is to be built on 583 acres of reclaimed land in Colombo harbor. In the original deal China was to be granted 20 hectares as freehold land. Under the revised agreement, the land will all be leased by China on a 99-year basis. Of the reason for the resumption of the project, Sri Lankan Cabinet Spokesman Rajitha Senaratne stated, "who else is going to bring us money, given tight conditions in the West?" Chinese investment in Sri Lanka, in particular for development of the port at Hambantota, has been substantial. China reportedly has loaned Sri Lanka approximately $5 billion, as compared with $1.7 billion by India, over the past decade. By some estimates, one-third of Sri Lanka's revenue goes to service this debt. Indian analysts have observed that difficulty in repaying such loans may provide China with an opportunity to turn loans into equity, "making them part owners of vital projects and granting China a new strategic outpost in the Indian Ocean." Given these developments in the China–Sri Lanka relationship, Congress may assess the implications of China's influence in Sri Lanka. Is China primarily motivated by economic or strategic goals or both? What is Sri Lanka's place in China's larger One Belt One Road (OBOR) strategy? Should the United States be concerned over rising Chinese influence in Sri Lanka and the Indian Ocean more generally or are these developments to be viewed as a legitimate expression of China's rise and its desire to secure its own sea lines of communication in the region? According to some observers, one possible response to these questions is that, while China's trade and investment activities in Sri Lanka are not a direct threat to American interests, it is not in America's interest to have its, or its friends' and allies', influence marginalized to the point of irrelevance in Sri Lanka given Sri Lanka's strategic position near critical sea lanes. Others are less concerned about these developments. Members of Congress and their staff have a range of interests related to Sri Lanka, both general and specific. Generally, Members' interests may include consideration of foreign operations budget requests related to Sri Lanka; potential hearings on bilateral relations, democratic reforms, and trade and investment; the House Democracy Partnership with Sri Lanka; the Congressional Caucus for Ethnic and Religious Freedom in Sri Lanka; ambassadorial confirmation hearings; and meetings with Sri Lankan delegations. More specifically, Congress may be interested in exercising oversight in a number of areas including the Administration's policy toward Sri Lanka with regard to support for democratic reform, ethnic reconciliation, human rights and transitional justice, geopolitics related to India and China in the Indian Ocean region, trade and investment, military-to-military relations, and the environment. The United States has indicated its support for Sri Lanka's "unity, territorial integrity and democratic institutions" and is a "strong supporter of ethnic reconciliation." The United States has also provided over $2 billion in development assistance to Sri Lanka since 1948. The State Department described Sri Lanka's 2015 presidential election as having "ushered in a new political era and opportunity for renewed U.S. diplomatic and development engagement." Secretary of State John Kerry visited Colombo in May 2015 and congratulated Sri Lanka for continuing steps toward reconciliation at the U.S.-Sri Lanka Partnership Dialogue in February 2016. During his visit, Secretary of State John Kerry stated ... true peace is more than the absence of war. True and lasting peace, especially after a civil conflict, requires policies that foster reconciliation, not resentment. It demands that all citizens of the nation be treated with equal respect and equal rights, and that no one be made to feel excluded or subjugated. In August 2016, United States Ambassador to Sri Lanka Atul Keshap noted the positive steps taken in a number of other areas: We applaud the establishment in law of an Office of Missing Persons to help families who still grieve and seek answers. We know the government has committed to establish truth and reconciliation and judicial mechanisms to investigate war crimes; to replace the Prevention of Terrorism Act; to charge or release the remaining security-related detainees; dismantle the culture of surveillance; end discrimination against minorities; return more land; boost an open and free society for journalists and civil society; and promote reconciliation and forge a reconciled, united, peaceful, prosperous Sri Lanka. Through its aid and diplomacy the United States has indicated that it supports initiatives that "increase accountability and transparency; protect human rights and fundamental freedoms; strengthen rule of law and democratic institutions; increase security and stability; promote reconciliation, interfaith harmony, and interethnic understanding; and bolster good governance and economic growth." The United States and Sri Lanka have a strong trade relationship. The United States is Sri Lanka's single largest market with approximately 25% of the nation's exports reaching the United States. Sri Lanka's largest exports are garments, tea, spices, rubber, gems and jewelry, refined petroleum, fish, and coconuts/coconut products. Other large trading partners include neighboring India and several European Union nations. While China is not one of Sri Lanka's largest trade partners, it is a growing investment partner. In December 2015, the Millennium Challenge Corporation (MCC) Board of Directors selected Sri Lanka as eligible to develop a threshold program. MCC threshold program assistance supports government efforts at reform. The United States and Sri Lanka adopted a Joint Action Plan to boost bilateral trade at the 12 th U.S.-Sri Lanka Trade and Investment Framework (TIFA) meeting in April 2016. U.S. goods exports to Sri Lanka increased 4.7% from 2014 to 2015 and were valued at $372 million. The Obama Administration has sought to broaden and deepen the U.S. relationship with Sri Lanka, and the inaugural U.S.-Sri Lanka Partnership Dialogue was held in Washington, DC, in February 2016. The dialogue discussed Sri Lanka's pivotal geostrategic location within the Indian Ocean region as well as economic cooperation, governance, development, and people-to-people ties. The United States expressed its support for Sri Lanka's "plans for constitutional and legislative reform including public consultations on a new constitution and the repeal of the Prevention of Terrorism Act." In considering how sensitive U.S. policy should be concerning the Sinhalese Buddhist majority's insecurities relative to Tamil demands for greater autonomy, Congress may assess the possibility, according to some observers, that Western pressure could create opportunities for political factions from within the Sinhalese Buddhist community that would be less likely to adopt reconciliation measures with the Tamil minority should they come to power. On the other hand, it is also argued that without Western pressure the prospects for true ethnic reconciliation are diminished. The U.S. Agency for International Development (USAID) has maintained a presence in Sri Lanka since 1948. The FY2017 Foreign Operations request for United States assistance to Sri Lanka would represent a significant increase over previous funding. U.S. assistance seeks to "support the new Sri Lanka government's reconciliation, reform, and accountability agenda with increased resources and programming to achieve historic advancements in human rights, economic equality, and stability that were inconceivable a year ago." Key objectives highlighted in the FY2017 Congressional Budget Justification for Sri Lanka include the following: Sri Lanka accelerates reconciliation between the majority population and ethnic and religious minorities with the assistance of U.S. programs. With U.S. help and projection of U.S. democratic values, Sri Lanka improves respect for and application of just and democratic governance, human rights, and freedom of expression principles. Through U.S. engagement and training Sri Lanka enhances regional security. The North, East, and surrounding conflict-affected areas experience accelerated and more equitable economic growth. Sri Lanka improves its business climate with greater transparency of government transactions and adherence to macroeconomic principles. In September 2016, the U.S. House Democracy Partnership and the Sri Lankan Parliament launched a collaborative agreement to strengthen partnership between the two legislatures. The collaboration between the legislatures is based on the exchange of information on legislative systems, consultations on legislative management, and training programs for Members and staff. USAID programs are aimed at supporting Sri Lanka's democratic process in a number of ways: USAID programming strengthens the rule of law, builds a robust civil society and promotes reconciliation—all of which are prerequisites for long-term stability and prosperity. USAID ensures greater access to justice for all citizens by building the capacity of local civil society and professional legal organizations, providing legal education to professionals, connecting universities and local organizations to develop policy and legal reforms that respond to citizens' needs, and assisting marginalized groups with legal assistance. USAID provides management support, organizational development, financial and project management, and monitoring and evaluation training to local organizations to extend much-needed services to citizens, advocate for their needs and sustain vital services long after donor resources phase out of the country. USAID programs also provide technical assistance to key democratic institutions, including to the Sri Lankan Parliament to improve legislative processes and practices and to the Election Commission to ensure continued free and fair elections. Previous military trade restrictions on Sri Lanka were eased in 2016. The U.S. Department of State's Directorate of Defense Trade Controls (DDTC) announced on May 4, 2016, that licensing restrictions on defense exports to Sri Lanka were lifted and that it would review future license applications on a case-by-case basis under usual International Traffic in Arms Regulations (ITAR). The previous restrictions on defense exports to Sri Lanka had been removed from the Consolidated Appropriations Act of 2016. U.S.-Sri Lankan military-to-military ties are expanding as part of the overall improvement in bilateral ties. During the July 2016 naval visit of the USS New Orleans , with its embarked 13 th Marine Expeditionary Unit, U.S. Ambassador to Sri Lanka Keshap stated "the 21 st century is in many ways the Indo-Pacific century, and Sri Lanka is well-positioned to take advantage of its strategic location.... [T]he United States looks forward to working with the Sri Lankan navy as a force for maritime security and stability." U.S. Secretary of the Navy Ray Mabus visited the Sri Lankan navy dockyard in Trincomalee to view ongoing bilateral training between the U.S. and Sri Lankan navies in August 2016. Operation Pacific Angel, a Pacific Command-led multinational humanitarian assistance operation, provided medical care for 4,000 people and renovated six schools in August 2016 as well. Looking forward, Congress may consider a number of questions as it considers legislation and exercises oversight of policy related to Sri Lanka: Does Sri Lanka's strategic significance merit stronger bilateral ties with Colombo? What is the nature of Sri Lanka's political and constitutional reform process? Should the United States continue to provide democracy assistance? How sensitive should U.S. policy be to the Sinhalese Buddhist majority's insecurities relative to Tamil demands for greater autonomy? What are the policy implications of the Sirisena government's level of sensitivity? Is the Sirisena government's progress on ethnic reconciliation sufficient to justify enhanced collaboration and increase U.S. foreign assistance or should such assistance be diminished pending further improvement in this area? Is there a danger that by pushing Colombo too hard on ethnic reconciliation the United States and the international community could unintentionally limit the Sirisena government's political room for maneuver to achieve moderate efforts of reconciliation? What are China's strategic interests in Sri Lanka and the Indian Ocean region? Are these potentially a threat to U.S. interests? How do they relate to India's strategic interests? Congress may choose to reevaluate U.S. assistance programs toward Sri Lanka as the new Administration develops its policy and as events unfold in Sri Lanka. The new Administration may, or may not, seek funding for policy objectives which may differ with current policy objectives. Events in Sri Lanka may also affect congressional decisionmakers' attitudes toward funding decisions as progress is, or is not, made in a number of areas of importance to Members.
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Sri Lanka is a nation of geopolitical importance despite its relatively small size. Strategically positioned near key maritime sea lanes that transit the Indian Ocean and link Asia with Europe and Africa, Sri Lanka's external orientation, in particular its ties to China, are of great interest to nearby India. Some observers view China's involvement in the Sri Lankan port at Hanbantota to be part of Beijing's strategy to secure sea lanes through the Indian Ocean. United States-Sri Lanka relations are expanding significantly, creating new opportunities for Congress to play a role in shaping the bilateral relationship. For example, the United States is increasing its foreign assistance to Sri Lanka while seeking to further develop trade between the two countries. The total foreign assistance request in the FY2017 Congressional Budget Justification for Congress for Foreign Operations is $39,797,000 compared with actual foreign assistance provided in 2015 of $3,927,000. In February 2016, the United States and Sri Lanka held their inaugural Partnership Dialogue, while in April 2016, the governments held their 12th Trade and Investment Framework Agreement (TIFA) talks. The United States is Sri Lanka's major export destination. Recent U.S.-Sri Lankan engagement has been prompted in part by a fundamental shift in Sri Lanka's domestic politics since early 2015. This shift has occurred against the backdrop of the more reconciliatory and reform-oriented approach of President Maithripala Sirisena of the Sri Lankan Freedom party (SLFP) and the "National Unity Government" he formed with Prime Minister Ranil Wickremesinghe of the United National Party (UNP). Under Sirisena's predecessor, former President Mahinda Rajapaksa (2005-2015), U.S.-Sri Lankan relations deteriorated, especially during the closing phase of Sri Lanka's civil war between government troops and the forces of the Liberation Tigers of Tamil Ealam (LTTE). The war ended in 2009 after 26 years, having claimed over 70,000 lives. Disagreements between the United States and Sri Lanka stemmed from human rights concerns about how the Sri Lankan government fought the LTTE, particularly at the end of the war. In presidential and parliamentary elections of January and August 2015, respectively, voters ousted the Rajapaksa regime and brought President Sirisena and Prime Minister Ranil Wickremesinghe to power in what the two major parties call a National Unity Government. Some observers assert that this significant reorientation of the Sri Lankan government has created opportunities for Colombo to restore and enhance the country's democracy through constitutional and political reform and achieve reconciliation with the Tamil minority. President Sirisena's government has also sought to rebalance its relationship with China. Human rights concerns remain, especially those related to implementing United Nations-supported transitional justice measures. Progress has been made in a number of areas including, for example, measures to create an office of missing persons and freedom of information legislation, but some observers indicate that more needs to be done to achieve lasting reconciliation with the Tamil minority. They deem such reconciliation to be necessary if Sri Lanka is to attain long-term peace and stability. As Congress considers legislation and exercises oversight of policy related to Sri Lanka, Members and committees may consider a number of questions. Is Sri Lanka's strategic significance such that the United States has an interest in developing stronger bilateral ties with Colombo? What is the nature of Sri Lanka's political and constitutional reform process? Should the U.S. continue to provide democracy assistance? If so, how can it be most effectively structured? Is the Sirisena government's progress on ethnic reconciliation sufficient to justify enhanced collaboration and increase U.S. foreign assistance, or should such assistance be withheld pending further improvement in this area? Is there a danger that by pushing Colombo too hard on ethnic reconciliation the U.S. and the international community could unintentionally limit the Sirisena government's political room for maneuver to achieve moderate efforts of reconciliation or political reform? What are China's strategic interests in Sri Lanka and the Indian Ocean region? Are these potentially a challenge to United States interests?
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Gasoline taxes affect both the national economy and the decisions of individual consumers. If set at a sufficiently high level, they can reduce gasoline consumption to levels that some say reflect the adverse effects of gasoline use, including environmental damage and national security costs. However, these taxes can also slow the level of macroeconomic activity, although they might contribute to lowering the trade deficit by reducing the need for imported oil. If, as in the United States, federal gasoline tax revenues are directly tied to financing highway construction and maintenance, they can also create jobs and improve the national infrastructure. If the gasoline tax is designed in such a way that it contributes to stabilizing the price of gasoline, more informed decisions concerning the purchase of fuel-efficient vehicles and the funding of mass transit might also be made. It is widely believed that the federal gasoline tax is unpopular with consumers and that increasing the tax will likely generate opposition. The perceived unpopularity of the tax could make renewing it when the legislation expires at the end of fiscal 2011 controversial. However, the federal tax on gasoline is relatively low, only about 5% of the average price per gallon in August 2011, and less than 5% of the average price earlier in 2011, the most recent peak in gasoline prices. The tax raises revenue for highway construction and maintenance, which is directly related to automobile and gasoline use, suggesting that the tax can be viewed as a user charge. Many attempts to increase the tax since the early 1970s, especially those tied to energy policy initiatives, have been defeated; however, over that period the tax increased in several steps from 4 cents per gallon to the current rate of 18.4 cents per gallon. Although the federal gasoline tax is collected at the refinery, it is believed to be passed on to consumers, along with state and local taxes, and is included in the pump price. This report examines the effects of the federal excise tax on gasoline and analyzes the positive and negative effects of the tax. The report also evaluates the incentive structure that a higher gasoline tax would likely create, and examines a revised version of the tax, a variable gasoline tax. Excise taxes are, in effect, sales taxes levied on specific goods. The tax may be set either as a percent of the value of the good, an ad valorem tax, or as a set dollar value per unit of the good, a unit tax, as in the case of the federal gasoline tax. Excise taxes have been used to provide general, or dedicated, revenue and deficit reduction, but in some cases, for example, as in the taxes on liquor and cigarettes, there is some presumption that discouraging consumption, in addition to raising revenues, is a motivating factor in enacting the tax. The first excise tax on motor fuels in the United States was enacted by Oregon in 1919. Within 13 years, every state and the District of Columbia had enacted similar taxes ranging from 2 to 7 cents per gallon. The federal government levied its first excise tax on gasoline in 1932 at the rate of 1 cent per gallon as a general revenue tax. The federal excise tax became permanent in 1941 under Section 521 (a)(20) of the Revenue Act of 1941. Gasoline for use on highways is currently taxed by the federal government at 18.4 cents per gallon. Of this 18.4-cents-per-gallon tax, 18.3 cents per gallon is earmarked for the Highway Trust Fund, and 0.1 cents per gallon is allocated to the Leaking Underground Storage Tank (LUST) Trust Fund. The total excise taxes on gasoline, at the retail level, are in the range of approximately 40 cents to over 50 cents per gallon, depending on the specific state and local taxes that are added to the federal tax. Federal, as well as most state and local levies, are unit taxes, and as such, do not vary with the price of gasoline, as a tax based on ad valorem rates would. While opposition to the federal gasoline tax has existed since its inception, the direct tie to the Highway Trust Fund, the expansion of the interstate highway system, and highway projects to ease road congestion, have led to the view that the tax might be a proxy for a user charge, or price, to consumers who directly benefit from services provided through the tax, easing opposition to some extent. After the oil embargo of 1973-1974, interest in the use of the gasoline tax as a policy instrument expanded to areas beyond highway financing. The Nixon Administration considered using a gasoline tax increase as a way of reducing inflationary pressures in the economy. During the Ford Administration, Representative Al Ullman introduced legislation to increase gasoline taxes to fund alternative energy sources by allocating revenues to a proposed trust fund. The Carter Administration embraced the idea of escalating gasoline taxes as a part of an energy program in 1977 designed to reduce oil consumption and increase U.S. energy security. After the fall of the Shah of Iran in 1979 and the Iran-Iraq war that began in 1980, gasoline prices increased to then-record levels, and interest in gasoline taxes as a way to reduce foreign oil dependence was suggested by independent presidential candidate John Anderson. The Carter Administration proposed an oil import fee in March 1980 that was intended to approximate the effect of a gasoline tax. None of these proposals were successfully passed into law by Congress. In 1982, the Reagan Administration proposed an increase in the federal gasoline tax for the purpose of improving and repairing the nation's highways, based on the user-fee nature of the tax. Within the Administration, the fact that the tax was likely to create jobs was also considered as a reason for the tax increase, although President Reagan did not support government-funded jobs programs, or tax increases. The Reagan gasoline tax increase passed in both the House and the Senate and was signed into law on January 5, 1983. It raised the federal tax from 4 cents per gallon to 9 cents per gallon. A further increase in the gasoline tax was included in the Omnibus Budget Reconciliation Act of 1990, but the rationale for the tax increase was deficit reduction. President George H. W. Bush initially opposed the tax increase, but then reversed himself and supported it, and signed the Omnibus Budget Reconciliation Act of 1990 into law on November 5, 1990, raising the federal gasoline tax to 14.1 cents per gallon. President Bill Clinton initially supported a broad-based energy tax rather than a gasoline tax. The Administration decided to propose a tax on the energy content of fuels, a British Thermal Unit (B.T.U.) tax. This tax proposal failed to gain support in Congress, and, as an alternative, an increase in the gasoline tax to 18.4 cents per gallon was passed by Congress and signed by President Clinton, and took effect in December 1993. The revenue from the tax increase, 4.3 cents per gallon, was restricted to be allocated to deficit reduction. The latter part of the 1990s was characterized by declining federal deficits as tax revenues rose, as well as low gasoline prices, taking increases in the gasoline tax off the policy agenda. President George W. Bush's Administration did not propose any increase in the gasoline tax. However, there were calls for a temporary reduction in the tax to help American drivers who paid record high prices for gasoline in the summer of 2008. The Obama Administration has opposed an increase in the gasoline tax during the recession. However, it has advocated a number of policy objectives—greenhouse gas reduction, energy security, economic stimulus, more fuel efficiency, and moving toward alternative energy sources—that have been discussed in the past as justifications for gasoline tax increases. A number of tax provisions related to Highway Trust Fund financing are scheduled to expire on September 30, 2011. These include, along with Internal Revenue code section, all but 4.3 cents per gallon of the federal tax on highway gasoline, diesel fuel, kerosene, and some alternative fuels (§§4041(a) and 4081(d)(1)), the reduced rate of tax on partially exempt methanol, or ethanol, fuels (§4041(m)), the tax on the retail sale of heavy highway vehicles (§4051(c)), the tax on heavy truck tires (§4071(d)), and the annual use tax on heavy highway vehicles (§4481(f)). In addition, the LUST Trust Fund financing rates, Sections 4041(d)(4) and 4081(d)(3), are set to expire at the same time. The purpose of a tax is to fund government through a transfer of resources from the taxpayer to the government. As a result, every tax leaves the taxpayers with less purchasing power than they had before the tax was levied. However, the government may use the resources acquired through levying the tax to finance the provision of public goods and services for the benefit of the taxpayers. Because it is unlikely that every taxpayer can, or will, agree concerning the proper mix and level of every public good and service, as well as every choice and level of tax instrument, taxes are unlikely to be voluntary, and the government must use the force of law to levy and collect taxes. In addition, taxes can have a wide variety of economic effects, from altering consumer decisions concerning mix of goods to purchase, to national macroeconomic issues of economic growth, employment, and inflation. The legal, or statutory, incidence of an excise tax on gasoline is on the refiner; however, the tax is typically passed on to the consumer, and is paid at the pump along with state and local taxes, leaving the economic incidence of the tax with the consumer. This result is in accord with economic theory that suggests that if the demand for the product is totally or nearly totally inelastic, the firm will pass the tax on to consumers who will pay the tax, independent of the nature of supply. Although the demand for gasoline is not totally inelastic in the short run, its elasticity is very low, approximating total inelasticity. Analytic studies suggest that the elasticity of gasoline demand over a wide range of price variation is low, and perhaps near zero in the short run. In the case of gasoline taxes, the supply side of the market is likely to support the demand side result because of the wide range of essentially constant cost output levels of gasoline from modern refineries. When a tax alters consumers' or producers' economic decisions, the tax is said to have an excess burden, a burden beyond that of the tax revenue paid to the government. If an excise tax is levied on a good whose marginal social cost is greater than its marginal private cost, the excess burden, which shifts consumer's choices away from the taxed good, may be part of the design of the tax. In the case of gasoline, if it is hypothesized that gasoline use generates social costs—for example, national security and/or environmental issues—that raise its total cost above the private costs, then in an untaxed environment, it could be said that gasoline is being over-consumed. If one denies the linkage between social costs and gasoline consumption, then a free market-generated consumption level consistent with the price equalized with marginal private cost is appropriate on economic efficiency grounds. In the real-world market for gasoline, it is unclear whether the market result is efficient or not, because a variety of market imperfections related to actual or potential market power exist, making it difficult to determine whether actual consumption is greater, or lower, than the consumption level of the free market. These potential market power factors include a market dominated by a few large firms, the presence of the Organization of the Petroleum Exporting Countries (OPEC), and national oil companies exerting political influence on the world price of oil. Even if it is accepted that gasoline consumption is associated with the generation of social costs, the level of the tax on a per-gallon basis must be determined. To encourage the use of alternative fuels, or to reduce petroleum imports and carbon emissions, the tax must be set high enough to cause consumers to decide that it is in their economic interest to substitute other energy sources, or to conserve. If the price elasticity of demand for gasoline is low, this implies that a relatively large tax will be necessary to result in a significant reduction in consumption. An increase in the federal excise tax on gasoline would be a drain on consumer purchasing power, and could result in a slow-down in macroeconomic activity. However, part, or all, of the tax revenue raised could be returned to consumers through reductions in other taxes. A total return of tax revenue would not be appropriate if the purpose of the tax increase was to fund the Highway Trust Fund. If the purpose is to reduce the consumption of gasoline, then a return of tax revenue through reductions in other taxes is more reasonable. Two key factors in explaining gasoline demand in the United States are price and consumer income. Economists have empirically estimated that in the short run, the sensitivity of the quantity demand of oil, and therefore, gasoline quantities, to price variations is low. Low price elasticity of demand, a percentage quantity variation less than the percentage price variation, suggests that the good is viewed by consumers as a necessity, one that must be purchased with little quantity variation, even in the face of higher prices. Additionally, commodities with low price elasticity of demand tend to be subject to substantial price volatility when quantities available on the market vary. Income elasticity measures how responsive consumer demand for a good is to changes in consumer income levels. Income and price elasticity can interact. For example, even if the price of a commodity increases, implying that the quantity demanded should fall in the proportion suggested by the price elasticity measure, the predicted demand reduction might not be observed in consumption data if income increases sufficiently, making any given expenditure on the good a smaller percentage of available income. These concepts of price and income elasticity are likely to have important effects on the structure and level of an effective gasoline tax. Effective, in relation to a gasoline tax, can be defined in a variety of ways. One possible way to define effective with respect to a tax is its efficacy in providing government revenues, and/or reducing the consumption of gasoline, in a predictable manner that provides consistent incentives to consumers to make appropriate economic choices, in accordance with national economic goals. U.S. gasoline consumption rose by 9.6% from 2000 to 2007 even as the nominal price of gasoline almost doubled. Income growth, as well as a variety of other factors, contributed to the increasing demand, even as prices rose. Demand for gasoline began to decline in the fourth quarter of 2007, coincident with the onset of the recession. The rise, and then peaking, of gasoline prices at over $4 per gallon in 2008 also contributed to the declining demand that resulted in the reduced demand that continued through 2010. Gasoline demand continues to decline into 2011 as a result of high prices and fears of a renewed economic slowdown. The behavior of gasoline demand over the period from 2000 to 2011 has implications for the design of a gasoline tax. The current federal tax on gasoline is a fixed 18.4 cents per gallon. In addition, states and localities generally add their own taxes on gasoline. The current tax does not appear to be functioning as an effective tax, by the definition set out above; it is not raising adequate revenues, reducing consumption, or providing consistent incentives. On the revenue side, the federal gasoline tax, along with the corresponding tax on diesel fuel (24.4 cents per gallon) provided over $30 billion in revenue to the Highway Trust Fund in FY2008, and over $22 billion in the first three quarters of FY2011; however, the Highway Trust Fund, the financing of which depends on fuel excise taxes for about 90% of its funding, has recently been relatively unstable financially. In addition, because the existing federal tax is relatively small, compared to the price of gasoline, and is a declining portion of consumer income, as incomes rise, it likely is not having as large an effect in reducing consumption as it might have had when it was instituted. Reducing gasoline consumption is a goal consistent with achieving less dependence on imported crude oil, and reducing greenhouse gas emissions. Since the federal gasoline tax is a fixed amount per gallon, and small relative to the price of gasoline, it does little to provide incentives to consumers to consider fuel-efficient vehicles. When the price of gasoline rises, and attains high levels, consumer interest in fuel efficiency increases, but when gasoline prices fall, their interest wanes. Volatile gasoline prices cause this cycle to repeat itself. As a result, consumers tend to buy the "wrong type" of vehicle for the next gasoline price cycle. On the production side, consumers' shifting automobile preferences have contributed to the instability in the auto industry. The high gasoline prices in 2008 and 2011 tend to shift consumer demand away from sport utility vehicles and light trucks, profit centers for the U.S. auto manufacturers, and helped push General Motors and Chrysler to bankruptcy. As these firms emerge from bankruptcy, and re-gain market share, their plans to introduce fuel-efficient cars that they can sell profitably could be problematic if gasoline were to fall below $2 per gallon and remain there for a significant time. One way to overcome these uncertainties, if it is the policy to discourage gasoline consumption in order to lessen dependence on imported oil and to reduce greenhouse gas emissions, is through a variable gasoline tax. A variable gasoline tax would target a specific price of gasoline (including tax) that was thought by policy makers to achieve desirable levels of gasoline consumption and/or revenue production. When the price of oil rises, increasing the cost of gasoline above the target price, the tax would remain constant, and consumption would fall in response to market forces. Alternatively, if gasoline prices fell, the tax would automatically rise to keep the price including tax at the target price level. In this way, the tax would provide a more constant incentive to consumers to purchase fuel-efficient vehicles, drive less, and encourage interest in alternative fuel vehicles. Economists identify two factors in consumer purchases, the substitution effect and the income effect. A tax raises the relative price of gasoline relative to other goods, causing consumers to respond with a decision to buy less of the good; this is called the substitution effect. Taxes also make the taxed goods more expensive, reducing consumers' general purchasing power; this is called the income effect. Even if the income effect is reversed through a tax rebate program, the substitution effect will still encourage lower consumption of the taxed commodity. In this way, the tax could have a minimal effect on purchasing power if consumers chose to follow market economic incentives and minimize consumption of the taxed good. If they chose to attempt to continue to consume at pre-tax levels, purchasing power would be reduced, but that would be the free choice of the consumer. The variable gasoline tax, set at a sufficiently high level to affect consumer decisions, could be expected to stimulate the demand for smaller, more fuel-efficient automobiles, spur the development of cars that use alternative energy sources, reduce U.S. oil imports and dependence on supplies from unstable parts of the world, reduce greenhouse gas emissions, and reduce the costs of maintaining the highway and road system, as well as likely reduce the number of accidents and fatalities. While U.S consumers have enjoyed low taxes on gasoline for some time, taxes in other industrialized nations make retail prices higher. As shown in Table 1 , in August 2011 gasoline prices ex tax in the United States were within a 5% spread of the average price in the United Kingdom, Germany, and France, but the price of gasoline including taxes was over twice as high in the European nations. High gasoline taxes in Europe have provided incentives for consumers to buy smaller cars, drive less, and switch to diesel fuel, which offers better fuel economy than comparable gasoline-fueled automobiles. Although the gasoline taxes in the countries identified in Table 1 are not variable, the taxes appear to be high enough to avoid the changing incentives that the current U.S. tax provides. With U.S. gasoline consumption generally in the range of 9 million barrels per day (378 million gallons per day), the gasoline tax would have a large base. If, for example, the tax were initially set at $2 per gallon, to achieve a tax inclusive target price of over $5 per gallon, revenues could approach $1 billion per day, minus the effect of conservation. Revenue on this scale might have a negative effect on the overall purchasing power of the economy, which might be a problem, especially in a recession. This could be ameliorated if tax revenue were recycled back into the economy through increased infrastructure projects, or expenditures on alternative energy projects. If desired, the tax revenue could be returned to households through an income tax rebate program, or a reduction in the income tax rates. If the revenue were returned to taxpayers in this way, the variable gasoline tax could still achieve a portion of its conservation goals through a higher relative price of gasoline, which would discourage consumption. Revenues generated by the gasoline tax could also assure funding for the Highway Trust Fund, improve the mass transit infrastructure, and fund research and development of alternative energy sources, as well as contribute to deficit reduction. The U.S. petroleum refining industry experienced what some have called a "golden age" during the years 2004-2007. A combination of rapidly increasing demand for petroleum products, especially gasoline, coupled with favorable price spreads between high and low quality crude oils, led to high rates of capacity utilization, yielding record profit levels for both the major oil companies and independent refiners. During this period, concern was expressed that U.S. refining capacity was not increasing rapidly enough to keep up with demand growth in the petroleum product markets. Since 2007 the state of and outlook for the petroleum refining industry have changed. Current weak product demand conditions have resulted in lower capacity utilization rates, refinery closures, and reduced profitability. The near-term outlook suggests continued rationalization will occur in the industry until excess capacity is eliminated. A key factor in the decline of the refining industry has been reduced gasoline demand, with 2010 consumption about 4% less than in 2007. Reduced consumption has resulted from the economic recession, high prices, and inroads in the demand structure made by alternative fuels, mainly ethanol. A tax on gasoline, to the extent that it reduces gasoline demand, would likely create additional economic pressure on the refining industry. Capacity utilization rates could continue to fall, further plant closures would be likely, and the profit picture could deteriorate even further. If gasoline demand is extremely price inelastic, as discussed in this report, the magnitude of the effects on the refining industry would likely be proportionately small, especially if the gasoline tax was small. The Obama Administration has expressed interest in reduced carbon emissions, reduced dependence on imported oil, and the development of alternative, renewable energy sources. The Highway Trust Fund is in need of an increase in stable funding. These goals might be attained through a renewal of, and possibly an increase in, the federal excise tax on gasoline. To facilitate consistent economic decision-making the tax could be set with variable rates, or levels, which would also enhance the predictability of the revenue base. However, a gasoline tax increase is also likely to be unpopular with consumers. It might also drain purchasing power, especially from an economy that remains weakened by recession.
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American drivers, compared to those in industrialized nations in Europe, pay relatively low federal, state, and local gasoline and diesel excise taxes. The federal taxes are used specifically to fund annual highway construction, maintenance, and mass transit. Over the years, proposals have come forth to raise the federal tax as a way to address long-standing national policy concerns, including U.S. dependence on imported oil and various environmental problems related to large volumes of gasoline consumption. The current federal gasoline tax legislation is set to expire on September 30, 2011, and renewal of the tax could be controversial. Policy attention on the role of the gasoline tax has also increased recently due to two major developments. First, the 2008 and 2011 oil and gasoline price run-ups and continuing effects of the economic downturn have periodically led to a decline in gasoline tax revenues available for needed highway construction and maintenance. Second, the volatility of gasoline prices has affected investment planning (e.g., for alternative fuels and vehicles) and arguably contributed to the troubles facing domestic automobile manufacturers. In the above context, this report outlines some of the macroeconomic and microeconomic pros and cons of using the federal gasoline excise tax for policy purposes in addition to the funding of highway infrastructure. Whether an increase in the gasoline tax is fixed or variable, advocates argue that increasing the relative price of gasoline would promote beneficial short- and long-term changes in how we use this form of energy. A higher relative price would encourage consumers and manufacturers to move toward more fuel-efficient vehicles, or to switch to alternative fuels, thus reducing oil consumption and imports, reducing air pollution, and possibly encouraging greater use of mass transit. Advocates further argue that such taxes could be recycled back into the economy through changes in the tax structure and/or increased investment in renewable or alternative fuels, among other options. Opponents of gasoline tax increases point to the effects on consumer and business spending, which affect the short- and long-term performance of the overall U.S. economy, especially in a time of needed economic recovery. Additionally, opponents point out that the gasoline tax has a regressive impact and affects rural areas disproportionately. Opponents also argue that such tax revenues could be better spent if left in the private sector. Gasoline price increases due to market forces, or earlier tax increases, of course, have been part of the economic environment for almost four decades. Since the mid-1970s, there have been significant spikes in gasoline prices due to world oil market turmoil attributed to political conflict and war in the Middle East and to financial market speculation. Depending on the specified purpose of a new gasoline tax increase, it could be modest, or more significant. Because the demand for gasoline is quite price insensitive (inelastic), significant revenues could be generated with little change in real consumption, even with a relatively low tax increase. A more substantial tax increase would likely be needed to change consumer preferences and business investment decisions. Any debate on modifying the gasoline excise tax will likely revolve around these tensions.
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Carbon dioxide, the major "greenhouse gas" of concern in possible climate change, is producedin large part as a result of energy production and use. The federal government has had programsdealing with energy efficiency and with climate research and services for more than 20 years. TheCongress has held hearings about them since the mid-1970s, when a major goal of such programswas to reduce U.S. dependence on oil imports during the energy crisis, and to expand scientificunderstanding of the dynamics of the climate system and its societal consequences as a basis forpolicy decisions that depend on improved predictions of future climate conditions and on betterclimate impact assessments. U.S. government policies explicitly addressing possible climate change linked to "greenhouse gas" emissions date back to the mid-1980s. (4) Thesepolicies have focused heavily on scientificresearch. The Energy Policy Act of 1992, in conjunction with the U.S. ratification of the 1992United Nations Framework Convention on Climate Change (UNFCCC), influenced the direction ofU.S. efforts, which continued in the first Bush and Clinton Administrations toward energy efficiency,renewable energy, and R&D, (5) to try to movetoward reducing greenhouse gas emissions. The Climate Change Action Plan, designed with the goal of reducing U.S. greenhouse gas emissions and announced in 1993 by the Clinton Administration, included more than 40 on-goingfederal programs to influence, assist, or work with business, state and local governments, scientificand other entities. R&D and other programs since then were largely maintained or modified withsome new activities and names. With evolution from prior efforts, coupled with some augmentation,packages of programs in the Clinton Administration such as the 1997 Climate Change TechnologyInitiative (CCTI) were built upon the earlier efforts, including efforts originally aimed at reducingdependence on oil imports. During the preparations for the final negotiations of the December 1997 Kyoto Protocol to the UNFCCC, (6) President Clinton announced thethree-stage CCTI on October 22, 1997. (7) It wasdescribed as "the cornerstone of the [Clinton] Administration's efforts to stimulate the developmentand use of renewable energy technologies and energy efficiency products that will help reducegreenhouse gas emissions," (8) through a combinationof R&D, and information and tax incentiveprograms. Stage 1 included funding for R&D, tax incentives for early action, a set of federalgovernment energy initiatives including various tax credits to encourage purchase and use of moreefficient technologies, and industry consultations to explore ways to reduce greenhouse gasemissions. Stage 2, which was planned to begin around 2004, would have reviewed and evaluatedstage 1. Stage 3, as envisioned prior to the Kyoto Protocol, included actions aimed at reducingemissions to 1990 levels by 2008-2012, meeting the binding targets anticipated in the Kyoto Protocolthrough measures that would include domestic and international emissions trading. The KyotoProtocol (which the United States signed on November 11, 1998 but which has not been submittedto the U.S. Senate for advice and consent on ratification), outlines an obligation for the United Statesto reduce its total greenhouse gas emissions by an average of 7% below 1990 levels, on average,between 2008 and 2012. (9) The ClintonAdministration supported United States participation in thisprotocol. The Bush Administration, on the other hand, has rejected the protocol. The Congress has in the past passed budget resolutions and appropriations bills with provisions prohibiting the use of funds to implement the Kyoto Protocol, which has not been ratified by theUnited States or entered into force internationally. Some controversy was engendered by thepossible linkage of funding proposals associated with the CCTI to the Kyoto Protocol goals. Aftersome early consideration of these concerns, for the most part the R & D elements were funded bythe Congress. Moreover, many of the programs related to the CCTI and other climate research preceded the Kyoto Protocol, and were mainly influenced by the voluntary commitments the UnitedStates made in the U.N. Framework Convention on Climate Change to try to meet a voluntary goalof returning greenhouse gas emissions to 1990 levels by the year 2000, and to current efforts toreduce intensity of emissions. (See CRS Report RL30024 , Global Climate Change Policy: Cost,Competitiveness, and Comprehensiveness ). The government's activities relating to climate change have been accomplished through severalprograms, initiatives, and agencies. Coordinating these activities continues to be a challenge. Various organizational structures have been attempted over the past two decades in the effort toimprove coordination and efficiency. An early effort, dating back to the late 1970s, was embodied in the National Climate Program Act of 1978 (H.R. 6669, Public Law 95-367), involving twelve federal agencies vestedwith responsibilities in climate research and services. (10) Designed to centralize planning and toimprove interagency and intergovernmental coordination, the National Climate Program emphasizeddevelopment and delivery of useful climatic information and services to a wide range of users, basedon current knowledge of climate and better use of existing climatic data. Simultaneously, theProgram sought an expanded federal effort in scientific research to foster better understanding of theclimate system and the societal consequences of climate change as a basis for national decisionmaking that depended on improved predictions of future climate conditions and better climate impactassessments. Some ten years after its enactment, however, the National Climate Program was faced with criticisms that involved charges of paucity of funding and concerns expressed among agencyprincipals that any program combining individual agency capabilities and resources into acoordinated effort could compromise or impede existing agency responsibilities. By the early 1990s, the National Climate Program faded from the scene (11) as the newly createdU.S. Global Change Research Program gained adherents, achieved prominence as a PresidentialInitiative with discretely identifiable budget items, (12) and eventually acquired legislativeunderpinning in the form of the Global Change Research Act of 1990 (S. 169, Public Law101-606). (13) It continues as part of current federalclimate activities, as described below and as shownin Table 1. The GCRP was created with the recognition that global change issues are complex and far reaching, extending beyond the mission, resources, and expertise of any single agency, requiringinstead the integrated efforts of several governmental entities. The program involves scientificresearch on global change generally, including but not limited to climate change. GCRP agenciessupport scientific research through coordination and joint activities. Members of the GCRP are theDepartments of Agriculture, Commerce (notably, its National Oceanic and AtmosphericAdministration), Defense, Energy, Health and Human Services (notably, the National Institutes ofHealth), Interior (United States Geological Survey), and State, plus the Environmental ProtectionAgency, National Aeronautics and Space Administration, National Science Foundation, andSmithsonian Institution. The GCRP coordinates and funds research on, among other things, naturalfluctuations of earth processes, possible impacts of human activities on the environment, and waysto increase the predictive power of climate change models. The GCRP (14) is mandated by statute to undertake scientific assessments of the potentialconsequences for the United States of global change. (15) The Global Change Research Act of 1990( P.L. 101-606 , Section 106) stated that the federal government "shall prepare and submit to thePresident and the Congress a National Assessment which: integrates, evaluates, and interprets the findings of the Program and discusses the scientific uncertainties associated with such findings; analyzes the effects of global change on the natural environment, agriculture,energy production and use, land and water resources, transportation, human health and welfare,human social systems, and biological diversity; and analyzes current trends in global change, both human-induced and natural, andprojects major trends for the subsequent 25 to 100 years." Research conducted by the GCRP was the scientific foundation on which the Assessment was built. The National Assessment Synthesis Team (NAST), a committee of experts drawn fromgovernment, academe, industry, and nongovernmental organizations, provided the leadership inwriting the Assessment. Approvals for the work were given by the NSTC, the cabinet-level bodyof agencies responsible for scientific research. The Assessment is composed of the Overview reportand the Foundation report; the Foundation report is more detailed than the Overview. (16) The tworeports are national-level, peer-reviewed documents which synthesized results from studiesconducted by regional and sector teams, and from the broader scientific literature. (17) On June 11, 2001, the Bush Administration issued the White House Initial Review on Climate Change, a Cabinet-level review of U.S. climate change policy. Members of the Cabinet, the VicePresident, and senior White House staff examined the science, technologies, U.S. activities, andoptions for addressing atmospheric concentrations of greenhouse gases. The White House InitialReview included the concurrent announcement of the U.S. Climate Change Research Initiative(CCRI) and the National Climate Change Technology Initiative (NCCTI). The CCRI's generalmission was to "improve the integration of scientific knowledge into effective decision supportsystems with performance metrics and deliverable products useful to policymakers in a 2-5 year timeframe." (18) Specific priorities begun in FY2003include new efforts to better understand the NorthAmerican carbon cycle, to develop reliable representations of the global and regional climateinteractions of atmospheric aerosols, to invest in more refined computer modeling, and to ensurelong term climate data records that are of higher quality. Additional organizational elements to deal with climate change were announced in 2002. An organization chart was released by the Bush Administration at a meeting on April 1, 2002 of theSubcommittee on Global Change Research (GCR), a part of the now-extinct CENR. (19) The chartprovided some details about new governmental structures and activities that are part of theAdministration's efforts to advance climate change science and technology. The organizationalbackground information for the chart released at the CENR's GCR Subcommittee meeting on April1, 2002 is summarized in Table 1. As described further in this report and shown in Table 2, theCCRI was combined in January 2003 with the GCRP to form the Climate Change Science Program. The NCCTI was announced by President George W. Bush on June 11, 2001. The Secretaries of the Departments of Commerce and Energy, working with other agencies, were directed to evaluatethe state of climate change technology R&D in the United States and make recommendations forimprovement; provide guidance on strengthening basic research in academe and in the nationallaboratories; develop opportunities to enhance public-private partnerships in applied R&D; makerecommendations for funding demonstration projects of cutting-edge technologies; and evaluateimproved technologies for measuring and monitoring gross and net terrestrial greenhouse gasemissions. The FY2004 budget requests $1.2 billion for climate change technology, within the President's NCCTI. The FY2004 budget request for climate change science is described later in this report. The Climate Change Policy Panel (CCPP; see Table 1) combines the concerns of the National Security Council, the Domestic Policy Council, and the National Economic Council. The chair ofthe CCPP is the National Security Advisor or other presidential appointee. The chair is responsiblefor program and policy review and reports to the president. The Committee on Climate Change Science and Technology Integration (CCSTI), which had been announced by the President on February 14, 2002, also continues. The CCSTI membership isshown in Table 1. The Executive Director of the CCSTI is the Director of the White House Officeof Science and Technology Policy. The CCSTI's functions include recommending to the Presidentclimate change science and technology activities and movement of funds and programs acrossagency boundaries, and coordinating with the OMB. The chair of the CCSTI is responsible for thefinal review of recommendations to the Climate Change Policy Panel. Reporting to the CCPP and the CCSTI, as seen in the organizational chart in Table 1, is the Interagency Working Group on Climate Change Science and Technology. The group's secretary wasexpected to be the Assistant Director for Climate Science and Technology from the Office of Scienceand Technology Policy (OSTP), a position the Administration said it intended to create; (20) while theposition had not been created as of the date of this report, the function is performed by OSTP'sAssociate Director for Science. (21) The functionsof the Interagency Working Group on ClimateScience and Technology include reviewing all programs relating to climate change science, providing recommendations to the CCSTI regarding climate science funding and programallocations, and accepting and acting on recommendations by the Joint Climate Change ScienceProgram Office and the Climate Change Technology Program Office. On January 30, 2003, the Administration announced that the CCRI and the GCRP would be combined into the Climate Change Science Program (CCSP), which is separate from climate changetechnology work which is part of the President's National Climate Change Technology Initiative. The FY2004 budget seeks $1.75 billion to directly sponsor scientific research managed by the CCSP. Included in the $1.75 billion CCSP funds are $182 million for the CCRI. Although the total CCSPrequest for spending in FY2004 was up only 0.1% over the FY2003 request, that portion of thefunding request allocated to the embedded CCRI was up 355% from $40 million in FY2003 to $182million in FY2004. An issue for Congress is the extent to which that large CCRI increase representsnew money versus how much is attributable to the reclassification of ongoing research programs. The CCSP reports to the Interagency Working Group on Climate Science and Technology and will have joint membership of all agencies with climate research funding, according to materialspresented on April 1, 2002 in a meeting of the Subcommittee on Global Change Research. TheCCSP is to be staffed by interagency detailees. The Director is a detailee from the Department ofCommerce (James Mahoney, Assistant Secretary of Commerce and Deputy Administrator of theNational Oceanic and Atmospheric Administration). The function of the CCSP will be to reviewall climate change science programs, not just the GCRP. The Director of the CCSP reports to thechair of the Interagency Working Group. (22) The Climate Change Technology Program (CCTP), announced April 1, 2002, located in DOE, is a new entity and reports to the Interagency Working Group on Climate Change Science andTechnology through the Secretary of Energy. The CCTP's Director is a DOE senior politicalappointee, according to materials presented on April 1, 2002 in a meeting of the Subcommittee onGlobal Change Research. (23) The functions of thisoffice are to develop, review, and implementclimate technology programs within the federal government consistent with the National ClimateChange Technology Initiative (NCCTI). The CCTP works with the current participants of theNCCTI. The CCTP began in FY2003 (and continues in FY2004) to create an inventory of climatechange technology efforts, with the goal of recommending priority programs to help meet theAdministration's goal of an 18-percent reduction in energy intensity (ratio of energy use to economicproductivity) by 2012. This ongoing creation of a variety of climate change technology effortsmakes comparisons of technology programs and funding before and after FY2003 very difficult; assuch, the comparative details as presented in Table 5 are unavailable for FY2004. (24) In a hearing of the House Science Committee held on November 6, 2003, the Administration stated its intention to release during the first quarter of 2004, for public comment, a draft plan forthe CCTP's activities. DOE also said that the CCTP will release two reports on near- and long-termgoals and the state of research and current technology activities. In a statement, some of thepriorities to be highlighted in the FY2005 budget include the Hydrogen Fuel Initiative (to acceleratethe transition to a hydrogen economy), "FutureGen" (for zero-emissions electricity generation usingcoal), and fusion energy (the same form of energy that powers the sun). (25) Comments made in thehearing noted that the Administration appeared to be focused mostly on long-term technologies, thatenergy efficiency and other proven technologies exist for short-term gains, and that there remainquestions about the specifics for the timeframe and the level at which atmospheric carbonconcentrations will be stabilized. (26) The GCRP member agencies had been directed by the President in June 2001 to develop the previously-mentioned Climate Change Research Initiative to accelerate climate change research overthe next five years, in order to assist in the development of climate change policy. A Strategic Planwould guide the climate change research. The National Academy of Sciences (NAS) was asked by the Administration in September 2002 to review the draft Strategic Plan. The draft Strategic Plan was made available in November 2002for scientific and public comments. A Planning Workshop for Scientists and Stakeholders was heldin December 2002 to formally gather comments about the draft Strategic Plan. The NAS review,and assembled outside comments, were reported by NAS in February 2003. Recommendationsfrom the NAS report addressed the federal structure for managing climate change research andtechnology, among other things. They included these comments: "The revised strategic plan should articulate a clear, specific and ambitious vision statement in the context of national needs ... (with) tangible goals, ... an explicit process toestablish priorities, and ... an effective management plan. The plan should present clear goals for the CCRI and ensure activities are consistent with these goals; maintain CCRI's ... emphasis on ... near-term decisions ... and includean explicit mechanism to link GCRP and CCRI activities. The plan should describe the management processes to be used to foster agency cooperation towards common CCSP goals. Clear mechanisms for coordinating and linking CCSP activities with the technology development activities of the CCTP should be described. [The plan should] more fully describe how models and knowledge supporting regional decision making and place-based science will be developed. [The plan should] strengthen treatment of human, economic, and ecological dimensions of climate and associated global changes. [The plan should] better describe a strategic program for an integrated observing system for climate variability and change on scales from regional toglobal. [The plan should] improve the description of how decision support capabilities will be developed. [The plan should] identify what sources and magnitudes of uncertainty reductions are especially needed. [The plan should] address the major requirements in building capacity in human and computing resources. [The plan should] use the clear goals and program priorities and advice from an independent advisory body to guide future funding decisions." (27) Subsequent to the NAS recommendations reported in February 2003, the Administration released its new CCSP Strategic Plan on Climate Change, on July 24, 2003. The plan describes fivemajor research goals: Improve knowledge of past and present climate, including natural variability, and improve understanding of causes of variability and change; Improve understanding of forces causing climate change; Reduce uncertainty in projections of future climate change; Understand the sensitivity and adaptability of natural and managed ecosystems to climate change; Explore the uses and limits of knowledge to manage risks and opportunities related to climate variability and change. Specific research targets accompany each goal. There also are schedules for research papers and synthesis reports, including a report within two years on how to resolve temperature datadifferences between satellite and ground-based readings, and a report within four years on abruptclimate change. The plan provides no budget details. Some critics say the plan overemphasizes theuncertainties in climate science, covers little new ground, and allows delay in taking actions to curbgreenhouse gas emissions; some proponents say the plan will more sharply focus research, withclearer goals and schedules. (28) The 360-page plancan be viewed at http://www.climatescience.gov/Library/stratplan2003/final/default.htm . The Administration's FY2004 budget seeks $1.7 billion to directly sponsor scientific research managed by the CCSP. Included in the $1.7 billion CCSP funds are $182 million for the ClimateChange Research Initiative (CCRI). The FY2004 budget requests $1.2 billion for climate changetechnology, as part of the NCCTI. The total amounts for research and for technologies are similar from the Clinton through the Bush Administrations (through the years, each year about $1.7 billion for research, about $1.2 billionfor technologies). This comparison is shown in Table 3. Table 3. Funding for Climate Change Research, Technologies: A Four Year Comparison ($ billion) Climate change research is specified in the budgets for thirteen federal entities: the Departments of Agriculture, Commerce, Defense, Energy, Health & Human Services, Interior, State, andTransportation, along with the Environmental Protection Agency, the National Aeronautics andSpace Administration, the National Science Foundation, the Agency for International Development,and the Smithsonian Institution. Testimony on January 8, 2003 given by Assistant Secretary ofCommerce James Mahoney to the Senate Commerce Committee mentions an additional $1.3 billion"of related research conducted by the thirteen CCSP collaborating agencies," but no further detailswere provided in the testimony or in the budget request. Funding by agency for climate change science programs is summarized in Table 4. Funding by agency for climate change technology programs is summarized in Table 5. Agencies in bothtables are listed in order of decreasing levels of funds. Table 4. Funding for Climate Change Science Program ($ millions) Table 5. Clinton Administration CCTI, and Bush Administration National Climate Change Technology Initiative (and Related) Funding byAgency ($ millions) (29) National Aeronautics and Space Administration. NASA's Global Change Research Program observes the global carbon cycle, water cycle,ecosystems, climate variability, atmospheric chemistry, and land cover-land use, to try to determinehow the global earth system is changing, what the primary causes of change are, how the earthsystem responds to natural and human-induced changes, what the consequence for humancivilization might be, and how better to predict future changes in the earth system. The FY2003amount to fund these activities was slightly over $1.1 billion. The FY2004 request is slightly under$1.1 billion, and is included in the CCSP total. National Science Foundation. The National Science Foundation, an independent government agency, inter alia initiates and supports scientificand engineering research through grants, contracts, and fellowships with academic, nonprofit, andother institutions and organizations. Climate change research funded through NSF includes studiesof carbon cycling, Antarctic ecosystems, climate modeling-analysis-prediction, sea-level changes,ecological diversity, water cycling, polar ozone depletion-ultraviolet radiation effects, greenhousegas dynamics, solar influences, climate variability-predictability, human dimensions of globalchange, and other related topics . The FY2003 funding level was $203 million. The FY2004 requestis $213 million. Department of Commerce/National Oceanic and AtmosphericAdministration (NOAA). Two main programs within the Department of Commerceaddressed issues relating to climate change. The wide range of research in Commerce's NationalOceanic and Atmospheric Administration (NOAA), one of 11 federal entities participating in theGCRP, included long-standing climate-related work, much of it not specifically identified as CCTIor CCRI but rather part of NOAA's generic mission. Among other things, research at NOAA soughtto determine "the impacts of climate variability and change on ecosystems; ... understand howradiative, chemical, and dynamical processes interact in the upper troposphere/lower stratosphereto affect climate; ... (and) study the effects of climate variability and change on health..." (30) Therealso were programs at the National Institute of Standards and Technology (NIST) which looked atclimate change issues. (31) The $2 million requestedand provided in the FY2000 budget specificallyfor the CCTI specifically was new to the Department of Commerce and did not go to NOAA (32) orNIST as a single CCTI line-item but to various climate-related R&D projects. NOAA's funding forclimate change research activities (including climate change observations and research to reducescientific uncertainty) in FY2003 amounted to $118 million, and the FY2004 request is $136 million. Department of Energy. Carbon dioxide, which as noted above is the major greenhouse gas, arises mostly from combustion of fossil fuels. TheDepartment of Energy, which has long had R&D programs relating to fossil fuel energy use, was byfar the largest recipient of both CCTI and similar later funding (DOE has received and continues toreceive about 90% of interagency climate change funding). While the Administration has stated thatthe total interagency FY2004 request for climate change technology is $1,210 million,agency-specific amounts are being reviewed through an interagency process (in comparison, asshown in Table 3, the FY2004 request for the climate change science program is $1,749 million). Funding for the DOE's efforts has been for the research, development, and deployment of more energy efficient and renewable technologies such as: "Buildings:" low-power sulfur lamps, advanced heat pumps, chillers and commercial refrigeration, fuel cells, insulation, energy conserving building materials, and advancedwindows; "Electricity:" generation using alternatives to fossil fuels such as solar energy, biomass power, wind energy, geothermal power, hydropower, and optimized nuclearpower; "Industries:" greater efficiency in industries such as aluminum, steel, mining,agriculture, chemicals, forest products, and petroleum; "Transportation:" researching, developing, and deploying more efficient technologies, such as advanced engines, hybrid systems, fuel cells and emission controls; theseconstituted the federal component of the Partnership for a New Generation of Vehicles (PNGV)which was a 10-year government/domestic auto industry partnership begun in the ClintonAdministration in 1993 that aimed to produce by 2004 a prototype midsized family car with 80 mileper gallon gasoline efficiency and a two-thirds reduction in carbon emissions. Seven federalagencies were involved in the PNGV (Commerce, Defense, Energy, Transportation, EPA, NationalAeronautics and Space Administration, and the National Science Foundation) (for details on PNGV,see CRS Report RS20852(pdf) ); the Bush Administration cancelled the PNGV program and began theFreedom CAR program which will focus on fuel cell vehicles; "Remove and Sequester Carbon:" trying to find better ways to remove and sequester carbon from fossil and other fuels, via agricultural and other approaches (in conjunctionwith EPA, and originally planned in conjunction with USDA); and "Management, Planning, Analysis and Outreach:" governmental efforts (federal, state, and others) to conserve energy through more highly coordinated management,planning, analysis and outreach. (33) As with the PNGV/FreedomCAR program, many of DOE's research and technology dollars have been spent in partnership with other federal entities such as EPA, with other governmentalunits, and with private sector entities. Table 6 shows funding levels for these DOE climate change research and technology programs. Table 6. DOE Climate Change Research and Technology ($ millions) (34) Department of Agriculture. Funding for climate change research at Agriculture amounted to $66 million in FY2003, and the FY2004 request is $73million. This research includes efforts to improve measurements of carbon inventories at thenational level, and to develop methods to manage crops, soils, and grazing systems to optimizeagricultural productivity, resource conservation, and greenhouse gas emissions and carbonsequestration. The FY2001 amount of $3 million in technology was principally to developagriculture-centered technologies to better manage the carbon cycle, from sources to sequestration. No funds were specified for Agriculture Department climate change technology activities insubsequent budget requests National Institutes of Health. Within the Department of Health and Human Services, the National Institutes of Health conducted researchidentified as related to climate change, including study of the health effects of ultraviolet radiationand of chemical replacements for chlorinated fluorocarbons. This work amounted to $59 millionin FY2003. The FY2004 request is for $61 million. Department of the Interior. The United States Geological Survey (USGS), within the Department of the Interior, has conducted global changeresearch including historical research on climate variability and change, and global carbon cyclingthrough lakes, streams, wetlands, soils, sediments, and vegetation. The USGS also manages anddisseminates satellite land-surface and ecosystem data which may be used in climate changeactivities. In FY2003 the Department received $26 million for its climate change research. TheFY2004 request is also $26 million. Environmental Protection Agency. The Environmental Protection Agency uses two main budget categories: Science and Technology (S&T,which includes R&D and technology development and diffusion efforts), and EnvironmentalPrograms and Management (EPM, which are the costs to run programs). Therefore, it is difficultto consistently separate R&D from technology assistance and diffusion efforts. For example, inEPA's climate change Buildings Sector, the owner of a building can have EPA's benchmarking toolvoluntarily applied to that building as a target for energy reduction. Various activities can be tried,e.g., plugging leaks and replacing less efficient lights with more efficient lights, to see if thebenchmark will be met. If not, other activities can be tried in an iterative fashion, trying andrecording and incorporating the findings in the benchmark. This program includes activities that canbe described as both research-related and technology diffusion and assistance. EPA's figures forclimate change S&T are used here. While there has been some discussion about the proper roles for government, industry, and academe in climate change and other R&D, (35) the climate change R&D activities have not beenhighly controversial. In general, EPA funds targeted for R&D, especially areas of more basic R&Dthat predate the CCTI and the Kyoto Protocol, were less controversial, and funds for new programsintended to assist technology deployment and diffusion and to help consumers learn about andchoose more efficient commodities and processes have sometimes been more controversial. The elements and levels of EPA's climate change research and technology funds are summarized in Table 7. Activities related to these program areas are briefly described below. Someof these funding areas focused heavily on R&D, while others involved information disseminationand other activities. Table 7. EPA Climate Change Research and TechnologyPrograms ($ millions) Source : EPA FY2004 Budget http://www.epa.gov/ocfo/budget/budget The "Buildings" component of EPA's climate change research and technology activities include housing and commercial structures. EPA and others (including DOE) argue thatefforts by individual and organizational consumers to secure the most energy efficient process orcommodity are hampered by a lack of objective information on which to make comparisons (fordetails, see CRS Issue Brief IB10020 Energy Efficiency: Budget, Oil Conservation, and ElectricityConservation Issues ). Through the Agency's ENERGY STAR Program and ENERGY STARBuildings and Green Lights Partnership, EPA evaluates and certifies energy-saving building-relatedproducts (including such items as televisions, appliances, residential lighting, and whole houses),and makes that information available so that consumers and businesses can choose energy-savingand pollution-reducing products more easily. "Transportation" activities of EPA include the following: expanded support for a program which provides new incentives for commuters toconsider transit, ridesharing, or other alternatives to driving; continued support of state and local efforts toward livable communities and smartgrowth; continued efforts in the Transportation Partners network which links about 340 localgovernments, community organizations, and companies in order to produceknowledge that is designed to reduce vehicle miles traveled; work which contributed to the Partnership for a New Generation of Vehicles and nowcontributes to the Freedom CAR (both being government/domestic-auto-industrypartnerships described previously under DOE). "Industry" efforts include working with industries (especially energy-intensiveindustries such as cement, chemicals, steel, petroleum, airlines, and food processing), commonlythrough technical assistance, to audit and identify greenhouse gas emission sources and to help informulating appropriate reduction goals and strategies, including removal of regulatory and otherbarriers. This includes working with ongoing privately-funded energy efficiency programs at privatecompanies. "Carbon Removal" efforts at EPA were planned in coordination with the Departments of Agriculture and Energy. The EPA/USDA/DOE funds for this activity are forstudying ways to increase environmental storage of carbon, as well as the kinds and sizes ofincentives that could be given to land owners and crop growers to increase the quantity of carbonstored on agricultural and forest lands, and at the same time improve soil quality, reduce soil erosion,and enhance other environmental and conservation goals. EPA works with "State and Local Governments" to help find ways to reduce energy use and pollution, sometimes by supporting existing state and local programs. The Cities forClimate Protection program, for example, involves more than 54 local governments in implementingbuilding, transportation, waste, and renewable energy projects to eliminate about 3 million metrictons of carbon dioxide. A state-level example is New Jersey's state carbon bank program,established to help achieve New Jersey's greenhouse gas emissions reduction goal of 3.5% below1990 levels by 2005. "International Capacity Building, Partnerships, and Cooperation" involves EPA and other agencies working to study ways to provide technical and other assistance to developingcountries to aid in reducing their emissions. Developing countries currently emit more than half theglobal total of greenhouse gases, and such emissions are growing rapidly. Smithsonian Institution. Global change research at the Smithsonian Institution attempts to understand more fully atmospheric processes, ecosystemdynamics, natural and human-induced environmental change on daily to decadal time scales, andlonger-term climate metrics. The Smithsonian also serves as a repository of climate change findings. These activities amounted to $6 million in FY2003, the same amount requested in FY2004. United States Agency for International Development. The US Agency for International Development has worked withforeign governments with the goal of reducing net greenhouse gas emissions and loweringvulnerability to the threats posed by climate change impacts, by studying ways to increase use ofenvironmentally sound energy, forestry, and biodiversity conservation methods. Foreigngovernments have included Brazil, the Phillippines, and Russia. These efforts amounted to $6million in FY2003, the same amount requested for FY2004. Department of Transportation. The Departmentof Transportation will conduct research and analysis relating to greenhouse gas models for thesurface transportation sector, greenhouse gas control strategies, and transportation and global climatechange. While there were no funds for this activity at DOT in FY2003, the FY2004 request is for$4 million. Department of State. Joined by various European Union environmental policy makers, the Department of State issued a joint statement on February7, 2003 identifying six areas for possible cooperative research: carbon cycle research; aerosol-climateinteractions; feedbacks, water vapor and thermohaline circulation; integrated observation systemsand data; carbon capture and storage; and hydrogen technology and infrastructure. Agovernment-industry partnership involving the Departments of State and Energy, and representativesfrom several countries, was announced on February 27, 2003 to design, build, and operate what waslabeled "the world's first pollution-free, coal-fired power plant. The facility will cost an estimated$1,000 million over the next 10 years." (36) Whileno climate change research funds for State wereidentified in FY2003, the FY2004 request is for $1 million. Department of Housing and Urban Development. Climate change research and technology programs, new to the Department of Housing and UrbanDevelopment (HUD) in FY1999, were for the government/ housing developers/ builders Partnershipfor Advancing Technology in Housing (PATH). Identified as part of the CCTI through FY2001,PATH research had a number of goals in addition to climate change. PATH efforts sought "todevelop and disseminate technologies that will result in housing that is substantially more affordable,durable, disaster resistant, safer and energy/resource efficient..." (37) No known money for HUD hasbeen requested since FY2001, but HUD continues to administer the overall operations of the PATH. Possible climate change linked to "greenhouse gas" emissions has been addressed by variousU.S. government policies since the mid-1980s, with an emphasis on energy R&D and on climateresearch and services. U.S. efforts in the former Bush and Clinton Administrations toward R&Din energy efficiency and renewable energy, and research into climate and global change were givendirection by the Energy Policy Act of 1992, which implemented United States responsibilities underthe UNFCCC, and by the Global Change Research Act of 1990. The 1993 Climate Change ActionPlan linked or made partnerships among various federal agencies, business, state and localgovernments, and other entities with the goal of reducing U.S. greenhouse gas emissions. TheClinton Administration's CCTI built upon these earlier efforts. The current Bush Administrationhas introduced its U.S. Climate Change Research Initiative, the National Climate ChangeTechnology Initiative, and the Climate Change Science Program Strategic Plan. The Plan, asreleased on July 24, 2003, describes five major research goals (improve knowledge of past andpresent climates, improve understanding of climate change forces, reduce uncertainty in climatechange projections, understand sensitivity and adaptability of ecosystems to climate change, andexplore uses and limits of knowledge to manage risks and opportunities). As funding and otherdetails become available, similarities to and differences from earlier climate-change programs maybecome apparent. The evolving organizational structure, however, makes it difficult to determineprecisely some of the interrelationships among science and technology programs. Some critics of current climate change policy call for sharper goals, better defined priorities, and more detailed, clearly stated objectives for climate change R&D, and its associated fundingprofile. Some observers point out, for example, that the total CCSP request for spending in FY2004was up only 0.1% over the FY2003 request, from $1.747 billion to $1.749 billion, while that portionof the funding request allocated to the embedded CCRI was up 355% from $40 million in FY2003to $182 million in FY2004. An issue for Congress in this regard is the extent to which such ademonstrably large CCRI increase actually represents new money, and how much is attributable tothe reclassification of ongoing research programs, especially given the fact that the overall requestis up only 0.1%. On the other hand, some proponents note that further R&D is needed to justifycertain climate change management strategies, to focus those strategies on key policy questions, andto reduce scientific uncertainties surrounding prospective climate change so that policymakers canmake better, more informed decisions.
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For over 20 years there have been federal programs directly or indirectly related to climate change. Direct programs have focused largely on scientific research to improve the capability tounderstand climate systems and/or predict climatic change and variability. Energy use has been amajor focus of efforts related to possible climate change because carbon dioxide, the major"greenhouse gas," is added to the atmosphere when fossil fuels are burned. Those efforts, whichsought to reduce oil imports, manage electricity needs, and address environmental concernsincluding climate change, involve many parts of the government. Similarly, climate science effortsin various agencies have sought to expand scientific understanding of the dynamics of climate andits societal consequences as a basis for policy decisions that rely on improved predictions of futureclimate conditions and climate impact assessments. Coordinating these efforts has been challenging. This report identifies and discusses only the direct climate scientific and research programs of thefederal government, and does not focus on the wide array of programs on energy that, thoughrelevant indirectly to climate change, do not include climate as a specific goal. The U.S. Global Change Research Program in the first Bush Administration, and subsequently in the Clinton Administration, funded studies to improve scientific understanding of the processesthat influence Earth's climate, including trends on global and regional scales. The Climate ChangeTechnology Initiative (CCTI) was the Clinton Administration's package of research anddevelopment (R&D) to develop renewable energy sources and more efficient technologies, targetedtax credits (to encourage purchase and deployment of more efficient technologies), and voluntaryinformation programs (so businesses and schools might be better informed when making purchasingand operating decisions involving energy use and emissions). The CCTI was followed by the current Bush Administration's Climate Change Research Initiative (CCRI) and National Climate Change Technology Initiative (NCCTI), both parts of acabinet-level Committee on Climate Change Science and Technology Integration. The CCRI andthe extant U.S. Global Change Research Program were combined into the Climate Change ScienceProgram (CCSP) in the FY2004 budget. Various major activities of the CCTI appear to continueat different funding levels through the Bush Administration, while using a different name. The FinalReport of the Strategic Plan for the Climate Change Science Program was released in July 2003. The FY2004 budget requests $1.7 billion to sponsor scientific research directly managed by the CCSP, and $1.2 billion for technology R&D in the NCCTI. An interagency review process isunderway to identify specific research areas. With various details about the Bush Administration's climate change efforts still in development, some critics highlight the need for clearer goals for climate change R&D, while someproponents note that further R&D is needed if certain climate change management strategies are tobe put in place. This report will be updated as events warrant.
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Recent congressional discussion of patent system reform has included consideration of provisions that would restrict the sorts of inventions for which patents may be obtained. Legislation introduced in the 111 th Congress would have prevented the patenting of tax planning methods, while one hearing regarding patent reform focused in part upon the propriety of patenting business methods. Legislation introduced in previous sessions of Congress would have banned patents relating to genetic materials as well. None of this legislation has been enacted. Under current law, one of the requirements to obtain a patent is that the invention must consist of a "process, machine, manufacture, or composition of matter." The courts and the U.S. Patent and Trademark Office (USPTO) have understood this language to allow an expansive range of patentable subject matter. Patents have therefore been obtained upon diverse inventions, including living organisms, genetic materials, tax avoidance strategies, insurance methods, and marketing techniques. Some observers believe that recent judicial opinions have narrowed the extent of patentable subject matter, however. The proper scope of patentable subject matter has been the subject of an often impassioned debate. Among other concerns, critics believe that business method patents are unnecessary to promote innovation, that tax strategy patents conflict with public policy, and that patents on generic materials raise ethical concerns. However, other observers believe that the patent system has served as a fair and effective mechanism for promoting advances in a broad range of disciplines. In their view, arbitrary restrictions upon the patent incentive are inappropriate. This report introduces the current debate concerning the appropriate range of patentable subject matter. It begins by providing an introduction to the patent system. It then reviews the ongoing discussion concerning the merits of business method and tax planning method patents. The current controversy concerning patents on genetic materials is then reviewed. The report then provides a broader discussion of innovation policy concerns that arise as policy makers consider the appropriate range of patentable subject matter. A summary of congressional issues and options concludes the report. The U.S. Constitution confers upon Congress the power "To promote the Progress of ... useful Arts, by securing for limited Times to ... Inventors the exclusive Right to their ... Discoveries." In accordance with the Patent Act of 1952, an inventor may seek the grant of a patent by preparing and submitting an application to the USPTO. USPTO officials known as examiners then determine whether the invention disclosed in the application merits the award of a patent. USPTO procedures require examiners to determine whether the invention fulfills certain substantive standards set by the patent statute. To be patentable, the invention must be novel, or different, from subject matter disclosed by an earlier patent, publication, or other state-of-the-art knowledge. In addition, an invention is not patentable if "the subject matter as a whole would have been obvious at the time the invention was made to a person having ordinary skill in the art to which said subject matter pertains." This requirement of "nonobviousness" prevents the issuance of patents claiming subject matter that a skilled artisan would have been able to implement in view of the knowledge of the state of the art. The invention must also be useful, a requirement that is satisfied if the invention is operable and provides a tangible benefit. Even if these requirements of novelty, nonobviousness, and utility are met, an invention is not patentable unless it falls within at least one category of patentable subject matter. According to section 101 of the Patent Act of 1952, an invention which is a "process, machine, manufacture, or composition of matter" may be patented. The range of patentable subject matter under this statute has been characterized as "extremely broad." The courts and USPTO have nonetheless concluded that certain subject matter, including abstract ideas and laws of nature, is not patentable under section 101. This report further discusses this legal standard below. In addition to these substantive requirements, the USPTO examiner will consider whether the submitted application fully discloses and distinctly claims the invention. In particular, the application must enable persons skilled in the art to make and use the invention without undue experimentation. In addition, the application must disclose the "best mode," or preferred way, that the applicant knows to practice the invention. If the USPTO allows the patent to issue, its owner obtains the right to exclude others from making, using, selling, offering to sell, or importing into the United States the patented invention. Those who engage in those acts without the permission of the patentee during the term of the patent can be held liable for infringement. Adjudicated infringers may be enjoined from further infringing acts. The patent statute also provides for an award of damages "adequate to compensate for the infringement, but in no event less than a reasonable royalty for the use made of the invention by the infringer." The maximum term of patent protection is ordinarily set at 20 years from the date the application is filed. At the end of that period, others may employ that invention without regard to the expired patent. Patent rights do not enforce themselves. Patent owners who wish to compel others to respect their rights must commence enforcement proceedings, which most commonly consist of litigation in the federal courts. Although issued patents enjoy a presumption of validity, accused infringers may assert that a patent is invalid or unenforceable on a number of grounds. The Court of Appeals for the Federal Circuit (Federal Circuit) possesses nationwide jurisdiction over most patent appeals from the district courts. The Supreme Court enjoys discretionary authority to review cases decided by the Federal Circuit. The Patent Act of 1952 allows a patent to issue upon a "process," which the statute defines to mean a "process, art, or method." Process patents claim a series of steps that may be performed to achieve a specific result. Process patents typically relate to methods of manufacture or use. A process patent may claim a method of making a product, for example, or a method of using a chemical compound to treat a disease. Although the statutory term "process" is broad, courts and the USPTO have nonetheless established certain limits upon the sorts of processes that may be patented. In particular, abstract ideas, mathematical algorithms, mental processes, and scientific principles have been judged not to be patentable. The Supreme Court has described these sorts of inventions as the "basic tools of scientific and technological work" that should be "free to all men and reserved exclusively to none." As explained by Supreme Court Justice Stephen Breyer, this rule "reflects a basic judgment that protection in such cases, despite its potentially positive incentive effects, would too severely interfere with, or discourage, development and the further spread of future knowledge itself." In recent years, two controversial categories of process patents have been identified. The first of these, business method patents, have been defined to include "a method of administering, managing, or otherwise operating a business or organization, including a technique used in doing or conducting business." The second, tax strategy patents, have been defined as "a plan, strategy, technique, or scheme that is designed to reduce, minimize, or defer, or has, when implemented, the effect of reducing, minimizing, or deferring, a taxpayer's tax liability." This report discusses these two sorts of process patents in turn. Prior to 1998, some courts had held that methods of doing business were not patentable subject matter under § 101 of the Patent Act. For example, the Court of Appeals for the First Circuit held that: [A] system for the transaction of business, such, for example, as the cafeteria system for transacting the restaurant business, or similarly the open-air drive-in system for conducting the motion picture theatre business, however, novel, useful, or commercially successful is not patentable apart from the means for making the system practically useful, or carrying it out. The Federal Circuit revisited the issue in 1998, however, and in its well-known decision in State Street Bank & Trust Co. v. Signature Financial Group held that no business method exclusion from patentability existed. The patent at issue in that case concerned a data-processing system for implementing an investment structure known as a "Hub and Spoke" system. This system allowed individual mutual funds ("Spokes") to pool their assets in an investment portfolio ("Hub") organized as a partnership. According to the patent, this investment regime provided the advantageous combination of economies of scale in administering investments coupled with the tax advantages of a partnership. The patented system purported to allow administrators to monitor financial information and complete the accounting necessary to maintain this particular investment structure. In addition, it tracked "all the relevant data determined on a daily basis for the Hub and each Spoke, so that aggregate year end income, expenses, and capital gain or loss can be determined for accounting and tax purposes for the Hub and, as a result, for each publicly traded Spoke." Litigation arose between Signature, the patent owner, and State Street Bank over the latter firm's alleged use of the patented invention. Among the defenses offered by State Street Bank was that the asserted patent claimed subject matter that was not within one of the four categories of statutory subject matter, and hence was invalid. The district court sided with State Street Bank. The trial judge explained: At bottom, the invention is an accounting system for a certain type of financial investment vehicle claimed as [a] means for performing a series of mathematical functions. Quite simply, it involves no further physical transformation or reduction than inputting numbers, calculating numbers, outputting numbers, and storing numbers. The same functions could be performed, albeit less efficiently, by an accountant armed with pencil, paper, calculator, and a filing system. The trial court further relied upon "the long-established principle that business 'plans' and 'systems' are not patentable." The court judged that "patenting an accounting system necessary to carry on a certain type of business is tantamount to a patent on the business itself." Because the court found that "abstract ideas are not patentable, either as methods of doing business or as mathematical algorithms," the patent was held to be invalid. Following an appeal, the Federal Circuit reversed. The court of appeals concluded that the patent claimed not merely an abstract idea, but rather a programmed machine that produced a "useful, concrete, and tangible result." Because the invention achieved a useful result, it constituted patentable subject matter even though its result was expressed numerically. The Federal Circuit further explained that: Today, we hold that the transformation of data, representing discrete dollar amounts, by a machine through a series of mathematical calculations into a final share price, constitutes a practical application of a mathematical algorithm, formula, or calculation, because it produces "a useful, concrete and tangible result"—a final share price momentarily fixed for recording and reporting purposes and even accepted and relied upon by regulatory authorities and in subsequent trades. The court of appeals then turned to the district court's business methods rejection, opting to "take [the] opportunity to lay this ill-conceived exception to rest." The court explained restrictions upon patents for methods of doing business had not been the law since at least the enactment of the 1952 Patent Act. The Federal Circuit then concluded that methods of doing business should be subject to the same patentability analysis as any other sort of process. Following State Street Bank, numerous patents that arguably claim business methods have issued from the USPTO. Katherine Strandburg, a member of the faculty of the New York University School of Law, has characterized business method patents as involving four categories: "(1) 'back office' or administrative operational methods; (2) customer service operational methods; (3) methods of providing personal or professional service; and (4) intangible 'products.'" Several of these patents have been the subject of litigation in the federal courts. Patents on methods of doing business have attracted controversy. Some observers believe that such patents are appropriate supporters of the costly research and development efforts that occur in our service-oriented, information-based economy. Others believe that business method patents are unnecessary to promote innovation and may raise unique concerns over competition. A subsequent portion of this report will review this debate. Congressional reaction to the patenting of business methods has to this point been limited. In 1999, Congress enacted the First Inventor Defense Act as part of the American Inventors Protection Act. That statute provides an earlier inventor of a "method of doing or conducting business" that was later patented by another to assert a defense to patent infringement in certain circumstances. In enacting the First Inventor Defense Act, Congress recognized that some firms may have operated under the impression that business methods could not be patented prior to the State Street Bank decision. As a result, they may have maintained their innovative business methods as trade secrets. Having used these trade secrets in furtherance of their marketplace activities for a period of time, however, these firms may be unable to obtain a patent upon their business method. Further, should a competitor later independently invent and patent the same business method, the trade secret holder would potentially be liable for patent infringement. Following the confirmation of the patenting of business methods by the State Street Bank court, the creation of the first inventor defense was intended to provide a defense to patent infringement in favor of the first inventor/trade secret holder. By stipulating that the first inventor defense applied only to a "method of doing or conducting business," Congress arguably recognized the validity of these sorts of patents. The First Inventor Defense Act did not define the term "method of doing or conducting business," however, and to date no published judicial opinion addresses the precise scope of this defense. Although the State Street Bank opinion rejected a per se rule denying patents on business methods, the invention claimed by the Signature patent was arguably motivated by a desire to reduce tax liability. In some sense, then, State Street Bank may be seen as the first tax patent case. Some commentators believe that the "increase in the number of tax strategy patents requested and approved by the [USPTO] came on the heels" of State Street Bank . Generally stated, tax planning method patents may be defined as those that disclose and claim a system or method for reducing or deferring taxes. As of January 6, 2011, the USPTO identified 130 issued patents and 155 published applications under classification number 705/36T. As the USPTO received 482,871 patent applications in 2009, and granted 191,927 patents during that year, it should be appreciated that tax strategy patents represent a very small share of that agency's workload. Among the titles of the issued patents are: • System and method for forecasting tax effects of financial transactions (U.S. Patent No. 7,305,353) • Method and apparatus for tax efficient investment management (U.S. Patent No. 7,031,937) • Method and apparatus for tax-efficient investment using both long and short positions (U.S. Patent No. 6,832,209) • Computerized system and method for optimizing after-tax proceeds (U.S. Patent No. 6,115,697) Tax planning method patents have resulted in a lively discussion among interested parties. Some observers, and in particular tax professionals, have found tax planning method patents to be "ridiculous," "bizarre," and "deeply unsettling." On the other hand, other commentators, including many patent professionals, believe both that concerns over tax patents are overstated, and that the patenting of tax strategies may lead to numerous positive consequences. This report will review this debate below. In the 111 th Congress, three bills have been introduced that would stipulate that patents may not be obtained on methods of tax planning. H.R. 1265 and S. 506 define the excluded category of "tax planning invention[s]" to mean "a plan, strategy, technique, scheme, process, or system that is designed to reduce, minimize, determine, avoid, or defer, or has, when implemented, the effect of reducing, minimizing, determining, avoiding, or deferring, a taxpayer's tax liability or is designed to facilitate compliance with tax laws, but does not include tax preparation software and other tools or systems used solely to prepare tax or information returns." H.R. 2584 would prevent any patent claiming a "tax planning method," which is defined similarly. The legislation would apply to any application filed at the USPTO on or after the date of enactment. Increasing public scrutiny of business and tax strategy patents in recent years has corresponded with heightened attention to patent eligibility issues by the USPTO and the courts. On June 28, 2010, the Supreme Court issued its decision in Bilski v. Kappos concerning patentable subject matter. Bilski's application concerned a method of hedging risk in the field of commodities trading. In particular, his application claimed the following method: A method for managing the consumption risk costs of a commodity sold by a commodity provider at a fixed price comprising the steps of: initiating a series of transactions between said commodity provider and consumers of said commodity wherein said consumers purchase said commodity at fixed rate based upon historical averages, said fixed rate corresponding to a risk position of said consumer; identifying market participants for said commodity having a counter-risk position to said consumers; and initiating a series of transactions between said commodity provider and said market participants at a second fixed rate such that said series of market participant transactions balances the risk position of said series of consumer transactions. The USPTO rejected the application as claiming subject matter that was ineligible for patenting under section 101. On appeal, the Federal Circuit characterized the "true issue before us then is whether Applicants are seeking to claim a fundamental principle (such as an abstract idea) or a mental process." The Federal Circuit explained: A claimed process is surely patent-eligible under § 101 if: (1) it is tied to a particular machine or apparatus, or (2) it transforms a particular article into a different state or thing. Applying this standard, the Federal Circuit concluded that Bilski's application did not claim patentable subject matter. The Court of Appeals acknowledged Bilski's admission that his claimed invention was not limited to any specific machine or apparatus, and therefore did not satisfy the first prong of the section 101 inquiry. The Federal Circuit also reasoned that the claimed process did not achieve a physical transformation. According to Chief Judge Michel, "[p]urported transformations or manipulations simply of public or private legal obligations or relationships, business risks, or other such abstractions cannot meet the test because they are not physical objects or substances, and they are not representative of physical objects or substances." As a result, the USPTO decision to deny Bilski's application was affirmed. After agreeing to hear the case, the Supreme Court issued a total of three opinions, consisting of a plurality opinion for the Court and two concurring opinions. No single opinion was joined by a majority of Justices for all of its parts. The opinion for the Court, authored by Justice Kennedy, agreed that Bilski's invention could not be patented. But the plurality rejected the Federal Circuit's conclusion that the machine or transformation test was the sole standard for identifying patentable processes. Rather, that standard was deemed "an important and useful clue." The Court also confirmed that laws of nature, physical phenomenon, and abstract ideas were not patentable subject matter. The majority also rejected the assertion that business methods should not be considered patentable subject matter per se . In reaching this conclusion, Justice Kennedy pointed to the First Inventor Defense Act, which explicitly speaks to patents claiming a "method of doing or conducting business." As he explained, the "argument that business methods are categorically outside of §101's scope is further undermined by the fact that federal law explicitly contemplates the existence of at least some business method patents." Justice Stevens, joined by Justices Breyer, Ginsburg, and Sotomayor, issued a lengthy concurring opinion on the day of his retirement from the Supreme Court. He agreed that the machine-or-transformation test was "reliable in most cases" but "not the exclusive test." In his view, the Court should "restore patent law to its historical and constitutional moorings" by declaring that "methods of doing business are not, in themselves, covered by the statute." Justice Breyer also issued a concurring opinion that Justice Scalia joined in part. Justice Breyer identified four points on which all nine justices agreed: (1) the range of patentable subject matter is broad but not without limit; (2) the machine-or-transformation test has proven to be of use in determining whether a process is patentable or not; (3) the machine-or-transformation test is not the sole standard for assessing the patentability of processes; and (4) not everything that merely achieves a "useful, concrete, and tangible result" qualifies as patentable subject matter. Opinions vary upon the impact of Bilski v. Kappos , particularly with respect to tax strategy patents. Attorney Marvin Petry explains that " Bilski seems, once and for all, to have ended the tax practitioners' concern with tax strategy patents because it conclusively rejects tax strategy patents which were of significant concern, those that involve pure method steps...." On the other hand, Ellen P. Aprill, a member of the faculty of Loyola Law School of Los Angeles, writes that Bilski v. Kappos "leaves us in a greater state of uncertainty than that which existed before it was decided." In her view, the Supreme Court ruling "demonstrates that for those who believe that tax strategies should not be patented, legislation is needed." Future developments will provide better perspectives upon the effect of the Bilski opinion upon business method and tax strategy patents. Controversy concerning patentable subject matter has not been confined to methods of doing business and tax planning methods. Patents claiming the products of biotechnology, and in particular genetic materials, have also led to considerable debate. In recent years, advances in biotechnology have resulted in a growing body of knowledge concerning the genetic material of living organisms. In turn, thousands of patents have been granted that assert rights in specific sequences of deoxyribonucleic acid (DNA)—the nucleic acid that contains the genetic instructions that all known living organisms use in order to develop and function. Other patents claim related technologies, including individual mutations known to cause disease, testing kits for detecting genetic mutations, amino acid sequences (proteins), and the use of these proteins as medicines. The availability of patents pertaining to genetic technologies may be traced to the well-known decision of the U.S. Supreme Court in Diamond v. Chakrabarty . That 1980 opinion held that a genetically engineered microorganism constituted patentable subject matter, qualifying as both a "composition of matter" or "manufacture" within the meaning of §101 of the Patent Act. In so doing, the Supreme Court confirmed the traditional rule that "laws of nature, physical phenomenon, and abstract ideas have been held not patentable. Thus, a new mineral discovered in the earth or a new plant found in the wild is not patentable subject matter." The Court reasoned that the traditional rule denying patents to "products of nature" was inapplicable to the invention before it, however. Chief Justice Burger explained: [T]he patentee has produced a new bacterium with markedly different characteristics from any found in nature and one having the potential for significant utility. His discovery is not nature's handiwork, but his own; accordingly it is patentable subject matter under § 101. As applied to genetic materials, the reasoning of Diamond v. Chakrabarty may be read to allow patents to issue where scientists have isolated these materials from their natural environment or produced through artificial techniques. As a result, patent claims directed towards DNA typically employ such terms as "isolated" or "recombinant" in order to reflect these conditions. Notably, this claim language restricts the scope of patent to isolated or artificially produced substances. As a result, the genes naturally possessed by humans and other living organisms are not included within the scope of proprietary rights. The March 29, 2010, decision of the District Court for the Southern District of New York in Association for Molecular Pathology v. USPTO cast serious doubt upon this reasoning, however. Judge Sweet's lengthy opinion struck down several patents owned by Myriad Genetics claiming isolated DNA and various analytical methods: The claims-in-suit directed to "isolated DNA" containing human BRCA1/2 gene sequences reflect the USPTO's practice of granting patents on DNA sequences so long as those sequences are claimed in the form of "isolated DNA." This practice is premised on the view that DNA should be treated no differently from any other chemical compound, and that its purification from the body, using well-known techniques, renders it patentable by transforming it into something distinctly different in character. Many, however, including scientists in the field of molecular biology and genomics, have considered this practice a "lawyer's trick" that circumvents the prohibitions on the direct patenting of DNA in our bodies but which, in practice, reaches the same result. The resolution of these motions is based upon long recognized principles of molecular biology and genetics: DNA represents the physical embodiment of biological information, distinct in its essential characteristics from any other chemical found in nature. It is concluded that DNA's existence in an "isolated" form alters neither this fundamental quality of DNA as it exists in the body nor the information it encodes. Therefore, the patents at issue directed to "isolated DNA" containing sequences found in nature are unsustainable as a matter of law and are deemed unpatentable subject matter under 35 USC 101. Similarly, because the claimed comparisons of DNA sequences are abstract mental processes, they also constitute unpatentable subjct matter under Section 101. Some observers believe that the broad language employed by Judge Sweet implies that virtually all gene patents are invalid under §101 as claiming unpatentable subject matter. At the time this report goes to press, this litigation is the subject of an appeal to the Federal Circuit. As with patents claiming business methods and tax strategies, patents pertaining to genetic materials are controversial. Critics have asserted that genetic materials should remain accessible to all, rather than subject to intellectual property rights, and that such patents may depress research efforts and have a deleterious impact upon public health. Other experts believe these critiques are overstated or misplaced, however. In their view, patent rights in DNA are no more expansive or worthy of concern than for other sorts of inventions. This report reviews this debate below. Congress has previously considered restricting patents relating to genetic materials. In the 110 th Congress, Representative Becerra introduced the Genetic Research and Accessibility Act, H.R. 977 . That bill would have provided: Notwithstanding any other provision of law, no patent may be obtained for a nucleotide sequence, or its functions or correlations, or the naturally occurring products it specifies. The proposed amendment would not have applied to a patent issued prior to the date of enactment of the Genetic Research and Accessibility Act. This legislation was not enacted. As well, the Genomic Research and Diagnostic Disability Act of 2002 was introduced, but not enacted, in the 107 th Congress. That legislation would have created a research exemption from infringement for research on genetic sequence information and an infringement exemption for genetic diagnostic testing. The patenting of business methods, tax strategies, genetic materials, and other sorts of post-industrial technologies has raised controversy. Some observers have expressed concerns that these sorts of inventions should not be patented, no matter how innovative they might be. They believe that section 101 of the Patent Act, the provision governing patentable subject matter, should be interpreted, and if necessary amended, to exclude these sorts of inventions from patenting. Others believe that these concerns are overstated. They further assert that the patenting of inventions of the Information Age, as well as biotechnologies, will be beneficial for innovation and competition. This report reviews some of the primary arguments that have been raised in this debate. Proponents of a broad notion of patentable subject matter assert that the patent system has traditionally offered a powerful incentive for innovation across many industries. For example, the chemical, electronics, manufacturing, telecommunications, and pharmaceutical industries are among those that have long sought and enforced patents. In the view of these commentators, the patent system will readily adapt to new fields of endeavor as well. Further, many inventions of the 21 st century—including business methods and genetic inventions—are as subject to costly research and development efforts as more traditional technologies. Observers question why the patent incentive exists in one field of costly research and development and not in another. The patent system also provides the benefit of public disclosure. In order to obtain patent rights, inventors must fully disclose their inventions such that a skilled artisan could practice them without undue experimentation. A patent system that denies protection to entire categories of inventions may cause inventors to conceal them as trade secrets. In contrast to patenting, trade secret protection does not result in the disclosure of publicly available information. Taking the steps necessary to maintain secrecy, such as implementing physical security measures, also imposes costs that may ultimately be unproductive for society. Another argument in favor of a broad notion of patentable subject matter is that distinguishing patentable and unpatentable inventions may at times prove difficult. For example, assessing whether a particular invention is sufficiently technologically embedded to constitute patentable subject matter may not constitute a straightforward, routine inquiry. Aware of the legal requirements to obtain a patent, lawyers may draft patent instruments in such as a way as to make software inventions appear to be hard-wired machines. Such artful claims drafting may ultimately make patents more difficult to read and interpret. Supporters of an expansive patent system also observe that patents have been identified as facilitators of markets. If inventors lack patent rights, they may have scant tangible assets to sell or license. In addition, an inventor might otherwise be unable to police the conduct of a contracting party. Any technology or know-how that has been disclosed to a prospective licensee might be appropriated without compensation to the inventor. The availability of patent protection decreases the ability of contracting parties to engage in opportunistic behavior. By lowering such transaction costs, the patent system may make transactions concerning information goods more feasible. Categorical exclusion of certain sorts of inventions from the patent system may deny entire industries this potential benefit. Studies have also indicated that entrepreneurs and small, innovative firms rely more heavily upon the patent system than larger enterprises. Large firms often possess a number of alternative means for achieving a proprietary interest in a particular technology. For example, trade secrecy, ready access to markets, trademark rights, speed of development, and consumer goodwill may to some degree act as substitutes for the patent system. However, individual inventors and small firms often do not have these mechanisms at their disposal. As a result, the patent system may enjoy heightened importance with respect to these enterprises. Legal experts also assert that patents do not provide the affirmative right to use the patented invention, but rather the right to exclude others from doing so. This perspective implies that the grant of patent neither implies government approval of an invention, nor allows meaningful control of a technology. As a result, the grant of a patent on, for example, a particular tax strategy, should not be deemed as an indication that the strategy is legally sound. Similarly, disallowing patents on genetic materials would not necessarily suppress the technology as a general matter. Although these and other assertions weigh in favor of an ambitious scope of patentable subject matter, other observers are less optimistic. Some commentators believe that innovation in areas such as business methods, tax planning methods, and genetic materials has flourished even though the availability of patent rights has been uncertain. For example, the American Institute of Certified Public Accountants [AICPA] asserts that "[p]eople already have substantial incentives to comply with tax law and lower their taxes." Under this line of reasoning, the patent incentive is unnecessary to promote a socially optimal level of innovation within these disciplines. Other observers go further, believing that patents in these areas may not merely be unnecessary, but also socially detrimental. With respect to business methods, some commentators believe that these patents are commonly of such broad scope as to "effectively appropriate all possible solutions to a particular problem." This extent of proprietary rights may limit the ability of others to design around the patented invention and ultimately discourage competition. With respect to tax strategy patents, some believe that an incentive to develop methods of lowering one's taxes is not socially desirable. William A. Drennan, a member of the law faculty at Southern Illinois University, contrasts the grant of tax strategy patents with recent Treasury Department Regulations that, in his view, "reduce the economic incentive to create tax loopholes." Mr. Drennan thus explains: [O]ne government agency—the Treasury Department—is taking action to discourage loopholes. In contrast, the Patent Office (at the direction of the Federal Circuit) is providing a new incentive to create loopholes. Since the Treasury Department is in charge of the sound administration of the U.S. tax system, the Treasury Department's views on sound tax policy should be given greater weight than the view of the Patent Office on this subject. Other experts believe that tax strategy patents are inappropriate because they are said to inject private control over a system of public laws. Under this view, a patent may potentially grant one individual the ability to prevent others from using a new tax provision. In turn, private actors may affect the ability of federal, state, and local governments to raise revenue, influence taxpayer behavior, and otherwise achieve the intended purposes of the tax laws. These concerns were voiced by the AICPA in the following way: Tax strategy patents also preempt Congress's prerogative to have full legislative control over tax policy. Congress enacts tax law provisions applicable to various taxpayers and intends that taxpayers will be able to use them. Tax strategy patents thwart this Congressional intent by giving tax strategy patent holders the power to decide how select tax law provisions can be used and who can use them. Tax professionals have also expressed concerns over the impact of tax strategy patents upon their own practices, as well as taxpayers in general. Some observers believe that the burdens of investigating whether a taxpayer's planned course of action is covered by a tax strategy patent, determining whether the patent was providently granted by the USPTO, and potentially negotiating with the patent proprietor in order to employ the strategy, will be costly and impractical for many taxpayers. Further, because compliance with the tax laws and its self-assessment system is obligatory for all citizens of the United States, the scope of this burden could be considerable. Several additional objections have arisen to patenting the inventions of genetic materials. Some individuals believe that patenting genetic materials devalues the worth and dignity of living beings. These commentators believe that such patents would allow individuals to obtain an ownership right in another sentient being. From this perspective, such a patent right is akin to slavery and morally wrong. Human genetic materials in particular are instead deemed to be the common heritage of humanity and therefore should be the subject of shared public ownership, rather than proprietary rights. Patents on genetic materials have also been said to lead to possible deleterious effects on healthcare and research related to healthcare. For example, some patents claim human genes that indicate susceptibility to a particular disease and diagnostic tests for detecting that gene. Observers question whether having only one proprietary diagnostic test for a particular disease lies in the public interest. They also suggest that patent rights over a gene that is linked to a particular disease might inhibit further research concerning that disease. Professors Heller and Eisenberg have also expressed the concern that the "tragedy of the anticommons" may lead to the underuse of patented genetic resources. In their view, too many overlapping intellectual property rights with respect to genetic materials may hinder research and development, and ultimately the exploitation of potential future products. For example, one enterprise might own a patent on a genomic DNA fragment, another on the corresponding protein, and yet another on a diagnostic test for a genetic disease. In this circumstance, multiple owners each have the right to exclude others and no one has an effective privilege of use. Development of a commercial product in this situation may prove difficult or impossible. Additional assertions have been made both in support of a broad scope of patentable subject matter, as well as in favor of restricting the scope of patenting. Unfortunately, no rigorous analytical method allows for study of the role the patent system plays in promoting innovation, investment, and competition. As a result, arguments for and against a broad scope of patentable subject matter are difficult to quantify. Determining the precise scope of patentable subject matter therefore remains a matter of legal reasoning, as informed by concerns over innovation and competition policy. If Congress decides that the current rules with respect to patent eligibility are satisfactory, then no action need be taken. Should Congress choose to take action, however, a number of options exist. One possibility is an amendment to section 101 of the Patent Act stipulating that certain subject matter is not patentable. Legislation introduced in the 111 th Congress would take this step with respect to tax shelters, while legislation in the 110 th Congress would have done so with respect to nucleotide sequences. Another option is to allow patents on particular inventions to issue, but to limit the remedies available to proprietors of such patents. The Patent Act currently stipulates that damages and injunctions are not available for patent infringement caused by "a medical practitioner's performance of a medical activity" under certain circumstances. This provision could potentially be amended to include other categories of inventions. Other legislative responses are also possible. Congress could choose to track USPTO practices with respect to patents on business methods, tax strategies, or genetic materials. In this respect, commentators have proposed several reforms, including the hiring of USPTO examiners with expertise in taxation or other sensitive areas. Congress could also encourage continued cooperation between the USPTO and other federal agencies, such as the IRS, with expertise in particular disciplines. If legislation is contemplated, one international agreement that deserves consideration is the World Trade Organization (WTO) Agreement on Trade-Related Aspects of Intellectual Property Rights, commonly known as the TRIPS Agreement. As a WTO member, the United States has committed to "give effect to the provisions of [the TRIPS] Agreement." The TRIPS Agreement provides that "patents shall be available for any inventions, whether products or processes, in all fields of technology." It further states that "patents shall be available and patent rights enjoyable without discrimination as to ... the field of technology." The TRIPS Agreement additionally stipulates that WTO member states may exclude from patentability certain inventions, in particular "diagnostic, therapeutic and surgical methods for the treatment of humans and animals" and "plants and animals other than micro-organisms, and essentially biological processes for the production of plants and animals other than non-biological and microbiological processes." Compliance with the TRIPS Agreement may place some limits on the ability of WTO member states to legislate with respect to patentable subject matter. The topic of patentable subject matter has raised a surprisingly heated debate in many contexts, including business methods, tax strategies, and genetic materials. Many knowledgeable observers have voiced strong objections to patents in these fields on a number of grounds. However, other experts point to the lack of direct evidence that granting patents within these fields has persistently led to deleterious consequences, and instead believe that they potentially benefit society. Although the patenting of business methods, tax strategies, and genetic materials has generally been viewed on an individual basis, the policy issues raised in these debates share many common themes. Collectively, these debates may promote further inquiry into the sorts of inventions that may be appropriately patented.
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Congressional interest in the patent system has grown in recent years, tracking increasing recognition of the importance of intellectual property to innovative U.S. industries. One of the areas of interest is the topic of patentable subject matter—that is, the sorts of inventions for which patents may be obtained. In particular, patents on business methods, tax planning methods, and genetic materials have proven controversial. Legislation introduced in recent sessions of Congress would restrict the availability of patents in these fields. None of these bills has been enacted. The patent statute currently provides that patents may be obtained on any invention that is a process, machine, manufacture, or composition of matter. The range of patentable subject matter under this provision has been characterized as extremely broad. The courts have nonetheless concluded that certain subject matter, including abstract ideas, mathematical algorithms, laws of nature, and mental processes may not be patented no matter how innovative they might be. They have reasoned that these inventions comprise the fundamental tools of scientific research, and that allowing them to be privately appropriated might interfere with future advancement. Business method patents relate to a method of administering, managing, or conducting a business or organization. Tax planning method patents concern a method of reducing or deferring taxes. The 2010 decision of the U.S. Supreme Court in Bilski v. Kappos addressed whether particular methods are patentable, although opinions vary as to the conclusiveness of the Courts' ruling. Patents claiming the products of biotechnology, and in particular genetic materials, have also led to considerable debate. Genetic material patents cover such technologies as DNA sequences, amino acid sequences, individual mutations known to cause disease, and testing kits for detecting genetic mutations. Since the 1980 decision of the Supreme Court in Diamond v. Chakrabarty, the U.S. Patent and Trademark Office (USPTO) has viewed genetic materials and related technologies as patentable. However, the March 29, 2010, district court opinion in Association for Molecular Pathology v. USPTO cast doubt upon the patentability of isolated DNA. Proceedings in the so-called "Myriad" litigation were pending as of the date this report issued. Numerous arguments have been advanced in opposition to patents on business methods, tax planning methods, and genetic materials. Some commentators believe that business method patents ultimately discourage competition, that tax strategy patents provide undesirable innovation incentives, and that patents on genetic materials lead to deleterious effects on healthcare and medical research. Other experts assert that these concerns are overstated, and further contend that the patent system provides a powerful incentive for innovation, investment, and public disclosure of technology across many fields of endeavor. Several legislative options present themselves. If Congress decides the current rules with respect to patent eligibility are appropriate, then no action need be taken. Other possibilities include amendments to the Patent Act either to bar the issuance of patents in particular disciplines, or to limit the ability to enforce certain kinds of patents. The desire to comply with certain international agreements, in particular the WTO Agreement on Trade-Related Aspects of Intellectual Property (TRIPS), may restrict certain legislative alternatives.
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Medicaid is a means-tested entitlement program that finances the delivery of primary and acute medical services as well as long-term services and supports. Medicaid is a federal and state partnership. The states are responsible for administering their Medicaid programs, and Medicaid is jointly financed by the federal government and the states. In FY2014, Medicaid is estimated to have provided health care services to 65 million individuals at a total cost of $494 billion (including federal and state expenditures). Participation in Medicaid is voluntary, though all states, the District of Columbia, and the territories choose to participate. The federal government sets some basic requirements for Medicaid, and states have the flexibility to design their own version of Medicaid within the federal government's basic framework. States incur Medicaid costs by making payments to service providers (e.g., for beneficiaries' doctor visits) and performing administrative activities (e.g., making eligibility determinations). The federal government reimburses states for a share of each dollar spent in accordance with their federally approved Medicaid state plans. Medicaid is an entitlement for both states and individuals. The Medicaid entitlement to states ensures that, so long as states operate their programs within the federal requirements, states are entitled to federal Medicaid matching funds. Medicaid is also an individual entitlement, which means that anyone eligible for Medicaid under his or her state's eligibility standards is guaranteed Medicaid coverage. This report provides an overview of Medicaid's financing structure, including both federal and state financing issues. The " Medicaid Expenditures " section of the report discusses Medicaid in terms of national health expenditures, trends in Medicaid expenditures, economic factors affecting Medicaid, and state variability in spending. The federal government and the states share the cost of Medicaid. The federal government reimburses states for a portion (i.e., the federal share or the federal financial participation ) of each state's Medicaid program costs. Federal Medicaid funding is an open-ended entitlement to states, which means there is no upper limit or cap on the amount of federal Medicaid funds a state may receive. A primary goal of the federal Medicaid matching arrangement is to share the cost of providing health care services to low-income residents with the states. The Medicaid financing structure represents a fiscal commitment on the part of the federal government toward paying at least half (but not all) of the cost of Medicaid. The federal government's open-ended financial commitment to Medicaid provides a fiscal incentive for states to extend Medicaid coverage to more low-income individuals than a state might choose to fund without the federal Medicaid funding. However, this incentive is counterbalanced by the requirement for states to share in the cost of Medicaid. Although most federal Medicaid funding is provided on an open-ended basis, certain types of federal Medicaid funding are capped. For instance, federal disproportionate share hospital (DSH) funding to states cannot exceed a state-specific annual allotment. In addition, Medicaid programs in the territories (i.e., American Samoa, Guam, the Commonwealth of the Northern Mariana Islands, Puerto Rico, and the Virgin Islands) are subject to annual spending caps. Another exception to open-ended federal Medicaid funding includes the Qualified Individuals program. The federal government's share of most Medicaid expenditures is established by the federal medical assistance percentage (FMAP) rate, which generally is determined annually and varies by state according to each state's per capita income relative to the U.S. per capita income. The formula provides higher FMAP rates, or federal reimbursement rates, to states with lower per capita incomes, and it provides lower FMAP rates to states with higher per capita incomes. FMAP rates have a statutory minimum of 50% and a statutory maximum of 83%. In FY2016, FMAP rates range from 50% (13 states) to 74% (Mississippi). The FMAP rate is used to reimburse states for the federal share of most Medicaid expenditures, but exceptions to the regular FMAP rate have been made for certain states (e.g., the District of Columbia and the territories), situations (e.g., during economic downturns), populations (e.g., certain women with breast or cervical cancer and individuals in the Qualifying Individuals program), providers (e.g., Indian Health Service facilities), and services (e.g., family planning and home health services). In addition, the federal share for most Medicaid administrative costs does not vary by state and is generally 50%. The Patient Protection and Affordable Care Act (ACA; P.L. 111-148 , as amended) included a couple of FMAP exceptions, such as the newly eligible federal matching rates and the expansion state federal matching rates. Under the newly eligible federal matching rate, from 2014 through 2016, states receive a 100% federal matching rate for the cost of individuals who are newly eligible for Medicaid due to the ACA expansion, and this newly eligible federal matching rate phases down to 90% for 2020 and thereafter. The expansion state federal matching rate is available for coverage of individuals in expansion states who were eligible for Medicaid on March 23, 2010, and are in the new eligibility group. The expansion state federal matching rate ranged from 72% to 92% in 2014 and varies each year until 2020, when the matching rate will be 90% for 2020 and thereafter. The federal share of Medicaid expenditures used to be about 57% in a typical year, which meant the state share was about 43%. However, with the exceptions to the FMAP added by the ACA, the federal share of Medicaid expenditures has increased. In FY2014, the federal share of Medicaid expenditures was 60% on average. It is expected to remain around 60% through at least FY2023. As discussed above, Medicaid is a federal entitlement to states, and in federal-budget parlance entitlement spending is categorized as mandatory spending , which is also referred to as direct spending . Although most mandatory spending programs bypass the annual appropriations process and automatically receive funding each year according to either permanent or multiyear appropriations in the substantive law, Medicaid is funded in the annual appropriations acts. For this reason, Medicaid is referred to as an appropriated entitlement . The level of spending for appropriated entitlements, similar to other entitlements, is based on the benefit and eligibility criteria established in law. The amount of budget authority provided in appropriations acts for Medicaid is based on budget projections for meeting the funding needs of the program. Although most changes to the Medicaid program are made through statute, the fact that Medicaid is subject to the annual appropriations process provides an opportunity for Congress to place funding limitations on specified activities in Medicaid, such as the circumstances under which federal funds can be used to pay for abortions. The appropriations bill usually provides Medicaid with (1) funding for the fiscal year considered in the appropriations bill and (2) an advance appropriation for the first quarter of the following fiscal year. For instance, the Consolidated and Further Continuing Appropriations Act, 2015 ( P.L. 113-235 ), provided Medicaid with $234.6 billion for FY2015 and an advance appropriation of $113.3 billion for the first quarter of FY2016. The federal government provides broad guidelines to states regarding allowable funding sources for the state share of Medicaid expenditures. However, to a large extent, states are free to determine how to fund their share of Medicaid expenditures. As a result, there is significant variation from state to state in funding sources. States can use state general funds (i.e., personal-income, sales, and corporate-income taxes) and "other state funds" (i.e., provider taxes, local government funds, tobacco settlement funds, etc.) to finance the state share of Medicaid. Federal statute allows as much as 60% of the state share to come from local government funding. Federal regulations also stipulate that the state share not be funded with federal funds (Medicaid or otherwise). In state fiscal year 2013, on average, 73% of the state share of Medicaid expenditures was financed by state general funds, and the remaining 27% was financed by other state funds. A few funding sources have received a great deal of attention over the past couple decades because states have used these funds in financing mechanisms designed to maximize the amount of federal Medicaid funds coming to the state. For example, some states have used financing mechanisms that involve the coordination of fund sources, such as provider taxes and intergovernmental transfers, and payment policies, such as DSH and supplemental payments, to draw down federal Medicaid funds without expending much, if any, state general funds. Medicaid expenditures account for a significant and growing portion of total health expenditures in the United States. Expansions of eligibility account for much of Medicaid's expenditure growth over time, and the ACA Medicaid expansion is expected to significantly increase Medicaid expenditures over the next few years. However, Medicaid expenditures also are influenced by economic, demographic, and programmatic factors. In addition, there is considerable variation in Medicaid spending from state to state due to demographic differences, state policy choices, utilization of services, and provider payment rates. In 2014, Medicaid represented 16% of national health expenditures; in that same year, private health insurance and Medicare accounted for 33% and 20% of national health expenditures, respectively. Figure 1 shows Medicaid as a percentage of national health expenditures from 1966 (the first year Medicaid was in operation) through 2014. Since the start-up years (i.e., 1966 through 1971), Medicaid expenditures have grown as a percentage of national health expenditures with just a couple of exceptions. In the past, much of Medicaid's expenditure growth has been due to federal or state expansions of Medicaid eligibility criteria. Over time, Medicaid has become one of the largest payers in the U.S. health care system. Medicaid is a major payer in some categories of national health expenditures and accounts for a smaller share of other categories of expenditures. Figure 2 shows that in 2014, Medicaid was a major payer in the categories of spending that include long-term services and supports, with Medicaid paying 56% of expenditures in the other residential, and personal care category; 36% of home health expenditures; and 32% of nursing facilities and continuing care retirement communities. Medicaid accounted for 17% of hospital expenditures. For the other services, in 2014, Medicaid accounted for a smaller share of the national expenditures, with Medicaid paying 13% of durable medical equipment, almost 11% of physician and clinical expenditures, 9% of prescription drugs, 9% of dental expenditures, and 7% of other professional expenditures. Medicaid did not have any expenditures for non-durable medical products in 2014. Over time, much of Medicaid's expenditure growth has been due to federal or state expansions of Medicaid eligibility criteria, and the ACA Medicaid expansion is expected to significantly increase Medicaid expenditures over the next few years. Figure 3 shows actual Medicaid expenditures from FY1997 to FY2014 and projected Medicaid expenditures from FY2015 through FY2023 broken down by state and federal expenditures. In FY2014, Medicaid spending on services and administrative activities in the 50 states, the District of Columbia, and the territories totaled $494 billion (see Table A-1 for state-by-state expenditures for FY2014). Medicaid expenditures are estimated to grow to $835 billion in FY2023. Federal Medicaid expenditures totaled $299 billion, or 60% of total Medicaid expenditures, in FY2014, and state Medicaid expenditures were $195 billion, which was 40% of total Medicaid spending. From FY2013 to FY2014, federal Medicaid expenditures grew by almost 14% whereas state Medicaid expenditures grew by only 1% due to the enhanced federal matching rates for the ACA Medicaid expansion (discussed in the " The Federal Medical Assistance Percentage " section). Medicaid expenditures resulting from the ACA Medicaid expansion are projected to be $457 billion from FY2014 to FY2023, with the federal government paying about 93% of this amount. Most Medicaid expenditures (i.e., 95% in FY2014) are for medical assistance (or nonadministrative) payments. In FY2014, Medicaid spending on medical assistance grew by an estimated 9.5%, which is significant relative to the annual percentage increases for FY2012 and FY2013—0.2% and 6.0%, respectively. The ACA Medicaid expansion was the main reason for the large increase in Medicaid spending, but the woodwork effect also contributed to the increase. Figure 4 shows medical assistance payments by service type for FY2014. Managed care, which includes payments to managed care organizations, primary care case management, and non-comprehensive prepaid health plans, accounted for 37% of Medicaid expenditures. Long-term services and supports, which include nursing facility care and home- and community-based services, made up 23% of all Medicaid expenditures. Hospitals received 11% of total Medicaid expenditures in return for services provided to Medicaid fee-for-service enrollees at the payment rates set by states. In Medicaid, there are four main eligibility groups: children, adults, the aged, and individuals with disabilities. Per-enrollee Medicaid expenditures across these groups averaged $6,897 in FY2013. However, as shown in Figure 5 , per-enrollee expenditures varied significantly by eligibility group, with the per-enrollee expenditures by eligibility group ranging from $2,807 for children to $17,352 for individuals with disabilities. One reason the aged and disabled populations have higher per-enrollee expenditures is because these populations consume most of the long-term services and supports, which comprise almost a quarter of all Medicaid expenditures (see Figure 4 ). Another reason for the difference in per-enrollee expenditures by eligibility group is that children and adults tend to be healthier and therefore tend to have lower health care costs than the aged and disabled populations, even though a significant number of nondisabled adults are pregnant women. In FY2013, the aged and disabled populations together accounted for about 26% of Medicaid enrollment and 64% of Medicaid expenditures. In comparison, the children and adult populations accounted for about 74% of Medicaid enrollment and 36% of Medicaid expenditures. Medicaid expenditures are influenced by economic, demographic, and programmatic factors. Economic factors include health care prices, unemployment rates, and individuals' wages. Demographic factors include population growth and the age distribution of the population. Programmatic factors include state decisions regarding which optional eligibility groups and services to cover and how much to pay providers. Other factors include the number of eligible individuals who enroll and their utilization of covered services. Medicaid enrollment is affected by economic factors, which in turn impact Medicaid expenditures. Medicaid is a countercyclical program, which means Medicaid enrollment growth tends to accelerate when the economy weakens and tends to slow when the economy gains strength. During the most recent recession, researchers estimated that for every 1% increase in the national unemployment rate, Medicaid enrollment increased by 1 million individuals. People become eligible for Medicaid during economic downturns because they lose their jobs, experience reductions in income, or lose access to health benefits. Figure 6 shows that total Medicaid spending is highly concentrated, with the seven most populous states (California, New York, Texas, Pennsylvania, Florida, Ohio, and Illinois) accounting for almost half of Medicaid expenditures in FY2014 (see Table A-1 for state-by-state expenditures for FY2014). State variation in Medicaid per-enrollee expenditures is significant, with per-enrollee Medicaid expenditures ranging from $4,803 in California to $13,039 in the District of Columbia for FY2012. Some of the state variation in Medicaid per-enrollee expenditures is due to demographic differences across states. For instance, states with lower-than-average proportions of elderly and disabled Medicaid enrollees and higher-than-average proportions of Medicaid enrollees who are children and adults would be expected to have lower-than-average per-enrollee Medicaid expenditures. However, state policy choices regarding optional populations and services cause variation in Medicaid spending. Other reasons for state variation in Medicaid per-enrollee expenditures include variation in utilization and provider payment rates. Medicaid is the largest source of general revenue-based spending on health services (even when compared to Medicare) because a sizable portion of Medicare spending is funded by a dedicated revenue source. Medicaid constitutes a significant portion of the federal budget, and federal Medicaid expenditures are expected to increase significantly over the next 10 years due to the ACA Medicaid expansion. As a result, Medicaid could be a focus of potential deficit reduction or other legislative proposals affecting the federal budget. Both the House and Senate FY2016 budget resolutions included proposals to reform Medicaid financing. The House Budget Resolution for FY2016 ( H.Con.Res. 27 ) and its resolutions for the previous four years have included converting Medicaid to a block grant as an illustrative example for achieving budget savings. The FY2016 Senate Budget Resolution ( S.Con.Res. 11 ) proposes to convert Medicaid for the "low-income, working-age, able-bodied adults" and children to a capped allotment like CHIP. Also, in February 2015, Senators Richard Burr and Orrin Hatch along with Representative Fred Upton released the Patient Choice, Affordability, Responsibility, and Empowerment (CARE) Act, which is a policy proposal that would convert Medicaid to a capped allotment. Table A-1 provides the most recent Medicaid expenditures for each state, including both the federal and state shares of spending on benefits, administrative services, and total Medicaid expenditures. These Medicaid expenditures exclude expenditures in the territories and spending for State Medicaid Fraud Control Units, Medicaid survey and certification of nursing and intermediate care facilities, and the Vaccines for Children program.
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Medicaid is a means-tested entitlement program that finances the delivery of primary and acute medical services as well as long-term services and supports. Medicaid is a federal and state partnership that is jointly financed by both the federal government and the states. The federal government's share for most Medicaid expenditures is called the federal medical assistance percentage (FMAP). Generally determined annually, the FMAP formula is designed so that the federal government pays a larger portion of Medicaid costs in states with lower per capita incomes relative to the national average (and vice versa for states with higher per capita incomes). Federal Medicaid funding to states is open ended. The federal government provides states a good deal of flexibility in determining the composition of the state share (also referred to as the nonfederal share) of Medicaid expenditures. As a result, there is significant variation from state to state in how the state share of Medicaid expenditures is financed. In 2014, Medicaid represented 16% of national health expenditures; in that year, private health insurance and Medicare accounted for 33% and 20% of national health expenditures, respectively. Medicaid is a significant payer in the categories of health spending that include long-term services and supports and hospital expenditures. For the other services (such as durable medical equipment, physician and clinical services, prescription drugs, and dental services), Medicaid accounts for a smaller share of the national expenditures. In FY2014, Medicaid expenditures totaled $494 billion, with the federal government paying $299 billion, or about 60% of the total. Over the next few years, Medicaid expenditures are expected to increase significantly due to the Patient Protection and Affordable Care Act (ACA; P.L. 111-148, as amended) Medicaid expansion. The federal government is paying the vast majority of the costs associated with the ACA Medicaid expansion due to the enhanced federal matching rates available to states that choose to implement the ACA Medicaid expansion. Spending on managed care and long-term services and supports comprises more than half of Medicaid expenditures on benefits. Per-enrollee Medicaid expenditures for individuals with disabilities and the elderly are significantly higher than per-enrollee expenditures for adults and children, due in part to the higher utilization of long-term services and supports among individuals with disabilities and the elderly. Medicaid expenditures are influenced by economic, demographic, and programmatic factors. Economic factors include health care prices, unemployment rates, and individuals' wages. In addition, state-specific factors, such as programmatic decisions and demographics, affect Medicaid expenditures and cause Medicaid spending to vary widely from state to state. Medicaid constitutes a significant portion of the federal budget, and federal Medicaid expenditures are expected to increase significantly over the next 10 years due to the ACA Medicaid expansion. As a result, Medicaid could be a focus of any potential deficit reduction or other legislative proposals affecting the federal budget. This report provides an overview of Medicaid's financing structure, including both federal and state financing issues. The "Medicaid Expenditures" section of the report discusses Medicaid in terms of national health expenditures, trends in Medicaid expenditures, economic factors affecting Medicaid, and state variability in spending.
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Four species of nonindigenous Asian carp are expanding their range in U.S. waterways, resulting in a variety of concerns and problems. Three species—bighead, silver, and black carp—are of particular note, based on the perceived degree of environmental concern. Current controversy relates to what measures might be necessary and sufficient to prevent movement of Asian carp from the Mississippi River drainage into the Great Lakes through the Chicago Area Waterway System. Movement of Asian carp into the Great Lakes is of concern because increased numbers of carp in the Great Lakes increase the risk that Asian carp will establish reproducing populations in these waters. Congressional interest in the 115 th Congress has focused on a draft feasibility study including proposed actions at the Brandon Road Lock and Dam to avoid the possibility of carp becoming established in the Great Lakes, as well as other actions to stem the further spread of Asian carp upstream in the Mississippi River Basin. The grass carp or white amur, Ctenopharyngodon idella , was first imported to the United States in 1963 by the U.S. Fish and Wildlife Service for biological control of vegetation in aquatic environments. Grass carp are stocked to biologically control invasive aquatic plants, such as Hydrilla and Eurasian water milfoil. Shallow, quiet waters are their typical habitat, and this species easily tolerates waters near freezing. Grass carp initially escaped from the U.S. Fish and Wildlife Service Fish Farming Experimental Station in Stuttgart, AR. By 1970, grass carp had been stocked in lakes and reservoirs throughout the southeast United States and in Arizona, including some that were open to stream systems. It has since spread widely across the country ( Figure 1 ), including to four of the Great Lakes. Most grass carp now are stocked as sterile triploids, and grass carp have not established breeding populations in the Great Lakes basin. The black carp, Mylopharyngodon piceus , arrived in the United States in 1973 with silver and bighead carp. Subsequently, this species was imported as a food fish, as the only cost-effective biological control agent to control non-native snails in catfish aquaculture ponds in Arkansas and Mississippi, and as a potential sterile biological control agent for zebra mussels. Of the four species of carp in U.S. waterways, black carp has the most limited known distribution ( Figure 2 ). The preferred habitat of black carp is along the bottom in deep water of large rivers. Owing to this habitat preference for deeper waters, sampling to determine black carp distribution is considered incomplete, since sampling is more difficult in deeper waters. Black carp feed primarily on mussels and snails, and there are concerns that black carp may harm native mollusks, many of which are listed as threatened or endangered under the Endangered Species Act. Silver carp, Hypophthalmichthys molitrix , were brought into the United States in 1973 under an agreement of maintenance between a private fish farmer and the Arkansas Game and Fish Commission. This species has been used to control phytoplankton (microscopic drifting algae) in nutrient-rich water bodies and is also a food fish. Escapes from a state fish hatchery and from research projects involving use of these fish in municipal sewage systems, as well as possible inclusion of silver carp among other fish shipments, contributed to the spread of this species. Silver carp proved unsuitable for U.S. aquaculture, and were never widely used. The U.S. distribution of silver carp is confined primarily to the Mississippi River drainage, with no record of capture in the Great Lakes ( Figure 3 ). The silver carp is a filter-feeder, capable of consuming large amounts of phytoplankton, zooplankton (small drifting and/or swimming invertebrates), and detritus. Silver carp are easily startled by outboard motors, causing them to jump several feet out of the water. There are no population estimates of silver carp in U.S. waters. However, the population of silver carp in the La Grange Reach of the Illinois River during 2007-2008 was estimated to be about 4,000 fish per river mile, with a biomass of about 19,000 pounds per river mile. Bighead carp, Hypophthalmichthys nobilis , were brought into the United States in 1973 under an agreement of maintenance between the Arkansas Game and Fish Commission and a private fish farmer. They proved suitable for U.S. aquaculture and continue to be economically important in Arkansas, Mississippi, and Alabama. This species was discovered in open waters of the Ohio and Mississippi Rivers in the 1980s, probably after escaping from fish hatcheries and/or research projects involving use of these fish in municipal sewage systems. In the United States, bighead carp are found primarily in the Mississippi River drainage. However, a limited number of bighead carp were captured by commercial fishermen in Lake Erie between 1995 and 2003 ( Figure 4 ). Like silver carp, bighead carp typically require large rivers for spawning, but inhabit lakes, backwaters, reservoirs, and other low-current areas during most of their life cycle. They are filter-feeders, consuming primarily phytoplankton and zooplankton. Non-native species that do become established commonly exist at low populations for several generations, after which some begin a period of rapid population growth and range expansion. Although initial captures of wild silver carp were reported in the early 1970s, silver carp only rarely were captured in U.S. rivers until about 1999, after which their population began to grow at an exponential rate. Some suggest that floods in the early 1990s may have provided excellent spawning and recruitment opportunities for silver carp, and stimulated their later exponential growth phase. Field experience in the United States has shown that silver carp generally follow a few years after bighead carp in colonizing new habitat. Many factors may contribute to the introduction and spread of non-native species. For example, juvenile silver and bighead carp are easily mistaken for native baitfish. Thus, the dumping of unused bait by sport fishermen may contribute to the introduction and spread of these species. In addition, bighead carp (as well as a number of other potentially invasive non-native fish species) have been reared, transported, and traded in large numbers as live fish for human food, especially in large metropolitan areas. Such commerce in bighead carp occurred with relatively limited state and local regulation until recently. Eradication of non-native species in aquatic environments is difficult and rare, having only occasionally been successful when efforts were focused on small-scale and closed systems like reservoirs, ponds, small locks, and marinas. Since eradication of a non-native species, once it has become established, is unlikely, difficult, and therefore expensive, management more often focuses on preventing troublesome species from entering new habitats, through regulating imports of certain nuisance species, preventing or slowing the spread of already introduced species, and monitoring to detect new invaders when their populations may be localized and at low densities such that eradication might still be possible. While efforts to prevent introduction may be costly, it almost always will be less expensive than continued attempts to eradicate or control non-native species that become established. Scientists disagree on the ability of Asian carp to thrive in the Great Lakes and the potential damage these fish might cause to Great Lakes ecosystems. According to the Great Lakes Fishery Commission, Asian carp pose a significant threat to fisheries of the Great Lakes. Asian carp populations could expand rapidly and change the composition of Great Lakes ecosystems. Direct ecological effects are likely to result from their various diets: silver carp eat phytoplankton, bighead carp eat zooplankton, black carp eat invertebrates such as snails and mussels, and grass carp eat aquatic plants. Resident Great Lakes fish species could be harmed, because Asian carp are likely to compete with them for food and modify their habitat. Species at greatest risk include native mussels, other aquatic invertebrates, and fishes. As bighead and silver carp have dispersed and migrated within the Mississippi River drainage, these species have out-competed native fish to become the most abundant fish in certain areas. In the Lake Erie basin, the Maumee, Sandusky, and Grand Rivers were determined to be the most likely to be able to support spawning of Asian carp. In July 2012, a Bi-national U.S.-Canadian Asian Carp Risk Assessment concluded that bighead and silver carp pose a substantial environmental risk to the Great Lakes within 20 years, with the risk increasing over time, especially for Lakes Michigan, Huron, and Erie. This assessment further concluded that should bighead and silver carp become established in the Great Lakes, their spread would not likely be limited. Ecological consequences might include competition for planktonic food, leading to reduced growth rates, and recruitment and abundance of fish dependent upon this plankton, as well as reduced abundance of fishes with pelagic, early life stages. A January 2016 Risk Assessment for Grass carp found that the invasion process of Grass carp to Lakes Michigan and Erie had begun, and these fish were likely to become established within 10 years. On the other hand, others have predicted that black carp are not likely to become established in the Great Lakes if introduced, while silver carp are predicted neither to spread quickly nor to be perceived as a nuisance in the Great Lakes. Bighead carp were not considered in this analysis. A 2015 study used a food model to find that, while Asian carp could eventually account for one-third of the fish weight in Lake Erie, a complete fishery collapse is unlikely. Models used in the study forecasted that Asian carp would not become as abundant in Lake Erie as they are in the Mississippi and Illinois rivers due to various ecosystem differences. Furthermore, the Great Lakes today are hardly pristine habitat, with the intentional human introduction of non-native species (e.g., brown and rainbow trout, coho and Chinook salmon) characterizing fishery management of the waters for many years. The intentional and accidental introduction of non-native species has changed this historic ecosystem in many ways, including depletion of previously dominant lake trout and whitefish species. In addition, the ecological changes wrought by non-native species arriving in ship ballast water (e.g., zebra mussels, round goby) and by other means (e.g., lamprey and alewife) have been substantial. Recreational and commercial fisheries of the Great Lakes depend on fish populations that could be affected by Asian carp. The primary economic impacts of Asian carp are likely to be related to these fisheries, although concerns have also been raised about potential effects on recreational boating and hunting. Although the net effects are likely to be negative, it is also possible that the introduction of Asian carp to the Great Lakes may provide some utility, such as the development of new commercial and recreational fisheries. It has been widely reported that Great Lakes fisheries generate U.S. economic activity of approximately $7 billion annually. One should exercise caution in using this figure for assessing public policy alternatives or to make comparisons with the value of other economic sectors. The Great Lakes is composed of many fisheries, each specific to different water bodies, species, and groups of users. Asian carp are likely to affect each lake and areas within lakes to varying degrees because of different biological, chemical, and physical conditions. Anglers will be affected to different degrees depending on local ecological interactions and substitute angling opportunities. Measures of economic activity such as the $7 billion of economic impacts are only one dimension of economic analysis. The economic input-output studies of the recreational and boating sectors provided below cannot be used to estimate changes in social welfare, to assess trade-offs among public policy alternatives, or to conduct benefit-cost analysis. To more fully understand how society would be affected, valuation studies would be required to estimate the potential changes in social welfare resulting from Asian carp introduction. Although Asian carp introduction is likely to harm many Great Lakes fisheries, potential changes to ecosystems and the associated economy are not well understood. It is questionable whether accurate predictions of changes by lake, species, and associated fishery are possible. Potential changes resulting from species invasions are difficult to assess because of the underlying complexity of ecological and economic systems. Data and models required to make these assessments are not available and complete assessments would be costly and likely require years of research. The lack of definitive predictions does not mean that the effects of Asian carp introduction would not be significant or that managers should wait to assess the actual effects as Asian carp become established in the Great Lakes. Existing information related to Asian carp movement and population increases in the Mississippi Basin and the magnitude of recreational activities in the Great Lakes indicate that a major threat exists and the effects are likely to be significant. The economic contributions of recreational and commercial activities on state and regional economies of the Great Lakes region are significant. The economic input-output data cited below measure financial activities associated with the money people spend to buy goods and services on their fishing trips. Expenditures at businesses that provide goods and services have direct, indirect, and induced effects on business revenues, jobs, and personal income in the local area and at the state level. This approach to assessing recreational fishing is the expenditure and economic impact approach. The following descriptions provide recent economic information, but do not consider the effects of Asian carp introduction. The Great Lakes' recreational fisheries target perch, black bass, walleye, lake trout, salmon, pike, steelhead, and others. In 2011, approximately 1.7 million anglers fished 19.7 million recreational days on the Great Lakes. Economic impacts resulting from these expenditures included approximately 50,000 jobs, salaries of $2.2 billion, and total impacts throughout the U.S. economy of slightly more than $7 billion. Great Lakes fisheries also support charter boat fishing businesses that provide recreational fishing services to anglers. In 2002, an estimated 1,746 charter firms made more than 93,000 charter trips in the Great Lakes region. Table 1 provides a breakdown of angling activity and economic impacts of recreational fishing by state. In 2015, Great Lakes commercial fishing produced 14.9 million pounds of fish with a landed value of over $22 million ( Table 2 ). Commercial fisheries are important to many coastal communities, and except for Lake Erie, each lake supports tribal fisheries. Top species are lake whitefish, yellow perch, walleye, chubs, and smelt. For certain species, specific lakes contribute the bulk of commercial landings—including Lake Huron (60% of whitefish), Lake Erie (84% of yellow perch, and 94% of smelt), and Lake Michigan (80% of chubs). Record harvests occurred in 1899, when 120 million pounds were landed in the United States. Landings were dominated by lake herring and chubs (64 million pounds), lake trout (10 million pounds), and yellow perch (10 million pounds). Landings and value of commercial fisheries in the Great Lakes have declined dramatically because of factors such as invasive species, pollution, habitat degradation, overfishing, competition with imports, personal tastes and preferences, and regulatory changes. There are almost 4.3 million boats registered in the Great Lakes states, and it has been estimated that 911,000 operate on the Great Lakes. When disturbed by a boat motor, silver carp may jump as high as 10 feet out of the water. In parts of the Mississippi River drainage, silver carp have caused injuries and damaged equipment when large fish have jumped into moving boats. Silver carp also could injure boaters and water-skiers and detract from boating in the Great Lakes. As in the case of fisheries, predictions of the potential magnitude of economic effects on Great Lakes boating are not available. In 2004, the U.S. Army Corps of Engineers in partnership with the Great Lakes Commission undertook a study of recreational boating in the Great Lakes states. Recreational boaters spent approximately $9.8 billion during trips and $5.7 billion on craft in Great Lakes states. Economic results from these expenditures included more than 246,000 jobs and salaries of $6.5 billion. The introduction of Asian carp to the Great Lakes, potentially changing lake ecosystems from "salmon and trout dominated" to "carp dominated," has the potential to damage the public image of these lakes and to lower the feeling of "well-being" and pride of area residents. As such, the introduction of these species could reduce the social value of lake-related activities. The popularity of live Asian carp in some ethnic markets continues to stimulate illegal transport of these fish across state and international borders. In February 2012, Canadian border enforcement personnel intercepted the third illegal shipment of live Asian carp in two months and the fifth in a year. These fish allegedly originated from fish farms in the southern United States and were bound for Toronto. The Chicago Area Waterway System (CAWS) is a segment of the Illinois Waterway in northeastern Illinois and northwestern Indiana. The Illinois Waterway is a 327-mile channel running from Chicago to St. Louis. It is maintained at a minimum depth of 9 feet by the U.S. Army Corps of Engineers (hereinafter referred to as the Corps). It is the only navigable link between two of the largest freshwater drainage basins in the world, the Great Lakes and the Mississippi River. The CAWS portion of the Illinois Waterway includes modified rivers, locks, canals and other structures that control the flow of water through the Chicago metropolitan area. It has recently received attention for its potential to provide a pathway for Asian carp to migrate from the Mississippi River and its tributaries into the Great Lakes. The system of projects comprising the CAWS is shown in Figure 5 . Historically, an important geologic feature in the Chicago area's watershed was the Chicago Portage. The Chicago Portage separated the drainage basins of the Mississippi River and the Great Lakes prior to modification of these waterways. These bodies of water were first artificially connected for navigation in 1848 through a privately constructed 97-mile canal connecting the Chicago River to the Illinois River. This canal, known as the Illinois and Michigan (I&M) Canal, was maintained for commercial use from 1848 to 1933. It was eventually replaced by the network of canals and locks that comprises the CAWS. Canals within the CAWS today include the Chicago Sanitary and Ship Canal (or CSSC, completed in 1900), the North Shore Channel (completed in 1910) and the Cal-Sag Channel (completed in 1922). During construction of these canals, the flows of the Chicago River and the Calumet River were also permanently reversed away from Lake Michigan and toward the Mississippi River drainage basin through structural modifications and pumping. The altered flow of the rivers prevented sewage discharge into the canals from contaminating Chicago's drinking water supply intakes on Lake Michigan. In recent years, the locks of the CAWS have become a focal point for those debating how to prevent invasive species (and specifically, Asian carp) encroachment between the Great Lakes and the Mississippi River. The Corps operates multiple lock sites that connect the CAWS to the Great Lakes, including the O'Brien Lock and Dam (on the Cal-Sag Channel) and the Chicago Lock (on the Chicago River; see Figure 5 ). Both of these locks include sluice gates operated by the Metropolitan Water Reclamation District of Greater Chicago (MWRD) that can provide flood control in severe rainstorms. The MWRD independently owns and operates a third site (the Wilmette pumping station) on the North Shore Channel that directly connects the CAWS to the Great Lakes. The Corps also owns and operates the lock at Lockport Powerhouse and Lock, which is southwest of Chicago on the CSSC. Due to its distance from the Great Lakes and the fact that the Corp's electric fish barriers (see below section " Electric Barriers ") operate upstream on the CSSC, this third lock has not been as prominent in recent invasive species debates. The CAWS plays a significant role in the region's commercial and recreational navigation, although estimates of the full economic value of the locks within the CAWS (in particular, O'Brien Lock) vary widely. The Chicago Lock, one of the country's busiest locks for traffic, handled 39,575 vessels and conducted 11,218 lockages in 2016. The O'Brien Lock handled 10,337 vessels and conducted 4,637 lockages in 2016. While most of the traffic on the Chicago Lock is recreational, the transit of commodity-laden commercial barges is higher at O'Brien Lock, which allows for shippers to offload onto deepwater vessels. Statistics from the Corps indicate that approximately 4 million tons worth of commodities move through O'Brien lock annually, including bulk quantities of sand and gravel, coal, and steel. Additional analysis, including a comparison of alternative means of freight transit, is necessary to fully understand the value of the locks to the region. In response to an estimate by the Corps that shippers saved approximately $192 million by using the O'Brien and Chicago locks in 2008 (or an addition of approximately $27 per ton of freight shipped), the state of Michigan commissioned a study which concluded that the locks are of considerably less value (thus any closure of locks would have a minimal impact). The 2010 Michigan study estimated that a shift from barge to overland shipping would result in additional costs of approximately $64 million-$69 million annually, or approximately $10 per ton. This study was criticized by the Illinois Chamber of Commerce, which published several academic critiques of the Michigan study, as well as a separate study estimating much higher costs associated with lock closure. The Illinois study estimated a total cost of $530 million-$580 million annually over the next eight years for lock closure, and a net cost to the Chicago economy of $4.7 billion over a 20-year horizon. The studies differ considerably due to the treatment of several important assumptions, including those related to indirect costs for the transition to overland shipping. Both studies have ramifications for proposals to close or alter the CAWS to prevent the spread of Asian carp. Congress has directed the Corps and other agencies to undertake specific actions to block the upstream passage of Asian carp in the CAWS. This work was largely conducted by the Corps (due to its role in maintaining the CAWS), with planning coordination and funding from other agencies. The federal government has also been engaged in long-term, nationwide planning and management of Asian carp under authorities codified in the Nonindigenous Aquatic Nuisance Prevention and Control Act of 1990 ( P.L. 101-646 , as amended) and other statutes. These actions were conducted by the Aquatic Nuisance Species Task Force (ANS Task Force), chaired by the Fish and Wildlife Service (FWS) and the National Oceanic and Atmospheric Administration (NOAA), with support provided by various other agencies, including the U.S. Environmental Protection Agency (EPA), the U.S. Geological Survey (USGS), and the Corps. Due to the increasing profile of Asian carp and its potential establishment in the Great Lakes, efforts to impede the spread of Asian carp have intensified over time. The White House prioritized the issue in early 2010 with the White House Commission on Environmental Quality (CEQ) announcement of a forum of Great Lakes governors and a suite of new actions to control Asian carp. Total federal funding for Asian carp activities since the announcement of the framework has been approximately $463 million (see Table 3 ), with almost half of this funding derived from the EPA Great Lakes Restoration Initiative. In the National Invasive Species Act of 1996 ( P.L. 104-332 ), Congress directed the Corps and the ANS Task Force to investigate environmentally sound methods to prevent the dispersal of aquatic nuisance species from the Great Lakes into the Mississippi River drainage. In response, an advisory panel of federal, state, local, and international representatives (known as the Dispersal Barrier Panel) recommended an electronic dispersal barrier demonstration project at the southwestern end of the CSSC north of Lockport Powerhouse and Lock (see Figure 5 ) as the preferred short-term method to stop the movement of invasive species through the CAWS. This type of barrier uses steel cables secured to the bottom of the canal to create a pulsating field of electricity that discourages fish from passing. It was selected based on projected cost, likelihood of success, environmental impacts, commercial availability, permit requirements, and effect on existing canal uses. The barrier was completed in 2001 and became operational in 2002. Early experiences with power outages at the barrier led to concerns that Asian carp might use these opportunities to migrate through the area. Based on subsequent experience and testing, the Dispersal Barrier Panel determined that the demonstration barrier should be upgraded into a stronger, more permanent barrier (Barrier I), and that construction of a second large barrier (Barrier II) would provide additional protection through redundancy in the barrier system. These recommendations were subsequently authorized by Congress in 2005 and consolidated in 2007. Barrier II, located approximately 800 feet downstream from Barrier I, has two sets of electrical arrays (known as Barriers IIA and IIB). Construction of Barrier IIA began in 2004, and became operational in 2009 at a total cost of approximately $10 million. Barrier IIB was completed in 2010, at a cost of approximately $13 million. Recent budget requests by the Corps have estimated the operational costs of these barriers at approximately $16.7 million per year. Federal agencies have also coordinated rapid response activities to supplement the barrier protection system through the Asian Carp Regional Coordinating Committee (ACRCC), formed in 2009. The ACRCC, led by Council on Environmental Quality, includes representatives from federal agencies, as well as some state and local government organizations. To date, the most visible actions by the committee have been chemical treatments on the CAWS to temporarily eliminate and evaluate the presence of aquatic species, including Asian carp. In addition to building the electrical barriers, in Section 3061(b)(D) of WRDA 2007, Congress directed the Corps to study other means to prevent the spread of Asian carp through the CAWS, including the range of options for technologies to prevent passage beyond the electrical barriers. In recent appropriations acts, Congress has generally extended the authority for the Corps to implement these emergency actions, which relate to a number of studies by the Corps that are completed or in progress: Interim Report I recommended a network of concrete and chain link barricades to deter fish passage over the Des Plaines River during flooding or through culverts connecting the CSSC to the I&M canal. This project was built with approximately $13 million in funding and was completed in 2010. Interim Report II includes two phases: Report IIA studied optimal operating parameters for the electrical barriers and was completed in 2011, and Report IIB, which is in progress and will be used to improve barrier operations along with Report IIA. Interim Report III explored how locks and other structures could be operated to minimize the likelihood of Asian carp infestation. This study concluded that partial changes in operating parameters would not be beneficial in slowing Asian carp migration; however, the Corps installed fish screens on certain sluice gates and modified operations to provide lock closure during chemical and other control efforts in response to this study. Interim Report IIIa focused on other deterrent measures to prevent Asian carp migration into the Great Lakes. The study was completed in July 2010, but the Corps has stated that it currently lacks authority to implement its recommendations (which include an acoustic bubble curtain demonstration project). Interim Report IV is in progress and will document the results of ongoing testing and analysis, including a systematic risk assessment of barrier failure modes and a comprehensive environmental assessment. While the study was projected to be released in 2016, recent research efforts related to barrier efficacy have resulted in an extended release date. The Corps and other agencies, including the FWS, EPA, and USGS, have contributed resources toward monitoring efforts to evaluate the presence and movements of Asian carp in the CAWS. In addition to conventional sampling methods such as electrofishing and netting, the Corps worked with the University of Notre Dame to conduct an experimental fish sampling method known as environmental DNA (eDNA) testing. This method filters water samples, then extracts fragments of shed DNA to search for genetic markers unique to Asian carp. While few Asian carp have been located upstream of the barriers using conventional sampling methods, positive eDNA test results for silver carp from multiple locations upstream suggest that the fish could be present on the lake side of the barriers. A 2013 study by the Corps, FWS, and the USGS analyzed potential alternative sources for these positive eDNA samples (other than live fish) and concluded that a number of sources could potentially lead to positive samples. The Asian Carp Regional Coordinating Committee also released a 2014 study working to resolve issues of ambiguity in eDNA interpretation. Separate from efforts focusing on short-term prevention and other actions in the CAWS, the ANS task force has studied and initiated a number of nationwide management actions through its Asian Carp Working Group. Beginning around 2001, the working group requested and co-funded USGS risk assessments of multiple Asian carp species that found a high potential for black, silver, and bighead carp to become established in the United States. In response to these findings, FWS listed black and silver carp as injurious under the Lacey Act in 2007. On December 7, 2010, the President signed P.L. 111-307 , which listed bighead carp as injurious under the Lacey Act. Also in 2007, FWS authored a study, Management and Control Plan for Bighead, Black, Grass, and Silver Carps in the United States , produced in collaboration with federal and nonfederal stakeholders. The final plan outlines seven broad goals (divided into 133 short- and long-term recommendations) that would contribute to a goal of extermination of wild Asian carp. Recommendations in that report included a wide array of methods, including methods to stop Asian carp encroachment such as electric barriers, bubble curtains, and sonic barriers. Several developments raised the profile of the Asian carp issue and led to White House involvement in control efforts. As previously mentioned, eDNA testing in 2009 and 2010 indicated that Asian carp are potentially present at multiple locations upstream of the electric barriers. Additionally, in June 2010 the Asian Carp Regional Coordinating Committee (ACRCC) announced the capture of a live bighead carp at Lake Calumet (upstream of the electric barriers, between O'Brien Lock and Lake Michigan) by a fisherman under contract with the Illinois Department of Natural Resources. The finding was significant, as it represented the first live Asian carp located upstream of the barriers. A second live silver carp was found in June 2017 in the Little Calumet River (above the electric barriers, below the T.J. O'Brien Lock and Dam, nine miles from Lake Michigan) by a fisherman under contract as part of the ACRCC Monitoring Response Work Group's seasonal monitoring event. In 2010 the White House convened a Summit for Great Lakes governors on the threat of Asian carp. This meeting focused on defining strategies to combat the spread of Asian carp and improving coordination and effective response across all levels of government. At the summit, the Obama Administration unveiled a framework, known as the Asian Carp Control Strategy Framework (referred to here as the framework). The framework has been updated annually to report on new actions and funding for Asian carp. The original FY2010 framework built on the existing work by federal agencies (including barrier operations and monitoring) and outlined future actions and new funding sources to eliminate the threat of Asian carp in the Great Lakes. Many of the new expenditures at that time were funded by the Environmental Protection Agency's Great Lakes Restoration Initiative (GLRI), which provided for interagency transfers to fund federal actions, as well as grants for state and local actions. Subsequent frameworks have included less funding from the GLRI and more funding from agency "base" budgets (i.e., actions not funded from the GLRI). Major actions that have been funded in these frameworks include targeted monitoring and assessment above and below the electric barrier system, commercial harvesting and removal actions below the barrier system, waterway separation and control measures, research and technology development, eDNA analysis and refinement, enforcement of illegal transfer, outreach communication and training, and carrying out the Great Lakes Mississippi River Interbasin Study and other pathway closures (see below section, " GLMRIS Study "), among other things. In 2016 the title of the framework was changed to Asian Carp Action Plan (referred to here as action plan) in order to highlight interagency planning and coordination. The 2016 and 2017 action plans include a long-term planning document, identifying future actions to continue preventing the introduction, establishment, and spread of Asian cap in the Great Lakes. Reported funding levels in the frameworks are shown below in Table 3 . The most prominent long-term Asian carp prevention option is the potential separation of the Great Lakes and Mississippi River basins (in Chicago and in other areas), so as to prevent all interbasin movement of aquatic nuisance species. A return to physical hydrologic separation of the basins in the Chicago area would make further encroachment of Asian carp in that area unlikely, but would involve significant changes to existing navigation and water control structures in the CAWS. Efforts to separate other areas of potential encroachment between the two basins would be similarly costly and could require modifications and construction throughout the region. Beginning in 2010, the Corps undertook a study, the Great Lakes and Mississippi River Interbasin Study, or GLMRIS, to evaluate potential options to prevent or reduce the spread of aquatic invasive species between the Great Lakes and Mississippi River basins. Authority for the study was provided in Section 3061(d) of WRDA 2007 ( P.L. 110-114 ), and directed that "hydrologic separation" be among the options considered by the Corps. Congress provided subsequent guidance for GLMRIS in P.L. 112-141 , the Moving Ahead for Progress in the 21 st Century Act (also known as MAP-21), enacted on July 6, 2012. That authorization directed the Corps to expedite completion of the GLMRIS study. The Corps released its GLMRIS study on January 6, 2013. It differed from a "traditional" Corps feasibility study in several ways. Most important, it analyzed an array of potential alternatives but did not recommend a specific plan. In contrast to most Corps feasibility studies, it did not include an environmental impact statement as required for federal construction projects under the National Environmental Policy Act, nor did it include a breakdown of expected cost-share responsibilities between the federal government and local sponsors. Thus, some in Congress have expressed concerns that the report is not actionable in a legislative context. In explaining its approach, the Corps pointed to the original WRDA 2007 authority for the study, noting that in contrast to traditional Corps authorizations, this legislation directed the Corps to identify and study a range of alternatives. The Corps also pointed to the MAP-21 requirement for expedited study completion, and noted that a full study process would have been impossible to complete under the required time frame. The GLMRIS study describes eight alternatives, including a "no action" alternative, to prevent the interbasin transfer (i.e., upstream or downstream movements) of multiple aquatic nuisance species, or ANS (i.e., Asian carp, as well as other species). It focuses on the CAWS, with future phases of the study expected to focus on other areas of connection outside of Chicago. The options outlined in GLMRIS range from no or minimal changes to the current approach (such as nonstructural methods of prevention, which are included in seven of the eight options), to major structural changes to water control structures (six of the eight options) and complete hydrologic separation (four of the eight options). The cost for the options analyzed ranges from no cost to more than $18 billion for complete lakefront hydrologic separation. The eight alternatives analyzed in GLMRIS and their costs are shown below in Table 4 . Several of the alternatives include one or more of a new and previously untested structure, referred to by the Corps as a "GLMRIS lock." The lock would be built and operated to specifications meant to negate the potential for the spread of ANS. The lock is shown below in Figure 6 . The GLMRIS report describes the Brandon Road Lock and Dam (BRLD) as a promising location to control the movement of carp upstream into the Great Lakes basin, where all five aquatic pathways between the Great Lakes and Mississippi River basins share a connection point, as seen in Figure 7 . The height of the Brandon Road dam prevents fish from potentially swimming or jumping upstream; and therefore the only aquatic connection is through the adjacent lock. The BRLD was highlighted for implementation of proposed control technologies in three out of the six structural alternatives presented in the GLMRIS. In May 2014, the Corps released a summary of public comments received on the alternatives outlined in the GLMRIS report. The summary report found a split in public opinion, noting 40% of commenters favored an alternative that involved physical separation, while 35% preferred an alternative that allowed navigation within the CAWS. Based on this public input, the Corps concluded that a formal evaluation of options and technologies near the BRLD was an appropriate next step to prevent or reduce the spread of aquatic invasive species. Authority for the study was provided in Section 1039 of the Water Resources Reform and Development Act (WRRDA) of 2014 ( P.L. 113-121 ), which directed the Corps to establish formal emergency procedures to prevent the passing of Asian carp beyond the BRLD. Congress provided guidance for the Brandon Road Study in the explanatory statement for P.L. 114-113 , the Consolidated Appropriations Act of 2016, directing the Corps to expedite completion of the Brandon Road Study. After receiving pressure from Congress, the Trump Administration released a draft plan for the BRLD in August 2017. Those pushing for a delay of the release of the report proposed further planning and coordination until a new Assistant Secretary of the Army for Civil Works was appointed. On the other hand, two bills ( H.R. 2983 and S. 1398 ) were introduced in June 2017 that would have mandated the Corps to release the draft report. The study is a follow-up to the broader GLMRIS, which surveyed potential options to separate the Great Lakes and Mississippi River drainage basins so as to prevent encroachment of Asian carp and other invasive species. After public comment closes (October 2017), the Corps expects that a final feasibility study will take roughly two years to complete. The Draft Brandon Road Study evaluated six alternatives and includes a tentative recommendation. Alternatives were evaluated based on probability of establishment in Great Lakes, safety risk, system performance, construction and National Economic Development (NED) costs, and anticipated implementation date, among other things. Alternatives are further described in Table 5 . The study selected the technology alternative, including both complex noise and an electric barrier, as the tentatively selected plan, which involves using nonstructural control, complex noise, water jets, an engineered channel, an electric barrier, and other measures to prevent Asian carp from traveling further upstream. The Corps report says this alternative was selected because it both reduces risk of invasive establishment as well as allows for continued navigation. These measures would cost over $275 million and could be complete by 2025 at the earliest. While the lock closure alternative was ranked as the most effective alternative, the Corps calculated that the closure of navigation would cost the shipping industry more than $300 million annually. Some express concern for how the plan could affect commercial navigation, citing the effectiveness of control strategies to date at keeping Asian carp out of Lake Michigan. On the other hand, proponents for the plan in the recreational fishing and boating industry emphasize the risk invasive species pose to the aquatic ecosystem. Apart from efforts in the Great Lake region, some have expressed concern that Asian carp could continue north on the Mississippi River and its tributaries and damage ecosystems in the Upper Mississippi. Section 5016 of WRDA 2007 authorized the Corps to study and construct a project to prevent dispersal of aquatic nuisance species into the northern reaches of the Upper Mississippi River system. Section 1039 of WRRDA 2014 ( P.L. 113-121 ) authorized FWS, in collaboration with the National Park Service (NPS) and USGS, to provide technical assistance, best practices, and support to state and local governments working to slow the spread of Asian carp in the Upper Mississippi and Ohio River Basins. In FY2015, federal agencies spent approximately $2.3 million on activities in the Upper Mississippi and Ohio River Basins (excluding the CAWS). The apparent ecological and economic threat posed by the migration of Asian carp into the Great Lakes via the CAWS has prompted litigation to prevent such risks. Several Great Lakes states, particularly Michigan, have pursued a number of legal options, seeking court orders to restrict the entry of Asian carp into Lake Michigan and the Great Lakes generally. In December 2009, Michigan petitioned the U.S. Supreme Court to amend its 1967 decree regarding diversion of water between Lake Michigan and the Illinois Waterway, including the Chicago Sanitary and Ship Canal. With the support of other Great Lakes state and regional governments, Michigan sought an order from the Court that would declare the operation of diversion facilities within the CAWS to be a public nuisance that threatened natural resources and allowed the introduction of invasive species into Lake Michigan. Michigan also requested that the Court order Illinois, the U.S. Army Corps of Engineers, and the Metropolitan Water Reclamation District of Greater Chicago to prevent the spread of Asian carp into the lake by closing shipping locks and taking other necessary measures to prevent the carp from entering Lake Michigan. Without comment, the Court denied Michigan's requests. In February 2010, Michigan renewed its motion and requested that the Court reconsider an order to close the Chicago-area locks based on new evidence showing Asian carp to be present in Lake Michigan. The Court again denied Michigan's motion without comment. After a live Asian carp was found beyond the electric barrier in the summer of 2010, Michigan, Minnesota, Ohio, Pennsylvania, and Wisconsin sued the U.S. Army Corps of Engineers and the Metropolitan Water Reclamation District of Greater Chicago (MWRD) in federal district court, seeking similar remedial measures as they requested in their attempt to amend the Supreme Court's 1967 decree. The states sought an order compelling the Corps and MWRD to abate the public nuisance created by the migration of Asian carp into the Great Lakes, to minimize the risk of migration from the CAWS to Lake Michigan, and to implement permanent measures to separate Illinois waters from Lake Michigan. The court rejected each of the proposed remedial measures, noting a lack of consensus on the extent of the threat and the efficacy of the proposed solutions. It held that the discovery of a live fish above the barrier did not prove that the barrier had failed and noted that the cause of the introduction of the fish to that particular section of the waterway was not known. The court emphasized "its recognition that the potential harm in a worst case scenario is great" but concluded that "the level of certainty of harm is low based on the evidence adduced to date." In July 2014, a federal appeals court again denied unanimously the states' motion. For many decades, the United States and Canada have conducted a major cooperative program to deal with the consequences arising from the introduction of the non-native sea lamprey, Petromyzon marinus , to the Great Lakes. Through the Great Lakes Fishery Commission, the governments of the United States and Canada, together with neighboring states and provinces, spend millions of dollars annually to control this invasive parasite and limit its damage to sport and commercial fisheries. Canada has assessed the risks posed by the introduction of Asian carp, concluding that the risk of impact would be high in some parts of Canada, including the southern Great Lakes basin, by the four species of Asian carp. Canada is currently addressing these concerns through its participation in the bilateral Great Lakes Fishery Commission and the ACRCC. In 2015, nine Grass carp were found on the Canadian side of the Great Lakes. The Great Lakes Water Quality Agreement (Agreement) between the United States and Canada, coordinated by EPA, was renewed in 2012, stating that the Great Lakes should be "free from the introduction and spread of aquatic invasive species" which negatively impact water quality, among other things. The Agreement commits to a triennial review of the state of the Great Lakes to analyze basin-wide environmental trends and ecosystem conditions. The 2017 State of the Great Lakes report ranks the status of invasive species in the Great Lakes as poor with a deteriorating trend. The report notes that, while the number of new invasive species to the ecosystem has slowed, at least 30% of the aquatic invasive species in the Great Lakes have significant environmental impact. As previously mentioned, Section 1039 of P.L. 113-121 directed the Corps to implement additional measures to prevent aquatic nuisance species from bypassing the Chicago Sanitary and Ship Canal Dispersal Barrier Project and to prevent aquatic nuisance species from dispersing into the Great Lakes. Congress has previously held several hearings on Asian carp. On February 9, 2010, the House Transportation and Infrastructure Subcommittee on Water Resources and Environment held a hearing on Asian carp in the Great Lakes. On February 25, 2010, the Senate Energy and Natural Resources Subcommittee on Water and Power held a hearing to examine the science and policy behind efforts to prevent the introduction of Asian carp into the Great Lakes. On July 14, 2010, the Senate Energy and Natural Resources Subcommittee on Water and Power held an oversight hearing to examine the federal response to the discovery of Asian carp in Lake Calumet, Illinois. While no hearings have been held to date in the 115 th Congress, appropriations concerns relating to Asian carp have been discussed. House and Senate committee reports for the Energy and Water Development appropriations bill for FY2018 provide guidance for use of Corps funding related to Asian carp prevention. The Senate report would direct the Corps to provide quarterly updates to Congress on federal efforts to prevent the spread of Asian carp. The House report would provide funds for existing electric barriers in the CAWS and provide semiannual progress updates to Congress. Both reports also directed the Corps to release the Brandon Road Study in draft form. One ongoing question for Congress is whether to authorize the Brandon Road Study's findings, and if so when this should occur. In recent years, a finalized feasibility study by the Corps and a Report by the Chief of Engineers (or "Chief's Report") recommending a project for construction have typically formed the basis for Corps project construction authorizations in Water Resources Development Acts. Thus, formal authorization of the Brandon Road study's findings could encounter procedural hurdles in pursuing congressional authorization as long as the study remains in draft form. Bills introduced in the 115 th Congress, H.R. 2983 and S. 1398 , would have required the Corps to release a draft version of the GLMRIS Brandon Road Study, which was subsequently released in August 2017. Other authorities have been enacted in prior congresses. In the 112 th Congress, Division B, Section 105, of P.L. 112-74 authorized the Corps of Engineers to implement emergency measures to exclude Asian carp from the Great Lakes, and Section 1538 of P.L. 112-141 authorized expedited completion of parts of the GLMRIS study (see above section, " GLMRIS Study "). In the 113 th Congress, Section 1039 of P.L. 113-121 directed the Corps to establish formal emergency procedures to prevent the passing of Asian carp beyond the Brandon Road Lock and Dam. Congress provided guidance for the Brandon Road Study in the explanatory statement for P.L. 114-113 , directing the Corps to expedite completion of the Brandon Road Study.
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Four species of nonindigenous Asian carp are expanding their range in U.S. waterways, resulting in a variety of concerns and problems. Three species—bighead, silver, and black carp—are of particular note, based on the perceived degree of environmental concern. Current controversy relates to what measures might be necessary and sufficient to prevent movement of Asian carp from the Mississippi River drainage into the Great Lakes through the Chicago Area Waterway System. Recent federal response and coordination measures direct actions to avoid the possibility of carp becoming established in the Great Lakes. These include ongoing studies of efforts to separate the two drainage basins. According to the Great Lakes Fishery Commission, Asian carp pose a significant threat to commercial and recreational fisheries of the Great Lakes. Asian carp populations could expand rapidly and change the composition of Great Lakes ecosystems. Native species could be harmed because Asian carp are likely to compete with them for food and modify their habitat. It has been widely reported that Great Lakes fisheries generate economic activity of approximately $7 billion annually. Although Asian carp introduction is likely to modify Great Lakes ecosystems and cause harm to fisheries, studies forecasting the extent of potential harm are not available. Therefore, it is not possible to provide estimates of potential changes in the regional economy or economic value (social welfare) by lake, species, or fishery. The locks and waterways of the Chicago Area Waterway System (CAWS) have been a focal point for those debating how to prevent Asian carp encroachment on the Great Lakes. The CAWS is the only navigable link between the Great Lakes and the Mississippi River, and many note the potential of these waterways to facilitate invasive species transfers from one basin to the other. The U.S. Army Corps of Engineers (Corps) constructed and is operating electrical barriers to prevent fish passage through these waterways. In light of indications that Asian carp may be present near the Great Lakes, beginning in FY2010 the Obama Administration increased federal funding to prevent fish encroachment and related damage. Part of this funding was spent by the Corps to explore options that would achieve "hydrologic separation" of the Great Lakes and Mississippi River drainage basins. In January 2014, the Corps released a study (known as the "GLMRIS" study) which outlined a number of potential options ranging from no action to more than $18 billion for complete hydrologic separation and related mitigation. After pressure from Congress, the Corps in August 2017 released a draft of the Brandon Road Lock and Dam study (i.e., a follow-up study to GLMRIS focusing on a specific project) and recommended a tentatively selected plan. The selected alternative involves nonstructural control, complex noise, an electric barrier, and other measures, which would cost over $275 million and take four years to complete. Since December 2010, Michigan and other Great Lakes states have filed a number of requests for court-ordered measures to stop the migration of invasive Asian carp toward Lake Michigan from the Mississippi River basin via the CAWS. The U.S. Supreme Court denied several motions for injunctions to force Illinois, the Corps, and the Metropolitan Water Reclamation District of Greater Chicago to take necessary measures to prevent the carp from entering Lake Michigan. Michigan, Minnesota, Ohio, Pennsylvania, and Wisconsin sought a separate order in federal district court seeking similar relief, which was also denied. Bills introduced in the 115th Congress, H.R. 2983 and S. 1398, would have required the Corps to release a draft version of the GLMRIS Brandon Road Study (which was subsequently released in August 2017). With the release of the study, some in Congress may wish to authorize its draft contents, or direct other actions by the Corps and other agencies to stem the further spread of Asian carp.
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When the effects of the 1929 Depression began to be felt by the rest of the nation, rural residents had been struggling for several years with low incomes and low standards of living. The Federal Emergency Relief Administration began aiding rural families in 1932. Later, the Farm Security Administration and the Work Projects Administration provided much needed assistance to rural families and farm households. In the post-World War II era, widespread rural poverty, most notably among farmers, continued to dominate rural policy concerns. The Eisenhower Administration's Under Secretary for Agriculture, True D. Morse, began a Rural Development Program in 1955 to assist low-income farmers. Because agriculture was the major economic activity in many rural areas of the time, a focus on farms and farm households became de facto rural policy. The War on Poverty during the 1960s continued the focus on rural poverty as a central policy issue. With the continued decline in agriculture as rural America's dominant economic activity, policy attention shifted to rural revitalization. The 1980s farm financial crisis and economic dislocation in rural America brought the importance of rural structural change to the forefront of policy concerns. The further decline of farming to less than 8% of rural employment and the loss of many manufacturing jobs during the past decade have highlighted the growing gap between many rural areas and the nation's urban/suburban areas. While no overarching framework guides rural policy at the federal level, adequate housing, employment creation and business retention, human capital concerns, poverty issues, medical care, and physical infrastructure development remain key foci of federal rural policy. The rural population has declined over the past decade. According to the U.S. Census, as of July 2012, approximately 46.2 million people (14.6% of the U.S. population) lived in rural areas, down from approximately 16% in 2000. While rural farming and mining counties have long experienced dwindling populations, more recently rural retirement and recreation areas have also seen declines as the baby-boomer generation increasingly opts for urban areas in retirement. Manufacturing now accounts for about 22% of rural private sector earnings and about 11% of all rural jobs. The service sector, as with the U.S. domestic economy as a whole, however, dominates rural job opportunities. Although over 90% of total farm household income now comes from off-farm sources, farming, and agriculture more generally, remain the major legislative focus for much of congressional debate on rural policy. Since 1973, omnibus farm bills have included a rural development title. The most recently passed is Title VI of the Food, Conservation, and Energy Act of 2008 ( P.L. 110-246 ). Agriculture and manufacturing issues are increasingly seen as part of global and regional restructuring issues, which have significant implications for rural areas, especially those areas where these production sectors remain dominant. How to position rural areas to better compete in a global environment is a key issue framing debates about the future of rural America. Omnibus farm bills are the major modern legislative vehicle for addressing many rural development issues. While other legislation has significant implications for rural areas and rural residents (e.g., transportation initiatives, environmental regulation, finance and taxation, Medicare, Social Security), Congress has used periodic farm bills to address emerging rural issues as well as to reauthorize a wide range of rural programs administered by the various USDA rural development mission agencies. While the extent of overlap between federal agencies and programs targeting rural areas has been of concern to some rural policy observers, legislation enacted since 1990 reflects an effort to address rural issues more comprehensively. USDA's rural development mission is to enhance rural communities by targeting financial and technical resources to areas of greatest need. Three agencies, established by the Agricultural Reorganization Act of 1994 ( P.L. 103-354 ), are responsible for the mission area: the Rural Housing Service (RHS), the Rural Business-Cooperative Service (RBS), and the Rural Utilities Service (RUS). An Office of Community Development provides further community development support through USDA Rural Development's state offices. Congress has enacted many public laws bearing on rural policies and rural residents. The Rural Electrification Act of 1936, to cite one significant example, was central to the provision of electrical power and telephone service throughout rural America. In 1966, Congress created the National Commission on Rural Poverty, which published its famous report, The People Left Behind , the following year. Various loan and grant programs that target improvements in rural social welfare (e.g., housing) were also authorized and administered by the Farmers Home Administration (FmHA), the agency forerunner of today's USDA Office of Rural Development. Rural policy as an identified congressional concern, however, may be dated to the 1972 Rural Development Act, an amendment to the Consolidated Farmers Home Administration Act of 1961. In addition to periodic omnibus farm bills, new rural development legislation generally amends three major authorizing statutes: (1) the Consolidated Farm and Rural Development Act of 1972 (P.L. 92-419); (2) the Food, Agriculture, Conservation, and Trade Act of 1990 ( P.L. 101-624 ); and (3) the Rural Electrification Act of 1936. To illustrate the range of congressional legislative activity targeting rural areas, a brief description and overview of key sections of the basic statutory authorities for rural development programs are provided below. The act established the Rural Electrification Administration (REA) during the Great Depression to create jobs and electrify rural areas by providing subsidized loans and grants to rural electric cooperatives. In 1949, telephone cooperatives also were brought under the program. Cooperatives are a common form of business organization in rural areas, structured essentially as tax-exempt entities owned by the cooperative membership. In the 1930s, only a few farms and rural households had access to electricity; by the mid-1950s, the proportion of rural homes with electricity matched suburban penetration, and by 1975, more than 99% of all farms had electricity. Likewise, by the mid-1970s, telephone penetration in rural areas had topped 90%, and it has held steady at roughly 95% of households for the past 20 years. The Rural Utilities Service (RUS) is now the agency administering rural electric programs that were previously overseen by the REA. The REA was eliminated in the 1994 USDA reorganization (see below) and replaced by the RUS. The legislation was originally enacted as the Consolidated Farmers Home Administration Act of 1961. In 1972, Title V was changed to the Consolidated Farm and Rural Development Act, and is often referred to as the ConAct. The ConAct, as amended, currently serves as the authorizing statute for most USDA rural development lending and grant programs. Title V directed the Secretary of Agriculture to provide leadership within the executive branch and to assume responsibility for coordinating a nationwide rural development program using the services of executive branch departments and agencies, including, but not limited to, the agencies, bureaus, offices, and services of the Department of Agriculture, in coordination with rural development programs of state and local governments. The act also authorized the Community Facility Loan program, the Rural Business and Industry Loan program, and the Rural Business Enterprise Grant program. This legislation affirmed USDA as the lead agency for rural development. (The 1972 act named USDA as the lead federal coordinator for rural policy.) The act also added responsibilities to the 1972 Rural Development Act. It authorized the Secretary of Agriculture to expand the department's leadership role through which multi-state, state, sub-state, and local rural development needs, plans, and recommendations can be received and assessed on a continuing basis. Part of the omnibus 1990 farm bill. Title XXIII amended the Consolidated Farm and Rural Development Act of 1972 to establish in USDA the Rural Development Administration (RDA). Legislative action saw significant debate between House and Senate Appropriations Committees with the House Agriculture Committee over establishing the RDA. The newly formed RDA absorbed all non-farm FmHA functions. Important provisions included Establishing (1) a Rural Partnerships Investment Board to provide lines of credit for rural economic development revolving funds; (2) (in the Department of the Treasury) the Rural Business Investment Fund; and (3) local revolving funds. Amended the Consolidated Farm and Rural Development Act of 1972 to establish a delivery system for certain rural development programs; Providing rural water and waste facilities. Amended the Farm Credit Act of 1971 to authorize lending for water and waste projects and revised water and waste facility financing provisions. Established a rural wastewater treatment circuit rider program. Amended the Consolidated Farm and Rural Development Act to establish emergency community water assistance grants and water and waste facility loans and grants to alleviate health risks; Enhancing human resources. Provided for enhanced rural community access to advanced telecommunications. Amended the Consolidated Farm and Rural Development Act to authorize loans for business telecommunications partnerships and establish rural emergency assistance loans; Supporting rural business. Amended the Rural Electrification Act of 1936 to establish a technical assistance unit, defer economic development loan payments, and establish the Rural Incubator Fund to promote rural economic development. Title VIII authorized the first rural Empowerment Zones and Enterprise Communities (EZ/ECs). The EZ/EC program was a grant-making initiative whose objective is to revitalize low-income rural communities (and low-income urban areas) in ways that attract private sector investment. USDA administered the rural EZ/EC program, and the Department of Housing and Urban Development administers the urban EZ/EC program. In December 1994, three rural Empowerment Zones (EZ) and 30 rural Enterprise Communities (EC) were named. The Taxpayers Relief Act of 1997 added two additional rural EZs and 10 more rural ECs. A third round of competition, authorized by the Consolidated Appropriations Act of 2001, created two additional rural EZs. Although tax incentives for EZ Communities were extended through December 31, 2013, by P.L. 112-240 , the rural EC program expired on December 2009, per P.L. 111-20 . This means that all rural ECs designations expired on December 31, 2009. Currently, USDA Rural Development is not authorized to designate any new Empowerment Zones or Enterprise Communities. Title II authorized reorganization of the Department of Agriculture. It authorized the Secretary to establish the position of Under Secretary of Agriculture for Rural Economic and Community Development to succeed the Under Secretary of Agriculture for Small Community and Rural Development. The act further organized rural development into the Rural Housing Service (community facilities, technical assistance, and outreach), Rural Business-Cooperative Service (cooperatives, business and industry loans), and the Rural Utilities Service (electric, telecommunications, water). The legislation also abolished the Rural Electrification Administration established under the Rural Electrification Act of 1936 establishing the Rural Utilities Service as its successor. This act is the 1996 omnibus farm bill. Title VII was the Rural Development title. Several major initiatives were established in this legislation, including the following: Revised the rural distance learning and medical link programs into programs to finance the construction of facilities and systems to provide rural areas with telemedicine and distance learning services. Amended the Consolidated Farm and Rural Development Act of 1972 to increase the grant amounts authorized to be made by the Secretary for water and waste facilities. Revised the definition of "rural" and "rural area," for the purposes of eligibility for grants and loans for such facilities, to limit eligibility to those cities, towns, or unincorporated areas with populations of no more than 10,000 residents. Established mandatory funding for a Fund for Rural America for rural research, economic development, and housing. Established the Rural Community Advancement Program (RCAP), a consolidated program of existing grants, loans, guarantees, and other assistance to local communities and federally recognized Indian tribes. This is the 2002 farm bill. Title VI, in addition to providing funds for various existing rural loan and grant programs, also authorized several new rural development initiatives. Major new initiatives included provisions funded through direct (mandatory) spending. Historically, mandatory funding for rural development initiatives had not been authorized. Mandatory programs do not require annual appropriations. Spending for these programs is made available through the Commodity Credit Corporation. For FY2002-FY2007, new mandatory programs included The Rural Strategic Investment Fund established a National Board on Rural America that would provide $100 million in planning grants to certified Regional Investment Boards. The Rural Business Investment Program provided $100 million in loan guarantees and subsidies to form Rural Business Investment corporations that would make equity investments to small firms. The program would be administered through the Small Business Administration. Enhanced Access to Broadband Service to Rural Areas provided $10 million-$20 million per year, FY2002-FY2007, in grants and loans. Rural Local Television Broadcast Signal Loan Guarantees authorized $80 million under the Launching Our Communities' Access to Local Television Act of 2000. Value-added Agricultural Product Market Development Grants provided $40 million per year, FY2002-FY2007, to independent producers and producer-owned enterprises. There was also a 5% set-aside for organic production. $15 million of this funding was earmarked for 10 new Agriculture Innovation Centers for technical assistance to value-added agricultural businesses. The 10 centers were named in FY2003. The Rural America Infrastructure Development Account authorized a one-time funding of pending water and waste water applications of $360 million. The Rural Firefighters and Emergency Personnel Grant Program provided $10 million per year, FY2003-FY2007 funding to train emergency response personnel. Appropriators blocked most of the mandatory funding for several of these programs between FY2004 and FY2007. Other mandatory programs were funded through authorized discretionary appropriations, although not always in the same amounts as authorized. These provisions expired in 2007, although the 2008 farm bill ( P.L. 110-246 ) reauthorized several of these programs and funded them through annual appropriations rather than mandatory spending. This is the most recent omnibus farm bill, enacted in June 2008. The bill expired in September 2012 and was extended through December 2013 at current funding levels by the American Taxpayer Relief Act of 2012 ( P.L. 112-240 ). Title VI of this farm bill expanded broadband access in rural areas, created a new micro-entrepreneurial assistance program and a new rural collaborative investment program, and authorized three new regional economic development authorities. The bill also authorized $120 million for a one-time funding of pending water and wastewater infrastructure projects. Several programs authorized with mandatory spending in the 2002 farm bill were reauthorized with discretionary funding in the farm bill (Rural Firefighters and Emergency Personnel, Rural Business Investment Program, and Access to Broadband Services in Rural Areas). The Value-Added Product Grants Program, similarly authorized in the 2002 farm bill, was also reauthorized by P.L. 110-246 with $15 million of annual mandatory funding and $40 million of annual discretionary funding. The 2008 farm bill also modified the 2002 definition of "rural" to include "areas rural in character." This latter designation gives the Under Secretary for Rural Development discretion to make eligible certain rural areas that otherwise might be excluded from eligibility for USDA loans and grants. The section also made special designations for San Juan, Puerto Rico, and Honolulu, Hawaii. The provision also modified the definition of "rural" to establish criteria for defining rural areas that are contiguous to urban areas. Other new provisions in the rural development title included the following programs: loans and loan guarantees for locally or regionally produced agricultural food products supported by a 5% carve-out from the Business and Industry Guaranteed Loan program; a Rural Microentrepreneur Assistance Program to target economically disadvantaged microentrepreneurs (i.e., those who could compete in the private sector but have been impaired because of lack of credit opportunities and limited equity capital options); a Rural Collaborative Business Investment Program to increase the availability of equity capital in rural areas; the provision authorizes Regional Investment Strategy Grants, Rural Innovation Grants, and a Rural Endowment Loan Program; and three new regional economic development commissions: (1) Northern Border Regional Commission, (2) Southeast Crescent Regional Commission, and (3) Southwest Border Regional Commission. In addition to these newly authorized programs, the rural development title also included other provisions to create or to reauthorize and/or amend a wide variety of loan and grant programs that provide further assistance in four key areas: (1) broadband and telecommunications, (2) rural utilities infrastructure, (3) business and community development, and (4) regional development. The 2008 farm bill expired in 2012, but the 112 th Congress did not complete action and instead extended the law for one year ( P.L. 112-240 ). On February 7, 2014, the President signed into law the most recent farm bill, the Agricultural Act of 2014 ( P.L. 113-79 ). The bill authorized funding for many USDA Rural Development programs through FY2018. The Rural Development title of the 2014 farm bill reauthorized most existing rural development programs. The bill amended the water and waste water direct and guaranteed loan programs to encourage financing by private or cooperative lenders to the maximum extent possible. The law also provided a 3%-5% carve-out of the Community Facilities appropriation for technical assistance, and also encouraged the use of loan guarantees where possible. The law also included a new provision directing the Secretary of Agriculture to begin collecting data on the economic effects of the projects that USDA Rural Development funds to assess their long- and short-term viability, and directed the Secretary to develop simplified applications for funding. The Agricultural Act of 2014 eliminated several business programs, but consolidated many of their objectives into a broader program of Business Development grants. The law also provided $150 million in mandatory spending for pending rural development loans and grants and $63 million in mandatory spending for the Value-Added Product Grants program. The law retained the 2008 farm bill provision permitting communities that might otherwise be ineligible for USDA funding to petition USDA to designate their communities as "rural in character," thereby making them eligible for program support. The law also amended the definition of rural area in the 1949 Housing Act so that areas deemed rural between 2000 and 2010 would retain that designation until USDA receives data from the 2020 decennial census. The provision also raised the population threshold for eligibility from 25,000 to 35,000. The law also reauthorized funding for programs under the Rural Electrification Act of 1936, including the Access to Broadband Telecommunications Services in Rural Areas Program and the Distance Learning and Telemedicine Program. For Access to Broadband Telecommunication Services in Rural Areas, the law also established new procedures to compare applications and to set funding priorities. Additionally, a new Gigabit Network Pilot Program for high-speed broadband service was authorized at $10 million for each fiscal year FY2014-FY2018. The law also authorized a new Rural Energy Savings Program to fund loans to qualified consumers to implement energy efficiency measures. The following sections outline the various loan and grant programs administered by the three principal USDA Rural Development mission agencies: Rural Housing Service (RHS), Rural Business-Cooperative Service (RBS), and Rural Utilities Service (RUS). Program objectives, statutory authority, eligibility, and FY2005-FY2011 funding levels are provided. An overview of the programs administered by USDA's Office of Community Development is also provided. Key characteristics of rural housing needs are suggested by the following: Rural areas have a disproportionate share of the nation's substandard housing. There is a high incidence of poverty in rural America. There is an inadequate supply of affordable rural housing to meet demand in many rural areas. Mobile homes are increasingly pervasive in many rural areas. Homeownership is the principal form of housing in rural America. Rural households pay more of their income for housing than their urban counterparts. Hundreds of rural communities nationwide do not have access to clean residential drinking water and safe waste disposal systems. Development costs in rural areas are often disproportionately higher. Rural residents may have more limited access to mortgage credit. Rural minorities are less likely to own their homes than rural white households. The preamble to this landmark legislation declares that every American deserves a "decent home and a suitable living environment." Housing in the post-World War II era was in short supply, and many cities had housing that was in deteriorating condition. The Housing Act for the first time placed the federal government in the role of physically shaping U.S. urban and suburban areas. In doing so, the act influenced state and local polices regarding not only housing, but more broadly, social welfare policy, race relations, and economic development decisions. The act was significant in its creation of a new federal role, but it also was significant in establishing housing as a central policy focus, a focus that is more diminished today. To meet the goals of more and better housing, Title I of the Housing Act financed slum clearance under urban redevelopment/renewal programs. Title II increased authorization for Federal Housing Administration mortgage insurance. Title III committed the federal government to building 810,000 new public housing units by 1955. While the provisions of these titles were strongly influenced by cities and their immediately adjacent suburban areas, the Housing Act also recognized the shortages and low-quality housing that characterized much of rural America. Title V of the act gave authorization to the Farmers Home Administration to grant mortgages for the purchase or repair of rural single-family houses. Title V authorized financial assistance in rural areas to farmers, owners, developers, and elderly persons for the purchase of rural property and construction of adequate facilities, insurance on various loans, and financial assistance for rental housing for farm workers. Through the Rural Housing Insurance Fund Program account established by the Housing and Urban Development Act of 1965 (P.L. 89-117), the USDA Rural Housing Service today, as with the Farmers Home Administration in the past, insures and guarantees a variety of housing loans for home purchases, repair, and rental housing development. This legislation reaffirmed the 1949 Housing Act, but also placed greater emphasis on the failures of the 1949 act to address the problems of housing for low-income families. The 1968 act authorized the Federal Housing Administration's Section 235 homeownership program with the goal of expanding homeownership, especially among low-income families. The 1968 act had the goal of creating nearly 26 million new units of housing, 6 million of which were to be reserved for low-income persons. The legislation enacts the New Communities Act of 1968, National Flood Insurance Act of 1968, Urban Property Protection and Reinsurance Act of 1968, and Interstate Land Sales Full Disclosure Act. The 1968 act also created the Government National Mortgage Association (Ginnie Mae). Titles I through V are also referred to as the Housing and Urban-Rural Recovery Act of 1983. It amends the Housing and Community Development Act of 1974 and the United States Housing Act of 1937. Title V amends the 1949 Housing Act to require that at least 40% of all dwelling units financed by a rural housing loan through the Farmers Home Administration (now Rural Housing Service) and at least 30% of such units in each state be available only for very low-income persons and families. It authorizes loans for manufactured homes and lots meeting specified safety standards and installation, structural, site, and energy-conserving requirements, whether such homes and lots are real property, personal property, or both. The following programs are authorized by the Housing Act of 1949 (as amended) and include programs for individual homeownership and rental housing. The programs do not require annual reauthorization or reauthorization in periodic omnibus farm bills. Budget authorization is expressed in terms of loan subsidies and loan authority . Housing loan subsidies are transfers from the Treasury to lenders who may then provide loans at reduced interest rates to low-income borrowers who otherwise would not be able to obtain credit under a lender's usual criteria. Loan authority refers to the total value of all loans made under a particular program. A subsidy "leverages" a larger loan amount. A small total loan subsidy permits a relatively large amount of principal actually lent to a borrower. Loan authorization refers to the total amount of loan indebtedness that Congress permits a particular program to assume. Funding for Rural Housing Service homeownership programs is provided by the Rural Housing Insurance Fund through three financing mechanisms: (1) direct loans, (2) guaranteed loans, and (3) grants. Direct loans are loans whose principal is subsidized by the federal government. The principal for a guaranteed loan is provided by a private lender, but the lender is protected by the federal government in the event a borrower defaults. If a guaranteed loan is made at market interest rates and the default rate is zero, then the cost to the federal government for making the guaranteed loan is zero. A grant is a direct outlay to an applicant, often on the basis of a competition for funds. Funding levels for individual grants, loan subsidies, and total levels of loan authorization are established in annual appropriations legislation. This is USDA's main housing loan program and is designed to help low-income individuals purchase houses in rural areas. Funds can also be used to build, repair, or renovate a house, including providing water and sewage facilities. The program provides fixed-interest mortgage financing to low-income families who are unable to obtain credit elsewhere. The program also provides "supervised credit" including pre-loan and post-loan credit counseling to its borrowers to help them maintain their homes during financial crises. While the program benefits rural areas nationwide, the highest benefits (in per capita dollars) are in low-income areas such as the Delta South and rapidly growing areas in the West. Statutory Authority: Title V, Section 502 of the Housing Act of 1949; 42 U.S.C., Chapter 8A, Subchapter III, 1471, et seq. Financing: Loans are subsidized at a graduated interest rate from 1% over Treasury's cost of money, depending on family income. Applicants may obtain 100% financing and loans are for up to 33 years (38 years for those with incomes below 60% of the area median household income). Interest rates are determined so that a family pays from 22% to 26% of their income for principal, interest, taxes, and insurance. Eligibility: Borrowers must be either very-low income (less than 50% of median family income in the rural area where they reside) or low-income (50%-80% of median family income). Housing must be modest in size, design, and cost. Funding: Enacted loan authorization in FY2005: $1.14 billion; FY2006: $1.13 billion; FY2007: $1.13 billion; FY2008: $1.12 billion; FY2009: $1.1 billion; FY2010: $1.1 billion; FY2011: $1.1 billion; FY2012: $900 million; FY2013: $840.1 million; FY2014: $900.0 million; FY2015: $900.0 million; FY2016: $900.0 million. Loan subsidies (budget authority) FY2005: $132.1 million; FY2006: $128.6 million; FY2007: $113.3 million; FY2008: $105.1 million; FY2009: $75.4 million; FY2010: $40.7 million; FY2011: $70.1 million; FY2012: $45.6 million; FY2013: $50.1 million; FY2014: $24.5 million; FY2015: $66.4 million; FY2016: $60.7 million. Provides loan guarantees to private lenders for low- and moderate-income families to purchase housing. Objective is to provide an incentive to private lenders to offer loans for 30-year mortgages to rural residents who would otherwise be unable to obtain credit. Statutory Authority: Title V, Section 502 of the Housing Act of 1949; 42 U.S.C., Chapter 8A, Subchapter III, 1471, et seq. Financing: The government guarantees 90% of loan principal as an encouragement to private lenders to make loans to rural residents whose incomes are between 80% and 115% of the median county income. Loans may be up to 100% of market value or acquisition costs, whichever is less. There is no down payment requirement. Funding : Enacted loan authorization in FY2005: $3.28 billion; FY2006: $3.64 billion; FY2007: $3.64 billion; FY2008: $4.19 billion; FY2009: $6.2 billion; FY2010: $12.0 billion; FY2011: $24.0 billion; FY2012: $24.0 billion; FY2013: $24.0 billion: FY2014: $24.0 billion; FY2015: $24.0 billion; FY2016: $24.0 billion. Loan subsidies (budget authority) in FY2005: $33.3 million; FY2006: $40.5 million; FY2007: $42.6 million; FY2008: $50.0 million. FY2009: $79.0 million; FY2010: $172.8 million. Beginning in FY2011, the program became self-funding and required no budget authority to support the loan authorization level. This program provides loan and grant assistance to very-low and low-income homeowners to make housing repairs that remove various health and safety hazards from their houses or to improve or modernize a home. Grants may be made to cover the costs of such improvements as repairing roofs, providing toilet facilities, providing a convenient and sanitary water supply, and installation costs in obtaining central water and sewer service. Statutory Authority: Title V, Section 504 of the Housing Act of 1949; 42 U.S.C., Chapter 8A, Subchapter III, 1471, et seq. Financing: Loans of up to $20,000 and grants of up to $7,500 are available. Eligibility Criteria: Loans are available to very low-income rural residents who own and occupy a dwelling in need of repair. A homeowner must be unable to obtain affordable credit elsewhere. Grants are limited to elderly home owners (age 62 and older) whose incomes are 50% or less of the median in the rural area where they reside. Grant funds may be used only for removal of a health or safety hazard. Loan and grant assistance cannot exceed $27,000 to an individual. Funding: Enacted loan authorization in FY2005: $36.7 million (includes emergency supplemental); FY2006: $68.8 million (includes emergency supplemental); FY2007: $34.6 million; FY2008: $34.4 million; FY2009: $34.4 million; FY2010: $34.4 million; FY2011: $23.4 million; FY2012: $10.0 million; FY2013: $26.1 million; FY2014: $26.3 million; FY2015: $26.3 million; FY2016: $26.3 million. Loan subsidies (budget authority) in FY2005: $10.6 million (includes emergency supplemental); FY2006: $20.1 million (includes emergency supplemental); FY2007: $10.2 million; FY2008: $9.7 million; FY2009: $9.2 million; FY2010: $4.4 million; FY2011: $4.4 million; FY2012: $1.4 million; FY2013: $1.8 million; FY2014: $2.2 million; FY2015: $3.7 million; FY2016: $3.4 million. Housing Assistance Grants in FY2005: $37.4 million (includes emergency supplemental); FY2006: $49.6 million (includes emergency supplemental); FY2007: $29.7 million; FY2008: $38.7 million; FY2009: $41.5 million; FY2010: $45.5 million; FY2011: $40.3 million; FY2012: $33.1 million; FY2013: $3.6 million; FY2014: $32.2 million; FY2015:$32.2 million; FY2016: $32.2 million. This is the only nationwide program to provide housing for farm laborers. Loans and grants are provided to buy, build, improve, or repair housing for farm labor, including persons whose income is earned in aquaculture and on-farm processing. Section 516 grants are used in conjunction with the loans to finance affordable, off-farm rental housing to low-wage farm workers. The 2008 farm bill amended the Farm Labor Housing program to include aquaculture workers and workers in commodity processing facilities. Statutory Authority: Title V, Section 514 and 516 of the Housing Act of 1949; 42 U.S.C., Chapter 8A, Subchapter III, 1484 and 1486. Financing: This program provides direct loans to farm owners, Indian tribes, farmer associations, public bodies, and nonprofit organizations to provide living quarters, furnishings, and related facilities for domestic farm workers. Section 514 loans have a 1% interest rate and a maximum repayment term of 33 years. Grants may cover up to 90% of development costs. Eligibility Criteria: Farm workers who lease Section 514/516 units must be either U.S. citizens or permanent residents, and the majority of their income must come from farm work. Grants are available only to governments or nonprofit organizations. Funding : Loan authorization in FY2005: $32.9 million ($15.5 million in subsidies) and $30.3 million in grants; FY2006: $38.1 million ($17.0 million in loan subsidies) and $13.9 million in grants; FY2007: $38.1 million ($18.3 million in loan subsidies) and $13.9 million in grants; FY2008: $27.5 million ($11.9 million in loan subsidies) and $9.9 million in grants; FY2009: $21.7 million ($9.1 million in loan subsidies) and $9.1 million in grants; FY2010: $27.3 million ($9.9 million in subsidies) and $9.9 million in grants; FY2011: $25.7 million ($9.8 million in subsidies) and $9.8 million in grants; FY2012: $27.3 million ($7.1 million in subsidies) and $7.1 million in grants; FY2013: $21.4 million ($7.1 million in subsides) and $8.3 million in grants; FY2014: $23.8 million ($5.6 million in subsidies) and $8.3 million in grants; FY2015: $23.6 million ($7.6 million in subsidies) and $8.3 million in grants; FY2016: $23.8 million ($6.8 million in subsidies) and $8.3 million in grants. This program allows very-low- and low-income rural Americans to use "sweat equity" to reduce the costs of home ownership. Nonprofit organizations and local governments may obtain grant funds to enable them to provide technical assistance to groups of families that work cooperatively to build their houses. Typically, future homeowners use Section 502 direct loans to finance their mortgages and, through their own labor on constructing the house, are able to reduce costs by 10%-15% while learning construction skills. Statutory Authority: Title V, Section 523 (b)(1)(A) of the Housing Act of 1949; 42 U.S.C. 1490(c)(B). Financing: Grants. Grantees typically also use Section 502 loans, although other mortgage tools are also used. Funds may be used to pay salaries, rent, and office expenses of the participating nonprofit organizations. Pre-development grants up to $10,000 are available to qualified organizations. Eligibility Criteria: Low income (50%-80% of area median family income). Funding : Grants for FY2005: $34.0 million; FY2006: $ 32.3 million; FY2007: $33.9 million; FY2008: $38.7 million; FY2009: $38.7 million; FY2010: $41.9 million; FY2011: $36.9 million; FY2012: $30.0 million; FY2013: $27.7 million; FY2014: $25.0 million; FY2015: $27.5 million; FY2016: $27.5 million. This program provides funds to nonprofit organizations to develop building sites for low- and moderate-income participants in the Self-Help Housing Program. The nonprofit organizations resell these improved sites to program participants at cost. The interest rate on the loans is 3%, and the nonprofit organizations repay the loans when they sell these properties. Statutory Authority: Title V, Section 523 (b)(1)(A) of the Housing Act of 1949; 42 U.S.C. 1490(c)(B). Financing: Loans are for two years. Section 523 loans bear 3% interest rates. Eligibility Criteria: Section 523 loans are made to acquire and develop sites only for housing constructed by the self-help method. Funding: Loan authorization FY2005: $2.3 million; FY2006: $5.0 million; FY2007: $5.0 million; FY2008: $5.0 million; FY2013: $10.0 million; FY2014: $5.0 million. Subsidy levels (budget authority) FY2005: $0; FY2006: $51,000; FY2007: $123,000; FY2008: $141,000; FY2009: $82,000; FY2010: $0; FY2011: $288,000; FY2012: $0; FY2013: $0; FY2014: $0; FY2015: $5 million; FY2016: $5.0 million. This program is very similar to the Section 523 program above except that once the sites are developed, they may be provided to any low- or moderate-income person, not just to the self-help participant. Statutory Authority: Title V, Section 524 (b)(1)(A) of the Housing Act of 1949; 42 U.S.C. 1480(d). Financing: Loans are for two years. Section 524 loans bear the market rate of interest. Eligibility Criteria: Section 524 loans are made to acquire and develop sites for any low- or moderate-income family. Funding : Loan authorization in FY2005: $450,000; FY2006: $5.0 million; FY2007: $5.0 million; FY2008: $5.0 million; FY2009: $5.0 million; FY2010: $5.0 million; FY2011: $5.0 million; FY2012: $0; FY2013: $0; FY2014: $5.0 million; FY2015: $5.0 million; FY2016: $5.0 million. The program is self-funding so loan subsidies are not necessary to support the loan authorization level. This program provides funding through nonprofit groups, Indian tribes, and government agencies to very-low- and low-income home owners to repair their houses, and to rental property owners for the rehabilitation of rental and cooperative housing to be rented to very-low- and low-income families. Statutory Authority: Title V, Section 533 of the Housing Act of 1949 (amended by Section 522 of the Housing and Urban-Rural Recovery Act of 1983); 42 U.S.C., Chapter 8A, Subchapter III, 1490m. Financing: Grants. Eligibility Criteria: Low- and very-low-income rural residents. Grants may also be made to rental property owners if they agree to make such units available to low- and very-low-income occupants. Assistance is limited to $15,000 per unit. Funding : FY2005: $8.8 million; FY2006: $9.9 million; FY2007: $9.9 million; FY2008: $9.7 million; FY2009: $10.1 million; FY2010: $9.4 million; FY2011: $8.6 million; FY2012: $7.4 million; FY2013: $3.3 million; FY2014: $0; FY2015: $0; FY2016: $0. The Section 515 rental housing program houses the poor through 50-year, 1% loans and rental assistance. The program is typically used in conjunction with the Section 521 Rental Assistance Program (see below). With assistance, tenants pay a maximum of 30% of their income toward rent and utilities. Some 515 projects also use Housing and Urban Development Section 8 project-based assistance, which enables additional very-low-income families to be helped. There are four variations of the Section 515 loan program: (1) Cooperative Housing, (2) Downtown Renewal Areas, (3) Congregate Housing or Group Homes for Persons with Disabilities, and (4) the Rural Housing Demonstration Program. Statutory Authority: Title V, Section 515 of the Housing Act of 1949; 42 U.S.C. 1490(c). Financing: This program uses a public-private partnership to provide direct subsidized interest loans at 1% interest rate to limited-profit and nonprofit developers to construct or to renovate affordable rental complexes in rural areas. Eligibility Criteria: For very-low-, low-, and moderate-income families. In new Section 515 projects, 95% of tenants must have very low incomes. In existing projects, 75% of new tenants must have very low incomes. Funding: Loan authorization for FY2005: $99.2 million; FY2006: $99.0 million; FY2007: $99.9 million; FY2008: $68.2 million; FY2009: $67.7 million; FY2010: $69.5 million; FY2011: $69.5 million; FY2012: $64.5 million; FY2013: $29.2 million; FY2014: $28.4 million; FY2015: $28.4 million; FY2016: $28.4 million. Loan subsidies (budget authority) for FY2005: $46.7 million; FY2006: $45.4 million; FY2007: $45.2 million; FY2008: $29.0 million; FY2009: $27.8 million; FY2010: $18.9 million; FY2011: $23.4 million; FY2012: $22.0 million; FY2013: $10.3 million; FY2014: $6.6 million; FY2015: $9.8 million; FY2016: $8.4 million. The program funds construction, acquisition, and rehabilitation of multifamily housing for low- to moderate-income residents. It provides 90% loan guarantees to certified lenders to make rental housing affordable to low- and moderate-income residents. For the nonprofit sector, the program covers 97% loan-to-value ratios. Statutory Authority: Title V, Section 538 of the Housing Act of 1949; 42 U.S.C. 1485. Financing: Guarantees market-rate loans made by private lenders. Eligibility Criteria: Residents of the completed housing facility must be very-low- to moderate-income households; or elderly, or disabled persons with income not in excess of 115% of the median income of the surrounding area. Funding : Loan authorization in FY2005: $97.2 million; FY2006: $99.0 million; FY2007: $99.0 million; FY2008: $129.0 million; FY2009: $120.8 million; FY2010: $129.1 million; FY2011: $31.0 million; FY2012: $130.0 million; FY2013: $150.0 million; FY2014: $150.0 million; FY2015: $150.0 million; FY2016: $150.0 million. Loan subsides (budget authority) for FY2005: $3.4 million; FY2006: $5.4 million; FY2007: $7.6 million; FY2008: $12.1 million; FY2009: $8.1 million; FY2010: $1.5 million; FY2011: $3 million; FY2012: $0; FY2013: $0; FY2014: $0; FY2015: $0; FY2016: $0. The objective of this program is to help mitigate the burden on the nearly 25% of rural households who pay more than 30% of their income on housing costs. Statutory Authority: Title V, Section 521(a)(2) of the Housing Act of 1949; 42 U.S.C. 1490. Financing: Rental Assistance is project-based assistance used in conjunction with Section 515 and Section 514/516 loan/grant programs. The program provides rental assistance directly to the owners of some RHS-financed projects under contracts specifying that beneficiaries will pay no more than 30% of their income for rent. The program makes up the difference between the tenant's contribution and the rental charge. Eligibility Criteria: The subsidy goes to the housing unit, not an individual tenant. In effect, the subsidy indirectly goes to the tenant through lower rent payments. Funding: FY2005: $587.3 million; FY2006: $646.6 million; FY2007: $608.1 million; FY2008: $478.7 million; FY2009: $902.5 million; FY2010: $968.6 million; FY2011: $953.7 million; FY2012: $904.6 million; FY2013: $834.3 million; FY2014: $1.1 billion; FY2015: $1.1 million; FY2016: $1.2 million. (Rental assistance funding also includes rental assistance under the Section 502 (c)(5)(D) program, Section 515, and farm labor housing new construction.) Under this program, RHS may provide loans to low-income borrowers to purchase innovative housing units and systems that do not meet existing published standards, rules, regulations, or policies. The objective of the demonstration programs is to test new approaches to constructing housing under the statutory authority granted to the Secretary of Agriculture. The intended effect is to increase the availability of affordable rural housing for low-income families through innovative designs and systems. Statutory Authority: Title V, Section 506(b), Housing Act of 1949; 42 U.S.C. 1476. Financing: Loans and grants. Aggregate expenditures for the demonstration may not exceed $10 million in any fiscal year. Eligibility Criteria: Section 506 (b) requires that the health and safety of the population of the areas in which the demonstrations are carried out will not be adversely affected. Funding: Program funding is reserved through other RHS programs listed above. The Community Facilities loan and grant program, administered by RHS, supports essential community facilities in rural areas with a population of 20,000 or less. Essential facilities include fire stations, community centers, child care centers, and medical clinics, among other uses. In the Administration's 2015 Broadband Opportunity Initiative, broadband was cited as a potentially eligible program given the Community Facilities program's assistance to health clinics and recreation centers. Funding is allocated to state rural development offices, where state directors set priorities particular to their state's rural needs. From the total appropriation, the Community Facilities account also supports a rural community development initiative and an economic impact initiative. The 2014 farm bill ( P.L. 113-79 , Section 6006) authorized a technical assistance and training component for the Community Facilities program to assist communities in identifying and planning community facility needs. The provision authorizes not less than 3% or more than 5% of the total Community Facilities appropriation for the technical assistance component. Loans are made for constructing, enlarging, or improving essential community facilities in rural areas and towns of not more than 20,000 population. Eligible applicants must demonstrate that they cannot obtain funding in the commercial market at reasonable rates. Applications for health and public safety projects receive the highest priority. Interest rates are determined by the median family income of the area and range from 4.5% to 5.375%. In the case of guaranteed loans, the loans are made by a private lender, and the interest rate is negotiated between lender and borrower. Statutory Authority: Section 306(a)(1) of the Consolidated Farm and Rural Development Act of 1972. Financing: Direct and guaranteed loans. Eligibility Criteria: Priority is for loans to build essential community facilities that support public health and safety. The highest priority goes to projects located in communities with a population of 5,000 or less and to projects serving communities with median household incomes below the higher of the poverty line or 60% of the state non-metropolitan median household income. Health care, public safety, or public and community services are priority areas. Funding : Loan authorization levels for direct loans in FY2005: $729.3 million (includes hurricane emergency supplemental funding); FY2006: $297.0 million; FY2007: $297.0 million; FY2008: $294.9 million; FY2009: $294.9 million; FY2010: $294.9 million; FY2011: $290.5 million; FY2012: $1.3 billion; FY2013: $1.3 billion; FY2014: $2.2 billion; FY2015: $2.2 billion; FY2016: $2.2 billion. Subsidy levels for direct loans in FY2005: $29.5 million; FY2006: $9.9 million; FY2007: $19.0 million; FY2008: $16.4 million; FY2009: $16.8 million; FY2010: $3.8 million; FY2011: $3.8 million; FY2012: $0; FY2013: $0; FY2014: $0; FY2015: $0; FY2016: $0. Loan authorization levels for guaranteed loans in FY2005: $194.9 million; FY2006: $207.9 million; FY2007: $207.9 million; FY2008: $206.4 million; FY2009: $206.4 million; FY2010: $206.4 million; FY2011: $167.7 million; FY2012: $105.7 million; FY2013: $53.3 million; FY2014: $59.5 million; FY2015: $73.2 million; FY2016: $148.3 million. Subsidy levels for guaranteed loans in FY2005: $6.8 million; FY2006: $7.6 million; FY2007: $7.6 million; FY2008: $7.6 million; FY2009: $6.4 million; FY2010: $6.6 million; FY2011: $6.6 million; FY2012: $5.0 million; FY2013: $3.6 million; FY2014: $3.8 million; FY2015: $3.5 million; FY2016: $3.5 million. In most cases, these grants are used in conjunction with the direct loan program to make essential community facilities available to the neediest communities, which often cannot afford even direct loans without additional subsidies. These grants were authorized under the 1996 farm bill ( P.L. 104-127 ). Statutory Authority: Section 306(a)(1) of the Consolidated Farm and Rural Development Act of 1972. Financing: Grants. Eligibility Criteria: Low-income communities unable to secure funding on a loan basis. Public bodies, nonprofit organizations, and special purpose districts (e.g., nursing homes) are eligible applicants. Funding is for communities of 20,000 or less. Priority is given to communities of 5,000 or less. Facility must serve areas where median household income is below the poverty line or 90% of the state non-metropolitan median household income. The Community Facilities Grant Program is typically used to fund projects under special initiatives, such as Native American community development efforts, child care centers linked with the federal government's Welfare-to-Work initiative, Economic Impact Initiative Grants, federally designated Enterprise and Champion Communities, and the Northwest Economic Adjustment Initiative. Funding: FY2005: $24.5 million (includes hurricane emergency supplemental funding); FY2006: $16.8 million; FY2007: $16.8 million; FY2008: $20.4 million; FY2009: $20.4 million; FY2010: $20.4 million; FY2011: $15.0 million; FY2012: $11.4 million. Additional grant funds are earmarked in the Community Facilities Account for Economic Impact Initiative Grants targeted to communities suffering economic hardship and population out-migration: FY2005: $19.7 million; FY2006: $17.8 million; FY2007: $17.8 million; FY2008: $20.4 million; FY2009: $10.0 million; FY2010: $13.9 million; FY2011: $7.0 million; FY2012: $6.0 million; FY2013: $12.1 million; FY2014: $13.0 million; FY2015: $13.0 million; FY2016: $25.0 million. A program authorized in FY2002. The program provides grants for capacity-building among private, nonprofit community development organizations and low-income rural communities in the areas of housing, community facilities, and community and economic development. Funds are available to qualified intermediaries that can be public or private organizations (including tribal organizations) that have been legally organized for at least three years and have experience working with eligible recipients. Statutory Authority: Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriations Act, 2001 ( P.L. 106-387 ; 7 U.S.C. 1932). Financing: Competitive grants. Requires dollar for dollar matching funds. Eligibility Criteria: Only qualified intermediary organizations are eligible for the technical assistance grants. Such organizations must supply matching funds from non-Federal sources to receive the grants. Funding: FY2005: $3.9 million; FY2006: $6.3 million; FY2007: $6.3 million; FY2008: $6.3 million; FY2009: $6.3 million; FY2010: $6.3 million; FY2011: $5 million; FY2012: $3.6 million; FY2013: $5.7 million; FY2014: $6.0 million; FY2015: $4.0 million; FY2016: $4.0 million. The program provides funding for essential community facilities in rural communities with extreme unemployment and severe economic depression/dislocation. Eligible applications include public entities, nonprofits, and tribal organizations. Eligible rural areas are those with 20,000 or fewer residents and a unemployment rate greater than 19.5%. Median household income must be below 90% of the state non-metropolitan median household income level. Statutory Authority: Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriations Act, 2010 ( P.L. 111-80 ; 7 U.S.C. 1926). Financing: Competitive grants up to 75% of eligible projects costs. Eligibility Criteria: Rural areas of 20,000 or less; unemployment rate of more than 19.5%; median household income below 90% of non-metro median household Funding: FY2012: $8.0 million; FY2013: $7.3 million; FY2014: $5.8 million; FY2015: $5.8 million; FY2016: $5.8 million. Creating, expanding, and retaining employment in rural areas have been central concerns of rural development policies for nearly 75 years. Originally, agriculture, mining, fishing, and timbering related jobs were major targets of public funding. Since the mid-1950s, manufacturing was regarded as the most promising source of rural employment as jobs in the primary sectors declined. Abundant and largely non-unionized labor, inexpensive land, and minimal environmental regulation were rural America's competitive advantage as many manufacturing facilities sought branch production facilities. While manufacturing has provided relatively high-paying and stable employment for many rural residents, the U.S. rural manufacturing sector finds itself today competing with developing countries and with Eastern Europe. Low-skilled, peripheral manufacturing facilities have left many U.S. rural areas. Even employers in more advanced manufacturing production have moved from rural U.S. areas to offshore employment. Today, rural areas are trying to create new sources of competitive advantage in more technologically sophisticated production with higher-skill labor. With lack of capital a significant factor in many rural areas, the RBS provides loans and grants to help local entrepreneurs in starting up businesses and in expanding existing businesses. Other RBS programs provide specialized technical and marketing assistance. Programs authorized in the past three farm bills also addressed the needs of rural businesses, especially in capital formation. These direct loans are made to private nonprofit corporations, state or local government agencies, Indian tribes, and cooperatives that, in turn, capitalize a revolving loan program and lend the funds to rural businesses, private nonprofit organizations, and others. Assistance from the intermediary to the ultimate recipient must be for economic development projects, establishment of new businesses, and/or expansion of existing businesses, creation of new employment opportunities and/or saving existing rural jobs. Statutory Authority: Health and Human Services Act of 1986, Section 407, P.L. 99-425 , 7 U.S.C. 1932 note; Food Security Act of 1985, Section 1323, as amended, P.L. 99-198 , 7 U.S.C. 1631; Community Economic Development Act of 1981, Section 623, as amended, P.L. 97-35 , 42 U.S.C. 9812; 7 U.S.C. 1932; 42 U.S.C. 9812. Financing: Loans are made by RBS to intermediaries to capitalize a revolving loan program that provides loans to ultimate recipients for business facilities and community development projects. Eligibility Criteria: Financing is limited to community development projects not within the outer boundary of any city having a population of 25,000 or more. Funding : Loan authorization for FY2005: $33.9 million; FY2006: $33.9 million; FY2007: $33.9 million; FY2008: $33.0 million; FY2009: $33.5 million; FY2010: $33.5 million; FY2011: $19.2 million; FY2012: $17.7 million; FY2013: $17.4 million; FY2014: $18.9 million; FY2015: $18.9 million; FY2016: $18.9 million. Loan subsidies (budget authority) for FY2005: $15.7 million; FY2006: $14.5 million; FY2007: $14.9 million; FY2008: $14.5 million; FY2009: $14.4 million; FY2010: $8.5 million; FY2011: $7.4 million; FY2012: $6.0 million; FY2013: $5.6 million; FY2014: $4.1 million; FY2015: $5.8 million; FY2016: $5.2 million. This program provides zero-interest loans for RUS borrowers who then re-lend the funds at zero interest to rural businesses. Budget authority for the loans does not come from annual appropriations, but from a "cushion-of-credit" account in the U.S. Treasury. RUS borrowers forward pay on their loans into the Treasury account, which earns a 5% annual interest rate. Appropriators authorize a level of loans that can be made, and the requisite budget authority to leverage that amount of loans comes from the interest earned on the cushion-of-credit account. Statutory Authority: Rural Electrification Act of 1936, as amended, Title III, 7 U.S.C. 930-940c; 7 U.S.C. 1932(a). Financing: Direct loans. Eligibility Criteria: Loans are made to electric and telephone utilities that have current loans with the Rural Utilities Service (RUS) or Rural Telephone Bank loans or guarantees outstanding and are not delinquent on any federal debt or in bankruptcy proceedings. Funding: Loan authorization for FY2005: $24.3 million; FY2006: $24.7 million; FY2007: $24.7 million; FY2008: $33.1 million; FY2009: $33.1 million; FY2010: $33.1 million; FY2011: $33.1 million; FY2012: $33.1 million; FY2013: $33.1 million; FY2014: $33.1 million; FY2015: $33.1 million; FY2016: $33.1 million. Grants are used to establish a revolving loan fund program to promote economic development in rural areas. The revolving loan fund provides capital to nonprofit organizations and municipal organizations to finance community facilities in rural areas that promote job creation and education and training to enhance marketable skills, or improve medical care. Statutory Authority: Section 313 of the Rural Electrification Act of 1936; 7 U.S.C. 930-940(c); 7 U.S.C. 1932. Financing: Grants. Funds are provided from the interest differential on Rural Utilities Service borrowers' cushion of credit accounts. The cushion of credit account was established under Section 313 of the Rural Electrification Act (REA). Under this program, RUS borrowers may make voluntary deposits into a special cushion of credit account. A borrower's cushion of credit account balance accrues interest to the borrower at an annual rate of 5%. The amounts in the cushion of credit account (deposits and earned interest) can only be used to make scheduled payments on loans made or guaranteed under REA. Eligibility Criteria: Economic development projects benefitting rural areas. Funding may be used for feasibility studies, start-up costs, and incubator projects. Funding: FY2005: $8.1 million; FY2006: $10.0 million; FY2007: $0; FY2008: $10.0 million; FY2009: $10.0 million; FY2010: $10.0 million; FY2011: $10.0 million; FY2012: $10.0 million; FY2013: $10.0 million; FY2014: $0; FY2015: $0; FY2016: $0. The grants were established under the 1996 farm bill ( P.L. 104-127 ), which eliminated the term "technology" from the previously authorized Rural Technology and Cooperative Development Grant Program. Grants are made to fund the establishment and operation of centers for rural cooperative development with their primary purpose being the improvement of economic conditions in rural areas through the creation of new or improvement of cooperatives. Grants may be made to nonprofit institutions or higher education institutions. Grants may be used to pay up to 75% of the cost of the project and associated administrative costs. The applicant must contribute 25% from non-federal sources. Grants under this program are competitive and awarded on specific selection criteria. Grants are also made to assist small minority producers. The 2008 farm bill authorized a reserve of 20% of the appropriated funding (if the total appropriation exceeds $7.5 million) for cooperative development centers, individual cooperatives, or groups of cooperatives that serve socially disadvantaged groups. Statutory Authority: Section 310 B(e) of the Consolidated Farm and Rural Development Act of 1972; 7 U.S.C. 1932(e); 42 U.S.C. 9817. The program was amended in the 2008 farm bill (Section 6013 of P.L. 110-246 ). Financing: Grants. Eligibility Criteria: Grants to nonprofit corporations and institutions of higher education. For this program, rural is defined as all territories of a state not within the outer boundary of any city having a population of 50,000 or more based on the latest decennial census of the United States. Funding: FY2005: $7.0 million; FY2006: $4.4 million; FY2007: $3.7 million; FY2008: $4.4 million; FY2009: $4.4 million; FY2010: $7.9 million; FY2011: $7.9 million; FY2012: $5.8 million; FY2013: $6.5 million; FY2014: $5.8 million; FY2015: $5.8 million; FY2016: $5.8 million. A cooperative agreement established by the 1985 farm bill, the program was transferred to the Department of Interior's Fish and Wildlife Service in 1990. The 1996 farm bill transferred the program back to USDA's Rural Business Service. The program is an account of the Rural Cooperative Grants program. It provides information to farmers and other rural users on a variety of sustainable agricultural practices that include both cropping and livestock operations. The ATTRA program is located on the University of Arkansas campus at Fayetteville, AR, and functions as an information and technical assistance center staffed with sustainable agriculture specialists. Statutory Authority: Section 1323 of the Food Security Act of 1985; 7 U.S.C. 1932. Financing: The program is funded through a cooperative agreement between the not-for-profit National Center for Appropriate Technology and the Rural Business-Cooperative Service. Eligibility Criteria: Open. Funding: For FY2005: $2.5 million; FY2006: $2.5 million; FY2007: $936,000; FY2008: $2.6 million; FY2009: $2.6 million; FY2010: $2.8 million; FY2011: $0; FY2012: $2.2 million; FY2013: $2.1 million; FY2014: $2.2 million; FY2015: $2.5 million; FY2016: $2.5 million. The program provides grants to assist farmers and ranchers in creating greater value for agricultural commodities. The 2002 farm bill makes mandatory funding for this program through FY2007. A portion of the funds was reserved for the establishment of Agricultural Demonstration Centers, which will provide training and technical assistance to new or expanding value-added agricultural enterprises. Ten centers were established in FY2003 and funded at $1 million each. The program was reauthorized through 2012 in the 2008 farm bill ( P.L. 110-246 ). Statutory Authority: Agricultural Risk Protection Act of 2000 ( P.L. 106-224 ); Section 6401 of the Farm Security and Rural Investment Act of 2002 ( P.L. 107-171 ). Financing: Competitive grants. Eligibility Criteria: Profit and nonprofit organizations, cooperatives. Funding : FY2005: $15.5 million; FY2006: $20.5 million; FY2007: $20.3 million; FY2008: $18.9 million; FY2009: $3.9 million; FY2010: $20.7 million; FY2011: $18.8 million; FY2012: $14.0 million; FY2013: $13.9 million; FY2014: $15.0 million; FY2015: $10.7 million; FY2016: $10.7 million. This program was authorized by the 2002 farm bill and amended in the 2008 and 2014 farm bills. The program authorizes limited liability companies (Rural Business Investment Companies) to make equity capital investments in rural businesses. These companies are financed with both private funds and debt instruments guaranteed by the federal government. The program operates under a memorandum of agreement with the U.S. Department of Commerce's Small Business Administration. The 2008 farm bill ( P.L. 110-246 ) amended some of the original provisions (e.g., permitting more time to capitalize a Rural Business Investment Company). The 2002 and 2008 farm bills authorized $50 million for the program. The 2014 farm bill reduced that authorization to $20 million annually FY2014-2018. Statutory Authority: Section 6029, Farm Security and Rural Investment Act of 2002 ( P.L. 107-171 ). Financing: Direct loans, guaranteed debentures, and grants. Eligibility Criteria: Designation by the Secretary as a Rural Business Company. Funding: "Such sums as necessary" are authorized to cover the costs of guaranteeing a total of $280 million of debentures. In addition, $44 million in mandatory funding is authorized for grants and $56 million for direct loan subsidies. A portion of the mandatory funding for the program was blocked by appropriators in FY2003 and FY2004 while providing some initial funding to begin the program. The program was reauthorized in the 2008 farm bill and provided $50 million for the period FY2008-FY2012. The 2014 farm bill reduced the authorization to $20 million FY2014-2018. FY 2016: $0 for loans and grants. This program provides funding to eligible farmers, ranchers, and small businesses in purchasing renewable energy systems and making existing energy systems more efficient. The program was reauthorized in the 2008 farm bill and renamed the Rural Energy for America Program (REAP). Statutory Authority: Section 9006, Farm Security and Rural Investment Act of 2002 ( P.L. 107-171 ). Reauthorized as the Rural Energy for America Program (REAP, Section 9007) in the 2008 farm bill ( P.L. 110-246 ). Financing : Loans and grants. Eligibility Criteria: Agricultural producers with 50% of gross income coming from agricultural operations; small businesses in rural areas. Funding: The program was authorized for $23.0 million in mandatory funds per fiscal year, FY2003-FY2007. Appropriators prohibited the expenditure of any of the mandatory funds to carry out the program in FY2005-FY2006, but did provide $23.0 million in discretionary funding in each year. The Administration requested cancelling the mandatory funding for FY2007 and providing $10.2 million in discretionary funding. For FY2007, $22.8 million was provided. For FY2008, $35.7 million was appropriated for loan subsides and grants. For FY2009-FY2012, $255 million in mandatory spending was authorized. In addition, $25 million annually in discretionary funding was also authorized for FY2009-FY2012. FY2010: $39.3 million; FY2011: $5 million; FY2012: $6.5 million in loan authorization and $1.7 million in loan subsidies, $0 grants; FY2013: $13.1 million in loan authorization and $3.1 million in loan subsidies, $0 grants; FY2014: $12.8 million in loan authorization and $3.5 million in loan subsidies, $0 grants; FY2015: $12.7 million loan authorization ($1.3 million loan subsidies), $0 grants; FY2016: $7.6 million loan authorization ($500,000 loan subsidies), $0 grants. The Rural Microentrepreneur Assistance Program (RMAP) provides grant funding to microenterprise development organizations (MDOs) and approved microlenders to support microenterprises in rural areas. Microenterprises will generally have 10 or fewer employees. MDOs also use funds from the Rural Business Cooperative Service to make fixed-interest rate micro-loans of up to $50,000 for startup and growing rural microenterprises. Grants are also available for training or other services for MDOs that support rural microenterprises. Statutory Authority: Title VI, Subtitle D, Section 6022 of the Food, Conservation, and Energy Act of 2008 ( P.L. 110-246 ); 7 U.S.C. 1981, et seq. Financing : Fixed-interest direct loans and grants. Maximum loan amount to a microlender is $500,000. Maximum grant to an MDO is no more than 25% of the total outstanding balance of microloans made by the MDO. An MDO must provide matching funding of up to 15% of the total amount of the grant awarded to the MDO. Eligibility Criteria: Funds are provided to MDOs and approved microlenders who use the funding to capitalize rural revolving loan funds for the exclusive purpose of making microloans to microenterprise borrowers, accepting payments from microenterprises, and repaying RBS as required in their loan agreements. Funding: Mandatory funding of $4 million was provided in FY2010-FY2011 and $3 million in FY2012. Discretionary funding of $40 million each year FY2009-FY2012 was also authorized. For FY2010, funding of $5 million was provided ($11.7 million in loan authorization), divided evenly between loan subsidies and grants. FY2011: $0; FY2012: $0 (mandatory funding of $3 million was eliminated for FY2012); FY2013: $0; FY2014: $0; FY2015: $0; FY2016: $0. The 2008 farm bill authorized a new program that would make loan guarantees to individuals and businesses to provide locally and regionally produced foods. Providing food to underserved rural and urban areas and "food deserts" would be given priority. A locally or regionally produced food is defined as one for which the locality or region in which the final product is marketed is within 400 miles of the product's origin, or within the state in which the product is produced. Statutory Authority: Section 310B(g) of the Consolidated Farm and Rural Development Act; 7 U.S.C. 1932(g). Financing : The provision authorizes loan guarantees through the Business and Industry loan program. Eligibility Criteria: Locally and regionally produced foods are those marketed within 400 miles of the product's origin, or within the state. An underserved area is one with limited access to affordable, healthy foods, including fresh fruits and vegetables, in grocery retail stores or farmer-to-consumer direct markets. Areas with high rates of hunger or food insecurity or those with high poverty rates are also prioritized. Funding: 5% of the funds appropriated for the Business and Industry Loan Guarantee program are reserved for loan guarantees to support locally and regionally produced foods. (See B&I discussion below.) The 2014 farm bill (Section 4206) authorizes the creation of a Healthy Food Financing Initiative (HFFI) in USDA. The program operated through Community Development Financial Institutions designated by the U.S. Department of the Treasury. Priorities for the program include job creation and retention and support for locally and regionally produced food. The program is authorized to receive $125 million to be available until expended. To date, the program has not been funded. The Rural Business Program, administered by RBS, supports business development, training, and retention. Funding for the loan program is allocated to state rural development offices by formula where state directors set priorities particular to their state's rural needs. The account includes four budget lines: Rural Business Development Grants, the Delta Regional Authority, and the Business and Industry Guaranteed loan program. The 2014 farm bill reorganized two rural business programs, Rural Business Enterprise Grants and Rural Business Opportunity Grants (see below), into the new Rural Business Development Grants Program with similar functions. This program finances business and industry acquisition, construction, conversion, expansion, and repair in rural areas. Loan funds can be used to finance the purchase and development of land, supplies, and materials, and to pay start-up costs of rural businesses. Eligible applicants include individuals as well as public, private, and cooperative organizations. Although the RBS did make direct loans in FY2001 and in previous years, with the FY2002 budget forward, there have been no appropriations for the direct loan program. Statutory Authority: Section 310B(a)(1) of the Consolidated Farm and Rural Development Act of 1972; 7 U.S.C. 1932. Financing: Subsidized interest loans and guarantees for loans provided by lenders. Interest rates for guaranteed loans are negotiated between a lender and a borrower. A maximum guaranteed loan is $25 million. For loans of $5 million or less, maximum percentage of a guarantee is 80%. For loans between $5 million and $10 million, maximum percentage of guarantee is 70%. For loans between $10 million and $25 million, maximum percentage of guarantee is 60%. Under the American Recovery and Reinvestment Act of 2009 (ARRA), all loans that score at least 55 points based on loan priority variables (7 C.F.R. 4279.166) have 90% of the principal guaranteed. Eligibility Criteria: Borrowers must be unable to obtain credit from other lenders at reasonable rates and terms. Criteria for projects are (1) those that save existing jobs, (2) those that improve existing businesses or industry, and (3) those that create the greatest number of permanent jobs. Golf courses, race tracks, and gambling operations are ineligible. Funding: No funding for the direct loan program has been provided since FY2001. Loan authorization levels for guaranteed loans (including North American Development Bank loan guarantees) in FY2005: $678.1 million loan authorization with a loan subsidy of $34.2 million; FY2006: $1.0 billion loan authorization with a subsidy of $48.4 million; FY2007: $914 million with a loan subsidy of $39.8 million; FY2008: $993 million with a loan subsidy of $43 million; FY2009: $993.0 million with a loan subsidy of $43.2 million; FY2010: $993.0 million with a loan subsidy of $52.9 million; FY2011: $889.1 million with a loan subsidy of $45.0 million; FY2012: $822.8 million with a loan subsidy of $45.3 million; FY2013: $890.2 million with a loan subsidy of $52.3 million; FY2014: $958.1 million with a loan subsidy of $67.0 million; FY2015: $919.8 million with a loan subsidy of $47.0 million; FY2016: $919.8 million with a loan subsidy of $35.8 million. Grants are made to public bodies, nonprofit organizations, Indian tribes, and cooperatives for training and technical assistance to rural businesses, economic planning for rural communities, or training for rural entrepreneurs or economic development officials. Statutory Authority: Section 741, Federal Agriculture Improvement and Reform Act of 1996; Section 306(a)(11)(A) of the Consolidated Farm and Rural Development Act of 1972; 7 U.S.C. 1932. Reauthorized in the 2008 farm bill ( P.L. 110-246 ). Financing : Competitive grants. Eligibility Criteria: Grants are made to public bodies, nonprofit corporations, federally recognized tribal groups, and cooperatives with members that are primarily rural residents. Funding: FY2005: $3.1 million; FY2006: $3.0 million; FY2007: $3 million; FY2008: $2.5 million; FY2009: $2.5 million; FY2010: $2.5 million; FY2011: $2.5 million; FY2012: $2.2 million; FY2013: $2.1 million; FY2014: $2.2 million. These are grants to encourage the development of small and emerging business enterprises and the creation and expansion of rural distance learning networks, and to provide educational instruction or job training related to potential employment for adult students. Grants are also available to qualified nonprofit organizations for provision of technical assistance and training to rural communities for improving passenger transportation services or facilities. Statutory Authority: Section 310N(c) and 310B(f) of the Consolidated Farm and Rural Development Act of 1972; 7 U.S.C. 1932(c). Financing: Competitive grants. Eligibility Criteria: Priority for the grants is given to rural areas having a population of 25,000 or less. Other priorities include projects located in communities with large proportion of low-income residents and/or high unemployment. Funding: FY2005: $41.3 million; FY2006: $39.6 million; FY2007: $39.6 million; FY2008: $38.7 million; FY2009: $38.7 million; FY2010: $38.7 million. Supplemental funding under ARRA added $19.7 million for the program; FY2011: $34.9 million; FY2012: $24.3 million; FY2013: $22.6 million; FY2014: $24.3 million. The Business Development Grants program was newly authorized in the 2014 farm bill. The program combines the functions of the former Business Opportunity Grants and the Rural Business Enterprise Grants. Up to 10% of appropriated funds may be used to identify and analyze business opportunities; identify, train, and provide technical assistance to existing or prospective rural entrepreneurs and managers; assist in the establishment of new rural businesses and the maintenance of existing businesses; conduct economic development planning, coordination, and leadership development; and establish centers for training, technology, and trade. The balance of appropriated funding may be used for projects that support the development of business enterprises that finance or facilitate the development of small and emerging private business enterprise; the establishment, expansion, and operation of rural distance learning networks; the development of rural learning programs; and the provision of technical assistance and training to rural communities for the purpose of improving passenger transportation. Statutory Authority : Section 6012 of the Agricultural Act of 2014 ( P.L. 113-79 ); Section 310B of the Consolidated Farm and Rural Development Act (7 U.S.C. 1932). Financing : Competitive grants. Eligibility Criteria : Governmental entities, Indian tribes, and non-profit entities. Funding : FY2014: $26.6 million; FY2015: $24.0 million; FY2016: $24.0 million. The Delta Regional Authority (DRA) is a state-federal development authority providing economic assistance to 252 economically distressed counties and parishes in eight southern states—Alabama, Arkansas, Illinois, Kentucky, Louisiana, Mississippi, Missouri, and Tennessee. The DRA makes loans and grants for a variety of community projects supporting housing, business development, community facilities, and employment training. Statutory Authority: Subtitle F, Consolidated Appropriations Act of 2001 ( P.L. 108-447 ; 7 U.S.C. 1921, et seq.). Financing: Competitive grants. Eligibility Criteria: At least 75% of DRA funds must be invested in economically distressed counties and parishes. Approximately half of the funds are earmarked for transportation and basic infrastructure improvement. Funding: FY2005: $1 million; FY2006: $2 million; FY2007: $2 million; FY2008: $3 million; FY2009: $2.9 million; FY2010: $2.9 million; FY2011: $3 million; FY2012: $2.9 million; FY2013: $2.8 million; FY2014: $3.0 million; FY2015:$3.0 million; FY2016: $3.0 million. This appropriation does not include funding for the Delta Region Transportation Development program authorized by P.L. 109-59 . The Delta Regional Authority also receives funding under Independent Agency appropriations. Arguably, the earliest rural economic development policy consisted of providing infrastructure to get agricultural products to markets or to transportation nodes. Building railroads, roads, and telegraph lines represent early examples. Later, electricity and telephones constituted essential rural infrastructure. Because of great geographical distances and low population densities, rural areas would unlikely have had such services without federal support. The 1936 Rural Electrification Act discussed above was central to the provision of rural utilities in an urbanizing society. Today, rural electrification, telecommunications, and water infrastructure are the core programs administered by the Rural Utilities Service. New infrastructure includes facilities for health service delivery (e.g., telemedicine) and new broadband telecommunication resources. As was the case in the early years of the nation, great distances and sparse populations have also led Congress to provide funding for these new rural utilities as well as continuing support for telephones and electrical generation and transmission. Loans are made to expand, upgrade, maintain, and replace rural electric infrastructure. Interest rates are tied to the economic conditions of the areas served and the costs of providing services to the area. Most RUS-financed systems have their loan rates capped at 7%, although there are three interest rate levels: (1) direct loans for distressed areas, (2) Treasury rate loans, and (3) municipal rate loans. Borrowers must generally obtain approximately half their capital needs from the private sector. RUS also makes direct loans through the Federal Financing Bank, National Bank for Cooperatives, and National Rural Utilities Cooperative Finance Cooperation. The interest rate on loans by the Federal Financing Bank is based on the Treasury rate plus 1/8%. Because of a very low default rate, the FFB loan guarantee program has a zero subsidy cost. Most loans are made for 35 years and are secured by the borrower's electric system assets. The FFB loans account for over 90% of the loans made under the RUS electrification account. Statutory Authority: Section 305, Rural Electrification Act of 1936; 7 U.S.C. 904, 935. Financing: Three loan levels: Hardship loans are made to applicants whose consumers fall below average per capita and household income thresholds. Municipal rate loans are based on interest rates available in the municipal bond market. Borrowers are required to seek supplemental financing for 30% of their capital requirements. Treasury rate loans are based on rates established daily by the U.S. Treasury. Eligibility Criteria: Electricity producers and transmitters serving rural populations. Funding: Enacted loan authorization levels for Federal Finance Bank loans: FY2005: $4.32 billion; FY2006: $5.39 billion; FY2007: $5.39 billion; FY2008: $7.1 billion; FY2009: $6.6 billion; FY2010: $7.1 billion; FY2011: $7.1 billion; FY2012: $7.0 billion; FY2013: $7.1 billion; FY2014: $5.5 billion; FY2015: $5.0 billion; FY2016: $5.5 billion. Subsidies (budget authority) for FY2005: $5.0 million; FY2006: $6.1 million; FY2007: $3.6 million; FY2008: $119,000; FY2009: $0; FY2010: $0; FY2011: $0; FY2012: $0; FY2013: $0; FY2014: $0; FY2015: $0; FY2016: $0. There is also a guaranteed underwriting program that has had a $750 million loan authorization for FY2016. No subsidy (budget authority) is required for the program. This program makes loans for infrastructure improvement and expansion to furnish and improve telephone service, including a variety of related telecommunications purposes such as broadband service in rural areas. RUS lends directly to rural telecommunication systems and guarantees loans made by other lenders. Statutory Authority: Rural Electrification Act of 1936; 7 U.S.C. 922. Financing: Direct loans for construction, expansion, and operation of telecommunication lines and facilities or systems. Eligibility Criteria: Three loan levels: Hardship loans are made to applicants whose consumers fall below average per capita and household income thresholds. Municipal rate loans are based on interest rates available in the municipal bond market. Treasury rate loans are based on rates established daily by the U.S. Treasury. Direct loans are made through the Federal Financing Bank. Funding: Enacted loan authorization levels for Treasury rate direct loans: FY2005: $518.0 million; FY2006: $689.8 million; FY2007: $689.8 million; FY2008: $685.2 million; FY2009: $690.0 million; FY2010: $690.0 million; FY2011: $690.0 million; FY2012: $690.0 million; FY2013: $690.0 million; FY2014: $690.0 million; FY2015: $690.0 million; FY2016: $690.0 million. This program provides financial assistance to rural community facilities (e.g., schools, libraries, hospitals, and medical centers). The Telecommunications Act of 1996 targeted rural areas because of the difficulties they have in providing high-quality education and medical services. This program helps rural schools and hospitals obtain and use advanced telecommunications for health and educational services. Statutory Authority: Food, Agriculture, Conservation, and Trade Act of 1990; 7 U.S.C. 950 aaa-2 et seq. Financing: Competitive grants. Eligibility Criteria: Funds are made available to schools, hospitals, and libraries. Funding: Grant funding for FY2005: $34.7 million; FY2006: $29.7 million; FY2007: $29.7 million; FY2008: $34.7 million; FY2009: $34.7 million; FY2010: $37.7 million; FY2011: $32.4 million; FY2012: $21.0 million; FY2013: $17.5 million; FY2014: $24.3 million; FY2015: $22.0 million; FY2016: $22.0 million. The Rural Telephone Bank (RTB) was designed to ensure rural telephone systems' access to private sources of capital by establishing a supplemental credit mechanism to which borrower systems may turn for all or part of their future capital requirements. The capital structure of the Telephone Bank consists of three classes of stock: Class A, Class B, and Class C. Class A stock was issued to the Telephone Bank in exchange for an appropriation of $600 million of capital. This provided the Telephone Bank with its initial "seed" money to begin its lending operations. Through sales of Class A stock, the RTB is now privatized. Final liquidation payments were made to Class A and B shareholders at the time of liquidation on November 13, 2007. Statutory Authority: Rural Electrification Act of 1936; 7 U.S.C. 941, et seq. Financing: Interest rates depend on the financial condition of the borrower system and the costs of providing service to rural subscribers. Most rural systems are eligible for loans at a hardship rate of 5%. Eligibility Criteria: Utilities serving rural communities. Funding: Loan authorization level FY2005: $175.0 million; FY2006: $0; FY2007 (est.): $0. Loan subsidies (budget authority) for FY2005: $0 million; FY2006: $0; FY2007: $0; FY2008: $0; FY2009: $0; FY2010: $0; FY2011: $0; FY2012: $0; FY2013: $0; FY2014: $0; FY2015: $0; FY2016: $0. New telecommunication technologies will increasingly rely on infrastructure that can carry signals more complex than simple voice and at significantly faster speeds. Rural areas are currently at a disadvantage in gaining access to these newer technologies, in part, because the costs per user are higher than in more urbanized areas. RUS provides loans and grants to support acquisition/construction of broadband facilities in under-served rural areas. Statutory Authority: Rural Electrification Act of 1936; 7 U.S.C. 922. Financing: Interest rates on loans depend on the financial condition of the borrower system and the costs of providing service to rural subscribers. There are three interest rate levels: hardship, Treasury, and municipal. Treasury loans may be supplemented by loans from the Rural Telephone Bank. Most rural systems are eligible for loans at a hardship rate of 4%. Eligibility Criteria: The "community-oriented connectivity" approach will target rural, economically challenged communities and offer a means for the deployment of broadband transmission services to rural schools, libraries, education centers, health care providers, law enforcement agencies, and public safety organizations, as well as residents and businesses. Community eligibility requirements for funding through the Community Connect Broadband Grant Program include areas with (1) 20,000 or fewer residents; (2) no prior access to a broadband transmission service; and (3) a minimum matching contribution equal to 15% of the grant amount awarded. New rules promulgated in May 2013 prioritize persistent poverty counties, communities experiencing population declines, and the most rural areas. Funding: Loan authorization levels for FY2005: $331.1 million; FY2006: $495 million; FY2007: $495 million; FY2008: $297 million; FY2009: $400.5 million; FY2010: $400.0 million; FY2011: $400.0 million; FY2012: $212.0 million; FY2013: $39.1 million; FY2014: $34.5 million; FY2015: $24.1 million; FY2016: $20.5 million. Broadband telecommunication grants for FY2005: $32.8 million; FY2006: $8.9 million; FY2007: $8.9 million; FY2008: $13.4 million; FY2009: $13.6 million; FY2010: $17.9 million; FY2011: $13.4 million; FY2012: $10.4 million; FY2013: $9.6 million; FY2014: $10.4 million; FY2015: $104 million; FY2016: $10.4 million. This program provides direct loans and loan guarantees to construct, improve, and acquire facilities and equipment to provide broadband service to rural areas with less than 20,000 residents. Because of difficulties in implementing the program, no funding was provided after 2003 until the program could be restructured. The program was modified in the 2008 farm bill and again in the 2014 farm bill. In the 2014 farm bill, significant changes were made to develop criteria to prioritize loans and to provide a searchable database of broadband applicants, the areas to be served, and the status of the application, among other changes and conditions of assistance. The 2014 amendment also requires entities receiving support from USDA to file a semiannual report on capacity enhancements for medical and educational facilities and the number of residences and businesses served. The Rural Electrification Act was also amended in the 2014 farm bill to establish a Rural Gigabit Network Pilot Program. The provision authorizes $10 million for each year FY2014-2018 for the pilot program. No funds have been appropriated for the program. Statutory Authority: Section 6103, Farm Security and Rural Investment Act of 2002 ( P.L. 107-171 ) amends Section 601 of the Rural Electrification Act of 1936 (7 U.S.C. 950bb). Program was amended and reauthorized in the 2008 farm bill (Section 6110, P.L. 110-246 ). Financing: Direct and guaranteed loans. For direct loans interest rate is capped at 4%. Eligibility Criteria : Rural areas of less than 20,000 population and outside of an urban/metro commuting area. Funding : Mandatory funding was authorized at $20 million per year, FY2002-FY2005, and $10 million in FY2006 and FY2007. Funding of $20 million was provided in FY2003. Appropriators blocked funding for the program in FY2004-FY2007. For FY2008-FY2012, $25 million annually was authorized. The Rural Water and Waste Disposal Account, administered by RUS, supports construction and improvements to rural community water systems unable to get reasonable credit in the private market. Funding for the loan program is allocated to state rural development offices by formula where state directors set priorities particular to their state's rural needs. The Water and Waste loan and grant programs assist eligible applicants in rural areas and cities and towns of up to 10,000 residents. Drinking water, sanitary sewerage, solid waste disposal, and storm drainage facilities may be financed with direct and guaranteed loans and grants. Applications originate with state rural development offices. Rural water and waste water disposal loans and grants are administered by USDA's Rural Utilities Service. Loans are made to public bodies, organizations operated on a not-for-profit basis, and Indian tribes on federal and state reservations for development of storage, treatment, purification, or distribution of water or for collection, treatment, and disposal of waste in rural areas. Loans are repayable in not more than 40 years, or the useful life of the facility, whichever is less. Statutory Authority: Section 306 of the Consolidated Farm and Rural Development Act of 1972; 7 U.S.C. 1926. Financing: Direct loans carry interest rates not in excess of the current market yield for comparable term municipal obligations. The interest rate on loans cannot exceed 5% (they are currently being made at 4.5%) for those areas where the (1) median household income of the service area falls below the higher of 80% of the statewide non-metro median household income or the poverty level; and (2) the project is needed to meet applicable health or sanitary standards. The intermediate rate, which is halfway between the poverty rate and the market rate, with a ceiling of 7%, applies to those projects that do not meet the requirements for the poverty rate but are located in areas where the median household income does not exceed 100% of the statewide non-metro median household income. Guaranteed loans are made to the same groups and for similar purposes except that loans are guaranteed by RUS for 80% of the loan amount or, in exceptional circumstances, 90% of the loan amount. The interest rate is negotiated between borrower and lender. Eligibility Criteria: A rural area may include an area in any city or town that has a population of not more than 10,000 residents. Applicants must be unable to obtain sufficient credit elsewhere at reasonable rates to finance actual needs. Funding: Loan authorization level for direct loans in FY2005: $921.4 million; FY2006: $1.06 billion; FY2007: $990.0 million; FY2008: $1.3 billion; FY2009: $894.5 million; FY2010: $1.0 billion; FY2011: $898.3 million; FY2012: $730.7 million; FY2013: $923.7 million; FY2014: $1.2 billion; FY2015: $1.2 billion; FY2016: $1.2 billion. Loan subsidies for direct loans in FY2005: $82.9 million; FY2006: $73.4 million; FY2007: $98.5 million; FY2008: $69.6 million; FY2009: $0; FY2010: $77.1 million; FY2011: $76.9 million; FY2012: $70.0 million; FY2013: $74.5 million; FY2014: $0; FY2015: $0; FY2016: $31.2 million. Loan authorization levels for guaranteed loans in FY2005: $2.9 million; FY2006: $75.0 million; FY2007: $75.0 million; FY2008: $75 million; FY2009: $75.0 million; FY2010: $75.0 million; FY2011: $75.0 million; FY2012: $63.0 million; FY2013: $56.6 million; FY2014: $50.0 million; FY2015: $50.0 million; FY2016: $50.0 million. Loan subsidy levels for loan guarantees for FY2005-FY2011 were $0; FY2012: $1.0 million; FY2013: $600,000; FY2014: $355,000; FY2015: $295,000; FY2016: $275,000. Grants are made to public, quasi-public, and nonprofit associations as in the loan program. Grants are directed to projects serving the most financially needy communities. Grants are made to communities that have a median household income that falls below the higher of the poverty level or 100% of the state's non-metro household income. Grant amounts provide higher funding levels for projects in communities that have lower income levels, but they may not exceed 75% of the eligible development costs of the project. In addition, between 1% and 3% of the total appropriation each year for water and waste water is available for technical assistance and training to assist communities in identifying and evaluating alternative solutions to problems related to water and waste disposal, preparing applications, and improving operation and maintenance practices at existing facilities. Statutory Authority: Section 306(a)(2) of the Consolidated Farm and Rural Development Act of 1972; 7 U.S.C. 1926. Financing: Grants. Eligibility Criteria: Grants are made only if needed to reduce user charges to a reasonable level. For a grant of up to 70% of eligible costs, service area median household income must be below the poverty level or below 80% of the state non-metropolitan median household income, whichever is higher. Funding: FY2005: $507.5 million (includes hurricane emergency supplemental funding); FY2006: $508.7 million (includes hurricane emergency supplemental funding); FY2007: $437.7 million; FY2008: $464.2 million; FY2009: $482.1 million; FY2010: $469.2 million; FY2011: $331.7 million; FY2012: $327.1 million; FY2013: $397.0 million; FY2014: $345.5 million; FY2015: $347.1 million; FY2016: $364.4 million. Grants made to local and regional governments and to nonprofit organizations to provide technical assistance and training for the purposes of reducing or eliminating pollution of water resources and improving management of solid waste facilities. Statutory Authority: Section 310B(b) of the Consolidated Farm and Rural Development Act of 1972; 7 U.S.C. 1932(b). Financing: Grants. Eligibility Criteria: Assistance is available in rural areas and towns with a population of 10,000 or less. Funding: FY2005: $3.5 million; FY2006: $3.5 million; FY2007: $3.5 million; FY2008: $3.4 million; FY2009: $3.5 million; FY2010: $3.4 million; FY2011: $3.4 million; FY2012: $3.4 million; FY2103: $3.1 million; FY2014: 4.0 million; FY2015: $4.0 million; FY2016: $4.0 million. The program assists rural communities that have had a significant decline in quantity or quality of drinking water. Grants can be made in rural areas and cities or towns with a population not in excess of 10,000 and a median household income not more than 100% of a state's non-metropolitan median household income. Grants may be made for 100% of project costs. The maximum grant is $500,000 when a significant decline in quantity or quality of water occurred within two years, or $75,000 to make emergency repairs and replacement of facilities on existing systems. Statutory Authority: Sections 306A and 306B of the Consolidated Farm and Rural Development Act of 1972; 7 U.S.C. 1926(a)(b). Financing: Grants. Eligibility Criteria: For declared emergencies and disasters and for communities facing actual or immanent drinking water shortages. Funding: The 2002 farm bill ( P.L. 107-171 ) sets aside not less than 3% nor more than 5% of the total appropriated water and waste water funds for emergency community water assistance. Authorized $35 million each year in additional funding for the program, FY2005-FY2007. For FY2005: $10.7 million; FY2006: $14.1 million; FY2007: $13.9 million; FY2008: $6.8 million; FY2009: $13.0 million; FY2010: $0; FY2011: $0; FY2012: $0; FY2013: $3.1 million; FY2014: $4.0 million; FY2015: $0; FY2016: $0. This program provides funding for nonprofit organizations to finance the construction and refurbishing of household water well systems in rural areas for individuals with low or moderate incomes. Statutory Authority: Section 6012 of the 2002 farm bill ( P.L. 107-171 ) amends Section 306D of the Consolidated Farm and Rural Development Act is (7 U.S.C.1926d). Reauthorized in Section 6010 of the 2008 farm bill ( P.L. 110-246 ). Financing : Grants. Eligibility Criteria : Priority to nonprofit organizations with demonstrated expertise in providing well-water systems. Funding : The 2002 farm bill ( P.L. 107-171 ) authorized funding of $10 million annually, FY2002-FY2007. FY2005: $1.9 million; FY2006: $990,000; FY2007: $990,000; FY2008: $993,000; FY2009: $993,000; FY2010: $993,000; FY2011: $993,000; FY2012: $993,000; FY2013: $917,000; FY2014: $993,000; FY2015: $993,000; FY2016: $993,000. A percentage of the Water and Wastewater Grant Program is available each year to provide technical assistance for rural communities with a population of 10,000 or less. Grant funds may be used to assist communities and rural areas in identifying and evaluating solutions to water or wastewater problems, improving facility operation and maintenance activities, or preparing funding applications for water or wastewater treatment facility construction projects. Statutory Authority: Section 306(a) of the Consolidated Farm and Rural Development Act of 1972; 7 U.S.C. 1926(a)(14). Financing: Grants. Eligibility Criteria: Private, nonprofit organizations that have been granted tax-exempt status from the Internal Revenue Service may be eligible for grant funds provided they can demonstrate the ability, background, experience, legal authority, and actual capacity to provide technical assistance/training on a regional basis to small, rural communities. Funding: Formula funding based on the Water and Waste Water Grant appropriation for the current fiscal year. FY2005: $18.2 million; FY2006: $18.2 million; FY2007: $16.2 million; FY2008: 17.5 million; FY2009: $18.4 million; FY2010: $19.0 million; FY2011: $19.1 million; FY2012: $19.0 million; FY2013: $19.0 million; FY2014: $19.0 million; FY2015: $19.0 million; FY2016: $20.0 million. The program provides on-site technical assistance for the operation of rural water systems. Objective is to bring small public water systems into compliance with state and national environmental regulations. The program complements RUS loan supervision responsibilities. RUS contracts with the National Rural Water Association (NRWA) to provide this service in each state. Statutory Authority: Section 306(a) of the Consolidated Farm and Rural Development Act of 1972; 7 U.S.C. 1926(a)(22). Financing : RUS has a management contract with National Rural Water Association which contracts with state water associations. State water associations operate the program. Eligibility Criteria: Public water and waste water systems serving rural communities of 10,000 or less. Many states have further prioritized funding for very small communities. Funding : Circuit rider staff positions are funded out of staffing authorizations for RUS. FY2005: $13.5; FY2006: $13.7; FY2007: $9.5 million; FY2008: $13.6 million; FY2009: $14.0 million; FY2010: $14.6 million; FY2011: $14.7 million; FY2012: $15.0 million; FY2013: $15.0 million; FY2014: $15.0 million; FY2015: $15.9 million; FY2016: $16.4 million. The purpose of this grant program is to provide financial assistance for a broad range of energy facilities, equipment, and related activities to offset the impacts of extremely high residential energy costs in eligible communities. Eligible facilities include on-grid and off-grid renewable energy systems and implementation of cost-effective demand side management and energy conservation programs that benefit eligible communities. Most of the funding from this program has historically gone to Alaska Native Villages and some areas of Hawaii. Statutory Authority: Rural Electrification Act of 1936; 7 U.S.C. 918(a). Financing: Competitive grants. No cost sharing or matching funds are required as a condition of eligibility under this grant program. However, RUS will consider other financial resources available to the grantee and any voluntary commitment of matching funds or other contributions in assessing the grantee's capacity to carry out the grant program successfully and will award additional evaluation points to proposals that include such contributions. As a further condition of each grant, Section 19(b)(2) of the RE act requires that planning and administrative expenses may not exceed 4% of the grant funds. Eligibility Criteria: Areas with high energy costs are those where the average residential expenditure for home energy is 275% of the national average. Funding: For FY2005: $34.8 million; FY2006: $27.8 million; FY2007: $27.8 million; FY2008: $21.3 million; FY2009: $17.5 million; FY2010: $17.5 million; FY2011: $12.0 million; FY2012: $9.5 million; FY2013: $9.2 million; FY2014: $10.0 million; FY2015: $10.0 million; FY2016: $10.0 million. This was initially a pilot program for rural revitalization. The program assists rural communities suffering from out-migration, economic crises, and geographic isolation. Designated REAP zones receive modest technical and financial assistance from USDA as well as other federal agencies. REAP zones also receive special consideration and preferences under regular Rural Development loan and grant programs. REAP zones engage in community-based, long-term planning and regularly report on their progress using OCD's performance and benchmark reporting system. In 1995, two zones in North Dakota were designated to participate in the REAP initiative. Subsequently, two areas in upstate New York were added in 1999. In 2000, a rural area in Vermont was designated as the fifth REAP zone. The program was reauthorized in the 2014 farm bill ( P.L. 113-79 ). Statutory Authority: Presidential memorandum dated August 5, 1993; variously dated memoranda of agreement; Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriations Act of 2001 ( P.L. 106-387 ). Reauthorized in the 2014 farm bill (Section 6016, P.L. 113-79 ; 7 U.S.C. 1932(j)). Financing : Grants. Eligibility Criteria: Designation by the Secretary as a REAP zone. Funding: Appropriators provide targeted funding to REAP zones through various RHS, RBS, and RUS accounts. The National Rural Development Partnership (NRDP) was authorized by the 2002 farm bill. The NRDP coordinates the efforts of public, private, and nonprofit groups interested in rural development issues. State rural development councils, which exist in 36 states, are the major operative agents within the partnership. The partnership also includes the National Partnership Office, which is housed in USDA, and a National Rural Development Council. The latter consists of senior program managers from 40 federal agencies involved with rural development activities and national representatives of public interest and private sector organizations. Statutory Authority: Farm Security and Rural Investment Act of 2002 (Section 6201). Program was reauthorized in the 2008 farm bill (Section 6019, P.L. 110-246 ). Financing : State rural development offices provide matching funding to support partnership activities with State Rural Development Partnership Councils. Eligibility Criteria: State Rural Development Partnership Councils are composed of broadly representative public and private organizations. Funding : The 2002 farm bill ( P.L. 107-171 ) authorized $10 million in each fiscal year FY2003-FY2007. No appropriations provided for FY2003-FY2007, although the appropriators have encouraged the Secretary to support the NRDP through existing program funding. The program was reauthorized in the 2014 farm bill ( P.L. 113-79 ). The 2008 farm bill authorized the establishment of three new regional economic development authorities: the Southeast Crescent Regional Commission, the Southwest Border Regional Commission, and the Northern Border Regional Commission. Only the Northern Borders Commission has had an executive director appointed. The commissions are under the jurisdiction of the House Transportation and Infrastructure Committee. The commissions will undertake comprehensive infrastructure development planning for their respective regions. Commissions may make grants to states and local governments to develop basic public infrastructure, support alternative energy development, support telecommunications, and assist economically depressed areas of the regions. Funding was authorized at $30 million annually (FY2008-FY2012) for each commission. Regulatory rules for the implementation of the commissions have not yet been published, although some preliminary administrative functions have begun in the Northern Border Regional Authority and the Southeast Crescent Regional Authority. The regional commissions include the following counties: Southeast Crescent Regional Commission All counties of the states of Virginia, North Carolina, South Carolina, Georgia, Alabama, Mississippi, and Florida not already served by the Appalachian Regional Commission or the Delta Regional Authority. Southwest Border Regional Commission Arizona: The counties of Cochise, Gila, Graham, Greenlee, La Paz, Maricopa, Pima, Pinal, Santa Cruz, and Yuma. California: The counties of Imperial, Los Angeles, Orange, Riverside, San Bernardino, San Diego, and Ventura. New Mexico: The counties of Catron, Chaves, Dona Ana, Eddy, Grant, Hidalgo, Lincoln, Luna, Otero, Sierra, and Socorro. Texas: The counties of Atascosa, Bandera, Bee, Bexar, Brewster, Brooks, Cameron, Coke, Concho, Crane, Crockett, Culberson, Dimmit, Duval, Ector, Edwards, El Paso, Frio, Gillespie, Glasscock, Hidalgo, Hudspeth, Irion, Jeff Davis, Jim Hogg, Jim Wells, Karnes, Kendall, Kenedy, Kerr, Kimble, Kinney, Kleberg, La Salle, Live Oak, Loving, Mason, Maverick, McMullen, Medina, Menard, Midland, Nueces, Pecos, Presidio, Reagan, Real, Reeves, San Patricio, Shleicher, Sutton, Starr, Sterling, Terrell, Tom Green Upton, Uvalde, Val Verde, Ward, Webb, Willacy, Wilson, Winkler, Zapata, and Zavala. Northern Border Regional Commission Maine: The counties of Androscoggin, Aroostook, Franklin, Hancock, Kennebec, Knox, Oxford, Penobscot, Piscataquis, Somerset, Waldo, and Washington. New Hampshire: The counties of Carroll, Coos, Grafton, and Sullivan. New York: The counties of Cayuga, Clinton, Essex, Franklin, Fulton, Hamilton, Herkimer, Jefferson, Lewis, Madison, Oneida, Oswego, Seneca, and St. Lawrence. Vermont: The counties of Caledonia, Essex, Franklin, Grand Isle, Lamoille, and Orleans. Statutory Authority: Subtitle V of the Food, Conservation, and Energy Act of 2008 ( P.L. 110-246 ). Financing : Commissions make economic development and infrastructure grants to state, local, tribal, profit, and nonprofit entities to carry out the economic planning and development programs established by the respective commissions. Matching equity funding is required. Eligibility Criteria: Applications to a commission for a grant or other assistance for a project are made through, and evaluated for approval by, the state-appointed member of the commission representing the applicant. Funding : The 2008 farm bill ( P.L. 110-246 ) authorized $30 million in each fiscal year FY2008-FY2012. In FY2010, the Northern Border Regional Commission and the Southeast Crescent Regional Commission received $1.5 million and $250,000, respectively, under Energy and Water Appropriations.
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More than 88 programs administered by 16 different federal agencies target rural economic development. The United States Department of Agriculture (USDA) administers the greatest number of rural development programs and has the highest average of program funds going directly to rural counties (approximately 50%). The Rural Development Policy Act of 1980 also designated USDA as the lead federal agency for rural development. The Federal Crop Insurance Reform and Department of Agricultural Reorganization Act of 1994 created the Office of the Under Secretary for Rural Development and consolidated the rural development portfolio into four principal agencies responsible for USDA's mission area: the Rural Housing Service, the Rural Business-Cooperative Service, the Rural Utilities Service, and the Office of Community Development. The Agricultural Act of 2014 (P.L. 113-79), the most recent farm bill, was enacted on February 7, 2014. Among other changes, the law consolidates several business loan and grant programs into a single business support platform. The law allows prioritization of rural development projects that support strategic economic and community development. The new law provides $150 million in mandatory spending for backlogged rural development loans and grants and $63 million in mandatory spending for the Value-Added Product Grants program. Most existing programs authorized by the Consolidated Farm and Rural Development Act and the Rural Electrification Act were reauthorized. The Access to Broadband Telecommunication Services in Rural Areas Program was reauthorized and establishes new procedures to compare applications and set funding priorities. Additionally, a new Gigabit Network Pilot Program for high-speed broadband service was authorized at $10 million for each fiscal year FY2014-FY2018. The bill also authorizes a new Rural Energy Savings Program to fund loans to qualified consumers to implement energy efficiency measures. A new provision directs USDA to begin collecting data on the economic activities it funds to assess the short- and long-term viability of award recipients. This report provides an overview of the various programs administered by USDA Rural Development's mission agencies, their authorizing legislation, program objectives, eligibility criteria, and FY2005-FY2016 funding for each program. The report is updated as new USDA Rural Development programs are implemented or amended.
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The Antiquities Act of 1906 (54 U.S.C. §§320301-320303) authorizes the President to proclaim national monuments on federal lands that contain "historic landmarks, historic and prehistoric structures, and other objects of historic or scientific interest." The President is to reserve "the smallest area compatible with the proper care and management of the objects to be protected." The act does not further specify the process to be used by Presidents in proclaiming monuments. From 1906 to date, Presidents have established 157 monuments and have enlarged, diminished, or otherwise modified previously proclaimed monuments. Presidential establishment of monuments sometimes has been contentious, based on the size of the areas and types of resources protected; the effects of monument designation on land uses; and the lack of requirements for public participation, congressional and state approval, and environmental review, among other issues. Congress continues to face a variety of national monument issues. Whether to establish, amend, or abolish national monuments is of current interest. Congress has broad authority to take these actions, and it has exercised this authority on numerous occasions. In establishing and amending national monuments, questions for Congress include the optimal size of the areas to be protected and the extent to which various land uses and activities will be allowed, barred, or restricted. Congress also oversees presidential exercise of authority to proclaim monuments and has considered measures to alter this authority. On April 26, 2017, President Trump issued an executive order requiring the Secretary of the Interior to review national monuments established or expanded by Presidents since 1996. The order requires review of national monuments where the size at establishment or after expansion exceeded 100,000 acres or where the Secretary determines that the action was taken "without adequate public outreach and coordination with relevant stakeholders." The Antiquities Act does not specifically require public outreach and coordination in monument designations. The executive order sets out a policy with regard to monument designation, including that designations are made "in accordance with the requirements and original objectives" of the Antiquities Act and "appropriately balance the protection of landmarks, structures, and objects against the appropriate use of Federal lands and the effects on surrounding lands and communities." The review is to determine if the establishment or expansion of post-1996 monuments conforms to the policy in the executive order and to develop any recommendation for presidential actions, legislative proposals, or other actions to carry out the policy. In a May 5, 2017, press release, the Department of the Interior (DOI) identified 27 national monuments that would be reviewed under the President's executive order. One of the 27 monuments, Katahdin Woods and Waters National Monument, is under review based on the adequacy of public outreach and coordination with stakeholders in establishing the monument. The other 26 monuments are under review because the size at establishment or after expansion exceeded 100,000 acres. Five of the 26 monuments are marine based, and the Secretary of Commerce is taking the lead in reviewing these monuments. Twenty-one of the 26 monuments are land based, and the Secretary of the Interior is taking the lead in their review. The Administration sought public comment on monuments under review through July 10, 2017. A total of 1,410,857 comments were received. On June 10, 2017, the Secretary of the Interior issued an interim report on one of the land-based monuments—Bears Ears National Monument. This report was due within 45 days of the issuance of the executive order. A final report on the secretarial review of monuments is due within 120 days of the issuance of the executive order—August 24, 2017. This report provides a compilation and summary of provisions of monument proclamations that could facilitate congressional decisionmaking on monuments and oversight of presidential monument authority. As noted, in establishing and amending monuments, Congress can set the size of monument areas and regulate uses of monument lands. This report covers the 21 land-based national monuments established or expanded since 1996 in which the size exceeded 100,000 acres, which are being reviewed under President Trump's executive order. Monument proclamations provide presidential direction on management of federal lands and resources within the monument boundaries. Although proclamations vary as to the number and type of topics covered, they typically address particular uses and activities on monument lands as well as management planning. This report focuses on provisions of proclamations related to six topics that have been important in the debate on national monuments: energy, livestock grazing, use of motorized and non-motorized mechanized vehicles, timber, hunting and fishing, and tribes. The major provisions on each of these topics are summarized to provide an overview of their emphasis and variation. An analysis of the impact (if any) on changes in land management on the ground resulting from the proclamations is beyond the scope of this report. This report does not reflect more general provisions of the proclamations that may bear on the six topics discussed. As examples of the more general provisions, the proclamations typically "warn" against destroying or removing any "features" of the monument and make the monument the dominant reservation of the land without revoking existing reservations or withdrawals. The proclamations also usually establish the monuments subject to valid existing rights; this report addresses valid existing rights only in the context of the energy-related activities. An examination of the provisions on the six topics in the context of these more general provisions and the entirety of the proclamations might provide additional insights on monument management. The summaries of provisions on the six topics are not intended to capture all textual differences (or nuances) in the language of the proclamations. For this purpose, the verbatim text of the pertinent provisions for the 21 monuments is provided in six separate tables. Monuments are listed in the tables in alphabetical order. A few caveats about the tables deserve note. First, the tables provide the text of the provisions of monument proclamations, as noted, rather than characterizations or legal interpretations of the provisions. Second, although the tables may show differences in the text of provisions on a particular topic, these textual differences may not necessarily reflect differences in meaning. Third, the tables do not reflect other authorities pertaining to monument lands, such as laws, regulations, and agency land management plans. These other authorities govern use and protection of resources on agency lands, the development of land management plans, and public and other participation in agency decisionmaking, among other topics. The authorities vary from agency to agency, with Bureau of Land Management and Forest Service lands generally managed for multiple uses, Fish and Wildlife Service lands managed under a dominant use mission, and National Park Service lands governed by a dual-use mission. An analysis of the monument proclamations in the context of other authorities would be necessary to determine the extent to which activities are authorized on particular lands and the role of the public, states, and tribes in decisionmaking by the four agencies. The proclamations for the national monuments generally bar new mineral and geothermal leases, mining claims, and prospecting or exploration activities, subject to valid existing rights. This is typically accomplished by language to withdraw the lands within the monuments from entry, location, selection, sale, leasing, or other disposition under public land laws, including mining laws and mineral and geothermal leasing laws. A few of the proclamations contain exceptions. For instance, Canyons of the Ancients National Monument is to remain open for oil and gas leasing and development because most of the lands have already been leased and development is occurring, according to the proclamation. However, the Secretary of the Interior is authorized to issue new leases only for specified purposes. Another example is the proclamation for the San Gabriel Mountains National Monument, which allows for the disposal of materials under the Materials Act of 1947. In addition to the general protections for valid existing rights for land uses, the proclamations for three of the monuments—Canyons of the Ancients, San Gabriel Mountains, and Upper Missouri River Breaks—also specify how energy development or energy-related rights are to be managed. Although monument proclamations (at least since 1996) typically contain protections for valid existing rights, the extent to which monument designations may affect existing rights is not always clear. A common concern is that monument designation potentially could result in new constraints on development of existing mineral and energy leases, claims, and permits. Some fear that mineral exploration and extraction activities may have to adhere to a higher standard of environmental review, and may have a higher cost of mitigation, to ensure compatibility with the monument designation. Several of the monument proclamations also contain provisions pertaining to facilities and/or rights-of-way, such as for pipelines, utilities, and other purposes. The extent to which such facilities or rights-of-way pertain to energy-related land uses or other activities, such as telecommunications, has not been analyzed for this report. The provisions vary across monuments. Some contain broad assertions that the proclamations are not to be construed as interfering with these structures and uses. As an example, the proclamation for the Sand to Snow National Monument states that it is not to be construed as interfering with the operation, maintenance, replacement, or modification of existing water resource, flood control, utility, pipeline, or telecommunication facilities; existing facilities may be expanded; and new facilities may be constructed—to the extent consistent with the proper care and management of monument resources. Other proclamations appear more restrictive. For instance, the proclamation for the Basin and Range National Monument states that no new rights-of-way for electric transmission or transportation will be authorized in the monument except as necessary for the care and management of the protected objects or for livestock grazing. Table 1 provides the energy-related provisions of the proclamations for the 21 national monuments. The table does not identify the extent to which there have been determinations of valid existing rights on monument lands or the status of any rights, such as if there is development activity under such rights or federal government efforts to buy out the rights. For all but one of the 21 monuments—Sand to Snow—the proclamations address livestock grazing. The most common language among the proclamations provides that legal authorities governing livestock grazing on agency lands also apply to lands within the monument. The precise text on this point varies among monuments. However, the proclamation for Ironwood Forest National Monument is an example: "Laws, regulations, and policies followed by the Bureau of Land Management in issuing and administering grazing permits or leases on all lands under its jurisdiction shall continue to apply with regard to the lands in the monument." Some of the provisions within proclamations make explicit that the application of livestock grazing authorities is to be consistent with the care and management of objects in the monument that were identified for protection (e.g., Berryessa Snow Mountain). For a couple of monuments, the proclamations appear to authorize grazing only under existing permits and leases at the time of monument designation. However, further research or analysis, such as of other authorities governing the lands at issue, might be needed to determine if grazing could be authorized under new permits and leases. For example, the proclamation for the Grand Staircase-Escalante National Monument provides that "[n]othing in this proclamation shall be deemed to affect existing permits or leases for, or levels of, livestock grazing on Federal lands within the monument; existing grazing uses shall continue to be governed by applicable laws and regulations other than this proclamation." This proclamation does not expressly ban future permits and leases while affirming that existing permits and leases are unaffected by the proclamation. Livestock grazing is prohibited in two of the monuments analyzed. It is banned in the Hanford Reach National Monument to protect the objects identified in the proclamation. Hanford Reach is managed by the Fish and Wildlife Service and the Department of Energy. Lands of these agencies are not generally open to and managed for livestock grazing. Livestock grazing is also barred in the Gold Butte National Monument, where livestock grazing has not been permitted since 1998, according to the proclamation. A couple of monument proclamations condition or restrict livestock grazing. For example, in the Sonoran Desert National Monument, grazing permits in a particular area of the monument cannot be renewed, and grazing in another area could continue only if the managing agency determines grazing to be compatible with the protective purposes of the monument. In another example, the Secretary of the Interior is to study the impacts of livestock grazing on biological objects in the Cascade-Siskiyou National Monument. Existing grazing may continue with "appropriate terms and conditions." If existing permit holders and leaseholders relinquish their permits and leases, the Secretary of the Interior can reallocate the forage only under specified conditions. If grazing is determined to be incompatible with protecting the biological objects in the monument, the Secretary of the Interior is to retire the grazing allotments. Table 2 lists the livestock grazing provisions of the proclamations reviewed for this report. All but one of the monument proclamations—Grand Staircase-Escalante National Monument—addresses the use of motorized vehicles on monument lands. All but two of the monument proclamations—Grand Staircase-Escalante and the San Gabriel Mountains—address the use of non-motorized mechanized vehicles on monument lands. Most of the proclamations prohibit the use of motorized and non-motorized mechanized vehicles off-road except for emergency or administrative purposes. This is accomplished by either a direct prohibition against using vehicles off-road (with the specified exceptions), or by limiting the use of vehicles to designated roads and/or trails. Some of the proclamations generally limit the use of motorized vehicles to roads existing at the time of monument designation (e.g., Basin and Range, Mojave Trails, and Sand to Snow), or roads designated as open at the time of monument designation (Gold Butte). Many of the proclamations call for development of transportation or management plans to address motorized and non-motorized mechanized use of vehicles. Some of them require planning to designate roads and trails where motorized and/or non-motorized mechanized vehicles are allowed (e.g., Basin and Range, Bears Ears, Mojave Trails). Several proclamations require plans to address actions, including road closures or travel restrictions, necessary to protect objects in the monuments (e.g., Canyons of the Ancients, Carrizo Plain, Cascade-Siskiyou, Craters of the Moon, Ironwood Forest, San Gabriel Mountains, Sonoran Desert, Upper Missouri River Breaks, and Vermilion Cliffs). A few proclamations authorize the Secretary to allow off-road areas to be open to motorized use, such as in the Cascade-Siskiyou expansion area (for snowmobiles and non-motorized mechanized use) and San Gabriel Mountains (for off-highway vehicle areas existing on the date of the proclamation). In contrast, a few of the proclamations direct or authorize certain areas to be closed, as for the Cascade-Siskiyou National Monument (for a particular road) and the Giant Sequoia National Monument (for trails after a specified date, prior to issuance of the management plan). Table 3 identifies the provisions of monument proclamations on use of motorized and non-motorized mechanized vehicles for the 21 national monuments. Relatively few of the monument proclamations address timber on monument lands. Specifically, the proclamations for the following four monuments address timber directly or possibly as part of language on vegetative management: Cascade-Siskiyou, Giant Sequoia, Grand Canyon-Parashant, and San Gabriel Mountains. The proclamation for the Cascade-Siskiyou National Monument bars the commercial harvest of timber or other vegetative material except under certain conditions. Further, both Cascade-Siskiyou National Monument and Giant Sequoia National Monument ban the removal of trees, except under specified circumstances, and bar monument lands from being "considered to be suited for timber production" or used in determinations of sustained yield of timber. Giant Sequoia contains additional provisions on completion of timber sales under contract when the monument was proclaimed. In the San Gabriel Mountains National Monument, the Secretary is authorized to carry out vegetative management treatments, with timber harvest and prescribed fire allowed only under certain circumstances. San Gabriel Mountains as well as Grand Canyon-Parashant also allow for the sale of vegetative materials under specified laws or conditions—for instance, if part of a science-based ecological restoration project in the case of Grand Canyon-Parashant. The extent to which vegetative sales might relate to timber versus other types of materials has not been determined for this report. Table 4 identifies the timber-related provisions of the national monuments examined for this report. Table 4 does not reflect provisions of several monument proclamations pertaining to the traditional collection of monument resources, such as vegetation, tree and forest products, firewood, seeds, and other natural materials. The proclamations for the national monuments appear to recognize the primary authority of states to manage fish and wildlife. Proclamations for 20 of the monuments specify that they do not enlarge or diminish the jurisdiction of the relevant state with regard to fish and wildlife management, whereas the proclamation for Grand Staircase-Escalante references only "diminish." For several monuments, these provisions on fish and wildlife management are included in broader statements regarding state jurisdiction. For example, the proclamation for Basin and Range National Monument states, "Nothing in this proclamation shall be deemed to enlarge or diminish the jurisdiction of the State of Nevada, including its jurisdiction and authority with respect to fish and wildlife management." The proclamations for two of the monuments—Gold Butte and Grand Staircase-Escalante—explicitly say that the state authority regarding fish and wildlife management includes hunting and fishing. For instance, the proclamation for Gold Butte provides that "[n]othing in this proclamation shall be deemed to enlarge or diminish the jurisdiction of the State of Nevada, including its jurisdiction and authority with respect to fish and wildlife management, including hunting and fishing." Table 5 provides the provisions on hunting and fishing as contained in the proclamations for the 21 national monuments. The proclamations for 14 of the 21 national monuments contain provisions pertaining to tribal (or Indian) rights, land uses, or roles in monument management. All 14 proclamations state that they do not enlarge or diminish the rights of any Indian tribe; two of the 14 (for Bears Ears and Gold Butte) reference both Indian "rights or jurisdiction." Two of the proclamations, for Organ Mountains-Desert Peaks and Rio Grande del Norte, specify the rights of both Indian tribes and pueblos. Nine of the 14 proclamations also include language regarding protection of Indian sites and access to sites by members of Indian tribes for traditional cultural and customary uses, consistent with relevant authorities. The text of these protection provisions differs in a number of ways. For example, eight of the nine proclamations require protection by the relevant Secretary in consultation with Indian tribes, whereas the proclamation for the San Gabriel Mountains National Monument provides for the management plan to protect sites. Among other differences, the nine proclamations highlight different types of sites as protected (e.g., sacred, cultural, and/or religious), and some of them contain additional provisions on traditional collection of materials from monument lands. The nine proclamations also require the relevant agency or department head to seek public input in the development of the monument management plan, including consultation with tribes (among other governments and entities). The proclamation for Bears Ears National Monument has additional provisions providing for tribal involvement. It establishes a Bears Ears Commission with members from several tribes "to provide guidance and recommendations on the development and implementation of management plans and on management of the monument." The Secretary of Agriculture and the Secretary of the Interior are to "meaningfully engage" the commission or a successor entity composed of tribal government officers should the commission cease to exist. If the Secretaries decide not to incorporate recommendations of the commission (or comparable entity) in developing or revising management plans, the Secretaries are to provide a written explanation of their reasoning. Bears Ears National Monument further directs the Secretaries to establish an advisory committee to provide information and advice on developing the management plan and, "as appropriate, management of the monument." The membership of the advisory committee is to be drawn from tribes and a variety of other stakeholders. Table 6 reflects the tribal-related provisions of the proclamations for the 21 national monuments. The proclamations for the 21 national monuments generally bar new mineral and geothermal leases, mining claims, and prospecting or exploration activities, subject to valid existing rights. For all but one of the 21 monuments—Sand to Snow—the proclamations address livestock grazing. They typically express that legal authorities governing livestock grazing on agency lands also apply to lands within the monument. Most of the proclamations prohibit the use of motorized and non-motorized mechanized vehicles off-road except for emergency or administrative purposes. Only four of the monument proclamations address timber on monument lands, directly or possibly as part of language on vegetative management. The proclamations appear to recognize the primary authority of states to manage fish and wildlife. Twenty proclamations specify that they do not enlarge or diminish the jurisdiction of the relevant state with regard to fish and wildlife management, whereas one proclamation (for Grand Staircase-Escalante National Monument) references only "diminish." The proclamations for 14 of the 21 national monuments state that they do not enlarge or diminish the rights of any Indian tribe. Nine of these 14 proclamations also include language regarding protection of Indian sites and access to sites by members of Indian tribes for traditional cultural and customary uses. This analysis of provisions of monument proclamations pertaining to land uses within monuments may be useful to Congress in establishing, amending, and overseeing national monuments and assessing presidential actions under the Antiquities Act.
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The Antiquities Act of 1906 (54 U.S.C. §§320301-320303) authorizes the President to proclaim national monuments on federal lands that contain "historic landmarks, historic and prehistoric structures, and other objects of historic or scientific interest." The President is to reserve "the smallest area compatible with the proper care and management of the objects to be protected." From 1906 to date, Presidents have established 157 monuments and have enlarged, diminished, or otherwise modified previously proclaimed monuments. Presidential establishment of monuments has sometimes been contentious, based on the size of the areas and types of resources protected; the effects of monument designation on land uses; and the lack of requirements for public participation, congressional and state approval, and environmental review, among other issues. On April 26, 2017, President Trump issued an executive order requiring the Secretary of the Interior to review national monuments established or expanded by presidential proclamation since 1996 that meet certain criteria. The review arises in the context of current controversy over the President's monument authority and is to determine conformance of monument designation with a policy set out in the executive order. On May 5, 2017, the Department of the Interior (DOI) identified 27 national monuments that would be reviewed. One of the 27 monuments, Katahdin Woods and Waters National Monument, is under review based on the adequacy of public outreach and coordination with stakeholders in establishing the monument. The other 26 monuments are under review because the size at establishment or after expansion exceeded 100,000 acres. Of these 26 monuments, 5 are marine based and 21 are land based. The Secretary is to issue a final report on the review of monuments within 120 days of the issuance of the executive order—August 24, 2017. In his final report, the Secretary is to include recommendations for presidential actions, legislative proposals, or other actions. Congress has authority to alter the President's authority to proclaim monuments and to establish, abolish, or amend monuments (including regulating uses of monument lands). To facilitate congressional decisionmaking and oversight of national monuments, including consideration of uses of monument lands, this report provides a compilation and summary of provisions of proclamations for the 21 land-based monuments with sizes exceeding 100,000 acres. It focuses on provisions related to six topics important in the debate on national monuments: energy, livestock grazing, use of motorized and non-motorized mechanized vehicles, timber, hunting and fishing, and tribes. These provisions are summarized to provide an overview of their emphasis and variation, and the verbatim text of the pertinent provisions is provided in six separate tables. An analysis of monument proclamations in the context of other authorities would be necessary to determine the extent to which activities are authorized on particular lands and the effect (if any) on changes in land management on the ground. The proclamations for the 21 national monuments generally bar new mineral and geothermal leases, mining claims, and prospecting or exploration activities, subject to valid existing rights. For all but one of the 21 monuments—Sand to Snow—the proclamations address livestock grazing. They typically express that legal authorities governing livestock grazing on agency lands also apply to lands within the monument. Most of the proclamations prohibit the use of motorized and non-motorized mechanized vehicles off-road except for emergency or administrative purposes. Only four of the monument proclamations address timber on monument lands, directly or possibly as part of language on vegetative management. The proclamations appear to recognize the primary authority of states to manage fish and wildlife, by generally specifying that the proclamations do not enlarge or diminish the jurisdiction of the relevant state with regard to fish and wildlife management. The proclamations for 14 of the 21 national monuments expressly state that they do not enlarge or diminish the rights of any Indian tribe.
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Federal laws have long prohibited corrupt payments of things of value to federal officials, such as payments in the form of "bribes" from favor-seekers in the private sector. The regulations and limitations on mere "gifts" to federal officials from domestic sources — where there is not necessarily any bargain (reciprocity), compensation, or favor explicitly sought, understood, or agreed to — are, however, of a more recent vintage. The ethical issues and problems of "gifts" to public officials may arise because of the tacit or subtle influence or feelings of gratitude and appreciation that a public official may feel towards his or her benefactors that might "sway his decisions" and erode the official's "sense of mission to the public" in favor of loyalty to "his private benefactors and patrons." This concern, of course, must be balanced to some extent with the normal, expected, and generally innocent expressions of gratitude from the public, the realities of friendships and personal relationships, as well as the requirements of protocol and etiquette in an public officer's official and ceremonial duties and functions. With respect to the President, the exigencies of the office and considerations of protocol, courtesy, and etiquette, have led to an express exemption from the general limitation in regulations on the acceptance of private gifts which might apply to other officers and employees in the executive branch of the United States Government. The current restriction under federal statutory law on the receipt or solicitation of "gifts" by federal employees and officials was enacted as part of the Ethics Reform Act of 1989. The underlying statutory restriction enacted in 1989 in many respects merely codified similar gift standards which had already been applicable to all executive branch employees by way of executive orders and regulations since 1965. The current law, codified at 5 U.S.C. §7353(a), prohibits any federal officer or employee from soliciting or receiving any gift of any amount from a prohibited source, that is, from someone who is seeking action from, doing business with, or is regulated by one's agency, or whose interests may be substantially affected by the performance or nonperformance of one's official duties. The statute expressly provides in the next paragraph, however, that the designated supervisory ethics agencies in the government may make exceptions to this general restriction, and may issue regulations setting out circumstances under which gifts from private sources may be accepted for those under their jurisdictions. In the executive branch of the federal government, the regulations and interpretations of the Office of Government Ethics [OGE] apply to gifts that are offered to or received by executive branch officials. The regulations of the Office of Government Ethics set out the guidelines and standards for receipt of gifts by officials in the executive branch of the federal government. The executive branch gift regulations generally follow the statutory prohibitions by restricting the solicitation or acceptance of gifts from a "prohibited source" and , furthermore, restrict the solicitation or receipt of any gifts that are given "because of the employee's official position," often referred to as "status gifts." Under the regulations, "prohibited sources" are persons seeking official action from the employee's agency, those who do business or are seeking to do business with the agency, those whose activities are regulated by the employee's agency, persons whose interests may be substantially affected by the performance of the employee's official duties, or an organization a majority of whose members fit the above categories. Although an official may not receive a gift given because of his official position, that is, if the gift would not have been given "had the employee not held the status, authority or duties associated with his Federal position," an executive branch official may accept a gift without limitation when it is clear that the gift "is motivated by a family relationship or personal friendship rather than the position of the employee." Within the executive branch gift regulations there are numerous exceptions which would permit the acceptance (but not the solicitation) of certain things of value in particular circumstances. Such exceptions to the prohibition may allow, for example, the receipt of gifts of "minimal value" (under $20 in value), incidental food or drinks at events, bona fide awards, normal loans, prizes, honorary degrees, pensions, discounts which are generally available, and free attendance at certain widely attended conferences and similar events which are seen to benefit the agency. The federal regulations on gifts are not directly applicable to the spouses of federal officials since such regulations extend only to "officers or employees" of the government. However, in many cases, gifts to the spouse of a federal official may be "imputed" to the federal official himself or herself, and would thus come within the same kinds of restrictions, limitations, or permissions on gifts to the federal employee. The OGE regulations apply to gifts accepted or solicited directly or indirectly, and expressly provide that a gift which is "solicited or accepted indirectly includes" gifts which are "[g]iven with the employee's knowledge and acquiescence to his parent, sibling, spouse, child or dependant relative because of that person's relationship to the employee...." As noted, the President and Vice President are generally exempt by regulation from the statutory gift restrictions and the regulations promulgated by the Office of Government Ethics as to the receipt of gifts. Under these regulations, the President is expressly exempt from the broad restrictions on receiving or accepting gifts from prohibited sources or gifts given because of his official position, and thus may accept gifts from the general public, even from "prohibited sources," or gifts given because of his official position, as long as the President does not "solicit or coerce" the offering of gifts from such sources, nor accept a gift in return for an official act. The exception for the President and Vice President in the OGE regulations states: Because of the considerations relating to the conduct of their offices, including those of protocol or etiquette, the President and the Vice President may accept any gift on his own behalf or on behalf of any family member, provided that such acceptance does not violate §2635.202(c)(1) or (2), 18 U.S.C. §201(b) or 201(c)(3), or the Constitution of the United States. In promulgating its rules and exceptions, the Office of Government Ethics has noted that: "The ceremonial and other public duties of the President and Vice President make it impractical to subject them to standards that require an analysis of every gift offered." The regulations and exemptions indicate that the President is still subject to the prohibition on receiving a gift "in return for being influenced in the performance of an official act," and is still subject to the instruction under the regulations not to "solicit or coerce the offering of a gift," at 5 C.F.R. §2635.202(c)(2). It appears that the existing prohibition on "solicitations" of gifts would reach only solicitations which are restricted by the general rule, that is, solicitations of gifts from "prohibited sources," or given "because of the employee's official position." Since the President is not flatly prohibited from accepting gifts from the general public, such a gift made to the President personally, and accepted, may be retained by him when he leaves office. Gifts coming to the White House that are not intended for the President or First Lady personally, however, but rather are given with the intent to be made for the "White House," or otherwise made to the government of the United States, and personal gifts not retained by the President or First Lady, are catalogued, distributed, or disposed of by the United States. "Furnishings," for example, may be accepted by the National Park Service for use in the White House; "historic material" may be accepted by the Archivist for the Archives or Presidential Libraries; and other gifts for the United States, or ones not retained by the President, may be transferred to the General Services Administration for disposition, storage, or sale. In practice, domestic or private gifts are screened, categorized, and evaluated by aides in the White House Gift Office, and then distributed appropriately. If personal gifts to the President or First Lady are not to be retained by them, they are generally recorded, tracked, and sent to the National Archives and Records Administration [NARA] for courtesy storage, and possible eventual use and display at a presidential library. The process in the Reagan White House was explained as follows: While gifts from family and friends go directly from the White House Gift Unit to the first family, it is simply impossible for the President and First Lady to retain, or even view, most of the gifts from the general public. The Gift Unit, therefore, sees to the disposition of most of these items. Some are transferred to the National Archives, and eventually join head of state gifts as part of a presidential library museum collection. The President and all federal officials are restricted by the Constitution, at Article I, Section 9, clause 8, from receiving any "presents" from foreign governments, kings, or princes, without the consent of the Congress. The Congress has consented generally, in the Foreign Gifts and Decorations Act, to the acceptance of gifts of "minimal value" from foreign governments offered as souvenirs or marks of courtesy, and the acceptance of other gifts when a refusal of the gift may cause "offense or embarrassment" or otherwise harm the foreign relations of the United States. A tangible gift of more than minimal value accepted for reasons of protocol or courtesy may not be kept as a personal gift, however, but is considered accepted on behalf of and property of the United States, and in the case of such a gift for the President or the President's family, is handled by the National Archives and Records Administration. In the past, Presidents, as well as Vice Presidents and other federal officials, have been allowed to accept an award such as the Nobel Prize for a variety of reasons. With respect specifically to the prohibition on acceptance of things of value and gifts from foreign governments, the Nobel Prize is funded and managed by a private foundation and a private foundation board, and is thus not considered to be a gift given by a foreign government nor an instrumentality of a foreign state. The President and all federal officials are subject to the restrictions of the bribery law at 18 U.S.C. §201(b)(2), prohibiting the receipt of or agreement to receive anything of value "in return for being influenced" in the performance of one's official duties; and the so-called "illegal gratuities" clause of that statute, 18 U.S.C. §201(c)(1)(B), prohibiting the receipt of anything of value "for or because of" an official act performed or to be performed. The bribery provision requires a "corrupt" bargain or understanding to do some official act in return for something of value (often referred to as a quid pro quo ), where the payment was the motivation for the official act; while under the "illegal gratuities" provision, the official act may have been done even without the payment as motivation, but the payment was connected to the act in some way, for example, as a thank-you or other reward ( i.e. , a "gratuity"). Neither provision is technically a "gift" law, and neither applies merely to gifts given with no demonstrated connection to a particular official act. In addition to restrictions on the receipt of gifts, the President is required to publicly disclose personal financial information, including personal gifts over minimal amounts ($350 as of this writing) which have been received by him and his immediate family. These public disclosure reports are required each May 15 th , and upon leaving office, under the provisions of the Ethics in Government Act of 1978, as amended. Despite the permissibility of the receipt and acceptance of gifts by the President and the First Lady from the American public, certain acceptances of private gifts have in the past engendered some public and press criticism, and thus the receipt of particularly lavish or excessive gifts, even if free of legal liability, may not be free from political or public relations consequences.
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This report addresses provisions of federal law and regulation restricting the acceptance of personal gifts by the President of the United States. Although the President, like all other federal officers and employees, is prohibited from receiving personal gifts from foreign governments and foreign officials without the consent of Congress (U.S. Const., art. I, §9, cl. 8), the President is generally free to accept unsolicited personal gifts from the American public. Most of the restrictions on federal officials accepting gifts from "prohibited sources" (those doing business with, seeking action from, or regulated by one's agency) are not applicable to the President of the United States (5 C.F.R. §2635.204(j)), although the President may not solicit gifts from such sources. The President, in a similar manner as other federal officials, may also receive unrestricted gifts from relatives and gifts that are given on the basis of personal friendship. When personal gifts accepted by the President or his immediate family exceed a certain amount, those gifts are required to be publicly disclosed in financial disclosure reports filed annually by the President. 5 U.S.C. app., §§101(f)(1), 102(a)(2). The President remains subject to the bribery and illegal gratuities law which prohibits the receipt of a gift or of anything of value when that receipt, or the agreement to receive such thing of value, is connected in some way to the performance (or nonperformance) of an official act.
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After the recent financial crisis, Congress enacted the Dodd-Frank Wall Street Reform and Consumer Protection Act, P.L. 111-203 , which overhauled financial sector regulation. The 112 th Congress is actively involved in overseeing the act's implementation, including provisions involving corporate governance, the framework of rules and practices by which a board of directors ensures accountability, fairness, and transparency in the firm's relationship with its stakeholders. Among the studies that identified corporate governance failings as a key factor in the development of the crisis are the Financial Crisis Inquiry Commission's report and a study conducted by the Organization for Economic Co-operation and Development (OECD) whose members include the United States, the United Kingdom, Japan, and Germany. Directors on the boards of public corporations are fiduciaries with responsibility for overseeing the best interests of the corporation and its shareholders. Among other things, they oversee management, including the hiring and firing of senior executives, approving executive compensation, providing overall strategic direction, and approving annual business plans. Typically, state-based business laws such as those in Delaware (where most of the nation's large public companies and about half of all U.S. public corporations are incorporated) establish the overall legal structures that incorporated firms are subject to. In the area of corporate governance, state laws typically mandate that management of a corporation's business shall be under the board's direction; and that shareholders generally have the right to vote for the election or removal of directors, amend the charter and bylaws, and vote on extraordinary transactions such as mergers or liquidation, when they are proposed by the board of directors. Substantive corporate governance matters have traditionally been delegated to the states. State corporation laws have established that that shareholders have the right to vote their shares to elect directors and to approve or reject major corporate transactions at shareholder meetings. Under state corporation law, shareholders also have the right to appoint a proxy, a written authorization of voting power by a shareholder to vote shares on their behalf at shareholder meetings. Since most shareholders do not personally attend shareholder meetings, voting at the meetings occurs largely through the use of proxies that are solicited prior to the meetings. While the SEC has noted that its power to conduct proxy-related rulemaking under Section 14 of the Securities Exchange Act of 1934 (P.L. 73-291, the Exchange Act) has occasionally been challenged, SEC officials have consistently asserted the agency's broad authority to govern and make rules related to proxies and proxy solicitations. When it adopted Section 14(a) of the Exchange Act, Congress determined that the exercise of shareholder voting rights via the corporate proxy is a matter of federal concern, and the statute's grant of authority is not limited to regulating disclosure. Proxy materials and proxy statements are used to inform shareholders and to solicit votes for corporate decisions (such as the election of directors) and other corporate actions (including official management and shareholder corporate proposals for shareholder consideration). Slates of board-selected director nominees are typically voted on at annual shareholder meetings and an incumbent board and its nominating committee will use a company's proxy material to put forward a slate of directors to be voted on at the meeting. The majority of shareholders who do not attend the annual meeting can use the proxy ballots to vote in absentia. The SEC derives its authority to regulate the solicitation of proxies from the Investment Company Act of 1940 (P.L. 76-768) and most significantly from the Exchange Act. A law review article published in 1965 detailed the evolution of the agency's powers over proxy solicitation under the Exchange Act during the first three pivotal decades: Section 14(a) of the 1934 Act … gave broad powers to the Commission to adopt rules governing the solicitation of proxies as may be necessary or appropriate…. This grant of power to the Commission, however, was limited to securities registration on a national securities exchange. When the Commission adopted its first proxy regulations under Section 14(a) in 1935, it marked the beginning of a totally new body of substantive and procedural law with respect to the solicitation of proxies…. At different times between 1935 and 1964, the Commission pursuant to Section 14(a), adopted a series of rules under the general heading of Regulation 14…." One of the ways by which shareholders can express their views on the management and affairs of a company is through shareholder proposals, which are governed pursuant to Rule 14a–8, which the SEC adopted under Regulation 14. Rule 14a–8 gives shareholders an opportunity to place a proposal in a company's proxy materials for a vote at annual or special shareholder meetings. Under the rule, a company is generally required to include the proposal unless a shareholder has failed to comply with the rule's procedural requirements or in the event that the proposal falls within several of the rule's substantive reasons for such an exclusion. One such substantive basis for excluding a shareholder proposal is Rule 14a–8(i)(8) under Regulation 14, which involves shareholder proposals regarding director elections. Under the rule, also known as the "election exclusion," the SEC permitted the exclusion of shareholder proposals aimed at establishing procedures that could result in contested elections for positions on a company's board of directors. Shareholders interested in fellow shareholders consideration of an alternative slate of board nominees outside of inclusion in proxy materials must bear the distribution and printing costs of getting their slate to the dispersed corporate shareholders. Although there is some disagreement, many say that the cost of mounting such a proxy fight or proxy contest can pose a significant obstacle to shareholders who wish to do so. By some accounts, waging a proxy fight can require several hundred thousands of dollars. Historically, among the several thousand public firms in the United States, there tend to be fewer than 100 such proxy fights in any given year. In a May 2009 split vote, in which the two Republican commissioners dissented, the SEC voted to propose two rules involving proxy access. This represented the third time in seven years that the agency had wrestled with the issue of giving shareholders the ability to use corporate proxy materials to nominate candidates to corporate boards. One proposal would have established a new Rule 14a-11 under Regulation 14. Depending on a company's market capitalization and subject to various qualifications, the rule would have allowed shareholders with 1%, 3%, or 5% of a company's stock to nominate up to 25% of the board seats up for annual elections. The second proposal would have amended Rule 14a-8(i)(8) to permit shareholder proposals that involve the nomination process for directors. The proposed Rule 14a-11 was especially controversial, reigniting a longstanding debate that has been dominated by pension funds and members of the business community. Pension fund groups generally praised the rule's goal of easing access to director nominations, saying that it would help to make boards more accountable to shareholder interests. Members of the business community voiced concerns that it would lead to more divisive boards and better enable groups such as pension funds to push parochial agendas with little connection to the fundamental issue of shareholder returns. On August 25, 2010, with the two Republican commissioners again dissenting, the SEC voted to adopt modified versions of the 2009 proposals. Under its major rulemaking reform, proxy access would be provided to large investors meeting minimum continuous stock ownership requirements and ownership thresholds. Companies would generally be required to include the nominees of such large shareholders in their proxy materials as have continuously owned at least 3% of a company during the previous three years. Each shareholder would be able to include no more than one nominee or a number of nominees representing up to 25% of the company's board of directors, whichever is greater. In September 2011, shortly after the SEC rulemaking, two major business trade groups, the Business Roundtable (Roundtable) and the United States Chamber of Commerce (Chamber) filed a petition for review of the new but yet to be implemented SEC rulemaking under which proxy access would be provided to large investors meeting minimum continuous stock ownership requirements and ownership thresholds with the United States Court of Appeals for the District of Columbia Circuit on the grounds, among other things, that the rule was arbitrary and capricious. Pending the court's ruling, the SEC subsequently decided to discontinue implementation of the rule. On July 22, 2011, in Business Roundtable and Chamber of Commerce v. Securities and Exchange Commission , No. 10-1305 slip op. (D.C. Cir. Jul. 22, 2011), the court vacated the SEC's proxy access rule. On September 6, 2011, SEC officials announced that they would not seek an appeal of the court's decision. However, they indicated that a lesser part of the rulemaking, which would permit shareholders to submit shareholder proposals that seek to establish shareholder access regimes in companies, and had not been challenged in court, would go into effect at a later date. An earlier CRS report examined the SEC's aforementioned 2009 proxy access rule proposals and the policy debate surrounding it. This report examines: key aspects and the potential impact of the proxy access rules that the SEC adopted in August 2010; a provision in the Dodd-Frank Act that affirms the SEC's authority to make proxy access rules; congressional opposition to that provision; and the aforementioned court case that resulted in the SEC tabling the implementation of a key part of its proxy access rules. The proxy access rules adopted by the SEC involved two basic initiatives under Regulation 14, which the SEC adopted in 1935 pursuant to Section 14(a) of the Exchange Act: (1) the creation of a new rule, Rule 14a-11, which would permit individual investors or investor groups with a certain threshold percentage of the total voting power of a company's securities to put forward board nominees on a company's proxy materials; and (2) a new amendment to Rule 14a-8(i)(8) which would loosen historical limits on the ability of shareholders to make proposals related to contested director elections. The initiatives are described below. Key provisions of the amendment were as follows: If a shareholder meets certain conditions and is not otherwise prohibited by a state, or foreign law, or a company's governing documents from nominating a candidate for election as a director, companies would be required to include shareholder nominees for director in the company's proxy materials. To nominate directors under the rule, a shareholder would be required to own and have continuously held for at least three years, at least 3% of the total voting power of the company's voting securities during its annual meetings to elect directors. Individual shareholders would be allowed to combine their holdings to meet the 3% threshold. Shares that are sold short or borrowed would not be counted toward meeting the threshold. An eligible shareholder would be able to include only one director nominee, or several nominees who represent no more than 25% of the members of a company's board, whichever is greater. (For example, if a board has three members, one shareholder nominee could be included in the proxy materials. If a board has eight members, up to two shareholder nominees could be included in the proxy materials.) When there is more than one eligible shareholder or shareholder group, a company would be required to include in its proxy materials the nominee or nominees of the nominating shareholder or group with the highest percentage of the company's voting securities. nominating shareholder would be required to file with the SEC and provide the company with a new publicly available disclosure document (Schedule 14N). Among other things, it would require the disclosure of the amount and percentage of the voting power of the securities owned by the nominating shareholder, the length of ownership, and a statement that the nominating shareholder intends to continue to hold the securities through the date of the meeting. Nominating shareholders would be required to submit their candidates or proposals no later than 120 days before the anniversary date on which the company mailed its proxy statement the year before. Small companies with a public float of less than $75 million in equity would be exempt from the rule for the initial three years after its effective date for larger companies. The SEC's proxy access rulemaking also included an amendment to Rule 14a-8(i)(8). The Exchange Act permits companies to exclude shareholder proposals regarding elections. The amended rule stipulates that with certain limits, companies would be required to include in their proxy materials shareholder proposals aimed at establishing procedures in the company's governing documents for the inclusion of one or more shareholder director nominees. Under the rule, shareholders could seek approval for more permissive corporate bylaws such as even lower ownership thresholds and require a company to reimburse shareholders for proxy expenses. However, a company could not opt out of the Rule 14a-11 proxy access standards. In cases in which a state law, foreign law, or a company's governing bylaws prohibit inclusion of shareholder director nominees in company proxy materials, or establish share ownership rules that are more restrictive than would Rule 14a-11, Rule 14a-11's terms would supersede them. Conversely, where a state law, foreign law, or a company's governing bylaws prohibit inclusion of shareholder director nominees in company proxy materials, or establish share ownership rules more permissive than would Rule 14a-11, then the ability to pursue proxy access through Rule 14a-11 would not be available to shareholders with ownership levels, 2% for example, below Rule 14a-11's stated threshold. The SEC explained its basic rationale for adopting the new rule, Rule 14a-11, as follows: We believe that the new rule will benefit shareholders and protect investors by improving corporate suffrage, the disclosure provided in connection with corporate proxy solicitations, and communication between shareholders in the proxy process. Explaining its reasoning for adopting the amendment to Rule 14a-8(i)(8), the SEC said that it perceived the amendment to be an integral part of providing expanded shareholder suffrage benefits through the new Rule 14a-11: [W]e do not believe that adopting changes to Rule 14a8(i)(8) alone, without adopting Rule 14a-11, will achieve our goal of facilitating shareholders' ability to exercise their traditional state law rights to nominate directors. We believe that revising Rule 14a-8 will provide an additional avenue for shareholders to indirectly exercise those rights; therefore, the final rules include a revision to Rule 14a-8(i)(8). As adopted, companies will no longer be able to rely on Rule 14a-8(i)(8) to exclude a proposal seeking to establish a procedure in a company's governing documents for the inclusion of one or more shareholder nominees for director in the company's proxy materials. SEC chairwoman Mary Schapiro summarized the overall challenges associated with the rulemaking as well as its perceived benefits: These rules are the result of long and careful consideration of the often widely divergent views expressed by commenters, as well as constructive debate within the Commission and among its staff. These rules are stronger and will be more effective because of our concerted effort to balance competing interests. As the public reviews the changes that we have made from our proposal, it will see dozens of instances of "give and take." These rules reflect compromise and weighing competing interests. As with all compromises, they do not reflect all the views of any one person or group. They are, I firmly believe, rational, balanced and necessary to enhance investor confidence in the integrity of our system of corporate governance. Because the process created by these rules will represent a marked change to the status quo, I am committed to closely monitoring how these new rules are implemented. We will monitor not only in the context of future application to smaller companies, as I mentioned, but also so that we can make prompt changes for all companies, if practice demonstrates the need to do so…. Except in the case of small companies under Rule 14a-11, the SEC's proxy access amendments were both to become effective on November 15, 2010, 60 days after they were published in the Federal Register on September 16, 2010. The SEC argued that the proxy access rulemaking facilitates its stated goal of furthering shareholders' ability to nominate and elect their own director candidates principally by enabling the shareholder to avoid certain costs connected with traditional proxy contests. The savings are predicated on the assumption that a shareholder would replace an intended proxy fight, the traditional director nomination done without a company's proxy materials, with a nomination that is published in the proxy materials as provided in Rule 14a-11. The SEC acknowledges that it cannot be assumed such substitutions would always take place. However, the agency noted that when an eligible shareholder opts to put forward director nominees through Rule 14a-11 instead of engaging in a proxy contest, the key cost savings were predicted as follows: Direct Cost Savings from Reduced Printing and Postage Costs . A nominating shareholder or group may benefit from the direct cost savings that would come from a reduction in their printing and postage costs. The SEC determined that a shareholder who uses Rule 14a-11 to submit director nominations for inclusion in a company's proxy materials will save at least $18,000 in printing and postage costs on average. Direct Cost Savings from Reduced Expenditures for the Advertising and Promotion of Shareholder Nominees. With proxy access, shareholders could also see a reduction in their advertising and promotion expenditures for their nominees. Cost Savings Due to the Mitigation of the Collective Action/Free Rider Problem. A collective action problem exists when the time and the resources expended by a shareholder in promoting a nominee in a traditional proxy contest are not shared by the other shareholders who might benefit from the effort. Those other shareholders are thus free riding on the resource expenditures of their activist colleagues. The SEC argued that although a successful traditional proxy contest might produce greater total benefits for all a company's shareholders, the unequal cost sharing may discourage single shareholders from incurring the costs of a traditional proxy contest on their own. As a consequence, there was an economic cost from the forgone opportunities when a qualified director candidate is not nominated because no shareholder or shareholder groups are willing to incur the costs of a nomination. The SEC also contended that the direct cost savings through replacing traditional proxy fights with nominations through proxy access should help to mitigate these traditional collective action and free-rider concerns. For many years, SEC officials said that the agency had the legal authority to adopt proxy access rules, authority that others have, however, questioned. Title IX, Section 971 of the Dodd-Frank Act ( P.L. 111-203 ) affirms the SEC's authority to adopt proxy access rules by expressly authorizing the agency to do so. It also authorizes the agency to establish the terms and conditions of such shareholder access and requires it to consider the compliance burdens of small companies in assessing whether companies can be exempted from proxy access rulemaking. The Dodd-Frank Act's conference report stressed that by confirming that the SEC had the authority to write proxy access rules, it could "help shift management's focus from short-term profits to long-term growth and stability." In the 111 th Congress, H.R. 3817 contained some provisions that were eventually included in the Dodd-Frank Act. One such provision affirmed the SEC's right to adopt proxy access. During the House Financial Service Committee's markup of H.R. 3817 , the vote on the proxy access amendment split along partisan lines with the majority party unanimously in support and the minority party unanimously opposed. During that markup, some opponents specifically criticized the proxy access reform provision. Among them were Representative Spencer Bachus, then the committee's ranking member and its chairman in the 112 th Congress, and Representative Scott Garrett, chairman of the subcommittee on Capital Markets and Government-Sponsored Enterprises in the 112 th Congress. Explaining their opposition to the proxy access provision during the November 2009 markup, Representatives Bachus and Garrett joined with other Republicans on the committee to argue that proxy access reform would take the SEC away from its central mission of investor protection and that the states were already providing proper and enlightened leadership in this area: … [proxy access] takes the SEC away from its core mission of protecting investors. States are already enhancing shareholder rights. For example, Delaware has enacted legislation clarifying the authority of companies and their shareholders to adopt proxy access and proxy reimbursement bylaws and North Dakota has created a state proxy access right. These state actions allow shareholders to choose whether proxy access is appropriate and, if it is, to delineate specific details such as ownership thresholds and holding periods. The amendment would undermine 150 years of corporate governance that has served our capital markets well… This section provides some representative supportive views of the SEC's proxy access reform initiative. Several derive from labor unions and pension fund groups that have advocated for proxy access for many years. For example, AFL-CIO President Richard Trumka reportedly characterized the rulemaking as a "historic step in empowering long-term investors, [a change that the labor federation has sought for] close to 70 years." The Council of Institutional Investors (CII), a nonprofit association of public, union, and corporate pension funds with combined assets over $3 trillion), fellow CII member TIAA-CREF, and 14 other CII members expressed joint support for the proxy access rules in general and for Rule 14a-11 in particular. They argued that while few shareholders are expected to invoke their right to proxy access under the reform, the mere existence of that right should benefit manager and shareholder communications, ultimately benefitting managerial performance and investor returns: Absent a realistic prospect of removal, directors can fail to act in the long-term interests of the corporation, with disastrous results… Responding to those failures, the [the SEC proxy access] Rule [14-a11] allows certain shareholders to include director nominees in the company's proxy materials. The SEC carefully circumscribed that right, limiting it to shareholders with a large, long-term stake in the corporation, while deterring shareholders with parochial agendas. Experience abroad with similar rules strongly supports the SEC's conclusion that, while proxy access will rarely be invoked, it provides broad benefits: The possibility of shareholder candidates enhances communication between management and significant investors, improves management performance, and thereby limits the need to invoke proxy access. And when proxy access is invoked, it increases financial returns… The California State Teachers' Retirement System (CalSTRS, a pension plan for California teachers) was one of several pension groups that praised the rulemaking. CalSTRS chief executive officer, Jack Ehnes, reportedly observed This ruling is most welcome at CalSTRS, which as a fiduciary pledged to preserve our members' financial security, must maximize the value of its investments for the long haul. One of the lessons of this current economic downturn is to be mindful that governance is a significant risk factor and that greater accountability, which this ruling affords, will go a long way toward mitigating that risk. Some observers raised concerns that providing proxy access would further empower hedge funds who tend to have rather short-term corporate investment horizons, which some say could undermine a company's longer-term viability. Others, however, have disputed this, saying that the SEC rulings are likely to primarily advantage "long-term, passive, institutional shareholders, such as pension funds" with interest in nominating a few alternative board candidates, not hedge funds or more activist shareholders. This argument was largely premised on the perception that hedge funds and activist investors will generally not be able to meet the rulemaking's 3% stock-ownership threshold and its passive investment test. Hedge funds often acquire shares for the purpose of controlling a company, which means they would fail the passive investor test. In addition, an attorney at Mayer Brown, a corporate law firm, suggested that concerns that proxy access will result in a significant number of board members who have been nominated by larger shareholders are probably exaggerated: Just because shareholders can publish their nominations in the proxy materials in no way guarantees that their nominees will be elected. The greater impact may be that the rules encourage companies to pay more attention to shareholder issues. The board of directors may proactively go out and increase dialogue with larger shareholders to get a sense of what issues concern them. Lucian Bebchuk of Harvard University Law School is a corporate governance researcher and an advocate of proxy access. Scott Hirst is head of the law school's corporate governance program. The two jointly praised the SEC's proxy access rulemaking, predicting that while it was likely to be used sparingly, the reform should help boost shareholder returns: The case for the proposed rule is supported by the significant body of empirical work … indicating that reducing incumbent directors' insulation from removal is associated with improved value for shareholders. Although the case for proxy access is strong, corporate managements have long strongly resisted such access. The importance of the step taken today should therefore not be understated. We applaud both the SEC for adopting a proxy access rule and Congress for recently affirming the SEC's authority to do so. The details of the proxy access rule adopted today mean that its immediate consequences are likely to be modest. Under the rule, a shareholder (or shareholder group) would need to hold more than 3% of the company's shares for more than three years to be eligible to use the rule to place director candidates on the corporate ballot. These eligibility requirements, together with the rule's procedural requirements, will place substantial limits on its use. Other key arguments marshaled in support of general proxy access reform included Between 1990 and 2003, three academic researchers examined a corporate management entrenchment index based on several provisions in corporate charters, such as staggered boards, limits to shareholder bylaw amendments, and supermajority board vote requirements for mergers and for charter amendments. The authors determined that increases in the level of entrenchment were statistically correlated with economically significant reductions in firm valuation, which they said suggested that entrenching provisions cause lower firm valuation. Some view proxy access as an antidote to managerial entrenchment. Survey data from 760 independent board directors at large and medium-sized U.S. firms featured in a study that examined key influences on the prospect that the directors receive additional board appointments. It concluded that a director increased his or her prospects of being reappointed by providing advice and information to CEOs and engaging in ingratiatory behavior toward his or her colleagues on the board. The likelihood of reappointment was also bolstered by conducting only minimal levels of monitoring of company management. Summarizing the study's implications, one of its authors observed that "a common argument against shareholder democracy is that shareholders lack sufficient information or expertise to choose who runs their company. It seems ironic, then, that board members who gain the most influence are not those most involved in company governance but those most adept at currying favor with fellow directors." Proxy access could give shareholders a beneficial counterweight to the many boards whose managerial bias is heightened when the CEO also serves as the board chair, the dominant scheme among U.S. public companies. Maintaining the status quo in which Delaware and other states would individually decide on proxy access regimes for their incorporated firms could result in a variety of standards that would differ from company to company and from state to state, arguably posing a burdensome, costly, and unnecessarily complex scenario for investors. Several other developed nations, including the United Kingdom, the Netherlands, and Australia have adopted proxy access. According to some reports, while the reform has been used sparingly, it has helped to foster more independent boards who are more attentive to "market sentiment." The SEC's proxy access rulemaking also triggered an array of critical responses, many coming from entities associated with the business community. This section describes a number of such reactions. Initial criticism of the rulemaking came from the SEC's two dissenting Republican commissioners, Kathleen Casey and Troy Paredes, on the day of the rulemaking. Commissioner Casey said that she "adamantly" disagreed with all of the elements of the SEC release that explained the rules that it was adopting (which later became printed in the Federal Register) and asserted that the agency would be grappling with the implications of the rulemaking for "years to come." Ms. Casey emphasized that the rules appeared to be so flawed that they were unlikely to survive judicial scrutiny, and that if they did survive such scrutiny, they would burden the SEC staff with the responsibility of brokering disputes and responding to a spectrum of issues that every proxy season arose from the federal provision of proxy access. Another concern was that the rules give proxy access rights to larger institutional investors who do not represent the interest of all shareholders and that the rulemaking ultimately appeared to have been driven by "political pressures." Commissioner Paredes indicated he would have supported the amended Rule 14a-8, but that he was strongly opposed to the SEC's adoption of Rule 14a-11 because "it imposes a minimum right of proxy access, even when shareholders may prefer a more limited right of access or no proxy access at all." He also asserted that Rule 14a-11 would displace both existing state corporate governance law and that its fundamental shortcoming is that even when shareholders prefer a more restricted form of proxy access, or simply no proxy access at all, it would enact "a minimum right of proxy access." A related concern, he indicated, was that tension existed between the Rule 14a-11 and the Rule 14a-8 rulemaking: as a practical matter, he also argued that Rule 14a-11 would place limits on the extent to which shareholders can use Rule 14a-8 to shape shareholders' preferred proxy access regime. The commissioner was also critical of what he termed a "one-size-fits-all" approach to corporate governance that "forces a universal governance scheme on all firms without permitting an enterprise to adapt its approach to governance and corporate accountability to its distinct circumstances." Commissioner Paredes also indicated that the available economic research did not support the adoption of the new Rule 14a-11, noting that the findings were consistent with the view that different governance structures were optimal for different companies. Seth Hamot, a manager of Roark Rearden & Hamot Capital Management, an employee-owned hedge fund company, predicted that if the SEC's proxy access rulemaking goes forward, it is likely to be used frequently: "I think this is going to be used a lot and I think it's going to be used a lot soon. It's going to be slowed down a little bit by litigation to clarify some of the rules, specifically the ones regarding communication with other shareholders." Both Hamot and Steven Shapiro, an official of Taylor Capital Growth, raised concerns that the proxy access reform could disproportionately affect small companies. They argued that smaller companies would have larger numbers of investors who could meet the 3% threshold and three-year holding period and with respect to the size of resources they might have to expend to fend off the proxy access facilitated shareholder nominees. Mr. Hamot observed: The three percent hurdle is a high one for a large Fortune 500 or 100 company. Additionally, you just have questions of liquidity. In larger companies you have a lot of liquidity and people trading in and out of them and there's always a new statistic every year how short a time frame the aggregate investor owns a share of stock. That's less the case in small companies, where people tend to invest or tend to hold those stocks longer. It's also because people tend to like stories and stick around. Mr. Shapiro argued that [Small companies] are more likely to be the subject of these rules than larger companies… I think one of the unintended consequences might be the reaction of smaller companies, particularly the dedication of resources in response to these items both in terms of outlay of funds as well as management and board time to respond to them, particularly since, at least at the outset, so many of these rules will be untested. He also contended that the success of dissident shareholder nominated directors could rupture the critical collegiality of the boards: [Nominees] who may not have surfaced before as directors are going to have to disclose a lot of information about themselves that they hadn't had to disclose before. They're likely to be challenged, perhaps unfairly, in a very public forum. The ultimate victory is for them to serve as a minority board member in a board that would be antagonistic to them. In addition, and if you think this through, what's to say that the best directors on that board won't basically say, 'Look, if this is going to happen, I'm out of here,' leaving the company with fewer qualified directors. Charles Elson, director of the John L. Weinberg Center for Corporate Governance at the University of Delaware, reportedly raised investor fairness concerns. He has asserted that the SEC's 3% ownership threshold was formidable and would limit the ability of small individual investors and other shareholders to take advantage of proxy access to nominate board candidates: "The idea that only large shareholders have ability to nominate director candidates is against the SEC's investor protection role for all investors. Have you abrogated the smaller investors' rights?" Because of SEC-mandated filing requirements, Professor Elson also asked whether the presumed cost savings for investors who nominate directors under the SEC proxy access rules will be realized, noting that "the legal costs for meeting the process may ultimately be as much as the printing costs you're trying to avoid." The state of Delaware, where about half of the nation's public companies and most of its large public companies are incorporated, filed an amicus brief in support of the Chamber and the Roundtable's lawsuit. In the brief, the state observed that its corporate laws give corporations and their shareholders the latitude to privately order their corporate governance structure, giving them the right to choose from an array of proxy access models. It also argued that the SEC's Rule 14a-11 was in direct contradiction to the rights that it provides: [I]n 2009, [Delaware] enacted "an amendment to the Delaware General Corporation Law to clarify that bylaws of a corporation could establish a right of proxy access [which] … gives stockholders the ability to decide whether and when stockholders would be granted such a right of access. This amendment, together with the amendments to SEC Rule 14a-8 adopted at the same time as Rule 14a-11, would allow stockholders increased flexibility in shaping the process by which directors are elected. This company-by-company flexibility is consistent with long-standing Delaware corporate law principles. SEC Rule 14a-11, which takes away that choice, is completely contradictory to Delaware's newly adopted statute governing proxy access. In an amicus brief supporting the Chamber and the Chamber's lawsuit against the SEC's rulemaking, the Investment Company Institute (ICI, a mutual fund trade association) and its affiliate, the Independent Directors Council (a trade group for independent fund directors) were critical of what they called the inapplicability of the agency's "one size fits all" proxy reform to mutual funds: In adopting Rule 14a-11, the SEC adopted a "one-size-fits-all" approach that decidedly does not fit the unique structure of fund governance and rests upon reasoning that is arbitrary and capricious. Focusing on how the rule would apply to operating companies, the SEC's regulatory statement provides no logical explanation for why the SEC deemed the material differences between funds and operating companies to be wholly irrelevant to Rule 14a-11. After the SEC's rulemaking, Marcel Kahan of New York University and Edward Rock of the University of Pennsylvania released a study which found that the shareholder benefit part of the cost/benefit calculus from proxy access tends to be overstated and that it is likely that a limited number of shareholder nominees would result from the rules. Most of those, they argued, were likely to be defeated and the few who prevail are will probably have a marginal impact on the board: Overall, we believe that proxy access will have some undesirable effects - it will result in some increase in company expenses and may rarely increase the leverage of shareholders whose interest conflict with those of shareholders at large - and some desirable ones - it may occasionally lead to the election of nominees at recalcitrant boards, where such nominees may have a modest impact on governance and a marginal impact on company value. None of these effects is likely to be very material, and the net effect is likely to be close to zero. General criticisms of proxy access, many of which predated the SEC's rulemaking are described below. A major concern of critics of proxy access, including the Chamber and the Roundtable, was that the reform will enable select numbers of large shareholders with particular agendas to use the threat of proxy access as a bargaining tool to pressure companies into pursuing parochial interests that may have little to do with the goal of maximizing shareholder returns. Joseph Grundfest, a former SEC Commissioner and now director of Stanford University's Rock Center for Corporate Governance, detailed this concern: Labor unions and public pension funds rationally value proxy access for reasons that have nothing to do with the prospect of actually electing directors to corporate boards. Proxy access generates significant "megaphone externalities" in the form of the ability to draw attention to union and pension fund causes, even if the nominees have no chance of prevailing at the ballot box. These megaphone externalities are valuable to shareholder proponents even if they promote objectives that the majority of shareholders view as inimical to the best interests of the corporation. Proxy access advocates are therefore rationally and heavily invested in assuring that the Commission's proxy access rules make it as easy as possible to qualify for the ballot even if there is no prospect that their nominated candidate can prevail… Unions, pension funds and other proxy access advocates also appreciate that, if the matter were put to a majority shareholder vote, then there is a significant probability that the shareholder majority would establish qualifications for proxy access more stringent than those proposed by the Commission. Those standards would dramatically constrain megaphone externalities. Maximizing the private value of megaphone externalities to special interest constituencies therefore requires the imposition of an anti-democratic Mandatory Minimum Access Regime that is purposefully designed to negate the will of the shareholder majority…. Other key general arguments marshaled against proxy access include the following: During the past several years, senior managers at various financial firms reflected the dominant goals of their shareholders, managing in a manner that maximized the market price of company stock. As such, they managed to a market that focused on increasing observable earnings, but failed to factor in attendant and largely unobserved increases in risk. Doubts exist over whether expanding shareholder power through reforms like proxy access would have resulted in the adoption of more effective risk management regimes that could have helped to avert the financial crisis at the firms. Under state law, the board of directors is given the authority to manage the affairs and business of a corporation. Boards also have fiduciary duties with respect to carrying out their responsibilities. Mandating shareholder access to the corporation's proxy statement to nominate directors would affect the use of corporate assets and control of the corporation's proxy mechanism, which are key areas of director responsibility. This would interfere with the board's authority over the management of the corporation under state law. Because of asymmetric information, outside shareholders may be less well positioned than management to choose the most appropriate board candidates. One study that examined companies that had been removed from the S&P 500 during the 2008 financial crisis found that rates of CEO turnover greatly exceeded normal CEO turnover rates among the "at risk" financial firms in the group. The study saw this as evidence that well-functioning corporate governance systems were generally present. A fundamental goal of corporate shareholders is financial gain from their securities holdings. An event study is a statistical method for assessing the impact of events, such as corporate mergers, on the valuation of corporate shares. The studies do so by adjusting for the abnormal returns that can be attributable to an event by controlling the part of that return that derives from the share price fluctuation of the market as a whole. Several event studies have been conducted on the potential impact of proxy access reform on corporate share values. Examining financial firms, which were assumed to be more vulnerable to proxy contests under a new proxy access regime, one event study looked at 14 events between September 2006 and December 2009 that were associated with the possibility of proxy access. It found that the existence of proposals to facilitate director nominations by shareholders, signifying an increase in the prospects that firm's eligible shareholders would be able to nominate directors, tended to result in a decline in a firm's valuation and thus shareholder wealth. It concluded that "increasing shareholder rights, specifically by facilitating director nominations by shareholders, may actually be detrimental to shareholder wealth…." Another event study examined stock price behavior at various firms surrounding 13 different events between March 2007 and June 2009 that were perceived to be associated with the prospect of adopting proxy access. The study found that the securities market tends to devalue shares of firms with large investors with holdings of 1% or more during such proxy access "bellwether" events. It concluded that its findings were consistent with claims that large investors will tend to use proxy access to benefit themselves at the expense of other company shareholders. Thus, both of the studies found evidence that proxy access reform may diminish corporate and shareholder value. However, as many event studies do, the two have been criticized. Questions are asked about the significance of some of the examined events as proxy access bellwethers, the limited duration of the share behavior studied, the dependency on the assumption that the securities markets act rationally, and the possibility that the results may have been improperly influenced by market noise, a possibility that the authors acknowledged. A more recent event study examined the market response to an SEC announcement on October 4, 2010, that it was delaying the adoption of its proxy access rules because of the suit filed by the Chamber and the Roundtable. The study involved a one-day event study of shares of Standard & Poor's 1,500 companies surrounding the announcement to delay implementation. It found that based on their level of institutional investor shareholdings, the shares of the firms most likely to be affected by the proxy access rules saw a drop in value, an indication that the markets appeared to take a positive view of the rulemaking. The study appears to be the first empirical study to equate proxy access with positive shareholder value. Also, compared with the other two event studies, the research has the advantage of examining an event with greater significance to the actual adoption of proxy access reform. However, it does have some potential shortcomings. For example, because the research was only a one-day study, it did not address the behavior of the shares over longer periods. In addition, as with the earlier event studies, the study is predicated on the assumption that the securities markets are efficient at quickly and robustly assessing the implications of the designated events, a source of academic controversy. For both of these reasons, the study may have had a market noise problem. The research found that the positive effect on share value for companies incorporated in Delaware was less than for firms incorporated elsewhere, a fact that it attributed to Delaware's proxy access enabling laws. However, citing the law's limited use to date, at least one observer has questioned whether there might be other factors at play, including that of market noise. On September 29, 2010, two major business groups, the United States Chamber of Commerce (Chamber), which represents firms of various sizes, and the Business Roundtable (Roundtable), a group of some 200 chief executives at large U.S. companies, filed suit against the SEC with the United States Court of Appeals for the District of Columbia Circuit, questioning the legality of its Rule 14a-11 rulemaking. Both groups have a long history of complementary opposition to proxy access. The lawsuit charged among other things that the agency's "rules [were] unlawful under the Investment Company Act, Securities Exchange Act, and Administrative Procedure Act … [and that the] Proxy Access Rules are arbitrary and capricious and otherwise not in accordance with law; do not promote efficiency, competition, and capital formation; [and] exceed the Commission's authority; and violate issuers' rights under the First and Fifth Amendments of the Constitution.…" In addition, on September 29, 2010, the two business groups requested that the SEC stay whatever final rulemaking involving proxy access Rule 14a-11 pending a court resolution of their proxy access suit. The Chamber and the Roundtable did not, however, request a stay to the rulemaking associated with the amendment to Rule 14a-8. On October 4, 2010, the SEC announced that it, the Chamber, and the Roundtable had agreed to seek an expedited judicial review of the case and that it had also decided to stay Rule 14a-11 as well as the integrally related amendment to Rule 14a-8. It noted that "among other things, a stay avoids potentially unnecessary costs, regulatory uncertainty, and disruption that could occur if the rules were to become effective during the pendency of a challenge to their validity." Instances such as this in which the SEC grants a stay to the implementation of its rules when it faces a legal challenge to the implementation are reportedly rare. On July 22, 2011, saying that the SEC acted "arbitrarily and capriciously" and also failed to sufficiently analyze the economic impact of the proxy access rulemaking, the three members of the appeals court unanimously voted to vacate Rule 14a-11. The opinion written by Judge Douglas Ginsburg observed: We agree with the petitioners and hold the Commission acted arbitrarily and capriciously … for having failed once again... [to] adequately to assess the economic effects of a new rule. Here the Commission inconsistently and opportunistically framed the costs and benefits of the rule; failed adequately to quantify the certain costs or to explain why those costs could not be quantified; neglected to support its predictive judgments; contradicted itself; and failed to respond to substantial problems raised by commenters. For these and other reasons, its decision to apply the rule to investment companies was also arbitrary…. After the court of appeals vacated Rule 14a-11, the key part of the SEC August 2010 proxy access rulemaking, reactions to the ruling were mixed. Several business interests, including the Chamber and the Roundtable, joined several Republican leaders in praising the ruling. However, some investor advocacy groups criticized it and asked the SEC to appeal the ruling, actions that the agency opted not to pursue. Among those who reacted favorably to the court's decision were the suit's plaintiffs, the United States Chamber of Commerce and the Business Roundtable. In a joint statement, the two latter groups wrote: This is a big win for America's job creators and investors. We applaud the court's decision to prevent special interest politics from being injected into the boardroom. Companies and directors need to continue to focus on the important work of creating jobs and reviving our economy. Today's decision also sends a strong message that regulators need to meet their statutory requirement to clearly prove that the benefits of regulation outweigh the costs. In a July 28, 2011 letter reportedly sent to the SEC, three Republican leaders, Representative Scott Garrett (chairman of the House Financial Services Capital Markets Subcommittee), Representative Randy Neugebauer (chairman of the Financial Services Oversight Subcommittee), and Representative Jeb Hensarling (vice chairman of the Financial Services Committee), indicated their support for the court ruling. The letter was also reported to have asked why the agency would expend resources "defending a rule that was so clearly problematic from its inception, and that appears to many observers to have been motivated more by political considerations than by sound corporate governance principles." Also, the correspondence reportedly opined that the agency's pursuit of the proxy access "raises fundamental questions" about its exercise of its rulemaking authority and the adequacy of its rulemaking authority under the Dodd-Frank Act. As part of the correspondence, the members also reportedly informed SEC officials that given the unanimous nature of the court decision, the agency needed to be more cautious before concluding "that a rule would promote the efficiency of the economy on the whole." The letter was also said to include a request that the agency provide the members information on agency resources devoted to the proxy access rulemaking, including (1) the total number of staff hours and related dollars spent in drafting the rule, meeting with interested parties, and reviewing public comments; (2) the number of staff hours and money spent litigating the rule; and (3) funds spent by outside counsel in work related to the rulemaking. In August 2011, the Council of Institutional Investors wrote to the SEC, urging it to consider an appeal of the court's ruling. In the letter, the council argued that a determination on the costs and benefits of a particular policy were best left to agencies like the SEC, not the courts: The panel's decision reflects a failure to abide by the standards applicable to judicial review of agency determinations and, in particular, agency cost-benefit analysis. It is well-settled that 'a court is not to substitute its judgment for that of the agency. That is especially true when the agency is called upon to weigh the costs and benefits of alternative polices.'[C]ost-benefit analyses epitomize the types of decisions that are most appropriately entrusted to the expertise of an agency. An agency need only "consider relevant factors" and "articulate a reasoned basis for its conclusion. Unfortunately, the panel ignored these well-established principles. On September 6, 2011, the SEC announced that it would not be pursuing an appeal of the court's ruling to vacate Rule 14a-11. Agency officials, however, did note that the agency would be implementing Rule 14a-8 at a later date. That rule, which was not the subject of litigation, would allow eligible shareholders to require companies to include shareholder proposals on proxy access procedures in company proxy materials, giving companies and shareholders an opportunity to establish proxy access standards one company at a time. On the SEC's decision not to appeal the court's ruling on Rule 14a-11, SEC Chairman Schapiro observed: I firmly believe that providing a meaningful opportunity for shareholders to exercise their right to nominate directors at their companies is in the best interest of investors and our markets. It is a process that helps make boards more accountable for the risks undertaken by the companies they manage. I remain committed to finding a way to make it easier for shareholders to nominate candidates to corporate boards. At the same time, I want to be sure that we carefully consider and learn from the Court's objections as we determine the best path forward. I have asked the staff to continue reviewing the decision as well as the comments that we previously received from interested parties.
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In response to the financial crisis, the Dodd-Frank Wall Street Reform and Consumer Protections Act (P.L. 111-203) overhauled the nation's financial sector regulation. The 112th Congress is actively involved in overseeing the act's implementation, including provisions involving corporate governance such as expanding the role played by shareholders in the selection of public company corporate boards. While some regarded this as a change that would help make boards more sensitive to market developments and thus shareholder interests, others see it as a change that would place too much potentially abusable power in the hands of large shareholders. Members of public company boards are supposed to play key fiduciary and management watchdog roles for the shareholders. At annual public company shareholder meetings, incumbent boards submit slates of board nominees for shareholder consideration as part of the official corporate proxy materials and statement sent to shareholders in advance of the meeting. Whereas states like Delaware (the state of incorporation for a large proportion of sizeable public firms) have largely governed substantive corporate matters for firms that they incorporate, the Securities and Exchange Commission (SEC) oversees matters related to the content of proxy materials. Historically, the SEC has interpreted applicable federal securities laws as allowing companies to exclude from their proxy materials shareholder proposals involving the nomination of persons to their boards. Shareholders interested in pushing an alternative slate of nominees for fellow shareholder consideration must bear the printing and distribution costs themselves, which many believe poses a significant obstacle. Proxy access would reduce these cost barriers by allowing shareholder nominations to be included in the corporate proxy materials. A provision in the Dodd-Frank Act (P.L. 111-203) enacted on July 21, 2010, explicitly authorizes the SEC to adopt proxy access rules. In August 2010, with the Republican commissioners dissenting, the SEC did so. The central and most controversial change, the adoption of Rule 14a-11 under Regulation 14, which the agency adopted in 1935 pursuant to Section 14(a) of the Securities Exchange Act of 1934, would permit individual investors or investor groups with at least 3% of the total voting power of a company's securities to put forward no more than one nominee, or several that will constitute up to one-fourth of a company's board, whichever is greater, via the company's proxy material at the annual meeting. Shareholders would also be required to have held their shares for at least three years and will not be eligible to use the proxy access rule if their securities are held for the purpose of changing corporate control. Some longtime advocates of proxy access, including various labor unions such as the AFL-CIO and pension fund groups such as the Council of Institutional Investors, claim that the rules should help improve management as well as enhance investor returns. Some opponents of proxy access as formulated, including various business interests such as the Business Roundtable and the United States Chamber of Commerce, criticized the access rulemaking. A major criticism was that the SEC's rules would empower large investors, such as unions, at the expense of the small investors, giving them unfair leverage over corporate activities. On September 29, 2010, the Chamber and the Roundtable jointly filed a petition with the United States Court of Appeals for the District of Columbia Circuit alleging that Rule 14a-11 violated several federal statutes. On October 4, 2010, pending a judicial decision, the SEC agreed to stay implementation of the rule. On July 22, 2011, calling the rule arbitrary and capricious, the appeals court voted to vacate Rule 14a-11, a ruling that the SEC decided not to appeal. This report will be updated as events dictate.
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On July 8, 2012, international donors and the Afghan government met in Tokyo to discuss non-military assistance requirements in the 10-year period following the planned withdrawal of the U.S. military and the International Security Assistance Force in 2014. Donors pledged $16 billion in development aid through 2015. On May 25, 2012, the House Appropriations Committee reported H.R. 5857 ( H.Rept. 112-494 ), the FY2013 State, Foreign Operations appropriations. It did not specify amounts for Afghanistan under either regular or OCO appropriations. On May 25, 2012, the House Appropriations Committee reported H.R. 5856 ( H.Rept. 112-493 ), the FY2013 Defense appropriations, providing $5.0 billion for the ASFF, $250 million for the CERP, $375 million for the Afghan Infrastructure Fund, and $88 million for the Business Task Force. On May 24, 2012, the Senate Appropriations Committee reported S. 3241 ( S.Rept. 112-172 ), the FY2013 State, Foreign Operations appropriations. In its report, the committee recommended a total assistance level of $1.6 billion—$1.1 billion in ESF, $450 million in INCLE, $54.3 million in NADR, and $1.5 million in IMET. On May 21, 2012, the NATO summit in Chicago defined a post-transition 2014 and beyond annual security forces budget of $4.1 billion, including an Afghan government share of at least $500 million in 2015 and full financial responsibility by 2024. In February 2012, the Administration issued its FY2013 budget request, seeking a total of $2.5 billion in Foreign Operations assistance, including $1.8 billion in ESF, $600 million in INCLE, $54.3 million in NADR, and $1.5 million in IMET assistance. The Administration also requested Defense aid appropriations, including $5.7 billion for the ASFF, $400 million for CERP, $400 million for the Afghanistan Infrastructure Fund, and $179 million for the Business Task Force. Afghanistan, one of the poorest countries in the world, would be a candidate for U.S. development assistance under normal circumstances. But today, as a result of the war on Al Qaeda and the 2001 military effort that removed Taliban rule, Afghanistan is a U.S. strategic priority and recipient to date of nearly $83 billion in U.S. foreign assistance serving multiple objectives. Two-thirds of this assistance has been provided in the past four years, since the beginning of FY2009. Assistance efforts are broadly intended to stabilize and strengthen the country, through a range of development-related programs and through training and materiel support for the Afghan police and military. This report provides a "big picture" overview of the U.S. aid program and congressional action. It describes what various aid agencies report they are doing in Afghanistan. It does not address the effectiveness of their programs. For discussion of the Afghan political, security, and economic situation, see CRS Report RL30588, Afghanistan: Post-Taliban Governance, Security, and U.S. Policy , by [author name scrubbed], and CRS Report RS21922, Afghanistan: Politics, Elections, and Government Performance , by [author name scrubbed]. For greater detail on security assistance provided by the Department of Defense, see CRS Report R40156, War in Afghanistan: Strategy, Operations, and Issues for Congress , by [author name scrubbed]. The U.S. program of assistance to Afghanistan has multiple objectives implemented by a range of actors working in diverse sectors. The main purpose of the program is to stabilize and strengthen the Afghan economic, social, political, and security environment so as to blunt popular support for extremist forces in the region. The bulk of U.S. assistance is in security-related activities. Since 2001, nearly two-thirds (63%) of total U.S. assistance has gone to the Afghan Security Forces Fund (ASFF), the account supporting the training and equipping of Afghan security forces, and related military and security aid accounts. About 75% of U.S. assistance went to security programs in FY2012. The second-largest portion of assistance has been aimed at economic, social, and political development efforts. The main provider of these programs is the Agency for International Development (USAID), with the Department of State playing a significant role in democracy and governance activities. These programs account for roughly 28% of total aid since 2001. They accounted for 21% of aid in FY2012. A third element of assistance, humanitarian aid, largely implemented through USAID and international organizations, represents about 3% of total aid since 2001. They accounted for about 1% of U.S. aid in FY2012. The fourth main component of the aid program is counter-narcotics, implemented largely by the State Department in conjunction with Department of Defense (DOD), USAID, and the Drug Enforcement Agency (DEA). It accounts for about 5% of total aid since 2001. It represented roughly 3% of aid in FY2012. U.S. assistance must be viewed within the broader context of the Afghan government's development strategy and the contributions of other donors. In April 2008, an Afghanistan National Development Strategy (ANDS) was offered by the government as a program of specific goals and benchmarks in 18 sectors from security to poverty reduction to be accomplished from 2008 to 2013. The Afghan government estimated the cost of achieving these goals at $50 billion, with Afghanistan providing $6.8 billion and international donors asked to provide the rest. The strategy sought to have most funds provided through the central government in order to strengthen its legitimacy in the eyes of its citizens. Persistent questions regarding corruption and the ability of the government to effectively implement programs have prevented donors from more fully adopting this approach. At the January 2010 London donor conference and again at the July 2010 Kabul conference of foreign ministers, donors agreed to the goal of channeling half of all aid directly to the government ("on-budget") within two years conditional on Afghan government progress in strengthening public financial management systems, reducing corruption, and improving budget execution. The 2010 Kabul conference added the donor objective of aligning 80% of aid with Afghan government priorities within two years, either through the government core budget or off-budget. The 2010 London conference produced additional pledges of troops, police trainers, and funding. Participants issued a communique supporting a phased transition to an Afghan government lead in security, an increased civilian surge to match the military surge, and increased targets for the Afghan Army and Police forces, among other points. At the 2010 Kabul conference, the international community supported the Karzai objective that the Afghan National Security Forces should lead and conduct all military operations by the end of 2014, a position reaffirmed by NATO and ISAF at the Lisbon Summit in November 2010. The 2012 Chicago NATO summit moved the objective of Afghan security forces leadership up to mid-2013. For its part, at the 2010 Kabul conference, the Afghan government agreed to enact 37 key laws to curb corruption. None had been enacted as of November 2011, partly due to a election dispute-related lack of legislative work for most of 2011. Some steps have been taken by executive decree. Recent conferences have begun to look beyond the withdrawal of international forces. At the December 2011 Bonn conference, donors pledged to sustain support to Afghanistan for another decade, in exchange for clear progress on good governance. The May 2012 Chicago NATO summit predicted the need for a post-transition 2014 and beyond annual Afghan security forces budget of $4.1 billion, of which the Afghan government share would be at least $500 million in 2015 with full financial responsibility by 2024. The United States is expected to provide about $2 billion of this amount annually. In July 2012, international donors and the Afghan government met in Tokyo to discuss non-military assistance requirements in the 10-year period following the planned withdrawal of U.S. and NATO forces in 2014. Of particular concern was the estimated gap between predicted Afghan government revenues and needs during the post-withdrawal decade. At the conference, donors pledged $16 billion in development aid through 2015 and committed to providing support through 2017 at or near the levels of the past decade. In one estimate, of the $46.1 billion in all donor assistance committed to Afghanistan through mid-2009, the last available figure, U.S. assistance represented about 62%. In another estimate, nearly $38 billion was committed to Afghanistan in non-security official development assistance (ODA) between 2002 and 2010, of which the United States accounts for about 48%. An Afghanistan Reconstruction Trust Fund (ARTF), administered by the World Bank, is both a major conduit for donor assistance and a source of direct government aid, supporting both recurrent costs, such as Afghan government salaries, and key infrastructure investment. As of June 2012, donors had contributed roughly $5.7 billion to the ARTF, with the U.S. share accounting for 31% of the total. In June 2011, many donors, including the United States, reportedly stopped paying into the ARTF when the International Monetary Fund was unable to reach a loan agreement with Afghanistan because of concerns about Afghanistan's troubled Kabul Bank. In November 2011, the IMF approved a credit program following financial reforms, leading Secretary of State Clinton to announce at the 2011 December Bonn conference that the United States would release funds, estimated at around $650 million, to the ARTF. Apart from the United States, the bulk of aid contributions comes from the other NATO nations operating in the country as part of the International Security Assistance Force (ISAF). Japan is the largest non-NATO bilateral donor. The World Bank and European Union are the major multilateral agencies conducting aid programs in Afghanistan. The United Nations Mission in Afghanistan (UNAMA) is meant to play a key role coordinating aid from all donors. NATO countries, Sweden, and South Korea lead 14 of the 26 Provincial Reconstruction Teams (PRTs) located in the majority of Afghan provinces (as of early 2012). The United States leads 12, mostly those located in the strategically sensitive south and east. An innovation in the delivery of assistance that facilitates access to more remote regions of the country, the PRT has been a significant element in the U.S. aid program (and was later adopted and modified for Iraq). Its mission is to help extend the authority of the government of Afghanistan by fostering a secure and stable environment. PRT personnel work with government officials to improve governance and provision of basic services. In 2009, District Support Teams (DST), composed of three to five civilians living with forward-deployed military units, were introduced to help build Afghan government capacity at a more local level. PRTs are composed of both civilian and military personnel, located in conjunction with military forces providing physical security. In the case of the United States—the model differs by lead country—U.S. PRTs are mostly led by a military officer and report up a military chain of command. Most of the coalition PRTs are civilian-led. Most PRTs had a predominance of military staff, although this has changed in recent years, particularly in Kandahar and Helmand PRTs. There is now a civilian lead at each PRT and DST to act as counterpart to the military commander. Further, whereas in early 2009 there were generally only 3 to 5 civilians among 50 to 100 total personnel, civilian representation in the field rose substantially in the period since then. In May 2009, there were 67 civilian personnel in the field, in early January 2010 there were 252, in April 2010 there were 350, and by December 2011 there were 456 U.S. civilians in the field. The civilian team at the PRT and DST usually includes officers from the State Department, USAID, and Department of Agriculture. Similar but usually smaller teams are posted to non-U.S.-led PRTs. In Kandahar and Helmand, large U.S. teams are integrated with British and Canadian counterparts. The U.S. PRTs and other field entities utilize funding under a range of programs to meet their objectives. Programs provide targeted infrastructure aid to meet locally identified needs and aid to address employment and other local concerns, provide management training to local government personnel, and ensure that national-level development efforts in key sectors reach the local population. Other U.S. assistance is provided through the U.S. mission in Kabul. Working throughout the country, aid project implementers in most cases are either U.S. or Afghan non-governmental organizations receiving grants or private sector for-profit entities on contract. Due to Afghan government concerns regarding the existence of "parallel structures" vis-à-vis local governments, the PRTs are described by U.S. officials as moving from a focus on delivery of services to capacity building. As international security forces withdraw between now and 2014, PRTs and DSTs will gradually be terminated or become part of individual country aid programs. Despite significant progress in Afghanistan since 2001, insurgent threats to Afghanistan's government escalated beginning in 2006 to the point that some experts began questioning the success of stabilization efforts. An expanding militant presence in some areas previously considered secure, increased numbers of civilian and military deaths, growing disillusionment with corruption in the government of Afghan President Hamid Karzai, and Pakistan's inability to prevent Taliban and other militant infiltration into Afghanistan led the Obama Administration to conduct its own "strategic review," the results of which were announced on March 27, 2009. The thrust of the new strategy was a focus, not only on adding U.S. troops—a point reiterated and expanded following a second review that led to the announcement in December 2009 of an additional U.S. troop increase—but also on enhancing assistance efforts. The March 2009 review led to the formulation of a new aid strategy encapsulated in an Integrated Civilian-Military Campaign Plan for Support to Afghanistan , jointly published on August 10, 2009, by Ambassador Eikenberry and General McChrystal, and elaborated further in an Afghanistan and Pakistan Regional Stabilization Strategy by the State Department's Office of the Special Representative for Afghanistan and Pakistan in January 2010. The strategy emphasizes economic development, coordination among international donors, building local governing structures, improving capacity and reforming the Afghan government, and expanding and reforming the Afghan security forces. In practice, the strategy has led to an increase in U.S. assistance to Afghanistan, a greater emphasis on geographic centers of instability along the southern and eastern borders, more integrated military-civilian aid activity, and a significant increase in civilian aid personnel to formulate, administer, and monitor aid programs. With regard to the latter, U.S. civilian staff from State, USAID, USDA, Justice—at least 11 government departments and agencies—tripled from about 320 in early 2009 to 992 in March 2010. Total staff numbers, both in Kabul and in the field, reached about 1,142 in December 2011. They are likely to decline from this point in the future. With the eventual termination of PRTs, the Department of State plans (as of June 2012) to maintain a civilian presence after 2014 at the U.S. Embassy in Kabul and at four field offices in Herat, Mazar-e Sharif, Kandahar, and Jalalabad. The Herat consulate opened in March 2012; the other three will open toward the end of 2014. The changes in aid strategy are well-illustrated in several significant steps USAID and DOD have taken in the period since the strategy was launched. For one, they have promoted the Afghanization of assistance, directing assistance as much as feasible through Afghan entities, public and private. In 2009, USAID adopted the objective of moving as much as 40% of assistance through the Afghan government by the end of 2010. As noted earlier, at the January 2010 London Conference, the United States and other donors committed to providing 50% of aid through the government of Afghanistan by 2012. According to the GAO, in 2010 the United States provided about $2 billion in direct aid, $1.4 billion by USAID (71% of the total) and $576 million by DOD. This amount represented three times that provided in the previous year. As of June 2011, about 38% of USAID funding was going through the Afghan government. The intent is to increase the administrative capabilities of the Afghan government and at the same time enable the public to see that their government is providing services. Both USAID and DOD are also said to be directing procurement funding away from U.S. contractors and NGOs and more to the Afghan private sector. This policy, also adopted by other U.S. government and international entities, seeks to build private sector capacity and increase Afghan employment to the extent possible. In November 2010, the U.S. Embassy, U.S. military and UNAMA formally launched an "Afghan First" effort to actively solicit Afghan suppliers for procurement needs, including local procurement of agriculture produce for U.S. and ISAF military and civilian installations. Between January 2008 and May 2011, about $654 million in reconstruction funds were awarded by State, DOD, and USAID directly to 214 Afghan business firms. Another key shift in assistance policy in 2009 and following years has been to move more funds to regions and sectors previously less well-supported. More money is going to the southern and eastern parts of the country, especially as the military goes in and secures an area. An estimated 70%-80% of current U.S. assistance is going to these regions of high priority in the counterinsurgency effort. Beginning in FY2009, more funding was channeled to agriculture, a sector that had been relatively neglected, but is a way to reach rural areas that had been under the influence of the insurgents and is the most critical part of the Afghan economy. The main purpose of U.S. economic aid is to complement U.S. military efforts to stabilize the country as well as to build Afghan government capacity so that it can operate as a sustainable entity after the 2014 transition to Afghan lead is completed. USAID points to a number of achievements gained during the past decade, including measurable progress in the education, health, transport, power, independent media, and private sectors. According to USAID, between 2002 and 2011, it has rehabilitated 1,700 kilometers of roads; increased electricity supply from 117 to 223 Megawatt hours per month; helped increase access to basic health services from 9% of the population in 2002 to 64% in 2010; trained 54,000 teachers to government standards; helped increase school enrollment from 900,000 students to 7 million; helped establish 43 independent community radio stations, and helped establish more than 175,000 new micro and small businesses. However, as is the case with assessing the outcome of development efforts in other countries, a 10-year time frame may be insufficient to fairly evaluate assistance impacts on the broader fronts of economic growth and governance. Inspector General (IG) audits in 2011 and 2012 of individual USAID projects produce a cloudy picture with reports of progress marred by evidence of high costs, misuse of funds, and uncertain outcomes. For example: Local Governance and Community Development Project . The SIGAR found "delays [in project implementation], unexpectedly high contractor operating costs, difficulty setting and measuring program outcomes, and indications that, at best, the program had mixed results." The USAID IG found $6.6 million in questionable costs by a project contractor. Support to the Electoral Process Project . The USAID IG found that outputs related to strengthening the capacities of the Independent Electoral Commission and the Electoral Complaints Commission—training, drafting regulations, providing equipment, etc.—were achieved, but that evidence of progress toward the desired outcomes of institutional independence and citizen awareness of the electoral process was mixed. Construction of Health and Education Facilities Program . The USAID IG found significant delays due to security threats, lack of skilled labor and quality materials, and unscheduled work interruptions; reduction in the scope of work due to increased building and security costs; the inclusion of prayer rooms in educational facilities, contrary to U.S. prohibitions; use of inadequate materials; and questionable sustainability of constructed facilities. Skills Training for Afghan Youth Project . The USAID IG found that by funding operational costs the project enabled two Afghan vocational skills training centers to continue training youths and that the project also trained staff. However, it found little evidence that progress had been made "toward strengthening the overall technical capacity of these institutions or empowering youth." USAID is hindered in achieving a positive development outcome by the combined circumstances in Afghanistan of extreme underdevelopment, instability, and conflict. In the course of implementing projects, the assistance program has encountered a set of inter-related concerns that follow from this complex environment. These include the following. Lack of capacity . There exists an insufficiency of Afghan government skilled personnel, especially at the local level. To compensate, USAID is supporting 260 civilian advisers in the ministries and provided a variety of aid programs to train civil servants and boost government capacities. Afghan corruption raises questions about the efficiency of USAID projects and the adequacy of U.S. assistance oversight, especially in view of funds going to Afghan contractors, subcontractors, and the Afghan government. With regard to the latter effort, USAID has put into place a process to vet Afghan government ministries accepting direct assistance and to train ministry staff to ensure that funds are used as intended and not diverted. Ministries receiving funds must meet set performance standards. USAID also has established a process to vet Afghan companies and perform audits on locally incurred costs of implementing partners. Because oversight of sub-contracts is problematic, USAID has restricted the amount of funds allowed to sub-contracts and limited the layers of sub-contracting permitted. It has also assigned more monitoring responsibilities to field offices where contracts are carried out. Sustainability . A key concern for USAID, as for DOD use of security and reconstruction funds, is the long-term sustainability of its development efforts, especially in view of the often uncertain commitment of the Afghan government to U.S. funded efforts, the questionable availability of skills to manage and implement programs, and most of all, the possible lack of Afghan financial resources to maintain projects in the long-term as donor funding, currently responsible for the majority of Afghanistan government spending, declines. Guidance issued by the USAID Administrator in June 2011 called for all projects to be aligned with the Afghan government's own National Development Strategy, address recurrent cost concerns, and ensure that sufficient capacity will be developed to maintain USAID efforts. Most such projects are entered into under a Strategic Objective Grant Agreement between the United States and the Afghan government that defines the roles and responsibilities of the Afghans, including future operations and maintenance, upon turnover of the facility. Security is the most significant challenge to the aid program. According to USAID, since 2003, 387 employees of USAID partner organizations have been killed and 658 wounded. The security situation has had three main impacts on the aid program: It has forced contractors and grantees to cancel projects in progress or not even begin projects that were planned. It has made the program more expensive by requiring use of security contractors to protect U.S. government civilians and implementing partners. Based on project audits, the Commission on Wartime Contracting estimated that unanticipated security costs may have increased project expenses by 25%. It has interfered with the ability of U.S. government aid workers to access local people and geographic locations so that appropriate projects can be developed and monitored for effectiveness and accountability. In August 2010, President Karzai issued a decree disbanding the private security contractors and their tens of thousands of employees who had provided security to civilian aid project implementers. The deadline for this action with specific regard to development project security personnel was postponed to March 20, 2012, when they were to be replaced by the Ministry of Interior's Afghan Public Protection Force (APPF). According to USAID, only 32 out of 91 USAID projects as of March 2012 require protection by this force and are making the transition from private contractors at this time. USAID has estimated that the APPF requirement is 16% more expensive than the use of private contractors. The SIGAR, however, estimates that labor costs could rise as much as 46% in the first year of the transition to the APPF. Below is a menu of the range of assistance programs the United States is now implementing in Afghanistan. As one of the lesser-developed countries in the world, battered by decades of war and instability, Afghanistan could benefit from assistance in every aspect of its political, economic, and social fabric. U.S. development assistance programs, mostly implemented through the Agency for International Development (see Table 1 ), are directed at a wide range of needs. A high proportion of U.S. assistance has gone toward economic infrastructure, especially roads, electric power, and water and sanitation facilities. To facilitate coordination between U.S. agencies working in these sectors—predominately USAID and DOD—the Embassy established an Infrastructure Working Group for Afghanistan in 2009. About $2.1 billion, roughly 15% of total USAID assistance to Afghanistan through FY2011, went to road construction throughout the country. USAID has constructed or rehabilitated over 1,800 kilometers of roads—most notably portions of the Ring Road which spans the country—facilitating commercial activity and helping reduce time and costs in the transport and mobility of security forces. Substantial additional road construction has been undertaken by DOD as well as other international donors. Construction of a 105-megawatt power plant in Kabul is one aspect of U.S. support for electrical infrastructure. Another includes efforts to ensure that the national electric utility is sustainable by improving rates of payment for services, reportedly doubling revenues in each of the past three years, partly by outsourcing operations, maintenance, and billing to an international contractor, which has installed $14 million in meters, hoping to significantly reduce losses. Technical experts have been provided to the Ministry of Energy and Water and to the Afghanistan National Electricity Corporation. Other infrastructure efforts include support for a drilling team to assess gas availability in the Sheberghan gas fields and funding the Kajaki dam rehabilitation project in Helmand province that expects to increase output from 33 MW to 51 MW and provide electricity for 2 million Afghans. Infrastructure construction activities in specific sectors, such as health, education, governance, and security are noted below. The Afghanistan Infrastructure Fund is a funding spigot established by Congress in the FY2011 Defense Authorization (§1217, P.L. 111-383 ). It received $400 million in DOD appropriations in each of its first two years to be used for infrastructure projects approved jointly by the Department of State and DOD, and to be implemented by State in coordination with DOD, unless otherwise decided. It is anticipated that the funds will go toward projects of high priority to the counterinsurgency effort, especially in Kandahar province. Projects obligated so far include power generation and transmission, roads, and construction of five provincial justice centers. According to a July 2012 SIGAR audit, the FY2011 projects are running behind schedule and, despite their purpose of supporting U.S. counterinsurgency efforts, may not show any impact until after the 2014 withdrawal of U.S. forces. Further, the SIGAR suggests they do not adequately address long-term sustainability concerns. Although its purpose is to strengthen Afghan governance at the local level and local ties to the central government, the National Solidarity Program, to which the United States heavily contributes through the World Bank-administered Afghanistan Reconstruction Trust Fund (ARTF) and to which Congress has directed significant funding in explanatory statements accompanying appropriations ($175 million in FY2010), has been chiefly employed to construct village infrastructure. The Program is funded by international donors and implemented by the Ministry of Rural Rehabilitation and Development. Community Development Councils (CDCs), established at the grassroots level throughout the country with the help of international and local NGOs, apply for program funds after first reaching consensus on village needs. As of August 2012, nearly 30,000 CDCs had been established and received over $1 billion. Program grants generally support drinking water and irrigation systems, rural roads, school buildings and community centers, and electrification facilities. The chief challenge facing the NSP is whether it can successfully expand into insecure areas of the country where facilitating partner NGOs are unlikely to be able to provide good oversight. Plans have called for expansion to thousands of new communities, many in such insecure areas. U.S. assistance supports a number of efforts to stimulate growth of the Afghan economy—the most prominent part of which, agriculture, is discussed below. Projects to facilitate economic growth in the broader business sector include the provision of technical expertise to help reform the legal framework in which business operates, including taxation and administrative policies. U.S. aid also seeks to improve access to credit for the private sector, through micro and small business loans and by promoting bank reform to ease establishment of private banks. The Treasury Department maintains advisers in the central bank. The United States attempts to build business associations, such as chambers of commerce and the women's business federation, by providing training and development services to those emerging institutions. Specific industries with export promise are targeted for assistance (for example, investment promotion and external market link assistance for the marble and gemstone industries). An economic growth program that is of importance as well to agriculture is the USAID effort to improve land titling, through simplification of the registration process, establishing a legal and regulatory framework for land administration, and assistance to commercial courts in land dispute adjudication. Under USAID's Rule of Law project, assistance includes training for judges in conduct of commercial law and dispute resolution and for government officials on commercial law, and helping ministries in drafting commercial laws. A number of programs address immediate needs in the more unstable parts of Afghanistan, often in close coordination with U.S. military forces as they engage the insurgency. Perhaps chief among these is the Community Development Program, which provides temporary employment and income generation, from street cleaning to repair of irrigation systems and water supply rehabilitation. Partly to strengthen the relationship between the Afghan government and local populations, the Afghanistan Stabilization Initiative funnels funding largely through the Afghan government to local community-based consultative body approved small community improvement projects. The Task Force for Business and Stability Operations is an extension of a DOD-supported program begun in Iraq in 2006 to stimulate private sector economic growth. It's main focus in Afghanistan has been to encourage foreign investment. In 2010, it produced a study of as yet unexploited mineral deposits throughout the country, indicating large deposits of gold, lithium, copper, and rare earths that could greatly boost the Afghan economy. Among other activities, it has also launched a pilot project in January 2012 to process chromite to international standards, and it has assisted the Afghan government in the mineral tender process. The United States supports two major and sometimes overlapping agriculture efforts: one nationwide and another, under the rubric of alternative development, aimed at fostering legal alternatives to poppy and targeted at specific areas where poppy is grown. Among broad agriculture project efforts are the distribution of chickens, training in poultry management, vaccination of livestock, establishment of more than 850 Veterinary Field Units, seed distribution, capacity building for extension services, loans to farmers (a $100 million Agricultural Development Fund), and cash-for-work. The United States also assists in the establishment of food processing plants, such as flour mills and vegetable dehydration plants. Infrastructure assistance to Afghan agriculture includes repair of farm-to-market roads and rehabilitation of irrigation systems. USAID's alternative development effort, the Alternative Livelihoods Program, supports in poppy districts many of the same efforts it undertakes throughout Afghanistan. It attempts to increase commercial agricultural opportunities for licit, market-value crops and provides access to materials and expertise to produce those crops. Most of these agriculture programs are implemented by USAID. However, two other agencies are involved in this sector. DOD fields Agribusiness Development Teams (ADTs), 10 of them in April 2012, composed of National Guard personnel with backgrounds in agribusiness who provide training and advice to universities, provincial ministries, and farmers. USDA's presence has increased substantially in recent years, from 13 agriculture experts in October 2009 to 55 in December 2011. USDA provides one or more advisors to each of the U.S.-run PRTs, through which it seeks to build the capacities of provincial agricultural systems and assist local farmers. At the national level, it provides technical expertise to the Agriculture Ministry, the agriculture extension service, and agricultural associations, and works with the Ministry of Higher Education to improve agriculture education. In 2010, the Embassy established a Senior Agriculture Coordinator and Deputy Coordinator to oversee U.S. agriculture efforts. Health sector assistance, largely provided by USAID, has been aimed at expanding access to basic public health care, including rehabilitation and construction of more than 600 clinics and training of over 10,000 health workers. About 68% of Afghans reportedly now have access to basic health services (within one hour by foot or animal) compared to 9% in 2002. Health projects also address specific health concerns, such as polio prevention and vulnerable children. Technical expertise is provided to the Ministry of Health, which is one of the few ministries considered by USAID to be sufficiently transparent to directly handle U.S. assistance funds. Currently, direct U.S. funding goes to support the Afghan government's Basic Package of Health Services (BPHS) and Essential Package of Hospital Services (EPHS) that deliver basic health care provided through 5 provincial level hospitals and 22 Afghan and international NGOs serving 540 district level health facilities and 5,000 health posts in 13 provinces. USAID supports a number of education efforts. Technical expertise has been provided to the Ministry of Education and Ministry of Higher Education to build management capacities. More than 680 schools have been constructed or rehabilitated, thousands of teachers have been trained (more than 52,000 in 11 provinces since January 2006), and millions of textbooks printed. The women's dorm at the University of Kabul has been rehabilitated. The American University of Afghanistan and the International School of Kabul have been established. Literacy programs are being implemented nationwide. A wide range of U.S. assistance programs address the elements of democracy and government administration. Democracy programs include efforts to support the development of civil society non-governmental organizations. Afghan NGOs receive small grants, and training is provided to their leadership and staff. U.S. assistance has built independent radio stations and established a national network of 38 independent local radio stations. At the national level, a law facilitating NGO development was drafted with U.S. expertise. U.S. funds supported the 2009 Presidential and Provincial Council elections, and support the Independent Elections Commission, and a Civil Voter Registry. U.S. assistance seeks to strengthen local and national government institutions through efforts to build the competency of the civil service, increase the capacity of the National Assembly to draft legislation, help the government identify problems and carry out policy, and improve delivery of social services. The United States is providing technical assistance as well as direct cash transfers to the Civil Service Commission to make it independently capable of training government personnel, and it provides direct budget support to the Ministry of Finance to enable the Afghan government to exercise greater control over the hiring of technical advisors rather than rely exclusively on donors and contractors. A Performance-Based Governors' Fund provides funding for a range of government services for those provinces which do not receive adequate funds from the national government. Similar efforts help municipalities provide services and enhance their capabilities. An Afghan Social Outreach Program has created over 100 local district level representative councils that focus on service delivery and justice concerns and monitor the use of development projects. U.S. rule of law (ROL) programs are extensive, and multiple agencies—the State Department's Bureau of International Narcotics and Law Enforcement (INL), the Department of Justice, USAID, the Drug Enforcement Administration (DEA), U.S. Marshall Service, FBI, and DOD—are involved to some extent in rule of law issues. There is some overlap between agency programs; in July 2010, the U.S. Embassy created the position of Director for Rule of Law and Law Enforcement, to lead and coordinate U.S. agencies that implement rule of law programs. The embassy's ROL Implementation Plan defines objectives for U.S. programs to help meet the aims of the Afghan National Justice Program, the Afghan government's own ROL strategy. Among other efforts, USAID seeks to improve legal education by assisting with a redesign of the core curriculum for the Law and Sharia Faculties at Kabul University, and by providing training in teaching methodology, legal writing, computer research, and legal English to members of faculties of Kabul University and three regional universities. It provides training in substantive and procedural law to sitting judges and trains trainers to continue such activities. Together, INL and USAID programs have built or renovated 40 provincial courthouses and trained more than 900 sitting judges—over half of the judiciary—and more than 400 judicial candidates. USAID is also testing a program to assist the councils of village elders who adjudicate many disputes in Afghanistan's informal justice system. It has supported councils in four pilot districts to transmit their decisions in writing to the district level. INL is principally concerned with reforming the criminal justice and corrections system. Its Justice Sector Support Program supports 30 U.S. justice advisors and 35 Afghan legal consultants who work together in provincial teams to address needs of key provinces. These have trained over 14,000 Afghan justice professionals as of July 2012. INL also brings Afghan law professors to the United States for degrees and U.S. Assistant Attorneys to Afghanistan. Its Corrections Systems Support Program, addressing prison capacity issues, has built prisons in all 34 provinces and funds 35 U.S. corrections advisors who provide training and mentoring. As of April 2009, these had trained more than 3,800 Afghan corrections staff. Although much assistance is meant to ultimately benefit Afghans of both genders, in appropriations legislation and report language, Congress often directs funding to programs specifically assisting Afghan women and girls—in the FY2010 State, Foreign Operations appropriations requiring that at least $175 million in ESF and INCLE accounts be used for this purpose ( P.L. 111-117 , §7076) and in the FY2012 legislation requiring that funds be made available "to the maximum extent practicable" ( P.L. 112-74 , §7046). Among aid efforts supporting women and girls is a USAID rule of law project that attempts to raise awareness of women's rights by conducting public forums and through discussion in the media. USAID supports the introduction of legal rights education to women audiences and legal aid through legal service centers. Another project provides financial support to NGOs working to improve the lives of women and girls and seeks to strengthen their policy advocacy capacities. U.S. assistance also is supporting the establishment of a Women's Leadership Development Institute to train women for leadership roles. The CERP seeks to improve the security environment in which U.S. combat troops operate by offering small grants to local villages to address urgent relief and reconstruction needs. While funded by DOD appropriations and implemented by the military, the CERP often performs a development function on the surface indistinguishable from the activities of USAID and is a major assistance tool of the U.S.-run Provincial Reconstruction Teams. Most of the CERP has been used for infrastructure purposes—nearly two-thirds through FY2008 went for road repair and construction. This trend toward the funding of large-scale projects led, from FY2011, to restrictions on the size of projects, decreased overall funding for the CERP account, and, establishment of the Afghanistan Infrastructure Fund discussed above. U.S. funds address a number of humanitarian situations in Afghanistan, most stemming from the years of war that preceded the U.S. intervention as well as the insurgency that has followed. During this period, large numbers of people fled from their homes, many of whom became refugees in neighboring countries. U.S. assistance in Afghanistan, provided through international organizations and NGOs under the State Department's Migration and Refugee Program and through USAID's International Disaster Assistance program, targets both those individuals who are returning and those who have been displaced. As of February 2012, the U.N. High Commissioner for Refugees, supported in part with U.S. funding, was assisting an estimated 447,000 internally displaced persons (IDPs) and 162,000 returning refugees. Several million potential returnees remain in Pakistan and Iran. Where the insurgency is ongoing, assistance programs address the needs of affected vulnerable populations. USAID's Civilian Assistance Program provides assistance targeted to individuals or communities directly affected by military incidents. Medical care to those injured, vocational training to make up for loss of an income earner, and repair of damaged homes are among the activities supported by the program. The NATO/ISAF Post-Operations Humanitarian Relief Fund, to which the United States contributes, provides immediate food, shelter, and infrastructure repair assistance following military actions. The DOD's CERP also provides battle damage repair as well as condolence payments for deaths or injury. U.S. food assistance has been aimed at both short- and long-term food security needs. During the 2008-2009 drought, which led to a shortage of wheat, the United States contributed food aid. Chronic malnutrition has been addressed in U.S. funding of a school feeding program implemented by the World Food Program and a World Vision program aimed at children under two years of age. The United States also supports demining and disposal of other explosive ordinance remaining from years of war. These efforts protect the civilian population and clear land that can be utilized for agriculture. According to Administration officials, narcotics profits are a major source of funding for the insurgency. Counter-narcotics efforts, therefore, are viewed as an intrinsic part of the U.S. stabilization strategy. Counter-narcotics programs are managed through the State Department's International Narcotics and Law Enforcement Affairs Bureau (INL), funded under the INCLE account; through USAID's alternative development program funded under the ESF account; and through the DOD counter-narcotics program account. The United States supports a "5 Pillar Strategy" in addressing counter-narcotics concerns. First, alternative development, noted above, is largely the USAID effort to develop other sources of income for poppy farmers. In addition, INL funds a "good performers" initiative that offers rewards to provinces that are making progress in reducing poppy cultivation. Second, a U.S.-supported Poppy Eradication Force seeks to eliminate poppy. Third, assistance seeks to build the capacity of the Counternarcotics Police of Afghanistan and other forces to interdict heroin and opium traffic. Fourth, a range of law enforcement and justice reform programs noted above address the investigation and adjudication of drug trafficking cases. The fifth pillar is the raising of public awareness through dissemination of information to farmers, opinion leaders, politicians, and others. As a result of the March 2009 strategic review, greater emphasis has been given to alternative development, eradication efforts have been diminished for fear of alienating farmers, and interdiction aimed at drug lords has been increased. Along with INL, the Department of Defense has supported eradication and interdiction efforts mostly by provision of equipment and weaponry to Afghan counter-narcotics entities. The amount of opium produced in Afghanistan increased from 3.6 million kg in 2010 to 5.8 million kg in 2011, and the total area under opium cultivation had risen from 123,000 hectares in 2010 to 131,000 hectares in 2011. However, according to the UN Office on Drugs and Crime, villages with a low level of security and which had not received agricultural assistance in the previous year were significantly more likely to grow poppy in 2012 than villages with good security and those which had received assistance. DOD notes that areas with international and Afghan security presence "have seen a steady decline in cultivation, most notably in Helmand, Afghanistan's largest poppy growing province, where cultivation has declined for three consecutive years." Security assistance programs address the capabilities of the Afghan police, army, and other security forces. Most U.S. security assistance efforts are funded through the Afghan Security Forces Fund (ASFF), an account supported under the DOD appropriations. The ASFF accounts for $50.6 billion since it was established in FY2005. Prior to that time, $1 billion in military assistance was provided through the Foreign Military Financing (FMF) account. The United States provides equipment, training, and mentoring to police and army forces and works with responsible Afghan ministries—Interior and Defense—to ensure they are capable of organizing and leading these forces. The total Afghan National Security Force level of roughly 344,108 (as of March 2012) is expected to rise to their planned end strength of 352,000 by October 2012. Many observers have expressed concerns regarding the speed and effectiveness of training. Among obstacles facing the security assistance program are high attrition rates; leadership inadequacies; limitations in management, logistics, and procurement capabilities; and shortfalls in available trainers. Amid concern that training of the Afghan National Police was well behind that of the Afghan army and the results of a joint DOD-State IG report that found shortcomings in the State Department's civilian police program, contractual control of police training was shifted from the State Department to DOD in 2009. For discussion, see CRS Report R40156, War in Afghanistan: Strategy, Operations, and Issues for Congress , by [author name scrubbed]; and CRS Report RL30588, Afghanistan: Post-Taliban Governance, Security, and U.S. Policy , by [author name scrubbed]. The State Department's Nonproliferation, Anti-Terrorism, Demining and Related Programs (NADR) account supports a program for the training and equipping of the Afghan Presidential protection service, which protects the Afghan leadership and diplomats. It also funds counter-terrorist finance and terrorist interdiction efforts. The International Military Education and Training Program (IMET), co-managed by the State Department and DOD, exposes select Afghan officers to U.S. practices and standards. Although authorization of aid programs for a specific country are usually not required, in 2002, Congress approved the Afghanistan Freedom Support Act ( P.L. 107-327 ). It authorizes the full range of economic assistance programs supporting the humanitarian, political, economic, and social development of Afghanistan. A separate title (II) authorized support for the development of the Afghanistan security forces; its authority expired at the end of September 2006. Since then, security aid has been authorized in annual DOD authorization legislation. Economic assistance to Afghanistan has been provided in most years since 2001 in both regular appropriations and emergency supplemental appropriations bills. Defense assistance has largely been provided in emergency supplemental appropriations legislation. In FY2011 and FY2012, funding for both civilian and defense assistance was provided in regular appropriations; there was no supplemental. However, in the FY2012 regular State, Foreign Operations appropriations, much of the Afghan civilian aid was channeled to an off-budget category called Overseas Contingency Operations (OCO As noted in Table 2 , most aid has been provided in accounts that fall under one of two budget functions. Most economic and humanitarian aid, as well as IMET and the operational expenses of the Embassy, the Special Inspector General for Afghanistan Reconstruction, and USAID, is in the 150 International Affairs function, encompassed largely by the State, Foreign Operations appropriations. Food aid, also under the 150 function, is provided in the Agriculture appropriations bill. Most security aid, as well as the CERP, is in the 050 Defense budget function, encompassed by the DOD appropriations. In February 2011, the Administration issued its FY2012 budget request, including $3.2 billion in foreign operations assistance to Afghanistan and $13.9 billion in DOD aid. Under the latter, $12.8 billion was for the ASFF, $400 million for the CERP, $500 million for the Afghan Infrastructure Fund, and $150 million for the Business Task Force. The foreign operations request included $2.8 billion in ESF. For FY2012, the Administration sought to differentiate regular, "enduring" assistance requirements from those temporary needs emanating from the war which it categorized as Overseas Contingency Operations (OCO) funds. Of the ESF request, $1.6 billion was in regular "enduring" costs and $1.2 billion was in OCO funds. Other requests—$1 million in State and USAID Global Health, $15.5 million in food aid, $324 million in INCLE, $66.3 million in NADR, and $2.4 million in IMET funds—were considered regular costs. In its FY2012 request, the Administration also proposed $948 million in State Department Diplomatic and Consular Programs (D&CP) operational expenses for the Afghanistan diplomatic and aid effort over and above the ongoing so-called enduring expenses in these countries. The figure included funding of civilian personnel from the Department of State, USAID, and other agencies that are deployed throughout Afghanistan. In addition, $44.4 million in OCO funds was requested for the operations of the SIGAR. On December 23, 2011, the Consolidated Appropriations Act 2012 ( H.R. 2055 , P.L. 112-74 ) was signed into law. Division I, the State, Foreign Operations appropriations, provided funding for Afghanistan, although specific levels under each account were not mentioned. The legislation required that $50 million be made available for rule of law programs and the statement of conferees directed that $10 million go to the Afghan Civilian Assistance Program and at least $5 million be provided for the Office of Global Women's Issues small grants program. In its legislation, Congress shifted most of the Administration request for regular funding to the off-budget OCO category. After weighing competing priorities in Iraq and Pakistan, among others eligible for the OCO funds, the Administration allocated available FY2012 funds, providing $1.8 billion in ESF OCO and $324 million in INCLE OCO. It also divided NADR funds, providing $41.8 million in regular funds and $23 million in OCO. Congress also appropriated $1 billion for State Department D&CP operations in Afghanistan. Division A of the Consolidated Appropriations Act 2012 provided Department of Defense OCO appropriations to Afghanistan, including $11.2 billion for the ASFF, $400 million for the CERP, and $400 million for the Afghanistan Infrastructure Fund. The Administration has also allocated about $258 million for the Task Force for Business and Stability Operations. In February 2012, the Administration issued its FY2013 budget request, seeking a total of $2.5 billion in ESF, INCLE, NADR, and IMET, compared with the $2.3 billion allocated for these accounts in the previous year. Although Congress funded most of the FY2012 appropriations from the OCO budget, the Administration has again requested funding split between regular and OCO categories. It requests $811.4 million in regular ESF, $1 billion in OCO ESF, $400 million in regular INCLE, $200 million in OCO INCLE, $54.3 million in regular NADR, and $1.5 million in regular IMET. The FY2013 request also includes $1.9 billion for OCO State operations, a $871 million increase from the FY2012 level, in order to support needs associated with the pending U.S. military withdrawal. The funds would provide for civilian facilities in Kandahar and Jalalabad and increased security. The Administration has requested $49.9 million for the SIGAR. The Defense appropriations request total includes $5.7 billion for the ASFF, only slight more than half than the previous year's appropriation, $400 million for CERP, $400 million for the Afghanistan Infrastructure Fund, and $179 million for the Task Force for Business Stability Operations. On May 24, 2012, the Senate Appropriations Committee reported S. 3241 ( S.Rept. 112-172 ), the FY2013 State, Foreign Operations appropriations. In its report, the committee recommended a total assistance level of $1.6 billion, well below the $2.5 billion request, noting that there remained $3.7 billion in unobligated balances as of March 2012. The committee would provide $1.1 billion in ESF, $450 million in INCLE, $54.3 million in NADR, and $1.5 million in IMET. The committee recommended $15 million for the Afghan Civilian Assistance Program, not less than $5 million for the State Department's Office of Global Women's Issues small grants program, and not less than $10 million for democracy and human rights. In addition, the committee supports appropriations of $1.6 billion in State operational D&CP and $49.9 million for the SIGAR. It would provide $200.8 million for USAID operational expenses. The committee also noted its support for plans to reduce U.S. government and contract personnel, and voiced support for rule of law programs and the National Solidarity Program. On May 25, 2012, the House Appropriations Committee reported H.R. 5857 ( H.Rept. 112-494 ), the FY2013 State, Foreign Operations appropriations. It did not specify amounts for Afghanistan under either regular or OCO appropriations. As in the previous year, it provided more funding for each account under the OCO category than was requested and less in regular funds. Should the legislation be adopted, the Administration would make final country allocations based on competing priorities. The committee report raised a variety of concerns—expecting full implementation in FY2013 of USAID's Accountable Assistance for Afghanistan initiative to ensure accountability for its programs, encouraging support for the ARTF and National Solidarity Programs while maintaining legislative conditions on direct aid, voicing concern for implementing partners due to the transition to the Afghan Public Protection Force by withholding funds until the Secretary of State certifies that needed contracts are in place, addressing reports of implementing partners receiving tax bills by requiring the Secretary to develop a policy to prohibit illegitimate taxation, and urging an inter-agency strategy to deal with the rise in conflict-induced population displacement. The committee also voiced support for programs focusing on women and girls, rule of law, training for media, and regional trade efforts. On May 25, 2012, the House Appropriations Committee also reported H.R. 5856 ( H.Rept. 112-493 ), the FY 2013 Defense appropriations, providing $5.0 billion for the ASFF, $250 million for the CERP, $375 million for the Afghan Infrastructure Fund, and $88 million for the Business Task Force. Congress has imposed a wide range of conditions and reporting requirements on its authorization and appropriations of aid to Afghanistan. For example, the FY2012 appropriations contains a provision (sec. 7046 (1), P.L. 112-74 ) that no funds are to be available for ESF or INCLE until the Secretary of State certifies that the Government of Afghanistan is committed to reducing corruption, taking steps to facilitate public participation in governance and oversight, and taking steps to protect the human rights of women; that funds will be programmed to strengthen the capacity of Afghanistan to reduce corruption; that civil society and government representatives will be consulted. Another provision of the act requires that ESF and INCLE funds be used in a manner that emphasizes the participation of Afghan women (sec. 7046 (2) (B) (i)). Among congressional reporting requirements, there are two of special note with regard to assistance to Afghanistan. The 2008 Defense Authorization (§1229, P.L. 110-181 ), which established a Special Inspector General for Afghanistan Reconstruction, requires the SIGAR to submit a quarterly report describing aid activities and funding. The same legislation (§1230), extended until 2014 by the 2012 Defense Authorization ( P.L. 112-181 , section 1218), requires DOD, in coordination with all other agencies, to submit a report every six months on progress toward security and stability in Afghanistan, including descriptions of the ASFF, PRTs, counter-narcotics activities, and other assistance matters.
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The U.S. program of assistance to Afghanistan is intended to stabilize and strengthen the Afghan economic, social, political, and security environment so as to blunt popular support for extremist forces in the region. Since 2001, nearly $83 billion has been appropriated toward this effort. Since FY2002, nearly two-thirds of U.S. assistance—roughly 62%—has gone to the training and equipping of Afghan forces. The remainder has gone to development and humanitarian-related activities from infrastructure to private sector support, governance and democratization efforts, and counter-narcotics programs. Key U.S. agencies providing aid are the Department of Defense, the Agency for International Development, and the Department of State. On December 23, 2011, the Consolidated Appropriations Act 2012 (H.R. 2055, P.L. 112-74) was signed into law. The State, Foreign Operations appropriations did not specify account levels for Afghanistan, but from available amounts, the Administration allocated $1.8 billion in Economic Support Fund (ESF), $324 million in International Narcotics and Law Enforcement (INCLE), and $64.8 million in Nonproliferation, Anti-terrorism, and Demining (NADR) funds. The Defense appropriations provided $11.2 billion for the Afghan Security Forces Fund (ASFF), $400 million for the Commander's Emergency Response Program (CERP), and $400 million for the Afghanistan Infrastructure Fund. The Administration has allocated about $258 million for the Task Force for Business Stability Operations. In February 2012, the Administration issued its FY2013 budget request, seeking a total of $2.5 billion in total ESF, INCLE, NADR, and IMET, compared with the $2.3 billion allocated in the previous year. It also requested $5.7 billion for the ASFF, $400 million for CERP, $400 million for the Afghanistan Infrastructure Fund, and $179 million for the Task Force for Business Stability Operations. This report provides a "big picture" overview of the U.S. aid program and congressional action. It describes what various aid agencies report they are doing in Afghanistan. It does not address the effectiveness of their programs. It will be updated as events warrant. For discussion of the Afghan political, security, and economic situation, see CRS Report RL30588, Afghanistan: Post-Taliban Governance, Security, and U.S. Policy, by [author name scrubbed]. For greater detail on security assistance provided by the Department of Defense, see CRS Report R40156, War in Afghanistan: Strategy, Operations, and Issues for Congress, by [author name scrubbed].
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The FY2010 legislative branch appropriations bill provided $4.656 billion. It was signed by the President and became P.L. 111-68 on October 1, 2009. The conference report ( H.Rept. 111-265 ) was agreed to in the Senate on September 30, 2009 (Roll No. 302, 62-38). On September 25, 2009, the House agreed to the conference report on H.R. 2918 , the FY2010 Legislative Branch Appropriations bill (Roll No. 739, 217-190). Debate followed adoption of the rule ( H.Res. 772 , Roll No. 738, 209-189) for consideration of the report. An amendment to the rule was adopted allowing for a correction during enrollment ( H.Con.Res. 191 ). The rule had been reported by the House Rules Committee the previous day. On September 23, 2009, the House had ordered the previous question (Roll No. 733, 240-171) and agreed by voice vote to a conference with the Senate. A motion to instruct conferees failed (Roll No. 734, 191-213), and the House appointed conferees. Approximately $5.0 billion was requested for legislative branch operations in FY2010, an increase of 14.5% over the $4.4 billion provided in the FY2009 Omnibus Appropriations Act. The Subcommittees on the Legislative Branch of the House and Senate Appropriations Committees each held hearings during which Members considered the legislative branch requests. The House passed H.R. 2918 , the FY2010 legislative branch appropriations bill, on June 19, 2009. The Senate passed the bill, with a substitute amendment, on July 6, 2009. On June 11, 2009, the House Appropriations Committee, Subcommittee on Legislative Branch held a markup of the FY2010 bill. The subcommittee version contained $3.675 billion, not including Senate items. This level is approximately $237 million above the FY2009 enacted level and $282 million less than requested for these accounts. The largest increase would be provided to the Architect of the Capitol ($81 million over the FY2009 enacted level, or nearly 18%). The largest decrease would be for the Open World Leadership Program, which would have its budget reduced by $5 million, or nearly 36%. At a markup on June 12, 2009, the full committee adopted by voice vote three of four amendments offered. The House Rules Committee met on June 18, 2009, to report a rule for floor consideration of the bill, H.R. 2918 . The rule, H.Res. 559 , allowed for the consideration of one amendment. The resolution was adopted on June 19, 2009 (Roll No. 410, 226-179). The amendment offered by Representative Carolyn McCarthy of New York to require $250,000 of the funds appropriated to the Library of Congress be allocated for the Civil Rights Oral History Project was adopted by voice vote. Representative Jack Kingston of Georgia moved to recommit the bill to the Appropriations Committee with instructions to eliminate $100,000 from the Allowances and Expenses funding for "other applicable employee benefits" following a discussion of the House "Wheels4Wellness" bike sharing program. The House agreed to the motion (Roll No. 412, 374-34), and then adopted the amendment by voice vote. The House passed the bill (Roll No. 413, 232-178). The Senate Appropriations Committee held a markup on June 18, 2009, and reported an original bill for legislative branch appropriations. The Senate bill ( S. 1294 ) contained $3.136 billion, not including House items. This is $76.1 million more than provided for FY2009 and $296.8 less than requested. On June 23, 2009, Majority Leader Harry Reid asked for unanimous consent to proceed to the consideration of H.R. 2918 . The request was followed by debate concerning the amendment process, with a discussion of seven amendments that the minority was considering. On June 25, 2009, the Senate proceeded to consideration of the bill. Senator Ben Nelson, the chair of the legislative branch subcommittee, offered an amendment in the nature of a substitute ( S.Amdt. 1365 ) that would strike all after the enacting clause and insert the Senate text. Following discussion of the substitute amendment, Senator Vitter offered a motion to commit H.R. 2918 to the Committee on Appropriations with instructions to report the bill with amendments that would limit the overall spending level to not more than the FY2009 level, "while not reducing appropriations necessary for the security of the United States Capitol complex." The motion was tabled (Roll call #214, 65-31). Following the vote, Senator McCain offered an amendment ( S.Amdt. 1366 to S.Amdt. 1365 ) that would strike $200,000 in funding for the Durham Museum in Omaha, Nebraska. A discussion of this provision was followed by a discussion of language in the substitute amendment that would amend the Congressional Accountability Act. The language would strike paragraph 6 of 2 U.S.C. 1341(c), which sets a compliance deadline for violations under the Occupational Safety and Health Act (OSHA). No amendment to this language was offered. A unanimous consent agreement provided that the Senate resume consideration on July 6 of the amendment offered by Senator McCain, as well as an amendment related on online disclosure of Senate spending, to be offered by Senator Coburn; an amendment requiring the Architect of the Capitol to inscribe the phrase "In God We Trust" and the Pledge of Allegiance in the Capitol Visitor Center (CVC), to be offered by Senator DeMint; and an amendment on Federal Reserve audit reform, to be offered by Senator DeMint. Following consideration on July 6, the Senate agreed to the amendment offered by Senator Coburn on Senate expenses ( S.Amdt. 1369 ) and Senator DeMint's amendment regarding engravings at the CVC ( S.Amdt. 1370 ) by voice vote. The CVC language was also introduced as concurrent resolutions— S.Con.Res. 27 was introduced by Senator DeMint on June 15, 2009, and H.Con.Res. 131 was introduced by Representative Lungren on May 20, 2009. The latter was agreed to in the House on July 9, 2009, and in the Senate on July 10, 2009. Senator DeMint's amendment regarding audits by the Comptroller General of the United States of the Federal Reserve System ( S.Amdt. 1367 ) was ruled out of order as a violation of Senate Rule XVI. The Senate defeated (Roll No. 215, 31-61) Senator McCain's amendment ( S.Amdt. 1366 ) to strike funding for the Durham Museum. Senator Coburn then made a constitutional point of order against the substitute amendment because of the funding for this museum. The Senate voted (Roll No. 216, 70-23) that the substitute amendment was in order. The Senate then agreed to H.R. 2918 , as amended (Roll No. 217, 67-25). In FY2009, an additional $25 million was provided for the Government Accountability Office (GAO) in the American Recovery and Reinvestment Act of 2009. P.L. 111-32 , the FY2009 Supplemental Appropriations Act, also contained funding for the legislative branch. The House- and Senate-passed versions of H.R. 2346 both contained $71.6 million for the new U.S. Capitol Police radio system. The Senate version also contained $2 million for the Congressional Budget Office (CBO), to remain available until September 30, 2010, and authorized additional funds for the Senate Committee on the Judiciary. The conference agreement contained the police radio and the Congressional Budget Office funding. The House agreed to the conference report on June 17, 2009, with the Senate following the next day. The President signed the bill on June 24, 2009. Consideration of the FY2010 request follows the enactment on March 11, 2009, of the FY2009 Omnibus Appropriations Act. The FY2009 act provided a 10.88% increase over the $3.97 billion provided for FY2008. The FY2009 enacted level was $258.47 million less than the request for $4.66 billion in discretionary budget authority. An explanatory statement on the act was inserted into the Congressional Record on February 23, 2009, and later issued as a print from the Committee on Appropriations. Since FY2003, the annual legislative branch appropriations bill has usually contained two titles. Appropriations for legislative branch agencies are contained in Title I. These entities, as they have appeared in the annual appropriations bill, are the Senate; House of Representatives; Joint Items; Capitol Police; Office of Compliance; Congressional Budget Office; Architect of the Capitol, including the Capitol Visitor Center; Library of Congress, including the Congressional Research Service; Government Printing Office; Government Accountability Office; and Open World Leadership Program. Title II contains general administrative provisions and, from time to time, appropriations for legislative branch entities. For example, Title II of the FY2003 act, P.L. 108-7 , contained funds for the John C. Stennis Center for Public Service Training and Development and for the Congressional Award Act. On occasion the bill may contain a third title for other provisions. For example, Title III of the FY2006 legislative branch appropriations act, P.L. 109-55 , contained language providing for the continuity of representation in the House of Representatives in "extraordinary circumstances." Prior to enactment of the FY2003 bill, and effective in FY1978, the legislative branch appropriations bill was structured differently. Title I, Congressional Operations, contained budget authority for activities directly serving Congress. Title II, Related Agencies, contained budget authority for activities considered by the Committee on Appropriations not directly supporting Congress. Occasionally, from FY1978 through FY2002, the annual legislative appropriations bill contained additional titles for such purposes as capital improvements and special one-time functions. In both the 110 th and 111 th Congresses, the House Appropriations Committee established a Legislative Branch Subcommittee. The House subcommittee did not exist in the 109 th Congress, and the full House committee considered the legislative branch bill, while the Senate established a subcommittee. Previously, both the House and Senate Appropriations Committees generally had a separate Legislative Branch Subcommittee dating back at least to the Legislative Reorganization Act of 1946, with the exception of the 83 rd Congress (1953-1954), during which the House and Senate Appropriations Committees established a subcommittee to consider both legislative and judiciary matters. The two chambers subsequently returned to the former practice of a separate Legislative Subcommittee beginning in the 84 th Congress (1955). The FY20 10 U.S. Budget contained a request for $5.0 billion in new budget authority for legislative branch activities, an increase of approximately 14.5% from the FY2009 enacted level. A substantial portion of the increase requested by legislative branch entities was to meet (1) mandatory expenses, which include funding for annual salary adjustments required by law and related personnel expenses, such as increased government contributions to retirement based on increased pay, and (2) expenses related to increases in the costs of goods and services due to inflation. As required by law, both houses considered separate 302(b) budget allocations for legislative branch discretionary and mandatory funds in FY2010. The House has allocated $4.830 billion in total budget authority for the legislative branch, including $4.7 billion in discretionary spending and $130 million in mandatory spending. The Senate has allocated $4.752 billion, including $4.622 billion in discretionary spending and $130 million in mandatory spending. Table 3 lists the dates of hearings of the legislative branch subcommittees in 2009. As stated above, the House Appropriations Committee, Subcommittee on Legislative Branch held a markup of the FY2010 bill on June 9, 2009. The full committee held its markup on June 12, 2009, considering four amendments before ordering the bill reported. The first three listed below were accepted by voice vote, while the fourth was rejected by voice vote. These included an amendment offered by Representative Debbie Wasserman Schultz adding report language emphasizing the importance of staff-led tours to Members and directing the Architect not to restrict these tours, except as directed by the Capitol Police Board; an amendment offered by Representative Debbie Wasserman Schultz adding report language directing an assessment of missteps during the 2009 Presidential inauguration and plans for the implementation of recommendations; an amendment offered by Chairman David Obey renaming the American Folklife Center as the "Archie Green American Folklife Center"; and an amendment offered by Representative Jack Kingston related to the use of the E-verify system to check the employment eligibility of legislative branch employees. At the markup, Members also discussed the reduction in funding for the Open World Leadership Program and efforts to require an educational display on emancipation within Emancipation Hall in the Capitol Visitor Center. On June 16, 2009, the House Committee on Rules issued a "Dear Colleague" letter stating that the committee expected to meet on June 18, 2009, to report a rule for consideration of the FY2010 legislative branch appropriations bill. The letter established requirements for any Member wishing to offer an amendment to the bill. The Rules Committee met on June 18, 2009, and reported H.Res. 559 , which made one amendment in order. The amendment requires $250,000 of the amounts available under the Library of Congress, Salaries and Expenses account, be used to carry out activities under the Civil Rights History Project Act of 2009. Summaries of the other 19 amendments submitted to the Committee on Rules are available on its website. The Senate Appropriations Committee held a markup on June 18, 2009. The committee ordered reported an original bill, S. 1294 . The Senate requested $1.009 billion for its internal operations, an increase of $114.2 million, or 12.8%, over the FY2009 level. The Senate-passed version of the bill contained $933.99 million, a 4.4% increase. The FY2010 law provided $926.16 million, a 3.5% increase. FY2010 requests and FY2009 funding levels for headings within the Senate account are presented in Table 7 . Appropriations for Senate committees are contained in two accounts: The inquiries and investigations account contains funds for all Senate committees except Appropriations. The request contains $172.99 million for inquiries and investigations, an increase of 25.9% from the $137.4 million provided in FY2009. The Senate-passed version of the bill contained $145.5 million. The FY2010 law provided $140.5 million, a 2.3% increase. The Committee on Appropriations account, for which $15.84 million was requested, an increase of $644,000, or 4.2%, over the FY2009 level of $15.2 million. The Senate-passed version of the bill and the FY2010 law contained this level. The Senators' Official Personnel and Office Expense Account provides each Senator with funds to administer an office. It consists of an administrative and clerical assistance allowance, a legislative assistance allowance, and an official office expense allowance. The funds may be interchanged by the Senator, subject to limitations on official mail. A total of $450.8 million was included in the request, which is 12.7% more than the $400.0 million provided in FY2009. The Senate-passed version of the bill contained $425.0 million. The FY2010 law provided $422 million, an increase of 5.5%. The House requested $1.497 billion in budget authority for its internal operations, an increase of 15.05% ($195.78 million) over the budget authority provided in the FY2009 Consolidated Appropriations Act. The House-passed level of $1.375 billion contained a 5.7% increase over the FY2009 level. The FY2010 law provided $1.369 billion, an increase of 5.2%. FY2010 requests and FY2009 funding levels for headings in the House of Representatives account are presented in Table 8 . Funding for House committees is contained in the appropriation heading "committee employees," which comprises two subheadings. The first subheading contains funds for personnel and nonpersonnel expenses of House committees, except the Appropriations Committee, as authorized by the House in a committee expense resolution. The FY2010 request contains $175.2 million, a 13.8% increase over the $154.0 million provided in the FY2009 Omnibus Appropriations Act. The House-passed bill contained $139.9 million, the same as contained in the FY2010 law. This level is 9.2% below the FY2009 level. The second subheading contains funds for the personnel and nonpersonnel expenses of the Committee on Appropriations. The House-passed bill and FY2010 law contain $31.3 million, the same as enacted for FY2009. The House had requested $33.3 million, an increase of 6.4% over the FY2009 level. The Members' Representational Allowance (MRA) is available to support Members in their official and representational duties. The House-passed and enacted level of $660.0 million represent an 8.4% increase over the $609.0 million provided in the FY2009 Omnibus. A total of $699.3 million, a 14.8% increase, was contained in the FY2010 budget request. The FY2009 level represented an increase of 5.1% from the $579.5 million provided in the FY2008 Consolidated Appropriations Act. The Green the Capitol Initiative was created in March 2007, when Speaker Nancy Pelosi, Majority Leader Steny Hoyer, and the chair of the Committee on House Administration, the late Representative Juanita Millender-McDonald, asked the Chief Administrative Officer (CAO) of the House, Daniel Beard, to provide an "environmentally responsible and healthy working environment for employees." For FY2008, $3.27 million was requested to implement the Green the Capitol Initiative, which included $100,000 in the Architect of the Capitol's House office buildings account for new light bulbs and $500,000 in the Capitol Grounds section of the report for an E-85 gasoline pump. The FY2008 Consolidated Appropriations Act provided $3.9 million for new "green" initiatives, including $100,000 for the House Office Buildings account, $500,000 for the Capitol Grounds account, and $3.27 million for the Capitol Power Plant. In addition, the FY2008 Consolidated Appropriations Act included an amendment to 2 U.S.C. § 117m(b), which governs the operation of the House Services Revolving Fund, allowing the CAO to use the revolving fund for environmental activities, including energy and water conservation, in buildings, facilities, and grounds under his jurisdiction. For FY2009, the CAO requested $2 million for the Green the Capitol Initiative. Although not specifically addressed in P.L. 111-8 or the explanatory statement, the program received $1 million according to the House Committee on Appropriations press release. The FY2010 request contains $10 million for energy demonstration projects. The House-passed bill and the FY2010 law would provide $2.5 million. The FY2010 request and FY2009 funding level is presented in Table 5 . The Capitol Police originally requested $410.1 million for FY2010, including $71.6 million for a new radio system, although funding for that project was subsequently included in the FY2009 supplemental request and in P.L. 111-32 , the FY2009 Supplemental Appropriations Act. The remaining $338.5 million request, not including the radio project, represents a 10.7% increase over the $305.75 million provided in the FY2009 Omnibus. The House-passed level of $325.1 million contained an increase of 6.3%. The Senate-passed version of the bill contained $331.6 million, an 8.4% increase. The FY2010 law provided $328.3 million. Previously, the FY2009 Omnibus provided an 8.5% increase over the $281.9 million provided in the FY2008 Consolidated Appropriations Act, which represented an increase of 6.1% over the $265.6 million (including supplemental appropriations) provided in FY2007. Appropriations for the police are contained in two accounts—a salaries account and a general expenses account. The salaries account contains funds for the salaries of employees; overtime pay; hazardous duty pay differential; and government contributions for employee health, retirement, Social Security, professional liability insurance, and other benefit programs. The general expenses account contains funds for expenses of vehicles; communications equipment; security equipment and its installation; dignitary protection; intelligence analysis; hazardous material response; uniforms; weapons; training programs; medical, forensic, and communications services; travel; relocation of instructors for the Federal Law Enforcement Training Center; and other administrative and technical support, among other expenses. The House-passed bill contained $263.2 million for salaries (an increase of 6.1%, rather than the requested increase of 8.3%) and $61.9 million for general expenses (an increase of $4.2 million, or 7.2%, from the $57.8 million provided in the FY2009 Omnibus Appropriations Act). The Senate-passed version of the bill contained $267.2 million for salaries (a 7.7% increase) and $64.4 million for general expenses (an 11.4% increase). The FY2010 law provided $265.2 million and $63.13 million for salaries and general expenses. A second appropriation relating to the Capitol Police appears within the Architect of the Capitol account for Capitol Police buildings and grounds. The FY2010 law provided $27 million, an increase of 42.2% from the nearly $19 million provided in FY2009. The House-passed level of $26.4 million represented an increase of 38.8%. The Senate-passed level of $26.2 million represented an increase of 37.7%. The Architect had requested $30.8 million, an increase of 62.0%. The FY2009 level was a 27.2% increase over the $14.9 million provided in FY2008. The cost of the new radio system was discussed at length at both the House and Senate hearings. Topics addressed included the final cost of the project, as well as increases from previous projections, the appropriate timing of funding, the expected life of the new system, and competitive bidding for the radio contract. The House also discussed a number of staffing concerns, including the impact of new FTEs (full-time equivalents) and the opening of the CVC on overtime compensation, and the implementation of recommendations from a recent manpower study. The Architect of the Capitol (AOC) is responsible for the maintenance, operation, development, and preservation of the United States Capitol Complex, which includes the Capitol and its grounds, House and Senate office buildings, Library of Congress buildings and grounds, Capitol Power Plant, Botanic Garden, Capitol Visitor Center, and Capitol Police buildings and grounds. The Architect is responsible for the Supreme Court buildings and grounds, but appropriations for their expenses are not contained in the legislative branch appropriations bill. Operations of the Architect are funded in the following ten accounts: general administration, Capitol building, Capitol grounds, Senate office buildings, House office buildings, Capitol power plant, Library buildings and grounds, Capitol Police buildings and grounds, Capitol Visitor Center, and Botanic Garden. The FY2010 law includes $601.6 million, an increase of 13.6% over the FY2009 level. The report includes $50 million for the House Historic buildings revitalization fund. The House-passed bill included an initial payment of $60 million for this heading, which was not contained in the Senate version. The Architect of the Capitol (AOC) had requested a total of $644.6 million for FY2010, a 21.7% increase from the $529.6 million provided in the FY2009 Omnibus. The FY2009 level represented an increase of $116.1 million (28%) over the FY2008 level of $413.5 million, while the AOC had requested $642.7 million in new budget authority, a 55.4% increase. The FY2008 budget authority had represented a decrease of 8.1% from the $449.9 million (including supplemental appropriations) provided in FY2007. The FY2010 request and FY2009 funding level for each of the AOC accounts is presented in Table 6 . The AOC requested $24.6 million for FY2010 for the operations of the Capitol Visitor Center (CVC). This represents a decrease of nearly 39% from the total funding provided in FY2009, which included $31.1 million for the CVC project and $9.1 million for operational costs. The CVC opened to the public on December 2, 2008. The House-passed bill contained $23.1 million for the CVC. The Senate-passed version of the bill contained $22.8 million. The FY2010 law provided $22.5 million, a decrease of more than 44% from the FY2009 level. The condition of the Capitol Power Plant utility tunnels, and the funds necessary to repair them, have been discussed during appropriations hearings in recent fiscal years. The funding for repairs follows a complaint issued February 28, 2006, by the Office of Compliance regarding health and safety violations in the tunnels. The Office of Compliance had previously issued a citation due to the condition of the tunnels on December 7, 2000. On November 16, 2006, the Government Accountability Office (GAO) wrote a letter to the chair and ranking minority members of the Senate Committee on Appropriations, Subcommittee on the Legislative Branch, and the House Committee on Appropriations, examining the conditions of the tunnels, plans for improving conditions, and efforts to address workers' concerns. Potential hazards identified by the Office of Compliance and GAO include excessive heat, asbestos, falling concrete, lack of adequate egress, and insufficient communication systems. In May 2007, the Architect of the Capitol and the Office of Compliance announced a settlement agreement for the complaint and citations. Steps necessary to remedy the situation, as well as the actions and roles of the Architect of the Capitol and the Office of Compliance, have been discussed at multiple hearings of the House and Senate Appropriations Committees since 2006. Other committees have also expressed concern about the utility tunnels and allegations of unsafe working conditions. For example, the Senate Committee on Health, Education, Labor and Pensions, Subcommittee on Employment and Workplace Safety, heard testimony on tunnel safety during a March 1, 2007, hearing on the effects of asbestos. Following the complaint by the Office of Compliance, Congress provided $27.6 million in FY2006 emergency supplemental appropriations to the Architect of the Capitol for Capitol Power Plant repairs, and an additional $50 million was provided in emergency supplemental appropriations for FY2007. The Architect of the Capitol had requested $24.77 million for FY2008. This request, which was submitted prior to the provision of funds in the May 2007 emergency supplemental appropriations act, was not supported by either the House or Senate Appropriations Committee. According to the explanatory statement produced by the Committee on Appropriations, the FY2009 Omnibus provides $56.4 million for the utility tunnel project. The Architect had requested $126.65 million to meet the terms of the settlement agreement. AOC indicated in its budget justification that "the bulk of this work will begin in early calendar year 2009, and will extend through the spring of 2011." The FY2010 budget request contained $45.77 million for the tunnel program. During the House hearing on April 23, 2009, the Acting Architect testified that the utility tunnel abatement project is ahead of schedule and under budget. The House-passed bill contained $16.85 million. The Senate also provided this total, stating the following: To date, $134,000,000 has been appropriated to abate these hazards. While AOC originally requested $45,770,000 for fiscal year 2010 to continue the tunnel program, it has reassessed its plans for repairs. AOC was able to decrease the fiscal year 2010 estimate to $16,850,000 with a modified plan that will still meet the Office of Compliance settlement agreement. The revised total cost of the utility tunnel project is now $176,130,000. The Committee commends these efforts and requires that the AOC continue to evaluate assessments and immediately report any changes to current and projected costs. The Committee's firm expectation is that the AOC will meet the June 2012 commitment to abate safety and health hazards within the tunnels. The conference agreement contained the $16.85 million provided in the House and Senate versions of the bill. The FY2010 budget request includes language, some of which was revised or resubmitted from the FY2009 request, that would 1. grant the AOC authority to implement specified procedures established in the Federal Acquisition Streamlining Act; 2. allow the AOC to retain proceeds from the lease of its facilities to commercial entities; 3. allow the AOC to enter into multi-year leases; 4. allow the AOC to incur expenses and accept donations related to in certain emergencies, as determined by the Capitol Police Board; 5. allow the AOC to retain funds from energy and water savings for other conservation projects; 6. authorize the AOC to dispose of, and retain receipts from the sale of, surplus or obsolete property; 7. establish an AOC Senior Executive Service; 8. continue a flexible work schedule program; 9. amend the statute governing the authority for death gratuities for survivors of AOC employees; 10. provide early retirement authority; 11. authorize the hiring of disabled veterans through a non-competitive process; 12. provide for the acceptance of voluntary student services; 13. allow the AOC to enter into agreements with private entities for the benefit of the Botanic Garden; and 14. extend the Capitol grounds to include an additional parcel of D.C. that is now used for AOC and USCP parking. In addition to the administrative provision establishing the Historic Buildings Revitalization Trust Fund, the House-passed bill contains provisions related to: (1) expenditures and acceptance of donations during certain emergencies; (2) a flexible work schedule program; and (3) the acceptance of voluntary student services. The Senate-passed bill also includes provisions related to a flexible work schedule program and the acceptance of voluntary student services, as well as provisions authorizing the disposition of surplus or obsolete personal property, the noncompetitive appointment of disabled veterans, and a contract for the sale of refreshments at the Botanic Garden. The FY2010 law includes the provisions related to (1) expenditures and acceptance of donations during certain emergencies; (2) a flexible work schedule program; (3) the acceptance of voluntary student services; (4) the disposition of surplus or obsolete personal property; and (5) the Historic Buildings Revitalization Trust Fund. At the House hearing on April 23, 2009, the subcommittee discussed the condition of buildings around the Capitol Complex and deferred-maintenance issues, with a particular focus on the House garages and repairs to the plumbing, roof, electrical equipment, and exterior stone of the Cannon House Office Building. Shortly after the hearing, on May 6, 2009, the Committee on House Administration held a hearing on the conditions of the House Office Buildings. Topics at the Senate hearing on May 7, 2009, included the percentage of the AOC budget that is requested to respond to citations issued by the Office of Compliance (see " Office of Compliance " section) and long-term plans for the Capitol Power Plant. At both the House and Senate hearings, Members discussed the Architect's "greening" programs, including projects at the Capitol Power Plant, the application of the Energy Independence and Security Act of 2007 to the legislative branch, and efforts to meet the requirements of this act. CBO is a nonpartisan congressional agency created to provide objective economic and budgetary analysis to Congress. CBO cost estimates are required for any measure reported by a regular or conference committee that may vary revenues or expenditures. The FY2010 law, as well as the House-passed and Senate-passed versions of the bill, provides $45.2 million, a 2.5% increase from the $44.1 million provided in the FY2009 Omnibus Appropriations Act. The law also contained a provision amending the executive exchange program to increase participation from not more than three to not more than five individuals (2 U.S.C. 611 note). CBO requested $46.4 million for FY2010, a 5.2% increase. The FY2009 level represented an increase of $6.8 million (18.2%) over the $37.3 million provided in the FY2008 Consolidated Appropriations Act. The FY2009 levels do not include the $2.0 million, to remain available through FY2010, contained in the FY2009 Supplemental Appropriations Act ( H.R. 2346 ). CBO Director Douglas Elmendorf testified that the agency is requesting 254 FTEs for FY2010, an increase of 4 FTEs from the FY2009 approved level. He indicated that CBO may not reach the maximum authorized level this year since the hiring process has been slow and the final level was not approved until the fiscal year was underway. The subcommittee discussed CBO's hiring process, with questions about diversity as well as challenges in competing for talent and the starting salary for CBO analysts. As with many legislative branch agencies, CBO indicated that lack of space is a concern. The Library of Congress provides research support for Congress through a wide range of services, from research on public policy issues to general information. Among its major programs are acquisitions, preservation, legal research for Congress and other federal entities, administration of U.S. copyright laws by the Copyright Office, research and analysis of policy issues by the Congressional Research Service, and administration of a national program to provide reading material to the blind and physically handicapped. The Library also maintains a number of collections and provides a range of services to libraries in the United States and abroad. The FY2010 law provided $643.3 million, an increase of 6.0% over the FY2009 level of $607.1 million. The House-passed bill contained $647.4 million, an increase of 6.6% over the FY2009 Omnibus level. The Senate-passed version contained $638.6 million, or a 5.2% increase. The Library requested $658.4 million for FY2010, an 8.5% increase. The FY2009 level represented an increase of approximately 7.8% over the $563 million provided in the FY2008 Consolidated Appropriations Act. These figures do not include additional authority to spend receipts. The FY2010 budget contains the following heading requests: Salaries and expenses—The FY2010 law provided $439.8 million, an increase of 6.6% over the FY2009 level of $412.7 million. The House-passed bill contained $443.9 million, an increase of 7.6% over the FY2009 level. The Senate-passed bill contained $434.7 million, or a 5.3% increase. The Library had requested $452.2 million, an increase of 9.6%. Both the House-passed bill and the request include an additional authority to spend $6.35 million in receipts. Copyright Office—The FY2010 law, as well as the House-passed and Senate-passed versions of the bill and the FY2010 request, provided $20.9 million (not including authority to spend $34.6 million in receipts). This level represents a 14.2% increase over the $18.3 million (not including authority to spend $33.3 million in receipts) provided in FY2009. Congressional Research Service—The FY2010 law provided $112.49 million, an increase of 4.8% over the $107.3 million provided in FY2009. This level was included in the House-passed bill. The Senate-passed bill contained $112.8 million, a 5.1% increase. A 7.3% increase, or $115.1 million, was requested. Books for the Blind and Physically Handicapped—The FY2010 law, and the House-passed and Senate-passed versions of the bill, provided $70.2 million, an amount equal to the request. This represents a 2.0% increase over the $68.8 million provided in FY2009. The Architect's budget also contains funds for the Library buildings and grounds. The FY2010 law provided nearly $45.8 million, an increase of 17.1% from the FY2009 enacted level of $39.1 million. The House-passed bill contained $41.9 million (a 7.3% increase). The Senate-passed version contained $40.8 million, or an increase of 4.2%. A total of $69.1 million was requested (a 76.9% increase). The House subcommittee discussed the Library's budget request on April 29, 2009. Among the topics discussed were (1) the backlog in processing new registrations at the copyright office; (2) the budget of the Law Library and the potential for it to attract private funding; (3) the history and cost of the digital talking book initiative; (4) the completion of the merger between the Capitol Police and Library of Congress police by the end of FY2009; (5) the Library's storage capacity and how it determines what needs to be preserved and the accessibility of items at the main Library buildings and in remote storage; (6) the establishment of a new management structure at CRS, including the recruitment and background of new managers; and (7) CRS products, including a discussion of format and electronic availability. At its hearing on June 4, 2009, the Senate subcommittee also discussed the backlog in copyright processing, new information technology requests, and the status of the digital talking book initiative. Additionally, the Senate subcommittee asked questions about the Library's overseas offices, including the history and need for the foreign books acquisition program, costs for the Library and shared costs with program participants, and security costs assessed by the State Department. The subcommittee also examined the Library's request for storage modules in Ft. Meade, MD, including funds to relocate parts of the collection to Modules #3 and #4 and construct Module #5, and discussed interest in the private sector to help fund the law library. At the hearings, the Librarian of Congress, Dr. James H. Billington, indicated that the Library has been working with the Committee on House Administration on new language that would encourage outside funding for the law library. On June 10, 2009, the House Administration Committee ordered reported with amendments H.R. 2728 , the William Orton Law Library Improvement and Modernization Act. The bill was passed by the House on July 30, 2009 (Roll No. 278, 383-44). The bill has been referred to the Senate Committee on Rules and Administration. As of the date of this report, no further action has been taken in the Senate. The Library requested a number of administrative provisions for FY2010, which would provide 1. regular authority to obligate funds for reimbursable and revolving fund activities; 2. transfer authority among Library of Congress headings; 3. a clarification of the pay authorities related to senior-level Library employees following the enactment of the Senior Professional Performance Act of 2008 ( P.L. 110-372 ) and leave carryover provisions for statutory positions following the enactment of the FY2008 National Defense Authorization Act ( P.L. 110-181 ); 4. authority for expenses related to the incentive awards program; 5. an increase in the cap on the rate of pay for temporary experts and consultants to Level IV of the Executive Schedule ($153,200 in 2009); and, 6. revisions to the Library of Congress gift authority provisions to allow the Librarian to directly accept certain gifts. With the exception of the final two provisions listed, the House-passed bill includes the provisions the Library requested. The Senate-passed version contains the first three provisions. The FY2010 law included the first three provisions mentioned above, and the conference agreement directed the Librarian to establish the "Archie Green Fellowship Program at the American Folklife Center." GAO works for Congress by responding to requests for studies of federal government programs and expenditures. GAO may also initiate its own work. Formerly the General Accounting Office, the agency was renamed the Government Accountability Office effective July 7, 2004. The FY2010 law provided $556.8 million. The House-passed bill contained $558.8 million and the Senate-passed bill contained $553.7 million. GAO received $531.0 million, not including offsetting collections, in the FY2009 Omnibus Appropriations Act and an additional $25 million in P.L. 111-5 to cover responsibilities under the American Recovery and Reinvestment Act of 2009. The House subcommittee discussed the $25 million provided to GAO under the American Recovery and Reinvestment Act of 2009, asking if the funding was sufficient to cover GAO's responsibilities under the act. The subcommittee also discussed congressional understanding of GAO's workload and the costs associated with requests and reports. While some statutory provisions requiring GAO reports were repealed in the FY2009 Omnibus, the Acting Comptroller General stated additional provisions may be outdated. The subcommittee also addressed a number of employment-related issues, including the establishment of the GAO employee union and its current relationship with GAO management, succession planning, and the role of the GAO internship program in recruitment and retention. The FY2010 law provided nearly $147.5 million, an increase of 4.9% over the $140.6 million provided in the FY2009 Omnibus Appropriations Act. The House-passed bill would have provided $146.2 million, or a 4.0% increase. The Senate-passed version of the bill would have provided $146.99 million, a 4.6% increase. The Government Printing Office requested $166.3 million for FY2010, an increase of 18.3%. The FY2009 level represented an increase of 12.7% over the $124.7 million provided in the FY2008 Consolidated Appropriations Act. GPO's budget authority is contained in three accounts: (1) congressional printing and binding, (2) Office of Superintendent of Documents (salaries and expenses), and (3) the revolving fund. FY2009 levels for these accounts are: Congressional printing and binding—The House and Senate passed versions of the bill, which are equal to the GPO request, contain $93.3 million. This represents a decrease of 3.7% from the $96.8 million provided in FY2009. The FY2010 law provided $93.77 million, a decrease of 3.2% from the FY2009 level. GPO testified that the reduced request was achievable because of the elimination of a shortfall in this account through funds provided in FY2009. Office of Superintendent of Documents (salaries and expenses)—The FY2010 law, the House and Senate passed versions of the bill, and the GPO request, all contain $40.9 million, an increase of 5.6% from the $38.7 million provided in FY2009. The FY2009 level represented an increase of nearly 11% from the $34.9 million provided in the Consolidated Appropriations Act. Revolving fund—The House-passed bill contained $12.0 million. The Senate-passed version of the bill contained $12.8 million. The FY2010 law contained the level from the Senate-passed version of the bill. GPO requested $32.1 million. In FY2009, GPO received nearly $5 million for the revolving fund and had requested $33 million. The FY2008 Consolidated Appropriations Act did not include an appropriation for the revolving fund. The congressional printing and binding account pays for expenses of printing and binding required for congressional use, and for statutorily authorized printing, binding, and distribution of government publications for specified recipients at no charge. Included within these publications are the Congressional Record ; Congressional Directory ; Senate and House Journals; memorial addresses of Members; nominations; U.S. Code and supplements; serial sets; publications printed without a document or report number, for example, laws and treaties; envelopes provided to Members of Congress for the mailing of documents; House and Senate business and committee calendars; bills, resolutions, and amendments; committee reports and prints; committee hearings; and other documents. The Office of Superintendent of Documents account funds the mailing of government documents for Members of Congress and federal agencies, as statutorily authorized; the compilation of catalogs and indexes of government publications; and the cataloging, indexing, and distribution of government publications to the Federal Depository and International Exchange libraries, and to other individuals and entities, as authorized by law. At the House hearing on April 28, 2009, Members of the subcommittee asked about the number of "equal employment opportunity" (EEO) complaints at GPO. The Chair asked Public Printer Robert C. Tapella to update a report required last year on the number of active EEO cases and compare this level to complaints at other federal agencies. Stating that approximately 25% of GPO employees are eligible for retirement, the Public Printer also discussed succession planning and recruitment and retention issues. The Office of Compliance is an independent and nonpartisan agency within the legislative branch. It was established to administer and enforce the Congressional Accountability Act, which was enacted in 1995. The act applies various employment and workplace safety laws to Congress and certain legislative branch entities. The conference report contains $4.377 million, an increase of 7.5% from the $4.1 million provided in the FY2009 Omnibus. The House-passed bill contained $4.335 million, an increase of 6.5%. The Senate-passed version of the bill contained $4.418 million, an 8.5% increase. The Office of Compliance requested $4.47 million for FY2010, an increase of nearly 10%. The FY2009 level represented an increase of 21.8% over the FY2008 level of $3.3 million, which was an increase of 6.5% over the $3.1 million made available in FY2007. Both the House and Senate subcommittees discussed the office's request for a new position to replace a Department of Labor detailee whose service to the office will be ending as well as progress on ameliorating conditions in the Capitol Power Plant utility tunnels. The House requested a report on the scope of any health and life-safety problems around the Capitol Complex and the efforts to address them, including the current number of infrastructure citations. The violations cited by the office were also discussed in the Senate, with Members asking for a comparison to standards in the executive branch, the applicability of these standards to historic and closely-monitored buildings, the costs associated with resolving the violations, and the timing of any renovations and coordination with other planned or required renovations. The conference report also addressed the standards applied to legislative branch buildings, stating: The conferees are concerned that the Congressional Accountability Act of 1995 may enable the Office of Compliance (OOC) to apply a higher enforcement standard for certain health and safety standards than those applied to the Executive Branch and private sector. Strict statutory deadlines for remedying citations exacerbate this situation, and have led AOC to give highest priority to projects for which OOC has issued citations regardless of whether they represent the highest risk to health and safety. The conferees believe that the standards applied to the legislative branch should be consistent with their application to the private sector and the executive branch. Therefore, the conferees expect the Office of Compliance General Counsel (OOCGC) to work with legislative branch agency heads to implement corrective actions in a realistic and reasonable time frame, taking into consideration the risks the deficiencies pose, the costs involved in remedying the deficiencies, as well as mitigating factors which have been implemented (sprinklers, alarms, and other building improvements) to reduce risk. The conferees expect the OOCGC to amend its regulations to establish criteria that use a comprehensive risk-based approach, including the cost of remedial actions as well as building renovations planned for the future, in working with agencies to address needed corrections. The center administers a program that supports democratic changes in other countries by giving their leaders opportunity to observe democracy and free enterprise in the United States. The first program was authorized by Congress in 1999 to support the relationship between Russia and the United States. The program encouraged young federal and local Russian leaders to visit the United States and observe its government and society. Established at the Library of Congress as the Center for Russian Leadership Development in 2000, the center was renamed the Open World Leadership Center in 2003, when the program was expanded to include specified additional countries. In 2004, Congress further extended the program's eligibility to other countries designated by the center's board of trustees, subject to congressional consideration. The center is housed in the Library and receives services from the Library through an inter-agency agreement. The FY2010 law provided $12 million, a decrease of 13.7% from the $13.90 million provided in the FY2009 Omnibus. The House-passed bill contained $9 million, a decrease of 35.3%. The Senate-passed version of the bill and the FY2010 budget request contain nearly $14.5 million for Open World, a 4% increase. In FY2008, Open World received $8.98 million in budget authority, a decrease of 35% from the $13.86 million provided in FY2007 and FY2006. Open World also requested an administrative provision, which was included in amendments to the FY2010 budget request transmitted by the President on May 21, 2009. The proposed language would (1) amend the Board membership to specify that the four appointees of the President pro tempore and Speaker shall be Members of the Senate and House of Representatives; (2) amend the language in the "purpose" section to recognize that the program now exists outside Russia and to authorize the Center to engage program alumni in additional activities; (3) authorize the provision of grants to organizations outside of the United States; (4) authorize the use of funds to engage alumni in program activities outside of the United States; (5) authorize the Librarian to appoint the Executive Director on behalf of the Board; and (6) allow the Librarian, rather than the Secretary of State, to waive annuity restrictions for reemployment in Center positions. The Senate-passed version of the bill includes the administrative provisions amending the Board membership and clarifying the Librarian's authority to appoint the Executive Director on behalf of the Board. These amendments were included in the law. The location of Open World at the Library of Congress, as well as its inclusion in the legislative branch budget, has been a topic of discussion at appropriations hearings in recent fiscal years. As in previous years, the House Legislative Branch Subcommittee examined whether the program should be located within the legislative branch at the Library of Congress, within the judiciary, or within the executive branch at the State Department, during a FY2010 budget hearing on April 29, 2009. Previously, during a hearing on the FY2009 budget, Ambassador John O'Keefe, the executive director of Open World, testified that the program may attract different participants if associated with the executive branch rather than the Library of Congress. The FY2009 explanatory statement directed the Open World Leadership Center Board of Trustees to work with the State Department and the Judiciary to establish a shared funding mechanism. The subcommittee also had discussed this issue during the FY2008 appropriations cycle, and language was included in the FY2008 Consolidated Appropriations Act requiring Open World to prepare a report by March 31, 2008, on "potential options for transfer of the Open World Leadership Center to a department or agency in the executive branch, establishment of the Center as an independent agency in the executive branch, or other appropriate options." The House full committee print states that "the Legislative Branch Subcommittee has been clear that it expects the Open World program to become financially independent of funding in this bill as soon as possible." This sentiment was also expressed in the conference report, which stated: The conferees are fully supportive of expanded efforts of the Open World Center to raise private funding and expect this effort to reduce the requirements for funding from the Legislative Branch appropriations bill in future years. The Committees look forward to a report of progress being made by the Center's fundraising program prior to hearings on its fiscal year 2011 budget request. The center was created by Congress in 1988 to encourage public service by congressional staff through training and development programs. The conference report, the FY2010 House- and Senate-passed versions of the bill, and the FY2010 request, contain $430,000 for the Stennis Center. The FY2009 Omnibus provided $430,000, which was equal to the request as well as the amount contained in the FY2008 House-passed bill and the Senate-reported bill. The FY2008 Consolidated Appropriations Act provided $429,000, including a rescission. Since the closure of the Office of Technology Assessment (OTA), which was a legislative branch agency established in 1972 and last funded in FY1996, congressional appropriators have periodically reexamined funding for scientific studies by the legislative branch. In recent Congresses, some Members have expressed support for the refunding of OTA through the distribution of "Dear Colleague" letters and the introduction of legislation. Other Members have suggested that technology assessments may be conducted more cost-effectively by existing legislative branch agencies. The FY2008 Consolidated Appropriations Act provided $2.5 million to GAO for technology assessments. The FY2009 explanatory statement indicates that funding continues to be provided for these studies. On May 5, 2009, the House subcommittee invited Members and public witnesses to testify on their interests for FY2010. Representative Rush Holt asked the subcommittee to provide $35 million for the re-funding of the OTA. The subcommittee discussed the possibility of other legislative branch agencies—including CRS and GAO—conducting these studies, with the dialogue including the methodologies used by these agencies; the relative costs of expanding one agency versus reestablishing OTA; timeliness of OTA's analysis; and the ability of Congress to obtain technology assessments from outside entities. The House report indicates that funding is provided "at the fiscal year 2009 level for GAO to conduct technology assessment studies." CRS Report RL34490, Legislative Branch: FY2009 Appropriations , by [author name scrubbed]. CRS Report RL34031, Legislative Branch: FY2008 Appropriations , by [author name scrubbed]. CRS Report R40083, Legislative Branch Appropriations Bill: Structure, Content, and Process , by [author name scrubbed]. These sites contain information on the FY2010 and FY2009 legislative branch appropriations requests and legislation, and the appropriations process. House Committee on Appropriations http://appropriations.house.gov/ Senate Committee on Appropriations http://appropriations.senate.gov/ CRS Appropriations Products Guide http://apps.crs.gov/cli/cli.aspx?PRDS_CLI_ITEM_ID=615&from=1&fromId=73 Congressional Budget Office http://www.cbo.gov Government Accountability Office http://www.gao.gov Office of Management & Budget http://www.whitehouse.gov/omb/ Key Policy Staff
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Approximately $5.0 billion was requested for legislative branch operations in FY2010, an increase of 14.5% over the FY2009 enacted level. The Subcommittees on the Legislative Branch of the House and Senate Appropriations Committees held hearings during which Members considered the legislative branch requests. On September 23, 2009, the House ordered the previous question (Roll No. 733, 240-171) and agreed by voice vote to a conference with the Senate on H.R. 2918, the FY2010 Legislative Branch Appropriations bill. A motion to instruct conferees failed (Roll No. 734, 191-213), and the House appointed conferees. The House Rules Committee met on September 24, 2009, to adopt a rule for consideration of the conference report. The committee reported the rule (H.Res. 772) and the House adopted it the following day. Following adoption of the rule, the House passed the conference report on H.R. 2918. The House passed H.R. 2918, with amendments, on June 19, 2009. The House bill would have provided nearly $3.675 billion, not including Senate items. The Senate Appropriations Committee held a markup and reported an original bill for legislative branch appropriations on June 18, 2009. The Senate bill (S. 1294) contained $3.136 billion, not including House items. The Senate agreed to the House bill, as amended, on July 6, 2009, and appointed conferees. The conference report (H.Rept. 111-265) provides $4.656 billion. It was agreed to in the House on September 25 and in the Senate on September 30. It was signed by the President and became P.L. 111-68 on October 1, 2009. Among issues that have been considered during hearings on the FY2010 budget in the House and Senate Appropriations Committees, Subcommittees on the Legislative Branch, are the following: the need for the new U.S. Capitol Police radio system and the timing of funding; deferred maintenance issues around the Capitol complex; the effect of the Office of Compliance citations on the Architect's project prioritization and budget request; employment issues, including pay, recruitment and retention, diversity, and equal employment opportunity concerns; and the future of the Open World Leadership Program, including the location of the program within the legislative branch and the selection of participant countries. The FY2009 Omnibus Appropriations Act (P.L. 111-8, enacted on March 11, 2009) provided $4.4 billion for legislative branch activities. This represents an approximately 11% increase over the nearly $4 billion approved by Congress for FY2008. In FY2009, the American Recovery and Reinvestment Act of 2009 (P.L. 111-5) provided an additional $25 million for the Government Accountability Office and the FY2009 Supplemental Appropriations Act (P.L. 111-32) provided $71.6 million for the new U.S. Capitol Police (USCP) radio system and $2 million for the Congressional Budget Office (CBO). This report will not be updated.
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Nearly half a million miles of high-volume pipeline transport natural gas, oil, and other hazardous liquids across the United States. These transmission pipelines are integral to U.S. energy supply and have vital links to other critical infrastructure, such as power plants, airports, and military bases. While an efficient and fundamentally safe means of transport, many pipelines carry volatile, flammable, or toxic materials with the potential to cause public injury and environmental damage. The nation's pipeline networks are also widespread, running alternately through remote and densely populated regions, some above ground and some below. These systems are vulnerable to accidents and terrorist attack. Recent pipeline accidents in Marshall, MI, San Bruno, CA, Allentown, PA, and Laurel, MT, have demonstrated this vulnerability and have heightened congressional concern about pipeline risks. The federal program for pipeline safety resides primarily within the Department of Transportation (DOT), although its inspection and enforcement activities rely heavily upon partnerships with state pipeline safety agencies. The federal pipeline security program began with the DOT as well, immediately after the terror attacks of September 11, 2001, but pipeline security authority was subsequently transferred to the Department of Homeland Security (DHS) when the latter department was created. The DOT and DHS have distinct missions, but they cooperate to protect the nation's pipelines. The Federal Energy Regulatory Commission is not operationally involved in pipeline safety or security, but it can examine safety issues under its siting authority for interstate natural gas pipelines, and can allow pipeline companies under its rate jurisdiction to recover pipeline security costs. Collectively, these agencies administer a comprehensive and complex set of regulatory authorities which has been changing significantly over the last decade and continues to do so. The federal pipeline safety program is authorized through the fiscal year ending September 30, 2015, under the Pipeline Safety, Regulatory Certainty, and Job Creation Act of 2011 ( P.L. 112-90 ), which was signed by President Obama on January 3, 2012. This report reviews the history of federal programs for pipeline safety and security, key policy issues, and recent developments leading up to P.L. 112-90 . Although the act contains over 30 substantive sections, this report focuses only on a subset of provisions of key interest in recent congressional debate. Of the nation's approximately half million miles of transmission pipeline, roughly 180,000 miles carry hazardous liquids—over 75% of the nation's crude oil and around 60% of its refined petroleum products, along with other products. Within this network, there are nearly 200 inter state crude oil and liquid fuel pipelines, which account for roughly 80% of total pipeline mileage and transported volume. The U.S. natural gas pipeline network consists of around 300,000 miles of inter state and intra state transmission. It also contains some 14,000 miles of onshore field and gathering pipeline, which connect gas extraction wells to processing facilities. Around 120 systems make up the inter state gas transmission network; another 90 or so systems operate strictly within individual states. These inter state and intra state gas transmission pipelines feed around 900,000 miles of regional pipelines in some 1,400 local distribution networks serving over 66 million customers. Natural gas pipelines also connect to 127 active liquefied natural gas (LNG) storage sites, which can augment pipeline gas supplies during peak demand periods. Taken as a whole, releases from pipelines cause few annual fatalities compared to other product transportation modes. According to the DOT, there were 14 deaths per year on average from all U.S. pipeline systems from 2007 through 2011. Accidental pipeline releases result from a variety of causes, including third-party excavation, corrosion, mechanical failure, control system failure, and operator error. Natural forces, such as floods and earthquakes, can also damage pipelines. There were 140 hazardous liquid pipeline accidents, 84 natural gas transmission (including gathering) pipeline accidents, and 58 natural gas distribution accidents in 2011. Although pipeline releases have caused relatively few fatalities in absolute numbers, a single pipeline accident can be catastrophic in terms of deaths and environmental damage. Notable pipeline accidents in recent years include: 1999― A gasoline pipeline explosion in Bellingham, WA, killed three people and caused $45 million in damage to a city water plant and other property. 2000― A natural gas pipeline explosion near Carlsbad, NM, killed 12 campers. 2006― Corroded pipelines on the North Slope of Alaska leaked over 200,000 gallons of crude oil in an environmentally sensitive area and temporarily shut down Prudhoe Bay oil production. 2007― An accidental release from a propane pipeline and subsequent fire near Carmichael, MS, killed two people, injured several others, destroyed four homes, and burned over 70 acres of grassland and woodland. 2010 ―A pipeline spill in Marshall, MI, released 819,000 gallons of crude oil into a tributary of the Kalamazoo River. 2010 —A natural gas pipeline explosion in San Bruno, CA, killed 8 people, injured 60 others, and destroyed 37 homes. 2011― A natural gas pipeline explosion in Allentown, PA, killed 5 people, damaged 50 buildings, and caused 500 people to be evacuated. 2011 ―A pipeline spill near Laurel, MT, released an estimated 42,000 gallons of crude oil into the Yellowstone River. 2012 —A natural gas pipeline explosion in Springfield, MA injured 21 people and heavily damaged over a dozen buildings. Such accidents have generated persistent scrutiny of pipeline regulation and have increased state and community activity related to pipeline safety. In addition to their vulnerability to accidents, pipelines may also be intentionally damaged by vandals and terrorists. Pipelines may also be vulnerable to "cyber-attacks" on supervisory control and data acquisition (SCADA) systems or attacks on electricity grids and communications networks. Oil and gas pipelines, globally, have been a favored target of terrorists, militant groups, and organized crime. In Colombia, for example, rebels have bombed the Caño Limón oil pipeline and other pipelines over 950 times since 1993. In 1996, London police foiled a plot by the Irish Republican Army to bomb gas pipelines and other utilities across the city. Militants in Nigeria have repeatedly attacked pipelines and related facilities, including the simultaneous bombing of three oil pipelines in May 2007. A Mexican rebel group similarly detonated bombs along Mexican oil and natural gas pipelines in July and September 2007. In June 2007, the U.S. Department of Justice arrested members of a terrorist group planning to attack jet fuel pipelines and storage tanks at the John F. Kennedy (JFK) International Airport in New York. Natural gas pipelines in British Columbia, Canada, were bombed six times between October 2008 and July 2009 by unknown perpetrators. In 2009, the Washington Post reported that over $1 billion of crude oil had been stolen directly from Mexican pipelines by organized criminals and drug cartels. Since September 11, 2001, federal warnings about Al Qaeda have mentioned pipelines specifically as potential terror targets in the United States. One U.S. pipeline of particular concern, and with a history of terrorist and vandal activity, is the Trans Alaska Pipeline System (TAPS), which transports crude oil from Alaska's North Slope oil fields to the marine terminal in Valdez. TAPS runs some 800 miles and delivered approximately 600,000 barrels of oil per day in 2011 (over 10% of U.S. domestic oil production). In 1999, Vancouver police arrested a man planning to blow up TAPS for personal profit in oil futures. In 2001, a vandal's attack on TAPS with a high-powered rifle forced a two-day shutdown and caused extensive economic and ecological damage. In January 2006, federal authorities acknowledged the discovery of a detailed posting on a website purportedly linked to Al Qaeda that reportedly encouraged attacks on U.S. pipelines, especially TAPS, using weapons or hidden explosives. In November 2007 a U.S. citizen was convicted of trying to conspire with Al Qaeda to attack TAPS and a major natural gas pipeline in the eastern United States. Notwithstanding the incidents cited above, to date, there have been no known Al Qaeda attacks on TAPS or other U.S. pipelines. The most recent U.S. federal threat assessment concludes "with high confidence that the terrorist threat to the U.S. pipeline industry is low ... [with] no specific or credible threat information indicating that violent transnational extremist groups or domestic extremists are actively plotting to conduct attacks on the U.S. pipeline industry." Terrorist activities are in constant flux, however, and difficult to predict, so terrorist attacks remain a possibility in the future. Although Al Qaeda attacks on U.S. pipelines may be perceived as unlikely, attacks by individuals not associated with organized or terrorist groups may be a growing concern. For example, in August 2011, federal agents arrested a U.S. citizen—acting alone—who confessed to planting an improvised explosive device (which failed to detonate) under a natural gas pipeline in Oklahoma. In June 2012, a man was critically injured attempting to plant an improvised explosive device along a natural gas pipeline in Plano, TX. One specific area of pipeline security risk that has recently come to the fore is SCADA system cybersecurity. In March 2012, the Industrial Control Systems Cyber Emergency Response Team within DHS identified an ongoing series of cyber intrusions among U.S. natural gas pipeline operators dating back to December 2011. According to the agency, various pipeline companies described targeted spear-phishing attempts and intrusions into multiple natural gas pipeline sector organizations "positively identified … as related to a single campaign. " In 2011, computer security company McAfee reported similar "coordinated covert and targeted" cyberattacks originating primarily in China against global energy companies. The attacks began in 2009 and involved spear-phishing, exploitation of Microsoft software vulnerabilities, and the use of remote administration tools to collect sensitive competitive information about oil and gas fields. In 2010, the Stuxnet computer worm was first identified as a threat to industrial control systems. Although the Stuxnet software initially spreads indiscriminately, the software includes a highly specialized industrial process component targeting specific Siemens industrial SCADA systems. Computer security specialists claim that malicious software developers have already created new software programs tailored to target the kinds of SCADA system weaknesses revealed by Stuxnet. The increased vulnerability of pipeline SCADA systems due to their modernization, taken together with the emergence of SCADA-specific malicious software and the recent cyberattacks, suggests that cybersecurity threats to pipelines have been increasing. The Natural Gas Pipeline Safety Act of 1968 (P.L. 90-481) and the Hazardous Liquid Pipeline Act of 1979 ( P.L. 96-129 ) are two of the principal early acts establishing the federal role in pipeline safety. Under both statutes, the Transportation Secretary is given primary authority to regulate key aspects of interstate pipeline safety: design, construction, operation and maintenance, and spill response planning. Pipeline safety regulations are covered in Title 49 of the Code of Federal Regulations . The DOT administers pipeline regulations through the Office of Pipeline Safety (OPS) within the Pipelines and Hazardous Materials Safety Administration (PHMSA). At the end of FY2012, PHMSA employed 203 total staff, including 135 inspection and enforcement staff. In addition to its own staff, PHMSA's enabling legislation allows the agency to delegate authority to intra state pipeline safety offices, and allows state offices to act as "agents" administering inter state pipeline safety programs (excluding enforcement) for those sections of inter state pipelines within their boundaries. Approximately 350 state pipeline safety inspectors were available in 2012. PHMSA's pipeline safety program is funded primarily by user fees assessed on a per-mile basis on each regulated pipeline operator. P.L. 109-468 authorized annual pipeline safety program expenditures of $79.0 million in FY2007, $86.2 million in FY2008, $91.5 million in FY2009, and $96.5 million in FY2010. P.L. 112-90 authorizes expenditures of $109.3 million annually for each of FY2012 through FY2015, and $1.5 million annually through FY2015 for state pipeline damage prevention programs. The President's FY2013 budget requested $177 million. PHMSA uses a variety of strategies to promote compliance with its safety standards. The agency conducts programmatic inspections of management systems, procedures, and processes; conducts physical inspections of facilities and construction projects; investigates safety incidents; and maintains a dialogue with pipeline operators. The agency clarifies its regulatory expectations through published protocols and regulatory orders, guidance manuals, and public meetings. PHMSA relies upon a range of enforcement actions, including administrative actions such as corrective action orders (CAOs) and civil penalties, to ensure that operators correct safety violations and take measures to preclude future safety problems. Between January 1 and November 8, 2012, PHMSA initiated 244 enforcement actions against pipeline operators. Civil penalties proposed by PHMSA for safety violations during this period totaled approximately $8.3 million. PHMSA also conducts accident investigations and system-wide reviews focusing on high-risk operational or procedural problems and areas of the pipeline near sensitive environmental areas, high-density populations, or navigable waters. Since 1997, PHMSA has increasingly required industry's implementation of "integrity management" programs on pipeline segments near "high consequence areas." Integrity management provides for continual evaluation of pipeline condition; assessment of risks to the pipeline; inspection or testing; data analysis; and follow-up repair; as well as preventive or mitigative actions. High consequence areas include population centers, commercially navigable waters, and environmentally sensitive areas, such as drinking water supplies or ecological reserves. The integrity management approach directs priority resources to locations of highest consequence rather than applying uniform treatment to the entire pipeline network. PHMSA made integrity management programs mandatory for most oil pipeline operators with 500 or more miles of regulated pipeline as of March 31, 2001 (49 C.F.R. §195). Presidential Decision Directive 63 (PDD-63), issued during the Clinton Administration, assigned lead responsibility for pipeline security to the DOT. These responsibilities fell to the OPS, at that time part of the DOT's Research and Special Programs Administration (RSPA), since the agency was already addressing some elements of pipeline security in its role as safety regulator. In 2002, the OPS conducted a vulnerability assessment to identify critical pipeline facilities and worked with industry groups and state pipeline safety organizations "to assess the industry's readiness to prepare for, withstand and respond to a terrorist attack." Together with the Department of Energy and state pipeline agencies, the OPS promoted the development of consensus standards for security measures tiered to correspond with the five levels of threat warnings issued by the Office of Homeland Security. The OPS also developed protocols for inspections of critical facilities to ensure that operators implemented appropriate security practices. To convey emergency information and warnings, the OPS established communication links to key staff at the most critical pipeline facilities throughout the country. The OPS also began identifying near-term technology to enhance deterrence, detection, response, and recovery, and began seeking to advance public and private sector planning for response and recovery. On September 5, 2002, the OPS circulated guidance developed in cooperation with the pipeline industry defining the agency's security program recommendations and implementation expectations. This guidance recommended that operators identify critical facilities, develop security plans consistent with prior trade association security guidance, implement these plans, and review them annually. Although the guidance was voluntary, the OPS expected compliance and informed operators of its intent to begin reviewing security programs within 12 months, potentially as part of more comprehensive safety inspections. Federal pipeline security authority was subsequently transferred outside of DOT, however, as discussed below, so the OPS did not follow through on a national program of pipeline security program reviews. On December 12, 2002, President Bush signed into law the Pipeline Safety Improvement Act of 2002 ( P.L. 107-355 ). The act strengthened federal pipeline safety programs, state oversight of pipeline operators, and public education regarding pipeline safety. Among other provisions, P.L. 107-355 required operators of regulated natural gas pipelines in high-consequence areas to conduct risk analysis and implement integrity management programs similar to those required for oil pipelines. The act authorized the DOT to order safety actions for pipelines with potential safety problems and increased violation penalties. The act streamlined the permitting process for emergency pipeline restoration by establishing an interagency committee, including the DOT, the Environmental Protection Agency, the Bureau of Land Management, the Federal Energy Regulatory Commission, and other agencies, to ensure coordinated review and permitting of pipeline repairs. The act required DOT to study ways to limit pipeline safety risks from population encroachment and ways to preserve environmental resources in pipeline rights-of-way. P.L. 107-355 also included provisions for public education, grants for community pipeline safety studies, "whistle blower" and other employee protection, employee qualification programs, and mapping data submission. On December 29, 2006, President Bush signed into law the Pipeline Inspection, Protection, Enforcement and Safety Act of 2006 (PIPES Act, P.L. 109-468 ). The main provisions of the act address pipeline damage prevention, integrity management, corrosion control, and enforcement transparency. The PIPES act created a national focus on pipeline damage prevention through grants to states for improving damage prevention programs, establishing 811 as the national "call before you dig" one-call telephone number, and giving PHMSA limited "backstop" authority to conduct civil enforcement against one-call violators in states that have failed to conduct such enforcement. The act mandated the promulgation by PHMSA of minimum standards for integrity management programs for natural gas distribution pipelines. It also mandated a review of the adequacy of federal pipeline safety regulations related to internal corrosion control, and required PHMSA to increase the transparency of enforcement actions by issuing monthly summaries, including violation and penalty information, and a mechanism for pipeline operators to make response information available to the public. In November 2001, President Bush signed the Aviation and Transportation Security Act ( P.L. 107-71 ) establishing the Transportation Security Administration (TSA) within the DOT. According to TSA, the act placed the DOT's pipeline security authority (under PDD-63) within TSA. The act specified for TSA a range of duties and powers related to general transportation security, such as intelligence management, threat assessment, mitigation, security measure oversight and enforcement, among others. On November 25, 2002, President Bush signed the Homeland Security Act of 2002 ( P.L. 107-296 ) creating the Department of Homeland Security (DHS). Among other provisions, the act transferred to DHS the Transportation Security Administration from the DOT (§403). On December 17, 2003, President Bush issued Homeland Security Presidential Directive 7 (HSPD-7), clarifying executive agency responsibilities for identifying, prioritizing, and protecting critical infrastructure. HSPD-7 maintains DHS as the lead agency for pipeline security (par. 15), and instructs the DOT to "collaborate in regulating the transportation of hazardous materials by all modes (including pipelines)" (par. 22h). The order requires that DHS and other federal agencies collaborate with "appropriate private sector entities" in sharing information and protecting critical infrastructure (par. 25). TSA joined both the Energy Government Coordinating Council and the Transportation Government Coordinating Council under provisions in HSPD-7. The missions of the councils are to work with their industry counterparts to coordinate critical infrastructure protection programs in the energy and transportation sectors, respectively, and to facilitate the sharing of security information. HSPD-7 also required DHS to develop a national plan for critical infrastructure and key resources protection (par. 27), which the agency issued in 2006 as the National Infrastructure Protection Plan (NIPP). The NIPP, in turn, required each critical infrastructure sector to develop a Sector Specific Plan (SSP) that describes strategies to protect its critical infrastructure, outlines a coordinated approach to strengthen its security efforts, and determines appropriate funding for these activities. Executive Order 13416 further required the transportation sector SSP to prepare annexes for each mode of surface transportation. In accordance with the above requirements the TSA issued its Transportation Systems Sector Specific Plan and Pipeline Modal Annex in 2007 with an update on 2010. Pipeline security activities at TSA are led by the Pipeline Security Division (PSD) within the agency's Office of Security Policy and Industry Engagement (OSPIE). According to the agency's Pipeline Modal Annex (PMA), TSA has been engaged in a number of specific pipeline security initiatives as summarized in Table 1 . In addition to the activities in Table 1 , TSA has also conducted regional supply studies for key natural gas markets, has conducted training on cyber security awareness, has participated in pipeline blast mitigation studies, and has joined in "G-8" multinational security assessment and planning. In 2003, TSA initiated its Corporate Security Review (CSR) program, wherein the agency visits the largest pipeline and natural gas distribution operators to review their security plans and inspect their facilities. During the reviews, TSA evaluates whether each company is following the intent of the OPS security guidance, and seeks to collect the list of assets each company had identified meeting the criteria established for critical facilities. In 2004, the DOT reported that the plans reviewed to date (approximately 25) had been "judged responsive to the OPS guidance." TSA has completed CSRs covering the largest 100 pipeline systems (84% of total U.S. energy pipeline throughput) and is in the process of conducting second CSRs of these systems. According to TSA, CSR results indicate that the majority of U.S. pipeline systems "do a good job with pipeline security" although there are areas in which pipeline security can be improved. Past CSR reviews have identified inadequacies in some company security programs such as not updating security plans, lack of management support, poor employee involvement, inadequate threat intelligence, and employee apathy or error. In 2008, the TSA initiated its Critical Facility Inspection Program (CFI), under which the agency conducted in-depth inspections of all the critical facilities of the 125 largest pipeline systems in the United States. The agency estimated that these 125 pipeline systems collectively included approximately 600 distinct critical facilities. TSA concluded the CFI program in May 2011, having completed a total of 347 inspections throughout the United States. In addition to the initiatives in Table 1 , TSA has worked to establish qualifications for personnel applying for positions with unrestricted access to critical pipeline assets and has developed its own inventory of critical pipeline infrastructure. The agency has also addressed legal issues regarding recovery from terrorist attacks, such as FBI control of crime scenes and eminent domain in pipeline restoration. In October 2005, TSA issued an overview of recommended security practices for pipeline operators "for informational purposes only ... not intended to replace security measures already implemented by individual companies." The agency released revised pipeline security guidelines in 2010 and 2011. The guidelines include a section on cybersecurity developed with the assistance of the Applied Physics Laboratory of Johns Hopkins University as well as other government and industry stakeholders. The President's FY2012 budget request for DHS did not include a separate line item for TSA's pipeline security activities. The budget request did include a $134.7 million line item for "Surface Transportation Security," which encompasses security activities in non-aviation transportation modes, including pipelines. The PSD has traditionally received from the agency's general operational budget an allocation for routine operations such as regulation development, travel, and outreach. According to the PSD, the budget funds 13 full-time equivalent staff within the office. In 2007 the TSA Administrator testified before Congress that the agency intended to conduct a pipeline infrastructure study to identify the "highest risk" pipeline assets, building upon such a list developed through the CSR program. He also stated that the agency would use its ongoing security review process to determine the future implementation of baseline risk standards against which to set measurable pipeline risk reduction targets. Provisions in the Implementing Recommendations of the 9/11 Commission Act of 2007 ( P.L. 110-53 ) require TSA, in consultation with PHMSA, to develop a plan for the federal government to provide increased security support to the "most critical" pipelines at high or severe security alert levels and when there is specific security threat information relating to such pipeline infrastructure (§1558(a)(1)). The act also requires a recovery protocol plan in the event of an incident affecting the interstate and intrastate pipeline system (§1558(a)(2)). TSA published this plan in 2010. In addition to the above pipeline security initiatives, the TSA Pipeline Security Division has performed a limited number of vulnerability assessments and has supported investigations for specific companies and assets where intelligence information has suggested potential terrorist activity. The PSD, along with PHMSA, was involved in the investigation of an August 2006 security breach at an LNG peak-shaving plant in Lynn, MA. Although not a terrorist incident, the security breach involved the penetration of intruders through several security barriers and alert systems, permitting them to access the main LNG storage tank at the facility. The PSD also became aware of the JFK airport terrorist plot in its early stages and supported the Federal Bureau of Investigation's associated investigation. The PSD engaged the private sector in helping to assess potential targets and determine potential consequences. The PSD worked with the pipeline company to keep it informed about the plot, discuss its security practices, and review its emergency response plans. In December 2008, the Senate Committee on Commerce, Science, and Transportation requested a study by the Government Accountability Office (GAO) examining TSA's efforts to ensure pipeline security. GAO's report, released in August 2010, focused on TSA's use of risk assessment and risk information in securing pipelines, actions the agency has taken to improve pipeline security under guidance in the 9/11 Commission Act of 2007 ( P.L. 110-53 ), and the agency's efforts to measure such security improvement efforts. Among other findings, GAO concluded that, although TSA had begun to implement a risk management approach to prioritize its pipeline security efforts, work remained to ensure that the highest risk pipeline systems would get the necessary scrutiny. GAO also concluded that TSA was missing opportunities under its CSR and CFI programs to better ensure that pipeline operators understand how they can enhance the security of their pipeline systems. TSA could also make better use of CSR and CFI recommendations for analyzing pipeline vulnerabilities and was not following up on these recommendations. GAO found that linking TSA's pipeline security performance measures and milestones to the goals and objectives in its national security strategy for pipeline systems could aid in achieving results within specific time frames and could facilitate more effective oversight and accountability. TSA concurred with all of GAO's recommendations for addressing the issues and has since been implementing them. One area related to pipeline safety and security not under either PHMSA's or TSA's primary jurisdiction is the siting approval of new gas pipelines, which is the responsibility of the Federal Energy Regulatory Commission (FERC). Companies building interstate natural gas pipelines must first obtain from FERC certificates of public convenience and necessity. (FERC does not oversee oil pipeline construction.) FERC must also approve the abandonment of gas facility use and services. These approvals may include safety and security provisions with respect to pipeline routing, safety standards, and other factors. As a practical matter, however, FERC has traditionally left these considerations to the other agencies. On September 14, 2001, FERC notified jurisdictional companies that it would "approve applications proposing the recovery of prudently incurred costs necessary to further safeguard the nation's energy systems and infrastructure" in response to the terror attacks of 9/11. FERC also committed to "expedite the processing on a priority basis of any application that would specifically recover such costs from wholesale customers." Companies could propose a surcharge over currently existing rates or some other cost recovery method. In FY2005, the commission processed security cost recovery requests from 14 oil pipelines and 3 natural gas pipelines. FERC's FY2006 annual report stated that "the Commission continues to give the highest priority to deciding any requests made for the recovery of extraordinary expenditures to safeguard the reliability and security of the Nation's energy transportation systems and energy supply infrastructure." FERC's subsequent annual reports do not mention pipeline security. In February 2003, FERC promulgated a new rule (RM02-4-000) to protect critical energy infrastructure information (CEII). The rule defines CEII as information that "must relate to critical infrastructure, be potentially useful to terrorists, and be exempt from disclosure under the Freedom of Information Act." According to the rule, critical infrastructure is "existing and proposed systems and assets, whether physical or virtual, the incapacity or destruction of which would negatively affect security, economic security, public health or safety, or any combination of those matters." CEII excludes "information that identifies the location of infrastructure." The rule also establishes procedures for the public to request and obtain such critical information, and applies both to proposed and existing infrastructure. On May 14, 2003, FERC handed down new rules (RM03-4) facilitating the restoration of pipelines after a terrorist attack. The rules allow owners of a damaged pipeline to use blanket certificate authority to immediately start rebuilding, regardless of project cost, even outside existing rights-of-way. Pipeline owners would still need to notify landowners and comply with environmental laws. Prior rules limited blanket authority to projects up to $17.5 million and 45-day advance notice. The National Transportation Safety Board (NTSB) is an independent federal agency charged with determining the probable cause of transportation accidents (including pipeline accidents), promoting transportation safety, and assisting accident victims and their families. The board's experts investigate significant accidents, develop factual records, and issue safety recommendations to prevent similar accidents from recurring. The NTSB has no statutory authority to regulate transportation, however, so its safety recommendations to industry or government agencies are not mandatory. Nonetheless, because of the board's strong reputation for thoroughness and objectivity, the average acceptance rate for its safety recommendations is 78%. The NTSB's "Most Wanted List" for 2013 called for enhanced pipeline safety through improved oversight of the pipeline industry. In August 2011, the NTSB issued preliminary findings and recommendations from its investigation of the San Bruno Pipeline accident. The investigation included testimony from pipeline company officials, government agency officials (PHMSA, state, and local), as well as testimony from other pipeline experts and stakeholders. In addition to specifics about the San Bruno incident, the hearing addressed more general pipeline issues, including public awareness initiatives, pipeline technology, and oversight of pipeline safety by federal and state regulators. The NTSB's findings were highly critical of the pipeline operator (PG&E) as well as both the state and federal pipeline safety regulators. The board concluded that "the multiple and recurring deficiencies in PG&E operational practices indicate a systemic problem" with respect to its pipeline safety program. The board further concluded that the pipeline safety regulator within the state of California, failed to detect the inadequacies in PG&E's integrity management program and that the Pipeline and Hazardous Materials Safety Administration integrity management inspection protocols need improvement. Because the Pipeline and Hazardous Materials Safety Administration has not incorporated the use of effective and meaningful metrics as part of its guidance for performance-based management pipeline safety programs, its oversight of state public utility commissions regulating gas transmission and hazardous liquid pipelines could be improved. In her opening statement about the San Bruno accident report, NTSB Chairman Hersman summarized the board's findings as "troubling revelations … about a company that exploited weaknesses in a lax system of oversight and government agencies that placed a blind trust in operators to the detriment of public safety." The NTSB's final accident report "concludes that PHMSA's enforcement program and its monitoring of state oversight programs have been weak and have resulted in the lack of effective Federal oversight and state oversight." The NTSB issued 39 recommendations stemming from its San Bruno accident investigation, including 20 recommendations to the Secretary of Transportation and PHMSA. These recommendations included: Conducting audits to assess the effectiveness of PHMSA's oversight of performance-based pipeline safety programs and state pipeline safety program certification, Requiring pipeline operators to provide system-specific information to the emergency response agencies of the communities in which pipelines are located, Requiring that automatic shutoff valves or remote control valves be installed in high consequence areas and in class 3 and 4 locations, Requiring that all natural gas transmission pipelines constructed before 1970 be subjected to a hydrostatic pressure test that incorporates a spike test, Requiring that all natural gas transmission pipelines be configured so as to accommodate internal inspection tools, with priority given to older pipelines, and Revising PHMSA's integrity management protocol to incorporate meaningful metrics, set performance goals for pipeline operators, and require operators to regularly assess the effectiveness of their programs using meaningful metrics. More detailed discussion of the accident findings and the NTSB's recommendations are publicly available in the final accident report. The 112 th Congress reauthorized the federal pipeline safety program and enacted a number of new pipeline safety provisions. In the context of its continuing oversight of federal pipeline safety and security activities, and in addition to the findings of the NTSB's San Bruno investigation, the 113 th Congress may focus on certain key issues that have drawn particular attention in recent policy deliberations. The U.S. pipeline safety program employs a combination of federal and state staff to implement and enforce federal pipeline safety regulations. To date, PHMSA has relied heavily on state agencies for pipeline inspections, with only approximately 25% of inspectors in 2012 being federal employees. Some in Congress have criticized inspector staffing at PHMSA as being insufficient to adequately cover pipelines under the agency's jurisdiction, notwithstanding state agency cooperation. In considering PHMSA staff levels, three distinct issues are the overall number of federal inspectors, the agency's historical use of staff funding, and the staffing of pipeline safety inspectors among the states. The President's FY2013 budget request listed PHMSA's estimated staffing in 2013 as 290 full-time equivalent employees (FTEs), up from 206 funded staff in 2010. By contrast, as Figure 1 shows, the addition of 10 inspection and enforcement staff under P.L. 112-90 amounts to only a modest continuation of staff growth (of mostly inspectors) begun over 10 years ago in response to the 1999 Bellingham accident, the terrorist attacks of 9/11, implementation of PHMSA's integrity management regulations, and the expansion of U.S. pipeline networks. Whether an increase of 10 PHMSA pipeline safety staff by 2014, in addition to filling all previously authorized positions, would be the optimal number remains to be seen. Under the President's FY2013 budget request for 290 FTEs, most of the staff additions would presumably be inspectors. While such an increase would represent a dramatic increase in the number of federal pipeline safety staff available, filling all these positions and retaining all these employees might pose practical challenges, further discussed below. One issue that has complicated the PHMSA staffing debate is a long-term pattern of understaffing in the agency's pipeline safety program. At least as far back as 1994, PHMSA's (or RSPA's) actual staffing for pipeline safety as reported in its annual budgets requests has generally fallen well short of the level of staffing anticipated in the prior year's budget request. For example, the president's FY2011 budget request for pipeline safety reports 175 actual employees in 2009. However, the FY2010 budget request stated an expectation of 191 employees ("estimated") for 2009. On this basis, from 2001 through 2011, the agency reported a staffing shortfall averaging approximately 23 employees every year. (Note that, due to this annual shortfall, the FTEs reported in Figure 1 are generally higher than the number actually employed by PHMSA.) Furthermore, most of this staffing shortage has been among inspectors. In testimony before Congress in September 2010, DOT officials reported that PHMSA employed only 110 of 137 inspectors for which it was funded—a shortfall of 27 inspectors. In March 2011, agency officials reported 126 inspectors employed. However, as of the end of FY2012, PHMSA reported 135 inspection and enforcement staff out of 203 total staff at the agency—nearly a full complement of funded inspector FTE's. PHMSA officials offer a number of reasons for the historical shortfall in inspector staffing. These reasons include a scarcity of qualified inspector job applicants, delays in the federal hiring process during which applicants accept other job offers, and PHMSA inspector turnover—especially to pipeline companies which often hire away PHMSA inspectors for their corporate safety programs. Because PHMSA pipeline inspectors are highly trained by the agency (typically for two years before being allowed to operate independently) they are highly valued by pipeline operators seeking to comply with federal safety regulations. The agency states that it aggressively recruits a qualified and diverse workforce but is challenged by industry recruitment of the same candidates, especially with the rapid development of unconventional oil and gas shales, for which the skill sets PHMSA seeks (primarily engineers) are in high demand. PHMSA officials also cite structural issues associated with the agency's appropriations, which can require the use of FTE salary funding to meet other obligations. P.L. 112-90 requires the DOT to report on PHMSA's pipeline staffing shortfalls, including the reasons for such shortfalls, and actions the agency is taking to fill the positions (§31(a)). This report has not yet been completed. Because state agencies would continue to account for the majority of U.S. pipeline safety inspectors under P.L. 112-90 , another important consideration is how the number of state inspectors might be affected by budget shortfalls and possible agency funding cuts faced by many states due to the recent U.S. economic recession. Under P.L. 109-468 (§2(c)), PHMSA is authorized to award grants reimbursing state governments for up to 80% of the cost of the staff, personnel, and activities required to support the federal pipeline safety program. According to DOT, these grant are essential to "enable the states to continue their current programs and hire additional inspectors ... [and] assure that states do not turn over responsibility for distribution pipeline systems to the Federal inspectors," among other reasons. According to PHMSA, in 2012, the average state grant was approximately 74% of state program expenditures during 2011. Notwithstanding federal pipeline safety grants, inspector staffing at state pipeline safety agencies has been negatively affected by state budget deficits. According to a 2010 letter from the National Association of Pipeline Safety Representatives, pipeline safety employees in 17 states had already been furloughed without pay for up to three weeks at that time. PHMSA officials have also reportedly cited unfilled positions among state pipeline safety agencies as eroding the state pipeline safety workforce. Senior DOT officials consider financial problems among state pipeline safety agencies a matter of "great concern" and have granted to states waivers from certain regulatory financial requirements to increase their access to federal grant money. Nonetheless, the future availability of state pipeline safety inspectors remains uncertain. In particular, the possibility that some states may choose to end their roles as agents for the federal pipeline safety program—or that states may lose federal pipeline safety program certification for performance reasons—and thereby shift a greater burden for pipeline inspections back to the federal government, may warrant continued attention from Congress. Similar to its concerns about the adequacy of federal pipeline safety staffing, Congress has long been concerned about staff resources available to implement the nation's pipeline security program. For example, as one Member remarked in 2005, "aviation security has received 90% of TSA's funds and virtually all of its attention. There is simply not enough being done to address ... pipeline security." At a congressional field hearing in April 2010, another Member expressed concern that TSA's pipeline division did not have sufficient staff to carry out a federal pipeline security program on a national scale. At its current staffing level of 13 FTEs, TSA's Pipelines Security Division has limited field presence. In conducting a pipeline corporate security review, for example, TSA typically sends one to three staff to hold a three- to four-hour interview with the operator's security representatives, followed by a visit to only one or two of the operator's pipeline assets. TSA's plan to focus security inspections on the largest pipeline and distribution system operators tries to make the best use of its limited resources. However, there are questions as to whether the agency's CSRs as currently structured allow for rigorous security plan verification and a credible threat of enforcement. The limited number of CSRs the agency can complete in a year is a particular concern. According to a 2009 GAO report, "TSA's pipeline division stated that they would like more staff in order to conduct its corporate security reviews more frequently," and "analyzing secondary or indirect consequences of a terrorist attack and developing strategic risk objectives required much time and effort." Since both PHMSA and TSA have played important roles in the federal pipeline security program, with TSA the designated lead agency since 2002, Congress has raised questions about the appropriate responsibilities and division of pipeline security authority between them. According to TSA, the two agencies have established "a 24/7 communication and coordination relationship in regards to all pipeline security and safety incidents." Nonetheless, given the limited staff in TSA's pipeline security division, and the comparatively large pipeline safety staff (especially inspectors) in PHMSA, legislators have considered whether the TSA-PHMSA pipeline security relationship optimally aligns staff resources across both agencies to fulfill the nation's overall pipeline safety and security mission. The Transportation Security Administration Authorization Act of 2011 ( H.R. 3011 ) in the 112 th Congress would have mandated a study regarding the relative roles and responsibilities of the Department of Homeland Security and the Department of Transportation with respect to pipeline security (§325). In the 2010 San Bruno pipeline accident, natural gas continued to flow from the pipeline for nearly two hours after the initial explosion—fueling the intense fire, hindering emergency response, and increasing fire damage. The long duration of flowing gas was due to delays in the closing of manually operated valves by the pipeline operator, and may have been exacerbated by inadequate employee training in valve closure procedures. Consequently, some advocates have called for widespread installation of remotely or automatically controlled valves in natural gas and hazardous liquids transmission pipelines. As noted earlier, the NTSB has recommended the installation of such valves in all "high consequence" and relatively more populated areas. P.L. 112-90 requires automatic or remote-controlled shut-off valves, or equivalent technology, where economically, technically, and operationally feasible on transmission pipeline facilities constructed or entirely replaced (§4(1)). The act also requires a study on the ability of transmission pipeline operators to respond to a hazardous liquid or natural gas release from pipelines located in high-consequence areas (§4(2)). The possibility of requiring remotely controlled or automatic shutoff valves for natural gas pipelines is not new. Congress previously considered such requirements in reaction to a 1994 natural gas pipeline fire in Edison, NJ, similar to the San Bruno accident, in which it took the pipeline operator 2½ hours to close its manually operated valves. In 1995, during the 104 th Congress, H.R. 432 and S. 162 would have required the installation of remotely or automatically controlled valves in natural gas pipelines "wherever technically and economically feasible" (§11). Under the Accountable Pipeline Safety and Partnership Act of 1996 ( P.L. 104-304 ), Congress mandated a DOT assessment of remotely controlled valves (RCVs) on interstate natural gas pipelines, and empowered the agency to require such valves if appropriate based upon its findings (§4(h)). The DOT's assessment, released in 1999, reported that installation of RCVs would provide only "a small benefit from reduced casualties because virtually all casualties from a rupture occur before an RVC could be activated." Moreover, the DOT reported that it lacked data to compare pipeline fire property damage with and without RCVs. Nonetheless, the DOT study advocated the deployment of RCVs, at least in some gas pipeline locations. We have found that RCVs are effective and technically feasible, and can reduce risk, but are not economically feasible. We have also found that there may be a public perception that RCVs will improve safety and reduce the risk from a ruptured gas pipeline. We believe there is a role for RCVs in reducing the risk from certain ruptured pipelines and thereby minimizing the consequences of certain gas pipeline ruptures.... Any fire would be of greater intensity and would have greater potential for damaging surrounding infrastructure if it is constantly replenished with gas. The degree of disruption in heavily populated and commercial areas would be in direct proportion to the duration of the fire. Although we lack data enabling us to quantify these potential consequences, we believe them to be significant nonetheless, and we believe RCVs may provide the best means for addressing them. Notwithstanding this conclusion, the DOT has not mandated the use of RCVs in natural gas transmission pipelines. The natural gas pipeline industry historically has objected to federal mandates to install remotely controlled or automated valves. Although pipeline operators already employ such valves under specific circumstances, such as in hard-to-access locations or at compressor stations, they have opposed the installation of such valves more widely throughout their pipeline systems on the grounds that they are usually not cost-effective. They also argue that such valves do not always function properly, would not prevent natural gas pipeline explosions (which cause most fatalities), and are susceptible to false alarms, needlessly shutting down pipelines and disrupting critical fuel supplies. Automatic valves, in particular, may be susceptible to unnecessary closure, potentially disrupting critical flows of natural gas to distribution utilities and—as a result—increasing safety risks associated with residential furnace relighting, among other concerns. Some operators also claim higher maintenance costs for valves that are not manually operated. The use of remotely controlled or automatic valves has also been a long-standing consideration for hazardous liquid pipeline systems. The National Transportation Safety Board (NTSB) began to address the need for rapid shutdown of failed hazardous liquid pipelines using remotely controlled or automatic valves in the 1970s. In 1987, the NTSB recommended that the DOT "require the installation of remote-operated valves on pipelines that transport hazardous liquids, and base the spacing of remote-operated valves on the population at risk." The Pipeline Safety Act of 1992 ( P.L. 102-508 ) required the DOT to assess the effectiveness of "emergency flow restricting devices (including remotely controlled valves and check valves)" on hazardous liquid pipelines, and required the DOT to "issue regulations prescribing the circumstances under which operators of hazardous liquid pipeline facilities must use emergency flow restricting devices" (§212). Notwithstanding this congressional mandate, the NTSB found the DOT's efforts to promote the use of such devices inadequate. In 1996, the NTSB stated that the DOT "has performed studies, conducted research, and sought industry input, but has failed to carry through and develop requirements for leak detection and rapid shutdown of failed pipelines." In its integrity management regulations, issued in December 2000, the DOT opted to leave the decision whether to install emergency flow restricting devices up to pipeline operators. Cost would be a major factor in a broad national program to retrofit manual valves with remotely controlled or automatic valves. For example, in the interstate natural gas pipeline network, valves are typically installed every 5 to 20 miles. Assuming a 10-mile separation between valves, the nation's 306,000 mile gas transmission system contains over 30,000 valves. The spacing of valves can be much closer together in particular pipeline systems, however, such as systems located in more populated areas. In October 2010 PG&E reported 300 valves that could be candidates for automation in approximately 565 miles of high-consequence area pipelines in its California system. The potential costs of retrofitting manual valves vary greatly by pipeline and specific location. A 1998 Southwest Research Institute report estimated a cost of $32,000 (approximately $40,000 in 2010 dollars) per valve for retrofitting 30-inch pipeline valves to make them remotely controlled. The DOT's 1999 study reported an average cost of $83,000 (approximately $100,000 in 2010 dollars) for Texas Eastern Transmission Corporation (TETCO) to retrofit 90 existing valves in a large part of its pipeline system. PG&E estimates the average cost of retrofitting an automatic or remotely controlled valve on an existing large diameter pipeline at approximately $750,000, but ranging as low as $100,000 and as high as $1.5 million. Applying, for illustration, a $100,000 cost to some 30,000 valves yields $3.0 billion in capital investment required, not counting any higher future maintenance expenses. The American Gas Association reportedly has estimated the cost of replacing manual valves with automatic valves nationwide at $12 billion. Even if such valve retrofits were required only in heavily populated areas, industry costs could still be hundreds of millions of dollars—a significant cost to the pipeline industry and therefore likely to increase rates for pipeline transportation of natural gas. To the extent that some pipeline systems, like PG&E's, contain more valves then others per mile of pipe, they could be disproportionately affected. Gas pipeline service interruptions would also be an issue as specific lines could be repeatedly taken out of service during the valve retrofit process. The hazardous liquids pipeline industry could face capital costs and service interruptions of the same magnitude if required to do a widespread valve retrofit on existing lines. Additional right-of-way costs, environmental impacts, and construction accidents associated with the valve replacements could also be a consideration. For new pipelines, the incremental costs of installing remotely controlled or automatic valves instead of manual valves would be lower than in the retrofit case, but could still increase future pipeline costs. In October 2012, Oak Ridge National Laboratory released a safety study of remotely controlled and automatic pipeline shutoff valves which the laboratory completed for the DOT in response to the requirements in P.L. 112-90 and related NTSB recommendations. Among other findings, the study concluded that such valves can be effective for mitigating potential consequences resulting from a natural gas pipeline release ( and subsequent fire). However, because natural gas pipeline fires can cause damage so quickly, such mitigation requires that the leak is detected and the proper valves close d completely so the damaged pipeline segment can be isolated and firefighting activities can begin within 10 minutes of the initial fire . Fire hydrants must also be accessible in the vicinity of the leak within the potentially severe fire damage radius. For hazardous liquid pipelines , the study similarly concluded that installing such valves can be effective for mitigating potential fire damage resulting from a " guillotine-type " break and subsequent fire if the leak is detected and the damaged pipeline segment isolated within 15 minutes after the break. The report further concluded that "a dding automatic closure capability to block valves in newly constructed or fully replaced hazardous liquid pipelines can also be an effective strategy for mitigating potential socioeconomic and environmental damage resulting from a release that does not ignite ." Thus the Oak Ridge study concludes that while remotely controlled and automatic pipeline shutoff valves can improve safety, they can do so only in conjunction with rapid and well-coordinated emergency response. To effectively reduce the impact of pipeline accidents, installing remotely controlled or automatic valves may require associated investments in supervisory control and data acquisition (SCADA) systems along with other operational changes to improve leak detection. As one pipeline expert has stated, The pipeline operator's focus on keeping the pipeline system operating and the lack of remotely-operable valves are the primary factors that control the quantity of product released after a rupture or leak. Even with remote control valves this relationship will not change unless the pipeline is equipped with a reliable leak detection subsystem that works with the SCADA system and [unless] those who control pipeline operations are trained for and dedicated to minimizing product release (safety and environmental mindset) rather than trained for and dedicated to keeping the system operating (economic mindset). In its report about a 1996 pipeline accident in Tiger Pass, LA, the NTSB similarly concluded that the operator's "delay in recognition ... that it had experienced a pipeline rupture at Tiger Pass was due to the piping system's dynamics during the rupture and to the design of the company's SCADA system." Estimates of converting manual valves may, therefore, need to account for the costs of SCADA changes, leak detection systems, and associated training. These costs may also include significant reliability and security components, since increasing reliance upon new or expanded SCADA systems may also expose pipeline systems to greater risk from operating software failure or cyberterrorism. Consistent with the concerns above, P.L. 112-90 requires a DOT analysis of the technical limitations of leak detection systems as well as the feasibility of establishing standards for such systems (§8(a)). After congressional review of this analysis, the act authorizes the DOT to issue new leak detection standards if "practicable" (§8(b)). The agency released its leak detection study in December 2012. However, the study does not reach specific conclusions or recommendations; it only provides data and reports on technical and cost aspects of leak detection systems. The DOT has not stated whether or how it intends to develop new leak detection standards based on the findings of this report. Some stakeholders have argued that public perceptions of improved pipeline safety and control are the highest perceived benefit of remotely controlled or automatic valves. Although the value of these perceptions is hard to quantify (and, therefore, not typically reflected in cost-effectiveness studies), the importance of public perception and community acceptance of pipeline infrastructure can be a significant consideration in pipeline design, expansion, and regulation. In 2001, a representative of the National Association of Regulatory Utility Commissioners testified before Congress that "the main impediment to siting energy infrastructure is the great difficulty getting public acceptance for needed facilities." Likewise, the National Commission on Energy Policy stated in its 2006 report that energy-facility siting is "a major cross-cutting challenge for U.S. energy policy," largely because of public opposition to new energy projects and other major infrastructure. One result of public concern about pipeline safety has been to prevent new pipeline siting in certain localities, and to increase pipeline development time and costs in others. In a 2006 report, for example, the Energy Information Administration (EIA) stated that "several major projects in the Northeast, although approved by FERC, have been held up because of public opposition or non-FERC regulatory interventions." In the specific case of the Millennium Pipeline, proposed in 1997 to transport Canadian natural gas to metropolitan New York, developers did not receive final construction approval for nine years, largely because of community resistance to the pipeline route. Numerous other proposed pipelines, especially in populated areas, have faced similar public acceptance barriers. Controversy surrounding the proposed Keystone XL pipeline project, discussed below, is only the most recent example of how the development of major pipeline projects may be influenced by public opinion. Even where there is federal siting authority, as is the case for interstate natural gas pipelines, community stakeholders retain many statutory and regulatory avenues to affect energy infrastructure decisions. Consequently, the public perception value of remotely controlled or automatic pipeline valves may need to be accounted for, especially with respect to its implications for general pipeline development and operations. While the San Bruno, CA, and Edison, NJ, gas pipeline accidents focused attention on automatic valves in large diameter transmission pipelines, this technology also applies to smaller gas distribution lines serving individual buildings. In natural gas distribution systems, "excess flow" valves are safety devices which can automatically shut off pipeline flow in the event of a leak. In this way, the valves can minimize the release of natural gas during a pipeline accident, thereby reducing the likelihood or severity of a fire or explosion. PHMSA issued new standards requiring the installation of excess flow valves on new gas distribution lines in single-family homes as part of its final rule for natural gas distribution integrity management programs on December 3, 2009. P.L. 112-90 authorizes regulation, "if appropriate," requiring excess flow valves for new or entirely replaced distribution branch pipelines, as well as for service lines to multi-family residential buildings and small commercial facilities (§22). Although smaller in scale, automatic valves in distribution lines raise the same cost and safety tradeoffs as automatic valves in large diameter pipelines. The adequacy of the PHMSA's enforcement strategy has been an ongoing focus of congressional oversight. Provisions in the Pipeline Safety Improvement Act of 2002 ( P.L. 107-355 ) put added scrutiny on the effectiveness of the agency's enforcement strategy and assessment of civil penalties (§8). In April 2006, PHMSA officials testified before Congress that the agency had institutionalized a "tough-but-fair" approach to enforcement, "imposing and collecting larger penalties, while guiding pipeline operators to enhance higher performance." According to the agency, $4.6 million in proposed civil penalties in 2005 was three times greater than penalties proposed in 2003, the first year higher penalties could be imposed under P.L. 107-355 (§8(a)). Proposed penalties totaled $4.5 million in 2010. Proposed penalties in 2011 totaled $3.7 million, with an average penalty of approximately $65,500. P.L. 112-90 increases the maximum civil penalty from $1.0 million to $2.0 million for a related series of major consequence violations, such as those causing serious injuries, deaths, or environmental harm (§2(a)). Although PHMSA's imposition of pipeline safety penalties increased quickly after P.L. 107-355 was enacted, the role of federal penalties in promoting greater operator compliance with pipeline safety regulations is not always clear. To understand the potential influence of penalties on operators, it can be helpful to put PHMSA fines in the context of the overall costs to operators of a pipeline release. Pipeline companies, seeking to generate financial returns for their owners, are motivated to operate their pipelines safely (and securely) for a range of financial reasons. While these financial considerations certainly include possible PHMSA penalties, the costs of a pipeline accident may also include fines for violations of environmental laws (federal and state), the costs of spill response and remediation, penalties from civil litigation, the value of lost product, costs for pipeline repairs and modifications (e.g., to resolve federal regulatory interventions), and other costs. Depending upon the severity of a pipeline release, these other costs may far exceed pipeline safety fines, as illustrated by the following examples. Kinder Morgan. In April 2006 Kinder Morgan Energy Partners entered into a consent agreement with PHMSA to resolve a corrective action order stemming from three hazardous liquid spills in 2004 and 2005 from the company's Pacific Operations pipeline unit. According to the company, the agreement would require Kinder Morgan to spend approximately $26 million on additional integrity management activities, among other requirements. Under a 2007 settlement agreement with the U.S. Justice Department and the State of California, Kinder Morgan also agreed to pay approximately $3.8 million in civil penalties for violations of environmental laws and approximately $1.5 million related to response and remediation associated with these spills. The spills collectively released approximately 200,000 gallons of diesel fuel, jet fuel, and gasoline. This volume of fuel would have a product value on the order of $0.5 million based on typical wholesale market prices at the time of the spills. Plains All American. In 2010, Plains All American Pipeline agreed to spend approximately $41 million to upgrade 10,420 miles of U.S. oil pipeline to resolve Clean Water Act (CWA) violations for 10 crude oil spills in Texas, Louisiana, Oklahoma, and Kansas from 2004 through 2007. Among these upgrades, the company agreed to spend at least $6 million on equipment and materials for internal corrosion control and surveys on at least 2,400 miles of pipeline. The company was required to pay a $3.25 million civil penalty associated with the CWA violations. Enbridge. Enbridge Energy Partners estimated expenses of $475 million to clean up two oil spills on its Lakehead pipeline system in 2010, including the spill in Marshall, MI. This estimate did not include fines or penalties which might also be imposed in connection with the spills. The pipeline operator also reported $16 million in lost revenue from pipeline shipments it could not redirect to other lines while the Lakehead system was out of service. The full impact of these expenditures on the company's business is unclear, however, as Enbridge stated in a subsequent quarterly report that "substantially all of the costs" related to its 2010 oil pipeline spills "will ultimately be recoverable under our existing insurance policies." Olympic Pipe Line. After the 1999 Bellingham pipeline accident, Olympic Pipe Line Company and associated defendants reportedly agreed to pay a $75 million settlement to the families of two children killed in the accident. El Paso . In 2002, El Paso Corporation settled wrongful death and personal injury lawsuits stemming from the 2000 natural gas pipeline explosion near Carlsbad, NM, which killed 12 campers. Although the terms of those settlements were not disclosed, two additional lawsuits sought a total of $171 million in damages. However, El Paso's June 2003 quarterly financial report stated that "our costs and legal exposure ... will be fully covered by insurance." The threat of safety enforcement penalties is often considered one of the primary tools available to pipeline safety regulators to ensure operator compliance with safety requirements. However, as the examples above suggest, pipeline safety fines, even if they were raised to $2.0 million for major violations, could still account for only a limited share of the financial impact of future pipeline releases. So, it is not clear how large an effect increasing PHMSA's authorized fines, alone, might have on operator compliance. On the other hand, the authority of PHMSA to influence pipeline operations directly—for example, through corrective action orders or shutdown orders in the event of a pipeline failure—can have a large financial impact on a pipeline operator in terms of capital expenditures or lost revenues. Indeed, some have suggested that this operational authority is the most influential component of PHMSA's pipeline safety enforcement strategy. Therefore, as Congress continues its oversight of PHMSA's enforcement activities, and as it considers new proposals to increase compliance with federal pipeline safety regulations, Congress may evaluate how PHMSA's authorities to set standards, assess penalties, and directly affect pipeline operations may reinforce one another to improve U.S. pipeline safety. Canadian oil exports to the United States have been increasing rapidly, primarily due to growing output from the oil sands in Western Canada. Oil sands (also referred to as tar sands) are a mixture of clay, sand, water, and heavy black viscous oil known as bitumen. Oil sands are processed to extract the bitumen, which can then be upgraded into a product that is suitable for pipeline transport. Canada's oil sands production can be exported as either a light, upgraded synthetic crude ("syncrude") or a heavy crude oil that is a blend of bitumen diluted with lighter hydrocarbons ("dilbit") to ease transport. The bulk of oil sands' supply growth is expected to be in the form of the latter. Five major pipelines have been constructed in recent years to link the oil sands region to markets in the United States. A sixth pipeline, Keystone XL, was rejected in January 2012 by the U.S. State Department, although the developer plans to reapply for a federal permit with a modified route. If ultimately approved and constructed, Keystone XL would bring Canada's total U.S. petroleum export capacity to over 4.1 million barrels per day, enough capacity to carry over a third of current U.S. petroleum imports. This expansion of petroleum pipelines from Canada has generated considerable controversy in the United States. One specific area of concern has been perceived new risks to pipeline integrity of transporting heavy Canadian crudes. Some opponents of the new Canadian oil pipelines, notably the Natural Resources Defense Council (NRDC), have argued that these pipelines could be more likely to fail and cause environmental damage than other crude oil pipelines because the bitumen mixtures they would carry are "significantly more corrosive to pipeline systems than conventional crude," among other reasons. NRDC has called for a moratorium on approving new oil pipelines from oil sands regions, and a review of existing pipeline permits, until these safety concerns are researched further and addressed in federal environmental and safety studies. Canadian officials and other stakeholders have rejected these arguments, however, citing factual inaccuracies and a flawed methodology in the NRDC analysis, which compares pipeline spill rates in Canada to those in the United States. Some in Congress have called for a review of PHMSA regulations to determine whether new regulations for Canadian heavy crudes are needed to account for any unique properties they may have. Accordingly, P.L. 112-90 requires PHMSA to review whether current regulations are sufficient to regulate pipelines transmitting "diluted bitumen," and analyze whether such oil presents an increased risk of release (§16). This study, which is being performed by the Transportation Research Board of the National Academy of Sciences, has not yet been completed. As noted earlier in this report, federal pipeline security activities to date have relied upon voluntary industry compliance with PHMSA security guidance and TSA security best practices. By initiating this voluntary approach, PHMSA sought to speed adoption of security measures by industry and avoid the publication of sensitive security information (e.g., critical asset lists) that would normally be required in public rulemaking. Provisions in P.L. 109-468 require the DOT Inspector General to "address the adequacy of security standards for gas and oil pipelines" (§23(b)(4)). P.L. 110-53 similarly directs TSA to promulgate pipeline security regulations and carry out necessary inspection and enforcement—if the agency determines that regulations are appropriate (§1557(d)). Addressing this issue, the 2008 IG report states that TSA's current security guidance is not mandatory and remains unenforceable unless a regulation is issued to require industry compliance.... PHMSA and TSA will need to conduct covert tests of pipeline systems' vulnerabilities to assess the current guidance as well as the operators' compliance. Although TSA's FY2005 budget justification stated that the agency would "issue regulations where appropriate to improve the security of the [non-aviation transportation] modes," the agency has not done so for pipelines, and it is not currently working on such regulations. The pipeline industry has long expressed concern that new security regulations and related requirements may be "redundant" and "may not be necessary to increase pipeline security." The PHMSA Administrator, in 2007, similarly testified that enhancing security "does not necessarily mean that we must impose regulatory requirements." TSA officials have questioned the IG assertions regarding pipeline security regulations, particularly the IG's call for covert testing of pipeline operator security measures. They have argued that the agency is complying with the letter of P.L. 110-53 and that its pipeline operator security reviews are more than paper reviews. In accordance with P.L. 110-53 (§1557 (b)), TSA has been implementing a multi-year program of pipeline system inspections, including documentation of findings and follow up reviews. Because the TSA believes the most critical U.S. pipeline systems generally meet or exceed industry security guidance, the agency believes it achieves better security with voluntary guidelines, and maintains a more cooperative and collaborative relationship with its industry partners as well. Although the TSA believes its voluntary approach to pipeline security is adequate, Canadian pipeline regulators have come to a different conclusion. In 2010 the National Energy Board of Canada mandated security regulations for jurisdictional Canadian petroleum and natural gas pipelines, some of which are cross-border pipelines serving export markets in the United States. A number of companies operate pipelines in both countries. In announcing these new regulations, the board stated that it had considered adopting the existing security standards "as guidance" rather than an enforceable standard, but "taking into consideration the critical importance of energy infrastructure protection," the board decided to adopt the standard into the regulations. Establishing pipeline security regulations in Canada is not completely analogous to doing so in the United States, as the Canadian pipeline system is much smaller and operated by far fewer companies than the U.S. system. Nonetheless, Canada's choice to regulate pipeline security may raise questions as to why the United States has not. In its oversight of potential pipeline security regulations, Congress may evaluate the effectiveness of the current voluntary pipeline security standards based on findings from the TSA's CSR reviews, pipeline inspections, DHS cybersecurity alerts, and any future DOT Inspector General reports. In addition to the issues mentioned above, Congress may consider several issues related to proposed legislation or otherwise raised by pipeline stakeholders. On January 3, 2011, as a response to its initial investigation of the San Bruno pipeline accident, the NTSB issued urgent new safety recommendations "to address record-keeping problems that could create conditions in which a pipeline is operated at a higher pressure than the pipe was built to withstand." The NTSB issued these recommendations after it had concluded that there were significant errors in the records characterizing the San Bruno pipeline, and that "other pipeline operators may have discrepancies in their records that could potentially compromise the safe operation of pipelines throughout the United States." PHMSA officials have also testified that some operators may not be collecting all the pipeline system data necessary to fully evaluate safety and compliance with federal regulations. In 2006, questions were raised about the accuracy of pipeline location data provided by operators and maintained by PHMSA in the National Pipeline Mapping System (NPMS). At the time, agency officials reportedly acknowledged limitations in NPMS accuracy, but did not publicly discuss plans to address them. P.L. 112-90 authorizes PHMSA to collect additional geospatial and technical data from pipeline operators to achieve the purposes of the NPMS (§11(a) and §12). Congress may review whether these or other statutory measures are sufficient to verify that pipeline operator information is complete and correct, particularly for older parts of the pipeline network. Some proposals would increase requirements for pipeline operators to conduct internal inspections of transmission pipelines using "smart pigs," robotic devices sent through pipelines to take physical measurements continuously along the way. In its San Bruno accident investigation report, the NTSB has recommended that all natural gas transmission pipelines be configured to accommodate such internal inspection tools. However, experts note that there are different pipeline inspection techniques with overlapping capabilities and different strengths. While an effective technology for detecting corrosion in many applications, smart pigs have limitations as a general tool for assessing the integrity of pipelines. For example, although smart pigs may be good corrosion detectors, they are still a developing technology and may be somewhat less effective in detecting other types of pipeline anomalies (e.g., cracks). Operators also maintain that smart pigging may be less useful for predicting future problems with pipeline integrity than other federally approved maintenance techniques like "direct assessment" (49 C.F.R. 192.903) wherein pipelines are examined externally based on risk data and other factors. Furthermore, because many older pipelines contain sharp turns and other obstructions due to historical construction techniques, they cannot accommodate smart pig devices without significant and costly pipeline modifications to make them more "piggable." Consequently, some industry stakeholders caution against unrealistic expectations for the capabilities of smart pigs as a stand-alone pipeline inspection tool. As an alternative to internal inspection where such inspection cannot currently be performed, some policy makers have called for mandatory hydrostatic testing of pipelines to verify their integrity. Hydrostatic testing involves filling a pipeline with water under pressure greater than the anticipated operating pressure to determine if it is structurally sound and does not leak. Such testing is common for new pipelines that have not yet entered service. Because it uses only water, hydrostatic testing poses relatively little direct risk to the public or the environment, but when used for operating pipelines it necessarily interrupts pipeline service. Injecting water into pipelines is also costly, and may create safety problems since water is corrosive and may be difficult to remove completely from a pipeline once testing is completed. Nonetheless, as noted above, the NTSB has recommended that all natural gas transmission pipelines constructed before 1970 be subjected to hydrostatic pressure tests. P.L. 112-90 requires verification of maximum allowable operating pressure for all natural gas transmission pipelines "as expeditiously as economically feasible" (§23(a)). The act also authorizes regulations for pressure verification that "shall consider … pressure testing; and ... other alternative methods, including in-line inspections" (§23(a)). As Congress examines any new federal requirements for pipeline inspection, it may consider smart pig devices and hydrostatic testing as only two techniques in a portfolio of maintenance practices operators may need to employ to ensure their pipelines are physically sound. Federal regulations require pipeline operators to prepare emergency response plans for pipeline spills and to make those plans available for inspection by PHMSA and local emergency response agencies (49 C.F.R. 192.605). Some stakeholders have proposed that these plans also be made available to the public to allow for additional review of their adequacy and to provide better risk and response information to people living near pipelines. Operators reportedly have resisted such disclosures on the grounds that their emergency response plans contain confidential customer and employee information. They also raise concerns that the plans contain security-sensitive information about pipeline vulnerabilities and spill scenarios which could be useful to terrorists. P.L. 112-90 requires PHMSA to collect and maintain copies of pipeline emergency plans for public availability excluding any proprietary or security-sensitive information (§6(a)). As oversight of this issue continues, Congress may consider the tradeoffs between public awareness and pipeline security in a general operating environment where both safety and security hazards may be significant. The 2011 oil spill into the Yellowstone River near Laurel, MT, appears to have been the result of the buried oil pipeline becoming exposed due to scouring of the river bottom during unusually heavy flooding. Prior to the flooding, a depth-of-cover survey by the operator verified that the pipeline was at least five feet below the riverbed, exceeding a four-foot minimum cover requirement in PHMSA regulations. Because the four-foot requirement appears to have been insufficient to prevent riverbed pipeline exposure in this case, some policy makers have called for a review of pipeline river crossings and associated safety requirements nationwide. P.L. 112-90 mandates a review of the adequacy of PHMSA regulations with respect to pipelines that cross inland bodies of water at least 100 feet wide and, based on the review's findings, requires PHMSA to develop legislative recommendations for changing existing regulations (§28(a)). The agency has not yet released this study. Both government and industry have taken numerous steps to improve pipeline safety and security over the last 10 years. While stakeholders across the board agree that federal pipeline safety programs have been on the right track, major pipeline incidents since 2010 suggest there continues to be significant room for improvement. Likewise, the threat of physical and cyberattack on U.S. pipeline infrastructure remains a concern. The NTSB has identified improvement of federal pipeline safety oversight as a "top ten" priority for 2013. The leading pipeline industry associations have concurred. The American Gas Association has expressed support for these NTSB recommendations, stating that "pipeline safety and integrity is the top priority for the natural gas industry." The Interstate Natural Gas Association of America (INGAA) has stated that "INGAA members are addressing all of the issues that the NTSB has outlined ... and more." The Association of Oil Pipe Lines has also welcomed the NTSB's focus on pipeline safety, stating that "operators are hard at work on safety improvements suggested by NTSB, PHMSA and their own initiatives." Whether the renewed efforts by industry, combined with additional oversight by federal agencies, will further enhance the safety and security of U.S. pipelines remains to be seen. As Congress oversees the federal pipeline safety program and the federal role in pipeline security, key issues of focus may be pipeline agency staff resources, automatic pipeline shutoff valves, penalties for safety violations, safety regulations for oil sands crudes, and the possible need for pipeline security regulations, among other concerns. In addition to these specific issues, Congress may assess how the various elements of U.S. pipeline safety and security activity fit together in the nation's overall strategy to protect transportation infrastructure. Pipeline safety and security necessarily involve many groups: federal agencies, oil and gas pipeline associations, large and small pipeline operators, and local communities. Reviewing how these groups work together to achieve common goals could be an oversight challenge for Congress.
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Nearly half a million miles of pipeline transporting natural gas, oil, and other hazardous liquids crisscross the United States. While an efficient and fundamentally safe means of transport, many pipelines carry materials with the potential to cause public injury and environmental damage. The nation's pipeline networks are also widespread and vulnerable to accidents and terrorist attack. Recent pipeline accidents in Marshall, MI, San Bruno, CA, Allentown, PA, and Laurel, MT, have heightened congressional concern about pipeline risks and drawn criticism from the National Transportation Safety Board (NTSB). Both government and industry have taken numerous steps to improve pipeline safety and security over the last 10 years. Nonetheless, while many stakeholders agree that federal pipeline safety programs have been on the right track, the spate of recent pipeline incidents suggest there continues to be significant room for improvement. Likewise, the threat of terrorist attacks, especially cyberattacks on pipeline control systems, remains a concern. The federal pipeline safety program is authorized through the fiscal year ending September 30, 2015, under the Pipeline Safety, Regulatory Certainty, and Job Creation Act of 2011 (P.L. 112-90), which was signed by President Obama on January 3, 2012. The act contains a broad range of provisions addressing pipeline safety and security. Among the most significant are provisions that could increase the number of federal pipeline safety inspectors, require automatic shutoff valves for transmission pipelines, mandate verification of maximum allowable operating pressure for gas transmission pipelines, increase civil penalties for pipeline safety violations, and mandate reviews of diluted bitumen pipeline regulation. Both government and industry have taken numerous steps to improve pipeline safety and security over the last 10 years. Nonetheless, the NTSB has identified improvement of federal pipeline safety oversight as a "top ten" priority for 2013. The leading pipeline industry associations have concurred. Whether renewed efforts by industry, combined with additional oversight by federal agencies, will further enhance the safety and security of U.S. pipelines remains to be seen. As Congress oversees the federal pipeline safety program and the federal role in pipeline security, key issues of focus may be pipeline agency staff resources, automatic pipeline shutoff valves, penalties for safety violations, safety regulations for oil sands crudes, and the possible need for pipeline security regulations, among other concerns. In addition to these specific issues, Congress may assess how the various elements of U.S. pipeline safety and security activity fit together in the nation's overall strategy to protect transportation infrastructure. Pipeline safety and security necessarily involve many groups: federal agencies, oil and gas pipeline associations, large and small pipeline operators, and local communities. Reviewing how these groups work together to achieve common goals could be an oversight challenge for Congress.
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Energy Policy Act of 2005 (EPACT) P.L. 109-58 . The tax provisions are located in Title XIII. Emergency Economic Stabilization Act of 2008 (EESA) P.L. 110-343 . The tax provisions are located in Titles I, II, and III of Division B, the Energy Improvement and Extension Act of 2008. American Recovery and Reinvestment Act of 2009 (ARRA) P.L. 111-5 . Conference Report with full text of the act ( H.R. 1 , as passed, P.L. 111-5 ) and the Joint Explanatory Statement. The tax provisions are located in Division B, Title I. This section lists and describes several resources that contain information about federal incentives available to support energy efficiency and renewable energy. Tax Incentives Assistance Project (TIAP) http://www.energytaxincentives.org/ This website is sponsored by a number of government agencies, nonprofit groups, and other organizations. It focuses solely on information about federal tax incentives. Information is organized into categories for consumers, businesses, and builders/manufacturers. The site includes updates about enacted federal legislation and provides links to Internal Revenue Service (IRS) tax forms. Environmental Protection Agency (EPA) Energy Star http://www.energystar.gov/index.cfm?c=products.pr_tax_credits This website has a page on "Federal Tax Credits for Energy Efficiency." The information on that page is organized into categories for consumers (home improvements, cars, solar energy, fuel cells), home builders, appliance manufacturers, and commercial buildings. The site includes a frequently asked questions (FAQ) section providing answers about energy efficiency tax credits. Department of Energy (DOE) Financial Opportunities http://www1.eere.energy.gov/financing/ This website is focused mainly on information about matching funds, grants, and financing. Information is organized into categories for consumers, business/industry/universities, inventors (small business), federal energy managers, states, and Native American tribes. The site includes a section on energy efficiency and consumer home financing. U.S. Department of Energy Alternative Fuels and Advanced Vehicles Data Center (AFDC) http://www.eere.energy.gov/afdc/ This website presents information about incentives for alternative fuels (renewable fuels and others) and vehicles. A key link provides access to "State and Federal Incentives and Laws." Incentives covered include grants, tax credits, loans, rebates, regulatory exemptions, fuel discounts, and technical assistance. Information on state incentives is made available through a national map and through summary tables organized by type of incentive, regulation, technology/fuel, and user. The information about state incentives is updated after each state legislature's session ends. Information about federal incentives is updated after pertinent legislation is enacted into law. Another link provides access to "Laws and Incentives Enactment History." U.S. Department of Energy (DOE) Clean Cities Financial Opportunities http://www1.eere.energy.gov/cleancities/financial_opps.html This website presents information about incentives for alternative fuels and advanced technologies. A link to "Government Sources" provides information about funding opportunities through federal grant-making agencies (Grants.gov), Metropolitan Planning Organization (MPO), the Congestion Mitigation and Air Quality (CMAQ) Program, and various EPA programs. A link to "Solicitations" provides information about business funding opportunities that cover a variety of changing topics that have included plug-in hybrid vehicles, hydrogen vehicles, and transportation planning. Clean Cities Coordinators are available to help with funding applications. Department of Housing and Urban Development (HUD) Energy Efficient Mortgages Program http://www.hud.gov/offices/hsg/sfh/eem/energy-r.cfm HUD's website provides information on Energy Efficient Mortgages. These mortgages can help homeowners finance the cost of adding energy-efficiency features to new or existing housing as part of their Federal Housing Authority-insured home purchase or refinance. Alliance to Save Energy (ASE) Home and Vehicle Tax Credits http://www.ase.org/content/article/detail/2654 ASE's website organizes information into categories on energy efficiency incentives for home improvements, hybrid vehicles, and solar energy. The site includes details on eligible equipment, credit limits, and credit expiration dates. This section covers websites that list and describe state and local incentives available to support energy efficiency and renewable energy. Database of State Incentives for Renewables and Efficiency (DSIRE) http://www.dsireusa.org/ DSIRE's website is sponsored by the Interstate Renewable Energy Council (IREC). IREC is a nonprofit organization focused on standards, guidelines, and other activities to support renewable energy. This site contains information about various types of energy efficiency and renewable energy financial incentives provided by state and local governments and utility companies. Summary data is accessed through a national map—and several additional special topic maps—that are linked to data on each state. Alternatively, the data can be searched by technology (solar, wind, geothermal), sector (residential, commercial/industrial, government, utility), and incentive type (tax credits, bonds, grants, loans), and eligible and implementing sectors. The site is updated weekly. Also, the homepage includes a map-link to a list of federal incentives. U.S. Department of Energy (DOE) State Activities and Weatherization Assistance http://www.eere.energy.gov/weatherization/ DOE's website on the Weatherization Assistance Program has information about how to apply for weatherization funding assistance. The site also has a "state activities" link, which provides information about state-level energy assistance programs. The following are links to resources by type of renewable energy. Database of State Incentives for Renewables and Energy Efficiency (DSIRE). Incentive for Biomass http://www.dsireusa.org/ Energy Efficiency and Renewable Energy. Alternative Fuels and Advanced Vehicles Data Center. State and Federal Incentives and Laws http://www.eere.energy.gov/afdc/progs/fed_summary.php/afdc/US/0 Environmental Protection Agency. Funding Database Biomass/Biogas http://www.epa.gov/chp/funding/bio.html Database of State Incentives for Renewables and Energy Efficiency (DSIRE). Incentives for Geothermal Heat Pumps and Geothermal Electric http://www.dsireusa.org/ Geothermal Heat Consortium – GeoExchange.org. New Federal Tax Credits for Geothermal Heat Pump Systems http://www.geoexchange.org/component/content/article/90-new-federal-tax-credits-.html Alliance to Save Energy. Energy-Efficiency Home and Vehicle Tax Credits. Solar Energy and Fuel Cell http://www.ase.org/content/article/detail/2654#fuelcells_solar Database of State Incentives for Renewables and Energy Efficiency (DSIRE). Incentives for Solar Technology http://www.dsireusa.org/ Energy Star. Federal Tax Incentives for Renewable Energy. Tax Incentives for Solar Energy Systems http://www.energystar.gov/index.cfm?c=products.pr_tax_credits#s4 Solar Energy Industries Association. Solar Bills/Legislation http://www.seia.org/cs/solar_bills Solar Energy Industries Association. Frequently Asked Questions on the Solar Investment Tax Credit http://www.seia.org/galleries/pdf/ITC_Frequently_Asked_Questions_10_9_08.pdf Tax Incentives Assistance Project. Consumer Tax Incentives. Solar Energy Systems http://www.energytaxincentives.org/consumers/ Tax Incentives Assistance Project. Businesses Tax Incentives. Solar Energy Systems http://www.energytaxincentives.org/business/renewables.php American Wind Energy Association. Legislative Affairs http://www.awea.org/legislative/ Database of State Incentives for Renewables and Energy Efficiency (DSIRE). Incentives for Wind http://www.dsireusa.org A number of CRS reports provide information about federal energy efficiency and/or renewable energy incentives: CRS Report R40412, Energy Provisions in the American Recovery and Reinvestment Act of 2009 (P.L. 111-5) CRS Report RL33831, Energy Efficiency and Renewable Energy Legislation in the 110 th Congress CRS Report RL33578, Energy Tax Policy: History and Current Issues CRS Report RL34162, Renewable Energy: Background and Issues for the 110 th Congress CRS Report RL32979, Alcohol Fuels Tax Incentives CRS Report R40168, Alternative Fuels and Advanced Technology Vehicles: Issues in Congress CRS Report R40110, Biofuels Incentives: A Summary of Federal Programs CRS Report RS22558, Tax Credits for Hybrid Vehicles CRS Report RS22351, Tax Incentives for Alternative Fuel and Advanced Technology Vehicles CRS Report RL33883, Issues Affecting Tidal, Wave, and In-Stream Generation Projects CRS Report RL34546, Wind Power in the United States: Technology, Economic, and Policy Issues Catalog of Federal Domestic Assistance (CFDA) http://www.cfda.gov/ The CFDA is the primary source of federal grants program information, although actual funding depends upon annual congressional budget appropriations. The CFDA is available on the Internet. Many federal grants do not provide funding directly to individuals, but rather to states, local governments, universities, and tribal entities. Check the "applicant eligibility" section in the CFDA program description to see who may apply. Individuals may be eligible to apply for funds after they have been distributed at the state and local level, through their state energy offices or other contact listed in the CFDA program description. Grants.gov http://www.grants.gov Federal grant funding opportunities are also posted on the website Grants.gov. Grants.gov enables grant seekers to electronically find and apply for competitive grants from all federal agencies. CRS Report RL34035, Grants Work in a Congressional Office CRS Report RL32159, How to Develop and Write a Grant Proposal CRS Report RL34012, Resources for Grantseekers
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The following list of authoritative resources is designed to assist in responding to a broad range of constituent questions and concerns about renewable energy and energy efficiency tax incentives. Links are provided for the following: the full text of public laws establishing and extending federal renewable energy and energy efficiency incentives; federal, state, and local incentives resources; incentive resources grouped by technology type (solar, wind, geothermal, and biomass); CRS reports on this topic; and federal grants information resources. The last section of this report includes tables displaying popular incentives, the corresponding U.S. Code citations, and current expiration dates of those incentives. This list reflects information that is currently available. It will be updated regularly as other relevant material becomes available.
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The Reclamation Fund was established in 1902 as a special fund within the United States Treasury to aid the development of irrigation on the arid lands of western states. It originated as a revolving fund supported by the proceeds of the sale of land and water in the western United States. Over time it, has been amended to receive proceeds from a number of disparate sources, including power generation and mineral leasing. Since the mid-1990s, balances in the Reclamation Fund have increased significantly as appropriations made from the fund have not kept pace with receipts coming in to the fund. As of the end of FY2011, the fund had a balance in excess of $9.6 billion. Barring major changes by Congress in the form of increased appropriations from the fund or a redirection of its receipts, the fund's balance is expected to continue to increase. This report provides general background information on the Reclamation Fund, including a short history of the fund and trends in its deposits and appropriations. It includes a brief analysis of the issues associated with using the current surplus balance for other means. The Reclamation Act of 1902 authorized the Secretary of the Interior to construct irrigation works in western states and established the Reclamation Fund to pay for these projects. The Reclamation Fund was established as a special fund within the U.S. Treasury and was designated to receive receipts from the sale of federal land in the western United States. All moneys received from the sale and disposal of public lands in … [the western United States.] … shall be, and the same are hereby, reserved set aside, and appropriated as a special fund in the Treasury to be known as the "reclamation fund, " to be used in the examination and survey for and the construction and maintenance of irrigation works for the storage, diversion, and development of waters for the reclamation of arid and semiarid lands in the said States and Territories, and for the payment of all other expenditures provided for in this Act. The 1902 act made funding from the Reclamation Fund available for the purposes outlined in the legislation without further appropriation by Congress. This requirement was later revised in the Reclamation Extension Act (1914) to limit Reclamation's expenditures for carrying out the 1902 act to only those items for which funds are made available annually by Congress. Between 1902 and 1910, the Reclamation Service (later changed to the Bureau of Reclamation) authorized 24 projects across the West, and the balance in the fund reached as much as $68 million. However, by 1910, estimates indicated that anticipated income and repayments would not be adequate to carry on the authorized construction program, and funds were borrowed from the U.S. Treasury on multiple occasions. In the act of June 25, 1910, Congress authorized an advance of $20 million to the Reclamation Fund from the General Fund of the U.S. Treasury. Congress authorized an additional advance of $5 million from the General Fund in the act of March 3, 1931. These funds were eventually reimbursed in 1938 under the Hayden-O'Mahoney Amendment, which among other things directed the Secretary of the Treasury to transfer funding accruing to the western states from lands within naval petroleum reserves. The Reclamation Fund was not adequate to fund many of Reclamation's large investments in water infrastructure. Dating to the late 1920s, Congress directed that the General Fund (in lieu of the Reclamation Fund) finance part or all of some of Reclamation's largest construction projects. By the end of the 1930s, most major Reclamation projects under construction were financed by the General Fund of the Treasury. For instance, the Boulder Canyon Project Act of 1928 provided that construction of Hoover Dam would be financed from the General Fund of the Treasury rather than the Reclamation Fund. In the 1950s and 1960s, other large, multiple-purpose Reclamation projects were built with support from the General Fund. Among these projects were those authorized in the Colorado River Storage Project Act (P.L. 485, which authorized Glen Canyon Dam, built in 1956) and the Colorado River Basin Project Act (P.L. 90-537, which authorized the Central Arizona Project in 1968). The Reclamation Fund was originally established to serve as a "revolving" fund, but this concept proved impractical over time. When the fund was created, it was expected that project repayment and receipts from the sale of public lands (under the original statute, the fund receives 95% of these proceeds) would finance expenditures on new or ongoing projects. As previously noted, around 1910 Congress recognized that the existing Reclamation Fund revenue stream was inadequate to finance ongoing expenditures. Congress made the fund subject to annual appropriations in 1914, and directed additional receipts toward the Reclamation Fund over time, including those from revenues associated water and power uses and from sales, leases, and rentals of federal lands and resources (e.g., oil, gas, and minerals) in the 17 western states. Of these, natural resource royalties and power revenues (discussed below) have proven to be the most significant sources of revenue for the Reclamation Fund. Receipts from natural resource royalties were initiated in the Mineral Leasing Act of 1920. These receipts, which include 40% of the royalty payments received by the federal government for the production of oil, gas, coal, potassium, and other minerals on federal lands, currently generate the most revenue for the Reclamation Fund (see Figure 1 ). In recent years, these receipts have increased significantly (see the section, " Recent Trends "). Hydropower receipts were authorized to be received by the Reclamation Fund through the aforementioned Hayden-O'Mahoney Amendment, enacted on May 9, 1938. The amendment provided that revenues associated with irrigation projects' power features be deposited into the Reclamation Fund. The practical function of the change was to secure for the fund power revenues from large projects then under construction, such as Coulee Dam, Shasta Dam, and Parker Dam. An additional significant source of revenues into the Reclamation Fund is sales of water contracts, which was authorized by Congress in 1920. The primary sources of revenue for the Reclamation Fund are summarized below in Table 1 . Congress makes appropriations from the Reclamation Fund in annual appropriations acts. Appropriations from the Reclamation Fund are typically made for three separate accounts: the Bureau of Reclamation's Water and Related Resource account, the Bureau of Reclamation's Policy and Administration account, and the Western Area Power Administration's (WAPA's) Construction, Rehabilitation, and Operation and Maintenance account. Funds are made available from the Reclamation Fund only for projects authorized under the fund. Funds have been provided to WAPA since 1978, when the power marketing function of Reclamation was transferred to the Department of Energy. Appropriations are typically provided in annual Energy & Water Development Appropriation bills. After the early financial issues between the Reclamation Fund's establishment in 1902 and the supplemental funding from the General Fund in the 1930s, the fund maintained a relatively stable balance until the early 1990s. Beginning in the mid-1990s, the fund's balance began to increase significantly as revenues from power sales and natural resource royalties significantly exceeded appropriations from the fund. For every year since FY1994, receipts going into the Reclamation Fund have exceeded appropriations made from it by more than $100 million, and in some years receipts have exceeded appropriations by more than $1 billion. The exception to this trend was FY2009, when the American Recovery and Reinvestment Act (ARRA, P.L. 111-5 ) appropriated funding for Reclamation from the Reclamation Fund. As of the end of FY2012, the fund had a balance in excess of $10.8 billion. Trends in the Reclamation Fund from 1990 to 2010 are summarized below in Figure 1 . Receipts deposited into the Reclamation Fund are derived from five general categories: natural resource royalties, sales of federal land, hydropower receipts, timber sales receipts, and other proprietary receipts. Of these, natural resource royalties and hydropower revenues make up the majority of incoming receipts. From FY1990 to FY2011, an average of 87% of the Reclamation Fund's receipts came from these two sources. In recent years, even more receipts have come from these sources. From FY2006 to FY2011, an average of 91% came from the two sources (79% from natural resource royalties and 11% from hydropower receipts). A breakdown of the fund's receipts in FY2012 is provided in Figure 2 . Limited data is available on the source (by state) of the receipts going into the Reclamation Fund for various purposes. For the largest portion of revenues, mineral royalties (which accounted for approximately 79% of all receipts in the last five years), CRS estimates that from FY2006 to FY2011, an average of 93% of the receipts from onshore public mineral leasing came from five western states: Wyoming, New Mexico, Colorado, California, and Utah. Two states, Wyoming and New Mexico, accounted for about 64% of these receipts. For power revenues, Reclamation reported that the majority come from power generated on the Columbia River, the Central Valley Project, the Parker-Davis Project, and the Pick-Sloan Missouri Basin Program. On average, this power generated about 16% of Reclamation Fund revenues between 2000 and 2010. The increasing balance of the Reclamation Fund has caused some to call for directing these funds for new purposes or to supplement ongoing authorized expenditures. Such a change could take one or more forms, each of which may have an associated budget scoring impact. For instance, Congress could increase appropriations from the Reclamation Fund in annual discretionary appropriations, but such an increase would have to compete with other appropriations (including General Fund appropriations) subject to congressional 302 (b) allocations. Separately, Congress could dedicate a stream of revenue from the Reclamation Fund for a subset of projects and make it available, with or without further appropriations (i.e., discretionary funding or mandatory funding) required. Congressional PAYGO requirements may necessitate offsets in spending corresponding to some of these changes. Some, including water users and others benefitting from Reclamation projects, note that the Reclamation Fund was intended to benefit water resource projects in western states, and spending its balance on the fund's intended purposes is a logical use of the fund. However, others may view other potential uses of the fund's surplus as being more pressing in the current fiscal climate. These same interests argue that the large increases to mineral receipts were not foreseen when those disbursements were originally authorized, and may advocate for redirecting surplus balances to debt reduction or the states. A change to the Reclamation Fund enacted by Congress in 2009 provides an example of the challenges associated with dedicating Reclamation Fund balances toward a particular purpose. In Title X of the Omnibus Lands Act of 2009 ( P.L. 111-11 ), Congress redirected a portion of Reclamation Fund receipts for Indian water rights settlement projects. The bill established a separate fund (known as the Reclamation Water Settlements Fund) in the Treasury and directed the Secretary of the Treasury to transfer into the new fund up to $120 million annually between FY2020 and FY2034 that would otherwise go to the Reclamation Fund. Significantly, the law directed that this funding be made available without further appropriation. However, in this case, the appropriation was made outside of the congressional scoring window for PAYGO costs, and thus did not require an offset. More recently, a bill in the Senate in the 113 th Congress, the Authorized Rural Water Projects Completion Act ( S. 715 ), proposes to establish a new fund for rural water projects (similar to the Water Settlements Fund referenced above) that would receive, without further appropriation, approximately $80 million per year in funding that would otherwise revert to the Reclamation Fund. In contrast to the aforementioned water settlements fund, some of this funding would be redirected to projects over the next 10 years.
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The Reclamation Fund was established in 1902 to fund the development of irrigation projects on arid and semiarid lands of the 17 western states. It originated as a revolving fund for construction projects and was supported by the proceeds of the sale of land and water in the western United States. Over time, it was amended to receive proceeds from a number of other sources. It is currently derived from repayments and revenues associated with federal water resources development as well as the sales, rentals, and leases (including natural resource leasing) of federal land in the western United States. Portions of the fund's balance are appropriated annually by Congress for multiple purposes, including some of the operational expenditures of the Bureau of Reclamation (Reclamation) and the Power Marketing Administrations. Through FY2012, collections deposited into the Reclamation Fund totaled more than $40 billion, while total appropriations from the fund totaled more than $30 billion. The Reclamation Fund did not finance all Reclamation investments in the western United States. As a result of limited funding availability, a number of large dams and other Reclamation investments were financed by the General Fund of the U.S. Treasury. Notwithstanding advances to the Reclamation Fund by Congress in 1910 and 1931, deposits into and appropriations out of the fund have been roughly equal over time. From the 1940s until the 1990s, the fund maintained a small, relatively stable balance. Beginning in the mid-1990s, balances in the fund began to increase significantly as receipts from mineral leasing and power sales increased, while appropriations from the fund largely remained static. At the end of FY2012, the fund had a balance of more than $10.8 billion, and it is expected to continue to grow. Receipts deposited into the Reclamation Fund are made available to Reclamation by Congress through annual discretionary appropriations bills, which are subject to congressional budgetary allocations. Some have proposed that Congress appropriate some portion of the surplus balance in the Reclamation Fund to reclamation activities in western states, including new water storage projects or the rehabilitation of existing projects. These interests argue that the Reclamation Fund was set up to benefit western states and should now be used to increase investments in these areas. As the balance of the Reclamation Fund continues to increase, Congress may reevaluate the Reclamation Fund's status, including its financing of new or ongoing activities. The Omnibus Lands Act of 2009 (P.L. 111-11) included provisions that will transfer $120 million per year from the fund from FY2020 through FY2034, without further appropriation, to a separate fund that provides for Indian Water Settlement construction projects. In the 113th Congress, a bill before the Senate (S. 715) proposes to redirect funding that would otherwise go to the Reclamation Fund for the construction of rural water projects. Major changes to the Reclamation Fund may have scoring implications in the annual budget and under congressional pay-as-you-go rules.
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The U.S. farm sector is vast and varied. It encompasses production activities related to traditional field crops (such as corn, soybeans, wheat, and cotton) and livestock and poultry products (including meat, dairy, and eggs), as well as fruits, tree nuts, and vegetables. In addition, U.S. agricultural output inc ludes greenhouse and nursery products, forest products, custom work, machine hire, and other farm-related activities. The intensity and economic importance of each of these activities, as well as their underlying market structure and production processes, vary regionally based on the agro-climatic setting, market conditions, and other factors. As a result, farm income and rural economic conditions may vary substantially across the United States. However, this report focuses singularly on aggregate national net farm income and the status of the farm debt-to-asset ratio as reported by the U.S. Department of Agriculture's (USDA's) Economic Research Service (ERS). Annual U.S. net farm income is the single most watched indicator of farm sector well-being, as it captures and reflects the entirety of economic activity across the range of production processes, input expenses, and marketing conditions that have prevailed during a specific time period. When national net farm income is reported together with a measure of the national farm debt-to-asset ratio, the two summary statistics provide a quick and widely referenced indicator of the economic well-being of the national farm economy. According to ERS, net farm income is forecast at $63.4 billion in 2017, up 3% from last year ( Table 1 ). The forecast rise in 2017 net farm income comes after three consecutive years of decline from 2013's record high of $123.8 billion. The 2017 net farm income forecast is substantially below the 10-year average of $86.4 billion ( Figure 1 ). In inflation-adjusted dollars, the 2017 forecast is the second lowest since 2003 ( Figure 2 ). Net cash income is also projected to be up in 2017 but by a larger share (12.5%), driven largely by sales from previous years' inventory, to $100.4 billion. Since the record highs of 2013, net farm income and net cash income have fallen by 49% and 26%, respectively ( Figure 1 ). After three consecutive years of decline, net cash income and net farm income are both forecast to rise in 2017 relative to 2016. The downward trend in farm income since 2013 was primarily a result of the significant decline in most farm commodity prices since the 2013-2014 period. Farm prices for most feedstuffs—feed grains, hay, and wheat—declined during both 2015/16 and 2016/17 as U.S. and global grain stocks rebuild ( Table 4 and Figure 28 to Figure 31 ). In contrast, cotton and soybean prices showed resilience in 2016. The price outlook for 2017 is mixed. Poultry, hog, and milk prices are all projected to be higher in 2017, albeit well below their market highs of 2014/15 ( Table 4 and Figure 32 to Figure 35 ). Cattle prices are projected to be down slightly in 2017. Government payments in 2017 are projected to be down slightly (-0.2%) to $13.0 billion ( Figure 13 ). Lower marketing-assistance loan benefits and the end of the cotton ginning cost-share program, which paid $326 million in 2016, more than offset projected higher Price Loss Coverage (PLC) and Agriculture Risk Coverage (ARC) program payments of $8.4 billion—triggered by lower commodity prices. Outlays under the ARC and PLC programs (which are contingent on market prices) are intended to provide some relief for participating producers from the market downturn. Total production expenses ( Figure 14 ), at $355.1 billion, are projected to be up 1.3% in 2017, driven largely by replacement animal, labor, and interest costs. U.S. farm prices are supported in part by global demand for U.S. agricultural exports ( Figure 18 ), which are expected to rise to $139.8 billion (+8%) in 2017—still well below the record of $152.3 billion set in 2014. Farm asset values are projected to be up, at $3,075 billion (+4%) in 2017, as land values strengthen. A rise in farm debt to $390 billion (+4.4%) is expected to result in a rise in the debt-to-asset ratio to 12.7%, the highest level since 2011 ( Figure 24 ). Normal weather conditions prevailed in most U.S. growing regions, with the notable exception of Montana and the Dakotas, where severe drought impacted the small-grain crops. The north-central drought expanded in late summer into Idaho, Oregon, and Washington and parts of southern Iowa. As a result of the north-central drought, USDA is forecasting substantially lower yield and output for spring-grown barley and wheat crops in the affected states. Overall, 2017 U.S. wheat production is estimated to be down nearly 25% from last year. This production shortfall, coupled with continued strong export demand for U.S. wheat, is behind an 18% increase in the U.S. wheat farm price during the 2017/18 crop year to $4.60 per bushel—still below the $7.77 achieved in 2012 ( Figure 28 ). Reduced rainfall also appears to have lowered sorghum, oat, and forage-crop prospects in affected regions. However, the effect on the corn and soybean crops appears minimal. Corn and soybeans are the two largest U.S. commercial crops in terms of both value and quantity. These crops provide important inputs for the domestic livestock, poultry, and biofuels sectors. In addition, the United States is traditionally one of the world's leading exporters of corn, soybeans, and soybean products—vegetable oil and meal. As a result, the outlook for these two crops is critical to both farm sector profitability and regional economic activity across large swaths of the United States as well as in international markets. For the past several years, U.S. corn and soybean crops have experienced remarkable growth in both productivity and output. Both crops had record harvests in 2014, above-average harvests in 2015, and record harvests again in 2016, thus helping to build stockpiles at the end of the marketing year ( Figure 3 and Figure 4 ) and pressure prices lower in U.S. and international markets ( Figure 28 through Figure 31 ) in 2017. Planted acres for both feed grains (101.8 million acres) and wheat (45.7 million acres) were down in 2017 by 6.4% and 9.0%, respectively, from 2016. However, soybean-planted acres were estimated at a record 89.5 million (+7.3%). The 2017 yield outlook for both corn and soybean crops is above trend (although down from the previous year's record highs) for both, with expectations for the second-highest soybean yield (49.4 bu./ac.) and third-highest corn yield (169.9 bu./ac.) on record. The record soybean plantings coupled with the strong yield outlook combine for an expected record large soybean harvest of 4.4 billion bushels in 2017. As a result of the expected record harvest, soybean prices are projected to be lower (-3.2%) at $9.20 per bushel. Despite lower area, yield, and production, U.S. corn supplies are expected to continue to build in 2017, thus pushing the expected crop-year price down 4.5% to $3.20/bu. The corn and soybean price forecasts for 2017 are the lowest since the 2006 crop year for both crops. The length and severity of the California drought has important national implications for retail food prices. California production accounts for about one-third of U.S. vegetables, almost two-thirds of U.S. fruit and nuts, about 20% of U.S. milk, and a substantial portion of wine. Abundant precipitation during the 2016/17 winter has alleviated drought conditions in much of the northern portion of the state. However, the drought, which began in 2012, persists in the lower third of the state. The effects of hurricanes Harvey and Irma on U.S. agriculture are still being ascertained but have likely resulted in extensive crop damage. Harvey's impact focused on Texas and Louisiana. (Affected crops include upland cotton, rice, soybeans, sugar, and others.) Irma's impact focused on Florida, Georgia, South Carolina, and Alabama. (Affected crops include citrus, sugar, peanuts, upland cotton, soybeans, and specialty crops.) USDA's National Agricultural Statistics Service (NASS) announced on September 12, 2017, that it would collect harvested acreage information for a number of crops in affected states in preparation for the October Crop Production report. These additional data will help to better assess the full impact. The changing conditions for the U.S. livestock sector may be tracked by the evolution of the ratios of livestock output prices to feed costs ( Figure 5 ). A higher ratio suggests greater profitability for producers. The cattle-, hog-, and broiler-to-feed margins all moved upwards in the first half of 2017. The hog sector, despite seeing its hog-to-feed ratio dip lower in early 2017, remains profitable. However, continued strong production growth of between 2% and 3% for red meat and poultry suggests that prices are vulnerable to any weakness in demand. Milk prices and the milk-to-feed ratio turned sharply higher in 2017, suggesting improving profitability. However, this result varies widely across the United States with many small or marginally profitable producers facing continued financial difficulties. In addition, both U.S. and global milk production are projected to continue growing through 2017. As a result, milk prices could come under further pressure in the last half of 2017. With respect to the federal milk margin protection program (MPP) instituted by the 2014 farm bill (Agricultural Act of 2014, P.L. 113-79 ), the formula-based milk-to-feed margin used to determine government payments is likely to remain above the $8.00 per hundredweight (cwt.) threshold needed to trigger payments ( Figure 6 ). The MPP margin differs from the USDA-reported milk-to-feed ratio shown in Figure 5 but reflects the same market forces. Similarly, U.S. hog and cattle herds and poultry flocks are expected to continue to expand into 2018. Cattle and hog expansion is primarily the result of a substantial lag in the biological response to the strong market price signals of late 2014. The U.S. cattle sector has been expanding since 2014. During the 2007 to 2014 period, high feed and forage prices, plus widespread drought in the Southern Plains—the largest U.S. cattle production region—had resulted in an 8% contraction of the U.S. cattle inventory ( Figure 7 ). Reduced beef supplies led to higher producer and consumer prices, which in turn triggered the slow rebuilding phase in the cattle cycle that started in 2014 (see the price-to-feed ratio for steers and heifers, Figure 5 ). The resulting continued expansion of beef supplies pressured market prices lower into 2017. However, projections of expanding domestic and international demand across all meat categories through 2018 is expected to largely stem the decline in prices and profitability in 2017 ( Figure 32 ). In 2014, the U.S. hog sector was hit by the rapid outbreak and spread of the porcine epidemic diarrhea virus (PEDv), which caused market worries about reduced U.S. pork production. The incidence of PEDv since the winter of 2014/15 has declined, and initial market fears have subsided. However, the related 2014 surge in hog prices elicited substantial producer response, and the resulting continued expansion of pork supplies through 2016 has weighed on market prices ( Figure 34 ). For pork, as with beef and poultry, projections of expanding domestic and international demand have supported prices and profitability in 2017. During spring 2015, the U.S. poultry industry experienced a severe outbreak of highly pathogenic avian influenza. The outbreak ended by early summer 2015. More than 48 million chickens, turkeys, and other poultry were euthanized to stem the spread of the disease. Turkey and egg-laying hen farms in Minnesota and Iowa were the hardest hit. Commercial broiler farms were not affected. USDA estimates that egg production declined over 5% in 2015, pushing egg prices up 28% that year. The recovery in broiler and egg production was swift as prices fell 7% and 53% in 2016, respectively. In 2017, strong domestic and export demand is expected to push prices up by a projected 11.5% and 2.7% for broilers and eggs. In sum, production of beef (+5.3%), pork (+2.2%), broilers (+1.5%), and eggs (+2.3%) are projected to expand relatively robustly in 2017. Meat and egg supplies are projected to continue growing in 2018 at 1.4% to 3.4%, respectively. Fortunately for producers, USDA projects that combined domestic and export demand will grow by 2.2% in 2018, thus helping to support red meat, poultry, and egg prices and profit margins in 2017 ( Table 4 ). Total farm sector gross cash income for 2017 is projected to be up (+4%), to $409.4 billion, driven by a $14.1 billion (4%) increase in the value of agricultural sector production. That is nevertheless well below 2014's record $470.6 billion ( Figure 8 ). The projected 2017 increase includes higher livestock returns (+8.4%) and farm-related income (+7%). Record yields helped to offset lower crop prices, leaving total crop revenues up slightly (0.3%), at $190.1 billion in 2017. Similarly, larger animal product output and improving prices (for hogs, broilers, eggs, and milk) are expected to push livestock cash receipts higher, to $176.5 billion. Farm-sector revenue sources and shares include crop revenues (46% of sector revenues), livestock receipts (43%), government payments (3%), and other farm-related income, including crop insurance indemnities, machine hire, and custom work (7%). Total crop sales peaked in 2012 at a record $231.6 billion when a nationwide drought pushed commodity prices to record or near-record levels. In 2017, crop sales are projected at $190.1 billion, up slightly from 2016, as record yields offset lower prices for corn, soybeans, and cotton ( Figure 9 ). The crop sector includes 2017 projections (and percentage changes from 2016) for: feed crops—corn, barley, oats, sorghum, and hay—of $54.6 billion (-0.4%); oil crops—soybeans, peanuts, and other oilseeds—of $42.6 billion (+5.8%); food grains—wheat and rice—of $11.0 billion (-3.0%); fruits and nuts of $23.8 billion (-17.2%); vegetables and melons of $20.4 billion (+6.8%); cotton of $7.4 billion (+25.6%); and all other crops—including tobacco, sugar, greenhouse, and nursery crops—of $28.4 billion (+1.2%). The livestock sector includes cattle, hogs, sheep, poultry and eggs, dairy, and other minor activities. Cash receipts for the livestock sector grew steadily following the severe downturn of 2009, peaking in 2014 at a record $212.8 billion. However, the sector turned downward in 2015 (-10.8%) and again in 2016 (-12.3%)—driven largely by projected year-over-year price declines across major livestock categories ( Table 4 and Figure 11 ). In 2017, livestock sector cash receipts are projected to show some recovery, with year-to-year growth of 8.4%, to $176.5 billion. Highlights include 2017 projections (and percentage changes from 2016) for cattle and calf sales of $67.6 billion (5.7%), hog sales of $21.6 billion (14.6%), poultry and egg sales of $41.9 billion (+8.4%), and dairy sales, valued at $38.4 billion (+11.1%). Government payments in 2017 are projected to be down slightly, by 0.2% from 2016, at $13.0 billion. Declining farm prices are expected to trigger substantial payments under the price-contingent programs—the PLC and ARC programs ( Figure 13 ). However, increases in ARC and PLC payments are expected to be offset by declines in marketing-assistance loan benefits and the end of the one-time cotton ginning cost-share program (included in "All Other"), which made $326 million in payments in 2016. ARC and PLC are new revenue support programs established by the 2014 farm bill (Agricultural Act of 2014; P.L. 113-79 ). The PLC program replaced the previous Counter-Cyclical Price (CCP) program, but with a set of reference prices based on substantially higher support levels for most program crops. ARC relies on a five-year moving average price trigger in its payment calculation but also adopts the PLC reference price as the minimum guarantee in years when market prices fall below it. These higher relative support levels are expected to trigger payments of $8.4 billion in 2017, up from $8.2 billion in 2016. Government payments of $13 billion would represent a relatively small share (3%) of projected gross cash income of $409.4 billion in 2017. In contrast, government payments are expected to represent 20% of net farm income of $63.4 billion in 2017 ( Table 1 ). However, the importance of government payments as a percent of net farm income varies nationally by crop and livestock sector and by region. Payments under the price-contingent marketing loan benefit are forecast at $11 million in 2017, down sharply from $206 million in 2016, as program crop prices are expected to remain above most program loan rates through 2017 ( Table 4 ). Farm fixed direct payments, whose decoupled payment rates were fixed in previous legislation, were eliminated by the 2014 farm bill. The Margin Protection Program (MPP) for dairy is expected to earn savings as producer premiums paid exceed federal MPP payments by $5 million in 2017. Conservation programs include all conservation programs operated by USDA's Farm Service Agency (FSA) and the Natural Resources Conservation Service (NRCS) that provide direct payments to producers. Estimated conservation payments of $4.0 billion are forecast for 2017, up 6% from 2016. Supplemental and ad-hoc disaster assistance payments are forecast at $559 million in 2017, a 15% decline from $658 million in 2016. The decline is largely due to an expected decline in outlays under the Livestock Indemnity and Livestock Forage Programs. Total production expenses for 2017 for the U.S. agricultural sector are projected to be up 1.3% in nominal dollars, at $355 billion ( Figure 14 ) following two years of decline. Multi-year reductions in farm production expenses are relatively rare, the most recent occurrence being 1984 to 1986. Changes in input prices (i.e., expenses) typically lag commodity price changes. Commodity prices received by farmers generally declined from 2014 through 2016 before rebounding in 2017 ( Figure 15 ). Farm input prices showed a similar pattern but with a much smaller decline from their 2014 peak, thus putting pressure on producer margins in recent years. Production expenses will affect crop and livestock farms differently. The principal expenses for livestock farms are feed costs and purchases of feeder animals and poultry. Feed costs are projected to be down in 2017 (-2.9%), while replacement animal costs have increased by 3% ( Figure 16 ). Taken together, the principal livestock expenses are forecast to be down 1.2% from 2016, at $77.1 billion. The principal crop expenses—including fertilizers, pesticides, feed, and seed—are forecast to be down by about 3%, to $91.8 billion. Miscellaneous operating expenses, which are projected to be unchanged at $36.6 billion, include crop insurance premiums and thus directly impact crop production. Total farm production expenses were up largely because of higher interest charges, hired labor costs, net rent, and miscellaneous expenses that are not attributed to a particular production activity. Renting or leasing land is a way for young or beginning farmers to enter agriculture without incurring debt associated with land purchases. It is also a means for existing farm operations to adjust production more quickly in response to changing market and production conditions while avoiding risks associated with land ownership. The share of rented farmland varies widely by region and production activity. However, for some farms it constitutes an important component of farm operating expenses. Since 2002, about 38% of agricultural land used in U.S. farming operations has been rented. Some farmland is rented from other farm operations—nationally about 8% of all land in farms in 2012 (the most recent year for which data are available)—and thus constitutes a source of income for some operator landlords. However, the majority of rented land in farms is rented from non-operating landlords. Nationally in 2012, 30% of all land in farms was rented from someone other than a farm operator. Total net rent to non-operator landlords is projected to be up by 1.4%, at $15.1 billion in 2017. Average cash rental rates for 2017—which were set the preceding fall of 2016 or in early spring of 2017—still reflect the high crop prices and large net returns of the preceding several years (especially the 2011 to 2014 period) and have yet to decline substantially ( Figure 17 ). The national rental rate for crop land peaked at $144 per acre in 2015 and has been at $136 per acre for the past two years (2016 and 2017). U.S. agricultural exports have been a major contributor to farm income, especially since 2005. As a result, the sharp downturn in those exports that followed 2014's peak of $152.3 billion both coincided with and deepened the downturn in farm income that started in 2015. USDA projects U.S. agricultural exports at $139.8 billion in 2017, up 8% from 2016's total ( Figure 18 ), due largely to an improving economic outlook in several major foreign importing countries. USDA also projects that U.S. agricultural imports will be higher, at $116.2 billion (+3%), with a resulting agricultural trade surplus of $23.6 billion (+42%). As a share of total gross farm receipts, U.S. agricultural exports are projected to account for 33.4% of gross cash earnings in 2017 ( Figure 19 ). The top three markets for U.S. agricultural exports are China, Canada, and Mexico, in that order. Together, these three countries are expected to account for $65.6 billion, or 47% of total U.S. agricultural exports in FY2017 ( Figure 20 ). A substantial portion of the increase in U.S. agricultural exports since 2010 has also been due to higher-priced grain and feed shipments, plus record oilseed exports to China and growing animal product exports to East Asia. The fourth- and fifth-largest U.S. export markets are the European Union (EU) and Japan, which are projected to account for a combined 17% of U.S. agricultural exports in FY2017. However, these two markets have shown relatively limited growth in recent years when compared with the rest of the world. The "Rest of World" (ROW) component of U.S. agricultural trade—the Middle East, Africa, and Southeast Asia—has shown strong import growth in recent years. ROW is expected to account for 36% of U.S. agricultural exports in 2017. Over the past four decades, U.S. agricultural exports have experienced fairly steady growth in shipments of high-value products ( Figure 21 ). As grain and oilseed prices decline, so will the bulk value share of U.S. exports. Bulk commodity shipments (primarily wheat, rice, feed grains, soybeans, cotton, and unmanufactured tobacco) are forecast at a 35% share of total U.S. agricultural exports in 2017, at $49.3 billion. This compares with an average share of over 60% during the 1970s and 1980s. In contrast, high-valued export products—including horticultural products, livestock, poultry, and dairy—are forecast at $90.5 billion for a 66.4% share of U.S. agricultural exports in 2017. The U.S. farm income and asset-value situation and outlook suggest a relatively stable financial position heading into 2017 for the agriculture sector as a whole but with considerable uncertainty regarding the downward outlook for prices and market conditions for the sector and an increasing dependency on international markets to absorb domestic surpluses: Farm asset values—which reflect farm investors' and lenders' expectations about long-term profitability of farm sector investments—are projected to be up 4% in 2017 to a nominal $3,075 billion ( Table 3 ). In inflation-adjusted terms (using 2009 dollars), farm asset values peaked in 2014 ( Figure 22 ). Higher farm asset values are expected in 2017 due to strength in real estate values (+4.6%) that more than offsets a decline in non-real-estate values (-5.1%). Real estate traditionally accounts for the bulk of total value of farm sector assets—nearly an 81% share. Crop land values are closely linked to commodity prices. The leveling off of crop land values in 2017 reflects mixed forecasts for commodity prices (corn, soybeans, and cotton lower; wheat, rice, and livestock products higher) and the uncertainty associated with international commodity markets ( Figure 23 ). Meanwhile, total farm debt is forecast to rise to $390 billion in 2017 (+4.4%). Farm equity (or net worth, defined as asset value minus debt) is projected to be up 2.8%, at $2,621 billion in 2017, after having declined slightly in 2016. The farm debt-to-asset ratio is forecast to be higher in 2017, at 12.7%, still a relatively low value by historical standards ( Figure 24 ). Farm household wealth is derived from a variety of sources. A farm can have both an on-farm and an off-farm component to its balance sheet of assets and debt. Thus, the well-being of farm operator households is not equivalent to the financial performance of the farm sector or of farm businesses because of other stakeholders in farming, such as landlords and contractors, and because farm operator households often have nonfarm investments, jobs, and other links to the nonfarm economy. Average farm household income (sum of on- and off-farm income) is projected at $119,598 in 2017 ( Table 2 ), up 1.4% from $117,918 in 2016 but well below the record of $134,164 in 2014. About 20% ($24,262) of total household income is from the farm, and the remaining 80% ($95,336) is earned off the farm (including financial investments). The share of farm income derived from off-farm sources had increased steadily for decades but peaked at about 95% in 2000 ( Figure 25 ). Since the late 1990s, farm household incomes have surged ahead of average U.S. household incomes ( Figure 26 and Figure 27 ). In 2015 (the last year for which comparable data were available), the average farm household income of $119,880 was about 51% higher than the average U.S. household income of $79,263 ( Table 2 ). Aggregate data often hide or understate the tremendous diversity and regional variation that occurs across America's agricultural landscape. This report focuses entirely on national aggregate statistics. It is not intended to identify or discuss significant differences that may occur across different production activities and regions. For insights into the potential diversity of differences in American agriculture, readers are encouraged to visit the ERS websites on "Farm Structure and Organization" and "Farm Household Well-being," where more information on such differences is readily available in a highly accessible format. The following set of eight charts ( Figure 28 to Figure 35 ) presents USDA data on monthly farm prices received for several major farm commodities—corn, soybeans, wheat, upland cotton, rice, milk, cattle, hogs, and chickens. The data is presented in both nominal and indexed formats to facilitate comparisons. Three tables at the end of this report ( Table 1 to Table 3 ) present aggregate farm income variables that summarize the financial situation of U.S. agriculture. In addition, Table 4 presents the annual average farm price received for several major commodities, including the USDA forecast for the 2016/2017 marketing year.
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According to USDA's Economic Research Service (ERS), national net farm income—a key indicator of U.S. farm well-being—is forecast at $63.4 billion in 2017, up 3% from last year. The forecast rise in 2017 net farm income comes after three consecutive years of decline from 2013's record high of $123.8 billion. Net farm income is calculated on an accrual basis. Net cash income (calculated on a cash-flow basis) is also projected to be up in 2017 but by a larger share (12.6%), driven largely by sales from previous years' inventory, to $100.4 billion. The 2017 net farm income forecast is substantially below the 10-year average of $86.4 billion and would be the second lowest since 2003 in inflation-adjusted dollars. This is primarily the result of the outlook for continued weak prices for corn, soybeans, and cotton. Most crops and livestock product prices remain significantly below the average for the period of 2011-2013, when prices for many major commodities attained record or near-record highs. Net farm income is down 49% since 2013; net cash income is down 26%. Farm-sector production expenses have fallen slightly over that period (-1%) but not nearly as quickly as commodity prices and revenue, thus contributing to lower aggregate income totals. Partially offsetting the decline in farm revenues is a rise in government payments since 2013 (+18%). In 2017, payments are projected at $13.0 billion, down slightly (-0.2%) from 2016. The Price Loss Coverage (PLC) and Agricultural Risk Coverage (ARC) revenue support programs for major field crops are expected to trigger payments of $8.4 billion in 2017, up 2.5% from 2016. U.S. farm income experienced a golden period during 2011 through 2014, due to strong commodity prices and agricultural exports. In 2017 agricultural exports are forecast to be up 8%, at $139.8 billion, due largely to an improving economic outlook in several major foreign importing countries—but still well below 2014's record of $152.3 billion. U.S. agricultural exports are projected to account for 33% of farm sector gross earnings in 2017. In addition to the outlook for slightly higher net farm income in 2017, farm wealth is also projected to be up 4% from 2016, to $3,075 billion. Farm asset values reflect farm investors' and lenders' expectations about long-term profitability of farm sector investments. The outlook for slightly higher farm income has reversed the decline in farmland values experienced in 2016. Because they comprise such a significant portion of the U.S. farm sector's asset base (81%), change in farmland values is a critical barometer of the farm sector's financial performance. At the farm household level, average farm household incomes have been well ahead of average U.S. household incomes since the late 1990s. In 2015 (the last year for which comparable data were available), the average farm household income (including off-farm income sources) of $119,880 was about 51% higher than the average U.S. household income of $79,263. The outlook for a slight rise in net farm income and farm wealth suggests that the farm economy has at least temporarily stabilized but with substantial regional variation. Relatively weak prices for most major program crops signal continued tough times ahead. Heading into 2018, the financial picture for the agricultural sector as a whole remains dependent on continued growth in domestic and foreign demand sources to sustain prices at current modest levels. Improvements in agricultural economic well-being will hinge on crop harvests and prices, as well as both domestic and international macroeconomic factors, including economic growth and consumer demand. This report is an update of the February 2017 version to take account of USDA's August 30, 2017, farm income update and the August 29, 2017, U.S. agricultural trade outlook update.
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Policymakers at all levels of government are debating a wide range of options for addressing the nation's faltering economic conditions. One option that is once again receiving attention is accelerated investments in the nation's public infrastructure—that is, highways, mass transit, airports, water supply and wastewater, and other facilities—in order to create jobs while also promoting long-term economic growth. This report discusses policy issues associated with using infrastructure as a mechanism to benefit economic recovery. It begins with two contextual aspects of this discussion, what is the current economic condition and how to define infrastructure. The report then reviews the role of infrastructure investment in economic growth generally and in contributing to bolstering a faltering economy. It discusses key issues including the potential role of traditional and "green" infrastructure in creating jobs, timing, and setting priorities. Debate about direct government spending to accelerate economic recovery has intensified recently in response to economic indicators showing significant and continuing weakness of the national economy. Although the U.S. economy officially began to emerge in June 2009 from the recession that began in December 2007, the recovery has been sluggish, and the economy has continued to feel the recession's impact in terms of both budget deficits and high unemployment. In August 2011, the nation's unemployment rate was 9.1%, slightly improved from the 2010 average rate of 9.6%, but still stubbornly higher than in 2007 (4.6%) and 2008 (5.6%). Also in August, the Congressional Budget Office (CBO) projected continuing but modest economic growth for the next few years. Under its baseline projections, CBO estimated that deficits will fall from 8.5% of gross domestic product (GDP) in FY2011 to 6.2% in FY2012 and 3.2% in FY2013, although part of the expected change reflects policy changes, such as the expiration of the George W. Bush-era tax cuts in 2013 and expiration of the payroll tax cut in 2012. Fiscal problems are affecting all levels of government. In May, the National Association of State Budget Officers reported that state fiscal conditions in 2011 are somewhat improved from conditions in 2009 and 2010. However, the slow economic recovery and wind down of significant federal funding enacted in 2009 will continue to present states with tight fiscal conditions. State revenue collections continue to be affected by the economic downturn and soft consumer spending, while demand for healthcare and social services remains high. State general fund revenue collections are forecast to increase in 2011 and 2012, but state finances can take many months to recover from recessions. States also face long-term issues such as funding pensions and maintaining and repairing infrastructure. Local governments also are dealing with fiscal pressures. In June, the U.S. Conference of Mayors projected that by the end of 2011, 25 metropolitan economies will have unemployment rates higher than 12%, 75 will still be in double digits, and 193 (53% of all such areas) will have rates higher than 8%. The mayors group projected that by the close of 2014, over half of metropolitan areas will have returned to their peak employment levels, but that 48 are not expected to regain jobs lost during the recession in the next decade. Similarly, the National League of Cities has observed that state-local fiscal pressures require layoffs and difficult choices about cuts to necessary services like schools, fire, and police. Much of the public responsibility to build, operate, and maintain infrastructure resides with states and localities. Cities and states normally rely on the bond market to finance long-term projects, meaning that turmoil in financial markets creates concern for financing economic development and infrastructure projects. Virtually all state and local governments have balanced budget requirements and, before undertaking any borrowing, must carefully ensure their ability to repay. Thus, their capacity to self-finance needed projects is more constrained during economic downturns than when the economy is growing rapidly. Facing budgetary pressures and more difficult access to financing, officials may scale back, delay, or cancel projects. As a result of these conditions, organizations representing states and municipalities have issued agenda documents with both policy and short-term and long-term assistance recommendations for Congress and the Administration, including those in areas of infrastructure, economic development, businesses, manufacturing, and trade. The concept of countering the effect of economic downturn with legislation to spur job creation through increased spending on public works infrastructure is not new. In recent decades, Congress has done so on several occasions. For example, in 1983 ( P.L. 98-8 ) and 1993 ( P.L. 103-50 ), Congress appropriated funds to a number of existing federal infrastructure and public works programs in hopes that projects and job creation would be stimulated quickly. During the recent recession, policymakers took a number of monetary and fiscal policy actions to stimulate the economy. On the monetary policy side, the Federal Reserve has used both conventional tools (lowering short-term interest rates) and unconventional tools (purchasing equity interest in financial firms, long-term Treasury debt, and mortgage-backed securities). On the fiscal policy side, Congress enacted several measures in 2009 and 2010 that were intended to increase demand for goods and services through increases in federal spending and reduction in taxes. The largest of these was the American Recovery and Reinvestment Act of 2009 (ARRA, P.L. 111-5 ), a $787 billion package consisting of $286 billion in tax cuts and the remainder in spending. The spending in ARRA included more than $62 billion in infrastructure investment. While the fiscal stimulus from ARRA added to demand over time, this effect diminished as spending authority was spent and tax cuts expired. By CBO's estimate, ARRA funds will continue to be spent out through 2020, but the economic effects of ARRA—including direct and indirect effects—peaked in the first half of 2010. After that, the stimulus still adds to demand but by smaller amounts, and its effect eventually turns negative. At least two factors are bringing renewed attention to these issues, including whether another round of fiscal stimulus—including infrastructure spending—is needed. One is the slow pace of the current recovery. ARRA was controversial when enacted. While most economists believe it was effective, there is dispute among some economists. Nevertheless, there is widespread desire to accelerate job creation and economic recovery, although consensus on how to do so is not apparent. Another factor is that debate about additional job-creating programs has merged with discussion among infrastructure advocates that has been ongoing for years about the need for investment to address problems of aging and deteriorating public works. These infrastructure problems have been increasingly recognized by policymakers and the public at large. It is argued that U.S. investments in public infrastructure have declined significantly in recent decades, to the point that this country is underinvesting in its critical assets, and is failing to construct new facilities or adequately maintain existing systems. The perception that current investment levels are inadequate is in part supported by data which show that, relative to GDP, infrastructure spending has declined about 20%, from 3.0% of GDP in 1960 to 2.4% in 2007. During this same period, spending shifted from predominantly on capital (60% in 1960, compared with 45% in 2007) to operation and maintenance (40% in 1960, compared with 55% in 2007). In a growing economy, infrastructure should hold its own, but other data show that that has not been the case. While total government spending on infrastructure increased from $92 billion in 1960 to $161 billion in 2007, it declined from a high of $1.17 per capita in 1960 to $0.85 per capita in 2007 (in 2009 dollars). In response to these multiple concerns, on September 8, 2011, President Obama proposed the American Jobs Act ( S. 1549 ), legislation that includes tax cuts for businesses, extended unemployment insurance, expanded payroll tax cuts, $80 billion in spending on transportation infrastructure and school repair and modernization, and establishment of a national infrastructure bank to finance large infrastructure projects. Congress is to soon consider the President's proposal and possibly others for job creation and economic recovery. Most people probably think about roads, airports, or water supply when they refer to infrastructure, having in mind the types of systems or facilities that are publicly provided and are important to the productive capacity of the nation's economy. But some analysts argue that such a conception is too narrow. Accordingly, the term can be defined more broadly to also include spending by the private sector, such as by private utilities that provide electricity or natural gas. In addition, other types of public investment, such as public buildings, may not add directly to the productive capacity of the economy but do represent assets in the nation's capital stock. There is no single definition of infrastructure (see the box "What Is Infrastructure?" below). Today, many policymakers and stakeholder groups define the term broadly to include facilities and categories that vary considerably in the degree of historic federal investment in building or rebuilding physical structures (e.g., highways compared with public schools) and systems that have a long history of combined public and private ownership (water resource projects as well as electric transmission systems, some of which are federally owned, for example). Indeed, today there is considerable blurring between public and private infrastructure, raising more frequent questions about what should be the role of government, including the federal government, in providing infrastructure services. In part, this is due to increasing reliance on the private sector—through contract operations, full ownership and other arrangements—to provide functions and services that typically are thought of as public. Examples include prisons, highways, passenger rail, and postal services and mail delivery. A relatively new dimension in today's context is the notion of coupling public works with investments in environmentally friendly systems that incorporate renewable technologies or energy efficiency—called "green infrastructure" (see discussion below). Academics, economists, and policymakers debate two key issues concerning the contribution of infrastructure investment to the economy. One is the issue of the effects of infrastructure spending and investment on productivity and growth. The second related issue is the role of infrastructure spending, including short-term job creation, as a countercyclical tool to support economic recovery. The question of whether or how the availability of public infrastructure, and investments in public infrastructure, influence productivity and growth has long interested academics. One economist describes the issue as follows: The argument is simple. Infrastructure is a public good that produces positive externalities for production. The provision of adequate infrastructure is a necessary condition for private firms to be productive. Even if infrastructure is also provided for its amenity value (i.e. for its direct utility value to individuals) it is obvious that it plays a central role in generating external effects that fundamentally alter the capacity of the economy to produce goods and services. Just imagine an economy without roads or telephones to think about the impact that infrastructure has on productivity. Few would argue that infrastructure isn't important to economic activity. A Mercatus Center researcher observed that "economists have long recognized the value of infrastructure. Roads, bridges, airports, and canals are conduits through which goods are exchanged." But the precise ways in which infrastructure is important, and to what degree (e.g., new construction or maintenance of existing systems), are questions that have interested researchers. Thus, public roads are important, but by themselves, they don't produce anything. Yet they are linked in complex ways to economic growth. Economically, what is important are the services that roads provide in transporting goods and people, mitigating congestion, etc. Academic interest in the issue of economic payoff associated with public infrastructure spending was motivated in part by recognition of declines in public investment in the early 1970s and declines in economic productivity growth at about the same time. The question for researchers was whether there was linkage, or causality, between public investments and economic productivity and, consequently, whether underinvestment in infrastructure helped to explain the slowdown in productivity growth. Research reported in the late 1980s found that there are very large returns on investment from infrastructure spending and, by implication, argued that part of the U.S. productivity slump in the 1970s and 1980s was due to a shortfall of investing in infrastructure. Some of this early work found that a 10% rise in the public capital stock would raise multifactor productivity (meaning, changes in economic output resulting from the combination of labor, capital, materials, fuels, and purchased services) by almost 4%. This was a very high estimate and, as such, was very controversial. Subsequent investigations by others found that the initial results were highly sensitive to numerous factors, such as minor changes in data, or time period, or sectors of the economy that were analyzed. During the 1990s, further research on this issue modified the methodology used to analyze the economic effects of investing in public infrastructure and either affirmed or challenged the findings of the initial work. Although not all subsequent studies found a growth-enhancing effect of public capital, a general consensus has developed over time that there are positive returns on investment in public infrastructure, but that the impact is less than was first reported. Some of this research suggests that investments in energy infrastructure have the greatest impact on long-term wages and investment, followed by mass transit, and water and sewer. Another aspect of the issue is the interconnected nature of multiple infrastructure systems and the argument that being competitive in a global economy requires investment in what some refer to as "supply chain infrastructure," that is, ports and associated road, rail, and air connections that facilitate manufacturing, transport, and export. According to this view, inefficient connections and capacity limitations lead to delays that raise the price of a company's product and make it harder to compete globally, especially if global competitors out-perform the United States in this regard. One conclusion of more recent research is that both the average return and range of return to the economy vary, based on the type of infrastructure and the amount of infrastructure already in place. In other words, the larger the existing stock and the better its efficient use and current quality, the lower will be the impact of new infrastructure. Also, the effect of new public investment will crucially depend on the extent to which spending aims to alleviate bottlenecks in the existing network of infrastructure systems and facilities. Since mid-2008, Congress and the Administration have attempted to address the nation's significant economic difficulties through a variety of policy approaches. Policymakers have debated a range of options for doing so and, as noted previously, have used a combination of tools to stimulate the economy. Under discussion now is the need for additional actions. Throughout these debates, some have argued that economic stabilization can best be achieved through monetary policy (i.e., the Federal Reserve's ability to adjust interest rates), coupled with automatic fiscal stabilizers. CBO and others contend that the conventional policy tools available to the Federal Reserve for additional monetary stimulus currently are limited, since the Fed announced that it will continue to hold short-term interest rates near zero at least through mid-2013. The Fed could again use unconventional monetary policy tools, such as purchasing Treasury securities, as it has done since 2008. Others have argued for governmental policy to provide fiscal stimulus, which can involve tax cuts, government spending increases, or both. During debates that preceded enactment of ARRA in February 2009, a wide range of experts—including economists who generally differ in their economic policy views, such as Martin Feldstein and Paul Krugman —contended that, in times when neither consumers nor businesses are spending, a massive infusion of government spending is needed quickly to energize economic activity. Infrastructure investment, they argued, can be an important source of stimulating labor demand when the labor market is underutilized, and enhancing U.S. productivity through long-neglected investments in roads, bridges, water systems, ports, etc. Again today, some advocate using direct fiscal stimulus through a combination of measures such as infrastructure investments, state fiscal relief, employer tax benefits, and expanded unemployment insurance to provide a needed boost for the economy. The economic value of infrastructure investments follows from the cumulative, or multiplier effect, which is described by CBO. Infrastructure spending directly increases employment because workers are hired to undertake construction projects. It also adds to demand for goods and services through purchases of material and equipment and through additional spending by the extra workers who are hired … that increase in demand leads to further hiring. According to this view, spending on projects to address unmet infrastructure needs presents an opportunity to contribute significantly to economic recovery. During recessionary periods and the beginning of recovery, the state of the U.S. economy is such that there is excess capacity of both labor and materials for infrastructure projects. Large number of workers are unemployed, especially in the construction sector, which reported a 13.5% unemployment rate in August 2011. It is widely believed that a large number of those workers (many of whom had been employed in residential construction) could be employed on infrastructure construction projects. This same argument was raised during debate that preceded enactment of ARRA, when similarly high unemployment prevailed among construction workers. Proponents argue that the cumulative, or multiplier, effect of infrastructure spending on the economy, discussed previously, makes it especially beneficial to economic recovery. CBO recently estimated the multiplier effect of major provisions of ARRA and concluded that each dollar transferred to state and local governments for infrastructure raised GDP above what it would have been otherwise by a total of $1 to $2.50 over several quarters. In CBO's analysis, the output multiplier of infrastructure spending was the same as ARRA provisions for purchases of goods and services by the federal government, and both were greater than impacts of other ARRA provisions such as tax cuts for individuals. However, some critics of using public spending to create jobs argue that the costs far exceed the benefits. Public infrastructure's potential role in contributing to job creation at a time when the economy continues to sputter raises several questions, including does infrastructure spending really create jobs, does it invest in assets with long-term value, and how are needs and priorities determined? These issues, along with the potential contribution of investments in "green" infrastructure, are explored in the remainder of this report. One of the ways in which Congress has tried to spur job growth and stem job losses to mitigate the impact of recessions is by directly raising demand for (i.e., increasing spending on) goods and services. That is to say, Congress has increased federal spending to counteract the labor market effects of decreased consumer purchases. Most often in the postwar period, Congress has engaged in direct job creation by increasing federal expenditures on public works. When Congress has considered raising spending on infrastructure or other federally funded activities to help stimulate a flagging economy, a commonly asked question is "how many jobs will be created?" Although there are other bases upon which to develop estimates of the number of jobs created by a given economic activity, an input-output (I-O) model of the economy often is used due to its cost-effectiveness. An I-O model describes the interrelationships between industries in the production process, showing how the dollar value of a sale is distributed across industries at a particular point in time. It thus reflects how much of the purchased product comes from final and supplier industries. An I-O table might show, for example, the dollar value of concrete produced by the nonmetallic minerals product manufacturing industry and of steel produced by the primary metals manufacturing industry that the construction industry uses to produce its various final outputs (e.g., buildings, roads, and dams). The output requirements from each intermediate and final goods industry are then converted to employment requirements. Employment requirements are derived from productivity estimates for each industry at a particular point in time. The employment requirement associated with a given type of final demand is the employment in the industry producing the final product or service plus the employment in supplier industries. In other words, it is an approximation of both the direct and indirect employment dependent upon (supported by) the economic activity. It commonly is expressed as the number of jobs per billion dollars of expenditures valued in a particular year's dollars. Like an I-O table, an employment requirements table is a matrix of hundreds of columns and rows. Each column displays the number of jobs supported in each of the industry rows by an expenditure of one billion dollars in an industry as defined in the North American Industry Classification System (NAICS). For example, one billion dollars spent in the construction industry supports direct employment in the industry's various components (e.g., bridge construction) and indirect employment in the many industries that supply goods and services to the construction industry (e.g., fabricated metal bridge section manufacturing). Actual job creation may differ from estimated job creation, however, because I-O models assume that resources are unlimited. If, for example, the economy were performing at a fairly high level (i.e., plants operating near full capacity and few workers unemployed), the actual number of new jobs might fall short of the estimate due to capital and labor constraints. In addition, I-O tables may not differentiate between imported and domestically produced goods. As a consequence, the domestic employment impact of expenditures might be overstated to the extent that inputs are imported. Employment requirements tables also do not distinguish between jobs by number of hours worked (part- or full-time) or length of employment (short- or long-term). Induced jobs, that is, the number of jobs resulting from purchases of goods and services by those in first-round (direct and indirect) jobs, may be included in job creation estimates as well. For example, workers who are directly or indirectly employed as the result of a highway construction program might spend some of their wages in grocery stores, at auto repair shops, etc. Estimates of induced jobs (i.e., the multiplier) are considered tenuous in part because their calculation relies on estimates of how much of the additional money earned by first-round workers will be spent versus saved. The jobs multiplier will further depend on economic conditions (e.g., the availability of labor, the inflation rate). Job creation estimates vary from one source to another depending on such factors as industry definition and time period. The Federal Highway Administration (FHWA) provides the most widely cited estimate of jobs supported by federal highway investments. The latest iteration of the FHWA model indicates that a $1 billion expenditure on highway construction in 2007 supported a total of 30,000 jobs: 10,300 construction-oriented jobs (i.e., jobs at construction firms working on the projects and at firms providing direct inputs to the projects, such as guard rails); 4,675 jobs in supporting industries (i.e., jobs at companies providing inputs to the firms directly supplying materials and equipment used in highway construction, such as sheet metal producers who supply guard rail manufacturers); and 15,094 induced jobs (i.e., jobs dependent on consumer expenditures from the wages of workers in "construction-oriented" and "industry-supporting" jobs). The FHWA noted two caveats about I-O analysis in addition to those mentioned above. First, the job estimate "utilizes the national average mix of construction materials and labor inputs. Specific projects and local utilization ratios will alter the actual employment supported." For example, a different combination of materials and number of workers might be required for road resurfacing compared to bridge construction projects. Second, the 30,000 jobs estimate "includes 'new jobs' to the extent unemployed labor is hired; ... and 'sustained jobs' as current employees are retained with the expenditure." Another source of job creation estimates is the employment requirements table of the U.S. Bureau of Labor Statistics (BLS). Its most recent employment requirements table is based on the 2002 national I-O table developed by the U.S. Bureau of Economic Analysis (BEA), which BLS updated to reflect 2008 production and distribution technologies. The updated I-O table and 2008 labor productivity data were then used to develop an employment requirements table for 2008. The BLS employment requirements table indicates that 11,265 jobs were directly or indirectly dependent upon $1 billion of spending on construction activities in 2008. A majority of the jobs were in the construction industry itself (7,174 direct jobs). The 2008 figure from the BLS employment requirements table for construction expenditures (11,265) is lower than the 2007 direct and indirect jobs figure for highway expenditures from the FHWA (14,975). Another example of an infrastructure job creation estimate is provided by the BEA's Regional Input-Output Modeling System (RIMS II). Currently, the BEA uses either the 2002 benchmark I-O for the nation or the 2008 annual I-O for the nation adjusted by 2008 data from its regional economic accounts to provide subnational estimates. As shown in Table 1 , the number of jobs directly and indirectly supported by an expenditure of $1 billion in the construction industry in a given state in 2008 ranged widely. The main reason for the disparity in estimates is that each state has a different mix of industries within its borders. As a result, one state varies from the next in its capacity to supply all the intermediate goods needed to carry out construction projects. A secondary explanation is that earnings vary by state. Funding infrastructure is a long-term investment, not quick-fix spending, that should lead to something durable, useful, and financially productive. The long-term nature of such investments can be at odds with the goal of quickly injecting money into the economy. Thus, the overriding question in debating infrastructure spending as part of a job creation package is, what will the increased spending buy? Two important considerations regarding any such proposal are, will the proposal produce short-term or long-term benefit, and will it produce a significant amount of incentive for the economy, relative to its budgetary cost. Some analysts are cautious about the effectiveness of infrastructure spending in this regard because of one key issue: timing. This concern was described in testimony by the Director of the Congressional Budget Office in 2008. The timing of fiscal stimulus is critical. If the policies do not generate additional spending when the economy is in a phase of very slow growth or a recession, they will provide little help to the economy when it is needed.... Poorly timed policies may do harm by aggravating inflationary pressures and needlessly increasing federal debt if they stimulate the economy after it has already started to recover. **** For federal purchases [of goods and services, such as infrastructure spending], the primary issue in targeting the spending is that of timing ... because many infrastructure projects may take years to complete, spending on those projects cannot easily be timed to provide stimulus during recessions, which are typically relatively short lived. By definition, the goal of stimulus spending is to get money into the economy swiftly. But that objective conflicts with the reality of building infrastructure projects that typically are multiyear efforts with slow initial spendout. Public works projects are likely to involve expenditures that take a long time to get underway and also are spread out over a long time. Large-scale construction projects generally require years of planning and preparation, including cost analysis, land acquisition, engineering, environmental review, and securing financing. For major infrastructure, such as highway construction and water resource projects, the initial rate of spending can be 25% or less of the funding provided in a given year. Based on CBO information, the National Governors Association reported spendout rates for several infrastructure categories: About 68% of highway and 45% of transit obligations spend out over the first two years of a project. About 19% of airport obligations spend out in the first year and another 42% in year two. About 24% of drinking water and wastewater obligations are expended over two years, and 54% over three years. Economist Mark Zandi, who has been an advocate of infrastructure spending to stimulate economic recovery, acknowledged that it does take a substantial amount of time for funds to flow to builders, contractors, and the broader economy. "Even if the funds are only used to finance projects that are well along in their planning, it is very difficult to know just when the projects will get underway and the money spent." However, advocates of infrastructure spending have two responses to this concern. First, to the extent that recovery from a lengthy recession is slow—as it is now—projects with extended timeframes can still contribute to recovery. Thus, the general concern about timing is less relevant, they say. Second, because every major infrastructure category has significant backlogs of projects that could proceed except for funding, advocates are confident that large amounts of actual construction work can be undertaken with increased financial assistance. In 2009, policymakers concerned about these timing issues included requirements in ARRA that stimulus funds be awarded to "shovel ready" or "ready to go" infrastructure projects that could proceed to construction and contribute to economic output quickly. ARRA's effectiveness in meeting that challenge is not fully known, but may be less than was hoped for, at least according to CBO: "As a practical matter, the experience with ARRA suggests that fewer projects are 'shovel ready' than one might expect: By the end of fiscal year 2009, outlays for infrastructure spending from ARRA made up less than 10 percent of the budget authority granted for infrastructure in that year." A related concern raised by some is whether spending that is undertaken in efforts to stimulate economic recovery will represent investment in long-term assets for society. Critics contend that emphasizing "ready to go" projects is likely to result in spending on many with marginal value, such as projects with plans that have been backlogged for some time because they lack sufficient merits. Critics contend that most projects are small and do not solve long-term problems or have strategic value. Infrastructure projects should be justified on the merits, not as job-creating instruments. One such critic of additional infrastructure spending noted, "If additional infrastructure is worthwhile, it should be constructed. Such determinations are most likely to be accurate, however, when they are made without the haste associated with an attempt to respond to economic weakness." Undoubtedly, some types of public jobs programs support jobs that have little long-term impact, such as hiring workers to sweep streets or rake leaves, sometimes called "make work." Projects that involve substantial new construction are slower to complete and to impact jobs, but often have a political appeal because of high visibility to the public. Some infrastructure, such as highway resurfacing and minor road repairs or replacement of pumps and compressors at water facilities, does benefit the value of the nation's capital assets and can be done more quickly than new construction. Likewise, acquiring new clean fuel buses or rehabilitating transit stations can occur more rapidly than extending collector sewer lines into unsewered communities. Many public officials believe that it is possible to balance both short-term and long-term goals through infrastructure projects. Some economists contend that public infrastructure investments benefit economic growth only if the impact of the infrastructure outweighs the adverse effects of higher taxes that are needed to finance the investment, or if it outweighs the adverse effects of spending cuts in other areas, such as properly maintaining existing public works systems. Higher deficits that result from stimulus spending slow economic growth in the long run, it is sometimes said, because government borrowing crowds out private investment. Critics of this view say that this concern is valid in times when the economy is working at full capacity, because under those circumstances, government spending just changes the mix of jobs with no change in the overall quantity or quality of labor. According to this alternative view, government spending in a severe and lingering economic slowdown affects resources and labor that are idle, and it does not fully displace private investment. Other economists say that if federal assistance merely provides fiscal relief by paying for spending that would have occurred anyway—that is, if federal dollars merely substitute for or replace local dollars invested in the same activity—it provides no economic boost. In response, state and local public officials say that that is not the case in today's economy. Because of the pressures that they continue to face, states and cities have been cancelling and delaying infrastructure projects. Another way of describing this situation could be to say that what is under discussion is in reality about holding state and local governments harmless in order to encourage them to carry out projects that they could not otherwise do, because of budget shortfalls. Traditionally, setting priorities for infrastructure spending is based on a combination of factors. Estimates of funding needs are one factor that is commonly used as a measure of the dimension of a problem and to support spending on some activities relative to others, as in: funding needs for X are much greater than for Y, therefore, society should spend more heavily on X. One widely cited estimate of the nation's infrastructure needs is presented in the finding of the American Society of Civil Engineers (ASCE) that the condition of the nation's infrastructure merits a letter grade of "D." According to ASCE, five-year funding needs total $2.2 trillion, while the "gap" between estimated investment needs and estimated spending is $1.8 trillion. ASCE reported the condition of a dozen categories of infrastructure, including roads ("Poor road conditions cost U.S. motorists $67 billion a year in repairs and operating costs—$333 per motorist"), dams ("The gap between dams needing repair and those actually repaired is growing significantly"), wastewater ("Aging, underdesigned, or inadequately maintained systems discharge billions of gallons of untreated wastewater into U.S. surface waters each year"), and schools ("No comprehensive, authoritative nationwide data on the condition of America's school buildings has been collected in a decade. The National Education Association's best estimate to bring the nation's schools into good repair is $322 billion."). However, assessing "need" is complicated by differences in purpose, criteria, and timing, among other issues. In the infrastructure context, funding needs estimates try to identify the level of investment that is required to meet a defined level of quality or service. Essentially, this depiction of need is an engineering concept. It differs from economists' conception that the appropriate level of new infrastructure investment, or the optimal stock of public capital (infrastructure) for society, is determined by calculating the amount of infrastructure for which social marginal benefits just equal marginal costs. The last comprehensive national infrastructure needs assessment was conducted by the National Council on Public Works Improvement that was created by the Public Works Improvement Act of 1984 ( P.L. 98-501 ). The Council reported in 1988 that government outlays for public works capital totaled about $45 billion in 1985 and that a commitment to improve the nation's infrastructure "could require an increase of up to 100 percent in the amount of capital the nation invests each year." This estimate of future needs by the Council may have been imprecise because of the inherent difficulties of needs assessments, something its report discusses in detail. It is worth highlighting a few of these key difficulties as a cautionary note when attempting to interpret infrastructure needs assessments. One of the major difficulties in any needs assessment is defining what constitutes a "need," a relative concept that is likely to generate a good deal of disagreement. For this reason, some needs assessments are anchored to a benchmark, such as current provision in terms of physical condition and/or performance. This current level of provision may be judged to be too high by some and too low by others, but nonetheless it provides a basis for comparison as future spending needs can be estimated in terms of maintaining or improving the current condition and performance of the infrastructure system. Needs estimates in highway and public transit are calculated in this way by the U.S. Department of Transportation (DOT). The Environmental Protection Agency (EPA) similarly estimates total U.S. funding needs for wastewater treatment facilities. EPA defines a "need" as the unfunded capital costs of projects that address a water quality or water quality-related public health problem existing as of January 1, 2008, or expected to occur within the next 20 years. In some cases, estimates are intended to identify needs for categories of projects that are eligible for assistance under various federal programs. By being defined in that manner, assessments based solely on funding eligibility may not take into consideration needs for non-eligible categories, such as replacement of aging infrastructure or projects to enhance security. Some federal agencies estimate the funding necessary to bring the current infrastructure system to a state of good repair. The resulting funding estimate is sometimes referred to as the infrastructure "backlog." Again, among other problems, such as inventorying the current condition of infrastructure and calculating repair costs, the needs estimate is affected by judgments about what constitutes a state of good repair. It is worth noting, too, that needs assessment are often conducted by organizations with a vested interest in the outcome. This is most obviously a concern when a needs assessment is conducted by an advocacy group, but may also occur with government agencies. A second major difficulty with needs assessments is estimating future conditions, especially consumer demand for services that infrastructure provides. To begin with, estimating demand is difficult because it is based on a host of assumptions such as the rate of population and economic growth. Typically, the longer the time period over which conditions are forecast, the harder it is to accurately predict them. Particularly hard to predict, and, thus, the effect they have on infrastructure needs, are structural changes in the economy and technological change. In addition, however, consumer demand can vary enormously depending on how a service is financed and priced, as well as other public policy decisions including regulation and conservation. For example, highway infrastructure is primarily financed by fuels and other taxes that provide a vague signal or no signal at all about the total cost of driving, particularly the external costs such as the fuel and time wasted in congested conditions. Highway tolls, on the other hand, particularly those that fluctuate in line with congestion, provide a direct price signal for a trip on a certain facility at a certain time of the day. Pricing highway infrastructure in this way has been found to reduce travel demand, thereby affecting infrastructure need. Consumer demand can sometimes be met without infrastructure spending. For example, water supply needs can be reduced by employing water conservation methods. Finally, it is worth mentioning that the need for public funding to supply infrastructure, including federal support, may often be an open question because the roles of the public and private sector can and do shift over time. Even within the public sector, the roles of federal, state, and local governments change and these shifting intergovernmental relationships may even affect the assessments of infrastructure needs. A third major difficulty with infrastructure needs assessments is that needs estimates for individual elements of public infrastructure are rarely comparable. Some assessments include only capital spending, others include both capital and operation and maintenance (O&M) spending. Some estimates of need are developed for the purposes of short-term, fiscally constrained spending plans, while others are developed to assess long-term needs based on current system condition and performance, future demand, and the effects of pursuing different policy options. Some needs assessments are for public sector spending by all levels of government, while others focus only on federal spending. Furthermore, needs estimates are rarely directly comparable because of differing underlying assumptions, such as those about economic and population growth, based on when the assessment is being done and for what purpose. Even comparing assessments for the same category over time can be difficult, if criteria of what gets counted change. Needs surveys are likely to be conducted at different times, and thus will be expressed in different years' dollars. Comparing dollar estimates of infrastructure needs from different assessments is difficult. Many estimates are prepared in nominal dollars for the reference year, while others, particularly multi-year estimates, are sometimes prepared in constant dollars for a base year. Because there are different ways to inflate and deflate nominal dollar estimates, it should not be assumed that dollar estimates for the same year are necessarily comparable. Because of major differences in coverage and methodology, individual needs assessments cannot be added together to provide a single estimate of future public infrastructure needs, despite the political desire to do so. Moreover, as needs assessments are typically prepared separately, there may be instances where a need for a type of infrastructure is included in more than one estimate, resulting in double counting, and other instances of omission, resulting in undercounting. As separately estimated, these assessments also ignore competitive and complementary situations in which spending levels in one area may affect needs in another. For example, in the case of transportation infrastructure, an improved freight rail line might reduce the need to improve the highway system to accommodate truck traffic. A further complication arises in the context of evaluating job creation plans—whether infrastructure funds are targeted to true need, and whether "need" is defined by engineering assessments and established distribution methods, or by economic measures such as unemployment or the effectiveness of programs to pull in or leverage private capital. A relatively recent addition to debate over the issues discussed in this report is the concept of growing the economy and creating jobs with investments that will promote clean energy and environmental protection. In the current context of economic recovery, consideration of "green" projects is less prominent than it was preceding enactment of ARRA in 2009, but the concept continues to have advocates who contend that investments in technologies with improved energy efficiency, energy security, or environmental protection will benefit the economy. Several interest groups have advocated these types of proposals. Among these, the Center for American Progress (CAP), a public policy and research think tank, recommended green investment projects totaling $100 billion as part of "A Strategy for Green Recovery" and also has advocated on behalf of the economic benefits of investing in clean energy. Also, a February 2011 report by the BlueGreen Alliance and the Economic Policy Institute argues that investments in the green economy can address near-term economic challenges of creating jobs and the long-run challenge of helping global economies transition to less carbon-intensive forms of economic activity. Several questions arise concerning such proposals. First, what, exactly, is "green infrastructure?" The term is less precisely defined than is traditional infrastructure (see page 4), which some "green" advocates now refer to as "gray infrastructure." In the context of benefitting economic activity, green infrastructure has been broadly defined to include support for constructing the manufacturing infrastructure to develop and commercialize various technologies that are more energy efficient (e.g., advanced vehicle batteries) or more environmentally friendly (e.g., investments in renewable energy sources and the electricity grid to transmit and distribute clean energy). Renewable energy technologies generate electricity from resources such as the sun or wind, or produce transportation fuels from biomass, with essentially no net greenhouse gas emissions. Most of the future growth in green jobs is generally envisioned as coming from the growth in deployment of renewable energy technologies. Attention also has been given to mass transit projects that can decrease energy consumption and reduce global warming pollution. Similarly, many advocates favor such other technologies or techniques to retrofit schools and public buildings for greater energy efficiency. A second question is, can investment in "green" projects create jobs that benefit the economy's recovery? One aspect of this is, are there "ready to go" "green" projects that could create jobs quickly? As previously discussed, the key to stimulus spending is to get funds moving quickly into the economy. However, many of the proposals by green economy proponents were not conceived for the purpose of quickly stabilizing or increasing the number of jobs in the nation, or in industries particularly hard hit by recession. Studies like CAP's 2008 report recommend categories of projects to create green jobs, such as full funding of federal energy-efficiency programs, which "can start stimulating the economy relatively rapidly" and others, such as new authorization for grants to states to support manufacturing plant retooling to produce clean and energy-efficient technologies, that are "less fast-acting." Eighty percent of CAP's recommended funding would have been for "less fast-acting" programs. Critics say that many types of "green" projects are pricey, are subsidized through tax expenditures, and would do little to benefit the economy rapidly, but proponents contend that "green" investments represent a downpayment on long-term economic growth and should be done even over a somewhat longer time period. One environmental advocacy group, the Alliance for Water Efficiency, estimated that investments in water efficiency programs could increase GDP by $1.3-1.5 million per million dollars of direct investment. The types of projects include installing green roofs, raingardens, and permeable pavement that can reduce the need for new wastewater treatment plants and stormwater and sewer pipes; restoring wetlands and natural floodplains; and residential and commercial water efficiency projects. A final question is, what is the job creation potential of "green infrastructure" investments? Estimating the number of jobs dependent upon green infrastructure activities presents a greater challenge than estimates related to infrastructure projects as traditionally defined. As mentioned previously, the basis for most data collection by U.S. statistical agencies is the North American Industry Classification System (NAICS). It currently does not identify separately so-called green industries (e.g., those that utilize renewable resources to produce their outputs, or those that manufacture goods which minimize energy use). Within NAICS, the electric utility industry is disaggregated into hydroelectric, fossil fuel, nuclear, and other power generation, transmission, and distribution. Such renewable sources of energy production as wind, solar, and biomass are not uniquely recognized; they are included in the "other" category. If harnessing the wind to produce electricity and plant material to produce biofuel requires a substantially different mix of inputs than relying on coal and gasoline, for example, the conventional input-output (I-O) model does not seem well-suited as a basis for estimating the number of jobs supported by these green activities. Similarly, within NAICS, the building construction industry does not have a unique category for "green" retrofitting (e.g., installing additional insulation, fluorescent lighting, or energy-efficient heating and air-conditioning systems). Retrofitting likely requires a combination of inputs from supplier industries that differs from the mix for the top-to-bottom construction of buildings, once again making use of conventional I-O models problematic. This recognized difficulty generally is either not mentioned, or how it is dealt with is not described, in analyses of green job creation. The 2008 CAP study, mentioned above, does address the problem. The researchers explain that because "the U.S. government surveys and accounts that are used to construct the input-output tables do not specifically recognize wind, solar, biomass, building retrofitting, or new mass transit as industries in their own right," they created synthetic industries by combining parts of industries for which data are available. The researchers provided an example in the case of the biomass "industry:" they constructed it by combining the farming, forestry, wood products, and refining industries; then they "assigned relative weights to each of these industries in terms of their contributions to producing biomass products." Further complicating the matter is the context and manner in which estimates of green jobs generally are presented. Studies often develop employment projections based on differing sets of assumptions and time horizons, with the resulting analyses producing wide-ranging estimates of the number of green jobs. For example, some attempt to estimate the number of direct and indirect jobs 10 or more years in the future that are supported by an assumed increase in the demand for energy that is met by an assumed shift during the projection period from coal to wind and geothermal power generation. Some reports also include induced employment, but this is not always made clear. In addition, some analyses relate to a particular state. Their results may not be generalizeable to other areas, because state economies have different mixes of industries and may not be able to provide any or all of the inputs for a particular green output. The analyses also may express job estimates per unit of power generated by renewable resources and saved by increased demand for energy-efficient products and equipment, rather than per dollar of investment in green activities. And, the assumptions and methodologies underlying the job creation estimates often are not clearly articulated, which makes thoughtful review of the results very difficult. For these reasons, policymakers considering which if any green infrastructure programs to fund to create and preserve jobs in the near term may not find helpful many green economy studies.
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During the recent recession, policymakers took a number of monetary and fiscal policy actions to stimulate the economy. Notably, Congress enacted the American Recovery and Reinvestment Act (ARRA) that provided increases in federal spending and reduction in taxes in order to increase demand for goods and services. However, as the economy is only slowly emerging from the recession, interest in using federal government spending to boost U.S. economic recovery has again intensified. There is widespread desire to accelerate job creation and economic recovery, although consensus on how to do so is not apparent. Policymakers at all levels of government are debating a range of options to address these problems. This report is an overview of policy issues associated with one approach that also was included in ARRA: using accelerated investments in the nation's public infrastructure as a mechanism to benefit economic recovery. When most people think about infrastructure, they probably have in mind systems that are publicly provided and are important to the productive capacity of the nation's economy. Today, policymakers define the term more broadly to include both publicly and privately owned systems and facilities and categories that vary considerably in the degree of historic federal investment in building or rebuilding physical structures. Academics, economists, and policymakers debate two issues concerning the contribution of infrastructure investment to the economy. One issue is the effects of infrastructure investment on productivity and growth. The second related issue is the role of infrastructure spending, which is typically a long-term activity, as a short-term mechanism to invigorate a sluggish economy. Research conducted over time has resulted in a general consensus that there can be positive returns on productivity of investing in infrastructure. Many experts now argue that infrastructure spending could be an important source of stimulating labor demand and enhancing U.S. productivity through investments in roads, bridges, water systems, etc. Still, some analysts are cautious about the effectiveness of this type of fiscal stimulus because of one key issue: timing. By definition, the goal of stimulus spending is to get money into the economy swiftly, but infrastructure spending is different. The reality is that large infrastructure projects typically are multiyear efforts with slow initial spendout that continues over a period of time. Spending advocates contend that to the extent that recovery from a lengthy recession is slow—as it is now—projects with extended timeframes can still contribute to the economy's recovery. A key question in debating infrastructure as part of job creation to aid economic recovery is, what will the increased spending buy? Two important considerations are, will it produce short-term or long-term benefit, and will it produce a significant economic boost, relative to its budgetary cost. A commonly asked question is, how many jobs will be created? Setting priorities for infrastructure spending is based on a combination of factors, often including estimates of funding needs. Determining "need" is complicated by differences in purpose, criteria, and timing. In the context of evaluating job creation plans, a further complication is whether funds are targeted to true need, and whether "need" is defined by engineering assessments, by economic measures such as unemployment, or a program's effectiveness in leveraging private capital.
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"Libel tourism" describes the act of bringing a defamation suit in a country with plaintiff-friendly libel laws, even though the parties might have had relatively few contacts with the chosen jurisdiction prior to the suit. Libel tourism, like "forum shopping," may be negatively associated with plaintiffs who attempt to strategically manipulate legal processes to enhance the likelihood of a favorable outcome. However, a "libel tourist" could also be described as a plaintiff seeking favorable law under which to obtain redress for a grievance which he perceives as legitimate. Regardless of the characterization, given the increasingly globalized market for publications, some have warned that the libel tourism trend will cause an international lowest common denominator effect for speech, whereby "every writer around the globe [will be subjected] to the restrictions of the most pro-plaintiff libel standards available." The practice has affected U.S. persons in several suits brought by litigants who wish to avoid the relatively high burden of proof necessary to win defamation claims in the United States. U.S. courts interpret the First Amendment to protect speech that would be considered defamatory under traditional common law and in many other countries. For that reason, U.S. authors and publishers have been especially vulnerable to the possibility that a foreign libel judgment will impose penalties for speech that is protected in the author's home country. Although a committee of the English House of Commons has recommended reforms, England has a long history of providing redress for reputational injuries. Modern English law appeals to potential libel tourists primarily because it offers a dual advantage to plaintiffs: plaintiff-friendly libel laws and a relatively low bar for personal jurisdiction in libel suits. As a result, although England is not the only country with plaintiff-friendly libel laws, English courts have been an especially popular venue for defamation suits against U.S. nationals. Because obtaining a judgment and actually receiving the money awarded constitute two separate components of a successful lawsuit, winning a judgment in a foreign court does not end the discussion. If a defendant chooses not to appear in a foreign court, the court will typically award a default judgment against the defendant. In such circumstances, plaintiffs in foreign libel suits might involve U.S. courts when they seek to enforce judgments against U.S. defendants because foreign courts typically lack jurisdiction over assets located in the United States. Thus, the U.S. response to libel tourism has focused primarily on subsequent actions to recognize or enforce foreign court judgments in U.S. courts. For example, the first federal law on point, the Securing the Protection of our Enduring and Established Constitutional Heritage Act (SPEECH Act), bars U.S. courts, both state and federal, from recognizing or enforcing a foreign judgment for defamation unless certain requirements, including consistency with the U.S. Constitution and section 230 of the Communications Act of 1934 (47 U.S.C. § 230), are satisfied. U.S. and English defamation laws derive from a common origin, but the latter have evolved into a comparatively plaintiff-friendly approach to defamation that has made England a common destination for libel tourists. Traditionally, at common law, defamation liability under both U.S. and English law was strict, meaning that a defendant did not have to be aware of the false or defamatory nature of the statement, or even be negligent in failing to ascertain that character. Instead, a plaintiff had to prove only that a statement (1) was defamatory; (2) referred to the claimant; and (3) was communicated to a third party. However, this common law liability evolved differently under U.S. and English jurisprudence. Today, the differences between the U.S. and English defamation law is primarily attributable to the U.S. Supreme Court's interpretation of the First Amendment to the U.S. Constitution. Today, U.S. defamation law places the burden of proof on plaintiffs, making it more difficult for them to win. The U.S. Supreme Court first established a federal constitutional privilege in defamation law in New York Times v. Sullivan , a landmark First Amendment case. The Court held that a public official is prohibited from recovering damages for a defamatory falsehood relating to his official conduct unless he or she can prove with "convincing clarity" that the statement in question was made with "actual malice," defined by the Court as "with knowledge that it was false or with reckless disregard of whether it was false or not." The Court derived this constitutional restriction from the text of the First Amendment, which prohibits any law "abridging freedom of speech or of the press," and which has been applied to the states through the Fourteenth Amendment. The Court further stated, "It would give public servants an unjustified preference over the public they serve, if critics of official conduct did not have a fair equivalent of the immunity granted to the officials themselves." The Court subsequently extended this constitutional protection to all "public figures." A second U.S. Supreme Court case, Gertz v. Robert Welch , marked another shift in U.S. defamation law away from the common law approach used by England. In that case, which addressed a defamation suit brought by a non-public figure, the Supreme Court rejected the English law of strict liability, holding that even a private plaintiff is required to show fault amounting to the defendant's negligence or higher to recover damages. Accordingly, a plaintiff in a U.S. court must prove (1) a false and defamatory communication that concerns another and is (2) an unprivileged publication to a third party; (3) fault that is at least negligence by the publisher; and (4) in certain instances, special damages. English courts, on the other hand, have not modified the traditional common law elements that a public official must prove to recover for defamation. Instead, they allow a defendant to invoke, as a defense, a qualified or conditional privilege, known as the Reynolds privilege. The Reynolds privilege is a relatively new defense, often referred to as "the test of responsible journalism." In the case of Reynolds v. Times , the court considered that statements in the newspaper, which related to the conduct of individuals in public life, should be covered by a qualified privilege. Thus, while Members of Parliament or other public officials need only prove the traditional common law elements of defamation, they may be barred from recovery if the defendants are members of the media who can show that the publication in question falls under the Reynolds privilege. The Reynolds privilege, however, has limited application. First, it does not appear to be available to authors or others who publish outside the realm of journalism, and, second, the judge decides whether the statement at issue was privileged (i.e., in the public interest), a decision that determines whether the Privilege will apply to the defendant. Defendants in libel tourism suits brought in England have typically not been able to invoke the Reynolds privilege because they either do not qualify as media or the judge has not deemed their statements privileged. In reporting the SPEECH Act out of committee in 2009, the House Committee on the Judiciary noted that British libel law has become more protective of free speech after the House of Lords issued a decision expanding the scope of Britain's Reynolds privilege. However, this may have little effect on the majority of libel cases brought against U.S. persons in Britain. Nevertheless, the U.S. response to libel tourism may motivate a re-examination of English libel law, and, indeed, some proposals to reform libel laws in England have already garnered attention. Among the changes that have been recommended are shifting the burden of proof in some cases and creating a one-year statute of limitations for libel cases arising from Internet speech, however future changes cannot be predicted. A prominent example of libel tourism is the suit brought by a Saudi billionaire, Sheikh Khalid Bin Mahfouz, against a New York author, Rachel Ehrenfeld, whose book documented his alleged role in financing terrorism. Although the book was published in the United States, an English judge allowed the case to proceed in England because 23 copies of the book were sold through the Internet to English residents. Ehrenfeld did not defend herself in the litigation, and the English court ultimately entered a default judgment against her, awarding more than $200,000 in damages and ordering her to destroy copies of the book and apologize. In subsequent testimony before the House Judiciary Committee, Ehrenfeld expressed a concern that libel tourism was "limiting [scholars'] ability to write freely about important matters of public policy vital to our national security." This prompted concerns among lawmakers about the possible negative impact of libel tourism on the fight against terrorism. Other cases have involved U.S. plaintiffs suing U.S. defendants. An English court dismissed at least one such case on forum non conveniens grounds (i.e., because England was an inappropriate forum for litigation given the parties' circumstances) despite finding that it had the requisite ground for jurisdiction. On some occasions, however, English courts allowed the suits to proceed in England as long as a book or other publication had at least some exposure there. These suits against U.S. defendants in foreign courts prompted many lawmakers and editorial boards to characterize the libel tourism phenomenon as a threat to the U.S. Constitution's strong free-speech protections. A key concern was that foreign libel suits would have a "chilling effect" on speech because the possibility of civil or criminal liability for expression would deter or stifle speech that is protected within the United States. In turn, without a strong national law in the area, the possibility of foreign libel suits could inhibit the exchange of ideas vital to a functioning democracy. Except where preempted by federal law, state law governs the recognition and enforcement of foreign judgments in U.S. courts. No federal law provides uniform rules, nor is the United States a party to any international agreement regarding treatment of such judgments. Although states generally must recognize judgments from sister states under the Full Faith and Credit Clause of the U.S. Constitution, that requirement does not apply to judgments from foreign courts. For that reason, even if one state enacts a law prohibiting its courts from enforcing foreign libel judgments, the judgment might be enforceable in another state where a defendant has assets. Nonetheless, many states' recognition statutes share identical language, because most are based on one of a few common sources—namely, rules articulated in Hilton v. Guyot , a 19 th -century U.S. Supreme Court case, or one of two uniform state acts, which in turn draw from Hilton . Principles of international comity (i.e., "friendly dealing between nations at peace" ) undergird all of these sources. Comity need not be applied reciprocally, and reciprocity has been disregarded as a basis for recognition in some recent U.S. cases. In contrast, countries such as England have adopted a reciprocity-based approach to recognition of foreign judgments. Such countries will generally decline to recognize U.S. judgments if U.S. courts would not recognize a similar judgment rendered by its courts. In Hilton , the Supreme Court explained that international comity is "neither a matter of absolute obligation, on the one hand, nor of mere courtesy and good will, on the other." Rather, "it is the recognition which one nation allows within its territory to the legislative, executive or judicial acts of another nation, having due regard both to international duty and convenience, and to the rights of its own citizens[.]" Under this principle, a foreign judgment should be recognized "where there has been opportunity for a full and fair trial ... under a system of jurisprudence likely to secure an impartial administration of justice ... and there is nothing to show either prejudice in the court, or in the system of laws under which it was sitting, or fraud in procuring the judgment." Although states are not bound by that interpretation, most states have adopted the basic approach from Hilton as a matter of statutory or common law. Two uniform laws —the 1962 Uniform Foreign Money-Judgments Recognition Act and the 2005 Uniform Foreign-Country Money Judgments Recognition Act, which clarifies and updates the 1962 version—provide statutory language which many state legislatures have enacted to codify the basic principles articulated in Hilton . More than 30 states have enacted one of the two model laws, in whole or in part. The model acts provide, as a general rule, that "any foreign judgment that is final and conclusive and enforceable where rendered," and in which an award for money damages has been granted or denied, shall be recognized. However, exceptions apply. Both the common law comity principles and the uniform statutes provide grounds for refusing to recognize foreign judgments. Most relevant is the discretionary public policy exception, which is based on the idea that "no nation is under an unremitting obligation to enforce foreign interests which are fundamentally prejudicial to those of the domestic forum." In states that have enacted the 1962 model act, a court may refuse to recognize a judgment arising from a cause of action or claim for relief that is "repugnant to the public policy of the state." The 2005 version, which only a handful of states have adopted, offers an even broader public policy exception. Under this exception, a state court may refuse to recognize a foreign judgment if the judgment itself, as opposed to the underlying cause of action, is repugnant to the public policy of the state. In addition, it provides a similar ground for nonrecognition if the judgment or cause of action is repugnant to the United States as a whole. By including the foreign judgment itself within the scope of the exception, the act allows a judicial examination of the laws and procedures under which the foreign judgment was rendered. However, although the 2005 act's public policy exception is explicitly broader than the 1962 act's exception, it appears that the change merely incorporates the trend among state courts to interpret the 1962 provision to include judgments, rather than only causes of action, and to include policies of the country as a whole rather than only of the states. These public policy exceptions have been raised as grounds for nonrecognition in the small number of actions brought in U.S. courts to enforce foreign libel judgments. Even prior to the enactment of the SPEECH Act, courts in such cases generally declined to enforce foreign libel judgments on the basis of the public policy exceptions, concluding that the foreign libel laws upon which the judgments were based are repugnant to the U.S. Constitution. Although state courts have generally declined to enforce foreign libel judgments, some states enacted statutes addressing the libel tourism phenomenon. The first was New York's Libel Terrorism Protection Act, which makes foreign defamation judgments unenforceable in New York state courts unless a court finds that the foreign country's defamation law provides "at least as much protection for freedom of speech and press" as U.S. law provides. The other state statutes include similar "at least as much protection" language. For example, under the Illinois and Florida statutes, courts "need not [recognize]" a foreign defamation judgment unless the court "first determines that the defamation law applied in the foreign jurisdiction provides at least as much protection for freedom of speech and the press as provided for by both the United States and [Illinois or Florida] Constitutions." In general, these statutes appear to codify, and perhaps expand, the public policy exceptions as applied to libel suits under the states' foreign judgment recognition statutes. Although courts applying state law before the statutes were enacted might have rejected enforcement under the states' existing public policy exceptions, these libel-specific nonrecognition provisions made it more likely that courts in these states would decline to enforce foreign libel judgments. New York, Florida, and California took the additional step of expanding the categories of people over whom courts in those states (and, by implication, federal courts applying state law there) may assert personal jurisdiction (i.e., persons over whom courts may exert power and whose rights and liabilities they may determine). New York's statute, for example, authorizes personal jurisdiction over "any person who obtains a judgment in a defamation proceeding outside the United States" against (1) a New York resident, (2) a person with assets in New York, or (3) a person who may have to take actions in New York to comply with the judgment. Under all three statutes, the extension of personal jurisdiction permits a cause of action for injunctive relief, whereby courts in those states may declare foreign defamation judgments unenforceable and rule that defendants in the foreign suits have no liability related to the judgments. This change in law would prevent the problems faced by New York author and prominent libel tourism defendant Rachel Ehrenfeld, whose action for a declaratory judgment establishing that Bin Mahfouz's judgment against her was unenforceable in the State of New York was dismissed for lack of personal jurisdiction in 2006. The 111 th Congress considered several proposals to address libel tourism, and ultimately passed the Securing the Protection of our Enduring and Established Constitutional Heritage Act (or the "SPEECH Act"), which was signed into law on August 10, 2010. The SPEECH Act avoided the constitutional questions that accompanied some of the other proposals. For example, S. 449 and H.R. 1304 , which were collectively referred to as the Free Speech Protection Act, would have authorized counter-suits and a basis for exercising personal jurisdiction over a person who served documents related to a foreign defamation lawsuit on a U.S. person. Had this approach been adopted, it may have been viewed as authorizing federal courts to exercise personal jurisdiction beyond the boundaries permitted by due process, which requires the defendants to have "minimum contacts" in the judicial forum, such that the court's assertion of jurisdiction over them conforms with traditional notions of fairness. For these reasons, as well as concern for international comity, the House Committee on the Judiciary indicated that this approach would be too aggressive. Accordingly, the SPEECH Act does not authorize counter-suits against plaintiffs in foreign libel cases. Instead, the SPEECH Act bars U.S. courts from recognizing or enforcing a foreign judgment for defamation unless certain requirements are satisfied. However, advocates of a federal cause of action have argued that, without the threat of a counter-suit, bars on enforcement like the one created by the SPEECH Act are insufficient to prevent a chilling effect on the speech of U.S. persons. The SPEECH Act prohibits domestic courts from recognizing or enforcing foreign judgments for defamation in any one of three circumstances: 1. When the party opposing recognition or enforcement claims that the judgment is inconsistent with the First Amendment to the Constitution, until and unless the domestic court determines that the judgment is consistent with the First Amendment, 2. When the party opposing recognition or enforcement establishes that the exercise of personal jurisdiction by the foreign court failed to comport with the due process requirements imposed on domestic courts by the U.S. Constitution, or 3. When the foreign judgment is against the provider of an interactive computer service and the party opposing recognition or enforcement claims that the judgment is inconsistent with section 230 of the Communications Act of 1934 (47 U.S.C. § 230) regarding protection for private blocking and screening of offensive material, until and unless the domestic court determines that the judgment is consistent with those provisions. Moreover, in any of those three circumstances, a U.S. citizen opposing recognition or enforcement of the foreign judgment may bring an action in a federal district court for a declaratory judgment that the foreign judgment is repugnant to the Constitution. The SPEECH Act also permits any action brought in a state domestic court to be removed to federal court if there is diversity jurisdiction or one party is a U.S. citizen and the other is either a foreign state or citizen of a foreign state. The SPEECH Act ensures that a party who appeared in a foreign court rendering a foreign judgment to which the act applies is not deprived of the right to oppose recognition or enforcement of that subsequent judgment. If the party opposing recognition or enforcement of the judgment prevails, the act allows the award of reasonable attorney fees under certain conditions. Finally, the SPEECH Act appears to preempt state laws related to foreign judgments. The enactment of the federal SPEECH Act may raise questions about its effect in state court proceedings in states with a libel tourism statute. It appears that, to the extent that the federal law places greater restrictions on the nonrecognition of foreign defamation judgments, it will be deemed to conflict and consequently preempt the relevant state law pursuant to the Supremacy Clause of the U.S. Constitution. The Supremacy Clause states that the U.S. Constitution and laws made in pursuance thereof "shall be the supreme law of the land; and the judges in every state shall be bound thereby, any thing in the Constitution or laws of any [s]tate to the contrary notwithstanding." In general, federal preemption of state law can occur where the federal law has an express provision to that effect, where there is a perceived conflict between the state and federal law, or where the scope of the statute indicates that Congress intended to occupy the field exclusively. The Court has identified two forms of implied conflict preemption: situations in which it is impossible for private parties to comply with both state and federal requirements and situations in which the state law frustrates the purpose of Congress. However, these categories should not be interpreted formalistically because the ultimate touchstone of the preemption analysis is whether, and to what extent, Congress intended, explicitly or implicitly, for the federal law to preempt relevant state law. Like many other federal statutes, the SPEECH Act does not contain an express preemption provision, but its language and legislative history strongly suggest that Congress intended to preempt state laws that conflict with the accomplishment of its purpose. The primary evidence of Congress's preemptive intent is the explicit language of the SPEECH Act itself. The statute states that its provisions are applicable in all "domestic" courts and defines a "domestic court" to include both state and federal courts, "notwithstanding any other provision of [f]ederal or [s]tate law." In addition, House and the Senate Judiciary Committee reports indicate that Congress believed the SPEECH Act would preempt "[s]tate laws related to foreign judgments." Finally, the importance of ensuring a uniform approach towards foreign libel judgments is also likely to weigh in favor of preemption. Congressional intent aside, the preemptive effect of the Supremacy Clause can be constrained by other constitutional principles, notably federalism and separation of powers, leading courts to apply a presumption against preemption when the federal law in question appears to interfere with a traditional area of state law. Ultimately, whether such a presumption applies depends primarily on how the federal law is best characterized. In the context of the SPEECH Act, the law's subject matter could be described as state courts and state judicial procedure, subjects that typically fall within the purview of the state legislation. However, the SPEECH Act is perhaps more aptly characterized as a law that ensures uniformity and predictability in the federal and state posture towards foreign libel judgments and, therefore, it will likely be perceived as a law addressing foreign affairs, a subject over which the Congress has the primary lawmaking authority. Accordingly, principles of federalism or separation of powers should not dissuade a court from deeming relevant state law preempted by the SPEECH Act. A decision by a domestic court pursuant to the SPEECH Act not to enforce particular foreign libel judgments could have negative repercussions on the enforcement of U.S. libel judgments in foreign courts. As discussed, some countries condition recognition of foreign judgments on the foreign country's reciprocal recognition of judgments of the same type. In such countries, U.S. courts' refusal to enforce libel judgments would likely serve as a ground for refusing to enforce libel judgments rendered by state or federal courts in the United States. In particular, in some areas of civil tort liability (e.g., antitrust law) the United States has developed what many believe are exceptionally plaintiff-friendly laws, and some countries have tried to undermine their extraterritorial effect. Any U.S. diplomatic efforts to oppose these efforts by a foreign country, however, could be compromised if the SPEECH Act is perceived as employing a similar tactic. Prior to the enactment of the Securing the Protection of our Enduring and Established Constitutional Heritage Act (SPEECH Act), concern existed over the effect the threat of foreign libel suits was having on the exercise of Americans' freedom of speech rights. Although the U.S. Constitution provides relatively strong freedom of speech protections, it did not prevent courts in countries with a less protective view of speech from entering libel judgments against U.S. persons. The SPEECH Act is intended to address this libel tourism phenomenon and reduce or eliminate the potential "chilling effect" foreign libel suits may have on speech protected by the First Amendment to the U.S. Constitution. Accordingly, the SPEECH Act prohibits domestic courts from recognizing or enforcing foreign judgments for defamation that are inconsistent with the First Amendment of the Constitution, that were entered by a court that exercised personal jurisdiction in contravention of the due process requirements imposed on U.S. courts by the Constitution, or that were inconsistent with section 230 of the Communications of 1934. Some have argued, however, that, without the threat of a counter-suit, this bar on enforcement will prove insufficient to prevent a chilling effect on the speech of U.S. persons. There are several state libel tourism laws that predate the enactment of the SPEECH Act; however, the SPEECH Act appears to preempt state lawmaking in this area. Although the SPEECH Act lacks an explicit preemption provision, it applies to all "domestic" courts and defines a "domestic court" to include both state and federal courts, notwithstanding any other provision of state law. Furthermore, the legislative history of the act indicates that Congress believed, one, that the SPEECH Act would preempt state laws related to foreign judgments, and, two, that a uniform national approach towards foreign libel judgments was necessary. The passage of the SPEECH Act may have implications for international comity. A decision by a state or federal court in the United States not to enforce particular foreign libel judgments could have negative repercussions on the enforcement of U.S. libel or other judgments in foreign courts. This will be particularly true in those countries that condition recognition of foreign judgments on the foreign country's reciprocal recognition of judgments of the same type. Similarly, in some areas, U.S. law is perceived as plaintiff-friendly, and the United States may find its diplomatic efforts to ensure that foreign countries recognize judgments pursuant to these plaintiff-friendly laws are opposed by countries' whose libel judgments are negatively affected by the SPEECH Act.
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The 111th Congress considered several bills addressing "libel tourism," the phenomenon of litigants bringing libel suits in foreign jurisdictions so as to benefit from plaintiff-friendly libel laws. Several U.S. states have also responded to libel tourism by enacting statutes that restrict enforcement of foreign libel judgments. On August 10, 2010, President Barack Obama signed into law the Securing the Protection of our Enduring and Established Constitutional Heritage Act (SPEECH Act), P.L. 111-223, codified at 28 U.S.C. §§ 4101-4105, which bars U.S. courts, both state and federal, from recognizing or enforcing a foreign judgment for defamation unless certain requirements, including consistency with the U.S. Constitution and section 230 of the Communications Act of 1934 (47 U.S.C. § 230), are satisfied. Although the SPEECH Act does not have an express preemption provision, it appears designed to preempt state laws on foreign libel judgments. It explicitly applies to all "domestic" courts, which it defines to include state courts notwithstanding contrary state law. Moreover, its legislative history suggests that Congress perceived a need for, and understood the SPEECH Act as establishing, a single uniform approach to the problem of foreign libel judgments against U.S. persons. The SPEECH Act may, however, implicate aspects of international comity. One concern is that foreign countries may opt to decline to enforce U.S. libel judgments or become less receptive to calls for enforcement of U.S. judgments in legal areas in which U.S. law is perceived as relatively friendly to plaintiffs.
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The Fair Labor Standards Act (FLSA) of 1938 defines and prohibits the employment of "oppressive child labor" in the United States. The act establishes a general minimum age of 16 years for employment in non-hazardous occupations and a minimum age of 18 years for employment in any occupation determined by the Secretary of Labor to be hazardous to the health or well-being of minors. However, children younger than 16 may work if certain conditions are met, and rules for agricultural and nonagricultural employment vary significantly. Not all oppressive child labor is unlawful under the FLSA. The act's child labor provisions do not apply, for example, to child entrepreneurs and children who volunteer their time for charitable organizations. Certain occupations (e.g., newspaper delivery) are entirely excluded from coverage. Children who in no way participate, support, or work for enterprises that engage in interstate commercial activities nor work in proximity to establishments that ship goods across state lines are also not covered. This report is a guide to the FLSA child labor provisions, accompanying Department of Labor (DOL) regulations, and their administration. Taken together, these constitute what is commonly known as "federal child labor law." In addition, all states have child labor laws, compulsory schooling requirements, and other laws that govern children's employment and activities. No state law may weaken the worker protections provided by the FLSA. However, state laws that impose greater worker protections will supersede those provided by the FLSA. Such state protections are not discussed in this report. The FLSA includes four child labor provisions, two of which address the employment of oppressive child labor, which the act defines—with some exceptions—as the employment of youth under the age of 16 in any occupation or the employment of youth under 18 years in hazardous occupations. These provisions—at Section 12(c) and Section 12(a) of the act—create a direct and an indirect prohibition on the employment of oppressive child labor, respectively. Section 12(c) of the FLSA creates a direct ban on the employment of oppressive child labor under certain conditions. Section 12(c) states, No employer shall employ any oppressive child labor in commerce or in the production of goods for commerce or in any enterprise engaged in commerce or in the production of goods for commerce. Section 12(a) of the FLSA restricts the shipment of certain goods that have been produced in proximity to oppressive child labor—called "hot goods." It provides, in relevant part, No producer, manufacturer, or dealer shall ship or deliver for shipment in commerce any goods produced in an establishment situated in the United States in or about which within thirty days prior to the removal of such goods therefrom any oppressive child labor has been employed. This provision does not ban the employment of oppressive child labor directly, but restricts the interstate shipment of goods made in proximity to oppressive child labor. Child workers are protected under this provision even if they are not employed by the establishment that produces and ships the goods. The FLSA child labor provisions may apply to an individual child, an enterprise in which a child works, or an establishment that produces goods in proximity to child labor. These three types of coverage—individual, enterprise, and establishment—have somewhat different formulations, but each requires three elements: 1. Oppressive child labor . With some exceptions, oppressive child labor means the employment of youth under the age of 16 in any occupation or the employment of youth under 18 years in hazardous occupations. 2. Employment r elationship . The child must be employed by an employer (i.e., the child is not an entrepreneur or an unpaid volunteer). 3. Commerce . FLSA defines commerce as "trade, commerce, transportation, transmission, or communication among the several States, or between any State and any place outside thereof." Where one of these elements is missing—for example, where there is no employment relationship between a child and an employer—the FLSA child labor provisions do not apply. In addition, certain occupations (e.g., newspaper delivery) and work arrangements (e.g., children working for a parent) are explicitly exempt from the child labor provisions. Where so exempt, the provisions do not apply even if all three elements listed above are present. A child worker may be covered by Section 12(c) on an individual or enterprise basis. The child is covered individually if he or she is employed in oppressive child labor and engages in interstate or foreign commerce (e.g., regularly handles interstate or international mail, completes credit card transactions, uses the telephone to make interstate or international calls) or produces goods for interstate or foreign commerce. An enterprise is covered by the FLSA child labor provisions—and coverage extends to children employed in oppressive child labor therein—if it has at least two employees who engage in interstate or foreign commerce and has "annual sales or business done" of at least $500,000. Regardless of the dollar volume of business, the act applies to hospitals; residential institutions providing medical or nursing care; schools (including higher education institutions); and federal, state, and local government agencies . An establishment is covered by Section 12(a) of the act (i.e., the hot goods provision) if it produces goods in proximity to (i.e., "in or about") the employment of oppressive child labor. The goods produced are called hot goods and they may not be shipped out of state while the oppressive child labor is present and for 30 days after the removal of the oppressive child labor. An establishment is covered by Section 12(a) even if it is not the employer of the oppressive child labor and even if the child is not covered by the FLSA provisions on an individual or enterprise basis. The FLSA excludes certain occupations and work arrangements entirely from coverage of its child labor provisions: Children with a p arental e mployer . A child who works for a parent or a person standing in place of a parent (hereafter "parent") in an occupation other than manufacturing, mining, or hazardous work may be employed at any age and for any number of hours. Child p erformers . Children of any age may be employed as actors or performers in motion pictures or in theatrical, radio, or television productions. Newspaper d elivery p ersons . Children of any age may be employed to deliver newspapers to consumers. Evergreen w reath p roduce r s ( h omebased) . Children of any age may be employed as homeworkers to make evergreen wreaths and to harvest forest products used in making such wreaths. The act also relaxes restrictions on oppressive child labor in select occupations or industries—notably agriculture—by exempting them from the child labor provisions when certain conditions are met. For example, children who are 14 years old—and in some cases, at any age—may by employed in agriculture outside of school hours. Congress amended the FLSA to expand the set of permissible activities for 16- and 17-year-old children working with scrap balers and paper box compactors, for 17-year-old children to drive cars and trucks, and for children who are at least 14 years old and excused from compulsory schooling to work in establishments that operate power-driven woodworking machines (but they are not allowed to operate the machines). The FLSA defines oppressive child labor, generally, as the employment of a child under the age of 16 years in any occupation and the employment of a child under the age of 18 in an occupation determined to be hazardous to children by the Secretary of Labor. However, the act includes several exemptions to the child labor provisions and the oppressive child labor definition that create a complex set of thresholds that depend on the child's age, local school hours, the nature of the work (e.g., occupation, industry, and work environment), parental involvement in the child's employment, and other factors. Notably, exemptions to the act's child labor provisions create separate rules governing children's employment in non-agricultural and agricultural work. For non-exempt children, the minimum age for employment in non-agricultural occupations is 18 years for occupations determined by the Secretary of Labor to be hazardous to the health and well-being of children (i.e., "hazardous occupations"); 16 years for employment in non-hazardous occupations; and 14 years for a limited set of occupations, with restrictions on hours and work conditions, as determined by the Secretary of Labor. Under federal law, a child under the age of 14 may not be employed unless his or her employment is explicitly excluded from the definition of oppressive child labor (e.g., a parent is the child's sole employer in a non-hazardous occupation) or exempt from the FLSA child labor provisions (e.g., newspaper delivery). The act directs the Secretary of Labor to establish a list of occupations—other than mining and manufacturing—that do not constitute oppressive child labor for children who are 14 and 15 years old, based on the Secretary's determination that "such employment is confined to periods which will not interfere with their schooling and to conditions which will not interfere with their health or well-being." DOL regulations identify the following set of jobs and activities that—subject to hours-of-work restrictions—do not constitute oppressive child labor for children aged 14 and 15 years: office and clerical work; creative work that is intellectual or artistic in nature (e.g., computer programming, teaching, graphic design); various sales, retail, and advertising work (e.g., cashier, advertising jobs, marking prices, assembling orders, packing and shelving); certain errand and delivery work performed by foot, bicycle, or public transport; building cleaning (e.g., vacuuming); maintenance of grounds without the use of power-driven equipment; limited kitchen work, including the preparation and serving of food and beverages, cleaning and handling of fruits and vegetables, and cleaning of certain kitchen equipment; cooking, with some limitations concerning the equipment used and conditions of work (e.g., no cooking over an open flame); loading onto and unloading from motor vehicles of personal items (e.g., lunch box) and non-power tools (e.g., rake) or protective gear (e.g., work gloves) that the minor will use as part of his or her employment; dispensing gasoline and oil; cleaning cars by hand; certain work that may involve riding in motor vehicles—subject to restrictions on activities, industry of work, and working conditions; and, under limited circumstances, certain youth who are at least 14 years of age and excused from compulsory schooling may work in an establishment where machinery is used to process wood products (but may not operate machines). A minor who is at least 15 years of age and has received training and certification in aquatics and water safety by the American Red Cross (or a similar organization) may be employed as a lifeguard at "traditional swimming pools and water amusement parks." Any job not identified by the Secretary of Labor as permitted for children 14 and 15 years of age is prohibited. However, recognizing that additional guidance may be helpful in understanding the limits of the permitted work, DOL regulations also identify explicitly prohibited work for children 14 and 15 years old. For example, these regulations indicate that while office work is permitted for this age group, work that requires use of a ladder is expressly forbidden. Consequently, the employment of a 14-year-old child in an office to stock shelves using a ladder appears to constitute oppressive child labor and would be prohibited. Under DOL regulations, children aged 14 and 15 years may not work in any of the following jobs: manufacturing, mining, or processing occupations; occupations declared by the Secretary of Labor to be hazardous for the employment of minors between 16 and 18 years of age or detrimental to their health or well-being; occupations that involve a hoisting apparatus; work performed in or about boiler or engine rooms, including repair and maintenance; occupations that involve any power-driven machinery, including but not limited to lawn mowers, golf carts, all-terrain vehicles, trimmers, cutters, weed-eaters, edgers, food slicers, food grinders, food choppers, food processors, food cutters, and food mixers; operating motor vehicles, serving as helpers on motor vehicles, and riding in motor vehicles, with a few exceptions; outside window washing that involves working from window sills, and all work requiring the use of ladders, scaffolds, or similar equipment; youth peddling, which entails the sale of goods or services to customers at locations other than the employer's establishment, excluding unpaid volunteer work for charitable organizations or public agencies; loading and unloading of goods or property onto or from motor vehicles, railroad cars, or conveyors, with few exceptions; catching and cooping of poultry for transport or for market; public messenger service; occupations connected to the transportation of persons or property; warehousing and storage occupations; communications and public utilities occupations; and construction occupations, with exceptions for some office and sales work. DOL regulations require that work performed by 14- or 15-year-old children be outside school hours when school is in session. Regulations limit the number of hours performed per day and per week and the time of day when the work may occur. When school is in session, children may perform no more than 3 hours per day on a school day (including Friday), 8 hours on a non-school day, and 18 hours in one week. Otherwise, when school is not in session, children may perform up to 8 hours per day and 40 hours per week. Work hours are confined to 7 a.m. to 7 p.m. except during the summer, when evening hours are extended to 9 p.m. DOL regulations provide some exceptions to the hours-of-work requirements: Sports a ttendants . Children who provide specific sports-attending services at professional sporting events (e.g., batboys or batgirls) may work any hours so long as they occur outside of school hours. Work-experience and c areer e xploration p rogram p articipants . Children participating in certain state-run school-supervised work-experience and career exploration programs that have been approved by DOL are permitted to work during school hours up to 3 hours per day on school days. Children in these programs may work up to 23 hours per week when school is in session. All other rules regarding work hours apply. Work -s tudy p rogram p articipants . A child enrolled in a DOL-approved work-study program may work up to 18 hours per week when school is in session. The child may work one day or two days per week during school hours (depending on where the child is in the program's work cycle) for up to 8 hours on that day(s). High s chool g raduates and c hildren e xcused from c ompulsory s chooling . Children who have graduated high school, been excused from compulsory schooling by the state for certain reasons, or been expelled from school and not required to attend an alternate school are exempt from regulations limiting work hours when school is in session. For this group of children, the limits placed on hours worked per day and per week when school is not in session (i.e., 8 hours per day and 40 hours per week) apply at all times during the year. The Secretary of Labor has identified 17 groups of occupations as hazardous or detrimental to the health or well-being of children between the ages of 16 and 18 years ( Table 1 ). Employment in these jobs—formalized in regulations as the Secretary's "hazardous occupation orders" or "orders"—is prohibited, with limited exemptions for registered apprentices and student learners. In some instances, the orders ban children's employment in entire industries (e.g., coal mining, Order 3) with some exceptions for office, sales, or maintenance work; others prohibit children's exposure to certain materials (e.g., radioactive substances, Order 6) or equipment (e.g., power-driven hoisting apparatus, Order 7). Three exemptions to the FLSA child labor provisions create separate minimum age thresholds and hazardous occupations rules for children employed in agriculture. With some exceptions, the minimum age for employment in agricultural occupations is 16 years for employment in any agricultural job, including those determined to be hazardous by the Secretary of Labor, with no restrictions on hours of work; 14 years for employment in non-hazardous agricultural jobs outside of school hours; 12-13 years for employment in non-hazardous agricultural jobs, outside of school hours, with the written consent of a parent; written consent is not required if the work takes place on a farm that also employs the child's parent; 10-11 years for employment to hand-harvest select crops for up to eight weeks in non-hazardous agricultural jobs, outside of school hours, with the written consent of a parent, providing the employer has obtained a waiver permitting this employment from the Secretary of Labor; and Any age (up to 12 years), for employment in non-hazardous agricultural jobs, outside of school hours on certain small farms, with a parent's written consent. A child of any age who is employed exclusively by a parent on a farm owned or operated by the parent may work without restriction. With few exceptions, children employed in agriculture may not work during school hours until they are 16 years old. The FLSA does not limit the number of hours per day or week that children can work in agriculture, nor does it place limits on when that work occurs outside of school hours (i.e., children may work in agriculture for any number of hours per day or week, and at any time during the day or night). With few exceptions, a child below the age of 16 may not be employed in agriculture in an occupation that is determined by the Secretary of Labor to be particularly hazardous or detrimental to the health or well-being of children under 16 years old. This prohibition does not apply to children employed by a parent on a farm owned or operated by the parent. When certain requirements are met, student learners and graduates of tractor or machine operation programs that meet regulatory criteria may be employed in select hazardous occupations. DOL groups hazardous occupations in agriculture in 11 employment categories that are described in Table 2 . The FLSA authorizes the Secretary of Labor to conduct workplace inspections and investigations to determine if oppressive child labor is present and to enforce the child labor provisions. The Secretary of Labor has delegated inspection authority to the DOL Wage and Hour Division (WHD), which oversees enforcement of several federal laws governing workplaces. Two remedies are available for violations of the FLSA child labor provisions. The Secretary of Labor may assess civil money penalties or seek other relief, including injunctive relief. Employers who violate the FLSA child labor provisions may be assessed a civil penalty of up to $11,000 for each employee who was the subject of a child labor violation, or up to $50,000 for each violation that causes the death or serious injury of a minor employee; a penalty may be doubled if the violation is a repeated or willful violation. Civil penalties collected from employers for child labor violations are deposited in the general fund of the U.S. Treasury. Employers may seek an exception to a civil penalty determination or may request an administrative hearing within 15 days of receiving a determination of penalty from WHD; such requests must be made in writing. An examination of WHD enforcement data reveals that, since FY2007, the agency has concluded over 9,700 cases (representing more than 176,000 violations) in which employers violated FLSA child labor provisions. Well-represented among these cases were full-service restaurants (1983 cases), and limited-service restaurants (1,530 cases) and eating places (173 cases). Together these establishments represented more than 37% of concluded FLSA child labor cases. Overall, civil money penalties ranged from no penalty to $287,980. U.S. district courts have jurisdiction to enjoin violations of the FLSA's child labor provisions. For example, a federal court may order an employer to halt employment of a minor in a hazardous occupation or may enjoin a producer from shipping goods out of state from an establishment in or about which a child labor violation has occurred. Criminal penalties are also prescribed for willful violations of the FLSA's child labor provisions. Any person who willfully violates these provisions will, upon conviction, be subject to a fine of not more than $10,000, imprisonment for not more than six months, or both. Imprisonment, however, will be sentenced only if a violator has a prior conviction for willful violation of the child labor provisions. Since the enactment of the FLSA, various courts have resolved cases involving the meaning and operation of the law's child labor provisions. Many of the early cases brought under the child labor provisions considered whether they should apply when the movement of goods may not have occurred "in commerce" or when the items created by the employer were arguably not "goods" within the meaning of the provisions. These early cases appear to have focused generally on the application of Section 12(a) of the FLSA. Subsection (c) was not added to Section 12 of the FLSA until 1949. Thus, the courts in these early cases did not address the direct employment of minors but rather whether an employer was transporting goods that were produced by minors. In a 1945 decision, Western Union Telegraph v. Lenroot , the U.S. Supreme Court considered whether Section 12(a) applied to a telegraph company that employed messengers who were under the age of 16. Lenroot, who served as the DOL's chief of the Children's Bureau, maintained that Western Union violated Section 12(a) by shipping or delivering for shipment in commerce telegraphic messages that were produced in an establishment where oppressive child labor was employed. Whether the messages were "goods" for purposes of Section 12(a) was one of the questions considered by the Court. While the Court found that the messages "are clearly 'subjects of commerce' and hence ... are 'goods' under the [FLSA]," it nevertheless concluded that Western Union was not a producer of these goods. The Court maintained that Western Union simply transmitted the messages and did not handle them in such a way as to make it a producer of goods. The Court also concluded that Western Union did not "ship" the messages in such a way as to find a violation of Section 12(a). The Court observed: "We do not think that 'ship' in this Act applies to intangible messages, which we do not ordinarily speak of as being 'shipped.'" In Tobin v. Grant , another early decision from 1948, a federal district court in California considered the meaning of the phrase "ship or deliver for shipment in commerce" as it is used in Section 12(a). The employer in Tobin , a manufacturer of books and book covers, employed 22 minors under the age of 16 in processing and manufacturing occupations. Tobin, who served as Secretary of Labor at the time, alleged a violation of Section 12(a) even when the majority of the employer's goods were not shipped interstate. Although the employer knew that its customers would eventually ship the books and book covers for use outside of the state, it maintained that knowledge of the goods' ultimate destination was immaterial. The court concluded that the employer's delivery of goods, albeit primarily intrastate, was prohibited by Section 12(a). Citing the FLSA's legislative history, the court observed: [T]he words "deliver for shipment in commerce" are sufficiently broad to cover a situation in which a manufacturer, knowing that the ultimate destination of his goods is in interstate commerce, sells to a concern which makes the actual shipment. If the Act did not cover such a transaction, manufacturers could violate the law with impunity by selling goods within the state of manufacture, regardless of the known interstate market. More recent cases have examined Section 12(c) of the FLSA and the direct employment of minors. For example, in McLaughlin v. Stineco , a 1988 decision, a federal district court in Florida found that a framing contractor violated Section 12(c) by employing minors under the age of 18 years in a hazardous occupation and by employing a minor under the age of 16 years during hours not permitted by DOL regulations. The company employed a 17-year-old and a 15-year-old to perform roofing work, an occupation that the Secretary of Labor found to be hazardous. Regulations promulgated by the Secretary defined all occupations in roofing operations to be hazardous for the employment of minors between 16 and 18. Based on these regulations, the court further concluded that the employment of individuals between the ages of 14 and 16 years was also prohibited. Ultimately, the court found that the framing contractor violated Section 12(c). In addition, the court also determined that the framing contractor violated DOL's child labor regulations by employing the 15-year-old for more than 40 hours per week. The minor indicated that he worked for three to five weeks, arriving at work between 7:00 and 7:30 a.m., and quitting between 4:30 and 5:00 p.m., with a lunch break of 30 minutes to one hour. Under the agency's regulations, a minor between the ages of 14 and 15 years may not work for more than 40 hours in any one week when school is not in session and not more than 18 hours in any one week when school is in session. In Martin v. Funtime , a 1991 decision, a federal district court in Ohio found that the operator of three amusement parks in Ohio and New York violated Section 12(c) by employing numerous 14- and 15-year-olds beyond the hours prescribed by the Secretary of Labor. The minors were regularly employed for more than 40 hours per week when school was not in session and more than 18 hours per week when school was in session. The minors were also employed before the start time identified in DOL's regulations and after the similarly prescribed end time. In enjoining the amusement park operator from further violations of Section 12(c), the court rejected the operator's argument that it was engaging in serious efforts to reduce the number of violations and that it was inherently difficult to monitor the hours of all of the minor employees. The court maintained that the operator either knew about the violations or could have easily discovered them because they involved "an impermissible number of hours per week ... and were obvious from the defendant's own time records." In affirming the court's decision in Funtime , the U.S. Court of Appeals for the Sixth Circuit observed that an employer's responsibility for child labor violations "approaches strict liability." The court noted, "[A]n employer cannot avoid liability by arguing that its supervisory personnel were not aware of the violation, or by simply adopting a policy against employing children in violation of the Act." Although a review of recent FLSA cases produced few court decisions involving either Sections 12(c) or 12(a), it appears that the investigation of alleged child labor violations has continued steadily. In August 2015, for example, following a WHD investigation, DOL alleged violations of Section 12(c), as well as violations of the FLSA's minimum wage and overtime provisions, in a case involving an Ohio restaurant. In Perez v. Cathedral Buffet, Inc. , DOL is seeking $207,975 in back wages, as well as an equal amount in liquidated damages for the wage and hour violations. The agency is also seeking to permanently enjoin future violations of the FLSA. In December 2015, DOL filed a similar complaint against an Oklahoma restaurant. In Perez v. Moranto , DOL is alleging violations of the FLSA's child labor, minimum wage, and overtime provisions. With regard to the child labor allegations, DOL maintains that the restaurant employed minors between the ages of 10 and 17 to work as bussers and that minors under 16 years worked more than the number of hours permitted by DOL regulations and beyond the start and end times permitted by such regulations. The agency also asserts that at least one minor operated hazardous equipment on a regular basis.
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The Fair Labor Standards Act (FLSA) of 1938 prohibits the employment of "oppressive child labor" in the United States, which the act defines—with some exceptions—as the employment of youth under the age of 16 in any occupation or the employment of youth under 18 years old in hazardous occupations. The act includes several exemptions, however, that create a complex set of thresholds that depend on the child's age, local school hours, the nature of the work (e.g., occupation, industry, and work environment), parental involvement in the child's employment, and other factors. Notably, exemptions to the act's child labor provisions create separate rules governing children's employment in agriculture and in non-agricultural work. For non-exempt children, the minimum age for employment in non-agricultural occupations is 18 years for hazardous occupations; 16 years for employment in non-hazardous occupations; and 14 years for a limited set of occupations, with restrictions on hours and work conditions. With some exceptions, the minimum age for employment in agricultural occupations is 16 years for employment in any agricultural job, including hazardous agricultural occupations, with no restrictions on hours of work; 14 years for employment in non-hazardous agricultural jobs outside of school hours; and any age, for employment in non-hazardous agricultural jobs, outside of school hours, with parental consent, when certain conditions are met concerning farm size, the nature and duration of work, and other requirements. The FLSA provisions prohibit (1) the employment of oppressive child labor for children covered by the act, and (2) the interstate shipment of goods produced in an establishment in or about which oppressive child labor is employed. But not all work performed by underage children is unlawful under the act. The FLSA authorizes the Secretary of Labor to conduct workplace inspections and investigations to determine if oppressive child labor is present and enforce the child labor provisions. The Secretary may assess civil money penalties to employers who violate the provisions or pursue action in federal courts. Employers who violate the FLSA child labor provisions may be assessed a civil penalty of up to $11,000 for each employee who was the subject of a child labor violation, or up to $50,000 for each violation that causes the death or serious injury of a minor employee; a penalty may be doubled if the violation is a repeated or willful violation. Since FY2007, the Department of Labor (DOL) has concluded more than 9,700 cases in which employers violated FLSA child labor provisions. U.S. district courts have jurisdiction to enjoin violations of the FLSA's child labor provisions. Criminal penalties are also prescribed for willful violations of the FLSA's child labor provisions. Any person who willfully violates these provisions will, upon conviction, be subject to a fine of not more than $10,000, imprisonment for not more than six months, or both. Since the enactment of the FLSA, various courts have resolved cases involving the meaning and operation of the law's child labor provisions. Early cases focused on the movement of goods produced by minors and whether an employer's activities were restricted by the provisions. More recent cases have examined the direct employment of minors in oppressive child labor. Although there do not appear to be a substantial number of recent reported cases, DOL continues to pursue enforcement of the child labor provisions through litigation, as evidenced by court filings in 2015. This report describes the FLSA child labor provisions, accompanying DOL regulations, and their administration. Taken together, these constitute what is commonly known as "federal child labor law." In addition, all states have child labor laws, compulsory schooling requirements, and other laws that govern children's employment and activities. No state law may weaken the worker protections provided by the FLSA. However, state laws that impose greater worker protections will supersede those provided by the FLSA. Such state protections are not discussed in this report.
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The Department of Defense (DOD) accounts for approximately 63% of the energy consumed by federal facilities and buildings. This makes DOD the single largest energy consumer in the United States, even though consuming only 1% of national site-delivered energy. Its annual spending on facility energy has averaged over $3.4 billion recently. In the early 1970s, Congress began mandating reductions in energy consumed by federal agencies, primarily by improving the efficiency of buildings and facilities, and by reducing fossil fuel use. Initially, a 10% energy reduction goal was established for federal buildings as measured against a 1985 baseline. By fiscal year (FY) 2005, DOD reported a 28.3% reduction in energy consumption compared to the baseline. Recent legislation and Executive Orders establish further energy reduction goals. President-elect Obama's recently publicized economic recovery plans include improvements in public building energy efficiency. Recently introduced bills in Congress have called for establishing national building efficiency codes. This report reviews the energy conservation provisions in past and recent legislation applicable to DOD, Executive Orders that apply to all federal facilities and operations, and the Office of the Secretary of Defense (OSD) directives and instructions to the military departments and agencies. DOD spending on facility energy is annually reported to Congress as originally mandated by the National Energy Conservation Policy Act (NECPA). Data reported over the last decade have been summarized in this report. Annual defense appropriations that fund energy conservation measures along with DOD energy conservation investments are also summarized. This report does not cover the subject of transportation fuels. Federal government initiatives aimed at reducing energy consumption can be traced back to the start of the Federal Energy Management Program (FEMP) in 1973. The 1978 National Energy Conservation Policy Act (NECPA), Public Law (P.L.) 95-619, began the program of retrofitting federal buildings to improve energy efficiency. The 1985 Deficit Reduction Act ( P.L. 99-272 ) amended NECPA by authorizing energy savings contracts of up to 25 years. The 1992 Energy Policy Act further amended NECPA by adopting Energy Savings Performance Contracts (ESPCs) that offered federal agencies a novel means of making energy efficiency improvements to aging buildings and facilities (see discussion below). NECPA required federal agencies, including DOD, to report annually on the energy consumption by their buildings, operations, and vehicles. Overall federal energy consumption is reported annually to Congress by the Department of Energy (DOE) Federal Energy Management Program (FEMP). The Federal Energy Management Improvement Act of 1988 ( P.L. 100-615 ) amended NECPA by requiring each agency to achieve a 10% reduction in energy consumption in federal buildings by FY1995 when measured against an FY1985 baseline in terms of British thermal units per gross square foot (Btu/gsf) of building area. More recently, two major energy bills have been enacted with provisions generally pertaining to all federal agency facilities—the Energy Policy Act of 2005 (EPACT – P.L. 109-58 ) and the Energy Independence and Security Act of 2007 (EISA – P.L. 110-140 ). Annual DOD appropriation bills have also included energy provisions specifically pertaining to defense facilities. Legislation pertaining to the energy efficiency of federal and DOD buildings is summarized below. For bills introduced since the 107 th Congress, refer to the Appendix of this report. Section 103. Energy Use Measurement and Accountability amended Section 543 of the NECPA with the mandate for using advanced meters to reduce electricity use in federal buildings by October 1, 2012. Section 109. Federal Building Performance Standards amended the Energy Conservation and Production Act by adopting the 2004 International Energy Conservation Code, and requiring revised energy efficiency standards and a 30% reduction in energy consumption of new federal buildings over the previous standards. Section 203. Federal Purchase Requirement requires that the federal government offset its electric energy consumption with an increasing percentage of "renewable energy" from 3% starting in 2005 to not less than 7.5% by 2013 and each fiscal year thereafter. Renewable energy is defined as electrical energy generated from solar, wind, biomass, landfill gas, ocean (including tidal, wave, current, and thermal), geothermal, municipal solid waste, or new hydroelectric generation capacity achieved from increased efficiency or additions of new capacity at an existing hydroelectric project. Section 431. Energy Reduction Goals for Federal Buildings amends the National Energy Conservation Policy Act (NECPA) by mandating a 30% energy reduction in federal buildings by 2015 relative to a 2005 baseline. Section 432. Management of Energy and Water Efficiency in Federal Buildings requires DOE to issue guidelines and criteria that each federal agency will follow for designating "covered facilities", assigning energy managers, and implementing comprehensive energy and water evaluations. For the purpose of energy and water evaluations, covered facilities constitute at least 75% of facility energy use at each facility. Section 433. Federal Building Energy Efficiency Performance Standards requires 55% reduced fossil energy use in new federal buildings and major renovations by 2010 relative to a 2003 baseline, and 100% by 2030. Section 434. Management of Federal Building Efficiency requires that federal agencies ensure the energy life-cycle cost effectiveness of major equipment replacements (such as heating and cooling systems) and renovations or expansion of existing space. Section 435. Leasing prohibits federal agencies from leasing buildings that have not earned an EPA Energy Star label. Section 436. High Performance Green Federal Buildings directs the establishment of federal high-performance green building standards for all types of federal facilities, and the establishment of green practices that can be used throughout the life of a federal facility. Section 512. Financing Flexibility authorizes federal agencies to use a combination of appropriated funds and private financing for Energy Savings Performance Contracts (ESPC). Section 514. Permanent Authorization enacts permanent authorization of ESPCs, and restricts federal agencies from limiting the duration of ESPCs to less than 25 years or limiting the total amount of obligations. Sec. 518. Study of Energy and Cost Savings in Nonbuilding Applications directs DOD to study the potential use of ESPCs in nonbuilding applications, which include vehicles and federally owned equipment that generate electricity or transport water. Section 526. Procurement and Acquisition of Alternative Fuels prohibits federal agencies from procuring alternative or synthetic fuels, unless contract provisions stipulate that life-cycle greenhouse gas emissions do not exceed equivalent conventional fuel emissions produced from conventional petroleum sources. Subtitle E (Energy Security), reorganizes 10 U.S.C 2865 to establish new energy performance goals for DOD, establish new goals for using renewable energy, and encourage energy efficiency products and renewable forms of energy in new construction. More specifically: Section 2851. Consolidation and Enhancement of Laws to Improve Department of Defense Energy Efficiency and Conservation reorganizes 10 U.S.C. 2865 by the insertion of (new) Chapter 173— Energy Security , which requires the establishment of energy performance goals for transportation systems, support systems, utilities and infrastructure; leaves any appropriated funds equal to energy cost savings available for obligation until expended; requires development of a simplified method for contracting energy savings contract services; and authorizes energy conservation construction projects not previously authorized using appropriated funds after notification to Congress. Section 2852. Department of Defense Goal Regarding Use of Renewable Energy to Meet Electricity Needs amends 10 U.S.C. 2911 by making it DOD's goal to produce or procure at least 25% of its electric energy consumption from renewable sources by the year 2025. Section 2853. Congressional Notification of Cancellation Ceiling for Department of Defense Energy Savings Performance Contracts requires Congressional notice when federal agencies award an energy savings performance contract that contains a clause setting forth a cancellation ceiling in excess of $7,000,000. Section 2854. Use of Energy Efficiency Products in New Construction requires that to the maximum extent practicable, energy efficient products meeting Defense Department requirements must be used in new facility construction. Section 828. Multiyear Contract Authority For Electricity From Renewable Energy Sources authorizes contracts periods of up to 10 years for purchasing electricity from sources of renewable energy. Sec. 2861. Repeal of Congressional Notification Requirement Regarding Cancellation Ceiling for Department of Defense Energy Savings Performance Contracts amends 10 U.S.C § 2913 by striking subsection (e) requiring notification of an ESPC awarded with a cancellation ceiling clause exceeding $7 million. Section 902. Director of Operational Energy Plans and Programs amends 10 U.S.C. 139 by directing the appointment of a director responsible for the oversight of energy required for training, moving, and sustaining military forces and weapons platforms for military operations. Section 2831. Certification of Enhanced Use Leases for Energy-related Projects amends 10 U.S.C. 26679(h) by requiring certification that a lease exceeding 20 years for an energy production project is consistent with DOD performance goals. Section 2832. Annual Report on Department of Defense Installations Energy Management amends 10 U.S.C. 29259(a) by revising the subsection heading to "Annual Report Related to Installations Energy Management" and adding the reporting requirement for a description and estimate of the progress made by the military departments in meeting the certification requirements for sustainable green-building standards in construction and major renovations as required by Section 433 of EISA 2007. In signing Executive Order (EO) 13423 - Strengthening Federal Environmental, Energy and Transportation Management , President Bush revoked five earlier executive orders affecting federal agencies' energy and environmental management. Section 11 of the order consolidates and strengthens the five Executive Orders and two Memorandums of Understanding (MOU) and establishes new and updated goals, practices, and reporting requirements for environmental, energy, and transportation performance and accountability. In some cases the new executive order puts in place replacement energy and environmental efficiency goals for previous goals with target dates that have passed. The new Executive Order also implements and supplements provisions of the EPACT dealing with energy and environmental management by federal agencies. The combination of EPACT (Title I, Part A) and EO13423 define the current energy efficiency objectives for federal agencies. EO13423 directs all federal agencies, including DOD, to improve energy efficiency and reduce greenhouse gas emissions through reduction of energy intensity (3% annually through the end of FY2015, and 30% by the end of FY2015, relative to each agency's baseline energy use in FY2003). Progress in reaching building energy efficiency goals are scored by agencies in terms of reductions in energy consumption versus gross building area (Btu/gsf). For the energy reduction goals of EPACT and EO13423, some inherently inefficient industrial types of buildings are excluded from this scoring. EO13423 (Section 2f) mandates specific energy reduction targets for new construction and renovations. Executive branch agencies are directed to meet objectives set in the Federal Leadership in High Performance and Sustainable Buildings Memorandum of Understanding ("Sustainable Buildings MOU"). The Sustainable Buildings MOU calls for new buildings to be 30% more cost efficient than industry standards, and for buildings undergoing major renovations to be 20% more cost efficient than a pre-renovation, 2003 baseline. Federal agencies are encouraged to incorporate sustainable practices into projects underway, and are also encouraged to sell or dispose of unneeded assets. Executive Order 13123, now revoked, had directed improvements in building energy efficiency, promoted the use of renewable energy, and set goals for reduction of greenhouse gas (GHG) emissions associated with energy use in buildings, among other energy-related requirements. The revoked order had also served as the basis of DOD's instruction to the services on energy use. In contrast, the new Executive Order 13423 has no specific GHG reduction target. However, Section 2.a of the new Executive Order does include the goal of cutting GHG emissions by federal agencies through reductions in the energy intensity of agency operations, but does not specify a GHG reduction target. EPACT only credited electricity from renewable energy sources in meeting federal purchase requirements. EO13423 now requires that at least half of the EPACT renewable energy requirement comes from new (put in service after January 1, 1999) renewable energy sources. Agencies may also use new non-electric renewable energy sources to meet the requirement for new renewable energy. (Examples of non-electric renewable energy include thermal energy from solar ventilation pre-heat systems, solar heating and cooling systems, solar water heating, ground source heat pumps, biomass heating and cooling, thermal uses of geothermal and ocean resources.) However, these non-electric renewable energy sources cannot be used to meet the EPACT renewable electricity requirement (see Table 1 ). For the purpose of meeting the energy intensity reduction goals under EPACT (Btu/gsf), the credit agencies receive for renewable energy purchases started to phase out in FY2008, and will be reduced to zero by FY2011. Finally, EO13423 requires each federal agency to annually report to the President. The Office of Management and Budget (OMB) provides general reporting guidance in Circular No. A-11 (Section 55 – Information on Energy Use, Cos ts, and Efficiency ). Detailed reporting guidance is provided in a recent DOE memorandum to federal agency energy coordinators. The Office of the Secretary of Defense (OSD) has issued directives and instructions to the military departments and agencies on implementing EO13423 and complying with energy legislation. In an October 23, 2007 Energy Awareness Campaig n memorandum to the service departments and agencies, the Under Secretary of Defense underscored the energy conservation goals of EO13423 and established October as an Energy Awareness month. The memorandum effectively superseded an earlier January 2005 memorandum that referenced EO13123 - Greening the Government through Efficient Energy Management. DOD's primary guidance on installation energy management appears in DOD Instruction 4170.11. The instruction applies to all military departments and agencies, and pertains to all phases of administration, planning, programming, budgeting, operations, maintenance, training, and materiel acquisition activities that affect the supply, reliability and consumption of facilities energy. In reference to Instruction 4170.11, a November 18, 2005 memorandum on Installation Energy Policy Goals establishes goals of reducing greenhouse gases, reducing energy and water consumption, expanding renewable energy procurement, and reducing petroleum use. It also directs the completion of eligible utility privatization in a process established under the Deputy Secretary of Defense. Further guidance to DOD's installation and facility managers is provided in the DOD Energy Managers Handbook. In particular, the guidance endorses the sustainable building design approach for building and facility life-cycles, and encourages DOD components to obtain the U.S. Green Building Council's Leadership in Energy and Environment Design (LEED) certification. DOD responded to the EPACT Section 103 electric metering provision by revising instructions on installation energy management to require metering at all appropriate facilities in Department of Defense Metering Plan . DOD reports occupying over 316,000 buildings and additional 182,000 structures on 536 military installations worldwide. In FY2007 DOD spent over $3.4 billion on energy consumed by its facilities as shown in Table 2 ; roughly 13% of Defense-wide operations and maintenance (O&M) budget obligation authority. (In FY2001, it ran as high as 23%.) Electricity represented 45% of energy consumed, followed by natural gas at 33%, fuel oil at 11%. The balance was made up of coal and liquefied petroleum gas (LPG). Renewable energy represented 8.7% of facility electricity use. As shown in the Table 3 , energy consumption (express in British Thermal Units – Btu) has been decreasing over the same period, as has gross building area. Over the current decade, both electricity rates and natural gas prices steadily increased. DOD's average electricity costs in cents per kilowatt-hr (kWh) have stayed between the range of rates charged to commercial and industrial customers, as shown in Figure 1 . DOD natural gas costs have generally tracked the price of gas at the local distribution company (LDC) citygate ( Figure 2 ). The citygate is the point at which the LDC takes gas from the transmission pipeline for distribution to it customers. The spike in DOD's cost relative to the falling citygate price is not explained in any DOD reporting. Reporting requirements for renewable energy have changed over the last decade due to new legislated mandates and Executive Orders. EPACT Section 203 requires federal agencies to replace electricity consumption with increasing amounts of renewable energy. Federal agencies must also meet the new renewable energy requirements of EO13423. In 1999, DOD had not yet begun reporting on renewable energy. A limited capacity of photovoltaic (solar) panels had been installed, but operating statistics under the category of self-generated power had not been compiled until FY2001. As shown in Table 4 , DOD began reporting renewable energy in FY2000. For FY2007, DOD reported using over 1.6 million MWH of renewable electricity, which represented 5.5% of overall electricity consumption. The renewable energy goal by 2025 is 25% of total electricity use. Despite reductions in energy consumption, annual energy spending increased up through FY2006 and would likely have been higher without investment in energy efficiency improvements. DOD programs improvements through the Defense Energy Conservation Investment Program (ECIP), and takes advantage of ESPCs, and Utility Energy Savings Contracts (UESCs). Improvements are funded directly through the Defense Military Construction (MILCON) program, and indirectly through Operation and Maintenance (O&M) appropriations. Between 1999 and 2009, Congress appropriated $442.9 million in Defense Energy Conservation Projects (summarized in Table 5 ). These projects are accomplished through the DOD Energy Conservation Investment Program (ECIP), which designates projects that specifically save or reduce Defense energy costs, and are funded under MILCON. According to the Office of the Secretary of Defense: "OSD centrally controls ECIP funding allocation on a by-project basis. In FY 1999 ECIP funds were allocated to those projects with the highest savings to investment ratio (SIR) and the best payback periods, regardless of component. In FY 2001, the Department revised this process to allocate funds based on the components' percentage of total DOD installations BTU consumption. Within the allocated amount, the Component prioritizes their projects based on a combination of SIR and the priorities emphasized by the Energy Policy Act of 2005, Executive Order (EO) 13423, and the Energy Independence and Security Act of 2007. The Department emphasizes the use of ECIP in reducing energy consumption and greenhouse gas emissions, and increasing the use of renewable energy." Between 2001 and 2007, DOD in turn allocated $260.3 million for 193 ECIP projects (summarized in Table 6 ). ESPCs complement DOD's Energy Conservation Investment Program and Defense Energy Conservation appropriations by providing additional energy efficiency improvements. Qualified Energy Service Companies (ESCOs) finance the improvements through the savings realized by the facility, typically over a life-cycle of 10 to 25 years. These contracts include infrastructure improvements and new equipment to help reduce energy consumption. Examples include new thermal storage systems, chillers, boilers, lights, motors, energy monitoring and control systems, and water saving devices. In return for providing the financing, the ESPC contractor receives a specified share of any resulting energy cost savings. Between 1999 and 2007, DOD awarded 248 ESPCs for a value exceeding $2.8 billion (summarized in Table 7 ). ESPCs are funded through O&M appropriations. The Congressional Budget Office's (CBO) view of ESPCs found that they imposed a future financial obligation on the federal government. CBO began scoring ESPCs as mandatory spending, coinciding with the expiration of the 1990 Budget Enforcement Act ( P.L. 101-508 ) pay-as-you-go (PAYGO) rules. The CBO scoring reflects how ESPCs create future commitments to appropriations, consistent with how appropriations-funded ECIPs would be scored throughout the budget. The Government Accountability Office (GAO) finds that the benefits of ESPCs could be achieved using upfront funds (that is, fully funded in advance) and with lower financing costs, but agencies generally do not receive sufficient funds upfront for doing so and see ESPCs as a necessary supplement to upfront funding in order to achieve the energy savings benefits. DOD Utility Energy Savings Contracts (UESC) are financed and implemented through utility companies, similar in some respects to ESPCs. Essentially, the same energy efficiency improvements can be accomplished through UESCs as ESPCs. With a UESC, the utility typically finances the capital costs of the project, and is repaid over the contract term from the cost savings generated by the energy efficiency measures. The installation or facility pays for the improvement through O&M appropriated funds. There are no statutory energy savings guarantees for UESCs, unlike ESPCs. Although a facility manager may request such a guarantee at the time of a project's installation. Between 1999 and 2006, DOD reported placing 241 UESCs worth $967.6 million (summarized in Table 8 ). DOD spending on energy consumed by its facilities worldwide can make up as much as 23% of its annual Operating and Maintenance budget. More than $3.4 billion was spent annually in FY2006 and FY2007. DOD has steadily decreased its buildings' energy-intensity in response to mandated energy reduction goals through investment in energy conservation projects. Over the last decade, Congress has appropriated $443 million in DOD energy conservation projects, DOD investment in energy conservation adds another $250 million, and the value of Energy Savings Performance Contracts (ESPCs) exceeds $2.8 billion. Despite the investments, DOD annual energy spending has been increasing since 1999, as have electricity and particularly natural gas prices. Further investment in energy conservation is expected to meet the future mandated energy reduction goals. ESPCs have become a preferred means of making energy efficiency improvements because, in part, funds do not have to be directly appropriated (or programmed). However, as Energy Savings Contractors (ESCOs) assume a certain risk in guaranteeing savings through ESPCs, the risk is factored into their cost. Also, ESPC commitments may extend up to 25 years—an indication of the time needed to recoup the ESCO's investment. As energy efficiency improvements made through UESCs do not necessarily come with savings guarantees and thus risk, the lower cost may translate into higher savings. Federal agencies may not be taking full advantage of this savings opportunity. This may be due to individual utilities limited role promoting UESCs, the number of utilties that may offer UESCs, installation managers' unfamiliarity with UESCs, and ESCOs influence in promoting ESPCs. Aging buildings may have limits in meeting energy efficiency goals, and investment in energy conservation may eventually see diminishing returns in energy savings. Overall goals may be achieved, ultimately, through the replacement of older building with new buildings built to LEED standards and even newer "high-performance" building standards being developed the American Society of Heating, Refrigerating and Air Conditioning Engineers (ASHRAE). Whether future investments in energy conservation projects and ESPC commitments should give way to replacing older inefficient building with new construction is an issue that Congress may eventually wish to consider. Authorizing ESPCs for building renovation could be used to install more efficient equipment, better insulation and windows, and possibly renewable energy sources whose installation might not be accomplished by appropriation alone. Congress may wish to consider expanding the EISA Section 518 EPSC provision (non-building applications), to study renovating energy-inefficient buildings to LEED and high-performance standards. Under EISA 2007, Congress has authorized mixing appropriated funds with private financing of ESPCs. How funds appropriated for O&M may be applied to ESPCs, though, is unclear. DOE has not yet promulgated rules on the new authority. The lack of rules may prove to be a critical barrier to accomplishing DOD-related provisions in the American Recovery and Reinvestment Act (ARRA) of 2009 ( P.L. 111-5 ). ARRA provides nearly $3.7 billion under O&M for Defense Facilities Sustainment, Restoration, and Modernization that may be applied toward energy efficiency projects and repair and modernization of DOD facilities. Another $300 million for Research Development, Test and Evaluation may be applied to improvements in energy generation on military installations. The combined funding nearly matches the $4.2 billion in ECIP, ESPC, and UESC spending from FY1999 through FY2007. The ARRA appropriation, however, remains available for obligation until September 30, 2010. Acquisition planning for the improvements, not including the year-long acquisition process, may exceed the time–frame of funding availability. Timely acquisition, to meet the economic stimulus intent of ARRA, may also depend on having an adequately trained acquisition workforce in place. Given the lack of rules, comparatively high funding level, and short obligation period, Congress may wish to consider whether DOD may act effectively on the provisions. Finally, though DOD's average utility energy costs fall in the range of national energy prices, Congress may wish to consider how DOD's energy costs (not just consumption) could be reduced further. As the single largest national energy consumer, DOD might leverage its buying power in negotiating lower utility rates.
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In the early 1970s, Congress began mandating reductions in energy consumed by federal agencies; primarily by improving building efficiency, and reducing fossil fuel use. Early legislation mandated a 10% reduction in federal building energy and a recent Executive Order mandates a 30% further reduction by 2015. President-elect Obama has included the goal of improving public building energy efficiency in his administration's economic recovery plan. This report reviews energy conservation legislation and Executive Orders that apply to the Department of Defense, directives and instructions to the military departments and agencies on implementing the legislation and orders, Defense spending on facility energy over the last decade, annual Defense appropriations that fund energy-conservation improvements, and Defense energy conservation investments. In FY2007, Defense spending on energy to operate its facilities reached almost $3.5 billion. In the last decade, Congress has appropriated $443 million in Defense energy conservation projects, and the value of contracts to install energy savings improvements has exceeded $2.8 billion. While the Defense Department has reduced its energy consumption, its energy spending increased due to higher energy prices. Congress continues to look at furthering energy efficiency improvements in aging Defense facilities and buildings as a means to rein in energy consumption and spending.
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In an increasingly interconnected world, public health concerns and crises have domestic and international implications. In 2015, a salmonella outbreak associated with cucumbers imported from Mexico affected 907 people in 40 states, causing 6 deaths; while an October 2012 outbreak of fungal meningitis caused by steroid injections prepared at a Massachusetts compounding pharmacy resulted in over 60 deaths. In another incident, counterfeit Heparin imported from China in 2008 resulted in at least 80 deaths in the United States, and contaminated products in at least 10 other countries' drug supplies. Beyond preventing public health crises, Congress has a strong interest in ensuring that products consumed by Americans work as intended and are truthfully labeled. The Federal Food, Drug, and Cosmetic Act of 1938 (FD&C Act or the Act) promotes national public health by preventing fraudulent activity with respect to food, drugs, and an array of other public health products. The FD&C Act and its implementing regulations contain standards to protect and promote public health, including requirements for prescription drug approval and food safety. Providing an overview of the Act's enforcement, this report discusses the Act's civil and criminal provisions and enforcement mechanisms. The FD&C Act regulates most foods, food additives, color additives, dietary supplements, prescription and non-prescription drugs, medical devices, cosmetics, and tobacco products for safety. Congress enacted the FD&C Act in 1938, acting pursuant to its constitutional authority to regulate interstate commerce. The Act's primary purpose is to "safeguard" and "protect" consumers from "dangerous products" affecting public health and safety by regulating covered articles from the "moment of their introduction into interstate commerce all the way to the moment of their delivery to the ultimate consumer." The FD&C Act is enforced through a variety of measures such as formal and informal administrative actions, criminal and civil penalties, injunctions, recalls, and/or seizures of FD&C Act-covered goods. Though the FD&C Act has been "substantially amended since 1938," the Act "still retains its basic structure." The "heart of the enforcement provisions of the" FD&C Act is Section 301, which enumerates specific prohibited acts. The FD&C Act prohibitions have been described as "a catalogue of definitions elaborating two basic concepts: 'adulteration' and 'misbranding.'" Section 301 generally makes it illegal to distribute directly or indirectly a covered product in interstate commerce that is "adulterated" or "misbranded." The FD&C Act "ascrib[es] the labels 'adulterated' or 'misbranded' to products whose composition, production or labeling fails" to meet the Act's substantive requirements. For example, the FD&C Act deems a "food" adulterated if it has been held under "insanitary conditions," and a "drug" misbranded if its label does not contain the "name and place of business of the manufacturer, packer, or distributor." The language of the FD&C Act is "purposefully broad," providing the executive branch significant discretion over implementing rules and guidelines. Table 1 notes FD&C Act sections that identify when a particular product can be deemed "adulterated" or "misbranded." This section answers several basic and overarching questions about the Act's enforcement. Established under FD&C Act Section 1003, the U.S. Food and Drug Administration (FDA) is the primary agency that administers and enforces the Act. Generally, FDA's mission is to promote and protect public health by ensuring the safety, efficacy, and truthful labeling of products subject to the Act. Consistent with this mission, FDA is statutorily empowered to provide administrative guidance on the FD&C Act's broad mandates and to enforce the Act through administrative actions. For example, before certain articles may lawfully be sold in interstate commerce, FDA must rigorously review them to ensure that they meet certain standards, such as being safe and effective for their intended use. In addition to such pre-market authority, FDA also possesses significant post-market authority to monitor regulated products that have entered interstate commerce to ensure the product continues to adhere to the Act. For example, the Act empowers FDA to request information from pharmaceutical manufacturers, to inspect food producer facilities, or to order recalls of medical devices that may cause "serious, adverse health consequences." The FD&C Act also authorizes FDA to "conduct examinations and investigations" to administer the Act, to disseminate information about regulated products involving "imminent danger to health" or "gross deception to the consumer," and to publicize information on all formal enforcement actions resolved in court. FDA also uses "other enforcement tools not detailed in the FD&C Act," such as issuing warning and information letters to regulated entities that are violating the Act. These practices are discussed later in this report. FDA, however, is not the only federal agency that enforces the FD&C Act. Indeed, while FDA has significant authority to promote compliance with and to investigate violations of the Act, FDA, like most executive agencies, does not have independent litigating authority. Thus, to address noncompliance, FDA must coordinate with the Department of Justice (DOJ) to enforce the Act through product seizures, injunctions, civil penalty proceedings, or criminal prosecutions. To this end, when FDA discovers that the Act has been or is being violated, the relevant FDA district office, in consultation with FDA's Office of the Chief Counsel, generally evaluates the violation and determines whether to refer it to DOJ's Office of Consumer Litigation (OCL). The OCL and DOJ's field representative, the U.S. Attorney for the judicial district in which FDA anticipates seeking judicial relief, in consultation with FDA, ultimately decide whether to seek judicial relief on behalf of FDA. In addition to DOJ, several other agencies have FD&C Act enforcement roles. To administer federal laws relating to imports, exports, and duties, the U.S. Customs and Border Protection (CBP) "must work in close cooperation" with FDA to prevent articles that violate the FD&C Act from entering the United States. As a result, CBP alerts FDA when an FD&C Act-regulated product arrives at a port of entry. If FDA finds the product's importation would violate the Act, FDA asks CBP to issue a "Notice of Refusal of Admission" to the importer and to destroy any shipment that is not exported within 90 days. More broadly, because the Act covers a range of products and subject matters, other federal and state agencies have roles in regulating FD&C Act-covered products. For example, under the Act, FDA is to ensure that drug and device manufacturers properly label their products so as not to mislead consumers, a power that courts have broadly interpreted to allow FDA to regulate advertising relating to drugs or medical devices. However, the Federal Trade Commission (FTC), an independent agency tasked with promoting economic competition and consumer protection by eliminating "unfair or deceptive" acts or practices, likewise has authority over advertising of goods, including drugs and medical devices, in interstate commerce. Because their jurisdictions overlap, FDA and FTC have entered into a memorandum of understanding (MOU) regarding their respective authorities over the marketing of FD&C Act-regulated products. As a consequence, FTC is the primary agency overseeing over-the-counter drugs and medical device advertising. FDA has also entered into MOUs with other government agencies, including the U.S. Department of Agriculture (USDA), the Department of the Treasury, the Department of Defense (DoD), and the Centers for Disease Control and Prevention (CDC). Other "principal cooperating agencies" that FDA works with include the Environmental Protection Agency, the Consumer Product Safety Commission, the Drug Enforcement Administration, the National Institutes of Health, the Nuclear Regulatory Commission, the Office of Management and Budget, and the Securities and Exchange Commission. In addition, the FD&C Act authorizes state governments, working in conjunction with FDA, to enforce certain aspects of the Act. In short, while FDA is the primary agency enforcing the FD&C Act, other entities have roles. Significantly, the FD&C Act does not contain a private right of action under which members of the public can sue to enforce the Act. Instead, under the FD&C Act, generally all proceedings "for the enforcement, or to restrain violations, of" the Act must be in the name of the United States. As the Supreme Court has noted, "the [FD&C Act] and its regulations provide the United States with nearly exclusive enforcement authority," and "[p]rivate parties may not bring enforcement suits." While the Supreme Court has recognized that private lawsuits can be used to enforce laws with mandates similar to those of the FD&C Act, the onus for enforcing the Act lies almost exclusively with the federal government. FDA's regulatory authority comes from Congress's constitutional power to regulate interstate commerce. Article I, Section 8, Clause 3 of the U.S. Constitution grants Congress power "[t]o regulate commerce with foreign nations, and among the several States, and with the Indian Tribes." While early 20 th century case law interpreted the Commerce Clause narrowly to preclude federal regulation of local economic activity that had only "indirect" impacts on interstate commerce, in 1937, the Supreme Court began reading the Commerce Clause more expansively, finding Congress to have power to regulate intrastate economic activity that has "a substantial effect on interstate commerce." The Court's expansive interpretations of the Commerce Clause have led one commentator to state that "Congress ... appears to retain virtually unlimited power to regulate even the wholly intrastate production and sale of food, drugs, devices, and cosmetics." A product's nexus with interstate commerce may arise from many activities. For example, an individual can "introduce" an adulterated good into interstate commerce by directly selling and shipping the good into another state, contracting to do so, or even by selling or shipping a good with the knowledge that it will enter another state. Moreover, an individual can violate the Act by selling or "holding for sale" a misbranded article after its shipment in interstate commerce "without regard to how long after the shipment the misbranding occurred, how many intrastate sales had intervened, or who had received the articles at the end of the interstate shipment." Under the most expansive interpretations of the FD&C Act, courts have held that FDA has jurisdiction over products that contain only a single ingredient that was shipped in interstate commerce. Thus, although Congress has not provided FDA with all Congress's commerce clause, the FD&C Act's reach, which extends to any intrastate economic activities having a substantial effect on interstate commerce, is significant. As a consequence, recent federal court decisions have found that the FD&C Act requirement that articles be in interstate commerce poses "no obstacle" to FDA enforcing the Act with respect to seemingly wholly intrastate activities. FDA authority to apply the FD&C Act to seemingly wholly intrastate activities is limited: the FD&C Act applies only to certain articles. For example, prior to enactment of the Family Smoking Prevention and Tobacco Control Act of 2009, the FD&C Act did not appear to authorize FDA to regulate tobacco products expressly. In 1996, FDA issued regulations governing "access to and promotion of nicotine-containing cigarettes and smokeless tobacco to children and adolescents" on the grounds that nicotine is a "drug." In FDA v. Brown & Williamson Tobacco Corp. , the Supreme Court rejected FDA's argument, holding that Congress had "clearly precluded the FDA from asserting jurisdiction over tobacco products." While Congress has since provided FDA with explicit statutory authority to regulate tobacco products, Brown & Williamson illustrates that FDA's authority under the Act has limits. Given the breadth of articles that the FD&C Act regulates and the reach of FDA's enforcement authority, questions often arise as to whether FDA has discretion over initiating enforcement proceedings under the Act. The Supreme Court discussed FDA's enforcement discretion in Heckler v. Cheney . In Heckler, a death row inmate sentenced to die by lethal injection petitioned FDA to take enforcement actions against state officials who were administering the drug cocktail to be used in the execution. The petitioner argued that the injection would constitute use of a misbranded drug, as using the drug cocktail for a human execution was an "unapproved use of an approved drug" in violation of Sections 301(a) and 502(f) of the FD&C Act. The Supreme Court did not address the merits of the petitioner's misbranding argument, unanimously holding that FDA generally has "absolute discretion" over whether to prosecute or enforce FD&C Act violations through civil or criminal processes. For the Court, the FD&C Act's general enforcement provision, Section 702, was permissive in nature, merely "authorizing" the Secretary of Health and Human Services (and through a delegation of that authority, the Commissioner of FDA) "to conduct examinations and investigations for the purposes of" the Act, and indicated Congress's intent to give FDA discretion over initiating enforcement proceedings. Described as the "high-water mark of FDA discretionary selection of remedies," Heckler established that FDA has discretion over FD&C Act enforcement. Notwithstanding Heckler's holding, the Supreme Court recognized that an executive agency's nonenforcement decisions are only "presumptively" unreviewable. Put another way, the presumption that an executive agency has enforcement discretion "may be rebutted where the substantive statute has provided guidelines for the agency to follow in exercising its enforcement powers." Courts have found that the presumption against reviewing FDA's Section 702 enforcement decisions does not apply to other FD&C Act provisions. For example, in Cook v. FDA , a case similar to Heckler , a group of death row inmates sued FDA for allowing several state correctional facilities to import sodium thiopental, arguing that the drug, as used in lethal injections, was "a misbranded and unapproved new drug" and its import into the country violated Section 801 of the FD&C Act. In ruling against FDA, the D.C. Circuit Court of Appeals distinguished Heckler , noting that Section 801 mandates that, when FDA, through CBP, identifies certain imported drugs that are adulterated, misbranded, or unapproved, the drugs "shall be refused admission," and that this language "unambiguously imposes mandatory duties upon FDA" to refuse admission to the drugs. In other words, while Heckler recognized that FDA had significant discretion over enforcing Section 702, in Cook , the D.C. Circuit held that Congress had limited FDA's discretion over enforcing Section 801. FDA's enforcement discretion is central to many of the most contentious political disputes surrounding the agency. FDA is often faced with the difficult decision of whether to "ignore a safety issue and [potentially] precipitate deaths through nonfeasance" or "shut down an entire industry within a week through maximum sanctions." FDA has set enforcement priorities through policy statements, such as choosing to take actions against drugs with safety risks before taking actions against drugs that lack proof of effectiveness. The agency's enforcement discretion is of "perennial" interest to Congress. Enforcement actions for FD&C Act violations can be civil or criminal in nature. Absent DOJ involvement, FDA has several administrative tools for enforcing the Act, including warning and untitled letters, import alerts, recalls, debarments, and civil money penalties. FDA's other civil enforcement actions, including injunctions and seizures, require DOJ assistance. Although not required by law, depending on the type of FD&C Act violation and the public health threat, FDA usually provides individuals or firms with an opportunity to comply voluntarily before initiating other enforcement actions. FDA does this by issuing "advisory action letters," also referred to as "regulatory letters," which include both "warning" and "untitled" letters. FDA issues warning letters to alert individuals or firms that the agency has identified "violations of regulatory significance" and to request corrective action, with the expectation that most recipients will voluntarily come into compliance with the law. While warning letters may include notice of FDA's intention to take further enforcement actions if the recipient does not comply, FDA considers these letters to be informal and advisory in nature. Consequently, FDA has maintained that warning letters do not constitute "final agency action," a prerequisite for filing a lawsuit against a federal agency under the Administrative Procedure Act (APA). Courts have largely agreed with FDA's position, holding that an APA suit may not be based on a warning letter. Similarly, FDA considers untitled letters to be advisory and uses them to address violations that do not merit a warning letter. For example, FDA may issue an untitled letter to a firm when its promotional materials omit certain risk information and are misleading. Alternatively, FDA may issue a warning letter if FDA had previously communicated the same concerns to the firm, if the promotional materials failed to include any risk information at all, or if the risks omitted are particularly serious. Untitled letters do not include a warning that failure to comply may result in subsequent enforcement action. Because untitled letters are less serious than warning letters, it is unlikely that recipients could challenge untitled letters under the APA as final agency action. FDA bases its authority to issue import alerts, or automatic detention lists, on Section 801(a) of the FD&C Act, which provides that articles " appear[ing], from samples or otherwise ," to violate the Act "shall be refused admission" into the United States. Thus, if persuasive evidence exists, such as a history of violations or a failed facility inspection, that an article may violate the FD&C Act, FDA may place that entity or product on an import alert list to communicate to border officials that such articles should be automatically detained without physical examination until further notice. Once articles are detained, the owner or consignee has the opportunity to testify on the articles' admissibility. Depending on this information, FDA may either permit or refuse the articles' entry into the United States. FDA's use of import alerts to detain articles automatically prior to inspection has been challenged in court, primarily on procedural grounds. Plaintiffs have generally prevailed in cases where FDA effectively used an import alert to change the rules of admissibility for a range of products without prior notice. For example, in Bellarno International Ltd.v. FDA , a federal district court in New York held that FDA violated the APA by failing to conduct notice-and-comment rulemaking procedures prior to instituting a rule, by way of an import alert, that required articles to have a complete chain of custody prior to entry. Finding that the rule provided no enforcement discretion and was, therefore, a "substantive rule of general applicability ... rather than a discretionary statement of policy," the court held that the rule was subject to APA-required notice-and-comment rulemaking. Likewise, in Benten v. Kessler , a district court determined that an import alert, banning abortifacient drugs previously admissible under the agency's personal importation policy, constituted a substantive rule subject to notice-and-comment rulemaking because it was essentially binding in its effect, leaving no room for enforcement discretion. Alternatively, FDA has prevailed when it used import alerts to identify and detain articles suspected of violating existing rules. For instance, in Seabrook International Foods Inc. v. Harris , a federal district court in the District of Columbia held that "[section 801 (a) of the FD&C Act] authorizes the [refusal of] admission of an article, without the introduction of testimony or evidence, as long as that article 'appears' to be adulterated." Accordingly, the court held that, because FDA officials had already identified a number of Indian shrimp facilities as having sanitation issues, the agency was "justified in concluding that the shrimp 'appeared' adulterated and should be barred [absent any] satisfactory showing by the importer that it was not harvested from or packed in the insanity sites earlier observed by FDA inspectors in India." FD&C Act regulated articles that are already in distribution may be "recalled" or removed from market if FDA identifies FD&C Act violations that present consumer safety issues. Recalls may be more efficient than other formal or administrative processes for removing potentially hazardous products from market and alerting the public, thereby creating additional incentive for companies to comply with the Act. Recalls may be voluntary or mandatory. Most recalls are voluntary —that is, either requested by FDA or initiated by the firm or manufacturer itself. Firms or manufacturers must report any voluntary recalls they initiate to FDA and are subject to agency oversight. FDA can request a recall when it determines that a regulated product in distribution presents a "risk of illness, injury, or gross consumer deception" that necessitates agency action to protect public health. FDA typically requests recalls in urgent situations where FDA has evidence to support formal legal action, such as seizure. While a firm may disregard an FDA-requested recall, it does so at the risk of a subsequent FDA enforcement action. Alternatively, FDA has limited authority to mandate or order a firm to recall its products. More specifically, when certain criteria are met, FDA has mandatory recall authority over medical devices, biological products, human tissue intended for transplantation, infant formula, tobacco products, and foods, but it does not have mandatory recall authority over drug products. The procedures for mandatory recalls depend upon the product at issue, but generally, FDA institutes a mandatory recall by issuing an administrative order, which provides the recipient an opportunity to present its views on the order at an informal hearing before a presiding officer. Under section 306 of the FD&C Act, FDA is authorized to "debar" or prohibit corporations or individuals from participating in certain FDA-regulated activities based on their related conduct. For example, FDA may debar a clinical investigator, who was convicted of falsifying records in a clinical study, from "providing any services in any capacity to a person that has an approved or pending drug product application." Because debarment poses significant consequences for those participating in FDA-regulated industries, possibly necessitating career changes, debarment appears to create strong incentives to comply with the FD&C Act. The FD&C Act sets forth two types of debarment—mandatory and permissive. The statute also describes the criteria applying to individuals and corporations involved in the drug industry, as well as food importers. For mandatory debarment, debarment is permanent. For permissive debarment, debarment is for a period of "not more than five years," the length of which is based on six factors. FDA provides a notice of proposal for debarment to persons it seeks to debar, who may then request a hearing to show why debarment is not appropriate. Persons subject to permissive debarment may apply for a termination of debarment. Persons subject to debarment may also petition the United States Court of Appeals for the District of Columbia or the circuit in which they reside to review whether the debarment should be modified or set aside. Under the FD&C Act, FDA may impose monetary civil penalties for specified violations of the Act. These include violations relating to prescription drug marketing practices, medical devices, electronic products, tobacco products, pesticide residues in food, generic drug applications, and improper dissemination of direct-to-consumer advertisements for approved drugs or biological products. The maximum penalty that FDA may assess ranges from approximately $1,000 to over $1 million per violation depending on the prohibited act. To determine the penalty for many violations, the agency must consider the nature and circumstances surrounding the violation, the person's ability to pay, the effect on the person's ability to continue to do business, and any history of similar acts. FDA may assess penalties against both individuals and corporations. If FDA finds that a monetary civil penalty is warranted, it may assess the penalty absent DOJ's or the courts' involvement. Under FDA's regulations, FDA initiates a penalty proceeding by serving a complaint that alleges that the recipient is violating the Act and seeks a civil money penalty. The recipient must answer the complaint and may request a hearing on it. Following the hearing, an administrative law judge renders a decision, which may be appealed to the Department of Health and Human Service's Departmental Appeals Board (DAB). A decision by the DAB is considered final agency action ripe for judicial review. To prevent harmful goods from reaching consumers, the FD&C Act provides for the seizure of foods, drugs, devices, cosmetics, and tobacco products that are adulterated or misbranded. According to a House report accompanying the FD&C Act, a seizure is considered the harshest civil remedy under the Act, and "should be discouraged or confined to those cases where the public protection requires such action." Seizures may be small, involving only a specific lot or batch of defective products, or large, involving multiple seizure actions filed simultaneously in various locations and potentially halting the national distribution of a product. While FDA lacks authority to seize products, the U.S. Attorney may take such actions based on FDA's recommendation. In general, the U.S. Attorney commences a seizure action by filing a complaint in federal court on behalf of FDA and obtaining a warrant that directs the U.S. Marshal to take custody of the goods. FDA is not obligated to notify a manufacturer that its products violate the FD&C Act before undertaking a seizure action, and the Supreme Court has found that seizing products without a prior judicial hearing does not raise due process concerns. Under the FD&C Act, when a product may be seized depends on the product type and the alleged violation. In general, seizure proceedings involving food, drugs, and cosmetics may be initiated "when introduced into or while in interstate commerce or while held for sale ... after shipment in interstate commerce." However, for counterfeit drugs and the materials used to make them, as well as adulterated or misbranded medical devices and tobacco products, seizure may occur at any time (and before a complaint is filed). With some exceptions, FDA may not initiate seizure actions against a food that is misbranded due to its advertising, or that is being sold to consumers in an establishment not owned or operated by the food's manufacturer, packer, or distributor. If goods are seized, a company with an ownership interest in the goods has the option of claiming the article and contesting the seizure by filing an answer to the complaint. Often, the company will have the option of filing a claim to the article while admitting the violation and entering into a Consent Decree with the government. It has been noted that more than 90% of FDA seizure actions are not contested. The FD&C Act authorizes federal district courts to issue injunctions to prevent violations of the Act. Under the Act, injunctions are used to stem the flow of adulterated, misbranded, or otherwise violative goods in interstate commerce and to correct conditions causing violations. Injunctions can take the form of a prohibition, such as an order not to distribute a product, or a command to take certain actions, such as an order to clean a facility. Injunctions may be temporary or permanent in nature. According to FDA guidance, an injunction "may be considered for any significant out-of-compliance circumstance, but particularly when a health hazard has been identified." FDA has indicated that an injunction is the agency's remedy of choice when there are current and definite health hazards or a gross consumer deception requiring immediate action to stop the violative practice and a seizure is impractical; significant amounts of violative products owned by the same person, a voluntary recall by the firm was refused or is significantly inadequate to protect the public, and a seizure is impractical or uneconomical; or long-standing (chronic) violative practices that have not produced a health hazard or consumer fraud, but which have not been corrected through use of voluntary or other regulatory approaches. Similar to seizures, injunctions involve FDA and DOJ cooperation. Based on FDA's recommendation, the U.S. Attorney files, in federal court, to enjoin an individual or company from violating the Act. In general, courts have granted injunctions when DOJ has demonstrated that the defendants violated and are likely to continue to violate the FD&C Act. If the court enters an injunction, the individual or company must comply immediately, unless it obtains a stay of the court order, pending an appeal. Most injunction cases under the FD&C Act are resolved through the entry of a negotiated consent decree. In addition to civil enforcement mechanisms, the FD&C Act also subjects individuals to criminal penalties, including fines and imprisonment, for violating certain provisions of the Act. Criminal prosecutions under the FD&C Act are rare, with one commentator finding that "only a miniscule fraction of 1 per cent of the [FDA's] inspections will result in criminal prosecution," and "extremely technical infractions" of the Act are very unlikely to result in criminal punishment. According to FDA's enforcement manual, the agency usually affords individuals and firms an opportunity to comply voluntarily prior to initiating a criminal prosecution, as long as "a violative situation does not present a danger to health or does not constitute intentional, gross or flagrant violations." Although criminal prosecutions are rare under the Act, the threat of criminal penalties may create incentives to comply. Whereas economic penalties resulting from the civil enforcement tools "might ... be seen as merely an extra cost of business" for an entity regulated under the FD&C Act, criminal penalties potentially threaten the liberty of individuals such as the "factory manager, the corporate chief executive, or the researcher." FDA's Office of Criminal Investigations (OCI) is the primary entity that investigates suspected criminal violations of the FD&C Act and related laws. If OCI finds prosecution to be appropriate, FDA may give the alleged violator notice and an opportunity to present his "views ... with regard to such contemplated proceeding" pursuant to Section 305. Although the Supreme Court has held that hearings are not required, FDA generally provides hearings absent a regulatory bar. If prosecution is appropriate, OCI makes a recommendation to DOJ, which has authority to prosecute FD&C Act violations. DOJ, including the local U.S. Attorney's office, then reviews FDA's recommendation and, if warranted, institutes criminal proceedings against the alleged violator. While DOJ has discretion to reject FDA's recommendation, DOJ will typically "adhere to the recommendations of the FDA" and "act, as closely as possible, in partnership with attorneys from the FDA." Under the FD&C Act, criminal convictions generally require proof of three elements. First, the government must prove that the article, which the statutory violation concerns, is either a "food," "drug," "device," "tobacco," or "cosmetic." Second, the article at issue generally must be "adulterated" or "misbranded." Third, the article at issue must have been introduced into interstate commerce. Importantly, contrary to the typical requirement of American criminal law, FD&C Act criminal provisions do not include a mens rea or "guilty mind" requirement. Instead, the standard for criminal liability under the FD&C Act is strict liability, such that a defendant can be held criminally liable without proof of knowledge of the event or intention to perform the act that results in a violation. Two Supreme Court cases established this principle. In United States v. Dotterweich, Justice Frankfurter, writing for a five-member majority, explained that the FD&C Act "dispenses with the conventional requirement for criminal conduct awareness of some wrongdoing " and that criminal accountability extends to all who have "a responsible share in the furtherance of the transaction which the statute outlaws. " The Court reasoned that the strict liability standard was necessary because "[i]n the interest of the larger good [the Act placed] the burden of acting at hazard upon a person otherwise innocent but standing in responsible relation to a public danger. " Over thirty years later, in United States v. Park, the Supreme Court reaffirmed Dotterweich . In articulating what is known as the "responsible corporate officer" or " Park " doctrine, the Court held that a showing of criminal liability under the FD&C Act did not require an "awareness of some wrongdoing" by the defendant, but instead merely required the defendant to be in a "position in [a] corporation" in which he had "responsibility and authority either to prevent in the first instance, or promptly to correct, the violation complained of, and that he failed to do so." In so holding, the Court noted that while the strict liability standard imposed by the FD&C Act is "beyond question demanding" the standard is "no more stringent" than what should be expected of "those who voluntarily assume positions of authority in business enterprises whose services and products affect the health and well-being of the public that supports them." While the lack of a mens rea element in FD&C Act criminal cases could theoretically allow FDA and DOJ to "bring a criminal action ... in virtually every serious case" of an FD&C Act violation, two defenses may diminish the potential reach of the Act's criminal sanctions. First, an individual accused of an FD&C Act crime could raise the affirmative defense of "impossibility." The "impossibility defense" is available to a corporate officer who can introduce evidence that "he exercised extraordinary care, but was nevertheless unable to prevent violations of [the FD&C Act]." Upon such a showing, the burden of proof then shifts to the government to prove beyond a reasonable doubt that the officer was not actually powerless to prevent or correct the violation. Second, under the "guaranty clause" contained in Section 303(c) of the FD&C Act, a person who in "good faith" merely receives and later delivers an illegal article cannot be subjected to criminal penalties under the Act. Likewise, a person who introduced a misbranded or adulterated product into commerce is also exempt under Section 303(c) if that person received the article in "good faith" and has obtained a written guaranty that the product does not violate the Act. Under the guaranty clause, pharmacists who, in good faith, distributed misbranded or adulterated drugs from a drug manufacturer or distributor have escaped criminal liability. Under Section 303(a)(1) of the FD&C Act, criminal violations of the Act are generally treated as misdemeanors, meaning they are punishable by a fine or imprisonment of a year or less. Nonetheless, FD&C Act violations may constitute a felony if the violation is a second offense or is done with the "intent to defraud or mislead." For a defendant to act with an "intent to defraud or mislead" under the Act, the defendant must "design[] his conduct to avoid the regulatory scrutiny of the FDA," meaning that, for a defendant to incur a felony conviction under the Act, he must have intended to defraud or mislead not only the product's ultimate consumers but also state and federal government enforcement agencies. Section 303(a) establishes default criminal penalties for individuals who commit misdemeanors or felonies under the FD&C Act. The Act provides for a $1,000 fine, imprisonment of up to one year, or both for simple violations of the Act. The Act further provides for fines of up to $10,000, imprisonment for up to three years, or both for subsequent convictions or convictions demonstrating intent to defraud or mislead. However, under the Sentencing Reform Act of 1984, as amended by the Criminal Fines Improvement Act of 1987, all criminal fines in the United States Code, including FD&C Act fines, are subject to modification to achieve certain uniform levels. Consequently, for FD&C Act misdemeanors not resulting in death, the current maximum fine for an individual is $100,000, while for FD&C Act misdemeanors resulting in death or for FD&C Act felonies, the current maximum fine for an individual is $250,000. Likewise, for FD&C Act misdemeanors, the current maximum fine for an organization is $200,000 while, for FD&C Act misdemeanors resulting in death or for FD&C Act felonies, the current maximum fine for an organization is $500,000. Pursuant to the U.S. Sentencing Guidelines, defendants convicted of violating the Act receive a base offense level of six, resulting in a guideline recommendation of a final sentence of zero to eighteen months in prison, depending on the defendant's criminal history. If the defendant had previously violated the Act or if the offense involved fraud, the sentence could increase considerably. The Sentencing Guidelines also provide that an "upward departure" "may be warranted" if the offense "created a substantial risk of bodily injury or death; or bodily injury, death, extreme psychological injury, property damage, or monetary loss resulted from the offense."
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In an increasingly interconnected world, public health concerns and crises have domestic and international implications. In the United States, the Federal Food, Drug, and Cosmetic Act of 1938 (FD&C Act or the Act) promotes public health by preventing fraudulent activity with respect to food, drugs, and an array of other public health products that enter interstate commerce. Indeed, the Act's primary purpose is to "safeguard" and "protect" consumers from exposure to dangerous products affecting public health and safety. The FD&C Act does this by regulating covered articles from their introduction into interstate commerce to their delivery to the ultimate consumer. This report provides an overview of the FD&C Act, answers frequently asked questions about the Act's enforcement, and discusses the Act's various civil and criminal enforcement provisions. The FD&C Act is the main federal law regulating the safety of most foods, food additives, color additives, dietary supplements, prescription and non-prescription drugs, medical devices, cosmetics, and tobacco products. While the Act regulates a host of disparate products, it generally prohibits two basic acts: "adulteration" and "misbranding." Specifically, FD&C Act Section 301 makes it illegal to distribute directly or indirectly a covered product in interstate commerce that is adulterated or misbranded. The Act defines the terms "adulteration" and "misbranding" with respect to specific products. The FD&C Act is chiefly enforced by the U.S. Food and Drug Administration (FDA), an agency whose general mission is to promote and protect the public health by ensuring the safety, efficacy, and truthful labeling of the products it regulates. FDA enforces the Act through administrative mechanisms, such as pre-market reviews of certain products, examinations and investigations, and dissemination of information to the public. While primarily focused on interstate commerce, FDA's authority extends to intrastate activities that have a nexus with interstate commerce and concern a product that the Act covers. Supreme Court precedent recognizes that FDA enjoys significant discretion over enforcement of most FD&C Act provisions. Because FDA, like most executive agencies, does not have independent litigating authority, it must coordinate with the Department of Justice (DOJ) to pursue criminal or civil remedies. In addition to DOJ, other federal agencies play a role in enforcing discrete parts of the Act; private parties, however, do not have rights to enforce the FD&C Act through lawsuits. For serious FD&C Act violations, the FDA, in coordination with DOJ, has a wide range of civil and criminal remedies. For example, the FD&C Act authorizes the government to sue violators of the Act in court in order to punish or prevent future violations. Such civil actions include imposing money penalties, injunctions, and seizures. Other enforcement actions include warning letters, import alerts, recalls, and debarments. For extremely serious violations, FDA and DOJ may collaborate to bring criminal charges. A criminal violation of the FD&C Act does not require that the perpetrator have a "guilty mind." Intentional or repeated violations of the Act may result in multiple years of imprisonment and significant criminal fines. In an increasingly interconnected world, public health concerns and crises have domestic and international implications. In the United States, the Federal Food, Drug, and Cosmetic Act of 1938 (FD&C Act or the Act) promotes public health by preventing fraudulent activity with respect to food, drugs, and an array of other public health products that enter interstate commerce. Indeed, the Act's primary purpose is to "safeguard" and "protect" consumers from exposure to dangerous products affecting public health and safety. The FD&C Act does this by regulating covered articles from their introduction into interstate commerce to their delivery to the ultimate consumer. This report provides an overview of the FD&C Act, answers frequently asked questions about the Act's enforcement, and discusses the Act's various civil and criminal enforcement provisions. The FD&C Act is the main federal law regulating the safety of most foods, food additives, color additives, dietary supplements, prescription and non-prescription drugs, medical devices, cosmetics, and tobacco products. While the Act regulates a host of disparate products, it generally prohibits two basic acts: "adulteration" and "misbranding." Specifically, FD&C Act Section 301 makes it illegal to distribute directly or indirectly a covered product in interstate commerce that is adulterated or misbranded. The Act defines the terms "adulteration" and "misbranding" with respect to specific products. The FD&C Act is chiefly enforced by the U.S. Food and Drug Administration (FDA), an agency whose general mission is to promote and protect the public health by ensuring the safety, efficacy, and truthful labeling of the products it regulates. FDA enforces the Act through administrative mechanisms, such as pre-market reviews of certain products, examinations and investigations, and dissemination of information to the public. While primarily focused on interstate commerce, FDA's authority extends to intrastate activities that have a nexus with interstate commerce and concern a product that the Act covers. Supreme Court precedent recognizes that FDA enjoys significant discretion over enforcement of most FD&C Act provisions. Because FDA, like most executive agencies, does not have independent litigating authority, it must coordinate with the Department of Justice (DOJ) to pursue criminal or civil remedies. In addition to DOJ, other federal agencies play a role in enforcing discrete parts of the Act; private parties, however, do not have rights to enforce the FD&C Act through lawsuits. For serious FD&C Act violations, the FDA, in coordination with DOJ, has a wide range of civil and criminal remedies. For example, the FD&C Act authorizes the government to sue violators of the Act in court in order to punish or prevent future violations. Such civil actions include imposing money penalties, injunctions, and seizures. Other enforcement actions include warning letters, import alerts, recalls, and debarments. For extremely serious violations, FDA and DOJ may collaborate to bring criminal charges. A criminal violation of the FD&C Act does not require that the perpetrator have a "guilty mind." Intentional or repeated violations of the Act may result in multiple years of imprisonment and significant criminal fines.
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Residential energy efficiency can benefit consumers through reduced utility bills, and support national environmental policy objectives by reducing the demand for electricity generated using fossil fuels and reducing current strains on the electric power grid. Various policies to increase conservation and energy efficiency have been adopted since the 1970s, including tax incentives. Developing and deploying technologies that are consistent with the most efficient use of our nation's energy resources is broadly appealing. What remains unclear, however, is what set of policy tools the federal government should employ to meet energy-efficiency objectives. In 2016, roughly one-fifth of total energy consumed in the United States was consumed by the residential sector (see Figure 1 ). Over the long term, residential-sector energy use has gradually increased as a share of all energy consumption as illustrated in Figure 1 . In more recent years, however, residential energy consumption has fallen slightly, as a percentage of all energy consumption ( Figure 1 ) and on a per capita and aggregate basis ( Figure 2 ). As illustrated in Figure 2 , residential energy use per capita had remained relatively constant since the 1970s. Starting in the mid- to late- 2000s, per capita energy use began to trend downward. These modest declines in per capita residential energy use may indicate that efficiency gains have allowed aggregate residential energy use to remain relatively flat or even slightly decline even as consumers increasingly use more energy-demanding technologies. Although energy-efficiency gains have been made in recent decades, some experts suggest that a large potential for increased energy efficiency in the residential sector remains. Despite this potential, concerns remain that consumers may not invest in the optimal level of energy efficiency. There is some debate, however, about the optimal level of investment in energy efficiency. Increasing energy efficiency could change residential energy use trends, perhaps leading to reduced residential energy use per capita over time. However, population growth may still result in continued increases in total residential energy use. This report explores one policy option for promoting residential energy efficiency: tax credits. It begins by providing an overview of the current residential energy-efficiency tax credits (appendices to this report provide a more detailed legislative history). The report then goes on to provide an economic rationale for residential energy-efficiency tax incentives, introducing the concept of "market failures" and "market barriers" which may lead to suboptimal or "economically inefficient" investment in energy-efficiency technologies. That section summarizes various market failures and market barriers in the residential energy sector and outlines ways tax incentives correct them. The final sections of this report provide an economic analysis of the primary tax incentives for residential energy efficiency and briefly review various policy options. For the 2017 tax year, taxpayers are eligible to claim tax credits for expenditures related to residential energy-efficiency and residential renewable-energy generation technologies. The first credit, the nonbusiness energy property tax credit (IRC §25C), allows taxpayers to claim a tax credit for energy-efficiency improvements they make to the building envelope (insulation, windows, doors) of their primary residence and for the purchase of high-efficiency heating, cooling, and water-heating appliances they purchase for their primary residence. The amount of the credit is calculated as 10% of expenditures on building envelope improvements plus the cost of each energy-efficient property capped at a specific amount (ranging from $50 to $300), excluding labor and installation costs. Given the price of high-efficiency heating, cooling, and water-heating appliances, taxpayers generally claim the maximum amount of the credit for energy-efficient property. The maximum value of the credit is capped at $500. This cap applies to claims for the Section 25C credit made in the current year, as well as those made in the prior tax year. In other words, if a taxpayer claimed $500 or more of the Section 25C credit before 2017, they cannot claim it in 2017. The Section 25C credit expired at the end of 2017. Table 1 summarizes eligibility requirements for residential energy-efficiency tax credits in 2017. The second credit, the residential energy efficient property tax credit (IRC §25D), allows taxpayers to claim a tax credit for properties that generate renewable energy (e.g., solar panels, geothermal heat pumps, small wind energy, fuel cells) that they install on their residence. The amount of the credit is calculated as a percentage of expenditures on technologies that generate renewable energy, including labor and installation costs. For 2017, the credit rate is 30%. The rate is scheduled to be 26% in 2020 and 22% in 2021, with the credit expiring after 2021 (see Table 1 ). Generally, the maximum value of the Section 25D credit for renewable-energy-generating technologies is not capped. For more detailed information on the Section 25C and Section 25D credits, including eligible energy-efficiency property specifications, see Appendix A . A comprehensive legislative history of these credits can be found in Appendix B . Information on the current budgetary effects of Section 25C and Section 25D can be found in Appendix C . A rational consumer would be expected to invest in an energy-efficiency technology if the savings that resulted from using the property were greater than the cost of the property. For example, if insulation was expected to lower home-heating costs to such an extent that the homeowner fully recovered the costs of the insulation through lower heating bills, the homeowner would be expected to make this purchase. However, some consumers appear to forgo making these investments, which is known as the "energy-efficiency paradox." Various economic theories may help explain why consumers do not invest in the optimal amount of residential energy efficiency. Certain "market failures" related to both the production and consumption of energy may help explain why consumers do not make more investments in energy-efficiency technologies, such that the optimal or "economically efficient" number of consumers use these technologies. In addition to these market failures, other market barriers to investment in residential energy efficiency have been identified. The Section 25C and Section 25D credits do not directly correct for some of the market failures and market barriers discussed below, which may limit their impact on increasing energy efficiency. There are a variety of reasons why consumers may not make optimal investments in residential energy efficiency. Market failures, including both externalities and principal-agent problems, provide one possible explanation. Other market barriers, including capital market imperfections and informational issues, may also help explain suboptimal investment in residential energy efficiency. Energy consumption externalities are a potential reason why markets may underallocate resources for residential energy-efficiency investment. Broadly, an externality is a cost or benefit associated with a transaction that is not reflected in market prices. Specifically, residential electricity consumption may be associated with negative environmental externalities, such as pollution costs. If electricity prices do not reflect any potential negative environmental consequences of electricity production, consumers do not pay the full cost associated with consuming electricity. These lower prices lead consumers to consume more electricity than is optimal, and to underinvest in energy efficiency. Conversely, the adoption of newly developed energy-efficient technologies may result in positive externalities via "knowledge spillover" effects. For example, if one homeowner pays for and installs a new type of solar panel on his home, his neighbors may see this technology, learn about it, and be more likely to adopt it themselves. These knowledge spillover effects mean that, in addition to the benefits to each individual consumer, the adoption of emerging technologies has a greater benefit to society as a whole. Since markets fail to consider the benefits associated with knowledge spillover effects, more of the technology should be adopted than is adopted under the market forces of supply and demand. Another type of market failure, the principal-agent problem, can occur when there is a disconnect between the incentives for those making energy-efficient property purchasing decisions (the agent) and the ultimate energy consumer (the principal). For example, in non-owner-occupied housing, landlords (agents) may underinvest in energy efficiency when tenants (principals) pay the utility bills. Builders of new homes may also install lower-cost, less efficient technologies if they do not believe the cost of installing high-efficiency products can be recovered when the property is sold. Since the landlord and the builder make decisions regarding the level of energy-efficiency investment, without knowing the energy use patterns of the end user (the tenant or homebuyer), landlords and builders may not invest in the optimal amount of energy efficiency. Capital market imperfections may also lead households to underinvest in energy-efficiency property. Oftentimes, investments in energy efficiency involve high initial costs, followed by a flow of savings. Purchasers unable to obtain funds up front may purchase less expensive, less efficient alternatives. Low-income households tend to be more credit constrained, and therefore more likely to settle for less energy-efficient alternatives when unable to borrow cash up front. Finally, when consumers lack information about energy-saving technologies, they may be unaware of the opportunity to make such investments. If consumers have some, but not all the information relevant to make investments in energy-efficiency technologies, they may still be less willing to make these purchases. For example, uncertainty about future energy prices may make consumers reluctant to make irreversible energy-property investments. Various government policies can be used to enhance the functioning of markets in the face of market failures or market barriers. Tax incentives are one option. Other policy options, which are beyond the scope of this report, might include nontax incentives, such as grants, rebates, or credit enhancements. (Although one particular grant program, Energy Star, is briefly discussed as a policy option at the end of this report, a comprehensive analysis of this policy option is not provided in this report.) The government may also choose to address energy market failures using regulations or mandates. Governments can also support investments in energy efficiency through informational programs (e.g., the Energy Star labeling program). Policymakers can attempt to correct negative externalities associated with residential energy consumption by using tax credits like the Section 25C and Section 25D credits to lower the cost of energy-efficiency investments, thereby motivating additional investment in these technologies. Other tax incentives not discussed in this report, like the now-expired energy-efficient appliance manufacturer credit (IRC §45M), reduce the cost of producing energy-efficient products (known as a "supply-side" incentive) and may also bring down the cost of certain technologies. (For a list of residential energy-efficiency tax incentives, see Appendix C , Table C-1 .) By encouraging additional investment, the availability of tax credits may also address the positive externalities that result from energy-efficiency technologies in terms of increased awareness about these technologies. Governments can also increase knowledge about technologies with information programs like the Energy Star labeling program. However, if markets underinvest in energy efficiency because electricity prices are artificially low, tax credits are not the most economically efficient policy option for increasing energy-efficiency investment. Tax credits result in federal revenue losses and can provide windfall gains to taxpayers. The most efficient way to increase investment in energy efficiency under these circumstances would be to allow electricity prices to fully reflect electricity costs. This could be done by removing existing federal financial support for electricity (e.g., energy-related tax subsidies) or by taxing electricity production that generates external costs not currently reflected in market prices. Increasing the price of electricity such that consumers face the full costs associated with electricity consumption would encourage increased investment in energy-efficiency technologies. Most currently available tax incentives for residential energy efficiency do not directly address the principal-agent problem discussed earlier. The Section 25C and Section 25D credits are not available to renters, and thus do not directly encourage renters to invest in residential energy efficiency. Further, since the Section 25C and Section 25D credits cannot be claimed for investments made to rental property, landlords do not benefit from incentives designed to encourage residential energy-efficiency investments. Other tax incentives not discussed in this report, like the tax credit for energy-efficient new homes (IRC §45L), more directly address potential principal-agent problems in the market for new homes. Tax credits, which may be claimed several months after eligible purchases are made, will have limited effect in overcoming capital market imperfections for homeowners who may be unable to secure credit to pay for the upfront costs associated with energy-efficient technologies. Although tax incentives for residential energy efficiency do reduce the cost of investment, tax credits may not be the most effective policy option for providing immediate savings to consumers that are credit constrained. Finally, in cases where consumers lack information about energy-efficient technologies, and additional information is not fully effective at alleviating this market failure, policies that subsidize efficiency, like tax credits, may be beneficial and increase the adoption of these technologies, thereby increasing societal welfare. However, recent research suggests that such policies might decrease total welfare if adopted by those who are well-informed about energy efficiency. For such consumers, tax credits will not be necessary to encourage them to make energy efficient investment, and will instead provide a windfall gain to the recipients. Hence, according to this research, tax credits will be of the greatest benefit when they target consumers subject to the largest energy inefficiencies. Although the two tax credits analyzed in this report are designed to encourage additional investment in residential energy-efficient property in existing homes, they may not rectify other existing market failures, limiting their ability to increase usage of energy-efficient technologies to their optimal or economically efficient levels. The following sections provide a brief economic analysis of the Section 25C and Section 25D tax credits, evaluating their behavioral effects on increasing investment, their fairness or equity, and potential administrative issues. From an economic standpoint, tax incentives are effective if they succeed in causing taxpayers to engage in the desired behavior. In the case of residential energy-efficiency tax benefits, it is not clear how effective such tax credits are at causing additional investment, as opposed to rewarding consumers that would have made investments absent tax incentives. Residential energy tax credits also tend to benefit higher-income taxpayers, an issue which is explored in detail below. Finally, the Treasury Inspector General for Tax Administration (TIGTA) has identified administrative issues with the current tax benefits for residential energy efficiency. The results of their report are also summarized below. The goal of residential energy-efficiency tax credits is to encourage individuals to increase residential energy-efficiency investments. From the government's perspective, these tax policies are successful if tax credits cause additional residential energy-efficiency investment. If, however, tax credits simply reward consumers for investments that would have been made absent such tax incentives, then the tax incentives are not achieving the policy goal. Tax credits that reward consumers for residential energy-efficiency investments, rather than lead consumers to make additional residential energy-efficiency investments, provide a windfall gain to credit recipients without resulting in additional economy-wide energy-efficiency investment or reduced energy consumption. Concerns that tax credits for residential energy efficiency may not generate additional investment were raised when such credits were first introduced in the 1970s. In 1979, one year after residential energy tax credits were first introduced, several Members of Congress voiced their reservations about these tax credits in a series of House Ways and Means hearings on President Carter's proposals to expand residential energy tax benefits. During one of these hearings, Representative Bill Frenzel remarked, I am nervous about tax credits. The principal tax credit bill we passed last year does not seem to have given great incentive in the marketplace. The drain on Treasury has been less than we expected because people did not flock to take advantage of it. The tax credit tends to be a reward for economic action that was forced by other factors. The tax credit does not motivate, but rather simply occurs at the end of the year when the fellow finds out there was a tax credit available. And I do not think that is a very efficient and effective stimulus. Empirical evidence evaluating whether the residential energy tax credits available in the late 1970s and early 1980s caused additional investment in energy-efficiency property is mixed. Although some researchers found that tax incentives that reduced the price of energy-efficiency property would lead to additional investment, others found that the tax credits were instead more likely associated with windfall gains to credit recipients as opposed to additional energy-efficiency investment. Whether tax credits can result in additional energy-efficiency investment remains an issue to be considered by policymakers evaluating options for encouraging enhanced residential energy-efficiency investment. There are several reasons why residential energy tax credits may not have a significant impact on purchasing decisions for many consumers. First, consumers investing in residential energy-efficiency improvements may be responding to other market incentives, such as the high price of energy. For the consumer that would have invested in residential energy-efficiency property without the tax incentive, federal revenue losses associated with the tax credit are windfall gains to the consumer. Second, savings associated with tax credits are not realized until tax returns are filed, often months after energy-efficiency property is purchased. This reduces the incentive power of the credit. Third, tax credits only reduce the price of investment in residential energy-efficiency property for taxpayers having income tax liability to offset with credits. For example, estimates suggest that in 2017, 44% of U.S. households had no federal income tax liability, meaning that tax credits for energy-efficiency investment do not provide a current financial incentive for such investments for these taxpayers. Tax incentives for residential energy efficiency are most likely to motivate energy-efficiency investments for certain types of taxpayers. As noted above, tax incentives only create a financial incentive for investment for taxpayers with tax liability. Thus, higher-income taxpayers are more likely to benefit from residential energy-efficiency tax incentives. Higher-income taxpayers are also more likely to be motivated to invest in residential energy efficiency through tax incentives. Tax credits may also motivate those already in the market for energy property to make more efficient choices. If consumers choose to invest in certain residential energy-efficiency equipment, such as heating and cooling property, only when existing units are no longer operational, tax credits might motivate the purchase of high-efficiency units among taxpayers with tax liability. The purpose of residential energy-efficiency tax incentives is to increase investment in energy efficiency and properties that generate renewable energy. For these tax credits to be effective, they must be targeted at individuals and households that make choices regarding energy property investments. For residential credits, the target population is homeowners. Taxpayers that are homeowners tend to be higher income than taxpayers living in renter-occupied housing. Hence, it would be expected that energy tax incentives targeted at homeowners would tend to benefit higher-income taxpayers. This is borne out in tax data, as residential energy-efficiency tax credits are predominantly claimed by middle- and upper-income taxpayers (see Table 2 and Figure 3 ). In 2015, more than three-quarters of residential energy tax credits claims (77.6%) were made on tax returns with adjusted gross income (AGI) above $50,000. In addition, these tax units claimed 89.0% of the total value of residential credits in 2015. Although tax units with incomes below $50,000 compose nearly two-thirds (61.4%) of all tax units, approximately one-quarter (22.4%) of tax units in this income class claim residential energy tax credits, claiming 11.0% of the total value of these credits. In addition, as a tax unit's income rises, the average amount of its residential credit also rises, such that tax units with the highest income level receive on average a credit that is approximately seven times the average credit value for the lowest income tax unit. The nonrefundability feature of the Section 25C and Section 25D tax credits may limit who can claim these tax benefits. By definition, the value of a nonrefundable credit cannot exceed a taxpayer's tax liability. Although the Section 25D tax credit can be carried forward to offset tax liability in future years, the Section 25C credit cannot be carried forward. Thus, taxpayers without sufficient tax liability in the current year cannot benefit fully from the Section 25C credit. Taxpayers that eliminate their tax liability through claims of other tax incentives, such as those for the working poor, child-related tax incentives, and education tax benefits, are not able to benefit from certain tax-related residential energy-efficiency incentives. Residential energy-efficiency tax incentives tend to be limited to higher-income taxpayers, which may undermine one of the policy rationales behind using tax credits to motivate energy-efficiency investments. If households are not investing in energy-efficiency property because of the high up-front costs, and because these households are credit constrained, then tax credits that reduce this cost might encourage additional investment. However, if the tax credits are available only to higher-income households, households that are less likely to be credit constrained, then tax incentives may not be the most effective policy option for addressing this market barrier. An ideal tax code would be simple for taxpayers to comply with while also being simple for the government to administer. Taxpayers are more likely to claim tax benefits where compliance costs are low. If filing for certain tax benefits becomes too burdensome, eligible taxpayers might elect not to claim certain tax benefits, and therefore not respond to certain incentives delivered through the tax code. There may be a trade-off, however, between allowing for tax credits with little reporting requirements and overall taxpayer compliance. In April 2011, the Treasury Department's Inspector General for Tax Administration (TIGTA) released a report on the residential energy tax credits which found that the processing of these credits provided numerous opportunities for fraud. Specifically, TIGTA found that the IRS could not verify whether individuals that claim either the Section 25C or Section 25D residential credit actually made qualifying energy modifications to their homes and whether the modifications they made were for their residence. The IRS was unable to confirm that claimants of these credits are eligible for them when income tax returns were processed because they do not require taxpayers to provide information about the residences where they are installed, nor do they require third-party verification (i.e., receipts) that qualifying expenses were incurred. Prior to the issuance of the 2011 tax form (filed in 2012), the form that taxpayers used to claim both of these credits, IRS Form 5695, did not ask taxpayers for any information that would confirm their eligibility for these credits. As a result, TIGTA was unable to confirm that 30% of taxpayers in their sample who claimed the credits were even homeowners. The TIGTA report also noted that analysis of 2009 tax returns indicated that 5% of tax returns claiming these credits did not show any indication of homeownership. The IRS updated Form 5695 beginning with the 2011 tax year to request additional information about the taxpayer's home where the energy efficiency improvements take place. In a more recent report, TIGTA found that in some cases the IRS may have incorrectly denied almost 800 eligible taxpayers approximately $1.5 million in residential energy tax credits. As previously discussed the 25C credit is limited to $500, while the 25D credit has no monetary limit, but, since the credit is nonrefundable, it cannot exceed the taxpayer's tax liability. TIGTA estimated that the $500 limit to the 25C credit was erroneously applied to the 25D credit, resulting in the affected taxpayers being improperly denied the full amount of the credit. The Section 25C and Section 25D tax credits are temporary provisions and one policy option available to Congress is to allow these tax credits to expire as scheduled. Absent congressional action, the Section 25C credit expired at the end of 2017 and the Section 25D credit expires at the end of 2021, respectively. There may be other policy options Congress might want to consider regarding future incentives for residential energy efficiency, including modifying the credits or replacing them with a grant program. One option regarding these credits is to let them expire as scheduled. For taxpayers who base their purchasing decisions on the availability of credits, this may result in taxpayers choosing not to make eligible purchases after their expiration. However, insofar as the credits are claimed by people who would make qualifying purchases absent these incentives, the expiration of these provisions would eliminate a windfall tax benefit without incurring the revenue loss associated with further extension. Policymakers may choose to extend, expand, or otherwise modify residential energy-efficiency tax incentives. As detailed in the legislative history in Appendix B , the current tax credits for residential energy efficiency have undergone a number of changes since being added to the code in 2005. Extending the credit in its current form, with the $500-per-taxpayer cap in place, would provide limited incentives for additional investment for homeowners that have already claimed tax credits under Section 25C. These credits can be expanded in a variety of ways, including by calculating the credit using a more generous formula, expanding the types of technologies eligible for the credit, and by removing caps (both technology-specific and aggregate caps). Expansions may provide additional incentives that could encourage taxpayers to make more purchases. As illustrated in Table B-1 , the value of these credits grew nearly five times between 2007 (when both Section 25C and Section 25D were in effect) and 2009 (when ARRA expanded these tax credits). Further, expansion of these credits may also provide additional windfalls to taxpayers who were going to make these purchases anyway. Policymakers could also scale back these provisions in a variety of ways, including by reinstating technology-specific caps for the Section 25D credit, introducing an overall cap for the Section 25D credit (currently uncapped), reducing the technology-specific caps of Section 25C, or reducing the overall cap on Section 25C. Given that these would be changes from current policy, they may increase confusion among taxpayers when trying to estimate the size of their credits. Policymakers could also phase out these credits for upper-income taxpayers who would be more likely to make eligible purchases without the credits. Extension of current policy, whether in current form, expanded, or scaled back, will have a greater budgetary cost than expiration of these benefits. See Appendix C for more information on the budgetary effects of these provisions. Finally, policymakers may seek to replace these tax credits with a rebate program, or some alternative mechanism to provide direct cash payments to consumers for eligible purchases. This may be a more beneficial way to provide incentives to consumers purchasing energy-efficiency or renewable-energy-generating technologies, especially for consumers who do not have sufficient funds to make eligible expenditures and cannot wait until they file their taxes to receive a financial benefit from their purchases. Such a program could also benefit those with little or no tax liability who cannot benefit from nonrefundable tax credits. In 2010, both the House and Senate introduced legislation intended to create a rebate program, with rebates payable to contractors installing qualified energy-efficiency property. The Home Star Energy Retrofit Act of 2010 ( H.R. 5019 and S. 3177 and included in S. 3663 ) would have created a temporary two-tiered rebate program called Home Star. The legislation, which passed the House in 2010, was not considered by the Senate in the 111 th Congress. Appendix A. Specifications for Property Eligible for Residential Energy-Efficiency Tax Credits This appendix provides additional details on the technical standards for property to qualify for the tax credits in IRC Section 25C and Section 25D. Appendix B. Legislative History Tax credits for residential energy efficiency were first introduced in the late 1970s. These incentives were allowed to expire in the mid-1980s. The present-day residential energy tax incentives, introduced in 2005, are similar to the earlier incentives of the late 1970s and early 1980s. Residential Energy Credits in the 1970s and 1980s The Energy Tax Act of 1978 ( P.L. 95-618 ) introduced the first tax credit for conservation and renewable-energy generation. Specifically, this credit had two components. The first component was calculated as 15% of the first $2,000 of energy-conservation expenditures (a maximum credit value of $300). The second component was calculated as 30% of the first $2,000 in qualified expenditures for solar, wind, and geothermal energy plus 20% of the next $8,000 in qualified expenditures (a maximum credit value of $2,200). The final value of the credit was the sum of these two components, with the maximum value equaling $2,500. In 1980, Congress passed the Crude Oil Windfall Profit Tax Act of 1980 ( P.L. 96-223 ), which increased the amount of the credit. Specifically, this law increased the amount of the second component of the credit attributable to renewable energy generation to 40% of the first $10,000 of expenditures (yielding a maximum value of $4,000 for this component of the credit). This credit was allowed to expire at the end of 1985. Not until 2005, 20 years later, would Congress again enact federal tax credits for residential energy efficiency and renewable-energy property. The Energy Policy Act of 2005 The Energy Policy Act of 2005 (EPACT05; P.L. 109-58 ) created two new temporary tax credits for homeowners who made energy-efficiency improvements to their homes. Under EPACT05, both credits were in effect for 2006 and 2007. The first credit was the nonbusiness energy property credit (IRC §25C). Under Section 25C, taxpayers were eligible for a nonrefundable tax credit equal to 10% of qualified expenditures, subject to certain limitations for specific types of property. Specifically, property-specific credit limits were $50 per year for any advanced main air circulating fan; $250 per year for any qualified natural gas, propane, or oil furnace or hot water boiler; and $300 for electric heat pumps, geothermal heat pumps, central air conditioners, and boilers and water heaters that met certain efficiency standards. The maximum amount of Section 25C credit that could be taken for windows over 2006 and 2007 was capped at $200. The lifetime cap for the Section 25C credit was $500 for 2006 and 2007. The credit could only be applied to improvements made to the taxpayer's principal residence. The second credit temporarily established by EPACT05 for 2006 and 2007 was the residential energy-efficient property credit (IRC §25D). This nonrefundable credit was calculated as 30% of expenditures on qualified photovoltaic properties (where the sun's energy is used to generate electricity), solar water-heating properties (excluding those used for heating swimming pools and hot tubs), and fuel-cell generators, subject to annual limits. Specifically, the credit for photovoltaic and solar water-heating properties could not exceed $2,000 per year, whereas the credit for fuel cells could not exceed $500 per year. Qualifying photovoltaic and solar water-heating property expenditures included those made on any of the taxpayer's residences, whereas qualifying fuel-cell expenditures were limited to those made to the taxpayer's principal residence. At the end of 2007, Section 25C expired. By contrast Section 25D was extended for the 2008 tax year by the Tax Relief and Health Care Act of 2006 ( P.L. 109-432 ). Further, this act clarified that all property which used solar energy to generate electricity, not just photovoltaic property, could qualify for the Section 25D credit. The Emergency Economic Stabilization Act (EESA) In 2008, the Emergency Economic Stabilization Act of 2008 (EESA; P.L. 110-343 ) reinstated and modified the Section 25C credit for the 2009 tax year. EESA also expanded the list of qualified energy property to include biomass fuel stoves, which were eligible for a $300 credit. Geothermal heat pumps were removed from the list of eligible property under Section 25C but were added to the list of eligible property under Section 25D. EESA extended the Section 25D tax credit for eight years, through 2016, modified it for existing technologies, and expanded it to new technologies. Specifically, the act eliminated the $2,000 maximum annual credit limit for qualified solar-electric property expenditures beginning in 2009. In addition, it expanded the credit to include expenditures for qualified small wind-energy property and (as previously mentioned) qualified geothermal heat pump property. The credit for qualified small wind energy was equal to 30% of expenditures made by taxpayers on a small wind-energy property up to a cap. The cap was set at $500 for each half kilowatt of electric capacity generated by a wind turbine, not to exceed $4,000 annually. The credit for qualifying geothermal heat pumps was calculated as 30% of expenditures up to a $2,000 annual cap for this technology. Taxpayers were eligible for the credits for both small wind-energy and geothermal properties installed on any of their residential properties. The American Recovery and Reinvestment Act (ARRA) The American Recovery and Reinvestment Act of 2009 (ARRA; P.L. 111-5 ) further extended and modified the Section 25C and Section 25D tax credits. With respect to the Section 25C credit, ARRA extended the credit for two years (2009 and 2010) and modified the calculation of the credit to be equal to 30% of qualified expenditures for energy-efficiency improvements and energy property, eliminating the technology-specific credit amounts. In addition, the aggregate credit cap was lifted from $500 to $1,500 for 2009 and 2010 and the $200 aggregate cap for windows was eliminated for 2009 and 2010. Hence, if taxpayers used $1,000 of credit in 2009, their credit would be limited to $500 in 2010, irrespective if they had used this credit in 2006 and 2007. The removal of the aggregate cap for windows meant that in 2009 and 2010, taxpayers could claim up to $1,500 in tax credits for qualified windows. Finally, ARRA generally reduced the efficiency standards for both energy-efficiency improvements and energy property, expanding the availability of the credit to additional products. ARRA also changed the Section 25D tax credit for 2009 and 2010, primarily by removing the maximum credit caps for every type of technology except fuel cells. These changes were effective from 2009 through 2016. Following the changes made to the Section 25C and Section 25D tax credits under ARRA, the number of credits being claimed and the total dollar amount of credits being claimed increased (see Table B-1 ). Further, under ARRA, average credit amounts were higher than they had been during 2006 and 2007, reflecting the higher credit rate. When the ARRA expansions expired, the number of taxpayers claiming the residential energy credit fell, along with the total amount and average amount of these credits. The 2010 Tax Act ( P.L. 111-312 ) Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (The 2010 Tax Act; P.L. 111-312 ) extended the Section 25C credit for one year, through the end of 2011. However, the credit structure returned to the structure that existed prior to the enactment of ARRA. Importantly, the general lifetime limit ($500) and window lifetime limit ($200) were reinstated. Hence, if a taxpayer had claimed a total of $500 in Section 25C credits over 2006, 2007, 2009, and 2010 combined, they would be ineligible for the credit in 2011. Similarly if they had claimed $200 in credits for windows in 2006, 2007, 2009, and 2010 combined, they would be ineligible to claim the credit for windows in 2011. Additionally, certain efficiency standards that were relaxed under ARRA were restored to their prior levels. Finally, the technology-specific credit limits for energy-efficiency property were reinstated at pre-ARRA levels. The American Taxpayer Relief Act (ATRA) The American Taxpayer Relief Act (ATRA; P.L. 112-240 ) extended the 2011 parameters of the Section 25C credit for two additional years—2012 and 2013. The Tax Increase Prevention Act (TIPA) The Tax Increase Prevention Act (TIPA; P.L. 113-295 ) extended the 2011 parameters of the Section 25C credit for one additional year—2014. The Protecting Americans from Tax Hikes Act (PATH) The Protecting Americans from Tax Hikes Act (PATH Act; Division Q of P.L. 114-113 ) extended and modified the 25C credit. Specifically, the PATH Act extended the 25C credit for two years—2015 and 2016. In addition, the law modified the requirements for certain qualifying energy-efficient improvements. Before the PATH Act, windows (including skylights) and doors had to meet Energy Star requirements. As a result of the PATH Act, windows (including skylights) and doors must meet the more stringent Energy Star 6.0 standards. This new requirement for windows and doors goes into effect in 2016. Division P of P.L. 114-113 extended the 25D credit for solar technologies through 2021 and modified the credit formula for these technologies. Before enactment of P.L. 114-113 , the 25D credit for all qualifying technologies was scheduled to expire at the end of 2016. (Under current law, the 25D credit for nonsolar technologies is scheduled to expire at the end of 2016.) For qualifying solar technologies, the 25D credit will be extended for five additional years, 2017 through 2021. From 2017 through 2019, the 25D credit for solar technologies will be calculated as 30% of qualifying expenditures (the current formula). In 2020, the credit formula will become less generous and be calculated as 26% of qualifying solar technology expenditures. In 2021, the credit will be calculated as 22% of these expenditures. The Bipartisan Budget Act of 2018 (BBA) The Bipartisan Budget Act of 2018 (BBA; P.L. 115-123 ) extended the 25C credit retroactively for 2017. The law also extended the 25D credit for nonsolar technologies—for fuel cell plants, small wind energy property, and geothermal heat pump property—through the end of 2021 and harmonized the credit formula of nonsolar technologies with the credit formula for solar technologies. Under BBA, the credit rates for these nonsolar technologies now equal 30% for property placed in service before the end of 2019, falling to 26% in 2020 and 22% in 2021, identical to the credit rates for solar technologies. The 25D credit for solar technologies was left unchanged from prior law. Appendix C. Budgetary Impact of Residential Energy Tax Incentives
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Currently, on their 2017 federal income tax return, taxpayers may be able to claim two tax credits for residential energy efficiency. The nonbusiness energy property or "Section 25C" credit expired at the end of 2017. The residential energy efficient property or "Section 25D" credit is scheduled to expire at the end of 2021. The nonbusiness energy property tax credit (Internal Revenue Code [IRC] §25C) provides homeowners with a tax credit for investments in certain high-efficiency heating, cooling, and water-heating appliances, as well as tax credits for energy-efficient windows and doors. For installations made during 2011 through 2017, the credit rate is 10% of eligible expenses, with a maximum credit amount of $500. The credit available for 2011 through 2017 was less than what had been available during 2009 and 2010, when taxpayers were allowed a 30% tax credit of up to $1,500 for making energy-efficiency improvements to their homes. The residential energy efficient property credit (IRC §25D), which provides a 30% tax credit for investments in properties that generate renewable energy, is scheduled to be in effect through the end of 2021, although the percentage of expenditures a taxpayer can claim will fall from 30% to 26% in 2020, and to 22% in 2021. Advances in energy efficiency have allowed per-capita residential energy use to remain relatively constant since the 1970s, even as demand for energy-using technologies has increased. Experts believe, however, that there is unrealized potential for further residential energy efficiency. One reason investment in these technologies might not be at optimal levels is that certain market failures result in energy prices that are below the socially optimal level. If energy is relatively inexpensive, consumers will not have a strong incentive to purchase a technology that will lower their energy costs. Tax credits are one policy option to potentially encourage consumers to invest in energy-efficiency technologies. Residential energy-efficiency tax credits were first introduced in the late 1970s, but were allowed to expire in 1985. Tax credits for residential energy efficiency were again enacted as part of the Energy Policy Act of 2005 (P.L. 109-58). These credits were expanded and extended as part of the American Recovery and Reinvestment Act of 2009 (ARRA; P.L. 111-5). The Section 25C credit was extended, at a reduced rate, and with a reduced cap, through 2011, as part of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (P.L. 111-312). At the end of 2012, the 25C credit was extended for 2012 and 2013 by the American Taxpayer Relief Act (ATRA; P.L. 112-240). The Section 25C credit was extended for 2014 by the Tax Increase Prevention Act (P.L. 113-295). The Section 25C credit was extended for 2015 and 2016 by the Protecting Americans from Tax Hikes Act (PATH Act), which was included in P.L. 114-113. The Section 25D credit as it applies to solar technologies was also extended and modified by P.L. 114-113. Most recently, the Bipartisan Budget Act of 2018 (BBA; P.L. 115-123) extended the Section 25C credit for 2017, and extended the Section 25D credit for nonsolar technologies through 2021, providing parity in Section 25D between solar and nonsolar renewable energy technologies. Although the purpose of residential energy-efficiency tax credits is to motivate additional energy-efficiency investment, the amount of the investment resulting from these credits is unclear. Purchasers investing in energy-efficient property for other reasons—for example, concern about the environment—would have invested in such property absent tax incentives, and hence stand to receive a windfall gain from the tax benefit. Further, the fact that the incentive is delivered as a nonrefundable credit limits the provision's ability to motivate investment for low- and middle-income taxpayers with limited tax liability. The administration of residential energy-efficiency tax credits has also had compliance issues, as identified in a Treasury Department Inspector General for Tax Administration (TIGTA) report. There are various policy options available for Congress to consider regarding incentives for residential energy efficiency. One option is to let the existing tax incentives expire as scheduled. Another option would be to repeal these tax credits. A third option would be to extend or modify the current tax incentives. Finally, policymakers could replace the current tax credits with a grant or rebate program. Grants or rebates could be made more widely available, and not be limited to taxpayers with tax liability.
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Under the Appointments Clause of the Constitution, the President and the Senate share responsibility for making appointments to the Supreme Court, as well as to various lower courts in the federal judiciary. While it is the President who nominates persons to fill federal judgeships, the appointment of each nominee also requires Senate confirmation. Historically, the vast majority of appointments to judgeships in federal courts other than the Supreme Court have typically not engendered much public disagreement between the President and the Senate and between the parties within the Senate. Debate in the Senate over particular lower court nominees, or over the lower court appointment process, was uncommon, with controversy arising over nominees only on rare occasions. Most such nominations typically were both reported out of committee and confirmed by the Senate without any recorded opposition. In recent decades, however, appointments to two kinds of lower federal courts—the U.S. district courts and the U.S. circuit courts of appeals—have often been the focus of heightened Senate interest and debate, as has the process itself for appointing judges to these courts. Given congressional interest in the subject, this report is intended to provide readers with a basic overview of the appointment process for U.S. circuit and district court judges. Accordingly, the report, following a brief background section, describes, in successive parts, the three primary phases of the appointment process, namely the selection of judicial nominees by the President, including the key role often played by home state Senators in recommending judicial candidates to the President; the role of the Senate Judiciary Committee in considering and deciding whether to approve and report out the President's judicial nominations to the Senate; and the Senate's floor consideration and confirmation of judicial nominations, through use of either its unanimous consent process or its cloture process. The report then discusses the final appointment steps for nominees after Senate confirmation, including receipt of commissions signed by the President and the taking of their oaths of office, as well as various possible outcomes for nominees whose nominations are not confirmed, including the possibility of their being re-nominated. The report's exclusive focus, it should be emphasized, is the process of appointment of U.S. circuit and district court judges through presidential nomination and Senate confirmation . This has been, historically as well as in contemporary times, the process by which the vast majority of circuit and district court judges have been appointed. Not analyzed in this report are judicial appointments that occur on rare occasions when a President exercises his constitutional power to make "recess appointments," a process under which an individual can temporarily take office without Senate confirmation. The U.S. district courts are the trial courts of general federal jurisdiction, while the U.S. circuit courts of appeals are the intermediate appellate courts that generally consider appeals in cases originally decided by the district courts. With the Supreme Court deciding fewer than 100 cases per term, the district and circuit courts, one scholar has written, "today serve as the final arbiter of more than 99 percent of all federal court litigation," with "important policy ... being made every day in the lower federal courts." Ruling on a wide range of issues, the lower courts, and the persons selected to serve as judges on those courts, arguably have become of much more interest and concern to Congress in recent decades than they were historically. As congressional interest in the lower federal courts has heightened, the judicial appointment process in turn has often been at the center of Senate debate. In committee and on the Senate floor, Senators periodically have debated over the standards to use in evaluating judicial nominees; over whether certain nominees, if confirmed, would be impartial judges or bring with them ideological agendas or other disqualifying biases; or over how promptly or deliberately to act on judicial nominations. The judicial confirmation process in the Senate also is longer than it was historically. During the three most recent presidencies (of Bill Clinton, George W. Bush, and Barack Obama), the Senate has, on average, taken much more time to confirm district and circuit court nominees than it did previously—with average times from date of first nomination to confirmation no longer measured in weeks but in multi-month or half-year periods. Perhaps indicative of a more contentious process, the Senate in recent years has been confirming fewer district and circuit nominees by unanimous consent or voice vote than previously, increasingly voting instead by roll call, often with some, and occasionally with a substantial minority of, Senators casting "nay" votes. Periodically during recent presidencies, the Senate has been divided over when or whether to hold up-or-down confirmation votes. Illustrative of such division have been occasions where motions filed by Senators of the President's party to close debate on particular nominations have, in roll call votes, been opposed, and sometimes defeated, by a substantial number of "nay" votes cast by Senators of the other party. Frequently, debate over judicial nominations also has centered on the general pace at which the Senate should process the nominations. In a recurring pattern of this debate over recent years, Senators of the President's party, on the one hand, have accused the other party of generally engaging in "obstructionism" or tactics designed to delay or block committee or full Senate action on particular or even relatively large numbers of judicial nominations. Senators of the opposite party, on the other hand, have denied engaging in delaying tactics against judicial nominations, while asserting a Senate duty, under the Constitution's Appointments Clause, to deliberately review the qualifications of judicial nominees rather than to rush or "rubber stamp" the processing of their nominations. Often, in this debate, a related Senate concern has been the number of district or circuit judgeships vacant at that particular time. Senators, along party lines, have differed over whether judicial vacancy levels, when relatively high, were primarily due to delays by the President in making judicial nominations, or to delays by the Senate in confirming them. Recent frustrations over the judicial appointment process led to a bipartisan agreement reached on January 25, 2013, early in the first session of the 113 th Congress. That day, by a 78-16 vote approving S.Res. 15 , the Senate established a standing order of the Senate which could accelerate the consideration of nominations, including those to the district courts. The standing order, applicable only in the 113 th Congress, significantly reduced (from 30 to 2 hours) the maximum time for consideration of district court nominations after at least three-fifths of the Senate had agreed that debate on the nominations should be brought to a close. The order excluded circuit court nominations (as well as nominations to the Supreme Court, the U.S. Court of International Trade, and major executive branch positions), for which the length of "post-cloture" consideration, under Senate rules, continued to be 30 hours. Throughout the rest of 2013, however, the Senate again found itself periodically divided, along party lines, over judicial nominations. At issue was how quickly the Senate should act on lower court nominations in general, and whether or when various circuit court nominations pending on the Senate's Executive Calendar should receive confirmation votes. Late in the session, confirmation votes on three circuit court nominations were prevented when motions to close Senate debate on them received only simple majority votes in favor, rather than the three-fifths supermajority then required under Senate rules to close debate. These episodes (along with a simple Senate majority unable again, under similar circumstances, to close debate on an executive branch nomination) set the stage for the Senate's majority leader, shortly thereafter, to put before that body the following issue: Whether, as the majority leader proposed, the Senate should change its procedure to require only a simple majority vote in order to close debate on nominations—thereby more easily reaching confirmation votes, including those on circuit and district court nominations. The proposed procedural change was referred to by some Senate Members, as well as by outside observers and news media reports, as the "nuclear option." On November 21, 2013, the proposed change in procedure was considered by the Senate. By a vote of 52-48, it overturned a ruling of the chair and set a precedent that lowered the vote threshold required by the Senate for "invoking cloture" (closing debate) on most presidential nominations. Specifically, the Senate reinterpreted the provisions of Senate Rule XXII to require only a simple majority of those voting, rather than three-fifths of the full Senate, to close debate on all presidential nominations except those to the Supreme Court. The November 21, 2013, reinterpretation of its cloture rule ushered in a significant change in the way that the Senate thereafter processed circuit and district court nominations. For the rest of the 113 th Congress, until the day of its final adjournment almost 13 months later, cloture motions, rather than unanimous consent (UC) agreements, were the invariable procedural tool used in the Senate to reach confirmation votes on these nominations. Specifically, from November 21, 2013, through December 15, 2014, the process for every confirmed circuit or district court nomination involved the filing of a cloture motion, with the Senate then voting to invoke cloture. With a vote threshold needed to close debate lower during this period than it was previously, every motion filed to close Senate debate on a circuit or district court nomination succeeded, followed in turn by each nomination receiving Senate confirmation. During this period, no confirmations of circuit or district court nominations were reached through the unanimous consent process. The Senate, however, would eventually return to using unanimous consent agreements to reach confirmation votes on judicial nominations. On December 16, 2014, the day of the final adjournment of the 113 th Congress, the Senate reverted, for the first time in more than a year, to using a UC agreement, rather than the cloture process, to reach confirmation votes on district court nominations. Regular reliance on UC agreements to process judicial nominations returned in the 114 th Congress, coinciding with a change in party control of the Senate. In this Congress, the party not of the President was the new Senate majority, precluding continued use of the cloture process by the President's party to secure confirmations by party line or near party line votes. Instead, circuit and district court nominations in the 114 th Congress thus far have received Senate confirmation votes only pursuant to unanimous consent agreements requested by the majority leader or his designee. In future Congresses, the relative extent to which the Senate will rely on the unanimous consent or the cloture process to confirm judicial nominations remains to be seen. Accordingly, given the potential future relevance of both approaches to the Senate, this report, in its discussion of Senate floor consideration of judicial nominations, describes in some detail the two alternate procedural paths that the Senate has taken in recent years when arranging for such nominations to receive confirmation votes. Federal law authorizes a specific number of full-time active judgeships for each U.S. circuit or district court. The need for a President to make a circuit or district court nomination typically arises when one of these judgeships becomes or soon will become vacant. A judicial vacancy is created by an incumbent judge assuming part-time duties as a "senior status" judge; by a judge's retirement, resignation, or death; or by his or her elevation to a higher court. Judicial vacancies also arise when legislation is enacted creating new judgeships that are to be filled for the first time. Judges with imminent departure plans frequently give several months of advance notice, permitting the search for judicial replacement candidates to begin even before the vacancy occurs. The stated policy preference of the federal judiciary is that circuit and district court judges intending to leave full-time active status notify the President and the Administrative Office of the United States Courts "as far in advance as possible." (According to the judiciary, over fiscal years 2009 through 2013, the average advance notice provided by outgoing circuit and district court judges ranged from a low of 106 days in FY2009 to a high of 196 days in FY2011.) Occasionally, a judge also will give notice of the intention to leave office not on a specified future date, but upon the Senate's confirmation of his or her successor. In these circumstances, because of the conditional nature of the outgoing judge's departure, the President's selection of a nominee to succeed the judge necessarily will occur before there is a judicial vacancy. A complete listing of circuit and district court judgeships which currently are vacant or are scheduled to be vacated in the future is provided on the federal judiciary's website, at http://www.uscourts.gov . The website also maintains a list of judicial vacancies designated as "judicial emergencies" by the Administrative Office of the U.S. Courts. Placed on this list are vacant judgeships located in a district or circuit court deemed to have an extremely high workload or in one that has carried a high workload for an extremely long period of time. There are almost no formal restrictions on the potential pool of candidates the President may consider for nomination to circuit or district court judgeships. Neither the Constitution nor any federal statute specifies professional, age, or citizenship requirements for one to be a circuit or district court judge. For appointment to these positions, there "are no exams to pass, no minimum age requirement, no stipulation that judges be native-born citizens or legal residents, and no requirement that judges even have a law degree." Federal law, however, does require (making exceptions for only a few district or circuit courts) that persons at the time of their appointment be residents of the district or circuit and remain so during their judicial service. Although, as certain scholars have observed, candidates for U.S. judicial posts "do not have to be attorneys—let alone prominent ones—it has been the custom to appoint lawyers who have distinguished themselves professionally (or at least not to appoint those without merit)." Intensive scrutiny of their qualifications is not legally required. It is a well-established practice, however, that candidates for nomination to circuit and district court judgeships are rigorously evaluated for their degree of professional qualification at successive points in the selection process. Expectations that circuit and district court nominees meet a high standard of professional qualification have particularly been fostered by the long-standing role of a committee of the American Bar Association (a role dating back to the early 1950s) in evaluating and rating a President's judicial candidates. Further, virtually every President in recent decades has emphasized the importance of judicial nominees meeting high professional standards, as well as having the ability to be impartial as a judge. Besides the standard of high professional qualification, candidates for district or circuit court judgeships also often have to meet other informal qualification requirements. One such customary requirement usually, if not always, observed is that judicial nominees be of the same party affiliation as the President. Another informal standard generally understood to apply is that judicial candidates have a judicial philosophy, or view of what a judge's fundamental role is in our constitutional system, that is acceptable to the President or to others, such as home state Senators, who might have a deciding role in nominee selection. Scholars also have suggested that in recent decades an informal qualification requirement for judicial candidate has been that their selection be acceptable to the President's political base and to interest groups whose support is important to the President. Sometimes, a key qualification requirement also will be the ability of a potential candidate to meet a representational standard informally set for the circuit or district court in question. The President (or home state Senators or other state officials recommending judicial candidates to the President) may evaluate the suitability of a candidate according to whether certain groups or constituencies are adequately represented on the court. Among the representational considerations that might be taken into account are a candidate's ethnicity, religion, gender, and place of residence. The primary role in identifying judicial candidates sometimes is played by the Administration and other times by home state Senators or other officials of the state where the court in question is located. The respective roles that each plays often will depend in large part on whether one or both of a state's Senators are of the same party as the President and on whether the candidates are being considered for district or circuit court judgeships. By well-established custom, candidates whom the President considers for nomination to U.S. district court judgeships are identified by U.S. Senators of the state in which the judicial districts are located or by other officials from the state. The President and his Administration rarely initiate the search for district court candidates but instead defer to, and consider only the candidate recommendations made by, home state Senators or other state officials. The role of identifying district court candidates is invariably a senatorial one, if at least one of a state's Senators is of the President's party. By contrast, a home state Senator not of the President's party usually, if not always, plays a secondary rather than primary role in identifying district court candidates. Customarily, Senators of the same political party as the President are the key persons who provide the President's Administration with recommendations for U.S. district court judgeships in their state. One authority on the judicial appointments process has noted that a Senator of the President's party "expects to be able to influence heavily the selection of a federal district judgeship in the senator's state; indeed, most such senators insist on being able to pick these judges." When only one of a state's Senators is of the President's party, he or she alone, by custom, is entitled to select all candidates for district judgeships in that state. If the Administration has concerns about the Senator's recommendation, it is expected to resolve those concerns with the Senator. If the Administration continues to have a concern over a candidate, finding him or her unacceptable or in some way problematic, the Senator, and not any other official outside the Administration, is called on to provide a different recommendation. Also, by custom, if the Administration prefers its own candidate, it in turn must persuade the Senator to agree to its choice. If both of a state's Senators are of the President's party, they may share the role of recommending judicial candidates to the President or, alternately, one of them may take the lead role. Senatorial custom, particularly in recent decades, provides ample support for both Senators having an active role in recommending judicial candidates in their states, if each wishes to participate in the process. The extent to which the two Senators will share the judicial role may depend, to a great extent, on their respective prerogatives and interests in this area. If the prerogatives and interests of a state's Senators in selecting judicial candidates are roughly equal (e.g., they are both of the President's party, have about the same amount of Senate seniority, and are both interested in recommending judicial candidates to the President), sharing in some way the candidate selection role seems almost inevitable. If neither Senator in a state is of the President's party, each usually, by custom, plays a secondary role in recommending district court candidates for the President's consideration, with the primary role assumed by other officials from the state who are of the President's party. On occasion, however, exceptions do occur, with a President sometimes acquiescing to active senatorial participation in judicial candidate selection in states having two opposition party Senators. On other occasions, an agreed-upon arrangement in a state might be that, while officials of the President's party would be the ones recommending judicial candidates, the state's opposition party Senators would exercise a veto power over any recommendations they found objectionable. Even when neither of a state's Senators is of the President's party, a consultative role is contemplated, if not mandated, for them in the appointment process by means of the Senate Judiciary Committee's "blue slip" policy. Under this policy, as it has evolved in recent decades, the Judiciary Committee has come to expect that, as a courtesy, a state's Senators, no matter what their party affiliation, will be consulted by the Administration prior to the President nominating persons to U.S. district judgeships in the state as well as to U.S. circuit court judgeships historically associated with their state. Further, under the blue slip policy as applied by various chairs of the Judiciary Committee, a Senator opposed to a judicial nominee from his or her state may—by declining to return a positive blue slip to the committee, or by returning a negative one—block the nominee from receiving a committee hearing or vote. When the blue slip policy is applied in this way, the Administration is well advised, before it selects a nominee, to consult with both home state Senators, regardless of their party, to determine the acceptability to them of a judicial candidate under consideration. To fail to do so is to risk having a nominee unacceptable to a home state Senator vetoed in committee. Senators have great discretion as to the procedures they will follow in identifying and evaluating candidates for appointment to district court judgeships. A Senator may view his or her role in selecting a judicial candidate as essentially making a personal choice, with any input from others being informal in nature. By contrast, at the other end of the spectrum, a Senator may use a formally constituted advisory body of individuals, such as a "nominating commission" or "screening committee," to identify and evaluate judicial candidates. In either case, a Senator's office or nominating commission first may publish notice of the judicial vacancy and invite applications from potential candidates. This typically will be followed by a screening and evaluation process that includes interviews of the most promising candidates by commission members, the Senator's staff, or the Senator. At the end of the process, the Senator will select one or more candidates to recommend to the President for nomination to the vacant judgeship. Senators might use a number of criteria to determine the fitness of persons from their state to be recommended for district court judgeships. In nearly all cases, a fundamental starting requirement for judicial candidates presumably will be that any person selected have the professional qualifications, integrity, and judicial temperament needed to perform capably as a federal judge. Also, a Senator likely will be guided by at least some political party considerations in the judicial candidate search. (Traditionally, scholars have found, the overwhelming majority of all federal judicial nominees come from the same party as the nominating President.) Further, a Senator may evaluate the suitability of a judicial candidate according to whether certain groups or constituencies are adequately represented on the court in question. A Senator as well may sometimes use normative criteria to evaluate judicial candidates, being concerned, for instance, with what values—legal, constitutional, political, social, economic, and philosophical—would underlie a candidate's reasoning and decision-making as a judge. Since it is the President who ultimately decides whether a candidate will be nominated, a Senator might also be expected to take into account any standards explicitly set by the Administration for judicial candidates. Eleven of the 13 U.S. circuit courts of appeals are geographically based courts encompassing three or more states. In each of these circuit courts, many of the seats on the bench have traditionally been linked to a particular state. As a result, Presidents in recent decades usually, but not always, have been inclined to make a circuit court appointment in keeping with the "state seat" tradition by selecting a nominee from the same state as the vacating judge. Senators generally exert less influence over the selection of circuit court nominees than over the selection of district court nominees. Whereas home state Senators of the President's party often, if not always, dictate whom the President nominates to district judgeships, their recommendations for circuit court nominees, by contrast, typically compete with names suggested to the Administration by other sources or generated by the Administration on its own. Indicative of this, an Administration source, early in the Obama Administration, said that President Obama "retained the prerogative" to select circuit court nominees on his own, independently of Senators' recommendations. While Senators usually are not the dominant or decisive players in the process of selecting circuit court nominees, they, nonetheless, do enjoy certain prerogatives in the process. Once a judgeship in a circuit becomes vacant, Senators in states falling within the circuit are free to suggest names to the Administration regarding possible nominees. If the Administration has indicated which state it wants the judgeship to represent—whether in keeping with a traditional state seat or in a break with that tradition—the Senators of that state, if they are of the President's party, customarily are among those who recommend candidates for the judgeship. Senators of the President's party, one authority has written, "expect judgeships on the federal courts of appeals going to persons from their states to be 'cleared' by them." If the home state Senators are not of the President's party, they nonetheless have expectations—based on the Senate Judiciary Committee's long-standing blue slip policy—that they, too, will be consulted by the Administration for their views about the prospective nominee. A President typically will want to select a circuit court nominee unopposed by both home state Senators, to avoid having a negative or unreturned blue slip from either Senator block the nomination in committee. During the presidency of Barack Obama, the White House Counsel's Office has played the primary liaison role with Senators or other state officials regarding judicial appointments (as it did during the presidency of George W. Bush). As the primary consultative link with home state Senators, it is this office that ordinarily receives Senators' recommendations of specific candidates for judicial appointment. During the Obama presidency, the White House's Office of Legislative Affairs, working with the Counsel's Office, has also sometimes consulted with Senators regarding judicial vacancies within their home states. In recent presidential administrations, the task of evaluating the background and qualifications of judicial candidates has been apportioned between key staff persons in the White House Counsel's Office and the Department of Justice. These staff, aided by the research of subordinate White House or DOJ personnel, as well as by investigations of the Federal Bureau of Investigation (FBI) into the backgrounds of judicial candidates, decide which candidates to recommend to the President for nomination. The evaluation process of various candidates under consideration for nomination to a judgeship often involves a "preliminary vetting." In this initial vetting phase, Administration staff may interview some or all of the candidates (either by phone or in person) and review publicly available information about them (such as their published writings and news media accounts of their past activities in public life). The candidates also might be asked to fill out various forms and questionnaires, including a personal background information form for the FBI, a financial disclosure form, and a White House or Senate Judiciary Committee questionnaire. (In other cases, however, the Administration might wait until it has narrowed down the nominee search to one candidate, requiring only that candidate to fill out such forms.) After the evaluation process is narrowed down to one person (or after a single initial candidate passes the initial vetting phase), the candidate is cleared for "detailed vetting." For its part, detailed vetting may move forward on different fronts. Administration staff can be expected to carefully review the candidate's written opinions or other legal writings (depending on whether the candidate is a judge or a practicing attorney), as well as the forms and questionnaires filled out by the candidate. If they have not already done so, they likely will now interview the candidate in person, as well as persons in the legal community who have had past contact with, or have knowledge about, the candidate. During or immediately after the detailed vetting process, the FBI will conduct a confidential background investigation of the candidate, which usually takes four to six weeks. During the Obama presidency, scholars have observed, preliminary vetting typically has been conducted by the White House Counsel's Office and more detailed vetting by the Department of Justice's Office of Legal Policy (OLP): Once names—whether multiple recommendations or just one—have surfaced for a vacancy, preliminary vetting is done through the Counsel's Office to ensure that the administration's qualifications standards are met. Once that vetting has occurred, the names of viable potential nominees are forwarded to the Justice Department, where a much more elaborate vet occurs in the OLP. That vet, which generally takes about a month's time, usually, but not always, is limited to a single nominee per vacancy. Where more than one prospective nominee is vetted, the vacancy at issue is almost always at the circuit court level. The detailed vetting stage may also provide for, or be followed by, evaluation of the judicial candidate by a committee of the American Bar Association. The committee which performs this evaluation, the ABA's Standing Committee on the Federal Judiciary, is made up of 15 lawyers with various professional experiences. Since 1953, every presidential Administration, except that of George W. Bush, has sought ABA pre-nomination evaluations of its candidates for district and circuit court judgeships. The stated objective of the ABA committee is to assist the White House in assessing whether prospective judicial nominees should be nominated. It seeks to do so by providing what it describes as an "impartial peer-review evaluation" of each candidate's professional qualifications. This evaluation, according to the committee, focuses strictly on a candidate's "integrity, professional competence and judicial temperament" and does not take into account the candidate's "philosophy, political affiliation or ideology." In evaluating professional competence, the committee assesses the prospective nominee's "intellectual capacity, judgment, writing and analytical abilities, knowledge of the law, and breadth of professional experience." Evaluation of the judicial candidate is usually assigned to the ABA committee member from the judicial circuit in which the judicial vacancy exists. The committee evaluator assesses the qualification of the candidate in the following ways: by examining the candidate's responses to a comprehensive Personal Data Questionnaire, forwarded to the committee by the Department of Justice; by examining the candidate's legal writings and reviewing reported court decisions, briefs, legal memoranda, publications, speeches, hearing and argument transcripts, articles, and other writings by or involving the candidate; by conducting extensive confidential interviews of a broad cross section of judges, lawyers, and others who have served, or had other professional contact, with the candidate, to obtain their assessments of his or her integrity, professional competence, and judicial temperament; and by interviewing the candidate near the end of the evaluation process, affording him or her "a full opportunity to address and rebut any adverse information or comments" that might have come to the evaluator's attention during the evaluation process. After completing the above steps, the evaluator prepares an informal report for the committee chair. The report, in evaluating the candidate's professional qualifications, rates the candidate as either "well qualified," "qualified," or "not qualified." After reviewing the informal report for thoroughness, the committee chair informs the White House of "the likely outcome of the evaluation" by the full committee. If the White House requests the process to continue (which it typically does if the candidate has received an informal report rating of "qualified" or better), the chair directs the evaluator to prepare a formal report. After independently reviewing the formal report, each member of the committee votes on which rating category the candidate should receive. Once all votes are tallied, the chair confidentially advises the White House of the committee's rating, including whether the committee vote for it was unanimous. The rating will remain confidential and not be disclosed publicly until the candidate is nominated by the President. If the candidate is not nominated, the rating is not publicly released. Conveyed to the White House on a confidential basis, the ABA committee rating becomes part of a judicial candidate's overall profile for the Administration to consider in the pre-nomination evaluation process. On the one hand, a "well qualified" or "qualified" rating by all or a substantial majority of the committee's members typically may be seen by the Administration to strengthen the case for a candidate's nomination. On the other hand, a "not qualified" rating may be a reason for the President not to nominate. In such instances, another pre-nomination consideration is that the "not qualified" rating, and the reasons for it, will be publicly disclosed if the candidate is nominated. (In keeping with standard ABA committee practice, if a candidate is nominated in spite of a majority "not qualified" rating, the reasons for this rating will be made public if the Senate Judiciary Committee holds a hearing on the nomination. By contrast, it is not ABA committee practice to explain to the Judiciary Committee its reasons for any other ratings, including split votes in which a minority of committee members rate a nominee "not qualified.") ABA committee evaluations of judicial candidates, it should be stressed, are provided to the Administration strictly on an advisory basis. It is solely in the President's discretion as to how much weight to place on a judicial candidate's ABA rating in deciding whether to nominate. Hence, a "not qualified" ABA rating of a judicial candidate in some instances may dissuade a President from nominating, while in other instances the President may nominate in spite of the rating. Likewise, a favorable "well qualified" or "qualified" ABA rating of a judicial candidate does not oblige a President to nominate, and a President for his own reasons sometimes may choose not to nominate such a candidate. Near the end of detailed vetting, judicial selection staff in the Administration may, if necessary, conduct follow-up interviews of the candidate (either in person or by telephone) to address any new questions or confirm new information arising out of the detailed vetting process. Finally, Administration staff will evaluate the results of the detailed vetting effort and formally recommend to the President whether to nominate the candidate. If the recommendation is to nominate, and it meets with presidential approval, the President will sign a nomination message, which is then sent to the Senate. The President customarily transmits a circuit or district court nomination to the Senate in the form of a written nomination message. Once received, the nomination is numbered by the Senate executive clerk, read on the floor, and then immediately referred to the Judiciary Committee. The committee will play a key role, as an intermediary between the President and the full Senate, in deciding whether the nomination ultimately moves forward in the confirmation process. For the long-established Senate practice is that the Judiciary Committee must act on—and specifically "report"—a circuit or district court nomination before the whole Senate can act on it. The Judiciary Committee's processing of the nomination typically consists of three phases—a pre-hearing phase, the holding of a hearing on the nomination, and voting on whether to report the nomination to the Senate. Upon referral of a judicial nomination to the Judiciary Committee, professional staff on the committee initiate an investigation into the nominee's background and qualifications. Nominations units for the majority and the minority staff, each with their own nominations counsel, clerk, and investigators, will do their own research and review of the background of the nominee. Resources closely examined in their investigation will be a committee questionnaire completed by the nominee and any documents concerning the nominee provided by the Administration. The pace and timing of the staff investigation of the nominee may also depend on whether, or how promptly, home state Senators return their blue slips to the committee. Of interest as well to the committee's pre-hearing evaluation will be the ABA rating that the nominee receives. One primary source of information for staff review will be the committee's "Questionnaire for Judicial Nominees," to which each nominee responds in writing. The questionnaire asks the nominee for detailed biographical and financial disclosure information, including a comprehensive listing of the nominee's published writings, speeches, and activities in law, politics, and academia. If, as often is the case, the nominee has filled out the questionnaire prior to being nominated, the Administration will be able provide the questionnaire to the Judiciary Committee within days of the nomination being made. For its part, the committee expects the nominee to complete the questionnaire before it will hold a hearing on the nomination. A chief purpose of the questionnaire is to provide members of the Judiciary Committee and their staffs with detailed pre-hearing information about the nominee, thereby better equipping the committee to gauge the professional qualifications of the nominee. The completed questionnaire also can be helpful to the committee in identifying new questions that Senators might have about the nominee's background and therefore want to pose at his or her hearing. The committee typically treats the questionnaire's biographical and financial disclosure sections as public information. The committee, however, treats as confidential (and not available to the news media or the public) the nominee's responses to more sensitive questions, such as whether he or she ever had been under investigation for possible violation of a civil or criminal statute. As one political scientist has observed, the committee questionnaire, including its financial disclosure sections, "have become a routine part of the confirmation process," with nominees expected to "respect the importance of the documents" and be fully responsive to their questions. In the event a nominee discovers something omitted from the initial questionnaire, he or she is expected to provide the committee, as soon as possible, with follow-up supplemental questionnaire responses. The Judiciary Committee also may receive documents concerning the nominee from the White House, the Department of Justice, and the Federal Bureau of Investigation. Confidential FBI reports on the nominee are an important and regular source of background information for the committee. These reports are available only to committee members, a small number of designated staff, and home state Senators. (The reports are distinct from the records of FBI investigations, which are provided only to the White House.) The reports, a scholar has noted, ordinarily "do not provide damaging information about nominee," but "in a small number of cases, the material may require the committee to look further into a matter of concern." During the pre-hearing phase, the committee also formally solicits the opinions that home state Senators have of judicial nominees. Under its long-standing blue slip procedure, the chair of the Judiciary Committee seeks the assessment of home state Senators regarding circuit and district court nominees to judgeships within or associated with their state, including whether they approve having the committee consider and take action on the nominee. The chair does this by sending a blue-colored form to the Senators regarding the nominations. Through return of the blue slip to the committee, the committee's website has noted, home state Senators "can approve moving the nominee through the Committee process." Conversely, however, a home state Senator may prevent committee consideration of the nomination if he or she decides not to return the blue slip or to return it with a negative response. Recent chairs of the Judiciary Committee have required a return of a positive blue slip by both Senators in a state delegation before allowing a nomination to advance in the committee process. Also of interest to the Judiciary Committee is the rating that each circuit and district court nominee receives from the American Bar Association's Standing Committee on the Federal Judiciary. The chair of the ABA committee provides formal notification of this rating in a letter to the chair of the Judiciary Committee, typically soon after the person is nominated. The letter tells the Judiciary Committee whether the nominee received a "well qualified," a "qualified," or (on rare occasions) a "not qualified" rating, and whether the ABA committee members were unanimous in their rating. If the rating is not unanimous, the letter will indicate whether a "majority" or "substantial majority" of committee members voted in favor of it. The ABA committee also, after informing the Judiciary Committee, makes its ratings of the judicial nominee available to the public, on its website, at http://www.americanbar.org/groups/committees/federal_judiciary.html . On the website, a ratings chart for nominees in the current Congress is updated regularly, while ratings for nominees in earlier Congresses (dating back to the 101 st Congress) are also available online. The ABA committee letter informs the Judiciary Committee only of the nominee's ABA rating, without providing any explanation of the rating. If the nominee received either a unanimous or majority "well qualified" or "qualified" rating, the Judiciary Committee will receive no further information from the ABA committee concerning the rating. Likewise, in the event that a minority of the ABA committee's members rated a nominee "not qualified," their reasons for doing so will not be provided to the Judiciary Committee prior to, at, or after the nominee's confirmation hearing. By contrast, in the rare instance where a nominee receives either a unanimous or majority "not qualified" rating, the ABA committee will submit a written statement to the Judiciary Committee explaining the rating. The statement, however, ordinarily will be submitted to the committee only 48 hours in advance of the nominee's confirmation hearing. (The chair of the ABA committee also will testify at the confirmation hearing to further explain, and answer questions about, the committee's rating.) A nominee's ABA rating will be one among many factors for the Judiciary Committee to consider in its pre-hearing investigation of the nominee's judicial qualifications. At the outset, a unanimous "qualified" or higher rating may be considered, by its very nature, a plus for the nominee, with the nominee's fitness to be a judge attested to by the ABA committee's peer review evaluation. On the other hand, a "not qualified" rating, or even a split vote by the ABA committee with a minority rating the nominee "not qualified," might raise questions for the Judiciary Committee to investigate further in its pre-hearing investigation of the nominee. The pre-hearing phase for a circuit or district court nominee may extend over a period of months. There is variation across presidencies (as well as Congresses) in the length of time that circuit and district court nominees wait, on average, to receive a hearing after being nominated by a President. How quickly a lower court nominee will receive a confirmation hearing may be affected by a variety of factors. These factors may include, but not be limited to (1) how quickly the committee's questionnaire is filled out and provided to the committee; (2) the volume of investigative information there is about the nominee for committee staff to review and analyze; (3) whether any controversy surrounds the nominee; (4) partisan or ideological differences over judicial nominations between the President and the party of the Judiciary Committee's majority or minority; and (5) the inclination of the committee chair as to when to schedule a confirmation hearing. The scheduling of a confirmation hearing for a circuit or district court nominee is at the discretion of the chair of the Judiciary Committee. Under the committee's rules, the committee must provide public announcement of any hearing at least seven calendar days prior to the start of the hearing (unless the chair, with the consent of the ranking minority member, "determines that good cause exists to begin such hearing at an earlier date"). Such notice is posted on the Judiciary Committee's website at http://www.judiciary.senate.gov . At a confirmation hearing, lower court nominees engage in a question and answer session with members of the Senate Judiciary Committee. The hearing typically is held for more than one judicial nominee at a time. In such situations, the hearing sometimes may consist of two consecutive panels—for example, one panel for several district court nominees, followed by another for a circuit court nominee. At the hearing, either the chair of the Judiciary Committee, or another committee member delegated the task, will preside. Each judicial nominee will be "presented," or introduced, to the committee by one or both of his or her home state Senators. (Sometimes as well a senior House member or other state official may make a statement in support of the nominees. ) The presiding Senator, after calling the hearing to order, may make a short introductory statement. He or she will then invite the presenters to make their statements in support of the nominees. After this, the nominees will make brief opening statements (which typically include noting the presence at the hearing of family members and friends). Then, the hearing begins in earnest, with Senators on the committee posing questions to each nominee. The questions, it has been noted, ... typically address the individual's qualifications, understanding of how to interpret and apply the law, previous experiences in court, judicial temperament, and the role of judges. However, the Committee's members are not limited to these topics and may ask about anything contained in the Committee questionnaire. In essence, the nominee should be prepared to speak to the entirety of his/her legal career, writings, and speaking engagements. Most confirmation hearings for circuit and district court nominees, a scholar has observed, are not attended by all members of the Judiciary Committee. If a Senator does not attend, others have noted, "it is likely that his or her staff will, and will report back to the senator." (While the committee's quorum requirement for a hearing is only one Senator, typically at least one committee member of the minority party is present along with the presiding Senator at confirmation hearings for district court nominees, with a greater number of Senators of both parties typically in attendance for a hearing on a circuit court nominee.) Sometimes, however, confirmation hearings may prove less routine, particularly if there are concerns among committee members about a nominee's qualifications. In such an event, the questioning of a nominee may be more intensive or extended than otherwise, and more Senators than usual may attend to engage in the questioning. Further, if a nominee is relatively controversial, a hearing occasionally may be held exclusively for that nominee. On rare occasions, the committee may hold more than one day of hearings on a lower court nomination, if such additional time is considered needed for adequate questioning of the nominee. While a confirmation hearing is a means for the Judiciary Committee to evaluate a judicial nominee firsthand, it also, a scholar has suggested, serves a public education function (with the committee's website making available to the public a live webcast of each hearing). As well, it affords judicial nominees an opportunity to address any concerns that Senators might have about them. The confirmation hearing may also receive statements from public witnesses. Typically, if not always, these statements, whether in support of or in opposition to the nominee, will be written submissions. For example, if the nominee received a positive ABA rating, the Judiciary Committee's published hearing record will include only a letter attesting to that rating from the ABA's Standing Committee on the Federal Judiciary—rather than any oral testimony about that rating from an ABA spokesperson. Likewise, any statements to the Judiciary Committee by local or state bar associations or interest groups, either for or against the nominee, usually are submitted only in written form, rather than by in-person testimony. Sometimes, as well, the Judiciary Committee may receive written statements, rather than testimony, concerning a nominee from Senators not on the committee (usually home state Senators). In some instances, however, public witnesses may testify in person. This occurs, for instance, on the rare occasions when a lower court nominee has received a negative ABA rating. In these instances, the chair and another member of the ABA committee customarily appear at the confirmation hearing to explain the rating and answer any questions that Senators on the Judiciary Committee may have about it. Also, the committee sometimes, though infrequently, has permitted in-person testimony by public witnesses speaking for and against confirmation when nominees have been highly controversial. After the hearing, circuit or district court nominees sometimes may be required to provide written responses to follow-up questions from Senators on the Judiciary Committee. In some instances, Senators may pose these questions at the hearing, for a nominee to reply to afterwards. In other instances, Senators at the hearing may request that the nominee reply to a list of written questions that they will provide after the hearing. Follow-up questions often raise issues that Senators were unable to bring up at the hearing due to time constraints or other reasons, or they may ask the nominee to elaborate on responses he or she provided to certain questions at the hearing. Written responses to these questions, the Judiciary Committee has indicated, are necessary before the committee will consider whether to report the nomination to the Senate. The nominee's written responses will be included in the public record of the hearing that is subsequently printed by the Government Publishing Office. Hearings on judicial nominations are not required under the rules of the Senate or the Judiciary Committee. As noted earlier, whether or when a hearing will be held on a circuit or district court nominee is at the discretion of the committee's chair. At the same time, it is well-established practice of the Judiciary Committee that it will not vote on whether to report a circuit or district court nominee without having first held a hearing on the nominee. Some nominations, therefore, will fail to advance to the committee reporting stage if the Chair, for a policy or other reason, decides against scheduling a hearing. (The hearing, for example, might not be held because a home state Senator has declined to return a blue slip, or because the nomination was referred to the committee with little time left in the congressional session.) Sometimes, however, judicial nominees who fail to receive a hearing on their first nomination receive a hearing on a later nomination to the same court. For example, a nominee's first nomination, under Senate rules, may be returned to the President upon a Senate sine die adjournment at the end of a session or any recess of more than 30 days, only to have the person involved later re-nominated by the President. Hearings on second nominations also are particularly common for judicial nominees initially nominated late in a Congress and then re-nominated by the President early in the next Congress. Typically, for a circuit or district court nominee who receives a hearing, there will be only one hearing—even if he or she were nominated more than once. The Judiciary Committee, in other words, typically will not require a new hearing for a re-nominated judicial nominee who already received a hearing on a previous nomination (for instance, during the previous Congress). An additional hearing for a nominee, however, may always be held if new circumstances are perceived by the committee to warrant one. At the beginning of this phase, the nomination awaits a vote by the Judiciary Committee on whether it should be reported to the Senate as a whole. A committee vote in favor of reporting is the crucial step needed to send the nomination forward to the Senate. Conversely, if the nomination is not put to the committee for a vote, or if the committee votes against reporting it, the nomination will not move forward, ultimately failing to receive Senate confirmation. Decisions of whether or when to schedule judicial nominations for vote in committee are made by the committee's chair. Nominees slated for this vote are publicly listed in the agenda for the committee's next scheduled business meeting. The meeting itself, when it occurs, typically will, in line with recent committee practice, be webcast live from the committee. After the fact, a link on the committee website will list the results of the meeting (including whether and how the committee voted on judicial nominations). When the meeting of the Judiciary Committee is held, a sufficient number of members must be present for the committee to report a nomination. The committee's rules provide that no nomination (or bill or matter) "shall be ordered reported ... unless a majority of the Committee is actually present at the time such action is taken and a majority of those present support the action taken." If quorum requirements are met, the chair may then move or ask for unanimous consent that the nominations on the agenda either individually or en bloc be ordered reported to the Senate. It is not uncommon, however, for such votes to be delayed (or "held over") by one business meeting, at the request of a committee member. This comports with committee rules, under which any Senator on the committee may delay the vote by one committee business meeting or for one week, "whichever occurs later." It is at the chair's discretion as to whether to honor requests to delay a nomination over longer periods. The committee, when it ultimately votes on the nomination, has three reporting options—to report favorably, unfavorably, or without recommendation. Almost always, when the committee votes on a nomination, it votes to report favorably. The committee, however, may vote (as it has done in the past, but only on rare occasions) to report unfavorably or without recommendation. Such a vote advances the nomination for Senate consideration despite the lack of majority support for it in committee. The Judiciary Committee may vote on a motion to report a judicial nomination either by voice vote or by roll call. Historically, in the vast majority of cases (if not all cases), votes on motions to report district or circuit court nominations were by voice vote. In recent years, however, with committee members more frequently requesting the yeas and nays, roll call votes on judicial nominations have become somewhat more common. Motions to gain approval in Senate committees require a majority vote in favor and thus fail if there is a tie vote. In contrast to nominations reported to the Senate, some lower court nominations never leave the committee and die there. This occurs most dramatically when the Judiciary Committee votes against reporting a nomination. Historically a rare occurrence, a majority vote against reporting is an explicit act of rejection by the committee that also serves to prevent the nomination from receiving Senate consideration. However, the much more common way in which a nomination dies in committee is for it to fail ever to receive committee action. In most such cases, the nomination, having not advanced out of committee, is, under Senate rules, returned to the President when the Senate adjourns or recesses for more than 30 days, or at the final adjournment of a Congress. Also, on infrequent occasions, judicial nominations have failed when, while in committee, they were withdrawn by the President. Under Senate rules, it might be noted, a judicial nomination pending in the Judiciary Committee could also reach the Senate floor without being reported out of committee—if the Senate agreed to discharge the committee from consideration of the nomination. As a CRS report observes, it is "fairly common for committees to be discharged from noncontroversial nominations by unanimous consent, with the support of the committee, as a means of simplifying the process." Nonetheless, in a database search of judicial nominations dating back to the mid-1940s, CRS research has identified no instances in which the Senate has discharged the Judiciary Committee of a judicial nomination. After it is reported by the Judiciary Committee, a circuit or district court nomination is listed on the Executive Calendar , with a number assigned to it by the Senate's executive clerk. On this calendar, the nomination joins a list of other nominations (judicial and executive branch), as well as treaties, that have been reported out of committee and are eligible for floor consideration. (The Executive Calendar is separate from the Senate's Calendar of Business , which lists bills and resolutions eligible to be taken up by motion.) The nominations are listed chronologically according to the date each was reported. The Executive Calendar provides basic information for each nomination, including the nominee's name and office, the name of the previous holder of the office, and when the committee reported the nomination. In the rare instance that a committee has reported a nomination unfavorably or without recommendation, instead of favorably, that information is supplied as well. The Executive Calendar is published each day the Senate is in session and distributed to Senate personal offices and committee and subcommittee offices. It is also available to congressional personnel online by following the link to Executive Calendars under the "Senate" tab of the website of the Legislative Information System of the U.S. Congress. Business on the Executive Calendar, including a circuit or district court nomination, is considered by the Senate in executive session. While the Senate usually begins the day in legislative session, it subsequently enters executive session either by a non-debatable motion or, far more often, by unanimous consent. By custom, most motions and requests to go into executive session to consider a judicial or other nomination are made by the Senate majority leader. Under Senate rules, the nomination cannot be taken up until it has been on the Executive Calendar at least one calendar day. In practice, Senate floor consideration of circuit or district court nominations follows one of two procedural tracks. Customarily, most of these nominations, particularly if uncontroversial, have reached confirmation under the terms of unanimous consent agreements. On this procedural track, the Senate by unanimous consent not only takes up nominations for floor consideration, but also arranges for them to either receive up-or-down confirmation votes or be confirmed simply by unanimous consent. For other judicial nominations, however, particularly those facing strong opposition, unanimous consent to reach confirmation may not always be attainable. In these instances, the procedural track, for a nomination to move forward without unanimous consent, involves the Senate, after taking up the nomination, voting on a cloture motion to bring floor debate to a close. If the requisite majority under Senate rules supports closing debate, a confirmation vote on the nomination must be held after a limited period for consideration. For many decades, until late into the first session of the 113 th Congress, the Senate used unanimous consent agreements to decide how and when to act on the vast majority of circuit and district court nominations that ultimately were confirmed. However, the routine use of the unanimous consent process in confirming lower court nominations stopped after the Senate, on November 21, 2013, reinterpreted paragraph 2 of Senate Rule XXII, also known as the "cloture rule." In reinterpreting the rule, the Senate lowered the number of votes needed to close debate on nominations, other than to the Supreme Court, from three-fifths of the Senate to a simple majority of those voting. Hence, under the reinterpreted rule, a simple majority of Senators, by voting in favor of a motion to close debate on a circuit or district court nomination, could compel a Senate vote on confirmation—something that, prior to the rule's reinterpretation, would occur only if a three-fifths supermajority voted in favor of cloture. The November 21, 2013, reinterpretation of Rule XXII was followed, during nearly all of the rest of the 113 th Congress, by a basic change in the Senate's floor practice in confirming circuit and district court nominations. For the next 13 months, votes on confirmation, even for uncontroversial judicial nominations, no longer were reached by unanimous consent, but instead by the cloture process. Used primarily in the past to close debate on a relatively small number of nominations that did not enjoy wide bipartisan support, the cloture motion became, until the last day of the 113 th Congress, the invariable procedural tool used to reach confirmation votes for circuit and district court nominations. The routine use of the cloture process on judicial nominations, however, ceased on December 16, 2014. That day, just before the 113 th Congress's final adjournment, the Senate reverted, for the first time in more than a year, to using a unanimous consent agreement, rather than the cloture process, to reach confirmation votes, specifically on 11 district court nominations. Since then, in the 114 th Congress (2015-2016), following a switch in party control of the Senate, all confirmations of judicial nominations have been reached by the unanimous consent (UC) process, and none by use of cloture. In so doing, the Senate in the 114 th Congress returned to its traditional reliance on the UC process to confirm most judicial nominations. The following paragraphs discuss in more detail the manner in which circuit and district court nominations reach confirmation on the Senate floor, depending on whether unanimous consent or cloture is the procedural track taken. Descriptions of Senate procedures draw from relevant CRS reports as well as from research for this report that examined Senate floor treatment of judicial nominations over a 30-year period (starting with the 100 th Congress (1987-1988) and carrying up to the current 114 th Congress). Senate floor consideration of a judicial nomination by unanimous consent typically is scheduled by the majority leader in consultation with the minority leader and with all interested Senators. The majority leader, in such consultation, ordinarily seeks to establish that, if requested on the floor, no Senator will object to the nomination receiving a vote on confirmation. If this can be established, the leader will make the unanimous consent request at a convenient agreed-upon time. The UC request usually, if not always, is made while the Senate is in legislative session. In making the request, the majority leader (or, in some instances, another Senator acting on behalf of the majority leader) asks for unanimous consent to proceed to executive session—immediately, at some specified future time, or at a time to be determined later by the majority leader—to consider and then vote on the nomination. The unanimous consent request might or might not provide for debate prior to the Senate voting on the nomination. UC requests also, if less often, have been made for the Senate to consider and agree to confirm judicial nominations simply by unanimous consent rather than by voice or roll call vote. If providing for debate and vote, the UC request usually includes a limit on the total time for debate (for instance, up to 30 minutes). The request will also set the date and time at which the Senate is to begin consideration of, or vote on, the nomination. Typically, the amount of time for debate is divided evenly between the majority and minority parties, who usually have as their respective floor managers the chair and ranking minority member of the Judiciary Committee. If agreed to, a time limit on debate forecloses the use of unlimited debate or other tactics to delay or prevent a vote on the nomination. The UC request also generally provides for the "yielding back" of time in case either or both sides choose not to use all the time allotted to them and, further, that, upon the use or yielding back of time, the Senate vote "without intervening action or debate" on the nomination. When there is debate on a circuit or district court nomination, it will usually include a statement by the chair of the Judiciary Committee, often followed by remarks by the committee's ranking minority member. One or both of a judicial nominee's home state Senators often may speak on the nominee as well, particularly if they were involved in the selection process. At the end of debate, the presiding officer puts the following question before the Senate: "Will the Senate advise and consent to the nomination of [the judicial nominee in question]?" If no Senator asks for a roll call vote, the Senate may approve the nomination by voice vote. In other instances, however, a roll call vote will be taken on the nomination if any Senator present "asks for the yeas and nays." A simple majority of Senators voting (with a minimal quorum of 51 being present) is required to approve a nomination. Roll call votes on judicial nominees scheduled for a vote by unanimous consent may be close or lopsided. In recent decades, such roll calls have ranged from Senators voting unanimously in favor of confirmation to other instances with more than a third of Senators present voting against. Hence, a UC agreement to vote on a judicial nomination does not always indicate the absence of Senate opposition to the nominee; however, it does mean that, in instances where some Senators will oppose confirmation, they have not objected, but rather have agreed (through unanimous consent), to the Senate voting on the question of whether to confirm. Sometimes a UC request will provide that the Senate consider and vote on a judicial nomination without prior debate. The Senate, for instance, may agree to proceed to executive session at a specified time to consider a nomination and to vote on it "without intervening action or debate." Subsequently, at the appointed time for its consideration, the nomination, after being read by the legislative clerk, is immediately put by the presiding officer to the Senate for a vote. A UC agreement's explicit provision for no debate on a nomination prior to a Senate vote typically has indicated that the nomination is uncontroversial and will be confirmed by the Senate by voice vote or unanimous roll call vote. Sometimes, a unanimous consent request may ask for the Senate to proceed immediately to executive session to consider and confirm particular judicial nominations, without providing for any debate on them or for a vote by Members on whether to confirm. Such a request may be for consideration and confirmation of a single nomination or of an " en bloc " group of nominations. (For instance, the request, if involving several nominations, might ask both that the Senate proceed to consider the nominations and that they "be confirmed en bloc .") If the request is agreed to, the nomination or nominations are confirmed immediately, upon the presiding officer stating, "Without objection, it is so ordered." UC agreements to confirm without debate or vote, in the absence of any objection to confirmation, typically involve only judicial nominations on which no Senator wishes to record formal opposition. Unanimous consent sometimes also is requested for the Senate to proceed only to consideration of a nomination, without further providing for a vote on confirmation. This typically indicates that the majority leader, or other Senator making the request, anticipates an objection would be raised on the floor to an up-or-down confirmation vote. Although the request, if agreed to, falls short of bringing the nomination to a vote, it at least places the nomination on the floor, for it to be championed by Senate supporters in executive session. A UC agreement to proceed to consider a judicial nomination, without also providing for a Senate vote, leaves open the option for supporters to make another UC request for a confirmation vote at a later time. Far more frequently, however, the agreement serves a different strategic purpose: By bringing the nomination to the floor, it sets the stage for Senate supporters to try to use the cloture process to force a vote on confirmation, a process described next in this report. As discussed above, historically the usual route to confirmation for circuit and district court nominations has been for Senate floor votes on confirmation to be scheduled by unanimous consent. The Senate, however, has not always been able to agree unanimously on whether or when certain judicial nominations (often because of controversy associated with the nominees) should receive up-or-down votes. This particularly proved to be the case during more than half of the 113 th Congress, when the Senate was unable to use the UC process to schedule a confirmation vote on any circuit or district court nomination. During that period—from the Senate's November 21, 2013, reinterpretation of its rules for ending debate on most nominations, through December 15, 2014—every confirmation of a circuit or district court nomination was reached through the cloture process. Only a few UC requests for the Senate to consider and then vote on such nominations were made during that period, with objection heard to each request. A nomination under floor consideration without a time agreement for a vote is, under Senate rules, susceptible to being blocked indefinitely by opponents. That is because, as a CRS report has noted, "Senate rules place no general limits on how long consideration of a nomination (or most other matters) may last. Owing to this lack of general time limits, opponents of a nomination may be able to use extended debate or other delaying actions to prevent a final vote from occurring." As long as at least one Senator is understood to be opposed to a nomination receiving a confirmation vote, an objection can be expected if unanimous consent is requested for that purpose. As a result, the procedural track, if the nomination is to move forward to a vote in the absence of unanimous consent, will involve the Senate voting on a motion for cloture (the motion to bring floor debate to a close). Before such a motion can be filed, the Senate must be considering the nomination. To get to this point, unanimous consent ordinarily would be requested (or less frequently, a non-debatable motion made) that the Senate go into executive session to consider the nomination. Once the Senate has agreed to take up the nomination, a cloture motion to close debate can be made. Under the cloture rule (paragraph 2 of Senate Rule XXII), at least 16 Senators must sign a cloture motion. Typically, in recent years, the cloture motion has been sent to the desk immediately after the nomination has been taken up, although it can be done at any time the nomination is under Senate consideration. The motion, which is read by the clerk, states that the "undersigned Senators, in accordance with the provisions of Rule XXII of the Standing Rules of the Senate, hereby move to bring to a close debate on" the nomination. The Senate, unless deciding otherwise by unanimous consent, will not vote on the cloture motion until the second day of session after the motion has been presented. For example, if the motion were presented on a Monday, the Senate would act on it on Wednesday. (During the two days of session that elapse prior to the cloture vote, the Senate can and typically does turn to other business.) Typically, on the day the cloture motion "ripens," a unanimous consent agreement will provide for a specified period of time for debate, divided equally between the two parties, immediately prior to the cloture vote. Then, at the appointed time, with the Senate in executive session, Senators will vote either yea or nay on the question, "Is it the sense of the Senate that debate ... shall be brought to a close?" Pursuant to the November 21, 2013, decision of the Senate, cloture can be invoked in the Senate on most nominations, including circuit and district court nominations, by a simple majority of Senators voting in favor, a quorum being present. (Prior to that decision, dating back to 1975, it took three-fifths of the Senate, or 60 Senators if no more than one Senate vacancy, voting in favor of the motion to invoke cloture on a nomination.) Under Senate Rule XXII, when cloture is invoked on a nomination, there can be, prior to the Senate voting on confirmation, a maximum of 30 hours of consideration (including debate and time consumed by quorum calls, parliamentary inquiries, and all other proceedings). Pursuant to a standing order of the Senate, nominations of district court judges during the 113 th Congress were subject to a lower, 2-hour maximum of post-cloture consideration. However, in the 114 th Congress (2015-2016), time limits on post-cloture consideration reverted back to 30 hours for all nominations. After cloture is invoked, a frequent practice of the Senate (even when closely divided over whether to confirm a nominee) is to proceed to a vote on confirmation without debating the nomination for the maximum amount time allowed prior to the vote. This may be achieved by UC agreements that, for instance, yield back all or most "post-cloture" time prior to the scheduled votes on confirmation, count time during adjournment or recess as post-cloture time, or use large blocks of time, leading up to the confirmation vote, for consideration of legislative or other business unrelated to the nomination. When all post-cloture time has expired or been yielded back, the Senate then takes up the question of whether to confirm the nomination. As previously noted, the vote threshold by which the Senate can confirm is a numerical majority of those voting (provided a minimal quorum of 51 is present). Sometimes, multiple cloture motions are filed on judicial nominations in a single day. Doing so allows the motions to ripen simultaneously two days of session later. Further, during the 113 th Congress (2013-2014), multiple cloture motions of some district court nominations resulted in multiple confirmations on the same day that the cloture motions ripened. Same-day multiple cloture motions may be filed, as they were in the 113 th Congress, pursuant to use of motions to enter executive session. Specifically, when using this non-debatable motion, the majority leader moves that the Senate proceed from legislative to executive session to consider the first of a series of nominations. Immediately after this, the leader presents a cloture motion. The leader then moves to proceed back to legislative session. After that motion is agreed to, the leader has the Senate proceed to executive session to consider the second nomination, immediately thereafter presenting a cloture motion for that nomination, and so on. Same-day multiple cloture motions were filed in this way by the Senate majority leader on at least five different occasions during the 113 th Congress. Another (but less common) way to file multiple cloture motions on judicial nominations, instead of using motions to proceed to executive session, has been to proceed by unanimous consent. Multiple cloture motions on nominations, as already noted, ripen simultaneously two days of session after being filed. On the day of their ripening, the Senate, at a time typically agreed on by unanimous consent, votes on cloture on the first nomination. Assuming cloture is invoked, the Senate would then consider the nomination under the applicable time limit. After the time expires, the Senate would vote on confirmation. Then the cloture motion on the second nomination would be voted on. The processing of confirmation votes on multiple nominations on the same day may be achieved by UC agreements limiting or dispensing with time for post-cloture debate as well as those limiting time for voting on the nominations themselves. In the case of district court nominations, which in the 113 th Congress were considered for a maximum of two hours post-cloture (half of which could be yielded back by the majority), the Senate could invoke cloture and confirm multiple nominations in a single day. As noted previously, however, post-cloture consideration limits, pursuant to a Senate standing order, reverted back in the 114 th Congress to 30 hours for all nominations. As current rules allow 30 hours of post-cloture time for each judicial nomination, same-day confirmations of multiple cloture-invoked nominations could occur now only if not all post-cloture time were used. If a cloture motion is rejected, a nomination remains on the Executive Calendar (unless it is withdrawn by the President or returned to the President at the end of a congressional session or at the start of a recess of more than 30 days). During the remainder of the Congress, supporters are free, if they wish, to file additional cloture motions on the nomination (a relatively rare occurrence). Ultimately, however, the nomination, if not confirmed before the final adjournment of the Congress, is returned to the President at that time. In recent decades, prior to November 21, 2013, the vast majority of circuit and district court nominations that reached confirmation did so under the terms of unanimous consent agreements. That is, these nominations were confirmed on the Senate floor either by unanimous consent or by a vote on confirmation scheduled pursuant to a UC agreement. Under Senate rules, it was not until 1949 that nominations could be subjected to cloture attempts, and the first such attempt on a circuit or district court nomination did not occur until 1980. Subsequently, cloture motions were filed to limit debate on only a small share of the judicial nominations taken up for floor consideration. From 1980 up to November 21, 2013, the Senate on just 22 occasions confirmed a circuit or district court nomination after first invoking cloture on the nomination. The 22 confirmations represented 1.4% of the 1,525 total circuit and district court nominations confirmed during the same period. One disincentive to the more frequent use of cloture motions to limit debate on judicial nominations was the super-majority vote required to invoke cloture. As noted above, prior to November 21, 2013, it took three-fifths of the Senate, or 60 Senators if there were no more than one vacancy, to invoke cloture on a nomination. With such a threshold requirement in effect, supporters of a blocked judicial nomination in some situations might have declined to file a cloture motion, anticipating difficulties in getting supermajority support for it. (The potential difficulty of attaining 60 votes to invoke cloture was underscored in certain Congresses, when cloture attempts on particular judicial nominations were rejected, with only simple, but not three-fifths, majorities, voting for cloture.) Another disincentive to filing for cloture was that greater floor time was required to confirm judicial nominations through the cloture process than by unanimous consent agreements—time which arguably the Senate might often have preferred to devote to other business than judicial nominations. By contrast, after November 21, 2013 (when it decided to require only a simple majority to invoke cloture on most nominations), the Senate—until the last day of the 113 th Congress—reached all confirmations of circuit and district court nominations through the cloture process. Specifically, from November 21, 2013, through December 15, 2014 (the day before the final adjournment of the 113 th Congress), the Senate confirmed 14 circuit court nominations and 71 district court nominations. The process for each of these judicial confirmations involved the filing of a cloture motion, with the Senate then voting to invoke cloture, prior to a confirmation vote. All but a few of the votes invoking cloture during this period involved majorities of less than three-fifths of the Senate voting in favor of closing debate. (As such, these voting majorities fell short of the 60 Member supermajority number previously required to invoke cloture prior to November 21, 2013.) Further, voting on nearly all of the cloture motions was along party lines, with cloture typically invoked by nearly all of the Senate's majority party Members voting in favor, joined by no more than a few Members of the minority party. During this period, no confirmations of circuit or district court nomination were reached through the unanimous consent process. Requests for unanimous consent to confirm or vote on circuit and district court nominations, as noted earlier, were made on only a handful of occasions, with objections from the minority party heard to each request. On December 16, 2014, the day of the final adjournment of the 113 th Congress, the Senate reverted, for the first time in more than a year, to using a unanimous consent agreement, rather than the cloture process, to reach confirmation votes on district court nominations. Specifically, the UC agreement, requested by the Senate majority leader, affected 11 district court nominations on which cloture had been filed three days earlier. Pursuant to the agreement, all 11 cloture motions were withdrawn, with the Senate then voting on the nominations in the order on which cloture had been filed, in each case confirming by voice vote. As noted above, the Senate, over a 13-month period after its November 21, 2013, reinterpretation of Rule XXII, confirmed judicial nominations only through the cloture process. This usually involved the Senate, prior to voting on a nominee's confirmation, invoking cloture by party line or near party line votes. With only a simple majority of Senators voting needed to close debate on a nomination, the majority party in the Senate (which also was the party of the President) could, by its own Members alone voting in favor, invoke cloture on circuit or district court nominations, even against unified opposition to cloture by the party in the minority. The November 2014 congressional elections, however, ended this advantage for the President's party. In the elections, the minority party won a majority of Senate seats, making the party of the President the new Senate minority. By being in the Senate minority, the President's party no longer would be able to close debate on judicial nominations and secure their confirmations by party line or near party line votes. Instead, circuit and district court nominations in the 114 th Congress thus far have received Senate confirmation votes only pursuant to unanimous consent agreements requested by the majority leader or his designee. With all confirmations of judicial nominations reached by the unanimous consent process, and none by use of cloture, the Senate has returned in the 114 th Congress to its traditional reliance on the UC process to confirm most judicial nominations. In future Congresses, the extent to which the Senate will rely mostly on the unanimous consent or the cloture process to confirm district and circuit court nominations could depend on a number of factors. One key factor could be whether the majority party in the Senate was also the party of the President. With just a simple Senate majority needed to close debate on a nomination, under the Senate's November 2013 reinterpretation of its cloture rule, the party of the President conceivably, in any given Congress, could use the cloture process to confirm judicial nominations—provided it were in the Senate majority and all or (depending on the size of its majority) nearly all its Members could be counted on to vote in favor of motions to close debate. For such a majority, if intent on bringing a nomination to a confirmation vote, filing for cloture might be an effective alternative path to take if UC to vote on the nomination could not be attained. By contrast, if in the Senate minority, the President's party, even if unified in favor of invoking cloture, could not achieve cloture by their votes alone and might not expect Members of the majority party to join them in creating a voting majority supporting the closing of debate. Instead, when the party not of the President was in the Senate majority, confirmations of district and circuit court nominations typically might be expected to be reached, as they all have been thus far in the 114 th Congress, by the unanimous consent process. In future Congresses, another important factor likely to affect the Senate's relative use of the unanimous consent or the cloture process to confirm nominations could be whether many of them were viewed as controversial or were otherwise opposed by one or more Senators. For nominations that are uncontroversial, and unopposed by any Senator, the unanimous consent process might be the routine procedural path taken to confirmation, whichever party was in the Senate majority. For controversial nominations, however, scheduling confirmation votes by unanimous consent typically could be expected to be problematic and often not possible. Further, for such nominations, a cloture process to reach confirmation also would be problematic if this procedural path were opposed by the majority party. In some future Congresses, however, the cloture path to confirmation might again be frequently used, as it was in the 113 th Congress, to process controversial judicial nominations—if the Senate majority were the same party as the President's and opposition to a nominee came from the Senate's minority party alone or also from a small number of majority party Senators. In these circumstances, the Senate majority might sometimes choose to use the cloture process. It could do so aware that, if a UC agreement to schedule a confirmation vote were unattainable, it could instead compel a confirmation vote with just a simple majority of the Senate voting to close debate. The relative use of the UC and cloture processes, however, could be affected by still another factor—the potentially time-consuming nature of the cloture process. This factor would be important if, in future Congresses, it discouraged a Senate majority from readily using the cloture process and inclined it instead to seek unanimous consent to consider judicial nominations. As explained above, the cloture process can potentially require up to 30 hours of floor consideration on each nomination after cloture is invoked. After November 21, 2013, many nominations were able to be considered in the 113 th Congress through the cloture process in part because the maximum time for post-cloture consideration had been temporarily lowered to two hours for district court nominations (and to eight hours for many executive branch nominations), and half of that time could be yielded back by the majority. The regular 30-hour maximum could lead proponents to seek unanimous consent to consider nominations, in order to save floor time. Nevertheless, the cloture process would remain an option for the majority, perhaps particularly for nominations which would normally be debated on the floor. As noted earlier, the Senate may confirm nominations by unanimous consent, voice vote, or by recorded roll call vote. When the question of whether to confirm a nomination is put to the Senate, a roll call vote will be taken on the nomination if the Senate has ordered "the yeas and nays." (The support of 11 Senators is necessary to order the roll call.) Historically, the Senate has confirmed most district and circuit court nominations by unanimous consent or by voice vote. In recent decades, however, confirmations by roll call votes have become more common, and during the presidencies of George W. Bush and Barack Obama, they have been the most common way that the Senate has confirmed lower court nominations. A relatively small percentage of President Ronald Reagan's and George H.W. Bush's lower federal court nominees received Senate confirmation by roll call vote. According to CRS data, 5 (or 6.0%) of President Reagan's 83 confirmed circuit nominees and only 1 (2.4%) of President Bush's 42 circuit court nominees were approved by roll call votes. Additionally, only 1 district court nominee was confirmed by roll call vote during the Reagan presidency, and no district court nominees were confirmed by roll call votes during President Bush's presidency. Confirmation by roll call vote became more common during William J. Clinton's presidency, with 16 (24.6%) of 65 confirmed circuit court nominees and 32 (10.5%) of 305 confirmed district court nominees receiving Senate roll call votes. It was not, however, until President George W. Bush's tenure that a majority of lower court nominees were approved by roll call votes, with 49 (80.4%) of 61 circuit court nominees and 141 (54.0%) of 261 district court nominees confirmed in this way. This trend has continued under President Obama, with 49 (89.1%) of 55 confirmed circuit court nominees receiving roll call votes and 169 (63.8%) of 265 district court nominees receiving roll call votes (as of May 11, 2016). Senate Rule XXXI provides that, after the Senate has confirmed a nomination, any Senator who voted with the majority has the option of moving to reconsider the vote. Only one motion to reconsider is in order on the nomination, and it must be made on the day of the vote or on one of the next two days the Senate meets in executive session. Typically, however, the Senate, before the vote on confirmation has occurred, preempts the motion to reconsider, arranging beforehand by unanimous consent for it to be considered tabled in the event the nomination is confirmed. It is typical, for example, for the Senate, in a unanimous consent time agreement for a confirmation vote on a circuit or district court nomination, to include the provision that, after the vote, "the motion to reconsider be considered made and laid upon the table." Similarly, UC agreements concerning upcoming cloture votes on nominations often provide for the tabling of the motion to reconsider in the event cloture is invoked and the nominee then confirmed. In either case, tabling the motion prevents any subsequent attempt to reconsider. With the motion to reconsider tabled, the Secretary of the Senate attests to a resolution of confirmation and transmits it to the White House. (In the rare instance of the Senate voting against confirmation, the Secretary will transmit to the President a resolution of disapproval.) Senate Rule XXXI requires that the Secretary wait until the time for moving to reconsider has expired before notifying the President that a nomination has been confirmed. Such notice, however, in practice "is usually sent immediately, permitted by unanimous consent." Upon notification of a nominee's confirmation, the President performs the next step in the appointment process—the signing of the nominee's commission. The commission is a formal document empowering the nominee to assume the judicial office, which the President must sign before the nominee may begin his or her new duties. The date of a nominee's commission is the date the President signs it, which usually occurs within a few days of Senate confirmation (but can also occur on the same date as the confirmation itself). The commission is transmitted to the Department of Justice, which then sends it, as well as a packet of other documents, to the nominee. The appointment commission packet sent by the Department of Justice includes various forms to accompany the statutory oath of office, which each circuit and district judge must take before exercising the judicial authority of the United States. The oath of office is orally administered by someone legally authorized by state or federal law to administer oaths, including the chief judge or another judge on the court to which the nominee is assuming his or her position. Additionally, in some cases, the home state Senator of a nominee has administered the oath of office. The oath is a combination of the judicial oath of office required of every Justice and judge of the United States under 28 U.S.C. 453 and the general oath administered to all federal government officials, set forth in 5 U.S.C. 3331. At the time the oath of office is executed, the nominee himself or herself must also sign and date the commission. If two or more confirmed nominees to the same court sign their commissions on the same date, seniority is determined by seniority of age of the nominees. If, for example, Judges A and B both sign on the same date and Judge A is older than Judge B, then Judge A is considered more senior than Judge B. This process—receipt of the packet from the Department of Justice, administering the oath of office to the nominee, including obtaining his or her signature on the commission—typically occurs within a week or two of Senate confirmation. In some cases, however, a nominee might wait longer, for professional reasons, to take the oath and sign his or her commission. For example, a law professor who is confirmed as a U.S. district court judge might wait to sign her commission until after she has finished teaching for the semester. Typically, the last step in the appointment process is the investiture. At this ceremonial event, attended by family and friends, the new judge is sworn in yet again, in the courtroom. The ceremony, however, is not required for the nominee to assume office and can take place weeks or months after the oath of office is executed. Typically, during any given Congress, some circuit and district court nominations fail to receive Senate confirmation. How far along in the confirmation process they progress will vary. Some may not receive any committee consideration, while others might advance through part but not all of the committee stage (for example, receiving a hearing without being reported); still others, after being reported by committee, may be placed on the Executive Calendar without, however, receiving Senate floor consideration, or in other cases receive floor consideration but not a vote on confirmation. A variety of factors might play a part in a nomination's failure to advance farther, including the extent of Members' support for, or opposition to, the nomination and scheduling considerations and competing demands on the Judiciary Committee's or the Senate's time (often problematic for nominations the President sends to the Senate relatively late in a Congress). For judicial nominations that fail to be confirmed, the appointment process ends with one of three possible steps—rejection by the Senate (very rare), withdrawal of a nomination by the President (occasional, but infrequent), and (by far the most common occurrence) Senate return of the nomination to the President at the end of a session, at the end of the Congress, or upon a recess of more than 30 days. Although the appointment process is finished for such nominations, the President (or a successor President) is not precluded from re-nominating a person. In fact, when a circuit or district court nomination is returned, the nominee often is re-nominated and eventually confirmed. A lower court nomination, after advancing through nearly the entire confirmation process, only very rarely is then rejected by the full Senate. Over a 77-year period researched by CRS, from 1939 to the present, only six instances were found of the Senate, in a floor vote on confirmation, rejecting a district court nomination, while none was found of the Senate rejecting a circuit court nomination. (As noted earlier, when the Senate votes against confirmation, that action is followed immediately by the Secretary of the Senate transmitting to the President a resolution of disapproval.) Rejection by the Senate, however, does not bar re-nomination of a nominee—by the President or a successor President—and therefore the possibility of the nominee again being brought before the Senate for its consideration. Occasionally, for a judicial nomination that fails to be confirmed, the final step in the appointment process consists of the President withdrawing the nomination. (The President does this by transmitting to the Senate a message of withdrawal.) A nomination may be withdrawn for a variety of reasons. It might, for example, be withdrawn because prospects for its confirmation are viewed as unfavorable; there is no longer presidential support for it; the nominee has requested the withdrawal; or the President wishes to re-nominate the nominee to a different judgeship. Typically, during a presidency, only a small number of circuit or district court nominations are withdrawn. Under Senate Rule XXXI, paragraph 6, all pending nominations (whether in committee or on the Executive Calendar ) are returned to the President when the Senate adjourns sine die at the end of a session or when it recesses for more than 30 days. The return of a nomination to the President marks its end point in the appointment process, with its final status that of an unconfirmed nomination. However, nominations sometimes are not returned, if the Senate elects to waive the above rule. Further, even when a nomination is returned, the President has the option of re-nominating (i.e., sending to the Senate a new nomination of) the person in question, and this option is often exercised. At the end of a Congress, all pending nominations must be returned to the President, in keeping with Rule XXXI, paragraph 6. However, on other occasions, when adjourning between sessions or recessing for more than 30 days, the Senate often waives the rule by unanimous consent. (It commonly does so, for instance, before adjourning for its August or its inter-session recess.) In waiving the rule, the Senate, instead of returning nominations to the President while in recess, allows them to remain "in status quo." A UC agreement to have nominations remain pending in status quo during long recesses, however, may not always cover all nominations. Sometimes instead, if one or more Senators oppose the continued pendency of certain nominations, these specifically will be excluded from the agreement, necessitating their return to the President during the recess. When the Senate returns a nomination, the President ordinarily has only two options—to select a new nominee or to re-nominate, staying with the person previously nominated. Presidents frequently choose to do the latter, sending to the Senate new nominations of their previous nominees. On occasions when the Senate, at the start of a long recess, sends back all or nearly all pending nominations (having not reached a UC agreement for such nominations to remain in status quo), the President typically, without hesitation, re-nominates all or nearly all of the nominees involved. (A few possible exceptions might be made, and new nominations not submitted, for persons regarded as having doubtful chances for confirmation.) By contrast, as already noted, the Senate sometimes may return only a few judicial nominations, having, by unanimous consent, agreed that all other nominations remain in status quo during the long recess. The return of only certain specified nominations often may be an indicator to the President of some degree of opposition in the Senate to the nominations. As such, it is, in the case of each nomination, a consideration for the President to weigh in deciding whether to re-nominate or to select a new nominee. Following the return of all pending nominations at the final adjournment of a Congress, a President, early in the next Congress, is free to re-nominate persons whose previous judicial nominations were returned. However, even if some of the previous nominations progressed through certain steps of the confirmation process (for instance, they were reported out of committee or received floor consideration), the new nominations will have to repeat some of the steps taken previously in order to be processed and confirmed, in the new Congress. The new nominations, for instance, will again be referred to the Judiciary Committee and must be approved by the committee in order to be placed on the Executive Calendar . At the committee's discretion, however, one formal step in the confirmation process—the confirmation hearing—may be dispensed with if a judicial nominee already received a hearing in the previous Congress and an additional hearing is considered unnecessary.
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In recent decades, the process for appointing judges to the U.S. circuit courts of appeals and the U.S. district courts has been of continuing Senate interest. The responsibility for making these appointments is shared by the President and the Senate. Pursuant to the Constitution's Appointments Clause, the President nominates persons to fill federal judgeships, with the appointment of each nominee also requiring Senate confirmation. Although not mentioned in the Constitution, an important role is also played midway in the appointment process by the Senate Judiciary Committee. Presidential Selection of Nominees The need for a President to make a circuit or district court nomination typically arises when a judgeship becomes or soon will become vacant. With almost no formal restrictions on whom the President may consider, an informal requirement is that judicial candidates are expected to meet a high standard of professional qualification. By custom, candidates whom the President considers for district judgeships are typically identified by home state Senators if the latter are of the President's party, with such Senators, however, generally exerting less influence over the selection of circuit nominees. Another customary expectation is that the Administration, before the President selects a nominee, will consult both home state Senators, regardless of their party, to determine the acceptability to them of the candidate under consideration. In recent Administrations, the pre-nomination evaluation of judicial candidates has been performed jointly by staff in the White House Counsel's Office and the Department of Justice. Candidate finalists also undergo a confidential background investigation by the FBI and an independent evaluation by a committee of the American Bar Association. The selection process is completed when the President, approving of a candidate, signs a nomination message, which is then sent to the Senate. Consideration by Senate Judiciary Committee Once received by the Senate, the judicial nomination is referred to the Judiciary Committee, where professional staff initiate their own investigation into the nominee's background and qualifications. Also, during this pre-hearing phase, the committee, through its "blue slip" procedure, seeks the assessment of home state Senators regarding whether they approve having the committee consider and take action on the nominee. Next in the process is the confirmation hearing, where judicial nominees engage in a question and answer session with members of the Judiciary Committee. Questions from Senators may focus, among other things, on a nominee's qualifications, understanding of how to interpret the law, previous experiences, and the role of judges. The committee, when it ultimately votes on a nomination, has three reporting options—to report favorably, unfavorably, or without recommendation. Only on rare occasions has the committee voted to reject a judicial nomination or to report it other than favorably. Senate Floor Consideration Customarily, most circuit or district court nominations have reached confirmation under the terms of unanimous consent agreements. On this procedural track, the Senate by unanimous consent not only takes up nominations for floor consideration, but also arranges for them to either receive up-or-down confirmation votes or be confirmed simply by unanimous consent. If a roll call vote is asked for, a simple majority of Senators voting, with a minimal quorum of 51 being present, is required to approve a nomination. For a minority of judicial nominations, however, particularly those facing strong opposition, the procedural track, for moving forward without unanimous consent, customarily has involved the Senate voting on cloture motions to bring floor debate on them to a close. A simple majority of Senators voting is needed to close debate on all nominations except to the Supreme Court. (Prior to a Senate reinterpretation of its rules in November 2013, a three-fifths majority was required.) Nominations Not Confirmed Judicial nominations sometimes fail to be confirmed. This occurs most often when nominations in committee or on the Senate's Executive Calendar are returned to the President at the end of a session or upon a recess or more than 30 days. Senate votes rejecting a nomination are rare.
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The Administrative Procedure Act (APA) of 1946 (5 U.S.C. §551 et seq. ) generally requires federal agencies to publish their proposed rules (also called regulations) in the Federal Register, to provide the public with an opportunity to comment on those proposed rules, and to publish a final rule at least 30 days before its effective date. The APA does not, however, specify how agencies are to develop their proposed rules or who should participate in that process. Consequently, agencies sometimes develop rules without discussing relevant issues with all affected interests, and there may be little or no opportunity for an informal exchange of views among affected parties or between those parties and the rulemaking agency either before or after the proposed rule is published. Negotiated rulemaking (sometimes referred to as regulatory negotiation or "reg-neg") is a supplement to the traditional APA rulemaking process in which agency representatives and representatives of affected parties work together to develop what can ultimately become the text of a proposed rule. In this approach, negotiators try to reach consensus by evaluating their priorities and making tradeoffs, with the end result being a draft rule that is mutually acceptable. Negotiated rulemaking has been encouraged (although not usually required) by both congressional and executive branch actions, and has received bipartisan support as a way to involve affected parties in rulemaking before agencies have developed their proposals. Some questions have been raised, however, regarding whether the approach actually speeds rulemaking or reduces litigation. The development of negotiated rulemaking is traceable to dissatisfaction with what some viewed as the formal, complex, and adversarial nature of traditional rulemaking procedures. For example, in 1982, administrative law expert Philip J. Harterâan early advocate of negotiated rulemakingâsaid a "malaise" had settled over the federal rulemaking process because of the defensive and arms-length manner in which agencies and affected parties interacted. He suggested a different approach in which differences were acknowledged and resolved through face-to-face negotiations, and laid out a series of principles that could make those negotiations successful. Also in 1982, the Administrative Conference of the United States (ACUS) recommended that agencies consider using negotiated rulemaking as a way to develop proposed rules, published criteria for determining when negotiated rulemaking was likely to be successful, and suggested specific procedures to be followed when implementing the approach. For example, ACUS said agencies should use "conveners" to determine whether negotiated rulemaking is appropriate and to identify affected interests. ACUS also recommended that Congress pass legislation explicitly authorizing agencies to use negotiated rulemaking, but giving them substantial flexibility to adapt negotiation methods. In 1983, the Federal Aviation Administration became the first federal agency to try negotiated rulemaking (regarding flight and rest time requirements for domestic airline pilots), followed by the Environmental Protection Agency (EPA) and the Occupational Health and Safety Administration. In 1985, ACUS recommended refinements to the procedures based on these agencies' experience with the approach. For example, ACUS said that agencies sponsoring the effort should take part in the negotiations, and pointed out that negotiated rulemaking could be used at several stages of the rulemaking process. The Negotiated Rulemaking Act of 1990 (5 U.S.C. §§561-570), as amended and permanently authorized in 1996 by the Administrative Dispute Resolution Act of 1996 (110 Stat. 2870, 3873), essentially enacted the ACUS recommendations, establishing basic statutory authority and requirements for the use of the approach while giving agencies wide latitude in its implementation. The act supplements (but does not supplant) APA rulemaking procedures, and establishes a framework by which agencies are encouraged (but not required) to use negotiated rulemaking to develop proposed rules. The act established public notice requirements and procedures by which affected parties can petition for inclusion in the process, and clarified that agencies must generally comply with the Federal Advisory Committee Act in establishing and administering the negotiating committee. The negotiated rulemaking committee, composed of representatives of the agency and from the various non-federal interests that would be affected by the proposed regulation, addresses areas of concern in the hope that it can reach agreement on the contents of a proposed regulation. The agency can, if it agrees, then issue the agreement as a proposed rule, and eventually as a final rule, under existing APA procedures. The expectation is that any rule drafted through negotiated rulemaking would be easier to implement and less likely to be the subject of subsequent litigation. In September 1993, the Clinton Administration's National Performance Review (NPR) recommended (among other things) that federal agencies increase their use of negotiated rulemaking. That same month, President Clinton issued Executive Order 12866, which, in part, directed federal agencies to "explore and, where appropriate, use consensual mechanisms for developing regulations, including negotiated rulemaking." President Clinton also issued a separate memorandum in September 1993 directing each agency to identify at least one rulemaking for which the agency would use negotiated rulemaking during 1994, or to explain why the use of the approach was not feasible. In May 1998, President Clinton issued another memorandum to the heads of executive branch departments and agencies intended to promote greater use of negotiated rulemaking. Specifically, he designated the Regulatory Working Group (which had been established by Executive Order 12866 and was composed of the heads of agencies with significant domestic regulatory responsibilities) as an interagency committee to "facilitate and encourage agency use of negotiated rulemaking." The Negotiated Rulemaking Act permits agencies to establish a negotiated rulemaking committee if the head of the agency determines that doing so is "in the public interest." In making that determination, the act says the head of the agency must consider whether (1) a rule is needed, (2) there are a limited number of identifiable interests that will be significantly affected by the rule, (3) there is a "reasonable likelihood" that a balanced committee can be convened that will adequately represent those identifiable interests and is willing to negotiate in good faith to reach consensus on a proposed rule, (4) there is a "reasonable likelihood" that the committee will reach a consensus on the proposed rule within a fixed period of time, (5) the negotiated rulemaking process will not delay the issuance of the proposed or final rule, (6) the agency has adequate resources that it is willing to commit to the committee, and (7) the agency will use the committee's consensus as the basis of the proposed rule "to the maximum extent possible consistent with the legal obligations of the agency." The act also specifically permits the use of conveners to help the agency identify affected parties and to determine whether a committee should be established. If the agency decides to establish a negotiated rulemaking committee, the act requires the agency to publish a notice in the Federal Register (and, as appropriate, relevant trade or other specialized publications) containing (among other things) a description of the subject and scope of the rule, a list of affected interests, a list of those proposed to represent those interests and the agency, and a solicitation for comments. The comment period must be for at least 30 calendar days. Membership on the committee is limited to 25 members (including at least one from the sponsoring agency), unless the agency head determines that more members are needed. The agency can select (subject to the approval of the committee by consensus) an impartial "facilitator" to chair meetings and oversee the administration of the committee. The facilitator does not have to be a federal employee, but agencies are required to determine whether a person under consideration to be a convener or a facilitator has any financial or other conflict of interest. Any agreement on a negotiated rule must be unanimous, unless the negotiated rulemaking committee agrees to other conditions. If the committee reaches consensus, it must submit a report to the sponsoring agency containing the proposed rule and any other information it deems appropriate. However, any proposal agreed to by the committee is not binding on the agency or other parties; the agency may decide not to issue a proposed rule at all or not as designed by the committee, and interest groups represented on the committee may oppose the rule that they helped craft. The committee terminates no later than promulgation of the final rule. An agency may pay reasonable travel and per diem expenses, and reasonable compensation to negotiating committee members under certain conditions. Agency procedural actions related to establishing, assisting, or terminating the committee are not subject to judicial review, but any judicial review available regarding the rule resulting from negotiated rulemaking is unaffected. Although the Negotiated Rulemaking Act gives agencies substantial discretion as to whether the approach should be employed in rulemaking, Congress has sometimes mandated its use by rulemaking agencies and established specific procedures and time frames to follow. For example: Section 7212 of the Intelligence Reform and Terrorism Prevention Act of 2004 ( P.L. 108-458 ) required the Secretary of Transportation to use negotiated rulemaking in developing regulations establishing minimum standards for drivers licenses or personal identification cards. Section 222 of the "Consolidated Appropriations Act, 2004" ( P.L. 108-199 ) required the Secretary of Housing and Urban Development to "conduct negotiated rulemaking with representatives from interested parties for purposes of any changes to the formula governing the Public Housing Operating Fund." Section 1901(b)(3)(A) of the No Child Left Behind Act ( P.L. 107-110 ) required the Secretary of Education to "establish a negotiated rulemaking process on, at a minimum, standards and assessments." The section went on the stipulate that those involved in the process should be selected from among those that provided advice and recommendations on how the title should be carried out, and said that the process should follow the process outlined in the Negotiated Rulemaking Act (except that it should not be subject to the Federal Advisory Committee Act). Section 1125(a)(5) of the No Child Left Behind Act required the Secretary of Education to establish a negotiated rulemaking committee to prepare, for schools funded by the Bureau of Indian Affairs, a catalog of the condition of school facilities, a school replacement and new construction report, and a renovation repairs report. The act specified the contents of each report and required that it be submitted to particular congressional committees within 24 months. Section 106(b)(2) of the Native American Housing Assistance and Self-Determination Act of 1996 ( P.L. 104-330 ) required that all regulations under the act must be issued according to negotiated rulemaking procedures, and required that the negotiating committee be composed only of representatives of the federal government and "geographically diverse small, medium, and large Indian tribes." Section 6 of the Native American Housing Assistance and Self-Determination Reauthorization Act of 2002 ( P.L. 107-292 ) required negotiated rulemaking for any rules issued pursuant to amendments to the original act. Section 490D(b)(3) of the Higher Education Amendments of 1998 ( P.L. 105-244 ) required that negotiated rulemaking must be used for all subsequent regulations pertaining to the act's title on student assistance "unless the Secretary determines that applying such a requirement with respect to given regulations is impracticable, unnecessary, or contrary to the public interest." The Secretary is required to publish such a determination in the Federal Register at the same time as the proposed rule. Several bills that have been introduced in the 110 th Congress would, if enacted, also require the use of negotiated rulemaking. For example, the Indian Health Care Improvement Act Amendments of 2007 and 2008 ( H.R. 1328 and S. 1200 ) would (among other things) revise the Indian Catastrophic Health Emergency Fund (CHEF) requirements and require the Secretary of HHS to use negotiated rulemaking for the promulgation of CHEF regulations. According to ACUS and other advocates of the approach, negotiated rulemaking can have a number of beneficial effects, including the following: reduced time, money and effort expended on developing and enforcing rules, earlier implementation of associated rules, better agency understanding of regulated parties' concerns, greater understanding by regulated parties of their responsibilities and higher compliance rates, more creative and effective regulatory solutions, less litigation associated with the rule, and more cooperative relationships between the agency and other parties. ACUS and others have also identified a number of disadvantages of negotiated rulemaking. ACUS noted that the approach can be more resource-intensive than traditional rulemaking, at least in the short term, and does not work when the number of affected interests is too large (e.g., more than 25 negotiators). One author said that the approach has been used only rarely (reportedly for less than one-tenth of 1% of all rules), and he said only a few of those rules were considered "major" or "significant." The author noted that the Negotiated Rulemaking Act instructs agencies to select rules based on their likelihood of consensus, not their importance. Another author said that negotiated rulemaking has been used sparingly "for the good reason that it represents a corporatist abdication of public authority to private interests," and that even when used it only results in a proposed rule that is subject to the same procedural requirements as rules developed conventionally. Another commenter asserted that negotiated rulemaking does not work when developing regulations based on broad statutes, and may "inadvertently perpetuate the problem (of statutory vagueness) by facilitating efforts to shift blame for controversial public policies from legislators to bureaucrats." Yet another study concluded that "the principles, theory, and practice of negotiated rulemaking subtly subvert the basic, underlying concepts of American administrative lawâan agency's pursuit of the public interest through law and reasoned decisionmaking. In its place, negotiated rulemaking would establish privately bargained interests as the source of putative public law." Nevertheless, a number of observers continue to view negotiated rulemaking favorably, with one regulatory expert describing it as offering the public "the most direct and influential role in rulemaking of any reform of the process ever devised." Studies of how negotiated rulemaking works in practice have reached substantially different conclusions about its effects and prospects. In 1990, eight agencies that had convened negotiation committees reportedly told ACUS that even though full consensus was not always possible, the information developed through the process contributed substantially to the rule that was produced. A 1992 study of four EPA negotiated rulemaking efforts indicated that the approach reduced the time needed to develop rules (particularly during the period between proposed and final rulemaking). However, another study five years later examining more EPA negotiations reached the opposite conclusion, finding that conventional rules and negotiated rules took about the same amount of time and that negotiated rules were more likely to be challenged in court. Similarly, a 1999 study also concluded that negotiated rulemaking had "no discernible effect" on the amount of time between proposed and final rulemaking. Another study indicated that negotiated rulemaking can improve participants' perception of the final rule and of the overall rulemaking process. Participants in negotiated rulemaking were reportedly more pleased with the quality of the information the process generated than those who filed comments on conventional rules, and more likely to view their participation as having an effect on the final rule. The study also indicated, however, that negotiated rulemaking imposes substantial costs on participants, who are required to attend multiple meetings and interact with other stakeholders for long periods of time. Substantial disagreements exist regarding how the effectiveness of negotiated rulemaking should be measured (e.g., timeliness and the amount of litigation). Most researchers agree, however, that the approach is not appropriate for all rules, and that more research is needed to determine its effects on rules, the rulemaking process, and participants in that process.
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Negotiated rulemaking, which is a supplement to traditional rulemaking, is a process in which representatives of federal agencies and affected parties work together in a committee to reach consensus on what can ultimately become a proposed rule. Although negotiated rulemaking is not appropriate for all regulations, advocates believe that the approach can speed rule development, reduce litigation, and generate more creative and effective regulatory solutions. The Negotiated Rulemaking Act of 1990 established the basic statutory authority for the approach while giving agencies wide latitude in its implementation, and the Clinton Administration advocated a broader application of the approach. Agencies are permitted to use "conveners" to determine whether negotiated rulemaking is appropriate and to select participants, and to use "facilitators" to chair the negotiated rulemaking committee meetings. At the end of the process, agencies must still publish proposed and final regulations for public comment, but any proposal agreed to by the negotiating committee is not binding on the agency or other parties. Although the Negotiated Rulemaking Act gives agencies substantial discretion as to whether the approach should be employed in rulemaking, Congress has sometimes mandated its use by rulemaking agencies and established specific procedures and time frames to follow. Studies examining the implementation of negotiated rulemaking have reached different conclusions regarding the approach's effect on rulemaking timeliness, litigation, as well as other issues. Researchers also disagree regarding how the effectiveness of negotiated rulemaking should be measured. This report will be updated if significant developments occur (e.g., congressional action or research findings) that could affect the use of negotiated rulemaking. For information on the traditional rulemaking process, see CRS Report RL32240, The Federal Rulemaking Process: An Overview , by [author name scrubbed].
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Cybersecurity is a major concern of financial services providers and their federal regulators. In many ways, it is an important extension of physical security. Providers of financial services are concerned about both physical and electronic theft of money and other assets such as intellectual property. They want to prevent the destruction of property, whether it is a building or a website. They do not want to be closed down by either a physical storm or an electronic denial-of-service attack. They want to minimize human error, whether it is someone failing to secure written documents or an employee falling victim to a phishing attack. When it comes to keeping unauthorized persons away from sensitive electronic equipment, physical security and cybersecurity often overlap. There is a growing recognition by the federal government of the importance of cybersecurity in the financial services industry, as evidenced by the inclusion of financial services in the government's list of 16 critical infrastructure sectors. This report provides information on the landscape of federal laws and regulatory agencies directly regulating or establishing standards for financial services cybersecurity. Because each of the applicable federal laws contains specific implementation provisions, there are varying degrees and methods of regulatory oversight of cybersecurity in the financial sector. Some laws distribute authority to issue regulations and take enforcement actions among a number of agencies; others require one agency to issue implementing regulations and distribute enforcement authority among several agencies; and finally, some laws delegate all authority for issuing regulations and administrative enforcement to a single agency. Some agencies have authority to issue notice and comment rules; others have authority to impose requirements on the institutions that they regulate by guidance that has the same legal force as notice and comment rulemaking. The federal bank supervisory agencies, which have broad general authority to issue regulations, also issue any number of types of guidance documents under a variety of names such as policy statements, supervision and regulatory (SR) letters, financial institution letters (FIL), letters, bulletins, and other forms of communication. Many of the regulators issue informal guidance and bring adjudicatory enforcement actions on a case-by-case basis that often are interpreted as precedential signals to the regulated community as to how the agency interprets aspects of its regulatory authority. This report also provides brief descriptions and examples of the role of state law and of private sector initiatives. Its focus is, however, on the array of federal regulators and the varying ways in which federal laws impose information technology and cybersecurity requirements on financial services providers to protect the security, confidentiality, and integrity of data assembled and maintained in their businesses. Acronyms and abbreviations are listed in a glossary at the end of this report. Financial services are a critical part of any modern economy. These services include accepting deposits; making loans; processing payments; providing insurance and other financial products to spread risks; dealing in securities such as stocks, bonds, and derivatives; and offering, administrating, or advising employee benefit programs. Commercial and investment banks, stock and commodity markets, and insurance companies using various securities and commodity contracts, funds, trusts, and other financial vehicles provide these services. Banking institutions are subject to comprehensive prudential regulation touching many aspects of their daily operations. Regulation of the financial sector is based on both form (the type of charter the entity has) and function (what the entity does). There are special and distinct institution-based regulatory regimes and regulators for depositories, securities firms, and insurance companies, as well as multiple regulations based on the services or products that a financial institution provides. In addition to the traditional type of financial regulation in which various financial organizations, functions, activities, or products are subjected to regulatory controls, the federal government also treats financial services as one of 16 critical infrastructure sectors with which it has arrangements to prevent disruptions to the nation's economy and harm to its wellbeing. Distinctions are often made between commercial banking (accepting deposits and making loans to businesses and individuals) and investment banking (dealing in stocks, bonds, and related securities on the bank's account or for customers). In this report, the term "bank" will be used as a general term for depository institutions. The term will be employed to cover banks, savings associations, thrifts, and credit unions with federally insured deposits. The term will also be used to cover the companies that own or control banks or thrifts (i.e., bank holding companies, financial holding companies, and savings and loan holding companies). The term "commercial bank" will be used to refer to national banks and state-chartered banks but not savings and loans or thrifts or credit unions. When focusing on a nonbank subsidiary of a holding company, however, "bank" will not be used, but the report will indicate the type of organization in question (i.e., stock exchange, insurance company, securities firm, mortgage broker, etc.). Currently there are four federal commercial bank regulators, two federal securities regulators, one credit union federal regulator, but no primary federal regulator of insurance companies. Although primary regulation of insurance companies is the prerogative of the states, publicly traded insurance companies must comply with various securities laws and certain insurance company subsidiaries of financial holding companies may be subjected to requirements imposed by the Board of Governors of the Federal Reserve System (the Fed). Prudential regulation of depositories and holding companies for safety and soundness now includes concern for cybersecurity. Prudential regulation of depository institutions and their holding companies involves virtually every aspect of their capitalization, management, operations, activities, and services, as well as periodic on-site examination and continuing supervision. It is generally based upon organic legislation that establishes each regulator to charter and supervise banks, savings and loans, holding companies, or credit unions. These laws have been amended over time to provide regulators with authority to deal with changing issues and circumstances as they have arisen. Today, the Office of the Comptroller of the Currency (OCC) is the chartering authority and primary federal regulator of national banks and federal savings associations, and it relies on general authority under organic legislation to impose cybersecurity requirements on the institutions it regulates and their service providers. Congress created the OCC to charter and to oversee national banks. (States can also charter banks.) The Home Owners' Loan Act of 1933 established a separate depository charter for savings and loan associations. However, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank) transferred responsibility for chartering and regulating federal savings and loans to the OCC. The Board of Governors of the Federal Reserve System has regulatory authority over an array of financial institutions and systems, and it relies on broad authority in its organic legislation to impose cybersecurity requirements on the institutions it regulates. The Federal Reserve Act of 1913 created the Fed, headed by a Board of Governors, and gave it regulatory authority over state-chartered banks that are members of the Federal Reserve System. In 1956, the Bank Holding Company Act added regulation of bank holding companies to the Fed's responsibilities. Savings and loan holding companies were added in 2010 by the Dodd-Frank Act. The Fed is the primary regulator of state banks that are members of the Federal Reserve System; U.S. branches and agencies of foreign banks; international operations of U.S. banks; companies that own banks (bank and financial holding companies); securities holding companies that elect to be supervised by the Fed; savings and loan holding companies; and any firm designated as a systemically significant financial institution (SIFI) by the Financial Stability Oversight Council (FSOC). In addition, it regulates the payment, clearing, and settlement systems designated as systemically significant by the FSOC, unless regulated by the Securities and Exchange Commission (SEC) or Commodity Futures Trading Commission (CFTC). The Fed regulates wholesale payment systems, which are used by financial institutions to transfer large-value funds and to communicate with each other. The two primary domestic interbank payment and messaging systems are the Fedwire Funds Service (operated by the Fed) and the Clearing House Interbank Payments System (CHIPS, operated by The Clearing House Payments Company, L.L.C., which is based in New York). The Fed has oversight or supervisory responsibility over designated financial market utilities, which include systemically important private sector payment systems, securities settlement systems, central securities depositories, and central counterparties. While the Fed cooperates with the other central banks in the Group of 10 to oversee SWIFT—the Society for Worldwide Interbank Financial Telecommunication, a Brussels-based entity owned by financial organizations worldwide that provides secure international messaging among banks and other financial institutions—for the purposes of critical infrastructure protection, discussed later, SWIFT is considered a communications system, and, therefore, it is overseen for cybersecurity purposes by the Department of Homeland Security. The Federal Deposit Insurance Corporation (FDIC) is the primary regulator of federally insured, state-chartered banks that are not members of the Federal Reserve System and all federally insured, state-chartered thrifts and savings associations. It relies on broad general authority under its organic legislation to impose cybersecurity requirements on the institutions it regulates. The Banking Act of 1933 created the FDIC to insure bank deposits and to act as primary federal regulator of state-chartered banks that are not members of the Federal Reserve System. Except for a few small, state-chartered banks, all banks are required to have their deposits insured by the FDIC. The National Credit Union Administration (NCUA) is the federal regulator of federal credit unions and state-chartered, federally insured credit unions. It relies on broad authority under its organic legislation to impose cybersecurity requirements on the institutions it regulates. Credit unions are chartered as cooperative organizations of individuals with a common bond that accept deposits of members' savings and transaction balances in the form of share accounts, pay dividends, and offer consumer credit. The Federal Credit Union Act of 1934 authorized federally chartered credit unions and created the Bureau of Federal Credit Unions to oversee them. The Financial Institutions Regulatory and Interest Rate Control Act of 1978 replaced the bureau with the National Credit Union Administration. The Consumer Financial Protection Act of 2010 (CFP Act), which is Title X of Dodd-Frank, created the Consumer Financial Protection Bureau (CFPB) within the Federal Reserve System. The CFPB has rulemaking, enforcement, and supervisory powers over many consumer financial products and services, as well as the entities that sell them. It has rulemaking authority over financial consumer protection laws that have cybersecurity implications, including authority to develop identity theft guidelines under the Fair and Accurate Credit Transactions Act (FACT Act) and to issue regulations under the privacy provisions of the Gramm-Leach-Bliley Act (GLBA). Unlike the other bank regulators, however, it does not have authority under GLBA to promulgate administrative, technical, and physical safeguards (1) to insure the security and confidentiality of "customer" records and information; (2) to protect against any anticipated threats or hazards to the security or integrity of such records; and (3) to protect against unauthorized access to or use of such records or information which could result in substantial harm or inconvenience to any customer. The CFPB has published a Supervision and Examination Manual; examinations cover the protection of personally identifiable information (PII) covered by the privacy title of GLBA and the Fair Credit Reporting Act (FCRA) with respect to sharing of nonpublic personal information with nonaffiliated third parties. Under its organic legislation, the CFPB has authority to issue rules declaring certain acts or practices to be unlawful because they are unfair, deceptive, or abusive. This authority is similar to authority that the Federal Trade Commission (FTC) has used to bring enforcement actions based on cybersecurity inadequacies. This authority was used on March 2, 2016, by the CFPB in a cybersecurity-related enforcement action against an online payment platform. However, the CFPB's authority with respect to unfair, deceptive, or abusive practices is confined to the CFPB's general regulatory jurisdiction. The CFPB's supervisory powers include the authority to examine larger depositories for consumer compliance. The CFPB also has authority over certain nonbanks as follows: [t]he CFPB is authorized to supervise three groups of nonbanks. First, the CFPB supervises nonbanks, regardless of size, in three specific markets—mortgage companies (such as lenders, brokers, and servicers), payday lenders, and private education lenders. Second, the CFPB may supervise "larger participants" in certain consumer financial markets. The CFPB has some discretion to determine what those markets are and what constitutes a larger participant.... Third, the CFPB may supervise a nonbank if, based on consumer complaints or other sources, the CFPB has reasonable cause to determine that the nonbank poses risks to consumers in offering its financial services or products. The CFPB views protection of customer data as part of its responsibilities and has joined with the federal banking regulators to issue a cybersecurity assessment tool for financial services firms to use. The Federal Financial Institutions Examination Council (FFIEC) was created by Title X of the Financial Institutions Regulatory and Interest Rate Control Act of 1978, to "prescribe uniform principles for the Federal examination of financial institutions by the ... [federal bank regulators] and make recommendations to promote uniformity in the supervision of these financial institutions." All five federal depository institution regulators are members of the FFIEC. The federal agency members of the FFIEC examine institutions they supervise for safety and soundness. Included in their examinations, as discussed later, is a comprehensive review of information technology and cybersecurity. Under the privacy title of GLBA, all of the federal banking regulators, except (as previously noted) the CFPB, have authority to promulgate administrative, technical, and physical safeguards (1) to insure the security and confidentiality of "customer" records and information; (2) to protect against any anticipated threats or hazards to the security or integrity of such records; and (3) to protect against unauthorized access to or use of such records or information which could result in substantial harm or inconvenience to any "customer." Banks are subject to periodic on-site examination designed to maintain the safety and soundness of the individual institutions and of the entire banking system. Although every federally insured bank is evaluated on the same set of six factors that measure components of an institution's financial condition and operations, the degree of federal oversight of a bank varies with the size of a bank, and the variety and scope of its operations. One component of a bank examination is the information technology examination, which is based on the Interagency Guidelines Establishing Information Security Standards. In addition, the federal banking agencies have issued guidance advising banks that when a bank detects a breach of security involving customer information, it must promptly notify law enforcement and its regulators. Customers must be notified if a reasonable investigation determines that a breach of customer information has occurred or is reasonably likely to occur. The FFIEC has issued an information technology (IT) examination handbook for use by examiners of the member agencies. This handbook consists of 11 separate booklets that cover specific cybersecurity areas: audit, business continuity planning, development and acquisition, electronic banking, information security, management, operations, outsourcing technology services, retail payment systems, supervision of technology service providers, and wholesale payment systems. In addition to federal bank regulators, other federal regulators oversee securities, markets, government-sponsored enterprises in the secondary mortgage market, agricultural credit, and certain aspects of consumer protection. There are two federal regulators of securities and commodities: the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). The SEC was created by the Securities Exchange Act of 1934; the CFTC was created by the Commodity Futures Trading Commission Act of 1974. The SEC oversees securities exchanges, brokers and dealers, investment advisors, and mutual funds; the CFTC regulates designated contract markets, swap execution facilities, derivatives clearing organizations, swap data repositories, swap dealers, futures commission merchants, commodity pool operators, and other intermediators. The Securities Exchange Act of 1934 requires publicly traded companies to disclose material financial and other information to the public, primarily by filing this information with the Commission. The securities laws are broadly aimed at (1) investor protection; (2) maintaining fair, orderly, and efficient markets; and (3) facilitating capital formation. They do so by providing clear rules for honest dealing among securities market participants, including antifraud provisions, and a disclosure regime that requires the various entities involved in securities markets to disclose information deemed necessary for informed investment decision making. As a consequence of its responsibilities, the SEC oversees financial disclosures of both financial and nonfinancial publicly traded companies, such as large nationwide retailers. It enforces prohibitions against insider trading, accounting fraud, and providing false or misleading information about securities and the companies that issue them. Two key SEC regulations on cybersecurity are Regulation Systems Compliance and Integrity (Regulation SCI) and Regulation Privacy of Consumer Financial Information (Regulation S-P). Broadly speaking, Regulation SCI requires self-regulatory organizations (SROs), such as the Financial Industry Regulatory Authority (FINRA), to implement comprehensive policies and procedures for their technological systems and to notify the SEC of any problems. Regulation S-P implements the provision of the privacy title of GLBA, which requires the SEC to promulgate administrative, technical, and physical safeguards (1) to insure the security and confidentiality of "customer" records and information; (2) to protect against any anticipated threats or hazards to the security or integrity of such records; and (3) to protect against unauthorized access to or use of such records or information which could result in substantial harm or inconvenience to any "customer." This regulation applies to brokers and dealers, investment companies, and investment advisers registered with the SEC. The SEC's Office of Compliance Inspections and Examinations (OCIE) issues Risk Alert s to notify regulated entities of new emphases in their inspections and examinations. A recent alert highlighted six areas of concern: governance and risk assessment, access rights and controls, data loss prevention, vendor management, training, and incident response. In 2015, the OCIE alerted the securities industry to the importance of cybersecurity by publishing its "summary observations" of examinations it had conducted on approximately 100 broker-dealers or registered investment advisors for vulnerability to cyberattacks. Among OCIE's 2016 examination priorities are cybersecurity and Regulation SCI compliance. Under the Commodity Futures Modernization Act of 2000, the CFTC is required to impose requirements on the entities that it regulates to comply with the privacy title of the Gramm-Leach-Bliley Act. This includes promulgating administrative, technical, and physical safeguards (1) to ensure the security and confidentiality of customer records and information; (2) to protect against any anticipated threats or hazards to the security or integrity of such records; and (3) to protect against unauthorized access to or use of such records or information which could result in substantial harm or inconvenience to any customer. Under CFTC regulations, "[e]very futures commission merchant, retail foreign exchange dealer, commodity trading advisor, commodity pool operator, introducing broker, major swap participant, and swap dealer subject to the jurisdiction of the Commission must adopt policies and procedures that address administrative, technical and physical safeguards for the protection of customer records and information." The CFTC has listed best practices that are generally consistent with regulations and guidance promulgated by the FTC, the SEC, and the banking regulators. At a discussion held for securities industry participants, CFTC Chairman Timothy Massod summarized CFTC's cybersecurity regulatory efforts as follows: We have incorporated cybersecurity standards into our regulations, [and] required clearing houses and exchanges to maintain system safeguards and risk management programs, to notify us promptly of incidents, to have recovery procedures in place. And we also made this a priority in our examinations. Certain self-regulatory organizations (SROs)—private organizations empowered by law or regulation to create and enforce industry rules—also are concerned about cybersecurity. These include FINRA, which, to protect investors, oversees stock exchanges and those who trade on them. The National Futures Association (NFA) has a similar role for U.S. futures exchanges and in the retail foreign exchange market FINRA is "an independent, not-for-profit organization authorized by Congress to protect America's investors by making sure the securities industry operates fairly and honestly ... by ... writing and enforcing rules governing the activities of more than 3,957 securities firms with approximately 643,322 brokers; examining firms for compliance with those rules; fostering market transparency; and educating investors." FINRA was created by the merger of the National Association of Securities Dealers, Inc. and the regulatory arm of the New York Exchange. FINRA has published a directory of SROs. Among the SROs subject to the CFTC's jurisdiction, the NFA oversees those individuals and companies trading on U.S. futures exchanges and in the retail foreign exchange market. Under the general category of risk management, it considers operation risk, including computer systems. The NFA manual provides guidance for members' cybersecurity programs. There are no federal insurance regulators with roles parallel to those of the federal banking or securities agencies. The business of insurance is subject to state regulation, and when there is a data breach involving an insurance company state regulators are likely to conduct an investigation. However, certain federal laws, such as the privacy title of the Gramm-Leach-Bliley Act, specifically impose cybersecurity requirements on insurance providers and services. These laws are generally enforced by the state authorities. According to CRS In Focus IF10043, Introduction to Financial Services: Insurance Regulation , by [author name scrubbed], Each state government has a department or other entity charged with licensing and regulating insurance companies and those individuals and companies selling insurance products. States regulate the solvency of the companies and the content of insurance products as well as the market conduct of companies. Although each state sets its own laws and regulations for insurance, the National Association of Insurance Commissioners (NAIC) acts as a coordinating body that sets national standards through model laws and regulations. Models adopted by the NAIC, however, must be enacted by the states before having legal effect. The states have also developed a coordinated system of guaranty funds, designed to protect policyholders in the event of insurer insolvency. ********* The Dodd-Frank Act ( P.L. 111-203 ) in 2010 significantly altered the overall financial regulatory structure in the United States, but it largely left the state-centered insurance regulatory structure intact. The areas where the act did affect insurance regulation include (1) enhanced systemic risk regulatory authority, including authority over insurers, was vested in the Federal Reserve and in the Financial Services Oversight Council (FSOC), a new council of regulators headed by the Treasury Secretary; (2) oversight of bank and thrift holding companies, including companies with insurance subsidiaries, was consolidated in the Federal Reserve with new capital requirements added; and (3) the creation of a new Federal Insurance Office (FIO) within the Treasury Department. The Dodd-Frank Act also included measures affecting the states' oversight of surplus lines insurance and reinsurance. The Federal Trade Commission Act (FTC Act) established the FTC in 1914 to protect consumers from deceptive or unfair business practices. The FTC has used this authority to bring enforcement actions against various entities, such as hotels, for failing to protect consumer information stored on computer systems. The FTC also enforces the privacy provisions of GLBA and other consumer protection statutes. Under GLBA, FTC's authority covers "financial institutions," a term that is broadly defined to include all businesses "significantly engaged" in providing financial products or services other than those subject to primary regulation by other federal regulators (i.e., the federal banking or security regulators or state insurance authorities). The FTC has promulgated a regulation requiring "all financial institutions subject to its jurisdiction" to adopt administrative, technical, and physical standards to safeguard nonpublic customer information. The FTC's authority to proceed against unfair and deceptive practices, which does not extend to banks, savings associations, or credit unions, among others, has been the basis of over 50 cases that the FTC has brought against companies, some of which may be financial companies, accused of engaging in unfair or deceptive practices by failing to protect personal data. After complaints that its criteria for taking action on data breaches are unclear, the FTC published a guide for businesses that offers "10 practical lessons businesses can learn from the FTC's 50+ data security settlements" and briefly discusses specific breaches and explains why the FTC did or did not take action. The Housing and Economic Recovery Act of 2008 created the Federal Housing Finance Agency (FHFA) to replace the previous regulators of the three housing government-sponsored enterprises (GSEs) (i.e., Fannie Mae, Freddie Mac, and the Federal Home Loan Banks). FHFA has general safety-and-soundness regulatory authority over the three GSEs. In addition, on September 6, 2008, FHFA placed Fannie Mae and Freddie Mac in voluntary conservatorship. As conservator, FHFA assumes the authority of the boards of directors and management and has broad control and oversight over the two enterprises. FHFA has issued an Advisory Bulletin on Cyber Risk Management, applicable to Fannie Mae, Freddie Mac, and the Federal Home Loan Banks. It provides seven "principles-based and technology-neutral" components for cyber risk management. Included are management participation, inclusion of overall risk management, assessment of third-party relationships, and protection of sensitive, confidential, or personally identifiable information. The federal government has long been interested in assuring that credit is available in rural areas. The Federal Farm Loan Act of 1916 created what is today the Farm Credit Administration (FCA), which oversees two government-sponsored enterprises (GSEs) created by the federal government to make and to facilitate financing of agricultural loans: the Farm Credit System (FCS) and the Federal Agricultural Mortgage Corporation (Farmer Mac). The Farm Credit Act of 1971 consolidated and revised several farm credit provisions into a coordinated Farm Credit System, designed to extend credit to farmers and ranchers through cooperatively owned banks and credit associations. This system is administered and supervised by the Farm Credit Administration. The other agricultural GSE, Farmer Mac, is stockholder-owned and makes a secondary market in agricultural real estate mortgages, rural housing mortgages, and rural utility cooperative loans. It was created by the Agricultural Credit Act of 1987 "to establish a secondary market for agricultural real estate and rural home mortgages." The Farm Credit System Reform Act of 1996 gave Farmer Mac further authority to purchase and pool loans and issue mortgage-backed securities with guaranteed payment of principal and interest, rather than just guarantee such securities issued by other retail lenders. The FCA has no regulation that specifically addresses cybersecurity. Having said that, the agency's 2016 Regulatory Projects Plan includes consideration of "revisions to current information technology regulations to address information security, multifactor authentication, and cybersecurity." The FCA is required to conduct a periodic examination of the institutions of the Farm Credit System (except for federal land bank associations). Cybersecurity is an inherent component of these examinations. The FCA Examination Manual includes an Information Technology component in those examinations. In examining an institution's security, examiners "[d]etermine if the board and management have established and maintained effective security over the institution's facilities, systems, and media that process and store vital information for business operations.... " The examination is based on the FFIEC Examination Handbook and focuses on risk management and assessment, board and management oversight, and internal controls Major laws that include data security provisions affecting the financial services industry include Dodd-Frank, the Gramm-Leach-Bliley Act, the Fair Credit Reporting Act of 1970, the Fair and Accurate Credit Transactions Act of 2003, and the Sarbanes-Oxley Act of 2002. It might be noted that there are other laws, which are not specifically directed to the financial sector or to financial products, which may have an impact on the cybersecurity requirements of any financial institution. For example, the Health Insurance Portability and Accountability Act of 1996 (HIPAA) and the Health Information Technology for Economic and Clinical Health Act of 2009 impose privacy and security standards relating to health information. Financial institutions holding covered health information must comply with their requirements, which include data security standards. Federal regulation of the financial sector's cybersecurity also includes laws that deal with specific concerns. One of these is the privacy title of GLBA, which prohibits "financial institutions" from sharing nonpublic personal information of their customers with unaffiliated third-parties. Section 501 of GLBA imposes obligations on "financial institutions" to "respect the privacy of ... [their] customers and to protect the security and confidentiality of those customers' nonpublic personal information." The term "financial institution" is defined broadly. Under this legislation, the federal banking and securities agencies, the FTC, and state insurance regulators are charged with imposing requirements on the entities that they regulate to comply with the privacy title of GLBA. This includes promulgating administrative, technical, and physical safeguards (1) to insure the security and confidentiality of "customer" records and information; (2) to protect against any anticipated threats or hazards to the security or integrity of such records; and (3) to protect against unauthorized access to or use of such records or information which could result in substantial harm or inconvenience to any "customer." Each of these agencies has promulgated a safeguards rule implementing this requirement. There are also provisions in GLBA that generally prohibit, subject to certain exceptions, financial institutions from disclosing nonpublic personal information of their customers to nonaffiliated third parties. As discussed in the previous section, these provisions prohibit anyone from obtaining customer information of a financial institution by false pretenses. Authority to issue regulations under these provisions has been delegated to the CFPB; enforcement authority is shared among the federal banking regulators, the federal security regulators, the state insurance commissioners, and the CFPB, with respect to the "financial institutions" which they regulate. The FTC enforces these provisions with respect to "any institution engaged in the business of providing, financial services to customers who maintain a credit, deposit, trust, or other financial account or relationship with the institution on a nationwide basis." This includes, for example, check-cashing businesses, payday lenders, mortgage brokers, nonbank lenders, personal property or real estate appraisers, professional tax preparers, and courier services. The safeguards rule also applies to companies like credit reporting agencies and automatic teller machine (ATM) operators that receive information about the customers of other financial institutions. Section 404 of the Sarbanes-Oxley Act of 2002 requires that annual reports filed with the SEC pursuant to the Securities Exchange Act of 1934 include a management evaluation of internal controls. There is some speculation that the SEC is considering this as a means of exercising "authority over the IT [information technology] controls of publicly-traded companies." The disclosure provisions discussed here apply to corporations that are required to file reports under Sections 13(a) or 15(d) of the Securities Exchange Act of 1934. This includes companies with stock traded on national exchanges, foreign and domestic private issuers, and issuers of asset-backed securities. Bank holding companies, thrift holding companies, and insured depositories are required to file similar reports with their regulators. The bank regulators and the SEC have, by regulation, given those affected the option of filing one report that meets both sets of disclosure standards, or to file two reports. The Fair and Accurate Credit Transactions Act (FACT Act) amended the Fair Credit Reporting Act to require regulatory agencies to develop identity theft guidelines. These "red flag" guidance and regulations outline "patterns, practices, and specific forms of activity that indicate the possible existence of identity theft." Pursuant to this legislation, the FTC and federal banking, credit union, and securities regulators have been required to issue regulations as well as regulations governing the disposal of customer information. The FCA has notified farm credit institutions that it may examine them for compliance with the FTC regulations. The Bank Protection Act directs the federal bank regulators (the Fed, FDIC, and OCC) to establish minimum security standards for banks and savings associations "to discourage robberies, burglaries, and larcenies and to assist in the identification and apprehension of persons who commit such acts." It includes no mention of cybersecurity. The Bank Service Company Act of 1962 authorizes the Fed, FDIC, and OCC to regulate and examine companies that provide certain services to banks (i.e., "check and deposit sorting and posting, computation and posting of interest and other credits and charges, preparation and mailing of checks, statements, notices, and similar items, or any other clerical, bookkeeping, accounting, statistical, or similar functions performed for a depository institution"). Many small banks outsource some or all of these activities. Relying on its general powers under the Federal Credit Union Act, the NCUA issued a similar regulation which requires federally insured credit unions to "develop a written security program." The Health Insurance Portability and Accountability Act of 1996 (HIPAA), as amended by the Health Information Technology for Economic and Clinical Health Act of 2009 (HITECH), creates national standards for health care providers, health insurance plans, health care clearinghouses, and their business associates to comply with privacy and security requirements for paper and electronic medical records. It requires covered entities, some of which may be providing financial services for health care providers, to provide notification through first-class mail or email to individuals affected by a data breach. It also requires covered entities to notify the Secretary of the Department of Health and Human Services of breaches affecting 500 or more individuals; smaller breaches must be reported to the Secretary annually. Currently, one presidential directive and two executive orders address the critical role of financial services in the national economy. First, Presidential Policy Directive 21 (PPD-21), "Critical Infrastructure Security and Resilience," issued on February 12, 2013, revoked Homeland Security Presidential Directive 7 (HSPD-7). It identified the current 16 critical infrastructure sectors, including financial services, and designated the Department of the Treasury as the sector-specific agency. PPD-21 set out three "strategic imperatives" as follows: 1. refine and clarify functional relationships across the federal government to advance the national unity of effort to strengthen critical infrastructure security and resilience, 2. enable efficient information exchange by identifying baseline data and systems requirements for the federal government, and 3. implement an integration and analysis function to inform planning and operational decisions regarding critical infrastructure. Second, Executive Order 13636, "Improving Critical Infrastructure Cybersecurity," was issued on February 12, 2013. It ordered the National Institute of Standards and Technology (NIST) to develop a baseline cybersecurity framework that could be voluntarily adopted by the critical infrastructure sectors, including financial services. Additionally, as a sector-specific agency, Treasury was directed to consult with the Department of Homeland Security, Office of Management and Budget, and the National Security Staff to determine if existing cybersecurity regulations should be modified considering current and projected risks. Third, Executive Order 13681, "Improving the Security of Consumer Financial Transactions," was issued on October 17, 2014. It directed federal agencies to improve the cybersecurity of their consumer financial transactions by purchasing chip and PIN payment terminals and by issuing chip and PIN payment cards for official purchases. Chip and PIN is generally considered more secure than the chip and signature system being adopted by private sector. The additional security is effective only if both payment terminals and payment cards have PINs. Except for official government payment cards, most new payment cards issued in the United States lack PINs. In addition to the array of federal laws, financial institutions might be subject to state consumer protection data security laws. It is more likely that such a law will be held to apply to federally insured state-chartered banks and to other financial institutions organized under state law. Moreover, state requirements are likely to apply to insurance companies and to other financial firms that are not comprehensively regulated by the federal government, including industrial loan companies, payday lenders, check cashers, finance companies, and mortgage loan originators. There are also state securities laws and regulation, generally covering securities not publicly traded and registration and reporting of broker-dealers and stock brokers. It is beyond the scope of this report to discuss state regulation of financial services. The Conference of State Bank Supervisors (CSBS) is a central source for information on state banking regulation. The website of the North American Association of Securities Administrators is a useful source for information about state securities regulations, including registration and reporting requirements regarding broker-dealers. Although there are at least two data breach bills in the 114 th Congress— H.R. 2205 , the Data Security Act of 2015, reported out of the Committee on Financial Services, and S. 961 , the Data Security Act of 2115, referred to the Committee on Commerce, Science, and Transportation—currently, there is no federal law that requires financial institutions to notify their customers of data breaches. However, the overwhelming majority of the states have enacted laws requiring consumer notification of data breaches compromising PII. According to the National Conference of State Legislatures (NCSL), 47 states plus the District of Columbia, Puerto Rico, Guam, and the Virgin Islands have data breach notification laws that in general affect financial services within the individual jurisdictions. State, commonwealth, and territorial laws define what information and how many records trigger notification requirements. Many of these laws differ in how and when consumers are to be notified. Because Wall Street and many related financial activities are located in New York City, New York State law has notable influence over the national and international financial system. The New York State Department of Financial Services (DFS) lists of over 35 separate types of financial institutions which it regulates. Among them are banks; insurance companies; credit unions; investment companies; bank holding companies; foreign bank agencies, branches, and representative offices; trusts; mortgage brokers and mortgage bankers; licensed lenders; check cashers, charitable foundations, and service contract providers; and budget planners, money transmitters, and bail bond agents. DFS has issued a number of reports on cybersecurity. It has expanded its examinations in the areas of cybersecurity and third-party service providers (including third-party information technology providers). DFS has announced its intention to look more closely at cybersecurity policies and procedures, including third-party service provider management, multi-factor authentication, the role of the chief information security officer, application security, cybersecurity, personnel, auditing, and notifications to DFS of cybersecurity incidents. On November 9, 2015, DFS mentioned that it is considering proposing cybersecurity regulations for financial institutions, outlined the "key regulatory proposals," and invited feedback from state and federal regulators on how "to develop a comprehensive approach to cyber security regulation in the weeks and months ahead." The Payment Card Industry's Security Standards Council, founded in 2006 by American Express, Discover, JCB International, MasterCard, and Visa Inc., develops, maintains, and updates Payment Card Industry Data Security Standards (PCI DSS). According to the Council, [m]aintaining payment security is required for all entities that store, process or transmit cardholder data. Guidance for maintaining payment security is provided in PCI security standards. These set the technical and operational requirements for organizations accepting or processing payment transactions, and for software developers and manufacturers of applications and devices used in those transactions. Banks issuing credit and debit cards, merchants accepting such cards, and others processing transactions involving card payments are subject to contractual obligations to comply with PCI DSS standards addressing data security. The 2015 version of the PCI DSS Standard for assessing security procedures runs 115 pages and "comprises a minimum set of requirements for protecting account data [but] does not supersede local or regional laws, government regulations, or other legal requirements." Among the "high level standards" are the following: Do not use default passwords. Encrypt cardholder data when transmitted over open, public networks. Track and monitor all access to network resources and cardholder data. Regularly test security systems and processes. Independent qualified security assessors are used to assess compliance with PCI DSS in most cases. The rules are enforced by a series of contracts. One group of contracts is between a card brand, such as MasterCard, Visa, or American Express, and the banks that issue the payment cards or process payments. Another group of contracts is between these banks and those accepting the payment cards such as retailers and hotels. Since all of these contracts are private business transactions, relatively little is known about the terms. An exception to this occurs when the parties contest certain provisions in court. For example, in the litigation resulting from the Target data breach of 2013, the parties introduced some of these provisions into evidence. Oversight of financial services cybersecurity reflects a complex and sometimes overlapping array of state and federal laws, regulators, regulations, and guidance. Cybersecurity is a critical component of protecting the vital services to the economy provided by the financial sector. Maintaining the confidentiality, security, and integrity of the data held by financial institutions is critical to sustaining the level of trust which allows businesses and consumers to rely on the financial services industry to supply services on which they depend. In recognition of the importance of the information systems that support financial services, regulators have increasingly devoted attention to cybersecurity concerns by issuing regulations and various forms of guidance. As discussed herein, the federal government's oversight of the financial sector includes cybersecurity and involves at least four separate types of oversight and specific encouragement of voluntary cooperation. Depository institutions are subjected to comprehensive prudential regulation and supervision for safety and soundness. The federal securities regulators, who administer a regime that mandates disclosure of material information by publicly traded companies, oversee the major components of the securities industry by means of a system of self-regulation. This consists of an array of SROs, such as the national securities exchanges and securities associations registered with the SEC. Some federal agencies are charged with specific aspects of consumer protections that apply to products of the financial services industry. Some federal laws, which apply broadly, require financial institutions to safeguard information. Both Congress, with the enactment of the Consolidated Appropriations Act of 2016, and the executive branch, pursuant to a series of executive orders, are encouraging voluntary cooperation among owners and operators of critical infrastructure, including financial services providers, to implement cybersecurity practices and procedures best suited to safeguard the information that they hold which is critical to U.S. national security. There is every indication that there will be increased attention to cybersecurity at both the federal and state levels.
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Multiple federal and state regulators oversee companies in the financial services industry. Regulatory authority is often directed at particular functions or financial services activities rather than at particular entities or companies. It is, therefore, likely that a financial services company with multiple product lines—deposits, securities, insurance—will find that it must answer to different regulators with respect to particular aspects of its operations. Five federal agencies oversee depository institutions, two regulate securities, several agencies have discrete authority over various segments of the financial sector, and several self-regulatory organizations monitor entities in the securities business. Federal banking regulators (the Office of the Comptroller of the Currency, the Federal Reserve, and the Federal Deposit Insurance Corporation) are required to promulgate safety and soundness standards for all federally insured depository institutions to protect the stability of the nation's banking system. Some of these standards pertain to cybersecurity issues, including information security, data breaches, and destruction or theft of business records. The federal securities regulators (the Securities and Exchange Commission and the Commodity Futures Trading Commission) have asserted authority over various aspects of cybersecurity in securities markets and those who trade in them. This includes requiring publicly traded financial and nonfinancial corporations to file annual and quarterly reports that provide investors with material information, a category which could include information about cybersecurity risks or breaches. In addition, overseeing the securities industry are certain self-regulatory organizations—private organizations empowered by law or regulation to create and enforce industry rules, including those covering cybersecurity. These include the Financial Industry Regulatory Authority, which protects investors and oversees stock exchanges and those who trade on them. The National Futures Association has a similar role for U.S. futures exchanges and in the retail foreign exchange market. The Consumer Financial Protection Bureau issues and enforces federal consumer financial protection regulations, and it has certain consumer financial protection supervisory authority over depositories and consumer finance companies not otherwise federally regulated. The Federal Trade Commission has asserted authority over certain consumer finance operations of nonfinancial companies such as retailers and hotels. The basic authority that the federal regulators use to establish cybersecurity standards emanates from the organic legislation that established them and delineated the scope of their authority and functions. In addition, certain other laws such as the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the Gramm-Leach-Bliley Act of 1999, and the Sarbanes-Oxley Act of 2002 include provisions affecting cybersecurity of financial services. Moreover, two executive orders address the critical role of financial services in the national economy. Complementing the laws and regulations, the regulators issue guidance under a variety of names, such as policy statements, supervision and regulatory letters, financial institution letters, bulletins, and other forms of communications. Not all regulation (or cybersecurity regulation) is done at the federal level. State governments charter and regulate state banks and all insurance companies. State securities regulators oversee securities sold within their state, and many states have laws requiring consumer notification of financial data breaches. In addition, New York State has taken advantage of the fact that the nation's financial center, Wall Street, is located in the state to be very active in certain aspects of cybersecurity regulation. This report focuses on federal laws, regulations, and executive orders.
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"In the United States, the prevailing litigant is ordinarily not entitled to collect a reasonable attorneys' fee from the loser." Alyeska Pipeline Service Co. v. Wilderness Society , 421 U.S. 240, 247 (1975). This is known as the "American rule" (as opposed to the English rule, which routinely permits fee-shifting) and derives from court-made law. It has, however, numerous statutory exceptions (listed at the back of this report), some if not most of which Congress enacted in order to encourage private litigation to implement public policy. Id . at 263. Under these exceptions, a federal court (and sometimes a federal agency) may order the losing party to a lawsuit to pay the winning party's attorneys' fees. Although "attorney's fees generally are not a recoverable cost of litigation 'absent explicit congressional authorization,' ... [t]he absence of specific reference to attorney's fees is not dispositive if the statute otherwise evinces an intent to provide for such fees." Fee-shifting has been proposed, not only to encourage lawsuits, but to discourage them, especially tort suits. The English "loser pays" rule was included in tort reform legislation proposed by the Bush Administration in 1992, and in "The Common Sense Legal Reforms Act," which is part of the "Contract With America" proposed by the Republican House Members in 1994. The American rule has two major common law exceptions (instances when federal courts may award attorneys' fees without statutory authorization): the common benefit doctrine and the bad faith doctrine. These derive from the historic authority of the courts "to do equity in a particular situation." This authority has been called the "supervisory" or "inherent" power of the federal courts. Federal courts may use this inherent power even in diversity cases, which are cases arising under state law that are brought in federal court pursuant to 28 U.S.C. § 1332 when the parties are citizens of different states and the amount in controversy exceeds $50,000. Chambers v. NASCO, Inc. , 501 U.S. 32 (1991). In Alyeska , the Court had written that, "in the ordinary diversity case where the state law does not run counter to a valid federal statute or rule of court, and usually it will not, state law denying the right to attorney's fees or giving right thereto, which reflects a substantial policy of the state, should be followed." 421 U.S. at 259 n.31. In Chambers , the Court explained that this limitation "applies only to fee-shifting rules that embody a substantive policy, such as a statute which permits a prevailing party in certain classes of litigation to recover fees." 501 U.S. at 52. A substantive policy of the state is not "implicated by the assessment of attorney's fees as a sanction for bad-faith conduct before the court which involved disobedience of the court's orders and the attempt to defraud the court itself." Id . at 52-53. Common law exceptions to the American rule are "unquestionably assertions of inherent power in the courts to allow attorneys' fees in particular situations, unless forbidden by Congress." Alyeska , 421 U.S. at 259. The two major exceptions are cases in which a party at its own expense creates a fund or achieves a substantial benefit in which others share, and cases in which a party acts in bad faith. A former third exception, cases in which a plaintiff acts as a "private attorney general" in effectuating important public policy, was eliminated by the Supreme Court in Alyeska . "In the absence of a statutory prohibition, the federal courts have authority to award attorneys' fees from a fund to a party who, having a common interest with other persons, maintains a suit for the common benefit and at his own expense, resulting in the creation or preservation of a fund, in which all those having the common interest share." Annotation, 8 L.Ed.2d 894, 905 (1963). This exception to the American rule does not shift the cost of attorneys' fees to the losing party, but rather to those who benefit from the suit. The doctrine was originally conceived in Trustees v. Greenough , 105 U.S. 527 (1881), a case against trustees of 10 million or 11 million acres of land who had collusively sold hundreds of thousands of those acres at nominal prices. One beneficiary, after 11 years of litigation at his own expense, recaptured the assets and presented a claim for reimbursement of attorneys' fees. The Supreme Court approved the award, writing that "if the complainant is not a trustee, he has at least acted the part of a trustee in relation to the common interest." Id. at 532. In Mills v. Electric Auto-Lite Co. , 396 U.S. 375, 392 (1970), the Supreme Court held that under the common benefit doctrine there is no requirement "that the suit actually bring money into the court as a prerequisite to the court's power to order reimbursement of expenses." Mills was a stockholders' derivative suit, a type of case which, the Court noted, may bring substantial non-pecuniary benefits. Boeing Co. v. Van Gemert , 444 U.S. 472 (1980), was a successful class action in which over $3 million in damages were awarded. Some class members collected their shares of the damages, but others did not. The district court, invoking the common benefit doctrine, ordered that the plaintiffs' attorneys be awarded their fees from the total amount of the judgment, concluding that it was equitable for all class members—claiming and non-claiming alike—to bear a pro rata share of the costs of producing the judgment in their favor. The defendant objected to use of the unclaimed money for this purpose, arguing that the ultimate disposition of the unclaimed money had not been decided. But the Supreme Court affirmed the award of attorneys' fees, holding: The common-fund doctrine, as applied in this case, is entirely consistent with the American rule against taxing the losing party with the victor's attorney's fees.... Boeing presently has no interest in any part of the fund. Any right that Boeing may establish to the return of the money eventually claimed is contingent on the failure of the absentee class members to exercise their present rights of possession. Although Boeing itself cannot be obliged to pay fees awarded to the class lawyers, its latent claim against unclaimed money in the judgment fund may not defeat each class member's equitable obligation to share the expenses of litigation. Id. at 481-482. In Hall v. Cole , 412 U.S. 1, 5 (1973), the Supreme Court wrote: [I]t is unquestioned that a federal court may award counsel fees to a successful party when his opponent has acted 'in bad faith, vexatiously, wantonly, or for oppressive reasons.... ' In this class of cases, the underlying rationale of 'fee shifting' is, of course, punitive, and the essential element in triggering the award of fees is therefore the existence of 'bad faith' on the part of the unsuccessful litigant. A fee award under the bad faith exception requires subjective bad faith—"some proof of malice entirely apart from inferences arising from the possible frivolous character of a particular claim." Copeland v. Martinez , 603 F.2d 981, 991 (D.C. Cir. 1979), cert. denied , 444 U.S. 1044 (1980). In Hall v. Cole , the Supreme Court wrote: "It is clear ... that 'bad faith' may be found, not only in the actions that led to the lawsuit, but in the conduct of the litigation." 412 U.S. at 15. Subsequently, as another court wrote: "Federal courts have applied [the bad faith] exception both when bad faith occurred in connection with the litigation and when it was an aspect of the conduct that gave rise to the lawsuit." However, some courts have refused to apply the bad faith exception to a party's underlying claim, noting that the Supreme Court's statement in Hall v. Cole had concerned the common benefit exception, not the bad faith exception. An attorney, as well as a party, who acts in bad faith may be ordered to pay the attorneys' fees of the opposing party. In Roadway Express, Inc. v. Piper , 447 U.S. 752, 765-767 (1980), the Supreme Court held: [I]n narrowly defined circumstances federal courts have inherent power to assess attorney's fees against counsel. . . . The power of a court over members of its bar is at least as great as its authority over litigants. If a court may tax counsel fees against a party who litigated in bad faith, it certainly may assess those expenses against counsel who willfully abuse judicial processes.... Like other sanctions, attorney's fees certainly should not be assessed lightly or without fair notice and an opportunity for a hearing on the record. But in a proper case, such sanctions are within a court's powers. In Durrett v. Jenkins Brickyard, Inc. , 678 F.2d 911, 919 (11 th Cir. 1982), the court held "that the Court in Roadway Express intended to authorize the assessment of attorney's fees against counsel who either willfully disobeyed a court order or acted in bad faith, vexatiously, wantonly, or for oppressive reasons." In Roadway Express , the Supreme Court also noted that, under Federal Rule of Civil Procedure 37(b), "[b]oth parties and counsel may be held personally liable for expenses, 'including attorney's fees,' caused by the failure to comply with discovery orders." 447 U.S. at 763. The Court also found that only excess costs, not attorneys' fees, could be assessed under 28 U.S.C. § 1927, which provided that any attorney "who so multiplies the proceedings in any case so as to increase costs unreasonably and vexatiously may be required by the courts to satisfy personally such excess costs." However, the section soon after was amended by P.L. 96-349 , § 3, to permit awards of attorneys' fees as well as excess costs against counsel. The private attorney general doctrine provides that a plaintiff "should be awarded attorneys' fees when he has effectuated a strong Congressional policy which has benefited a large class of people, and where further the necessity and financial burden of private enforcement are such as to make the award essential." Many of the statutory exceptions to the American rule are based on this concept. In Newman v. Piggie Park Enterprises, Inc. , 390 U.S. 400, 402 (1968), the Supreme Court, discussing one such exception, wrote: If successful plaintiffs were routinely forced to bear their own attorneys' fees, few aggrieved parties would be in a position to advance the public interest by invoking the injunctive power of the federal courts. Congress therefore enacted the provision for counsel fees ... to encourage individuals injured by racial discrimination to seek judicial relief under Title II [42 U.S.C. § 2000a-3(b)]. Prior to the Supreme Court's decision in Alyeska , some lower federal courts had awarded attorneys' fees under the private attorney general doctrine in suits brought under statutes that had no fee-shifting provisions, thereby creating another court-made exception to the American rule. Alyeska at 270 n.46. In Alyeska , however, the Court held: [C]ongressional utilization of the private attorney general concept can in no sense be construed as a grant of authority to the Judiciary to jettison the traditional rule against non-statutory allowances to the prevailing party and to award attorneys' fees whenever the court deems the public policy furthered by a particular statute important enough to warrant the award. 421 U.S. at 263. The primary reasons the Court gave for its decision were the difficulty "for the courts without legislative guidance to consider some statutes important and some unimportant" and the fact that "the rational application of the private-attorney-general rule would immediately collide with the express provision of 28 U.S.C. § 2412," which at the time prohibited fee awards against the United States, except when specifically permitted by statute. Id. at 263-266. Congress's immediate response to Alyeska was enactment of the Civil Rights Attorney's Fees Awards Act of 1976, 42 U.S.C. § 1988(b), which is discussed below. Congress has since enacted many more statutes that authorize awards of attorneys' fees in specific situations, but it has not reversed Alyeska to grant courts the power to award attorneys fees to private attorneys general in cases brought under statutes that do not provide for fee-shifting. Awards of attorneys' fees against the United States were barred at common law not only because of the American rule, but also because of the doctrine of sovereign immunity, under which the United States may not be sued, nor its funds expended, without its consent. "Congress alone has the power to waive or qualify that immunity," and it did so, with respect to awards of attorneys' fees, with the Equal Access to Justice Act (EAJA) in 1980. Prior to enactment of EAJA, the common law exceptions to the American rule were inapplicable against the United States. Even statutory exceptions to the American rule were inapplicable against the United States unless they specifically authorized fee awards against the United States. EAJA allows awards of attorneys' fees against the United States in two broad situations. The first, codified at 28 U.S.C. § 2412(b), makes the United States liable for the prevailing party's attorneys' fees to the same extent that any other party would be under the common law and statutory exceptions to the American rule, including the statutory exceptions that do not specifically authorize fee awards against the United States. This provision, unlike the rest of EAJA, contains no limitations on the assets or number of employees of parties eligible to recover fees, and no maximum hourly rate for fee awards. The second broad situation in which EAJA authorizes fee awards against the United States is codified at 5 U.S.C. § 504 and 28 U.S.C. § 2412(d). These sections provide that, in specified agency adjudications and in all civil actions (except tort actions and tax cases) brought by or against the United States, the United States shall be liable for the attorneys' fees of prevailing parties, unless it proves that its position was substantially justified or that special circumstances make an award unjust. This second portion of EAJA contains two limitations on fee awards that are not found in § 2412(b). First, it prescribes a fee cap unless the court or agency determines that a special factor justifies a higher fee. (Most fee statutes authorize awards of "reasonable" fees, with the court determining the amount.) The cap was originally $75 per hour, but P.L. 104-121 , §§ 231-233, increased it to $125 per hour for cases commenced on or after the date of its enactment, which was March 29, 1996. Second, this portion of EAJA does not allow (with two exceptions) fees to be awarded to individuals whose net worth exceeds $2 million, or to businesses or organizations, including units of local government, with a net worth exceeding $7 million or more than 500 employees. This portion of EAJA sunset, by the terms of the original Act, on October 1, 1984. In 1985, EAJA was reenacted, retroactive to October 1, 1984, and made permanent. P.L. 104-121 , in addition to raising the cap under EAJA to $125 per hour, added the following provision to 28 U.S.C. § 2412(d), and a corresponding one to 5 U.S.C. § 504 applicable to adversary adjudications: If, in a civil action brought by the United States or a proceeding for judicial review of an adversary adjudication described in section 504(a)(4) of title 5, the demand by the United States [other than a recitation of the maximum statutory penalty] is substantially in excess of the judgment finally obtained by the United States and is unreasonable when compared with such judgment, under the facts and circumstances of the case, the court shall award to the party the fees and other expenses related to defending against the excessive demand, unless the party has committed a willful violation of law or otherwise acted in bad faith, or special circumstances make an award unjust. Fees and expenses awarded under this paragraph shall be paid only as a consequence of appropriations provided in advance. This provision thus authorizes fee awards in favor of losing parties and in that respect is unique in the law of attorneys' fees. In Pierce v. Underwood , 487 U.S. 552 (1988), the Supreme Court decided three issues concerning EAJA: (1) the applicable standard of appellate review, (2) the meaning of "substantially justified," and (3) the "special factors" that allow a court to award more than $75 per hour. (1) Standard of Review . Pierce v. Underwood addressed the standard that a federal court of appeals applies in reviewing a decision of a federal district court under EAJA. Either party may appeal a district court's decision under EAJA, and, as the Supreme Court explained: For purposes of standard of review, decisions by judges are traditionally divided into three categories, denominated questions of law (reviewable de novo ), questions of fact (reviewable for clear error), and matters of discretion (reviewable for "abuse of discretion"). 487 U.S. at 558. The Supreme Court found that EAJA did not provide a clear prescription as to the appropriate standard of review (unlike, for example, 42 U.S.C. § 1988(b), which provides that "the court, in its discretion, may allow the prevailing party ... a reasonable attorney's fee"). The Court, therefore, for a variety of reasons, held that the "abuse of discretion" standard was most appropriate for appeals of EAJA court decisions. Awards of attorneys' fees under EAJA at the agency level may be appealed to a court only by the prevailing party, not by the United States. The statute, at 5 U.S.C. § 504(c)(2), provides: The court's determination on any appeal heard under this paragraph shall be based solely on the factual record made before the agency. The court may modify the determination of fees and other expenses only if the court finds that the failure to make an award of fees and other expenses, or the calculation of the amount of the award, was unsupported by substantial evidence. Prior to the 1985 amendments to EAJA, this provision stated that the court could modify an agency decision only if it found "an abuse of discretion." It was intended that the new standard—"unsupported by substantial evidence"—permit "a broader scope of review ... consistent with the normal scope of judicial review of agency actions." (2) " substantially justified. " The United States may avoid liability for attorneys' fees under EAJA by proving that its position "was substantially justified or that special circumstances make an award unjust." 5 U.S.C. § 504(a)(1), 28 U.S.C. § 2412(d). The legislative history of the original EAJA stated that "[t]he test of whether the Government position is substantially justified is essentially one of reasonableness in law and fact." Twelve of the thirteen federal circuits subsequently interpreted "substantially justified" to mean reasonable. See , Pierce v. Underwood , 487 U.S. at 565-566. The U.S. Court of Appeals for the District of Columbia was the exception. It reasoned: The Senate Judiciary Committee considered and rejected an amendment to the bill that would have changed the pertinent language from "substantially justified" to "reasonably justified." S.Rept. 96-253 [96 th Cong., 1 st sess.] at 8. That refusal suggests that the test should, in fact, be slightly more stringent than "one of reasonableness." According to this view, the government's position may be reasonable, yet fail to be substantially justified, making it easier to recover fees under the substantially justified standard than under a reasonableness standard. The 1985 amendments to EAJA did not alter the text of the substantially justified language, but an accompanying committee report expressed support for the D.C. Circuit's interpretation: Several courts have held correctly that "substantial justification" means more than merely reasonable. Because in 1980 Congress rejected a standard of "reasonably justified" in favor of "substantially justified," the test must be more than just reasonableness. The Supreme Court in Pierce v. Underwood held that substantially justified means reasonable. The Court found that a "more than mere reasonableness" test would be "out of accord with prior usage" and "unadministerable." "Between the test of reasonableness," the Court wrote, "and a test such as 'clearly and convincingly justified' ... there is simply no accepted stopping-place, no ledge that can hold the anchor for steady and consistent judicial behavior." 487 U.S. at 568. The Court found that the 1985 committee report was not controlling because it was neither "(1) an authoritative interpretation of what the 1980 statute meant, or (2) an authoritative expression of what the 1985 Congress intended." Id. at 566. (3) Exceeding $75 (now $125) per hour. EAJA provides that fees "shall be based upon prevailing market rates for the kind and quality of the services furnished," but "shall not be awarded in excess of $75 [$125 for cases commenced on or after March 29, 1996] per hour unless the court determines that an increase in the cost of living or a special factor, such as the limited availability of qualified attorneys for the proceedings involved, justifies a higher fee." 28 U.S.C. § 2412(d)(2)(A)(ii). (The same cap applies in agency proceedings; see , 5 U.S.C. § 504(b)(1)(A)). The Court in Pierce v. Underwood held: If "the limited availability of qualified attorneys for the proceedings involved" meant merely that lawyers skilled and experienced enough to try the case are in short supply, it would effectively eliminate the $75 cap—since the "prevailing market rates for the kind and quality of the services furnished" are obviously determined by the relative supply and quality of services.... We think it refers to attorneys having some distinctive knowledge or specialized skill needful for the litigation in question—as opposed to an extraordinary level of the general lawyerly knowledge and ability useful in all litigation. Examples of the former would be an identifiable practice specialty such as patent law, or knowledge of foreign law or language. 487 U.S. at 571-572. As for other "special factors," the Court wrote: For the same reason of the need to preserve the intended effectiveness of the $75 cap, we think the other "special factors" envisioned by the exception must be such as are not of broad and general application. We need not specify what they might be.... Id . at 573. The Court, however, specified some items which are not special factors for purposes of exceeding the $75 per hour cap: "the novelty and difficulty of issues," "the undesirability of the case," "the work and ability of counsel," "the results obtained," "customary fees and awards in other cases," and "the contingent nature of the fee." All these "are factors applicable to a broad spectrum of litigation; they are little more than routine reasons why market rates are what they are." Id . In Commissioner, Immigration and Naturalization Service v. Jean , 496 U.S. 154 (1990), the Supreme Court held that, under EAJA, a prevailing party may recover attorneys' fees for services rendered in seeking a fee award without regard to whether the position of the United States was substantially justified. If the prevailing party is entitled to fees in the main action, then he is automatically entitled to fees for the time spent seeking fees. To hold otherwise could "spawn a 'Kafkaesque judicial nightmare' of infinite litigation for the last round of litigation over fees." Id . at 163. In Scarborough v. Principi , 541 U.S. 401 (2004), the Supreme Court addressed EAJA's requirement that fee applications be filed "within thirty days of final judgment in the action," and "allege that the position of the United States was not substantially justified." 28 U.S.C. § 2412(d)(1)(B). The Court held that, when a fee application is filed within 30 days, but fails to allege that the position of the United States was not substantially justified, the application may be amended to remedy the oversight, even after the 30 days have elapsed. In Richlin Security Service Co. v. Chertoff , 128 S. Ct. 2007, 2019 (2008), the Supreme Court held that, under EAJA, "a prevailing party ... may recover its paralegal fees from the Government at prevailing market rates." The lower court, which the Supreme Court reversed, had held that the prevailing party could recover fees for paralegal services only at their cost to the party's attorney. Source of Fees Paid by the Government Both agency-awarded and court-awarded fees are "paid by the agency over which the party prevails from any funds made available to the agency by appropriation or otherwise." 5 U.S.C. § 504(d), 28 U.S.C. § 2412(d)(4). Fee awards under 28 U.S.C. § 2412(b) are presumably paid from the source that pays damages awarded under the statute that authorizes fee awards. Formerly Required Annual Reports to Congress With respect to agency-awarded fees, the EAJA provides, "The Chairman of the Administrative Conference of the United States, after consultation with the Chief Counsel for Advocacy of the Small Business Administration, shall report annually to the Congress on the amount of fees and other expenses awarded during the preceding fiscal year pursuant to this section." 5 U.S.C. § 504(e). This provision remains on the books, but it has no effect because the Administrative Conference of the United States has not been functioning since 1996. With respect to court-awarded fees, the EAJA formerly provided, "The Attorney General shall report annually to the Congress on the amount of fees and other expenses awarded during the preceding fiscal year pursuant to this subsection." 28 U.S.C. § 2412(d)(5). This provision was repealed by P.L. 104-66 , § 1091(b) (1995). Most federal fee-shifting provisions authorize courts to award fees if "the fee claimant was the 'prevailing party,' the 'substantially prevailing party,' or 'successful.'" Ruckelshaus v. Sierra Club , 463 U.S. 680, 684 (1983). Although most of these statutes on their face do not distinguish between prevailing plaintiffs and prevailing defendants, the Supreme Court has held that Congress intended that under the civil rights statutes a dual standard should be applied in determining the appropriateness of fee awards to prevailing plaintiffs and prevailing defendants. In Newman v. Piggie Park Enterprises, Inc. , 390 U.S. 400 (1968), the Court considered 42 U.S.C. § 2000a-3(b), the provision in Title II of the Civil Rights Act of 1964 that provides for discretionary fee awards to prevailing parties. Noting that a plaintiff who is successful in a Title II suit vindicates "a policy that Congress considered of the highest priority"—enjoining racial discrimination—the Court held that under Title II a successful plaintiff "should ordinarily recover an attorney's fee unless special circumstances would render an award unjust." Id . at 402. In Albemarle Paper Co. v. Moody , 422 U.S. 405 (1975), the Court held that the Piggie Park standard of awarding attorneys' fees to a successful plaintiff is equally applicable under Title VII of the Civil Rights Act, 42 U.S.C. § 2000e-5(k). In Christiansburg Garment Co. v. Equal Employment Opportunity Commission , 434 U.S. 412, 417 (1978), the Court was faced with the question "what standard should inform a district court's discretion in deciding whether to award attorney's fees to a successful defendant in a Title VII action?" The Court noted that the statute on its face provided "no indication whatever of the circumstances under which either a plaintiff or defendant should be entitled to attorney's fees," and found that there are "strong equitable considerations" counseling a dual standard in determining the appropriateness of fee awards in the two situations. Id . at 418. Although prevailing plaintiffs should ordinarily recover attorneys' fees unless special circumstances would render an award unjust, prevailing defendants should recover fees only upon a finding that a plaintiff's action was "frivolous, unreasonable, or without foundation," although a finding that the action was brought in subjective bad faith is not necessary. Id . at 421. (A finding of subjective bad faith entitles either prevailing plaintiffs or defendants to a fee award under the common law exception to the American rule.) The reason for the dual standard "is that while Congress wanted to clear the way for suits to be brought under the Act, it also wanted to protect defendants from burdensome litigation having no legal or factual basis." Id . at 420. Awarding fees to prevailing plaintiffs in the ordinary case will encourage suits to vindicate the public interest, but awarding fees to defendants in the ordinary case might have a chilling effect on the institution of such suits. Awarding fees to defendants in frivolous cases, however, may discourage such suits. In Hughes v. Rowe , 449 U.S. 5, 14 (1980), the Supreme Court discussed the applicability of the Christiansburg standard for awards of attorneys' fees to prevailing defendants under the Civil Rights Attorney's Fees Awards Act of 1976, 42 U.S.C. § 1988(b): Although arguably a different standard might be applied in a civil rights action under 42 U.S.C. § 1983, we can perceive no reason for applying a less stringent standard. The plaintiff's action must be meritless in the sense that it is groundless or without foundation. The fact that a plaintiff may ultimately lose his case is not in itself a sufficient justification for the assessment of fees. With respect to awards under § 1988(b) to prevailing plaintiffs, the court of appeals in Brown v. Culpepper , 559 F.2d 274, 278 (5 th Cir. 1977), wrote: In Title II and Title VII [of the Civil Rights Act of 1964] cases the Fifth Circuit has held that the defendant's conduct, be it negligent or intentional, in good faith or bad, is irrelevant to an award of attorneys' fees [citations omitted]. We now hold that, consistent with congressional intent, the same standard should apply to section 1988. In Independent Federation of Flight Attendants v. Zipes , 491 U.S. 754, 755, 761 (1989), the Supreme Court held that, under Title VII of the Civil Rights Act of 1964, a court may "award attorney's fees against intervenors who have not been found to have violated the Civil Rights Act or any other federal law ... only where the intervenors' action was frivolous, unreasonable, or without foundation." The dual standard has also been held applicable to the attorneys' fees provisions in federal environmental statutes and under the Truth in Lending Act. However, it apparently is "more difficult for an environmental plaintiff than a civil rights plaintiff to recover an attorney fee." The Supreme Court has held that the dual standard does not apply under the attorneys' fees provision of the Copyright Act, 17 U.S.C. § 505, which, like those of the civil rights statutes, does not distinguish on its face between plaintiffs and defendants. In Fantasy, Inc. v. Fogerty , 510 U.S. 717, 527 (1994), the Court held that, in contrast with the civil rights statutes, under the Copyright Act, "defendants who seek to advance a variety of meritorious copyright defenses should be encouraged to litigate them to the same extent that plaintiffs are encouraged to litigate meritorious claims of infringement." The Court rejected both the dual standard and "the British Rule for automatic recovery of attorney's fees by the prevailing party. Prevailing plaintiffs and prevailing defendants are to be treated alike, but attorney's fees are to be awarded to prevailing parties only as a matter of the court's discretion." Id . at 534. "The touchstone of the prevailing party inquiry must be the material alteration of the legal relationship of the parties in a manner which Congress sought to promote in the fee statute." This language was quoted in Sole v. Wyner , 127 S. Ct. 2188, 2194 (2007), which held that, under 42 U.S.C. § 1988(b), a plaintiff who secures a preliminary injunction, but then loses on the merits, has gained no enduring change in the legal relationship between herself and the state officials she sued, and therefore is not entitled to an award of attorneys' fees. The Court expressed no view, however, "on whether, in the absence of a final decision on the merits of a claim for permanent injunctive relief, success in gaining a preliminary injunction may sometimes warrant an award of counsel fees." Id . at 2196. But "nearly every Court of Appeals to have addressed the issue has held that relief obtained via a preliminary injunction can, under appropriate circumstances, render a party 'prevailing.'" In Hewitt v. Helms , 482 U.S. 755, 760 (1987), the Supreme Court noted that a plaintiff must "receive at least some relief on the merits of his claim before he can be said to prevail." Thus, it held in that case that, under 42 U.S.C. § 1988(b), a plaintiff was not entitled to a fee award where "[t]he most that he obtained was an interlocutory ruling [by a court of appeals] that his complaint should not have been dismissed for failure to state a constitutional claim." The court of appeals had "explicitly left it to the District Court 'to determine the appropriateness and availability of the requested relief'... ; the Court of Appeals granted no relief of its own, declaratory or otherwise." Id. A "prevailing party," however, is not limited to a victor only after entry of a final judgment following a full trial on the merits. "The fact that respondent prevailed through a settlement rather than through litigation does not weaken her claim to fees." Maher v. Gagne , 448 U.S. 122, 129 (1980). Permitting fee awards upon favorable settlements encourages prevailing parties to settle, thereby lessening docket congestion, and it prevents losing parties from escaping liability for fees merely by conceding cases before final judgment. The simplest means of providing for an award is through a stipulation in the settlement that a particular party has prevailed and that a specified amount constitutes reasonable attorneys' fees. It has been held that, in settled cases in which courts are called upon to determine entitlement to attorneys' fees, judges should engage in "a close scrutiny of the totality of circumstances surrounding the settlement, focusing particularly on the necessity for bringing the action and whether the party is the successful party with respect to the central issue." Use of this standard will prevent fee awards in "nuisance settlements." In Buckhannon Board & Care Home, Inc. v. West Virginia Department of Health and Human Resources , the Supreme Court held that a party is not a "prevailing party" under federal fee-shifting statutes if it "has failed to secure a judgment on the merits or a court-ordered consent decree, but has nonetheless achieved the desired result because the lawsuit brought about a voluntary change in the defendant's conduct." Prior to this decision, most federal courts of appeals had recognized the "catalyst theory" and awarded fees in such circumstances. In cases that are litigated to conclusion, a party may be deemed to have prevailed for purposes of a fee award prior to the losing party's having exhausted its final appeal. However, a party that prevails at the trial level will ultimately be entitled to a fee award only if it finally prevails on appeal. A party awarded fees upon prevailing at the trial level apparently may be precluded from collecting them pending appeal; Federal Rule of Civil Procedure 62 (28 U.S.C. App. Rule 62) provides for a stay of proceedings to enforce a judgment pending appeal. If a party that prevails at the trial level should collect a fee award and subsequently lose the case on appeal, it apparently would be obligated to return the money. A party may also be deemed to have prevailed even before final disposition at the trial level. In Bradley v. Richmond School Board , 416 U.S. 696, 723 (1974), the Supreme Court wrote: To delay a fee award until the entire litigation is concluded would work a substantial hardship on plaintiffs and their counsel, and discourage the institution of actions.... A district court must have the discretion to award fees and costs incident to the final disposition of interim matters. At what stage of the litigation may a party be entitled to an interim award? In Bradley the Court would: say only that the entry of any order that determines substantial rights of the parties may be an appropriate occasion upon which to consider the propriety of an award of counsel fees.... Id. at 723 n.28. In Bradley , the statute under which fees were awarded, 20 U.S.C. § 1617 (since repealed), permitted awards only "[u]pon entry of a final order by a court of the United States." The Court, in allowing an interim award under this statute, noted that "many final orders may issue in the course of litigation." Id. at 723. In the case of a statute or common law rule that permits fee awards to prevailing parties but does not expressly make entry of a final order a prerequisite for such awards, fee awards may be appropriate at some stage of the litigation prior to entry of an interim final order. Some courts have required recipients of interim awards to post bonds to insure recovery of the awards and interest should the recipients ultimately lose. In Hanrahan v. Hampton , 446 U.S. 754 (1980), a district court had directed verdicts for the defendants, but the court of appeals had reversed and ordered a new trial. The court of appeals had also ordered the defendants, under the Civil Rights Attorney's Fees Awards Act of 1976, 42 U.S.C. § 1988(b), to pay the attorneys' fees incurred by the plaintiffs during the course of their appeal. The Supreme Court reversed the award of attorneys' fees on the ground that the plaintiffs were not "prevailing" parties as required by the statute as a condition for a fee award. The Court concluded that, under § 1988(b), although "a person may in some circumstances be a 'prevailing party' without having obtained a favorable 'final judgment following a full trial on the merits,'" a party must have "established his entitlement to some relief on the merits of his claims, either in the trial court or on appeal." Being granted the right to a new trial was not a victory on the merits; nor were any favorable procedural or evidentiary rulings victories on the merits, even though they may affect the disposition on the merits. In Rhodes v. Stewart , 488 U.S. 1, 4 (1988) (per curiam), the Supreme Court held that a declaratory judgment, like any other judgment, "will constitute relief, for purposes of § 1988(b), if, and only if, it affects the behavior of the defendant towards the plaintiff. In this case, there was no such result." In this case, two prisoners had sued prison officials for refusing to allow them to subscribe to a magazine. They won declaratory relief, but only after one had died and the other had been released from prison. In Ruckelshaus v. Sierra Club , 463 U.S 680, 694 (1983), the Supreme Court held that § 307(f) of the Clean Air Act, 42 U.S.C. § 7607(f), authorizes awards of attorneys' fees only to plaintiffs who have "some degree of success on the merits." This statute, as well as other federal environmental laws, provides: "In any judicial proceeding under this section, the court may award costs of litigation (including reasonable attorney and expert witness fees) whenever it determines that such an award is appropriate." On their face, these statutes allow fee awards even to parties who do not prevail, and, in the case under consideration, the court of appeals had awarded fees to such a party, holding that it was "appropriate" for it to receive fees for its contributions to the goals of the Clean Air Act. The Supreme Court acknowledged that the legislative history of the act stated that it was not intended that fee awards "should be restricted to cases in which the party seeking fees was the 'prevailing party.'" 463 U.S. at 687. The Court noted, however, that, prior to enactment of § 307(f), some courts had interpreted the phrase "prevailing party" in various fee-shifting statutes as limited to a party who prevailed "essentially" on "central issues." Id. at 688. When Congress said that awards under § 307(f) should not be restricted to prevailing parties, it meant, the Court held, merely to eliminate these restrictive readings of the phrase "prevailing party." Specifically, Congress meant only "to expand the class of parties eligible for fee awards from prevailing parties to partially prevailing parties —parties achieving some success , even if not major success" (emphasis supplied by Court). Id . In Hensley v. Eckerhart , 461 U.S. 424, 433 (1983), the Supreme Court noted that "plaintiffs may be considered 'prevailing parties' for attorney's fees purposes if they succeed on any significant issue in litigation which achieves some of the benefit the parties sought in bringing suit." However, if the plaintiffs achieve only some of the benefit, then they will not necessarily be entitled to a full award of attorneys' fees. The Court addressed the issue of whether, under 42 U.S.C. § 1988(b), "a partially prevailing plaintiff may recover an attorney's fee for legal services on unsuccessful claims." Id. at 426. The Court held: Where the plaintiff has failed to prevail on a claim that is distinct in all respects from his successful claims, the hours spent on the unsuccessful claim should be excluded in considering the amount of a reasonable fee. Where a lawsuit consists of related claims, a plaintiff who has won substantial relief should not have his attorney's fee reduced simply because the district court did not adopt each contention raised. But where the plaintiff achieved only limited success, the district court should award only that amount of fees that is reasonable in relation to the results obtained. Id . at 440. As for how to determine the amount of fees that is reasonable when the plaintiff achieves only limited success, the Court wrote: There is no precise rule or formula for making these determinations. The district court may attempt to identify specific hours that should be eliminated, or it may simply reduce the award to account for the limited success. The court necessarily has discretion in making this equitable judgment. Id . at 436-437. In Texas State Teachers Association v. Garland Independent School District , 489 U.S. 782, 791 (1989), the Supreme Court held that, under 42 U.S.C. § 1988(b), although a party must prevail on a "significant" issue in order to be eligible for a fee award, it need not prevail on the "central" issue in the litigation. "[T]he degree of the plaintiff's success in relation to the other goals of the lawsuit is a factor critical to the determination of the size of a reasonable fee, not to eligibility for a fee award at all." Id . at 790 (emphasis in original). In Farrar v. Hobby , 506 U.S. 103 (1992), the Supreme Court held that, under 42 U.S.C. § 1988(b), a plaintiff who is awarded only nominal damages—in this case one dollar when he had sought $17 million—is a prevailing party for attorneys' fees purposes. Nevertheless, "[w]hen a plaintiff recovers only nominal damages because of his failure to prove an essential element of his claim for monetary relief ... , the only reasonable fee is usually no fee at all." Id . at 115. In this case, the plaintiff had established "the violation of his right to procedural due process but cannot prove actual injury." Id . at 112. Consequently, although he was a "prevailing party," he was entitled to no award of attorneys' fees. Can a person receive an award of attorneys' fees for representing himself? In Kay v. Ehrler , 499 U.S. 432, 435 (1991), the Supreme Court noted that there is no disagreement "that a pro se litigant who is not a lawyer is not entitled to attorney's fees" under 42 U.S.C. § 1988(b). The question before the Court however was whether a pro se litigant who is an attorney is entitled to fees under § 1988(b). The Court found no answer in the statute or in its legislative history. It ruled against the attorney in an effort to create an incentive for attorneys not to represent themselves, because an attorney who represents himself "is deprived of the judgment of an independent third party." Id . at 437. It concluded that its decision would serve "[t]he statutory policy of furthering the successful prosecution of meritorious claims." Id. at 438. Kay v. Ehrler has been applied to other fee-shifting statutes, including the Equal Access to Justice Act, the Freedom of Information Act, the Individuals with Disabilities Education Act, the Fair Debt Collection Practices Act, and Title VII of the Civil Rights Act of 1964. Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e-5(k), provides, in pertinent part: In any action or proceeding under this subchapter the court, in its discretion, may allow the prevailing party ... a reasonable attorney's fee as part of the costs. In New York Gaslight Club v. Carey , 447 U.S. 54 (1980), the plaintiff sought relief for an alleged violation of Title VII of the Civil Rights Act of 1964, and filed a state administrative proceeding, as required by the act, and a federal court suit. She won the state proceeding and agreed to a dismissal of the federal court suit, except for her request for attorneys' fees. The Supreme Court upheld her right to an award by the court of attorneys' fees incurred at the administrative level. The Court noted "Congress's use of the broadly inclusive disjunctive phrase 'action or proceeding'" ( id. at 61) and added that it found nothing to indicate that "proceeding" was intended to apply only to federal agency proceedings. In dicta, the Court added that, for purposes of a fee award, it did not matter whether the plaintiff had lost at the administrative level and prevailed in court on the merits, or had prevailed at the administrative level and sued in court solely to recover attorneys' fees incurred at the administrative level. The Court wrote: It would be anomalous to award fees to the complainant who is unsuccessful or only partially successful in obtaining state or local remedies, but to deny an award to the complainant who is successful in fulfilling Congress' plan that federal policies be vindicated at the state or local level. Id. at 66. Title VII's attorneys' fees provision has been a model for others. One of the statutes modeled on it was the Civil Rights Attorney's Fees Awards Act of 1976, 42 U.S.C. § 1988(b). It provides: In any action or proceeding to enforce a provision of sections 1981, 1981a, 1982, 1983, 1985, and 1986 of this title, title IX of P.L. 92-318, the Religious Freedom Restoration Act of 1993, title VI of the Civil Rights Act of 1964, or section 40302 of the Violence Against Women Act of 1994, the court, in its discretion, may allow the prevailing party, other than the United States, a reasonable attorney's fee as part of the costs. In Webb v. County Board of Education of Dyer County, Tennessee , 471 U.S. 234 (1985), the plaintiff lost an administrative hearing authorized by state law but subsequently prevailed in a federal court suit under 42 U.S.C. § 1983. He then filed a motion for an award under § 1988(b) of attorneys' fees incurred in both the hearing and the suit. The Supreme Court faced the same question it had in faced in Gaslight —the recoverability of fees incurred at the administrative level—but this time with respect to fee awards under 42 U.S.C. § 1988(b) in cases brought under 42 U.S.C. § 1983. Even though § 1988(b) contains the same "action or proceeding" language as Title VII, the Court held that § 1988(b) does not authorize awards of fees in § 1983 administrative proceedings. The basis for the different results in Gaslight and Webb was that under Title VII administrative proceedings are mandatory, but under § 1983 they are not, and it is only mandatory proceedings that are brought to "enforce" a federal civil rights statute. Because the plaintiff could have gone "straight to court to assert" his § 1983 claim, the Court found that: the school board proceedings in this case simply do not have the same integral function under § 1983 that state administrative proceedings have under Title VII.... Administrative proceedings ... created by state law simply are not any part of the proceedings to enforce § 1983. 471 U.S. at 241. The Court did not explicitly address whether the word "proceeding" in § 1988(b) had any reference in the context of a § 1983 "action or proceeding," but it did allow that attorneys' fees incurred in an administrative proceeding could be awarded in a § 1983 action to the extent "that any discrete portion of the work product from the administrative proceeding was work that was both useful and of a type ordinarily necessary to advance the civil rights litigation...." Id. at 242. The most recent Supreme Court decision to address the issue of awards of attorneys' fees incurred at the administrative level was North Carolina Department of Transportation v. Crest Street Community Council, Inc. , 479 U.S. 6 (1986). The plaintiffs in this case had prevailed in a federal administrative proceeding under Title VI of the Civil Rights Act of 1964, and sought to recover fees under § 1988(b) in an independent action in federal court. It might have been expected that the Supreme Court would decide whether § 1988(b) authorized an award of attorneys' fees incurred at the administrative level on the basis of whether an administrative proceeding under Title VI was mandatory, and therefore was a proceeding to enforce Title VI. However, the Court did not reach this issue because it rejected a fee award on a different ground: that an action solely to recover a fee award is not an action to enforce Title VI. The Court wrote: The plain language of § 1988 suggests the answer to the question of whether attorney's fees may be awarded in an independent action which is not to enforce any of the civil rights laws listed in § 1988. The section states that in the action or proceeding to enforce the civil rights laws listed—42 U.S.C. §§ 1981, 1982, 1983, 1985, 1986, Title IX, or Title VI— the court may award attorney's fees. The case before us is not, and was never, an action to enforce any of these laws. On its face, § 1988 does not authorize a court to award attorney's fees except in an action to enforce the listed civil rights laws. The legislative history of § 1988 supports the plain import of the statutory language. Id . at 12. This means that, under all the statutes listed in § 1988(b), a party who prevails at the administrative level may not bring a court action solely to recover a fee award. A party who loses an administrative proceeding, however, and prevails on the merits in court, may recover attorneys' fees incurred at both the administrative and court levels. He may recover fees incurred in an administrative proceeding in either of two situations: if the proceeding was one to enforce the statute (i.e., was mandatory), or if a "discrete portion of the work product from the administrative proceedings . . . was both useful and of a type ordinarily necessary to advance the civil rights litigation. . . ." Id . at 15, quoting Webb , 471 U.S. at 243. The Court in Crest Street acknowledged that in Gaslight it had said that it would be "anomalous" to distinguish in this way between a party who sues in court solely to recover fees (after having prevailed at the administrative level) and one who sues also on the merits. In Crest Street , however, the Court referred to this comment in Gaslight as "dicta" ( id . at 13), presumably because the plaintiff in Gaslight had filed a court action not solely to recover fees. The Court in Crest Street added: Moreover, we now believe that the paradoxical nature of this result may have been exaggerated. There are many types of behavior that may lead others to comply with civil rights laws. For example, an employee, after talking to his lawyer, may choose to discuss hiring or promotion practices with an employer, and as a result of this discussion the employer may alter those practices to comply more fully with employment discrimination laws. In some sense it may be considered anomalous that this employee's initiative would not be awarded with attorney's fees. But an award of attorney's fees under § 1988 depends not only on the results obtained, but also on what actions were needed to achieve those results. It is entirely reasonable to limit the award of attorney's fees to those parties who, in order to obtain relief, found it necessary to file a complaint in court. Id . at 14. The dissent in Crest Street , apart from disagreeing with the majority's interpretation of the language and the legislative history of § 1988(b), argued that the effect of the decision would be to burden federal courts by causing parties who are not required to exhaust administrative remedies to "immediately file suit in federal court to protect any possible claim for attorney's fees should they subsequently prevail." Id . at 21. In Gaslight , in fact, the Court had acknowledged "that if fees were authorized only when the complainant found an independent reason for suing in federal court under Title VII, such a ground almost always could be found." 447 U.S. at 66 n.6. Thus, Crest Street may have little practical import for Title VII. It may also be argued that the reasoning of Crest Street does not even apply to Title VII. Although § 1988(b) was modeled on the attorneys' fees provision of Title VII, there is a difference in their language that may be relevant. Section 1988(b) provides that a court may award attorneys' fees in any action or proceeding "to enforce" various civil rights statutes. Title VII, by contrast, says that a court may award fees in any action or proceeding "under this title" (as enacted) or "under this subchapter" (as codified), in either case referring to Title VII itself. Arguably, a suit solely to recover fees incurred in an administrative proceeding under Title VII is an action or proceeding under Title VII, even though a suit solely to recover fees incurred in an administrative proceeding under Title VI is not an action or proceeding to enforce Title VI. However, this may be an overly literal reading in that when the attorneys' fees provision in Title VII refers to an action or proceeding "under" Title VII, it may not have been intended that it refer to itself, but rather only to the rest of Title VII. The Supreme Court, in Gaslight , of course, has already interpreted this language and concluded that it "encompasses a suit solely to obtain an award of attorney's fees for legal work done in state and local proceedings." Yet in Crest Street the Court labeled as "dicta" its statement in Gaslight that to hold otherwise would be anomalous. It appears uncertain whether the Court would reach the result it reached in Gaslight in a Title VII case in which a court action was never filed on the merits. An issue that has never reached the Supreme Court is whether administrative agencies themselves may award attorneys' fees under any of the civil rights statutes. Title VII's attorneys' fees provision and the statutes modeled on it authorize only "the court" to award fees, but, to the extent that a court may award fees incurred at the agency level, the question has arisen whether an agency itself may do so in order to save the parties and a federal court from litigation solely on a fee claim. Of course, only if a court may award fees incurred at the administrative level will the question arise whether the agency itself may award such fees. There are two circumstances in which a court clearly may not award fees incurred at the administrative level: the circumstances of Crest Street and of Webb . Crest Street prohibits courts from awarding fees in suits solely to recover fees, at least in suits under § 1988(b), so it seems clear that agencies may not award fees under § 1988. Assuming that the reasoning of Crest Street does not apply to some statutes, such as Title VII, Webb still would preclude courts from awarding fees incurred in non-mandatory administrative proceedings under such statutes, except to the extent that such fees cover "any discrete portion of the work product ... that was both useful and of a type ordinarily necessary to advance the civil rights litigation." However, Title VII provides for mandatory administrative proceedings, so the question arises under Title VII whether an agency itself may award fees and thereby save the prevailing party from going to court. The court of appeals in Crest Street had held that a party who prevailed in an administrative proceeding under Title VI could bring a court action under § 1988(b) solely to recover fees. The court of appeals in Crest Street , in addition, citing the fact that § 1988(b) on its face authorizes only "the court" to award fees, said in dicta that "it follows that plaintiffs must apply to a court for their fees." 769 F.2d at 1033 (emphasis in original). However, in Smith v. Califano , 446 F. Supp. 530 (D.D.C. 1978), the court held that an agency could award fees in a Title VII proceeding. It wrote: Title VII is a statute in which Congress already has specifically provided for an award of attorneys' fees. Although the expression of that exception [to the American Rule] is contained in the remedial authority of the courts, the rights protected by the courts are the very same rights the agencies are to protect. Thus, finding authority for the agency also to award counsel fees to one who prevails at the administrative level would not create a "far-reaching" exception to the Rule. Rather, it would make the existing exception applicable regardless of the stage at which that federal right is protected. Id . at 532-533. In addition, the court noted: [A]lthough Title VII does not expressly state that an agency may award attorneys' fees, it does state that [in proceedings brought by federal employees] the agency is to enforce the Act "through appropriate remedies ... as will effectuate the policies of this section...." 42 U.S.C. § 2000e-16(b) (Supp. V 1975). Because the "make-whole" concept is one of those policies, this provision can be read to permit the agency to award attorneys' fees, thereby making whole one who appears before it. Id. at 533. This decision was followed in two other Title VII cases. However, two other cases in the same district came to the contrary conclusion, holding that a party who prevails at the agency level under Title VII must go to court to recover his fees. In 1980, the EEOC issued a regulation (amended in 1987) providing that it or other federal agencies may award attorneys' fees to federal employees under Title VII. 29 C.F.R. § 1613.271(d). No reported case appears to have challenged the EEOC's authority to promulgate this regulation. An argument may be made, however, that, if the reasoning of Crest Street applies to Title VII, then the legality of these regulations would be placed in doubt. For, if the reasoning of Crest Street applies, which means that courts may not award attorneys' fees incurred by parties who prevail at the administrative level, then the only basis for an agency to award fees would be the "appropriate remedies" provision. It is not clear, however, that Smith v. Califano would have reached the same result in the absence of the statute's authorizing courts to award fees. If, under Crest Street , courts cannot award fees to parties who prevail in administrative proceedings under Title VII, then to allow agencies to award fees apparently would constitute a "far-reaching" exception to the American rule. Before an agency may order a litigant to bear his adversary's expenses, "it must be granted clear statutory power by Congress." The power to employ "appropriate remedies" might not be sufficient. Two lower court cases have addressed the question of the recoverability of fees in administrative proceedings under the Rehabilitation Act. In Department of Education v. Katherine D. , 531 F. Supp. 517, 531 (D. Hawaii 1982), rev ' d on other grounds , 727 F.2d 809 (9 th Cir. 1983), cert. denied , 471 U.S. 1117 (1985), the district court held that it could award attorneys' fees for services rendered in connection with both judicial and administrative proceedings under § 504 of the act. In Watson v. United States Veterans Administration , 88 F.R.D. 267 (C.D. Cal. 1980), a district court held that the agency itself could award fees under § 501 of the act. The court, citing Smith v. Califano , held that construing § 501 "to authorize the agency to award attorney's fees is more in keeping with the purpose of the statute and the intent of Congress than the contrary interpretation." 88 F.R.D. at 269. The court noted that the "'appropriate remedies' concept" is "incorporated in the Rehabilitation Act from Title VII." Id. at 268. Notwithstanding this decision, if the reasoning of Crest Street precludes courts from awarding fees in suits solely to recover attorneys' fees incurred in administrative proceedings under the Rehabilitation Act, then it apparently would also preclude agencies from awarding fees. However, in 1987, the EEOC amended the regulation cited above (29 C.F.R. § 1613.271(d)) to authorize federal agencies to award attorneys' fees in proceedings under § 501 or § 505 of the Rehabilitation Act. All federal civil rights laws permit awards of attorneys' fees and the major litigation concerning fee awards has occurred under these laws. Some aspects of these laws have already been discussed: the dual standard they have been construed to include, the meaning of the term "prevailing" they contain, and the extent to which they permit awards of fees incurred in administrative proceedings. This section of the report quotes or summarizes each attorney's fee provision applicable to a civil rights law, and discusses significant court decisions not covered in the discussions of the aspects of these laws just mentioned. Title II prohibits discrimination and segregation on the basis of race, color, religion, or national origin in places of public accommodation such as hotels, restaurants, gasoline stations, theaters, and other places of exhibition or entertainment, if their operations affect commerce or if their acts of discrimination or segregation are supported by state action. 42 U.S.C. § 2000a. Title II's attorneys' fees provision, 42 U.S.C. § 2000a-3(b), states: the court, in its discretion, may allow the prevailing party, other than the United States, a reasonable attorney's fee as part of the costs, and the United States shall be liable for costs the same as a private person. In addition, the court may appoint an attorney for a complainant. 42 U.S.C. § 2000a-3(a). Title III gives the Attorney General the authority to bring a civil action on behalf of any person unable to initiate and maintain appropriate legal proceedings who claims: that he is being deprived of or threatened with the loss of his right to equal protection of the laws, on account of his race, color, religion, or national origin, by being denied equal utilization of any public facility which is owned, operated, or managed by or on behalf of any State or subdivision thereof, other than a public school or public college, as defined in section 2000c of this title.... 42 U.S.C. § 2000b(a). In any action under Title III "the United States shall be liable for costs, including a reasonable attorney's fee, the same as a private person." 42 U.S.C. § 2000b-1. Title VII prohibits discrimination by employers, employment agencies, and labor organizations on the basis of race, color, religion, sex, or national origin. Before an individual may bring a civil action in federal court under Title VII, he must file a charge with the Equal Employment Opportunity Commission (EEOC), which will attempt to resolve the complaint. However, if the individual alleges discrimination in a state or locality that prohibits it, then federal proceedings must be deferred until relief through state or local proceedings has been sought. 42 U.S.C. § 2000e-5(c). If the matter does end up in federal court, the court may appoint an attorney for the complainant. 42 U.S.C. § 2000e-5(f)(1). Relief may include injunctions and "such affirmative action as may be appropriate, which may include, but is not limited to, reinstatement or hiring of employees, with or without back pay...." 42 U.S.C. § 2000e-5(g). Title VII's attorneys' fees provision, 42 U.S.C. § 2000e-5(k), provides: In any action or proceeding under this subchapter the court, in its discretion, may allow the prevailing party, other than the Commission or the United States, a reasonable attorney's fee (including expert fees) as part of the costs, and the Commission and the United States shall be liable for costs the same as a private person. Title VII's attorneys' fees provision on its face bars awards in favor of the EEOC or the United States. In 1964, when the provision was enacted, Title VII did not apply to federal workers, so the United States at the time could be only a plaintiff in a Title VII suit. The 1972 amendments that made it possible for the United States to be a defendant under the act did not amend the attorneys' fees provision, and, in Copeland v. Martinez , 603 F.2d 981 (D.C. Cir. 1979), cert. denied , 444 U.S. 1044 (1980), the issue arose whether an employee who sues the United States may be held liable for attorneys' fees. In this case the employee was found to have sued in bad faith, so the court did not have to decide whether Title VII affirmatively authorizes fee awards to the federal government as defendant. The court held only "that § 706(k) does not preclude a court from awarding the United States its attorneys' fees [under the common law exception] when it has been sued in bad faith." Id. at 987. Of course, as discussed above, even if the United States is entitled to fees as a prevailing defendant under Title VII in the absence of bad faith on the part of the plaintiff, it may recover only upon a finding that the plaintiff's suit was "frivolous, unreasonable, or without foundation." Prevailing plaintiffs (other than the United States), in contrast, may recover fees "in all but very unusual circumstances." Albemarle Paper Co. v. Moody , 422 U.S. 405, 415 (1975). Courts have held that in Title VII suits attorneys' fees may be awarded against state governments ( Fitzpatrick v. Bitzer , 427 U.S. 445, 456 (1976)), and in favor of state governments ( Kutska v. California State College , 564 F.2d 108 (3 rd Cir. 1977)). The Fair Housing Act, Title VIII of the Civil Rights Act of 1968, as amended by the Fair Housing Amendments Act of 1988, P.L. 100-430 , prohibits discrimination on the basis of race, color, religion, sex, handicap, familial status (having children), or national origin in the sale or rental of housing, the financing of housing, or the provision of brokerage services. 42 U.S.C. §§ 3404-3606. An aggrieved person may bring a civil action, in which the prevailing party, other than the United States, may recover reasonable attorneys' fees and costs, with the United States liable for such fees and costs to the same extent as a private person. 42 U.S.C. § 3613(c). Presumably, the dual standard that applies to the fee-shifting provisions of other federal civil rights statutes will apply here. The court may appoint an attorney for the plaintiff. 42 U.S.C. § 3613(b). In addition, the Secretary of Housing and Urban Development may bring an administrative proceeding, and the Attorney General may bring a civil action, against a violator. In either case, the prevailing party, other than the United States, may recover a reasonable attorney's fee and costs, except that the United States shall be liable for fees and costs only to the extent provided by the Equal Access to Justice Act. 42 U.S.C. §§ 3612(p), 3614(d). The Fair Labor Standards Act, among other things, prohibits employers from discriminating on the basis of sex in the amount of wages paid employees for equal work, and it prohibits labor organizations from causing employers to so discriminate. 29 U.S.C. § 206(d). Section 216(b) of Title 29 provides that in actions to enforce such provision, the court: shall, in addition to any judgment awarded to the plaintiff or plaintiffs, allow a reasonable attorney's fee to be paid by the defendant, and costs of the action. The Age Discrimination in Employment Act of 1967 (ADEA), 29 U.S.C. §§ 621 et seq. , prohibits, with certain exceptions, employers, employment agencies, and labor organizations from discriminating on the basis of age against individuals who are at least 40 years old. Section 7(b) of the act, 29 U.S.C. § 626(b), incorporates the attorneys' fees provision of the Fair Labor Standards Act, 29 U.S.C. § 216(b). In 1974, a section was added to the ADEA to protect federal employees from age discrimination. 29 U.S.C. § 633a. However, this section provides that other provisions of the ADEA shall not apply in the case of federal employees (29 U.S.C. § 633a(f)), and the section makes no reference to attorneys' fees. Consequently, it is unsettled whether they may be awarded to federal employees who prevail at the administrative or the judicial level. The Civil Service Reform Act of 1978 provides for awards of attorneys' fees "in accordance with the standards prescribed under § 706(k) of the Civil Rights Act of 1964 (42 U.S.C. 2000e(k)" to a federal "employee or applicant for employment" who is discriminated against "on the basis of age, as prohibited under §§ 12 and 15 of the Age Discrimination in Employment Act of 1976 (29 U.S.C. 631, 633a)." 5 U.S.C. §§ 7701(g)(2), 2302(b)(1)(B). However, these provisions of the Civil Service Reform Act authorize only the Merit Systems Protection Board (MSPB), not the EEOC, to award attorneys' fees, and federal employees who wish to file age discrimination complaints at the administrative level ordinarily must do so before the EEOC. The MSPB becomes involved in age discrimination complaints when it hears appeals of "mixed case" complaints, which are discrimination complaints that an employee or job applicant raises as an affirmative defense to an adverse action. 29 C.F.R. § 1613.402. The Equal Credit Opportunity Act, 15 U.S.C. §§ 1691 et seq. , makes it unlawful for any person, business, or governmental agency that regularly extends credit to discriminate against any credit applicant: (1) on the basis of race, color, religion, national origin, sex or marital status, or age (provided the applicant has the capacity to contract); (2) because all or part of the applicant's income derives from any public assistance program; or (3) because the applicant has in good faith exercised any right under the Consumer Credit Protection Act. Section 1691e(d) provides that in any successful action to enforce the act, "the costs of the action, together with a reasonable attorney's fee as determined by the court, shall be added to any damages awarded...." The Voting Rights Act's attorneys' fees provision, 42 U.S.C. § 1973 l (e), as amended by P.L. 109-246 (2006), provides: In any action or proceeding to enforce the voting guarantee of the fourteenth or fifteenth amendment, the court, in its discretion, may allow the prevailing party, other than the United States, a reasonable attorney's fee, reasonable expert fees, and other reasonable litigation expenses, as part of the costs. The Voting Accessibility for the Elderly and Handicapped Act, 42 U.S.C. § 1973ee-4(c), provides: Notwithstanding any other provision of law, no award of attorney fees may be made with respect to an action under this section, except in any action brought to enforce the original judgment of the court. The Civil Service Reform Act of 1978, 5 U.S.C. § 5596(b)(1)(A)(ii), provides: An employee of an agency who ... is found ... to have been affected by an unjustified or unwarranted personnel action ... is entitled, on correction of the personnel action, to receive ... reasonable attorney fees related to the personnel action which, with respect to any decision relating to an unfair labor practice or grievance processed under a procedure negotiated in accordance with chapter 71 of this title, or under chapter 11 of title I of the Foreign Service Act of 1980, shall be awarded in accordance with standards established under section 7701(g) of this title. Section 7701(g) provides: (1) Except as provided in paragraph (2) of this subsection, the [Merit Systems Protection] Board, or an administrative law judge or other employee of the Board designated to hear a case, may require payment by the agency involved of reasonable attorney fees ... if warranted in the interest of justice.... (2) If an employee or applicant for employment is the prevailing party and the decision is based on a finding of discrimination prohibited under section 2302(b) of this title, the payment of attorney fees shall be in accordance with the standards prescribed under section 706(k) of the Civil Rights Act of 1964 (42 U.S.C. 2000e-5(k)). Section 2302(b) provides: Any employee who has authority to take, direct others to take, recommend, or approve any personnel action, shall not, with respect to such authority—(1) discriminate for or against any employee or applicant for employment— (A) on the basis of race, color, religion, sex, or national origin, as prohibited under section 717 of the Civil Rights Act of 1964 (42 U.S.C. 2000e-16); (B) on the basis of age, as prohibited under sections 12 and 15 of the Age Discrimination in Employment Act of 1967 (29 U.S.C. 631, 633a); (C) on the basis of sex, as prohibited by section 6(d) of the Fair Labor Standards Act of 1938 (29 U.S.C. 206(d)); (D) on the basis of handicapping conditions, as prohibited under section 501 of the Rehabilitation Act of 1973 (29 U.S.C. 791); or (E) on the basis of marital status or political affiliation as prohibited under any law, rule, or regulation. Thus, in the ordinary case, fees may be awarded if "warranted in the interest of justice," but in civil rights cases the standards of 42 U.S.C. § 2000e-5(k) are incorporated, which apparently means that a prevailing plaintiff should recover fees "in all but very unusual circumstances." Albemarle Paper Co. v. Moody , 422 U.S. 405, 415 (1975). The Age Discrimination Act of 1975, 42 U.S.C. §§ 6101 et seq. , prohibits age discrimination in programs or activities receiving federal, financial assistance. P.L. 95-478 , § 401, amended 42 U.S.C. § 6104(e) to provide that "the court shall award the costs of suit, including a reasonable attorney's fee, to the prevailing plaintiff." Section 3 of the Civil Rights of Institutionalized Persons Act, 42 U.S.C. § 1997a, provides that the Attorney General may institute a civil action against any state or political subdivision of a state or employee thereof whom he has reasonable cause to believe is engaging in a pattern or practice of subjecting persons residing in or confined to an institution (which includes, among other things, mental institutions, prisons, and nursing homes) to egregious or flagrant conditions which deprive such persons of any rights, privileges, or immunities conferred by the Constitution or laws of the United States. In any such action, "the court may allow the prevailing party, other than the United States, a reasonable attorney's fee against the United States as part of the costs." 42 U.S.C. § 1997a(b). Section 5 of the act, 42 U.S.C. § 1997c, provides that the Attorney General may intervene in any private action commenced in any federal court seeking relief from a pattern or practice of egregious or flagrant conditions which deprive persons in institutions of any rights, privileges, or immunities secured by the Constitution or laws of the United States. (This section does not appear to create a new private right of action; rather, it contemplates actions under existing law, such as 42 U.S.C. § 1983.) Section 5(d) reads: In any action in which the United States joins as an intervenor under this section, the court may allow the prevailing party, other than the United States, a reasonable attorney's fee against the United States as part of the costs. Nothing in this subsection precludes the award of attorney's fees available under any other provisions of the United States Code. The conference report that accompanied this law explains: In both the initiation and intervention sections, the Act makes clear the liability of the United States to opposing parties for attorneys' fees whenever it loses. The award is discretionary with the court, and it is intended that the present standards used by courts under the civil rights laws will apply. However, it is not intended that recovery be allowed from the United States, as a plaintiff, by another plaintiff or plaintiff-intervenor. The award is to be made to an opposing party who prevails. Thus, in actions instituted by or intervened in by the Attorney General, fees may be awarded against the United States only to prevailing defendants, and only if the suit was, in the words of Christiansburg , supra , 434 U.S. at 421, "frivolous, unreasonable, or without foundation." Prevailing plaintiffs, other than the United States, apparently may recover attorneys' fees against defendants if awards are authorized under a statute such as the Civil Rights Attorney's Fees Awards Act of 1976 or the common law bad faith exception to the American rule. In 1996, the Prison Litigation Reform Act, P.L. 104-134 , § 803, amended § 7 of the Civil Rights of Institutionalized Persons Act, 42 U.S.C. § 1997e, to provide that no prisoner may bring an action with respect to prison conditions, under 42 U.S.C. § 1983 or any other federal law, "until such administrative remedies as are available are exhausted." It also limited the right to recover attorneys' fees under the Civil Rights Attorney's Fees Awards Act of 1976, 42 U.S.C. § 1988(b), as detailed below in the discussion of that statute. Section 501 of the Rehabilitation Act of 1973 provides protection from employment discrimination on the basis of handicap by federal executive branch agencies. 29 U.S.C. § 791. Section 504, as amended in 1978, prohibits discrimination solely by reason of handicap under programs receiving federal financial assistance or under programs conducted by executive agencies or by the Postal Service. 29 U.S.C. § 794. Section 505, which was added in 1978, provides that specified remedies, procedures, and rights set forth in Title VII of the Civil Rights Act of 1964 shall be available with respect to complaints under § 501, and the remedies, procedures, and rights set forth in Title VI of the Civil Rights Act of 1964 shall be available with respect to complaints under § 504. Section 505 also provides that, in any "action or proceeding" under the Rehabilitation Act, "the court, in its discretion, may allow the prevailing party, other than the United States, a reasonable attorney's fee as part of the costs." 29 U.S.C. § 794a. An attorneys' fees provision was added to the Education of the Handicapped Act by the Handicapped Children's Protection Act of 1986, P.L. 99-372 , 20 U.S.C. § 1415(e)(4). This statute was enacted to overturn Smith v. Robinson , 468 U.S. 992 (1984), which precluded fee awards under the EHA. The plaintiffs in Smith v. Robinson had sued on behalf of a handicapped child who allegedly had been deprived of his right to a free special education. They had sued under state law and under three federal statutes: EHA, § 504 of the Rehabilitation Act of 1973 (29 U.S.C. § 794), and 42 U.S.C. § 1983. The EHA guarantees the right to a free appropriate public education in states that receive grants under the statute; the Rehabilitation Act prohibits discrimination on the basis of handicap in any program or activity that receives federal financial assistance; and § 1983 permits suits against state or local officials if, under color of state law, they deprive someone of a federal constitutional or statutory right. The EHA prior to the 1986 Act did not authorize awards of attorneys' fees, but the Rehabilitation Act did, and 42 U.S.C. § 1988(b) permits fee awards in § 1983 cases. The plaintiffs in Smith v. Robinson , after prevailing on the merits of their case, asked the court to award fees pursuant to either the Rehabilitation Act or § 1988(b). The Supreme Court held that they were not entitled to relief under the Rehabilitation Act or § 1983, and therefore were not entitled to a fee award under either statute. Although these statutes on their face appear to apply to cases of handicapped children who are denied their right to a free appropriate public education, the Court found that, in cases in which these statutes do not provide rights greater than those available under the EHA, Congress intended the EHA to be the exclusive remedy. Congress, therefore, added 20 U.S.C. § 1415(i)(3)(B) to the EHA, which, as amended, provides: In any action or proceeding brought under this section, the court, in its discretion, may award reasonable attorneys' fees as part of the costs. ... Administrative proceedings are mandatory under the EHA, and the legislative history makes clear that courts may award fees incurred at the administrative and the judicial levels, including when a party prevails at the administrative level and brings a court action solely to recover fees. Therefore, the Supreme Court's decisions in neither Webb nor Crest Street appear to preclude a court from awarding attorneys' fees incurred at the administrative level. The attorneys' fees provision prohibits bonuses and multipliers (discussed below under "Determining a Reasonable Attorneys' Fee"), and contains a section based on Rule 68 of the Federal Rules of Civil Procedure (discussed below under "Rule 68 of the Federal Rules of Civil Procedure"). In Arlington Central School District Board of Education v. Murphy , 548 U.S. 291 (2006), the Supreme Court held that IDEA's attorneys' fees provision does not authorize prevailing parents to recover fees for services rendered by experts in IDEA actions. In the case of statutes, such as IDEA, that are enacted pursuant to the Spending Clause of the Constitution, Art. I, § 8, cl. 1, "when Congress attaches condition to a State's acceptance of federal funds, the conditions must be set out 'unambiguously,'" to ensure that recipients of the funds agree to the conditions "voluntarily and knowingly." Id . at 296. IDEA's attorneys' fees "provision does not even hint that acceptance of IDEA funds makes a State responsible for reimbursing prevailing parents for services rendered by experts." Id . at 297. The ADA, 42 U.S.C. §§ 12101 et seq ., provides protection against discrimination on the basis of disability in employment, public services, public accommodations, and telecommunications. It supplements the Rehabilitation Act of 1973 by extending such protection, to varying degrees, to Congress and the legislative branch agencies, to the states, and to the private sector. Section 505 of the ADA, 42 U.S.C. § 12205, provides: In any action or administrative proceeding commenced pursuant to this Act, the court or agency, in its discretion, may allow the prevailing party, other than the United States, a reasonable attorney's fee, including litigation expenses, and costs, and the United States shall be liable for the foregoing the same as a private individual. The Civil Rights Attorney's Fees Awards Act of 1976, 42 U.S.C. § 1988(b), provides: In any action or proceeding to enforce a provision of sections 1981, 1981a, 1982, 1983, 1985, and 1986 of this title, title IX of P.L. 92-318, the Religious Freedom Restoration Act of 1993, the Religious Land Use and Institutionalized Persons Act of 2000, title VI of the Civil Rights Act of 1964, or section 40302 of the Violence Against Women Act of 1994, the court, in its discretion, may allow the prevailing party, other than the United States, a reasonable attorney's fee as part of the costs, except that in any action brought against a judicial officer for an act or omission taken in such officer's judicial capacity such officer shall not be held liable for any costs, including attorney's fees, unless such action was clearly in excess of such officer's jurisdiction. In 1996, the Prison Litigation Reform Act, P.L. 104-134 , § 803, amended § 7 of the Civil Rights of Institutionalized Persons Act, 42 U.S.C. § 1997e(d), to provide: (1) In any action brought by a prisoner ... fees shall not be awarded [under § 1988(b)], except to the extent that— (A) the fee was directly and reasonably incurred in proving an actual violation of the plaintiff's rights protected by a statute pursuant to which a fee may be awarded under [§ 1988(b)]; and (B)(i) the amount of the fee is proportionately related to the court ordered relief for the violation; or (ii) the fee was directly and reasonably incurred in enforcing the relief ordered for the violation. (2) Whenever a monetary judgment is awarded in an action described in paragraph (1), a portion of the judgment (not to exceed 25 percent) shall be applied to satisfy the amount of attorney's fees awarded against the defendant. If the award of attorney's fees is not greater than 150 percent of the judgment, the excess shall be paid by the defendant. (3) No award of attorney's fees in an action described in paragraph (1) shall be based on an hourly rate greater than 150 percent of the hourly rate established under section 3006A of title 18, United States Code, for payment of court-appointed counsel. (4) Nothing in this subsection shall prohibit a prisoner from entering into an agreement to pay an attorney's fee in an amount greater than the amount authorized under this subsection.... In Martin v. Hadix , 527 U.S. 343 (1999), the Supreme Court held that 42 U.S.C. § 1997e(d)(3) "limits attorney's fees with respect to postjudgment monitoring services performed after the PLRA's [Prison Litigation Reform Act's] effective date but it does not so limit fees for postjudgment monitoring performed before the effective date." In Johnson v. Daley , 339 F.3d 582 (7 th Cir. 2003), the Seventh Circuit upheld the constitutionality of the Prison Litigation Reform Act's discrimination against prisoners as compared with other plaintiffs, and cited other circuits that had reached the same result. The 11 statutes under which § 1988(b) authorizes fee awards are now examined in the order listed in § 1988(b). This section provides: All persons within the jurisdiction of the United States shall have the same right in every State and Territory to make and enforce contracts, to sue, be parties, give evidence, and to the full and equal benefit of all laws and proceedings for the security of persons and property as is enjoyed by white citizens, and shall be subject to like punishment, pains, penalties, taxes, licenses, and exactions of every kind, and to no other. This section, enacted by the Civil Rights Act of 1991, P.L. 102-166 , § 102, provides for punitive damages in actions for unlawful intentional employment discrimination under specified statutes. This section provides: All citizens of the United States shall have the same right, in every State and Territory, as is enjoyed by white citizens thereof to inherit, purchase, lease, sell, hold, and convey real and personal property. This section provides: Every person who, under color of any statute, ordinance, regulation, custom, or usage, of any State or Territory, subjects, or causes to be subjected, any citizen of the United States or other person within the jurisdiction thereof to the deprivation of any rights, privileges, or immunities secured by the Constitution, and laws, shall be liable to the party injured in an action at law, suit in equity, or other proper proceeding for redress, except that in any action brought against a judicial officer for an act or omission taken in such officer's judicial capacity, injunctive relief shall not be granted unless a declaratory decree was violated or declaratory relief was unavailable. For the purposes of this section, any Act of Congress applicable exclusively to the District of Columbia shall be considered to be a statute of the District of Columbia. Section 1983 permits suits against state and local officials, as individuals, if, under color of state law, they deprive someone of a federally protected right. The Supreme Court has held that a state is not a "person" subject to suit under § 1983. Will v. Michigan Department of State Police , 491 U.S. 58 (1989). Furthermore, a suit for damages against a state official acting in his or her official capacity "is no different from a suit against the State itself." Id . at 71. However, "a State official in his or her official capacity, when sued for injunctive relief, would be a person under § 1983 because 'official-capacity actions for prospective relief are not treated as actions against the State.'" Id . at 71 n.10. In such suits, attorneys' fees may be awarded against a state under § 1988(b), but not against the state official personally, except under the common law bad faith standard. Hutto v. Finney , 437 U.S. 678, 692 n.19, 693, 700 (1978) (discussed in detail in section IX of this report). State officials may be sued in their individual capacities for damages under § 1983. Hafer v. Melo , 502 U.S. 21 (1991). In such suits, a state official may be held liable for attorneys' fees even in the absence of bad faith. However, the state will not be liable for fees. Kentucky v. Graham , 473 U.S. 159 (1985). Section 1983 permits suits against local governments, provided that the deprivation of rights was based on official policy and not merely respondeat superior (the common law liability of employers for acts of employees). Monell v. Department of Social Services of the City of New York , 436 U.S. 658 (1978). If a local official is sued under § 1983 in his official capacity, the public entity is liable, "provided, of course, the public entity received notice and an opportunity to respond." Brandon v. Holt , 469 U.S. 464, 471-472 (1985). Maine v. Thiboutot , 448 U.S. 1 (1980), was a case brought under § 1983 in a state court challenging the state's method of computing benefits under a federally funded public assistance program. The state argued that § 1983 does not provide for suits brought to enforce purely statutory, non-constitutional claims, but the Supreme Court held that "the phrase 'and laws,' as used in § 1983, means what it says." Id. at 4. In other words, according to this case, suits may be brought under § 1983 to enforce statutory as well as constitutional claims—even statutory claims unrelated to civil rights and even claims arising under statutes that do not themselves contain an express or implied private right of action. And, the Court held, under §1988(b), state courts as well as federal courts may award attorneys' fees in § 1983 suits. In Dennis v. Higgins , 498 U.S. 439 (1991), the Supreme Court held that suits against state officials for violation of the Commerce Clause (Art. I, § 8, cl. 3) may be brought under § 1983. The Court found that the Commerce Clause confers a right "to engage in interstate trade free from restrictive state regulation" ( id . at 448), and that this right is protected by § 1983. There may be another limitation upon awards of attorneys' fees under § 1988(b) in § 1983 cases. In Maher v. Gagne , 448 U.S. 122 (1980), which the Supreme Court decided the same day as Thiboutot , the Court left open the question whether the Eleventh Amendment prohibits federal courts from awarding fees in wholly-statutory, non-civil rights cases. The impact of the Eleventh Amendment on fee awards against the states is considered in section IX of this report, but brief mention of it will be made here in order to explain more fully the holdings of Maine v. Thiboutot and Maher v. Gagne . The Eleventh Amendment generally prohibits suits for damages in federal court against a state. Notwithstanding the Eleventh Amendment, however, a state may be sued for damages in federal court for violations of laws enacted to enforce the Fourteenth Amendment. Section 1983, and civil rights laws generally, were enacted to enforce the Fourteenth Amendment. Maine v. Thiboutot , however, held that § 1983 permits assertion of claims arising under both civil rights and non-civil rights laws. This raises the question whether claims arising under non-civil rights laws should be considered as having been brought under a law enacted to enforce the Fourteenth Amendment merely because the laws under which they arise may be enforced through the use of § 1983. The Court did not have to answer this question in Maine v. Thiboutot because that case was brought in state court, where the Eleventh Amendment does not apply. Maher v. Gagne the Court also avoided the question, but for a different reason. This case was brought in federal court, and, like Maine v. Thiboutot , it charged a state with having violated a non-civil rights law. However, the plaintiff in Maher v. Gagne also raised a constitutional claim, and that was decisive. Prior to trial, the case was settled favorably for the plaintiff, without the constitutional issue's being reached. The state argued that the Eleventh Amendment prohibited a fee award because the case involved a purely statutory, non-civil rights claim. The Court held, however, that, under § 1988(b), a federal court, notwithstanding the Eleventh Amendment, may award attorneys' "fees in a case in which the plaintiff prevails on a wholly statutory, non-civil rights claim pendent to a substantial constitutional claim or in one in which both a statutory and a substantial constitutional claim are settled favorably to the plaintiff without adjudication." Id. at 132. Because of the constitutional claim (which was held to be substantial), the Court found "there is no need to reach the question whether a federal court could award attorney's fees against a State based on a statutory, non-civil-rights claim." Id . at 130. This section has three subsections. Subsection (a) gives to "any person" a right to be free from a conspiracy "to prevent, by force, intimidation, or threat" the acceptance of a federal office "or from discharging any duties thereof." Subsection (b) gives any person who is a party or a witness, or a grand or petit juror, in any court of the United States a right to be free from a conspiracy to obstruct justice. Subsection (c) protects persons from deprivations "of equal protection of the laws, or of equal privileges and immunities under the laws." This section provides that any person who has knowledge that any of the wrongs mentioned in 42 U.S.C. § 1985 are about to be committed, and has the power to prevent or aid in preventing the commission of such wrongs, who neglects or refuses so to do, shall be liable to the party injured for all damages caused by the wrongful act which such person by reasonable diligence could have prevented. This statute, codified at 20 U.S.C. §§ 1681 et seq. , prohibits discrimination on the basis of sex, blindness, or severe visual impairment under any educational program or activity receiving federal assistance. In Cannon v. University of Chicago , 441 U.S. 667 (1979), the Supreme Court held that Title IX contains an implied private right of action. In Franklin v. Gwinnett County Public Schools , 503 U.S. 60 (1992), the Court added that this right includes the remedy of monetary damages. In Fitzgerald v. Barnstable School Committee , 129 S. Ct. 788 (2009), the Court held that the existence of a right of action under Title IX does not preclude suits under 42 U.S.C. § 1983 alleging gender discrimination in schools in violation of the Equal Protection Clause. This statute ( P.L. 103-141 , 42 U.S.C. §§ 2000bb et seq. ), was enacted in response to Employment Division, Oregon Department of Human Resources v. Smith , 494 U.S. 872 (1990), in which the Supreme Court held that religiously neutral laws (in this case a law proscribing the use of peyote) usually may be applied without regard to any burden they place on the exercise of religion. In other words, the First Amendment's guarantee of the free exercise of religion ordinarily mandates no religious exemptions from otherwise valid laws. The Religious Freedom Restoration Act provides statutory protection in lieu of constitutional protection. It prohibits government at all levels from substantially burdening a person's exercise of religion unless the government demonstrates that the burden is in furtherance of a compelling governmental interest and is the least restrictive means of furthering that interest. The act contains an express private right of action. This statute ( P.L. 106-274 , 42 U.S.C. §§ 2000cc et seq. ) provides that "[n]o [state or local] government shall impose or implement a land use regulation in a manner that imposes a substantial burden on the religious exercise of a person, including a religious assembly or institution, unless the government demonstrates that imposition of the burden on that person, assembly, or institution—(A) is in furtherance of a compelling governmental interest; and (B) is the least restrictive means of furthering that compelling governmental interest." This prohibition applies if the burden is imposed in a program or activity that receives federal financial assistance, affects interstate commerce, or is imposed through a process that permits the government to make individualized assessments of the proposed uses for the property involved. The statute also provides that "[n]o [state or local] government shall impose a substantial burden on the religious exercise of a person residing in or confined to an institution, as defined in section 2 of the Civil Rights of Institutionalized Persons Act (42 U.S.C. 1997) ... unless the government demonstrates that imposition of the burden on that person—(1) is in furtherance of a compelling governmental interest; and (2) is the least restrictive means of furthering that compelling governmental interest." This prohibition applies if the burden is imposed in a program or activity that receives federal financial assistance or affects interstate commerce. The statute also provides that "[n]o [state or local] government shall impose or implement a land use regulation in a manner that treats a religious assembly or institution on less than equal terms with a nonreligious assembly or institution," or "that discriminates against any assembly or institution on the basis of religion or religious denomination." This statute, codified at 42 U.S.C. §§ 2000d et seq. , provides: No person in the United States shall, on the ground of race, color, or national origin, be excluded from participation in, be denied the benefits of, or be subjected to discrimination under any program or activity receiving Federal financial assistance. In Guardians Association v. Civil Service Commission of the City of New York , 463 U.S. 582 (1983), a majority of the Justices indicated that Title VI contains a private right of action. Section 40302 of this act provides that "[a] person ... who commits a crime of violence motivated by gender ... shall be liable to the party injured, in an action for the recovery of compensatory and punitive damages, injunctive and declaratory relief, and such other relief as a court may deem appropriate." Section 7430 of the Internal Revenue Code, 26 U.S.C. § 7430, authorizes the Internal Revenue Service and federal courts to award attorneys' fees of up to $125 an hour in tax cases in which the United States fails to establish that its position in the proceedings was substantially justified. In this respect, § 7430 is similar to EAJA, discussed above. In other respects, however, it is different, and the law governing awards of attorneys' fees in tax cases has undergone multiple changes since Congress first authorized fee-shifting in tax cases in 1976. Awards of attorneys' fees in tax cases were first permitted by the Civil Rights Attorney's Fees Awards Act of 1976, 42 U.S.C. § 1988(b), which authorized federal courts to award attorneys' fees to a prevailing party, other than the United States, "in any civil action or proceeding, by or on behalf of the United States of America, to enforce, or charging a violation of, a provision of the United States Internal Revenue Code." This provision, commonly known as the "Allen amendment," had little effect because of its limitation to tax cases brought "by or on behalf of the United States." Although in several circumstances the United States may bring suit under the Internal Revenue Code, in the vast majority of tax cases the taxpayer is the plaintiff. See Key Buick Company v. Commissioner of Internal Revenue , 613 F.2d 1306 (5 th Cir. 1980). Even in those cases that are brought by or on behalf of the United States in which the taxpayer is the defendant, a prevailing defendant is entitled to fees under § 1988(b) only upon a finding that the action is "meritless in the sense that it is groundless or without foundation." Hughes v. Rowe , 449 U.S. 5, 14 (1980). The Equal Access to Justice Act (EAJA), which took effect October 1, 1981, amended § 1988(b) to remove its authorization for awards of attorneys' fees in tax cases. EAJA instead itself authorized federal courts to award attorneys' fees against the United States in tax cases, except those brought in Tax Court. This exception had not been explicit in the act, but a committee report indicated that the courts empowered by the act to award attorneys' fees "are those defined in section 451 of title 28," and the Tax Court is not among them. Apart from this, awards of attorneys' fees in tax cases could be awarded under the same conditions as other awards against the United States under the EAJA: a prevailing plaintiff whose net worth was within the prescribed limits was entitled to an award up to $75 per hour (or more if a special factor justified a higher fee) unless the United States proved that its position was substantially justified or that special circumstances made an award unjust. Next, § 292 of the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA), P.L. 97-248 , made the EAJA inapplicable to tax cases and enacted § 7430 of the Internal Revenue Code. Section 7430 authorized fee awards in federal courts, including Tax Court, placed a cap of $25,000 on fee awards, and authorized awards only if the taxpayer proved that the position of the United States was "unreasonable." It contained no limits on hourly rates or the net worth of eligible plaintiffs. Section 7430 sunset, but was reenacted with amendments by § 1551 of the Tax Reform Act of 1986, P.L. 99-514 . Then, in 1988, P.L. 100-647 , §6239, amended § 7430 to apply in administrative, as well as court, proceedings. The 1986 Act, while not placing tax cases back within the EAJA, amended § 7430 to make it more like the EAJA. Section 7430, as amended in 1988 and 1996, provides that, in any administrative or court proceeding brought by or against the United States, in connection with the determination, collection, or refund of any tax, interest, or penalty under the Internal Revenue Code, the prevailing party, other than the United States or a creditor of the taxpayer, may be awarded litigation costs, including reasonable attorneys' fees. Section 7430 contains the same limitations as the EAJA on the net worth of eligible plaintiffs (see § 7430(c)(4)(A)(ii), as renumbered by P.L. 104-168 , § 701(a)), and it originally contained the same $75 cap on hourly rates. However, in 1996, P.L. 104-121 raised EAJA's rate to $125, and P.L. 104-168 , § 702, raised § 7430's to $110, with cost of living increases after 1996. In 1998, P.L. 105-206 , § 3101, raised § 7430's cap to $125, without amending the language authorizing cost of living increases after 1996. The IRS set the fee at $160 per hour for calendar year 2006, and $170 per hour for calendar years 2007 and 2008. Rev. Proc. 2005-70, 2006-53, 2007-66. As under the EAJA, a party is not eligible for a fee award "if the United States establishes that the position of the United States in the proceeding was substantially justified." 26 U.S.C. § 7430(c)(4)(B)(i). (Prior to enactment of this provision by P.L. 104-168 , § 701(b), the burden of proof as to this issue was on the taxpayer.) Unlike the EAJA, § 7430 does not allow the government to avoid a fee award where "special circumstances make an award unjust." Section 6673(a) of the Internal Revenue Code, 26 U.S.C. § 6673(a), as amended by P.L. 101-239 , § 7731(a), allows the Tax Court to impose upon a taxpayer a penalty of up to $25,000 if it finds that— (A) proceedings before it have been instituted or maintained by the taxpayer primarily for delay, (B) the taxpayer's position in such proceedings is frivolous or groundless, or (C) the taxpayer unreasonably failed to pursue available administrative remedies. Section 6673(a) also allows the Tax Court to require any attorney who unreasonably and vexatiously multiplies the proceedings in any case to pay personally the excess costs, expenses, and attorneys' fees reasonably incurred because of such conduct. If the attorney is appearing on behalf of the IRS, then the United States must pay the amount awarded. Section 6673(b) allows the court to impose upon a taxpayer a penalty of up to $10,000 "[w]henever it appears to the court that the taxpayer's position in proceedings ... under section 7433 is frivolous or groundless...." Section 7433 authorizes taxpayers to sue the United States in federal district court if an Internal Revenue Service officer or employee "recklessly or intentionally disregards" any provision of the Internal Revenue Code. Under § 7433, a prevailing taxpayer may recover up to $100,000 of "(1) actual, direct economic damages sustained as a proximate result of the reckless or intentional actions of the officer or employee, and (2) the costs of the action." Awards of attorneys' fees are already provided for by § 7430. Article III, § 2, of the United States Constitution provides that the judicial power of the United States (i.e., federal court jurisdiction) shall extend to controversies between a state and citizens of another state. The Eleventh Amendment modifies this section by providing that the judicial power of the United States shall not be construed to extend to any suit against a state by citizens of another state or of a foreign state. In Hans v. Louisiana , 134 U.S. 1 (1890), the Supreme Court construed the Eleventh Amendment to prohibit a citizen from suing even his own state in federal court. In Alden v. Maine , 527 U.S. 706 (1999), the Supreme Court held that the Eleventh Amendment prevents Congress from authorizing private suits against a state, even in its own courts, without the state's consent. Notwithstanding the Eleventh Amendment, a state may consent to suit by its citizens or citizens of other states. Missouri v. Fiske , 290 U.S. 18, 24 (1933). In Ex parte Young , 209 U.S. 123 (1908), the Supreme Court held that federal courts may enjoin state officials as individuals from enforcing state laws that violate the United States Constitution. The Court reasoned that an official who attempts such action "comes into conflict with the superior authority of that Constitution, and he is in that case stripped of his official or representative character and is subject in his person to the consequences of his individual conduct." Id. at 159-160. One commentator noted: The idea that the court restrained the individual rather than the state was, of course, pure fiction, since the state could not act other than through its officials. But through this fiction the Court apparently sought to guarantee the nation's authority to limit state action. In Edelman v. Jordan , 415 U.S. 651 (1974), the Supreme Court explicitly limited the types of relief that may be granted under the theory of Ex parte Young . The plaintiffs in Edelman had sued state officials, alleging that the officials were administering a welfare program in a manner inconsistent with various federal regulations. The district court found for the plaintiffs and ordered the state officials to comply with federal regulations in the future and to disburse all benefits wrongfully withheld in the past. The court of appeals affirmed. The Supreme Court affirmed the prospective portion of the district court's order, but reversed the retroactive portion of the order, holding that because the award "must inevitably come from the general revenues of the State of Illinois," it "resembles far more closely the monetary award against the State itself ... than it does the prospective injunctive relief awarded in Ex parte Young ." Id. at 665. The Court acknowledged that "the difference between the type of relief barred by the Eleventh Amendment and that permitted under Ex parte Young will not in many instances be that between day and night." Id. at 667. This is evidenced by the fact that the prospective portion of the district court's order, as well as the retroactive portion, necessarily required the payment of state funds, but this the Court termed a permissible "ancillary effect" of the prospective order. In Fitzpatrick v. Bitzer , 427 U.S. 445, 456 (1976), the Supreme Court lessened the importance of its ruling in Edelman by holding that the Eleventh Amendment is "necessarily limited by the enforcement provisions of § 5 of the Fourteenth Amendment." In Fitzpatrick the plaintiffs had sued a state official under Title VII of the Civil Rights Act of 1964, which was enacted under § 5 of the Fourteenth Amendment and which includes a fee-shifting provision. Like the plaintiffs in Edelman , the plaintiffs in Fitzpatrick had sought prospective injunctive relief and retroactive benefits; in addition, in Fitzpatrick they had sought attorneys' fees. The district court awarded only the prospective relief, holding that the other relief was barred by Edelman . The court of appeals agreed that Edelman barred an award of retroactive benefits, but held that an award of attorneys' fees was a permissible ancillary benefit. The Supreme Court did not decide whether an award of attorneys' fees constituted an impermissible retroactive benefit or a permissible ancillary benefit. Instead, it reversed the denial of retroactive benefits, holding that neither they nor an award of attorneys' fees were barred in situations in which Congress, under § 5 of the Fourteenth Amendment, had provided for suits against states or state officials. The Supreme Court held, in other words, that the constitutional power of Congress to enforce "by appropriate legislation" the Fourteenth Amendment was intended to supersede the Eleventh Amendment and allow congressionally authorized suits (and awards of attorneys' fees) against both states and state officials. In Atascadero State Hospital v. Scanlon , 473 U.S. 234, 242 (1985), the Supreme Court held "that Congress may abrogate the States' constitutionally secured immunity from suit in federal court only by making its intention unmistakably clear in the language of the statute." Subsequently, Congress made explicit that states are not immune under the Eleventh Amendment from suits in federal court under any "Federal statute prohibiting discrimination by recipients of Federal financial assistance." 42 U.S.C. § 2000d-7. In Pennsylvania v. Union Gas Co. , 491 U.S. 1 (1989), the Supreme Court held that Congress also has the authority to override states' Eleventh Amendment immunity when legislating pursuant to the Commerce Clause. However, in Seminole Tribe of Florida v. Florida , 517 U.S. 44, 72 (1996), the Supreme Court overruled Pennsylvania v. Union Gas Co. , writing: "Even when the Constitution vests in Congress complete lawmaking authority over a particular area, the Eleventh Amendment prevents congressional authorization of suits by private parties against unconsenting States." The Court noted, however, that "an individual may [still] obtain injunctive relief under Ex parte Young in order to remedy a state officer's ongoing violation of federal law." Id . at 72 n.16. In Alden v. Maine , 527 U.S. 706, 712 (1999), the Supreme Court held "that the powers delegated to Congress under Article I of the United States Constitution do not include the power to subject nonconsenting States to private suits for damages in state courts." This decision continues to allow the federal government to sue the states in federal or state courts, and continues to allow private suits for damages in state courts under statutes enacted pursuant to the Fourteenth Amendment. In Hutto v. Finney , 437 U.S. 678 (1978), the Supreme Court affirmed two awards of attorneys' fees against the State of Arkansas: a $20,000 award by a federal district court and a $2,500 award for services on appeal by the Court of Appeals for the Eighth Circuit. The district court based its award on the bad faith exception to the American rule. The court of appeals affirmed this award on the basis of the Civil Rights Attorney's Fees Awards Act of 1976, 42 U.S.C. § 1988(b), which had been enacted while the appeal was pending, although the court of appeals noted that the award would have been justified under the bad faith exception. 548 F.2d 740, 742 n.6. Because § 1988(b) is a statute enacted pursuant to § 5 of the Fourteenth Amendment, and Fitzpatrick held that the Eleventh Amendment does not apply to such statutes, the Supreme Court apparently could have affirmed the district court fee award in Hutto on the basis of § 1988(b) merely by finding that § 1988(b) permitted awards of attorneys' fees against the states. The Court chose, however, to affirm on the basis of the bad faith exception. As the bad faith exception is a common law rule, not enacted pursuant to a statute that abrogates Eleventh Amendment immunity, the Court had to address the Eleventh Amendment question. It held that the district court award served the same purpose as a remedial fine imposed for civil contempt and did not constitute a retroactive monetary award, and therefore was not barred by the Eleventh Amendment under Edelman . In Missouri v. Jenkins , 491 U.S. 274, 280 (1989), the Supreme Court made clear that the "holding of Hutto ... was not just that Congress had spoken sufficiently clearly to overcome Eleventh Amendment immunity in enacting § 1988, but rather that the Eleventh Amendment did not apply to an award of attorney's fees ancillary to a grant of prospective relief." The holding of Missouri was that the Eleventh Amendment also does not apply to the calculation of the amount of a fee award and therefore does not prohibit enhancement of a fee award against a state to compensate for delay in payment. The $2,500 court of appeals award in Hutto was made solely pursuant to § 1988(b), and in affirming this award the Court held that Congress intended § 1988(b) to permit awards of attorneys' fees against the states. The Court based this conclusion on the legislative history of § 1988(b) and on the fact that § 1988(b) provides for fee awards "as part of the costs," and "[c]osts have traditionally been awarded without regard for the States' Eleventh Amendment immunity." Id . at 695. The Court also held that fees could be awarded against the state even though the state had not been named as a defendant. "Congress recognized that suits brought against individual officers for injunctive relief are for all practical purposes suits against the state itself." Id . at 700. Thus, in a suit for injunctive relief, the state, not the state official, may be held liable for fees under § 1988(b). However, in a suit for injunctive relief, a state official may be assessed fees under the common law bad faith standard, which was not affected by § 1988(b). Id . at 692 n.19, 693, 700. In addition, in Kentucky v. Graham , 473 U.S. 159 (1985), the Supreme Court indicated that state officials who are not, like judges (discussed below), immune from damages liability, may be sued in their personal capacities for damages under § 1983, and in such cases may be liable for fees even in the absence of bad faith. In such cases, however, the state will not be liable for fees. The holding in Hutto v. Finney that § 1988(b) permits fee awards against the states took on added importance in 1980, when the Supreme Court expanded the reach of § 1988(b) in Maine v. Thiboutot and Maher v. Gagne , both of which were discussed in detail in section VI of this report. Briefly, Maine v. Thiboutot permitted state courts to award fees in any action against a state for violation of any federal law (although subsequent cases discussed above narrowed this holding), and Maher v. Gagne permitted federal courts to do the same, provided there is a substantial claim raised under the Constitution or a statute enacted under § 5 of the Fourteenth Amendment. The Court left open the question whether the Eleventh Amendment allows federal courts to award fees in wholly statutory non-civil rights cases. In Supreme Court of Virginia v. Consumers Union of the United States , 446 U.S. 719 (1980), and in Pulliam v. Allen , 466 U.S. 522 (1984), the issue arose whether state judges, sued in their official capacities under 42 U.S.C. § 1983, enjoy any immunity from awards of attorneys' fees that other state officials lack. The answer, the Court found, depended upon whether the judges were sued for damages or injunctive relief, and whether the conduct concerning which they were sued had been performed in their legislative, enforcement, or adjudicative capacity. In 1996, P.L. 104-317 , § 309, modified the law announced in Pulliam . In Consumers Union , the Virginia court's restrictions on lawyer advertising were found to violate the First Amendment's guarantee of freedom of speech. The Supreme Court held that in propounding the advertising prohibitions the Virginia court had acted in a legislative capacity, and that in such capacity it enjoys common law immunity from damages liability and from declaratory and injunctive relief, and thus from awards of attorneys' fees. However, the Court noted, although Consumers Union had alleged only that the Virginia court had promulgated the advertising prohibitions, the Virginia court, in addition to its legislative function, has adjudicative and enforcement authority in attorney disciplinary cases. In their adjudicative and enforcement capacities, judges enjoy absolute immunity from damages liability. However, in both these capacities, they are subject to suits for injunctive relief, and, under § 1988(b), to awards of attorneys' fees. ( Consumers Union held this with respect to courts' enforcement authority, and Pulliam held it with respect to their adjudicatory authority.) In Pulliam , the Court wrote: Petitioner insists that judicial immunity bars a fee award because attorney's fees are the functional equivalent of monetary damages and monetary damages indisputably are prohibited by judicial immunity. She reasons that the chilling effect of a damages award is not less chilling when the award is denominated attorney's fees. There is, perhaps, some logic to petitioner's reasoning. The weakness in it is that it is for Congress, not this Court, to determine whether and to what extent to abrogate the judiciary's common-law immunity. See Pierson v. Ray , 386 U.S., at 554. Congress has made clear in § 1988 its intent that attorney's fees be available in any action to enforce a provision of § 1983. 466 U.S. at 543. It should be emphasized that, under Pulliam , the state and not the judge ordinarily will be liable for attorneys' fees. As noted above, in Hutto , the Supreme Court held that, in injunctive suits, the state must pay fees awarded under § 1988(b); state officials may be held personally liable for fees only under the common law bad faith standard. In 1996, P.L. 104-317 , § 309(b), amended 42 U.S.C. § 1988(b) to make judicial officers immune from awards of costs, including attorneys' fees, for any "act or omission taken in such officer's judicial capacity ... unless such action was clearly in excess of such officer's jurisdiction." Section 309(a) prescribed the same rule for federal judicial officers who are subject to Bivens actions. Section 309(c) amended 42 U.S.C. § 1983 to prohibit injunctive relief against a state judicial officer "unless a declaratory decree was violated or declaratory relief was unavailable." Federal Rule of Civil Procedure 54(d), 28 U.S.C. App. Rule 54(d), defines the power of federal courts to allow costs to prevailing parties. It states: Except when express provision therefor is made in a statute of the United States or in these rules, costs shall be allowed as of course to the prevailing party unless the court otherwise directs; but costs against the United States, its officers, and agencies shall be imposed only to the extent permitted by law.... "Costs" that may be awarded are those items enumerated in 28 U.S.C. § 1920, which do not include attorneys' fees. Section 1920 provides that federal courts may "tax as costs" (order the losing party to pay) the following: (1) Fees of the clerk and marshal; (2) Fees of the court reporter for all or any part of the stenographic transcript necessarily obtained for use in the case; (3) Fees and disbursements for printing and witnesses; (4) Fees for exemplification and copies of papers necessarily obtained for use in the case; (5) Docket fees under section 1923 of this title; (6) Compensation of court appointed experts, compensation of interpreters, and salaries, fees, expenses, and costs of special interpretation services under section 1828 of this Title. In Crawford Fitting Co. v. J.T. Gibbons, Inc. , 482 U.S. 437, 438 (1987), the Supreme Court "addressed the power of federal courts to require a losing party to pay the compensation of the winner's expert witnesses." The Court held that "a federal court is bound by the limits of [28 U.S.C.] § 1821, absent contract or explicit statutory authority to the contrary." Id . at 439. Section 1821, the cited statute, provides that witnesses in federal courts "shall be paid an attendance fee of $40 per day for each day's attendance." Thus, if no contract or expert witness fee-shifting statute provides otherwise, a fee award to an expert witness may not exceed $40 per day; the only exception is "when the witness is court-appointed." Id . at 442. The Court based its opinion on its reading of 28 U.S.C. § 1821 together with 28 U.S.C. § 1920 and Federal Rule of Civil Procedure 54(d). It rejected the view that § 1920 does not preclude taxation of costs above and beyond the items listed, and more particularly, amounts in excess of the § 1821 fee. Thus, the discretion granted by Rule 54(d) is a separate source of power to tax as costs expenses not enumerated in § 1920. We think, however, that no reasonable reading of these provisions together can lead to this conclusion, for petitioners' view renders § 1920 superfluous. If Rule 54(d) grants courts discretion to tax whatever costs may seem appropriate, then § 1920, which enumerates the costs that may be taxed, serves no role whatsoever. We think the better view is that § 1920 defines the term "costs" as used in Rule 54(d). Section 1920 enumerates expenses that a federal court may tax as a cost under the discretionary authority found in Rule 54(d). Id . at 441-442. In West Virginia University Hospitals, Inc. v. Casey , 499 U.S. 83, 87 (1991), the Supreme Court held that "the term 'attorney's fee' in § 1988" does not provide "the 'explicit statutory authority' required by Crawford Fitting " for the shifting of expert fees. The Civil Rights Act of 1991, P.L. 102-166 , §113, authorized courts to include expert fees as part of the attorney's fee under 42 U.S.C. § 1981 and 1981a, and under Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e-5(k). 42 U.S.C. § 1988(c). At common law, the United States could recover costs "as if they were a private individual." Pine River Logging Co. v. United States , 186 U.S. 279, 296 (1902). No statute has changed this. Costs against the United States, however, at common law were barred by sovereign immunity, absent express statutory consent. Id . The provision of Rule 54(d) that "costs against the United States, its officers, and agencies shall be imposed only to the extent permitted by law," "is merely declaratory and effected no change in principle." Reconstruction Finance Corp. v. J.G. Menihan Corp. , 312 U.S. 81, 83 (1941). Costs were made allowable against the United States in 1966 by 28 U.S.C. § 2412(a), which provides: Except as otherwise specifically provided by statute, a judgment for costs, as enumerated in section 1920 of this title but not including the fees and expenses of attorneys may be awarded to the prevailing party in any civil action brought by or against the United States.... A Senate report said that the 1966 change was enacted to correct the— disparity of treatment between private litigants and the United States concerning the allowance of court costs.... As things now stand, only in rare cases can costs be awarded against the United States in the event that it is the losing party. On the other hand when it sues on a claim and wins, it can collect full costs. Whether this disparity has been entirely eliminated appears questionable, because Rule 54(d), which allows costs against parties other than the United States, provides that costs "shall be allowed as of course," whereas § 2412, which allows costs against the United States, provides only that costs "may be awarded." The amount of attorneys' fees to be awarded pursuant to a statutory or common law exception to the American rule "should, as a general rule, be fixed in the first instance by the District Court, after hearing evidence as to the extent and nature of the services rendered." Perkins v. Standard Oil of California , 399 U.S. 222, 223 (1970). The evidence presented to the district court must be relatively specific: It is not necessary to know the exact number of minutes spent nor the precise activity to which each hour was devoted nor the specific attainment of each attorney. But without some fairly definite information as to the hours devoted to various general activities, e.g. , pretrial discovery, settlement negotiations, and the hours spent by various classes of attorneys, e.g. , senior partners, junior partners, associates, the court cannot know the nature of the services for which compensation is sought. Lindy Bros. Builders, Inc. v. American Radiator & Standard Sanitary Corp. , 487 F.2d 161, 167 (3 rd Cir. 1973). In Pennsylvania v. Delaware Valley Citizens ' Council for Clean Air ( Delaware Valley I) , 478 U.S. 546, 562-566 (1986), the Supreme Court explained "the proper measure for determining the 'reasonableness' of a particular fee award": One method, first employed by the Fifth Circuit in Johnson v. Georgia Highway Express, Inc. , 488 F.2d 714 (1974), involved consideration of 12 factors. Johnson was widely followed by other courts, and was cited with approval by both the House and the Senate when [42 U.S.C.] § 1988 was enacted.... Setting attorney's fees by reference to a series of sometimes subjective factors placed unlimited discretion in trial judges and produced disparate results. For this reason, the Third Circuit developed another method of calculating "reasonable" attorney's fees. This method, known as the "lodestar" approach, involved two steps. First, the court was to calculate the "lodestar," determined by multiplying the hours spent on a case by a reasonable hourly rate of compensation for each attorney involved. Lindy Bros. Builders, Inc. v. American Radiator & Standard Sanitary Corp. , 487 F. 2d 161, 167 (CA3 1973) ( Lindy I ). Second, using the lodestar figure as a starting point, the court could then make adjustments to this figure, in light of "(1) the contingent nature of the case, reflecting the likelihood that hours were invested and expenses incurred without assurance of compensation; and (2) the quality of the work performed as evidenced by the work observed, the complexity of the issues and the recovery obtained."... We first addressed the question of the proper manner in which to determine a "reasonable" attorney's fee in Hensley v. Eckerhart , 461 U.S. 424 (1983). We there adopted a hybrid approach that shared elements of both the Johnson and the lodestar method of calculation. "The most useful starting point for determining the amount of a reasonable fee is the number of hours reasonably expended on the litigation multiplied by a reasonable hourly rate...." To this extent, the method endorsed in Hensley follows the Third Circuit's description of the first step of the lodestar approach. Moreover, we went on to state: "The product of reasonable hours times a reasonable rate does not end the inquiry. There remain other considerations that may lead the district court to adjust the fee upward or downward. . . . We then took a more expansive view of what those "other considerations" might be, however, noting that "[t]he district court also may consider [the] factors identified in Johnson v. Georgia Highway Express, Inc. , 488 F. 2d 714, 717-719 (CA5 1974), though it should note that many of these factors usually are subsumed within the initial calculation of hours reasonably expended at a reasonable hourly rate." Id. at 434, n. 9 (citation omitted). We further refined our views in Blum v. Stenson , 465 U.S. 886 (1984).... Blum also limited the factors which a district court may consider in determining whether to make adjustments to the lodestar amount. Expanding on our earlier finding in Hensley that many of the Johnson factors "are subsumed within the initial calculation" of the lodestar, we specifically held in Blum that the "novelty [and] complexity of the issues," "the special skill and experience of counsel," the "quality of representation," and the "results obtained" from the litigation are presumably fully reflected in the lodestar amount and thus cannot serve as independent bases for increasing the basic fee award. 465 U.S., at 898-900. Although upward adjustments of the lodestar figure are still permissible, id. at 901, such modifications are proper only in certain "rare" and "exceptional" cases, supported by both "specific evidence" on the record and detailed findings by the lower courts. In short, the lodestar figure includes most, if not all of the relevant factors comprising a "reasonable" attorney's fee, and it is unnecessary to enhance the fee for superior performance in order to serve the statutory purpose of enabling plaintiffs to secure legal assistance. In Delaware Valley I , the Court indicated that to be entitled to an upward adjustment, a prevailing party must show that it would have been unable "to obtain counsel without any promise of reward for extraordinary performance." It must present "specific evidence as to what made the results it obtained ... so 'outstanding.'" It must show "that the lodestar figure ... was far below awards made in similar cases where the court found equally superior quality of performance." Finally, to adjust a fee upward, a court must make "detailed findings as to why the lodestar amount was unreasonable, and in particular as to why the quality of representation was not reflected in the number of hours times the reasonable hourly rate." 478 U.S. at 567-568. The Court left open "the question of upward adjustment ... based on the likelihood of success, or to put it another way, the risk of loss." Id . at 568. By "risk of loss" the Court apparently meant an attorney's risk of losing and not being paid at all because he had agreed to represent his client on a contingency basis, being paid out of the winnings or not at all. The Court answered this question in a second opinion in the same case. Pennsylvania v. Delaware Valley Citizens ' Council for Clean Air ( Delaware Valley II) , 483 U.S. 711 (1987), which was a 4-1-4 decision. Justice O'Connor concurred in parts of each plurality, which makes her opinion pivotal in determining what a majority of the Court decided in the case. Five justices (Justice O'Connor and the four who joined Justice Blackmun's dissent) decided that upward adjustments generally are appropriate in contingency fee cases. However, five justices (Justice O'Connor and the four who joined Justice White's plurality), decided that, even if "typical fee-shifting statutes are construed to permit supplementing the lodestar in appropriate cases by paying counsel for assuming the risk of nonpayment ... it was error to do so in this case." 483 U.S. at 728. Subsequently, however, in Burlington v. Dague , 505 U.S. 557, 567 (1992), the Court, "[a]dopting the position set forth in Justice White's opinion in Delaware Valley II ," held "that enhancement for contingency is not permitted under the fee-shifting statutes at issue." Those statutes were § 7002(e) of the Solid Waste Disposal Act, 42 U.S.C. § 6972(e), and § 505(d) of the Clean Water Act, 33 U.S.C. § 1365(d). However, the Court noted that the relevant language of these statutes "is similar to that of many other federal fee-shifting statutes ... ; our case law construing what is a 'reasonable' fee applies uniformly to all of them." Id . at 562. The Court's primary reason for its decision in Burlington was "that an enhancement for contingency would likely duplicate in substantial part factors already subsumed in the lodestar." Id . In Blum v. Stenson , 465 U.S. 886, 895 (1984), the Supreme Court held that "'reasonable fees' are to be calculated under [42 U.S.C.] § 1988 according to the prevailing market rates in the relevant community, regardless of whether the plaintiff is represented by private or nonprofit counsel." The Court rejected the position that awards be calculated according to the cost of providing legal services, which for legal aid groups that pay low salaries is usually less than the prevailing market rates. The Handicapped Children's Protection Act of 1986, P.L. 99-372 , which added an attorneys' fees provision to the Education of the Handicapped Act, adopted this feature of Blum v. Stenson , but at the same time prohibited upward adjustments entirely. The statute, 20 U.S.C. § 1415(e)(4)(C), provides: For purposes of this subsection, fees awarded under this subsection shall be based on rates prevailing in the community in which the action or proceeding arose for the kind and quality of services furnished. No bonus or multiplier may be used in calculating fees awarded under this subsection. In Laffey v. Northwest Airlines, Inc. , 746 F.2d 4 (D.C. Cir. 1984), cert. denied , 472 U.S. 1021 (1985), the court of appeals held that, for purposes of computing awards of attorneys' fees in civil rights cases, although a nonprofit legal organization is entitled under Blum v. Stenson to the prevailing market rate, a "for-profit" law firm that ordinarily charges less than the prevailing market rate—a "'quasi' public interest law firm," as the court called it in footnote 69—is entitled "in almost every case" only to its "established billing rates." Id. at 24. In Save Our Cumberland Mountains, Inc. v. Hodel , 857 F.2d 1516, 1520 (D.C. Cir. 1988) (en banc), the full court of appeals overruled Laffey , on the ground that its "anomalous" result was not intended by Congress. "Henceforth," the court wrote, "the prevailing market rate method heretofore used in awarding fees to traditional for-profit firms and public interest firms and public interest legal service organizations shall apply as well to those attorneys who practice privately and for profit but at reduced rates reflecting non-economic goals." Id. at 1524. In City of Riverside v. Rivera , 477 U.S. 561, 564 (1986), the Supreme Court held that, under 42 U.S.C. § 1988(b), an award of attorneys' fees is not "per se 'unreasonable' within the meaning of the statute if it exceeds the amount of damages recovered by the plaintiff in the underlying civil rights action." The Court wrote: Unlike most private tort litigants, a civil rights plaintiff seeks to vindicate important civil and constitutional rights that cannot be valued solely in monetary terms.... And, Congress has determined that "the public as a whole has an interest in the vindication of the rights conferred by the statutes enumerated in § 1988, over and above the value of a civil rights remedy to a particular plaintiff. . . ." Id . at 574. Nevertheless, in Farrar v. Hobby , 506 U.S. 103, 115 (1992), the Supreme Court held that, under 42 U.S.C. § 1988(b), "[w]hen a plaintiff recovers only nominal damages because of his failure to prove an essential element of his claim for monetary relief ... , the only reasonable fee is usually no fee at all." The Court held that a plaintiff who is awarded only nominal damages—in this case one dollar when he had sought $17 million—is a prevailing party for attorneys' fees purposes, as he had established "the violation of his right to procedural due process." Id . at 112. However, because he could not prove actual injury, he was not entitled to a fee award. What if a prevailing party is entitled to an award of "reasonable" fees from his opponent and has also agreed to pay his lawyer a contingent fee? Under 42 U.S.C. § 1988(b), if the "reasonable" fee is higher, then, the Supreme Court held in Blanchard v. Bergeron , 489 U.S. 87 (1989), the defendant must pay the higher fee. If the contingent fee is higher, then, the Supreme Court held in Venegas v. Mitchell , 495 U.S. 82 (1990), the defendant is liable only for the "reasonable" fee, but the plaintiff must still pay his lawyer the higher contingent fee. The Court emphasized in Venegas that "Section 1988 makes the prevailing party eligible for a discretionary award of attorney's fees." Id . at 87 (emphasis supplied by the Court). It would seem to follow that, in the Blanchard situation, where the "reasonable" fee is higher, the prevailing party may keep the difference between the "reasonable" fee paid by the defendant and the amount owed under the contingent fee agreement. This inference is supported by the Court's statement in Venegas that it "rejected the argument that the entitlement to a § 1988 award belongs to the attorney rather than the plaintiff." Id . at 89. Yet, in Blanchard , the Court wrote: Respondent cautions us that refusing to limit recovery to the amount of the contingency agreement will result in a "windfall" to attorneys who accept § 1983 actions. Yet the very nature of recovery under § 1988 is designed to prevent any such "windfall." Fee awards are to be reasonable.... 489 U.S. at 96 (emphasis added). In Missouri v. Jenkins , 491 U.S. 274 (1989), in addition to deciding the Eleventh Amendment question discussed in section IX of this report, the Supreme Court held that, under § 1988(b), the time of paralegals and law clerks should be considered in determining the amount of a fee award. Finally, there is the question of how to compute fee awards against the United States. Under the Equal Access to Justice Act and under the Internal Revenue Code, awards ordinarily are limited to $125 per hour. Apart from this, fee awards against the United States are calculated the same way as fee awards against other parties. Copeland v. Marshall , 641 F.2d 880 (D.C. Cir. 1980) ( en banc ). The full court of appeals in this case reversed an earlier opinion by a three judge panel of the court. 594 F.2d 244 (D.C. Cir. 1978). The panel had held that the Johnson guidelines: are applicable generally to Title VII cases against a federal agency, but that special caution must be shown by the trial court in scrutinizing the claims of attorneys for fees against a federal agency in such litigation. Special caution is required because of the incentive which the defendant's "deep pocket" offers to attorneys to inflate their billing charges and to claim far more as reimbursement than would be sought or could reasonably be recovered from most private parties. Id. at 250. To exercise that caution, the court wrote: "the trial court should give consideration to abandoning the traditional claimed hourly-fee starting point for its calculations in favor of a principle of reimbursement to a firm for its costs, plus a reasonable and controllable margin for profit." Id. at 251. This "cost-plus" formula would have lowered fee awards in Title VII cases against the federal government, and consequently had been called "a serious blow to the whole public interest law movement." ( N.Y. Times , November 14, 1978, at A25). The three judge panel, however, on June 29, 1979, denied a rehearing and issued an unreported opinion clarifying its decision. The full court of appeals reversed, writing that it did "not think that the amount of the fee should depend on the identity of the losing party." 641 F.2d at 894. It noted that Title VII provides that the "United States shall be liable for costs the same as a private person," and that the incentive supplied by fee awards to refrain from discrimination should not be less for the government than it is for private employers. Id. at 895. Furthermore, the court feared "that the proposed 'cost-plus' method of calculating fees would indeed become the inquiry of 'massive proportions' that we strive to avoid." Id. at 896. In sum, the court believed that in Title VII cases, against the government or otherwise, attorneys should be compensated "for the market value of the services rendered." Id. at 900. Rule 68 of the Federal Rules of Civil Procedure, 28 U.S.C. App. Rule 68, creates an exception to the general rule in federal courts that a prevailing party is entitled to collect its court costs from the losing party. "The plain purpose of Rule 68 is to encourage settlement and avoid litigation." Marek v. Chesny , 473 U.S. 1, 5 (1985). Rule 68 provides that if, at any time more than 10 days before a trial begins, a party defending against a claim offers a settlement including costs then accrued, and the offeree fails to accept the offer within 10 days, then, if the offeree wins the lawsuit, but the judgment he obtains "is not more favorable than the offer, the offeree must pay the costs incurred after the making of the offer." In other words, the plaintiff forfeits his right under Rule 54(d) to recover costs incurred after such time. In addition, the plaintiff must pay the defendant's costs incurred after such time. In Marek v. Chesny , the Supreme Court addressed the interaction of Rule 68 and the Civil Rights Attorney's Fees Awards Act of 1976, 42 U.S.C. § 1988(b). Section 1988(b) authorizes the award of "a reasonable attorney's fee as part of the costs" in suits brought under 42 U.S.C. § 1983, and several other civil rights statutes. The Court held that, if a lawsuit is brought under a statute, such as § 1988(b), that provides for awards of attorneys' fees as part of the costs, then the term "costs" in Rule 68 includes attorneys' fees. The Court viewed this as the "'plain meaning' interpretation of the interplay between Rule 68 and § 1988." Id . at 9. Though, under Marek v. Chesney , a prevailing civil rights plaintiff who has rejected a settlement offer for as much as he won must pay the defendant's post-offer costs, he never has to pay the defendant's post-offer attorneys' fees. This is because a civil rights defendant may not be awarded attorneys' fees unless he prevails, and unless the court determines that the plaintiff's action was "frivolous, unreasonable, or without foundation." Neither of these would be the case if the plaintiff prevailed. This decision in Marek v. Chesney means that Rule 68 creates an exception not only to Rule 54(d), but also to all statutes that authorize awards of attorneys' fees to prevailing parties as part of the costs. Under Marek v. Chesny , a prevailing plaintiff otherwise entitled to recover attorneys' fees under one of these statutes is not entitled to recover attorneys' fees incurred after an offer to settle was made if the prevailing plaintiff rejected the offer and then won no more than had been offered. The dissent in Marek v. Chesny pointed out that this means that "Rule 68 will operate to include the potential loss of otherwise-recoverable attorney's fees as an incentive to settlement in litigation under" the following statutes (of which the dissent listed 63): those that refer "to the awarding of 'attorney's fees as part of the costs,' to 'costs including attorney's fees,' and to 'attorney's fees and other litigation costs.'" Id . at 23. Rule 68 will not include the potential loss of attorneys' fees in statutes (of which the dissent listed 49) that refer "to the awarding of 'costs and a reasonable attorney's fee,' of 'costs together with a reasonable attorney's fee,' or simply of 'attorney's fees' without reference to costs." Id . In addition, as the dissent pointed out: "A number of statutes authorize the award of 'costs and expenses, including attorney's fees.' It is altogether uncertain how such statutes [of which the dissent listed 7] should be categorized under the Court's 'plain language' approach to Rule 68." Id . at 44. In short, the dissent believed that Marek v. Chesny sanctions "a senseless patchwork of fee-shifting that flies in the face of the fundamental purpose of the Federal Rules—the provision of uniform and consistent procedure in federal courts." Id . at 24. If Congress wishes to restore uniformity with respect to the effect of Rule 68 on awards of attorneys' fees, then it could amend Rule 68 to define "costs" as used in Rule 68 either to include or to exclude attorneys' fees in suits brought under statutes authorizing awards of attorneys' fees. If it defines "costs" to include attorneys' fees, then attorneys' fees incurred after an offer would not be recoverable by plaintiffs who reject a settlement offer and then fail to win more than they had been offered. If it defines "costs" to exclude attorneys' fees, then such parties would lose their opportunity under Rule 54(d) to be awarded costs incurred after an offer, but would retain their entitlement to an award of attorneys' fees. Alternatively, Congress could amend individual attorneys' fees statutes to provide that attorneys' fees may be awarded either as part of the costs or in addition to costs. It will also have to make this decision with respect to attorneys' fees statutes it enacts in the future. In the Handicapped Children's Protection Act of 1986, P.L. 99-372 , which was enacted after Marek v. Chesny , Congress adopted a compromise approach to settlement offers. It included a provision modeled on Rule 68 that bars recovery of attorneys' fees and costs of plaintiffs who reject settlement offers, and applies to administrative proceedings as well as to civil actions under the Individuals with Disabilities Education Act (formerly the Education of the Handicapped Act; see ch. VII of this report). However, it allows a prevailing plaintiff who would otherwise forfeit costs and attorneys' fees to recover them nevertheless if he had been substantially justified in rejecting a settlement offer. 20 U.S.C. § 1415(e)(4)(D). The conference report that accompanied the legislation stated: "Substantial justification for rejection would include relevant pending court decisions which could have an impact on the case in question." In Evans v. Jeff D. , 475 U.S. 717 (1986), the Supreme Court upheld the legality of negotiated waivers of attorneys' fees. Evans was a class action brought under 42 U.S.C. § 1983 seeking injunctive relief concerning the conditions of mentally and emotionally handicapped children institutionalized by the State of Idaho. One week before trial, the defendant offered the plaintiffs virtually all the injunctive relief they had sought—on condition that the plaintiffs waive their claim to fees and costs under 42 U.S.C. § 1988(b). The plaintiff's lawyer "determined that his ethical obligation to his clients mandated acceptance of the proposal" ( Id . at 722), but he requested the district court to approve the settlement except for the provision on costs and attorneys' fees. (Class action settlements must be approved by the court under Rule 23 of the Federal Rules of Civil Procedure.) The district court upheld the fee waiver, but the court of appeals reversed on the ground that § 1988(b) "normally requires an award of fees to prevailing plaintiffs in civil rights actions, including those who have prevailed through settlement. The court added that '[w]hen attorney's fees are negotiated as part of a class action settlement, a conflict of interest frequently exists between the class lawyers' interest in compensation and the class members' interest in relief.'" Id . at 725. If negotiated fee waivers are permitted, then a defendant can exploit a plaintiff's lawyer's ethical obligation to his client to force him to waive fees that Congress arguably intended him to recover. The Supreme Court rejected this view, holding that "[t]he statute and its legislative history nowhere suggest that Congress intended to forbid all waivers of attorney's fees...." Id . at 731. The Court added that "there are many ... civil rights actions in which potential liability for attorney's fees may overshadow the potential cost of relief on the merits and darken prospects for settlement if fees cannot be negotiated." Id . at 735. In response to these two points of the majority, the dissent argued first, that, although there is no evidence that Congress intended to ban all fee waivers, "[t]here is no evidence that Congress gave the question of fee waivers any thought at all" ( id . at 743-744), and second, that "a judicial policy favoring settlements cannot possibly take precedence over ... express congressional policy" favoring "incentives for lawyers to devote time to civil rights cases" ( id . at 760-761). The dissent concluded: Although today's decision will undoubtedly impair the effectiveness of the private enforcement scheme Congress established for civil rights legislation, I do not believe that it will bring about the total disappearance of "private attorneys general." It is to be hoped that Congress will repair this Court's mistake. In the meantime, other avenues of relief are available.... Indeed, several Bar Associations have already declared it unethical for defense counsel to seek fee waivers.... In addition, it may be that civil rights attorneys can obtain agreements from their clients not to waive attorney's fees. Id . at 765-766. Some federal statutes and regulations limit the amount attorneys may charge their clients for representing them before various federal agencies. These provisions have different types of limitations. For example, 42 U.S.C. § 406(a) limits contingent fees in agency proceedings under Title II of the Social Security Act to the lesser of 25 percent of past-due old-age, survivor, or disability benefits that are awarded, or $4,000; and 42 U.S.C. § 406(b) limits contingent fees in court proceedings under the same statute to 25 percent, with no dollar maximum. Contingent fees in cases before the Department of Veterans Affairs are limited by 38 U.S.C. § 5904(d) to 20 percent of past-due benefits awarded; 15 U.S.C. §§ 79g(d)(4) and 79j(b)(2)) provide that the amount of compensation paid under the Public Utility Holding Company Act of 1935 is subject to approval of the Securities and Exchange Commission; and 42 U.S.C. § 1383(d)(2) provides that the Secretary of Health and Human Services shall by rule and regulation prescribe maximum fees in Supplemental Security Income cases. Some of these attorneys' fees limitations are controversial because, although they may protect claimants from having to pay to their attorneys a large portion of any amount awarded, they may also so limit fees as to deter lawyers from handling cases, thus in effect denying claimants legal representation. The Supreme Court, however, held that the former $10 ceiling in Veterans' Administration cases is not unconstitutional for this reason. Walters v. National Association of Radiation Survivors , 473 U.S. 305 (1985). The Court noted Congress's desire "that the system should be as informal and non-adversarial as possible." Id . at 323-324. The Court did not, however, preclude the possibility that the $10 limitation could be unconstitutional as applied in a particular case. See , id . at 336 (O'Connor, J., concurring). In United States Department of Labor v. Triplett , 494 U.S. 715 (1990), the Supreme Court upheld the fee limitations of the Black Lung Benefits Act, 30 U.S.C. § 932(a), which are incorporated from the Longshore and Harbor Workers' Compensation Act, 33 U.S.C. § 928. These limitations prohibit an attorney from receiving a fee unless approved by the appropriate agency or court. In addition, "[t]he Department's regulations invalidate all contractual arrangements for fees ... and the Department will not approve a fee if the claimant is unsuccessful." Id . at 718. The Court concluded that there was no evidence adequate to "establish either that black lung claimants are unable to retain qualified counsel or that the cause of such inability is the attorney's fee system administered by the Department." Id . at 726 (emphasis in original). Therefore, there was "no basis for concluding that that system deprives claimants of property without due process of law." Id . The American Bar Association's Special Committee on Federal Limitations on Attorneys' Fees recommended in August, 1980 that Congress enact legislation establishing uniform principles for the regulation of attorneys' fees in proceedings conducted before federal administrative agencies, and that such legislation prohibit arbitrary maximum fees and provide for reasonable fees. Federal agencies, like federal courts, may not, absent statutory authority, order one party to a proceeding to pay the attorneys' fees of another. Even the common law exceptions to the American rule are unavailable to federal agencies, as those exceptions stem from the inherent power of federal courts to do equity. Turner v. Federal Communications Commission , 514 F.2d 1354 (D.C. Cir. 1975). In addition, courts of appeals for two circuits have held that, absent statutory authority, an agency may not pay the attorneys' fees of participants in its proceedings. Greene County Planning Board v. Federal Power Commission , 559 F.2d 1227 (2 nd Cir. 1976), rev ' d on rehearing en banc , 559 F.2d at 1237, cert. denied , 434 U.S. 1086 (1978); Pacific Legal Foundation v. Goyan , 664 F.2d 1221 (4 th Cir. 1981). Three federal agencies have explicit statutory authority to provide compensation for reasonable attorneys' fees, expert witness fees, and other costs of participating in their proceedings: the Environmental Protection Agency, which has such authority for rulemaking proceedings under the Toxic Substances Control Act (15 U.S.C. § 2605(c)(4)), the Federal Energy Regulatory Commission, which has such authority for all proceedings before it (16 U.S.C. § 825q-1(b)(2)), and the Department of State, which has such authority for all proceedings, advisory committees, and delegations (22 U.S.C. § 2692). In addition, the Consumer Product Safety Commission may contribute to any person's cost with respect to participation with the Commission in the development of a consumer product safety standard (15 U.S.C. § 2056(c)). Notwithstanding these statutes, Congress has refused to allow EPA or FERC to compensate participants in their proceedings. P.L. 103-327 (1994), § 510, which appropriated funds for EPA, provides: None of the funds in this Act shall be used to pay the expenses of, or otherwise compensate, non-Federal parties intervening in regulatory or adjudicatory proceedings. Nothing herein affects the authority of the Consumer Product Safety Commission pursuant to section 7 of the Consumer Product Safety Act (15 U.S.C. 2056 et seq.). P.L. 102-377 (1992), § 502, which appropriated funds for FERC, provides: "None of the funds in this Act or subsequent Energy and Water Development Appropriations Acts shall be used to pay the expenses of, or otherwise compensate, parties intervening in regulatory or adjudicatory proceedings funded in such Acts." At one time, several federal agencies without explicit statutory authority to fund intervenors did so under what they viewed as their general statutory powers, and had the support of the Comptroller General in so doing. The latter, in a decision (B-92288), wrote: [I]f the NRC in the exercise of its administrative discretion, determines that it cannot make the required determination unless it extends financial assistance to certain interested parties who require it, and whose participation is essential to dispose of the matter before it, we would not object to the use of appropriated funds for this purpose. The courts, however, decided the Greene County and Pacific Legal Foundation cases cited above, and Congress eliminated most intervenor funding by prohibiting it in appropriations measures, such as those cited above. One line of arguments for and against the American rule centers around the philosophical question of whose expense an attorney should be. "In support of the American rule, it has been argued that since litigation is at best uncertain, one should not be penalized for merely defending or prosecuting a lawsuit...." Fleischmann v. Maier Brewing Co. , 386 U.S. 714, 718 (1967). "[T]he expenses of litigation are ... not the 'natural and proximate consequences of the wrongful act' ... but are remote, future and contingent." St. Peter ' s Church v. Beach , 26 Conn. 355, 366 (1857). On the other hand, it has been noted that an injured person will not be made whole if he has to bear the expense of a lawyer. "[A] person who is successful in litigation is a part loser because he has to pay his own expenses and counsel fees, except a few minor items that are taxable as costs." Rodulfa v. United States , 295 F. Supp. 28 (D.D.C. 1969), appeal dismissed , 461 F.2d 1240 (D.C. Cir. 1972), cert. denied , 409 U.S. 949 (1972). "On what principle of justice can a plaintiff wrongfully rundown on a public highway recover his doctor's but not his lawyer's bill?" Judicial Council of Massachusetts, First Report , 11 Massachusetts Law Quarterly 1, 64 (1925). Another line of arguments centers around the question of whether keeping or abandoning the American rule will more effectively further the public policy of encouraging meritorious claims and deterring non-meritorious ones. "Current practice tends to deter prosecution of even clearly meritorious claims by litigants who could at best recover less than the often high expenses of counsel.... And what is true for plaintiffs also holds true for defendants: the cost of defending against an unjust small claim may easily exceed the cost of simply paying what is demanded. The result is distasteful, for it ranks legal rights by dollar value...." Court Awarded Attorney ' s Fees and Equal Access to the Courts , 122 University of Pennsylvania Law Review 636, 650 (1974). Requiring the loser to pay the winner's attorneys' fees might encourage litigation of some meritorious claims and discourage litigation of some nonmeritorious ones. On the other hand, the uncertainty of litigation might also lead to the opposite results. "[T]he poor might be unjustly discouraged from instituting actions to vindicate their rights if the penalty for losing included the fees of their opponents' counsel." Fleischmann , supra . In addition, non-meritorious claims might be encouraged by the prospect of avoiding the expense of a lawyer. However, it has also been argued in support of requiring losers to pay winners' lawyers' fees that, while conceding the uncertainty of litigation, it should be assumed that courts will more often than not arrive at a correct result. Otherwise, courts might as well be dispensed with entirely, as it would be cheaper and less time-consuming simply to flip a coin. In support of the American rule it has also been argued that "the time, expense, and difficulties of proof inherent in litigating the question of what constitutes reasonable attorney's fees would pose substantial burdens for judicial administration." Fleischmann , supra . Since this comment was made, however, Congress has enacted many fee-shifting statutes that require courts to determine what constitutes a reasonable fee. It has also been argued that abandonment of the American rule might have serious consequences for developing areas of the law, since potential litigants might be loath to espouse novel legal theories for fear of incurring additional expenses if they do not prevail. Finally, since the prospect of an award of attorneys' fees might at times encourage suits and at other times deter them, the crowding of court calendars has been cited as an argument both for and against the American rule. Until the enactment of P.L. 105-119 (known as the Hyde Amendment) in 1997, no federal statutory or common law exceptions to the American rule authorized fee-shifting from the losing to the winning party in federal criminal cases. Of course, the Supreme Court has held that the Constitution requires the government to provide for the legal representation of indigent criminal defendants. Congress does so with respect to persons accused of federal crimes in the Criminal Justice Act, 18 U.S.C. § 3006A. P.L. 105-119 , § 617, codified at 18 U.S.C. § 3006A note, provides, in pertinent part: the [federal] court, in any criminal case (other than a case in which the defendant is represented by assigned counsel paid for by the public) ... may award to a prevailing party, other than the United States, a reasonable attorney's fee and other litigation expenses, where the court finds that the position of the United States was vexatious, frivolous, or in bad faith, unless the court finds that special circumstances make an award unjust. Such awards shall be granted pursuant to the procedures and limitations (but not the burden of proof) provided for an award under section 2412 of title 28, United States Code.... Section 2412 is the Equal Access to Justice Act, and the procedures and limitations referred to have been held to be those mentioned in § 2412(d), including the $125 per hour cap, and the ineligibility for fee awards of prevailing parties whose assets exceed the amounts specified. (These are spelled out in ch. III, supra .) The burden of proof under EAJA is on the United States to prove that its position was substantially justified; the burden of proof under P.L. 105-119 is on the prevailing defendant to prove that the position of the United States was vexatious, frivolous, or in bad faith. "[A] determination that a prosecution was 'vexatious' for the purposes of the Hyde Amendment requires both a showing that the criminal case was objectively deficient, in that it lacked either legal merit or factual foundation, and a showing that the government's conduct, when viewed objectively, manifests maliciousness or an intent to harass or annoy." P.L. 105-119 does not define "prevailing party," so the courts may have to determine whether it includes, for example, a defendant against whom charges are dropped prior to trial, a defendant who is convicted of a lesser charge than the one brought, or a defendant whose conviction is reversed on appeal. One court has held that a defendant was "not a 'prevailing party' because he was not acquitted or otherwise exonerated. Defendant voluntarily settled his case with the advice of counsel by signing the Diversion Agreement, under which Defendant acknowledged paying the 'capping' fee, paid restitution, performed community service and submitted to 'probation-like reporting.'" Another court rejected "the Government's call for a bright-line rule that a dismissal without prejudice can never render a defendant a prevailing party under the statute." It also held that the EAJA requirement "of a 'final judgment' is incorporated into the Hyde Amendment. Using this term, the Court further finds that, under the facts present here, both the dismissals with and without prejudice are final judgments under the Hyde Amendment. If the Court were to accept the Government's position that a dismissal without prejudice is never a 'final judgment' under the Hyde Amendment, then Mr. Gardner's only alternative would be to wait to request attorneys' fees until the statute of limitations on each of the charges had expired. This result is inconsistent with both logic and the purpose behind the statute, which is to deter vexatious governmental conduct." Ethics in Government Act of 1978 2 U.S.C. § 288i(d) ( see also , 28 U.S.C. § 593(f)) "The Senate may by resolution authorize the reimbursement of any Member, officer, or employee of the Senate who is not represented by the [Senate Legal] Counsel for fees and costs, including attorneys' fees, reasonably incurred in obtaining representation. Such reimbursement shall be from funds appropriated to the contingent fund of the Senate." Federal Contested Elections Act 2 U.S.C. § 396 "The committee [on House Administration of the House of Representatives] may allow any party reimbursement from the contingent fund of the House of Representatives of his reasonable expenses of the contested election case, including reasonable attorneys fees...." Government Employee Rights Act of 1991 2 U.S.C. § 1220(e) "If the individual referred to in subsection (a) is the prevailing party in a proceeding under this section, attorney's fees maybe allowed by the court in accordance with the standards prescribed under section 706(k) of the Civil Rights Act of 1964 (42 U.S.C. 2000e-5(k))." Congressional Accountability Act of 1995 2 U.S.C. § 1361(a) "If a covered employee, with respect to any claim under this chapter, or a qualified person with a disability, with respect to any claim under section 1331 of this title, is a prevailing party in any proceeding under section 1405, 1406, 1407, or 1408 of this title, the hearing officer, Board, or court, as the case may be, may award attorney's fees, expert fees, and any other costs as would be appropriate if awarded under section 2005e-5(k) of Title 42." Presidential and Executive Office Accountability Act 3 U.S.C. § 435(a) ( see also , 28 U.S.C. § 3905(a)) "If a covered employee, with respect to any claim under this chapter, or a qualified person with a disability, with respect to any claim under section 421 [making sections of the Americans with Disabilities Act of 1990 applicable to the White House and specified other executive facilities], is a prevailing party in any proceeding under section 453(1), the administrative agency may award attorney's fees, expert fees, and other costs as would be appropriate if awarded under section 706(k) of the Civil Rights Act of 1964." Equal Access to Justice Act 5 U.S.C. § 504(a)(1) ( see also , 28 U.S.C. § 2412) "An agency that conducts an adversary adjudication shall award, to the prevailing party other than the United States, fees and other expenses incurred by that party in connection with that proceeding, unless the adjudicative officer of the agency finds that the position of the agency was substantially justified or that special circumstances make an award unjust." Freedom of Information Act 5 U.S.C. § 552(a)(4)(E)(i) "The court may assess against the United States reasonable attorney fees and other litigation costs reasonably incurred in any case under this paragraph in which the complainant has substantially prevailed." 5 U.S.C. § 552(a)(4)(E)(ii) "For purposes of this subparagraph, a complainant has substantially prevailed if the complainant has obtained judicial relief through either—(I) a judicial order, or an enforceable written agreement or consent decree; or (II) a voluntary or unilateral change in position by the agency, if the complainant's claim is not insubstantial." Privacy Act 5 U.S.C. § 552a(g)(2)(B) "The court may assess against the United States reasonable attorney fees and other litigation costs reasonably incurred in any case under this paragraph in which the complainant has substantially prevailed." 5 U.S.C. § 552a(g)(3)(B) "The court may assess against the United States reasonable attorney fees and other litigation costs reasonably incurred in any case under this paragraph in which the complainant has substantially prevailed." 5 U.S.C. § 552a(g)(4) "In any suit brought under the provisions of subsection (g)(1)(C) or (D) of this section in which the court determines that the agency acted in a manner which was intentional or willful, the United States shall be liable to the individual in an amount equal to the sum of ... the costs of the action together with reasonable attorney fees as determined by the court." Government in the Sunshine Act 5 U.S.C. § 552b(i) "The court may assess against any party reasonable attorney fees and other litigation costs reasonably incurred by any other party who substantially prevails in any action brought in accordance with the provisions of subsection (g) or (h) of this section, except that costs may be assessed against the plaintiff only where the court finds that the suit was initiated by the plaintiff primarily for frivolous or dilatory purposes. In the case of assessment of costs against an agency, the costs may be assessed by the court against the United States." Whistleblower Protection Act of 1989 5 U.S.C. § 1204(m)(1) "[T]he Board, or an administrative law judge or other employee of the Board designated to hear a case arising under section 1215, may require payment by the agency involved of reasonable attorney fees incurred by an employee or applicant for employment if the employee or applicant is the prevailing party and the Board, administrative law judge, or other employee (as the case may be) determines that payment by the agency is warranted in the interest of justice, including any case in which a prohibited personnel practice was engaged in by the agency or any case in which the agency's action was clearly without merit." 5 U.S.C. § 1204(m)(2) "If an employee or applicant for employment is the prevailing party of a case arising under section 1215 and the decision is based on a finding of discrimination prohibited under section 2302(b)(1) of this title, the payment of attorney fees shall be in accordance with the standards prescribed under section 706(k) of the Civil Rights Act of 1964 (42 U.S.C. 2000e-5(k))." 5 U.S.C. § 1214(g) "If the Board orders corrective action under this section, such corrective action may include ... (2) reimbursement for attorney's fees...." 5 U.S.C. § 1221(g)(1)(B) "Corrective action shall include attorney's fees and costs...." 5 U.S.C. § 1221(g)(2) "If an employee, former employee, or applicant for employment is the prevailing party before the Merit Systems Protection Board, and the decision is based on a finding of a prohibited personnel practice, the agency involved shall be liable to the employee, former employee, or applicant for reasonable attorney's fees and any other reasonable costs incurred." 5 U.S.C. § 1221(g)(3) "If an employee, former employee, or applicant for employment is the prevailing party in an appeal from the Merit Systems Protection Board, the agency involved shall be liable to the employee, former employee, or applicant for reasonable attorney's fees and any other reasonable costs incurred, regardless of the basis of the decision." Federal Erroneous Retirement Coverage Corrections Act 5 U.S.C. § 8331 note ( P.L. 106-265 , § 2208(a)(2)) "The Director of the Office of Personnel Management may ... (2) provide for the reimbursement of necessary and reasonable expenses incurred by an individual with respect to settlement of a claim for losses resulting from a retirement coverage error, including attorney's fees, court costs, and other actual expenses...." Civil Service Reform Act of 1978 5 U.S.C. § 5596(b)(1) "An employee of an agency who ... is found ... to have been affected by an unjustified or unwarranted personnel action which has resulted in the withdrawal or reduction of all or a part of the pay, allowances, or differentials of the employee—(A) is entitled, on correction of the personnel action, to receive ... (ii) reasonable attorney fees related to the personnel action which ... shall be awarded in accordance with standards established under section 7701(g) of this title." 5 U.S.C. § 7701(g) "(1) Except as provided in paragraph (2) of this subsection, the Board ... may require payment by the agency involved of reasonable attorney fees incurred by the employee or applicant for employment if the employee or applicant for employment is the prevailing party and the Board ... determines that payment by the agency is warranted in the interest of justice...." "(2) If an employee or applicant for employment is the prevailing party and the decision is based on a finding of discrimination prohibited under section 2302(b)(1) of this title, the payment of attorney fees shall be in accordance with the standards prescribed under section 706k of the Civil Rights Act of 1964 (42 U.S.C. 2000e-5(k))." Implementing Recommendations of the 9/11 Commission Act of 2007 6 U.S.C. § 1104(c) "Any person or authorized official found to be immune from civil liability under this section shall be entitled to recover from the plaintiff all reasonable costs and attorney fees." This statute immunizes people who, in good faith and based on objectively reasonable suspicion, report to an authorized official suspicious activity relating to passenger transportation; it also provides immunity to authorized officials regarding reasonable actions that they take, in good faith, to respond to the reported activity. Commodity Exchange Act 7 U.S.C. § 18(c) "In case a complaint is made by a nonresident of the United States, the complainant shall be required, before any formal action is taken on his complaint, to furnish a bond in double the amount of the claim conditioned upon the payment of costs, including a reasonable attorney's fee for the respondent if the respondent shall prevail...." 7 U.S.C. § 18(d) "If the petitioner finally prevails, he shall be allowed a reasonable attorney's fee, to be taxed and collected as a part of the costs of the suit." 7 U.S.C. § 18(e) "If the appellee prevails, he shall be allowed a reasonable attorney's fee to be taxed and collected as a part of his costs." Packers and Stockyards Act 7 U.S.C. § 210(f) "If the petitioner finally prevails, he shall be allowed a reasonable attorney's fee to be taxed and collected as a part of the costs of the suit." Perishable Agricultural Commodities Act 7 U.S.C. § 499f(e) "In case a complaint is made by a nonresident of the United States ... the complainant shall be required ... to furnish a bond ... conditioned upon the payment of costs, including a reasonable attorney's fee for respondent if the respondent shall prevail...." 7 U.S.C. § 499g(b) "If the petitioner finally prevails, he shall be allowed a reasonable attorney's fee, to be taxed and collected as a part of the costs of the suit." 7 U.S.C. § 499g(c) "Either party adversely affected by the entry of a reparation order by the Secretary may ... appeal therefrom.... Such appeal shall not be effective unless ... the appellant also files with the clerk a bond ... conditioned upon the payment of the judgment entered by the court, plus interest and costs, including a reasonable attorney's fee for the appellee, if the appellee shall prevail.... [I]f appellee prevails he shall be allowed a reasonable attorney's fee to be taxed and collected as a part of his costs." Federal Crop Insurance Act 7 U.S.C. § 1507(c) "The Board shall provide such agents and brokers with indemnification, including costs and reasonable attorney fees, from the Corporation for errors or omissions on the part of the Corporation or its contractors for which the agent or broker is sued or held liable, except to the extent the agent or broker has caused the error or omission." 7 U.S.C. § 1508(j)(3) "The Corporation shall provide approved insurance providers with indemnification, including costs and reasonable attorney fees incurred by the approved insurance provider, due to errors or omissions on the part of the Corporation." Animal Welfare Act 7 U.S.C. § 2157(d) "It shall be unlawful for any member of an Institutional Animal Committee to release any confidential information of the research facility.... Any person, including any research facility, injured in its business or property by reason of a violation of this section may recover all actual and consequential damages sustained by such person and the cost of the suit including a reasonable attorney's fee." Agricultural Unfair Trade Practices 7 U.S.C. § 2305(a) "In any action commenced pursuant hereto, the court, in its discretion, may allow the prevailing party a reasonable attorney's fee as part of the costs." 7 U.S.C. § 2305(c) "In any action commenced pursuant to this subsection, the court may allow the prevailing party a reasonable attorney's fee as a part of the costs." Plant Variety Act 7 U.S.C. § 2565 "The court in exceptional cases may award reasonable attorney fees to the prevailing party." 7 U.S.C. § 2570(b) "Such remedies include ... attorney fees under section 2565 of this title." Immigration and Nationality Act 8 U.S.C. § 1324b(h) "In any complaint respecting an unfair immigration-related employment practice, an administrative law judge, in the judge's discretion, may allow a prevailing party, other than the United States, a reasonable attorney's fee, if the losing party's argument is without reasonable foundation in law and fact." 8 U.S.C. § 1324b(j)(4) "In any judicial proceeding under subsection (i) of this section or this subsection, the court, in its discretion, may allow a prevailing party , other than the United States, a reasonable attorney's fee as part of the costs but only if the losing party's argument is without reasonable foundation in law and fact." Gonzales Act 10 U.S.C. § 1089(f)(2) "With respect to the Secretary of Defense and the Armed Forces Retirement Home Board, the authority provided by paragraph (1) also includes the authority to provide for reasonable attorney's fees for persons described in subsection (a), as determined necessary pursuant to regulations prescribed by the head of the agency concerned." (The persons in question are medical personnel who are sued for malpractice where a suit against the federal government under the Federal Tort Claims Act is the exclusive remedy.) Whistleblower Protections for Contractor Employees of Department of Defense, Coast Guard, and National Aeronautics and Space Administration 10 U.S.C. § 2409(c)(1) "If the head of an agency determines that a contractor has subjected a person to a reprisal prohibited by subsection (a), the head of the agency may ... (C) Order the contractor to pay the complainant an amount equal to the aggregate of all costs and expenses (including attorneys' fees and expert witnesses' fees) that were reasonably incurred...." Bankruptcy Act 11 U.S.C. § 110(i)(1) "[I]f a bankruptcy petition preparer ["a person, other than an attorney"] violates this section or commits any act that the court finds to be fraudulent, unfair, or deceptive ..., the court shall order the bankruptcy petition preparer to pay to the debtor ... (C) reasonable attorneys' fees and costs in moving for damages under this subsection." 11 U.S.C. § 110(i)(2) "If the trustee or creditor moves for damages on behalf of the debtor under this subsection, the bankruptcy petition preparer shall be ordered to pay the movant the additional amount of $1,000 plus reasonable attorneys' fees and costs incurred." 11 U.S.C. § 110(j)(4) "The court shall award to a debtor, trustee, or creditor that brings a successful action under this subsection reasonable attorneys fees and costs of the action, to be paid by the bankruptcy petition preparer." 11 U.S.C. § 111(g)(2) "A nonprofit budget and credit counseling agency that willfully or negligently fails to comply with any requirement under this title with respect to a debtor shall be liable for ... any court costs or reasonable attorneys' fees...." 11 U.S.C. § 303(i) "[T]he court may grant judgment—(1) against the petitioners and in favor of the debtor for—(B) a reasonable attorney's fee...." 11 U.S.C. § 330(a)(1) "[T]he court may award to a trustee, a consumer privacy ombudsman appointed under section 332, an examiner, an ombudsman appointed under section 333, or a professional person employed under section 327 or 1103—(A) reasonable compensation for actual, necessary services rendered by the trustee, examiner, ombudsman, professional person, or attorney and by any paraprofessional person employed by such person." 11 U.S.C. § 362(h) "[A]n individual injured by any willful violation of a stay provided by this section shall recover actual damages, including costs and attorneys' fees, and, in appropriate circumstances, punitive damages." 11 U.S.C. § 363(n) "The trustee may ... recover any costs, attorneys' fees or expenses incurred in avoiding such sale or recovering such amount." 11 U.S.C. § 503(b) "After notice and a hearing, there shall be allowed administrative expenses ... including—(4) reasonable compensation for professional services rendered by an attorney...." 11 U.S.C. § 506(b) "To the extent that an allowed secured claim is secured by property the value of which, after any recovery under subsection (c) of this section, is greater than the amount of such claim, there shall be allowed to the holder of such claim, interest upon such claim, and any reasonable fees, costs, or charges provided for under the agreement or State statute under which such claim arose." Some courts have interpreted this provision to allow attorneys' fees. 11 U.S.C. § 523(d) "[T]he court shall grant judgment in favor of the debtor for the costs of, and a reasonable attorney's fee for, the proceeding if the court finds that the position of the creditor was not substantially justified, except that the court shall not award such costs and fees if special circumstances would make the award unjust." 11 U.S.C. § 526(c)(2) "Any debt relief agency shall be liable to an assisted person ... for reasonable attorneys' fees and costs...." 11 U.S.C. § 526(c)(3)(C) "[I]n the case of any successful action under subparagraphs (A) or (B), [the State] shall be awarded the costs of the action and reasonable attorneys' fees as determined by the court." 11 U.S.C. § 707(b)(4)(A) "The court ... may order the attorney for the debtor to reimburse the trustee for all reasonable costs in prosecuting a motion filed under section 707(b), including reasonable attorneys' fees...." 11 U.S.C. § 707(b)(5)(A) "[T]he court ... may award a debtor all reasonable costs (including reasonable attorneys' fees) in contesting a motion filed by a party in interest...." Federal Home Loan Bank Act 12 U.S.C. § 1441a(c)(11)(B) "The parties specified in the preceding sentence shall be entitled to reasonable attorney fees upon prevailing in any such judicial action." Home Owners ' Loan Act 12 U.S.C. § 1464(d)(1)(B)(vii) "Any court having jurisdiction of any proceeding instituted under this section by a savings association, or a director or officer thereof, may allow to any such party reasonable expenses and attorneys' fees. Such expenses and fees shall be paid by the savings association." 12 U.S.C. § 1464(q)(3) "Any person injured by a violation of paragraph (1) may bring an action ... and shall be entitled to recover three times the amount of the damages sustained, and the cost of the suit, including a reasonable attorney's fee." Housing Act of 1959 12 U.S.C. § 1701q-1(f) "The monetary judgment may, in the court's discretion, include the attorneys fees and other expenses incurred by the United States in connection with the action." National Housing Act 12 U.S.C. § 1715k(h)(6) "In cases of defaults on loans insured under this subsection ... the Secretary ... may acquire the loan and any security therefor upon ... reimbursement for such collection costs, court costs, and attorney fees as may be approved by the Secretary." 12 U.S.C. § 1723i(e) (action to collect civil money penalty) "The monetary judgment may, in the discretion of the court, include any attorneys fees and other expenses incurred by the United States in connection with the action." 12 U.S.C. § 1735f-14(e) (action to collect civil money penalty) "The monetary judgment may, in the court's discretion, include the attorneys fees and other expenses incurred by the United States in connection with the action." 12 U.S.C. § 1735f-15(f) (action to collect civil money penalty) "The monetary judgment may, in the court's discretion, include the attorneys fees and other expenses incurred by the United States in connection with the action." Federal Credit Union Act 12 U.S.C. § 1786(p) "Any court having jurisdiction of any proceeding instituted under this section by any credit union or a director, officer, or committee member thereof, may allow to any party such reasonable expenses and attorneys' fees as it deems just and proper, and such expenses and fees shall be paid by the credit union or from its assets." Federal Deposit Insurance Act 12 U.S.C. § 1818(n) "Any court having jurisdiction of any proceeding instituted under this section by an insured bank or director or officer thereof, may allow to any such party such reasonable expenses and attorneys' fees as it deems just and proper; and such expenses and fees shall be paid by the bank or from its assets." Bank Holding Company Act 12 U.S.C. § 1844(f) "Any court having jurisdiction of any proceeding instituted under this subsection may allow to any such party such reasonable expenses and attorneys' fees as it deems just and proper." Bank Tying Act 12 U.S.C. § 1975 "Any person who is injured in his business or property by reason of anything forbidden in section 1972 of this title ... shall be entitled to recover... a reasonable attorney's fee." Farm Credit Amendments Act of 1985 12 U.S.C. § 2273 "Any court having jurisdiction of any proceeding instituted under this part by a System institution or a director or officer thereof, may allow to any such party such reasonable expenses and attorneys' fees as it deems just and proper; and such expenses and fees shall be paid by the System institution or from its assets." Real Estate Settlement Procedures Act 12 U.S.C. § 2605(f) "Whoever fails to comply with any provision of this section shall be liable to the borrower for each such failure in the following amounts: ... (3) Costs.—In addition to the amounts under paragraph (1) or (2), in the case of any successful action under this section, the costs of the action, together with any attorneys fees incurred in connection with such action as the court may determine to be reasonable under the circumstances." 12 U.S.C. § 2607(d)(5) "In any private action brought pursuant to this subsection, the court may award to the prevailing party the court costs of the action together with reasonable attorneys fees." International Banking Act of 1978 12 U.S.C. § 3108(b)(5) "Any court having jurisdiction of any proceeding instituted under this subsection may allow any party to such proceeding such reasonable expenses and attorneys' fees as the court deems just and proper." Right to Financial Privacy Act of 1978 12 U.S.C. § 3417(a) "Any agency or department of the United States or financial institution obtaining or disclosing financial records or information obtained therein in violation of this chapter is liable to the customer to whom such records relate ... (4) in the case of any successful action to enforce liability under this section, the costs of the action together with reasonable attorney's fees as determined by the court." 12 U.S.C. § 3418 "In the event of any successful action [for injunctive relief], costs together with reasonable attorney's fees as determined by the court may be recovered." Expedited Funds Availability Act 12 U.S.C. § 4010(a) "[A]ny depository institution which fails to comply with any requirement imposed under this title ... is liable ... (3) in the case of any successful action to enforce the foregoing liability, [for] the costs of the action, together with a reasonable attorney's fee as determined by the court." Financial Institutions Anti-Fraud Enforcement Act of 1990 12 U.S.C. § 4246 ( see also , 18 U.S.C. § 3059A(e)(2)) "When the United States, through private counsel retained under this subchapter, prevails in any civil action, the court, in its discretion, may allow the United States reasonable attorney's fees and other expenses of litigation as part of the costs." Truth in Savings Act 12 U.S.C. § 4310(a)(3) "[A]ny depository institution which fails to comply with any requirement imposed under this subtitle ... is liable ... in an amount equal to the sum of ... (3) in the case of any successful action to enforce any liability under paragraph (1) or (2), the costs of the action, together with a reasonable attorney's fee as determined by the court." Federal Housing Enterprises Financial Safety and Soundness Act of 1992 12 U.S.C. § 4 585 "The monetary judgment may, in the court's discretion, include the attorneys' fees and other expenses incurred by the United States in connection with the action." Homeowners Protection Act of 1998 12 U.S.C. § 4907 "Any servicer, mortgagee, or mortgage insurer that violates a provision of this Act shall be liable to each mortgagor to whom the violation relates for ... (4) reasonable attorney fees, as determined by the court." Check Clearing for the 21 st Century Act or Check 21 Act 12 U.S.C. § 5005(b) "The amount of the indemnity under subsection (a) shall be the amount of any loss (including costs and reasonable attorney's fees and other expenses of representation) proximately caused by a breach of a warranty provided under section 5. . . . In the absence of a breach of warranty provided under section 5, the amount of the indemnity under subsection (a) shall be . . . interest and expenses (including costs and reasonable attorney's fees and other expenses of representation)." 12 U.S.C. § 5009(a)(1) "[A]ny person who, in connection with a substitute check, breaches any warranty under this Act or fails to comply with any requirement imposed by, or regulation prescribed pursuant to, this Act ... shall be liable [for] ... interest and expenses (including costs and reasonable attorney's fees and other expenses of representation) related to the substitute check." Clayton Act 15 U.S.C. § 15(a) "[A]ny person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws may sue therefor ... and shall recover threefold the damages sustained by him, and the cost of suit, including a reasonable attorney's fee." 15 U.S.C. § 15(b)(1) "[A]ny person who is a foreign state may not recover under subsection (a) of this section an amount in excess of the actual damages sustained by it, and the cost of suit, including a reasonable attorney's fee." 15 U.S.C. § 15c(a)(2) "The court shall award the State as monetary relief threefold the total damage sustained as described in paragraph (1) of this subsection, and the cost of suit, including a reasonable attorney's fee." 15 U.S.C. § 15c(d)(2) "[T]he court may, in its discretion, award a reasonable attorney's fee to a prevailing defendant upon a finding that the State attorney general has acted in bad faith, vexatiously, wantonly, or for oppressive reasons." 15 U.S.C. § 26 "In any action under this section in which the plaintiff substantially prevails the court shall award the cost of suit, including a reasonable attorney's fee, to such plaintiff." 15 U.S.C. § 35(a) "No damages, interest on damages, costs, or attorney's fees may be recovered under section 15, 15a, or 15c of this title from any local government, or official or employee thereof acting in an official capacity." 15 U.S.C. § 36(a) "No damages, interest on damages, costs or attorney's fees may be recovered under section 15, 15a, or 15c of this title in any claim against a person based on any official action directed by a local government, or official or employee thereof acting in an official capacity." Unfair Competition Act 15 U.S.C. § 72 "Any person injured in his business or property by reason of any violation of, or combination or conspiracy to violate, this section, may sue therefor ... and shall recover ... a reasonable attorney's fee." Securities Act of 1933 15 U.S.C. § 77k(e) "In any suit under this or any other section of this subchapter the court may, in its discretion, require an undertaking for the payment of the costs of such suit, including reasonable attorney's fees...." 15 U.S.C. § 77z-1(a)(6) ( see also , § 77z-1(a)(7)(C), (c)(3)) "Total attorney's fees and expenses awarded by the court to counsel for the plaintiff class shall not exceed a reasonable percentage of the amount of any damages and prejudgment interest actually paid to the class." Trust Indenture Act 15 U.S.C. § 77ooo(e) "The indenture to be qualified may contain provisions to the effect that all parties thereto, including the indenture security holders, agree that the court may in its discretion ... assess reasonable costs, including reasonable attorneys' fees, against any party litigant...." 15 U.S.C. § 77www(a) "[T]he court may, in its discretion ... assess reasonable costs, including reasonable attorneys' fees, against either party litigant...." Securities Exchange Act of 1934 15 U.S.C. § 78i(e) "In any such suit the court may, in its discretion, require an undertaking for the payment of the costs of such suit, and assess reasonable costs, including reasonable attorneys' fees, against either party litigant." 15 U.S.C. § 78r(a) "In any such suit the court may, in its discretion, require an undertaking for the payment of the costs of such suit, and assess reasonable costs, including reasonable attorneys' fees, against either party litigant." 15 U.S.C. § 78u(h)(8) "In the case of an unsuccessful action under paragraph (7), the court shall award the costs of the action and attorney's fees to the Commission if the presiding judge or magistrate finds that the customer's claims were made in bad faith." Securities Investor Protection Act 15 U.S.C. § 78eee(b)(5)(A) "The court shall grant reasonable compensation for services rendered and reimbursement for proper costs and expenses incurred ... by a trustee, and by the attorney for such trustee, in connection with a liquidation proceeding." Jewelers ' Liability Act 15 U.S.C. § 298(b) "Any competitor, customer, or competitor of a customer ... may sue ... and shall recover ... a reasonable attorney's fee." 15 U.S.C. § 298(c) "Any duly organized and existing jewelry trade association shall be entitled to injunctive relief ... and if successful shall recover the cost of suit, including a reasonable attorney's fee." 15 U.S.C. § 298(d) "Any defendant against whom a civil action is brought under the provisions of sections 294 to 300 of this title shall be entitled to recover the cost of defending the suit, including a reasonable attorney's fee, in the event such action is terminated without a finding by the court that such defendant is or has been in violation of sections 294 to 300 of this title." Lanham (Trademark) Act 15 U.S.C. § 1116(d)(11) "Any person who suffers damage by reason of a wrongful seizure under this subsection has a cause of action against the applicant for the order under which the seizure was made, and shall be entitled ... unless the court finds extenuating circumstances, to recover a reasonable attorney's fee." 15 U.S.C. § 1117(a) "The court in exceptional cases may award reasonable attorney fees to the prevailing party." 15 U.S.C. § 1117(b) "In assessing damages under subsection (a) of this section ... , the court shall, unless the court finds extenuating circumstances, enter judgment for three times such profits or damages, whichever amount is greater, together with a reasonable attorney's fee...." 15 U.S.C. § 1122 "Such remedies include ... costs and attorney's fees under section 35 [15 U.S.C. § 1117]." Financial Services and General Government Appropriations Act, 2009, P.L. 111-8 , § 626(b)(7) 15 U.S.C. § 1638 note "If the attorney general of a State prevails in any civil action under paragraph (1), the State can recover reasonable costs and attorney fees from the lender or related party." Truth in Lending Act 15 U.S.C. § 1640(a) "[A]ny creditor who fails to comply with any requirement imposed under this part, including any requirement under section 1635 of this title, or part D or E of this subchapter [the Fair Credit Billing Act or the Consumer Leasing Act] with respect to any person is liable [for] ... the costs of the action, together with a reasonable attorney's fee as determined by the court." Fair Credit Billing Act 15 U.S.C. §§ 1666-1666j See , 15 U.S.C. § 1640(a) Consumer Leasing Act 15 U.S.C. § 1667b(a) ( see also , 15 U.S.C. § 1640(a)) "In all actions, the lessor shall pay the lessee's reasonable attorney's fees." Credit Repair Organization Act 15 U.S.C. § 1679g(a) "Any person who fails to comply with any provision of this title with respect to any other person shall be liable in an amount equal to ... (3).... In the case of any successful action to enforce any liability under paragraph (1) or (2), the costs of the action, together with a reasonable attorneys' fee." Fair Credit Reporting Act 15 U.S.C. § 1681n(c) "Upon a finding by the court that an unsuccessful pleading, motion, or other paper filed in connection with an action under this section was filed in bad faith or for purposes of harassment, the court shall award to the prevailing party attorney's fees reasonable in relation to the work expended in responding to the pleading, motion, or other paper." 15 U.S.C. § 1681o(b) "On a finding by the court that an unsuccessful pleading, motion, or other paper filed in connection with an action under this section was filed in bad faith or for purposes of harassment, the court shall award to the prevailing party attorney's fees reasonable in relation to the work expended in responding to the pleading, motion, or other paper." 15 U.S.C. § 1681s(c)(1) "In addition to such other remedies as are provided under State law, if the chief law enforcement officer of a State, or an official or agency designated by the State, has reason to believe that any person has violated or is violating this title, the State ... (C) in the case of any successful action under subparagraph (A) or (B), shall be awarded the costs of the action and reasonable attorney fees as determined by the court." 15 U.S.C. § 1681u(i) "Any agency or department of the United States obtaining or disclosing any consumer reports, records, or information contained therein in violation of this section is liable to the consumer to whom such consumer reports, records, or information relate in an amount equal to the sum of ... (4) in the case of any successful action to enforce liability under this subsection, the costs of the action, together with reasonable attorney fees, as determined by the court." Equal Credit Opportunity Act 15 U.S.C. § 1691e(d) "In the case of any successful action under subsection (a), (b), or (c), the costs of the action, together with a reasonable attorney's fee as determined by the court, shall be added to any damages awarded by the court under such subsection." Fair Debt Collection Practices Act 15 U.S.C. § 1692k(a) "[A]ny debt collector who fails to comply with any provision of this title with respect to any person is liable [for] ... a reasonable attorney's fee as determined by the court. On a finding by the court that an action under this section was brought in bad faith and for the purpose of harassment, the court may award to the defendant attorney's fees reasonable in relation to the work expended and costs." Electronic Fund Transfer Act 15 U.S.C. § 1693m(a) "[A]ny person who fails to comply with any provision of this title with respect to any consumer ... is liable [for] ... a reasonable attorney's fee as determined by the court." 15 U.S.C. § 1693m(f) "On a finding by the court that an unsuccessful action under this section was brought in bad faith or for purposes of harassment, the court shall award the defendant attorney's fees reasonable in relation to the work expended and costs." Interstate Land Sales Full Disclosure Act 15 U.S.C. § 1709(c) "The amount recoverable in a suit authorized by this section may include ... reasonable amounts for attorneys' fees." 15 U.S.C. § 1717a(d) "The monetary judgment may, in the discretion of the court, include any attorneys fees and other expenses incurred by the United States in connection with the action." Consumer Product Safety Act 15 U.S.C. § 2060(c) "A court may in the interest of justice include in such relief an award of the costs of the suit, including reasonable attorneys' fees (determined in accordance with subsection (f) of this section) and reasonable expert witnesses' fees. Attorneys' fees may be awarded against the United States (or any agency or official of the United States) without regard to section 2412 of title 28 or any other provision of law." 15 U.S.C. § 2060(f) "For purposes of this section and sections 2072(a) and 2073 of this title, a reasonable attorney's fee is a fee (1) which is based upon (A) the actual time expended by an attorney in providing advice and other legal services in connection with representing a person in an action brought under this section, and (B) such reasonable expenses as may be incurred by the attorney in the provision of such services, and (2) which is computed at the rate prevailing for the provision of similar services with respect to actions brought in the court which is awarding such fee." 15 U.S.C. § 2072(a) "Any person who shall sustain injury by reason of any knowing (including willful) violation of a consumer product safety rule ... may, if the court determines it to be in the interest of justice, recover the costs of suit, including reasonable attorneys' fees (determined in accordance with section 2060(f) of this title) and reasonable expert witnesses' fees...." 15 U.S.C. § 2073 "In any action under this section the court may in the interest of justice award the costs of suit, including reasonable attorneys' fees (determined in accordance with section 2060(f) of this title) and reasonable expert witnesses' fees." 15 U.S.C. § 2 087 (b)(3)(B)(iii) "[T]he Secretary, at the request of the complainant, shall assess against the person against whom the order is issued a sum equal to the aggregate amount of all costs and expenses (including attorneys' and expert witness fees) reasonably incurred...." 15 U.S.C. § 2087(b)(3)( C ) "If the Secretary finds that a complaint under paragraph (1) is frivolous or has been brought in bad faith, the Secretary may award the prevailing employer a reasonable attorneys' fee, not exceeding $1,000, to be paid by the complainant." 15 U.S.C. § 2087(b)( 4 ) "The court shall have jurisdiction to grant ... (C) compensation for any special damages sustained as a result of the discharge or discrimination, including litigation costs, expert witness fees, and reasonable attorney's fees." 15 U.S.C. § 2087(b)( 7 )(B) "The court ... may award costs of litigation (including reasonable attorneys' and expert witness fees) to any party whenever the court determines such award is appropriate." Hobby Protection Act 15 U.S.C. § 2102 "In any such action, the court may award the costs of the suit, including reasonable attorneys' fees." Magnuson-Moss Warranty Act 15 U.S.C. § 2310(d)(2) "If a consumer finally prevails in any action brought under paragraph (1) of this subsection, he may be allowed by the court to recover as part of the judgment a sum equal to the aggregate amount of cost and expenses (including attorneys' fees based on actual time expended) ... unless the court in its discretion shall determine that such an award of attorneys' fees would be inappropriate." Toxic Substances Control Act 15 U.S.C. § 2618(d) "The decision of the court in an action commenced under subsection (a), or of the Supreme Court of the United States on review of such a decision, may include an award of costs of suit and reasonable fees for attorneys and expert witnesses if the court determines that such an award is appropriate." 15 U.S.C. § 2619(c)(2) "The court in issuing any final order in any action brought pursuant to subparagraph (a) may award costs of suit and reasonable fees for attorneys and expert witnesses if the court determines that such an award is appropriate. Any court, in issuing its decision in an action brought to review such an order, may award costs of suit and reasonable fees for attorneys if the court determines that such an award is appropriate." 15 U.S.C. § 2620(b)(4)(C) "The court in issuing any final order in any action brought pursuant to subparagraph (A) may award costs of suit and reasonable fees for attorneys and expert witnesses if the court determines that such an award is appropriate. Any court, in issuing its decision in an action brought to review such an order, may award costs of suit and reasonable fees for attorneys if the court determines that such an award is appropriate." 15 U.S.C. § 2622(b)(2)(B) "If such an order issued, the Secretary, at the request of the complainant, shall assess against the person against whom the order is issued a sum equal to the aggregate amount of all costs and expenses (including attorney's fees) reasonably incurred, as determined by the Secretary...." Petroleum Marketing Practices Act 15 U.S.C. § 2805(d)(1) "If the franchisee prevails in any action under subsection (a), such franchisee shall be entitled ... to reasonable attorney and expert witness fees to be paid by the franchisor, unless the court determines that only nominal damages are to be awarded to such franchisee, in which case the court, in its discretion, need not direct that such fees be paid by the franchisor." 15 U.S.C. § 2805(d)(3) "If any action under subsection (a), the court may, in its discretion, direct that reasonable attorney and expert witness fees be paid by the franchisee if the court finds that such action is frivolous." Condominium and Cooperative Abuse Relief Act of 1980 15 U.S.C. § 3608(d) "Such relief may include, but shall not be limited to rescission, reformation, restitution, the award of damages and reasonable attorney fees and court costs. A defendant may recover reasonable attorneys' fees if the court determines that the cause of action filed by the plaintiff is frivolous, malicious, or lacking in substantial merit." 15 U.S.C. § 3611(d) "The amount recoverable under this section may include interest paid, reasonable attorneys' fees, independent engineer and appraisers' fees, and court costs. A defendant may recover reasonable attorneys' fees if the court determines that the cause of action filed by the plaintiff is frivolous, malicious, or lacking in substantial merit." Export Trading Company Act of 1982 15 U.S.C. § 4016(b)(1) "Any person who has been injured as a result of conduct engaged in under a certificate of review may bring a civil action for injunctive relief, actual damages, the loss of interest on actual damages, and the cost of suit (including a reasonable attorney's fee) for failure to comply with the standards of section 303(a) [15 U.S.C. § 4013(a)]." 15 U.S.C. § 4016(b)(4) "In any action brought under paragraph (1), if the court finds that the conduct does comply with the standards of section 303(a) [15 U.S.C. § 4013(a)], the court shall award to the person against whom the claim is brought the cost of suit attributable to defending the claim (including a reasonable attorney's fee)." National Cooperative Research Act of 1984 15 U.S.C. § 4303(a) "Notwithstanding section 4 of the Clayton Act (15 U.S.C. 15) and in lieu of the relief specified in such section, any person who is entitled to recovery on a claim under such section shall recover ... the cost of suit attributable to such claim, including a reasonable attorney's fee pursuant to section 5 of this Act [15 U.S.C. § 4304]...." 15 U.S.C. § 4303(b) "Notwithstanding section 4C of the Clayton Act (15 U.S.C. 15c), and in lieu of the relief specified in such section, any State that is entitled to monetary relief on a claim under such section shall recover ... the cost of suit attributable to such claim, including a reasonable attorney's fee pursuant to section 4C of the Clayton Act...." 15 U.S.C. § 4303(c) "Notwithstanding any provision of any State law providing damages for conduct similar to that forbidden by the antitrust laws, any person who is entitled to recover on a claim under such provision shall not recover in excess of ... the cost of suit attributable to such claim, including a reasonable attorney's fee pursuant to section 5 of this Act [15 U.S.C. § 4304]...." 15 U.S.C. § 4304(a) "Notwithstanding sections 4 and 16 of the Clayton Act [15 U.S.C. §§ 15 and 26], in any claim under the antitrust laws, or any State law similar to the antitrust laws, based on the conducting of a joint venture, the court shall, at the conclusion of the action—(1) award to a substantially prevailing claimant the cost of suit attributable to such claim, including a reasonable attorney's fee, or (2) award to a substantially prevailing party defending against any such claim the cost of suit attributable to such claim, including a reasonable attorney's fee, if the claim, or the claimant's conduct during the litigation of the claim, was frivolous, unreasonable, without foundation, or in bad faith." 15 U.S.C. § 4304(b) "The award made under subsection (a) may be offset in whole or in part by an award in favor of any other party for any part of the cost of suit, including a reasonable attorney's fee, attributable to conduct during the litigation by any prevailing party that the court finds to be frivolous, unreasonable, without foundation, or in bad faith." Telemarketing and Consumer Fraud Abuse and Prevention Act 15 U.S.C. § 6104(d) "The court, in issuing any final order in any action brought under subsection (a), may award costs of suit and reasonable fees for attorneys and expert witnesses to the prevailing party." CAN-SPAM Act of 2003 15 U.S.C. § 7706(f)(4) "In the case of any successful action under paragraph (1), the court, in its discretion, may award the costs of the action and reasonable attorney fees to the State." 15 U.S.C. § 7706(g)(4) "In any action brought pursuant to paragraph (1), the court may, in its discretion, require an undertaking for the payment of the costs of such action, and assess reasonable costs, including reasonable attorneys' fees, against any party." National Historic Preservation Act 16 U.S.C. § 470w-4 "In any civil action brought in any United States district court by any interested person to enforce the provisions of sections 470 to 470a, 470b, and 470c to 470w-6 of this title, if such person substantially prevails in such action, the court may award attorneys' fees, expert witness fees, and other costs of participating in such action, as the court deems reasonable." Endangered Species Act 16 U.S.C. § 1540(g)(4) "The court, in issuing any final order in any suit brought pursuant to paragraph (1) of this subsection, may award costs of litigation (including reasonable attorney and expert witness fees) to any party, whenever the court determines such award is appropriate." Public Utility Regulatory Policies Act of 1978 16 U.S.C. § 2632(a) "[S]uch utility shall be liable to compensate such consumer (pursuant to paragraph (2)) for reasonable attorneys' fees, expert witness fees, and other reasonable costs incurred." Alaska National Interest Lands Conservation Act 16 U.S.C. § 3117(a) ( see also , 43 U.S.C. § 1631(c)(3)) "Local residents and other persons and organizations who are prevailing parties in an action filed pursuant to this section shall be awarded their costs and attorney's fees." Federal Cave Resources Protection Act of 1988 16 U.S.C. § 4307(c) "If any person fails to pay an assessment of a civil penalty ... the Attorney General shall bring a civil action in an appropriate United States district court to recover the amount of the penalty assessed (plus costs, attorney's fees, and interest ... )." Copyright Act 17 U.S.C. § 505 "In any civil action under this title, the court in its discretion may allow the recovery of full costs by or against any party other than the United States or an officer thereof. Except as otherwise provided by this title, the court may also award a reasonable attorney's fee to the prevailing party as part of the costs." 17 U.S.C. § 511(b) "Such remedies include ... costs and attorney's fees under section 505...." 17 U.S.C. § 512(k) "As used in this section, the term 'monetary relief' means damages, costs, attorneys' fees, and any other form of monetary payment." 17 U.S.C. § 911(f) "In any civil action arising under this chapter, the court in its discretion may allow the recovery of full costs, including reasonable attorneys' fees, to the prevailing party." 17 U.S.C. § 911(g)(2) "Such remedies include ... costs and attorney's fees under subsection (f)." 17 U.S.C. § 1009(c) "In an action under subsection (a), the court ... (4) in its discretion may award a reasonable attorney's fee to the prevailing party." 17 U.S.C. § 1203(b)(5) "In an action brought under subsection (a), the court ... in its discretion may award reasonable attorney's fees to the prevailing party." 17 U.S.C. § 1322(b) "A seller or distributor who suffers damage ... may recover such relief as may be appropriate, including ... reasonable attorney's fees." 17 U.S.C. § 1323(d) "In an action for infringement under this chapter, the court may award reasonable attorney's fees to the prevailing party." 17 U.S.C. § 1325 "That amount shall be to compensate the defendant and shall be charged against the plaintiff and paid to the defendant, in addition to such costs and attorney's fees of the defendant as may be assessed by the court." Gun Control Act of 1968 18 U.S.C. § 922 note (as amended by P.L. 110-180 , § 101(c)(2)(A)(iii)) "If the denial of a petition for relief has been reversed after such judicial review, the court shall award the prevailing party, other than the United States, a reasonable attorney's fee for any and all proceedings in relation to attaining such relief, and the United States shall be liable for such fee. Such fee shall be based upon the prevailing rates awarded to public interest legal aid organizations in the relevant community." 18 U.S.C. § 924(d)(2)(A) "In any action or proceeding for the return of firearms or ammunition seized under the provisions of this chapter, the court shall allow the prevailing party, other than the United States, a reasonable attorney's fee, and the United States shall be liable therefor." 18 U.S.C. § 924(d)(2)(B) "In any other action or proceeding under the provisions of this chapter, the court, when it finds that such action was without foundation, or was initiated vexatiously, frivolously, or in bad faith, shall allow the prevailing party, other than the United States, a reasonable attorney's fee, and the United States shall be liable therefor." 18 U.S.C. § 924(d)(2)(D) "The United States shall be liable for attorneys' fees under this paragraph only to the extent provided in advance by appropriation Acts." 18 U.S.C. § 925A "In any action under this section, the court, in its discretion, may allow the prevailing party a reasonable attorney's fee as part of the costs." Civil Asset Forfeiture Reform Act of 2000 18 U.S.C. § 983(b)(2)(B)(ii) "The court shall enter a judgment in favor of the Legal Services Corporation for reasonable attorney fees and costs submitted pursuant to clause (i) and treat such judgment as payable under section 2465 of title 28, United States Code, regardless of the outcome of the case." 18 U.S.C. § 983(b)(3) "The court shall set the compensation for representation under this subsection, which shall be equivalent to that provided for court-appointed representation under section 3006A of this title." Major Fraud Act of 1988 18 U.S.C. § 1031(h) "Any individual who ... is ... discriminated against in the terms or conditions of employment by an employer because of lawful acts done by the employee on behalf of the employee or others in furtherance of a prosecution under this section ... may, in a civil action, obtain all relief necessary to make such individual whole. Such relief shall include ... compensation for any special damages sustained as a result of the discrimination, including litigation costs and reasonable attorney's fees." Organized Crime Control Act of 1970 18 U.S.C. § 1964(c) "Any person injured in his business or property by reason of a violation of section 1962 of this chapter may ... sue and shall recover ... a reasonable attorney's fee...." PROTECT Act 18 U.S.C. § 2252A(f) "Any person aggrieved by reason of the conduct prohibited under subsection (a) or (b) [of 18 U.S.C. § 2252A] or section 1466A may commence a civil action for . . . (A) temporary, preliminary, or permanent injunctive relief; (B) compensatory and punitive damages; and (C) the costs of the civil action and reasonable fees for attorneys and expert witnesses." Child Abuse Victims ' Rights Act of 1986 18 U.S.C. § 2255(a) "Any minor who is a victim of a violation of section 2241(c)(, 2242, 2243, 2251, 2251A, 2252, 2252A, 2260, 2421, 2422, or 2423 of this title and who suffers personal injury as a result of such violation may sue in any appropriate United States District Court and shall recover the actual damages such minor sustains and the cost of the suit, including a reasonable attorney's fee." Safe Streets for Women Act of 1994 18 U.S.C. § 2259(b)(3)(E) "[T]he court shall order restitution for any offense under this chapter.... The order of restitution under this section shall direct that ... the defendant pay to the victim ... the full amount of the victim's losses as determined by the court.... [including] attorneys' fees, as well as other costs incurred...." Safe Homes for Women Act of 1994 18 U.S.C. § 2264(b)(3)(E) "[T]he court shall order restitution for any offense under this chapter.... The order of restitution under this section shall direct that ... the defendant pay to the victim ... the full amount of the victim's losses as determined by the court.... [including] attorneys' fees plus any costs incurred in obtaining a civil protective order...." Anti-counterfeiting Amendments Act of 2004 18 U.S.C. § 2318(f) "(1) ... Any copyright owner who is injured, or is threatened with injury, by a violation of subsection (a) may bring a civil action in an appropriate United States district court.... In any action brought under paragraph (1), the court ... may award to the injured party—(i) reasonable attorney fees and costs." Antiterrorism Act of 1990 18 U.S.C. § 2333(a) "Any national of the United States injured in his or her person, property, or business by reason of an act of international terrorism, or his or her estate, survivors, or heirs, may sue therefor in any appropriate district court of the United States and shall recover threefold the damages he or she sustains and the cost of the suit, including attorney's fees." Wire Interception Act 18 U.S.C. § 2520(b)(3) "In any action under this section, appropriate relief includes ... a reasonable attorney's fee and other litigation costs reasonably incurred." Electronic Communications Privacy Act of 1986 18 U.S.C. § 2707(b)(3) "In a civil action under this section, appropriate relief includes ... a reasonable attorney's fee and other litigation costs reasonably incurred." 18 U.S.C. § 2707(c) "In the case of a successful action to enforce liability under this section, the court may assess the costs of the action, together with reasonable attorney fees determined by the court." Video Privacy Protection Act of 1988 18 U.S.C. § 2710(c)(2)(C) "The court may award ... reasonable attorneys' fees and other litigation costs reasonably incurred." Driver ' s Privacy Protection Act of 1994 18 U.S.C. § 2724(b)(3) "The court may award ... reasonable attorneys' fees and other litigation costs reasonably incurred." Criminal Defendants 18 U.S.C. § 3006A note "[T]he [federal] court, in any criminal case (other than a case in which the defendant is represented by assigned counsel paid for by the public) ... may award to a prevailing party, other than the United States, a reasonable attorney's fee and other litigation expenses, where the court finds that the position of the United States was vexatious, frivolous, or in bad faith, unless the court finds that special circumstances make an award unjust. Such awards shall be granted pursuant to the procedures and limitations (but not the burden of proof) provided for an award under section 2412 of title 28, United States Code...." Financial Institutions Anti-Fraud Enforcement Act of 1990 18 U.S.C. § 3059A(e)(2) ( see also , 12 U.S.C. § 4246) "(1) A person who ... is ... discriminated against in the terms or conditions of employment by an employer because of lawful acts done by the person on behalf of the person or others in furtherance of a prosecution under any of the sections referred to in subsection (a) ... may, in a civil action, obtain all relief necessary to make the person whole. (2) Relief under paragraph (1) shall include ... compensation for any special damages sustained as a result of the discrimination, including litigation costs and reasonable attorney's fees." Authentication of Foreign Documents 18 U.S.C. § 3495(a) "Every foreign counsel selected pursuant to a commission issued on application of the United States ... shall be paid by the United States, such compensation ... as [the consular officer] may allow." Witness Security Reform Act of 1984 18 U.S.C. 3524(d)(6) "The United States shall be required by the court to pay litigation costs, including reasonable attorneys' fees, incurred by a parent who prevails in enforcing a custody or visitation order; but shall retain the right to recover such costs from the protected person." Juvenile Delinquency 18 U.S.C. § 5034 "In cases where the juvenile and his parents, guardian, or custodian are financially able to obtain adequate representation but have not retained counsel, the magistrate may assign counsel and order the payment of reasonable attorney's fees or may direct the juvenile, his parents, guardian, or custodian to retain private counsel within a specified period of time." Higher Education Act of 1965 20 U.S.C. § 1078(c)(6)(B)(i) "'administrative costs of collection of loans' means ... attorney's fees...." 20 U.S.C. § 1095a(8) "The court shall award attorneys' fees to a prevailing employee...." Individuals with Disabilities Education Act 20 U.S.C. § 1415(i)(3) "In any action or proceeding brought under this section, the court, in its discretion, may award reasonable attorneys' fees as part of the costs...." Discrimination Based on Sex or Blindness (Title IX of P.L. 92-318) 20 U.S.C. §§ 1681 et seq. See , 42 U.S.C. § 1988(b). Foreign Service Act of 1980 22 U.S.C. § 4137(b) "If the Board finds that the grievance is meritorious, the Board shall have the authority to direct the Department—(5) to pay reasonable attorney fees to the grievant to the same extent and in the same manner as such fees may be required by the Merit Systems Protection Board under section 7701(g) of Title 5." Cuban Liberty and Democratic Solidarity (LIBERTAD) Act of 1996 22 U.S.C. § 6082(a)(1)(A)(ii) "[A]ny person that ... traffics in property which was confiscated by the Cuban Government on or after January 1, 1959, shall be liable to any United States national who owns the claim of such property for ... court costs and reasonable attorneys' fees." Indian Arts and Crafts Act of 1990 25 U.S.C. § 305e(b) "In addition to the relief specified in subsection (a), the court may award punitive damages and the costs of suit and a reasonable attorney's fee." Indian Self-Determination and Education Assistance Act 25 U.S.C. § 450m-1(c) "The Equal Access to Justice Act [5 U.S.C. § 504, 28 U.S.C. § 2412] shall apply to administrative appeals ... by tribal organizations regarding self-determination contracts." Navajo and Hopi Indian Relocation Amendments Act of 1980 25 U.S.C. § 640d-27(a) "In any litigation or court action between or among the Hopi Tribe, the Navajo Tribe and the United States or any of its officials, departments, agencies, or instrumentalities, arising out of the interpretation or implementation of this subchapter, as amended, the Secretary shall pay, subject to the availability of appropriations, attorney's fees, costs and expenses as determined by the Secretary to be reasonable." 25 U.S.C. § 640d-27(b) "Upon the entry of a final judgment in any such litigation or court action, the court shall award reasonable attorney's fees, costs and expenses to the party, other than the United States or its officials, departments, agencies, or instrumentalities, which prevails or substantially prevails, where it finds that any opposing party has unreasonably initiated or contested such litigation. Any party to whom such an award has been made shall reimburse the United States out of such award to the extent that it has received payments pursuant to subsection (a) of this section." American Indian Agricultural Resource Management Act 25 U.S.C. § 3713(a)(1)(C) "[T]he Secretary [of the Interior] shall issue regulations that ... establish civil penalties for the commission of trespass on Indian agricultural lands, which provide for ... court costs, and attorney fees." Internal Revenue Code 26 U.S.C. § 6110(f)(4)(A) "Any person who has exhausted the administrative remedies prescribed pursuant to paragraph (2) with respect to a request for disclosure may file a petition in the United States Tax Court or a complaint in the United States District Court for the District of Columbia.... [T]he provisions of subparagraphs (C), (D), (E), (F), and (G) of section 552(a)(4) of title 5, United States Code, shall apply to any proceeding under this paragraph." (Subparagraph (E) is the attorneys' fees provision of the Freedom of Information Act.) 26 U.S.C. § 6110(i)(2) "In any suit brought under the provisions of paragraph (1)(A) ... or in any suit brought under subparagraph (1)(B) ... the United States shall be liable [for] the costs of the action together with reasonable attorney's fees as determined by the Court." 26 U.S.C. § 6673(a)(1) "Whenever it appears to the Tax Court that—(A) proceedings before it have been instituted or maintained by the taxpayer primarily for delay, (B) that the taxpayer's position in such proceedings is frivolous or groundless, or (C) that the taxpayer unreasonably failed to pursue available administrative remedies, the Tax Court, in its decision, may require the taxpayer to pay to the United States a penalty not in excess of $25,000." 26 U.S.C. § 6673(a)(2) "Whenever it appears to the Tax Court that any attorney or other person admitted to practice before the Tax Court has multiplied the proceedings in any case unreasonably and vexatiously, the Tax Court may require—(A) that such attorney or other person pay personally the excess costs, expenses, and attorney's fees reasonably incurred because of such conduct, or (B) if such attorney is appearing on behalf of the Commissioner of Internal Revenue, that the United States pay such excess costs, expenses, and attorneys' fees in the same manner as such an award by a district court." 26 U.S.C. § 6673(b)(1) "Whenever it appears to the court that the taxpayer's position in the proceedings before the court instituted or maintained by such taxpayer under section 7433 is frivolous or groundless the court may require the taxpayer to pay to the United States a penalty not in excess of $10,000." 26 U.S.C. § 7430(a) "In any administrative or court proceeding which is brought by or against the United States in connection with the determination, collection, or refund of any tax, interest, or penalty under this title, the prevailing party [other than the United States or any creditor of the taxpayer involved] may [unless the United States establishes that the position of the United States in the proceeding was substantially justified] be awarded a judgment or a settlement for—(1) reasonable administrative costs incurred in connection with such administrative proceeding within the Internal Revenue Service, and (2) for reasonable litigation costs incurred in connection with such court proceeding." 26 U.S.C. § 7431(c)(3) "[I]n the case of a plaintiff which is described in section 7430(c)(4)(A)(ii), reasonable attorneys fees, except that if the defendant is the United States, reasonable attorneys fees may be awarded only if the plaintiff is the prevailing party...." 26 U.S.C. § 7434(b) "In any action brought under subsection (a), upon a finding of liability on the part of the defendant, the defendant shall be liable to the plaintiff in an amount equal to greater of $5,000 or the sum of—(1) any actual damages ... (2) the costs of the action, and (3) in the court's discretion, reasonable attorneys fees." 26 U.S.C. § 9501(d) ( see also , 30 U.S.C. § 932(a)) "Amounts in the Black Lung Disability Trust Fund shall be available, as provided by appropriations Acts, for ... (7) the reimbursement of operators and insurers for amounts paid by such operators and insurers (other than amounts paid as penalties, interest, or attorney fees) at any time in satisfaction (in whole or in part of any claim denied ... before March 1, 1978...." Judicial Discipline and Removal Reform Act of 1990 28 U.S.C. § 372(c)(16) "Upon the request of a judge or magistrate whose conduct is the subject of a complaint under this subsection, the judicial council may, if the complaint has been finally dismissed under paragraph 6(C), recommend that the Director of the Administrative Office of the United States Courts award reimbursement, from funds appropriated to the Federal judiciary, for those reasonable expenses, including attorneys' fees, incurred by that judge or magistrate during the investigation which would not have been incurred but for the requirements of this subsection." Independent Counsel Reauthorization Act of 1987 28 U.S.C. § 593(f)(1) ( see also , 5 U.S.C. § 288i(d)) "Upon the request of an individual who is the subject of an investigation conducted by an independent counsel pursuant to this chapter, the division of the court may, if no indictment is brought against such individual pursuant to that investigation, award reimbursement for those reasonable attorney's fees incurred by that individual...." Judicial Improvements and Access to Justice Act 28 U.S.C. § 655(e) "In any trial de novo demanded under subsection (a) in which arbitration was done by consent of the parties, a district court may assess costs, as provided in section 1920 of this title, and reasonable attorney fees against the party demanding the trial de novo if—(1) such party fails to obtain a judgment, exclusive of interest and costs, in the court which is substantially more favorable to such party than the arbitration award, and (2) the court determines that the party's conduct in seeking a trail de novo was in bad faith." Tucker Act 28 U.S.C. §§ 1346(a), 1491 See , 42 U.S.C. § 4654. Removal of Cases from State Court 28 U.S.C. § 1447(c) "An order remanding the case [back to state court, if the federal court lacks jurisdiction] may require payment of just costs and actual expenses, including attorney fees, incurred as a result of the removal." In Martin v. Franklin Capital Corp ., 546 U.S. 132, 141 (2005), the Supreme Court held that, "[a]bsent unusual circumstances, courts may award attorney's fees under § 1447(c) only where the removing party lacked an objectively reasonable basis for seeking removal." U.S. Court of Federal Claims—Patent and copyright cases 28 U.S.C. § 1498(a) "Reasonable and entire compensation shall include the owner's reasonable costs, including reasonable fees for expert witnesses and attorneys, in pursuing the action if the owner is an independent inventor, a nonprofit organization, or an entity that had no more than 500 employees at any time during the 5-year period preceding the use or manufacture of the patented invention by or for the United States. Notwithstanding the preceding sentences, unless the action has been pending for more than 10 years from the time of filing to the time that the owner applies for such costs and fees, reasonable and entire compensation shall not include such costs and fees if the court finds that the position of the United States was substantially justified or that special circumstances make an award unjust." Parental Kidnaping Prevention Act of 1980 28 U.S.C. § 1738A note "In furtherance of the purposes of section 1738A of title 28 ... State courts are encouraged to ... award to the person entitled to custody or visitation ... attorneys' fees...." Jury System Improvements Act of 1978 28 U.S.C. § 1875(d)(2) "In any action or proceeding under this section, the court may award a prevailing employee who brings such action by retained counsel a reasonable attorney's fee as part of the costs. The court may tax a defendant employer, as costs payable to the court, the attorney fees and expenses incurred on behalf of a prevailing employee, where such costs were expended pursuant to paragraph (1) of this subsection. The court may award a prevailing employer a reasonable attorney's fee as part of the costs only if the court determines that the action is frivolous, vexatious, or brought in bad faith." Fees and Costs 28 U.S.C. § 1912 "Where a judgment is affirmed by the Supreme Court or a court of appeals, the court in its discretion may adjudge to the prevailing party just damages for his delay, and single or double costs." This provision has been interpreted to permit awards of attorneys' fees. See , 50 ALR Fed 652, 67 ALR Fed 319. 28 U.S.C. § 1927 "Any attorney or other person admitted to conduct cases in any court of the United States or any Territory thereof who so multiplies the proceedings in any case unreasonably and vexatiously may be required by the court to satisfy personally the excess costs, expenses, and attorneys' fees reasonably incurred because of such conduct." Equal Access to Justice Act 28 U.S.C. § 2412 ( see also , 5 U.S.C. § 504) "(a)(1) Except as otherwise specifically provided by statute, a judgment for costs, as enumerated in section 1920 of this title, but not including the fees and expenses of attorneys, may be awarded to the prevailing party in any action brought by or against the United States...." "(b) Unless expressly prohibited by statute, a court may award reasonable fees and expenses of attorneys, in addition to the costs which may be awarded pursuant to subsection (a), to the prevailing party in any civil action brought by or against the United States.... The United States shall be liable for such fees and expenses to the same extent that any other party would be liable under the common law or under the terms of any statute which specifically provides for such an award." "(d)(1)(A) Except as otherwise specifically provided by statute, a court shall award to a prevailing party other than the United States fees and other expenses, in addition to any costs awarded pursuant to subsection (a), incurred by that party in any civil action (other than cases sounding in tort), including proceedings for judicial review of agency action, brought by or against the United States ... unless the court finds that the position of the United States was substantially justified or that special circumstances make an award unjust." "(d)(3) In awarding fees and other expenses under this subsection to a prevailing party in any action for judicial review of an adversary adjudication, as defined in subsection (b)(1)(C) of section 504 of title 5, United States Code, or an adversary adjudication subject to the Contract Disputes Act of 1978, the court shall include in that award fees and other expenses to the same extent authorized under subsection (a) of such section, unless the court finds that during such adversary adjudication the position of the United States was substantially justified, or that special circumstances make an award unjust." "(e) The provisions of this section shall not apply to any costs, fees, and other expenses in connection with any proceedings to which section 7430 of the Internal Revenue Code of 1986 applies...." Civil Asset Forfeiture Reform Act of 2000 28 U.S.C. § 2465(b)(1) "Except as provided in paragraph (2), in any civil proceeding to forfeit property under any provision of Federal law in which the claimant substantially prevails, the United States shall be liable for—(A) reasonable attorney fees and other litigation costs reasonably incurred by the claimant." 28 U.S.C. § 2465(b)(2)(C) "If there are multiple claims to the same property, the United States shall not be liable for costs and attorneys fees associated with any such claim if the United States . . . (iii) does not cause the claimant to incur additional, reasonable costs or fees . . . ." 28 U.S.C. § 2465(b)(2)(D) "If the court enters judgment in part for the claimant and in part for the Government, the court shall reduce the award of costs and attorney fees accordingly." Federal Debt Collection Procedures Act of 1990 28 U.S.C. § 3205(c)(6) "The court may award a reasonable attorney's fee to the United States and against the garnishee if the writ is not answered within the time specified therein...." Presidential and Executive Office Accountability Act ( see also , 3 U.S.C. § 435) 28 U.S.C. § 3905(a) "If a covered employee, with respect to any claim under chapter 5 of title 3, or a qualified person with a disability, with respect to any claim under section 421 of title 3, is a prevailing party in any proceeding under section 1296 or section 1346(g), the court may award attorney's fees, expert fees, and other costs as would be appropriate if awarded under section 706(k) of the Civil Rights Act of 1964." Assumption of Contractual Obligations Related to Transfers of Rights in Motion Pictures 28 U.S.C. § 4001(g) "[T]he court in its discretion may allow recovery of full costs by or against any party and may also award a reasonable attorney's fees to the prevailing party as part of the costs." Federal Rules of Civil Procedure 28 U.S.C. App. Rule 11(c)(2) "[T]he sanction may consist of, or include ... an order directing payment to the movant of some or all of the reasonable attorneys' fees and other expenses incurred as a direct result of the violation." 28 U.S.C. App. Rule 16(f) "[T]he judge shall require the party or the attorney representing the party or both to pay the reasonable expenses incurred because of any noncompliance with this rule, including attorney's fees, unless the judge finds that the noncompliance was substantially justified or that other circumstances make an award of expenses unjust." 28 U.S.C. App. Rule 23(h) "In a certified class action, the court may award reasonable attorney's fees and nontaxable costs that are authorized by law or by the parties' agreement." 28 U.S.C. App. Rule 26(g)(3) "If without substantial justification a certification is made in violation of the rule, the court, upon motion or upon its own initiative, shall impose upon the person who made the certification, the party on whose behalf the disclosure, request, response, or objection is made, or both, an appropriate sanction, which may include an order to pay the amount of the reasonable expenses incurred because of the violation, including a reasonable attorney's fee." 28 U.S.C. App. Rule 30(g)(1) "If the party giving notice of a deposition fails to attend and proceed there with and another party attends in person or by attorney pursuant to the notice, the court may order the party giving notice to pay to such other party the reasonable expenses incurred by that party and that party's attorney in attending, including reasonable attorney's fees." 28 U.S.C. App. Rule 30(g)(2) "If the party giving the notice of the taking of the deposition of a witness fails to serve a subpoena on him and the witness because of such failure does not attend, and if another party attends in person or by attorney because that party expects the deposition of that witness to be taken, the court may order the party giving the notice to pay to such other party the reasonable expenses incurred by that party and that party's attorney in attending, including reasonable attorney's fees." 28 U.S.C. App. Rule 37(a)(4) "(A) If the motion is granted or if the disclosure or requested discovery is provided after the motion was filed, the court shall, after affording an opportunity to be heard require the party or deponent whose conduct necessitated the motion or the party or attorney advising such conduct or both of them to pay to the moving party the reasonable expenses incurred in making the motion, including attorney's fees, unless the court finds...." "(B) If the motion is denied, the court may enter any protective order authorized under Rule 26(c) and shall, after affording an opportunity to be heard, require the moving party or the attorney filing the motion or both of them to pay to the party or deponent who opposed the motion the reasonable expenses incurred in opposing the motion, including attorney's fees, unless the court finds...." 28 U.S.C. App. Rule 37(b)(2) "In lieu of any of the foregoing orders or in addition thereto, the court shall require the party failing to obey the order or the attorney advising that party or both to pay the reasonable expenses, including attorney's fees, caused by the failure, unless the court finds...." 28 U.S.C. App. Rule 37(c)(1) "In addition to requiring payment of reasonable expenses, including attorney's fees, caused by the failure, these sanctions may include...." 28 U.S.C. App. Rule 37(c)(2) "If a party fails to admit the genuineness of any document or the truth of any matter as requested under Rule 36, and if the party requesting the admissions thereafter proves the genuineness of the document or the truth of the matter, the requesting party may apply to the court for an order requiring the other party to pay the reasonable expenses incurred in making the proof, including reasonable attorney's fees...." 28 U.S.C. App. Rule 37(d) "In lieu of any order or in addition thereto, the court shall require the party failing to act or the attorney advising that party or both to pay the reasonable expenses, including attorney's fees, caused by the failure, unless the court finds that the failure was substantially justified or that other circumstances make an award of expenses unjust." 28 U.S.C. App. Rule 37(g) "If a party or a party's attorney fails to participate in good faith in the development and submission of a discovery plan by agreement as required by Rule 26(f), the court may, after opportunity for hearing, require such party or attorney to pay to any other party the reasonable expenses, including attorney's fees, caused by the failure." 28 U.S.C. App. Rule 56(g) "[T]he court shall forthwith order the party ... to pay to the other party the amount of the reasonable expenses which the filing of the affidavits caused him to incur, including reasonable attorney's fees...." 28 U.S.C. App. Rule 68 If, more than 10 days before trial begins, a party defending a claim makes a settlement offer which is rejected by the offeree, and, "[i]f the judgment finally obtained by the offeree is not more favorable than the offer, the offeree must pay the costs incurred after the making of the offer." In Marek v. Chesny , 473 U.S. 1 (1985), the Supreme Court held that "costs" includes attorneys' fees in actions brought under statutes that allow attorneys' fees as part of the costs. Federal Rules of Appellate Procedure 28 U.S.C. App. Rule 38 "If a court of appeals determines that an appeal is frivolous, it may, after a separately filed motion or notice from the court and reasonable opportunity to respond, award just damages and single or double costs to the appellee." This provision has been interpreted to permit awards of attorneys' fees. See , 50 ALR Fed 652, 67 ALR Fed 319. Norris-LaGuardia Act 29 U.S.C. § 107(e) "No temporary restraining order or temporary injunction shall be issued except on condition that complainant shall first file an undertaking with adequate security in an amount to be fixed by the court sufficient to recompense those enjoined for any loss, expense, or damage caused by the improvident or erroneous issuance of such order or injunction, including all reasonable costs (together with a reasonable attorney's fee)...." Fair Labor Standards Act 29 U.S.C. § 216(b) "The court in such action shall, in addition to any judgment awarded to the plaintiff or plaintiffs, allow a reasonable attorney's fee to be paid by the defendant, and costs of the action." Labor-Management Reporting and Disclosure Act of 1959 29 U.S.C. § 431(c) "The court in such action may, in its discretion, in addition to any judgment awarded to the plaintiff or plaintiffs, allow a reasonable attorney's fee to be paid by the defendant, and costs of the action." 29 U.S.C. § 501(b) "The trial judge may allot a reasonable part of the recovery in any action under this subsection to pay the fees of counsel prosecuting the suit...." Age Discrimination in Employment Act of 1967 29 U.S.C. § 626(b) This section incorporates the attorneys' fees provision of the Fair Labor Standards Act, 29 U.S.C. § 216(b). Rehabilitation Act of 1973 29 U.S.C. § 794a(b) "In any action or proceeding to enforce or charge a violation of a provision of this title, the court, in its discretion, may allow the prevailing party, other than the United States, a reasonable attorney's fee as part of the costs." Employee Retirement Income Security Act 29 U.S.C. § 1132(g) "In any action under this subchapter by a participant, beneficiary, or fiduciary, the court in its discretion may allow a reasonable attorney's fee and costs of the action to either party." 29 U.S.C. § 1305(b)(1) "Each fund established under this section shall be credited with the appropriate portion of ... (F) attorney's fees awarded to the corporation...." 29 U.S.C. § 1370(e) "(1) General Rule.—In any action brought under this section, the court in its discretion may award all or a portion of the costs and expenses incurred in connection with such action, including reasonable attorney's fees, to any party who prevails or substantially prevails in such action." "(2) Exemption for Plans.—Notwithstanding the preceding provisions of this subsection, no plan shall be required in any action to pay any costs and expenses (including attorney's fees)." 29 U.S.C. § 1401(a)(2) "The arbitrator may also award reasonable attorney's fees." 29 U.S.C. § 1451(e) "In any action under this section, the court may award all or a portion of the costs and expenses incurred in connection with such action, including reasonable attorney's fees, to the prevailing party." Employee Polygraph Protection Act of 1988 29 U.S.C. § 2005(c)(3) "The court, in its discretion, may allow the prevailing party (other than the United States) reasonable costs, including attorney's fees." Worker Adjustment and Retraining Notification Act 29 U.S.C. § 2104(a)(6) "In any such suit, the court, in its discretion, may allow the prevailing party a reasonable attorney's fee as part of the costs." Family and Medical Leave Act of 1993 29 U.S.C. § 2617(a)(3) "The court in such an action shall, in addition to any judgment awarded to the plaintiff, allow a reasonable attorney's fee, reasonable expert witness fees, and other costs of the action to be paid by the defendant." Federal Coal Mine Health and Safety Act of 1969 30 U.S.C. § 815(c)(3) "Whenever any order is issued sustaining the complainant's charges under this subsection, a sum equal to the aggregate amount of all costs and expenses (including attorney's fees) ... shall be assessed against the person committing such violation." 30 U.S.C. § 932(a)—Black Lung Benefits Act ( see also , 26 U.S.C. § 9501(d)(7)) This subsection incorporates 33 U.S.C. § 928(a) and (b). 30 U.S.C. § 938(c) "Whenever an order is issued under this subsection granting relief to a miner at the request of such miner, a sum equal to the aggregate amount of all costs and expenses (including attorney's fees) ... shall be assessed against the person committing the violation." Surface Mining Control and Reclamation Act 30 U.S.C. § 1270(d) "The court, in issuing any final order in any action brought pursuant to subsection (a) of this section, may award costs of litigation (including attorney and expert witness fees) to any party, whenever the court determines such award is appropriate." 30 U.S.C. § 1270(f) "Any person who is injured in his person or property through the violation by any operator of any rule, regulation, order, or permit issued pursuant to this chapter may bring an action for damages (including reasonable attorney and expert witness fees)...." 30 U.S.C. § 1275(e) "Whenever an order is issued under this section, or as a result of any administrative proceeding under this chapter, at the request of any person, a sum equal to the aggregate amount of all costs and expenses (including attorney fees) ... may be assessed against either party...." 30 U.S.C. § 1293(c) "Whenever an order is issued under this section to abate any violation, at the request of the applicant a sum equal to the aggregate amount of all costs and expenses (including attorneys' fees) ... shall be assessed against the persons committing the violation." Deep Seabed Hard Mineral Resources Act 30 U.S.C. § 1427(c) "The court, in issuing any final order in any action brought under subsection (a) of this section, may award costs of litigation, including reasonable attorney and expert witness fees, to any party whenever the court determines that such an award is appropriate." General Accounting Office Act of 1980 31 U.S.C. § 755(b) "If an officer, employee, applicant for employment, or employee of the Architect of the Capitol, the Botanic Garden, or the Senate Restaurants is the prevailing party in a proceeding under this section, and the decision is based on a finding of discrimination prohibited under section 732(f) of this title or section 312(e)(2) of the Architect of the Capitol Human Resources Act, attorney's fees may be allowed by the court in accordance with the standards prescribed under section 706(k) of the Civil Rights Act of 1964 [42 U.S.C. § 2000e-5(k)]." Federal Acquisition Streamlining Act of 1994 31 U.S.C. § 3554(c)(1) "If the Comptroller General determines that a solicitation for a contract or a proposed award or the award of a contract does not comply with a statute or regulation, the Comptroller General may recommend that the Federal agency conducting the procurement pay to an appropriate interested party the costs of—(A) filing and pursuing the protest, including reasonable attorneys' fees and consultant and expert witness fees...." 31 U.S.C. § 3554(c)(2) "No party ... may be paid, pursuant to a recommendation made under the authority of paragraph (1)—(A) costs for consultant and expert witness fees that exceed the highest rate of compensation for expert witnesses paid by the Federal Government; or (B) costs for attorneys' fees that exceed $150 per hour unless the agency determines, based on the recommendation of the Comptroller General on a case by case basis, that an increase in the cost of living or a special factor, such as the limited availability of qualified attorneys for the proceedings involved, justifies a higher fee." Debt Collection Improvement Act of 1996 31 U.S.C. § 3720D(e)(2) "The court shall award attorneys' fees to a prevailing employee...." 31 U.S.C. § 3720D(f)(1)(B) "The employer of an individual ... shall be liable for any amount that the employer fails to withhold from wages due an employee following receipt by such employer of notice of the withholding order, plus attorneys' fees, costs, and, in the court's discretion, punitive damages." False Claims Act 31 U.S.C. § 3730(d)(1) "Any such person shall also receive an amount for reasonable expenses which the court finds to have been necessarily incurred, plus reasonable attorneys' fees and costs. All such expenses, fees, and costs shall be awarded against the defendant." 31 U.S.C. § 3730(d)(2) "Such person shall also receive an amount for reasonable expenses which the court finds to have been necessarily incurred, plus reasonable attorneys' fees and costs. All such expenses, fees, and costs shall be awarded against the defendant." 31 U.S.C. § 3730(d)(4) "[T]he court may award to the defendant its reasonable attorneys' fees and expenses if the defendant prevails in the action and the court finds that the claim of the person bringing the action was clearly frivolous, clearly vexatious, or brought primarily for purposes of harassment." 31 U.S.C. § 3730(g) "In civil actions brought under this section by the United States, the provisions of section 2412(d) of title 28 shall apply." 31 U.S.C. § 3730(h) (2) "Relief under paragraph (1) shall include ... compensation for any special damages sustained as a result of the discrimination, including litigation costs and reasonable attorneys' fees." Local Partnership Act 31 U.S.C. § 6716(c) "In an action under this section, the court ... to enforce compliance with section 6711(a) or (b), may allow a prevailing party (except the United States Government) a reasonable attorney's fee." Longshore and Harbor Workers ' Compensation Act 33 U.S.C. § 928(a) "[T]here shall be awarded, in addition to the award of compensation, in a compensation order, a reasonable attorney's fee against the employer or carrier in an amount approved by the deputy commissioner, the Board, or court, as the case may be...." 33 U.S.C. § 928(b) "[A] reasonable attorney's fee based solely upon the difference between the amount awarded and the amount tendered or paid shall be awarded in addition to the amount of compensation.... If the claimant is successful in review proceedings before the Board or court in any such case an award may be made in favor of the claimant and against the employer or carrier for a reasonable attorney's fee for claimant's counsel...." 33 U.S.C. § 933(e)(1) "The employer shall retain an amount equal to—(A) the expenses incurred by him in respect to such proceedings or compromise (including a reasonable attorney's fee) as determined by the deputy commissioner or Board...." Water Pollution Prevention and Control Act 33 U.S.C. § 1319(g)(9) "Any person who fails to pay on a timely basis the amount of an assessment of a civil penalty as described in the first sentence of this paragraph shall be required to pay, in addition to such amount and interest, attorneys fees and costs for collection proceedings...." 33 U.S.C. § 1321(b)(6)(H) "Any person who fails to pay on a timely basis the amount of an assessment of a civil penalty as described in the first sentence of this subparagraph shall be required to pay, in addition to such amount and interest, attorneys fees and costs for collection proceedings...." 33 U.S.C. § 1365(d) "The court, in issuing any final order in any action brought pursuant to this section, may award costs of litigation (including reasonable attorney and expert witness fees) to any prevailing or substantially prevailing party, whenever the court determines such award is appropriate." 33 U.S.C. § 1367(c) "[A] sum equal to the aggregate amount of all costs and expenses (including the attorney's fees), as determined by the Secretary of Labor ... shall be assessed against the person committing such violation." 33 U.S.C. § 1369(b)(3) "In any judicial proceeding under this subsection, the court may award costs of litigation (including reasonable attorney and expert witness fees) to any prevailing or substantially prevailing party whenever it determines that such award is appropriate." Marine Protection, Research, and Sanctuaries Act 33 U.S.C. § 1415(g)(4) "The court, in issuing any final order in any suit brought pursuant to paragraph (1) of this subsection may award costs of litigation (including reasonable attorney and expert witness fees) to any party, whenever the court determines such award is appropriate." Deepwater Ports Act 33 U.S.C. § 1515(d) "The court, in issuing any final order in any action brought pursuant to subsection (a) of this section, may award costs of litigation (including reasonable attorney and expert witness fees) to any party, whenever the court determines such award is appropriate." Act to Prevent Pollution from Ships 33 U.S.C. § 1910(d) "The court, in issuing any final order in any action brought pursuant to this section, may award costs of litigation (including reasonable attorney and expert witness fees) to any party including the Federal Government." Oil Pollution Act of 1990 33 U.S.C. § 2715(c) "At the request of the Secretary, the Attorney General shall commence an action on behalf of the Fund to recover any compensation paid by the Fund to any claimant pursuant to this chapter, and all costs incurred by the Fund by reason of the claim, including ... attorney's fees." Patent Infringement 35 U.S.C. § 271(e)(4) "The remedies prescribed by subparagraphs (A), (B), and (C) are the only remedies which may be granted by a court for an act of infringement described in paragraph (2), except that a court may award attorney fees under section 285." 35 U.S.C. § 285 "The court in exceptional cases may award reasonable attorney fees to the prevailing party." 35 U.S.C. § 296(b) "Such remedies include ... attorney fees under [35 U.S.C.] section 285...." Amateur Sports Act of 1978 (use of Olympic symbols) 36 U.S.C. § 380(a) This provision incorporates the attorneys' fees provision of the Trademark Act, 15 U.S.C. § 1117. See , International Olympic Committee v. San Francisco Arts & Athletics , 781 F.2d 733 (9 th Cir. 1986), rehearing denied , 789 F.2d 1319 (9 th Cir. 1986), aff ' d (not on an attorneys' fees issue), 483 U.S. 522 (1987). Uniformed Services Employment and Reemployment Rights Act of 1994 38 U.S.C. § 4323(c)(2)(B) "In any action or proceeding to enforce a provision of this chapter by a person under subsection (a)(2) who obtained private counsel for such action or proceeding, the court may award any such person who prevails in such action or proceeding reasonable attorney fees, expert witness fees, and other litigation expenses." Federal Acquisition Streamlining Act of 1994 41 U.S.C. § 265(c)(1) "If the head of an executive agency determines that a contractor has subjected a person to a reprisal prohibited by subsection (a), the head of the executive agency may ... (C) Order the contractor to pay the complainant an amount equal to the aggregate amount of all costs and expenses (including attorneys' fees and expert witnesses' fees) that were reasonably incurred...." Contract Disputes Act of 1978 41 U.S.C. §§ 601 et seq . See , 28 U.S.C. § 2412(d)(3) Public Readiness and Emergency Preparedness Act, P.L. 109-148 (2005), Division C (limits on liability for pandemic flu and medical biodefense countermeasures) 42 U.S.C. § 247d-6d "Whenever a district court of the United States determines that there has been a violation of Rule 11 of the Federal Rules of Civil Procedure in an action under subsection (d), the court shall impose upon the attorney, law firm, or parties that have violated Rule 11 or are responsible for the violation, an appropriate sanction, which may include an order to pay the other party or parties for the reasonable expenses incurred as a direct result of the filing of the pleading, motion, or other paper that is the subject of the violation, including a reasonable attorney's fee. Such sanction shall be sufficient to deter repetition of such conduct or comparable conduct by others similarly situated, and to compensate the party or parties injured by such conduct." Safe Drinking Water Act 42 U.S.C. § 300h-2(c)(7) "If any person fails to pay an assessment of a civil penalty ... the Administrator may request the Attorney General to bring a civil action in an appropriate district court to recover the amount assessed (plus costs, attorneys' fees, and interest ... )." 42 U.S.C. § 300j-8(d) "The court, in issuing any final order in any action brought under subsection (a) of this section, may award costs of litigation (including reasonable attorney and expert witness fees) to any party whenever the court determines such an award is appropriate." 42 U.S.C. § 300j-9(i)(2)(B)(ii) "If such an order is issued, the Secretary, at the request of the complainant, shall assess against the person against whom the order is issued a sum equal to the aggregate amount of all costs and expenses (including attorneys' fees) reasonably incurred...." National Childhood Vaccine Injury Act of 1986 42 U.S.C. § 300aa-15(b) "Compensation awarded under the [National Vaccine Injury Compensation] Program ... may also include an amount, not to exceed a combined total of $30,000, for—(1) lost earnings ... (2) pain and suffering ... , and (3) reasonable attorneys' fees and costs (as provided in subsection (e) of this section." 42 U.S.C. § 300aa-15(e) "(1) In awarding compensation on a petition filed under section 300aa-11 of this title the special master or court shall also award as part of such compensation an amount to cover—(A) reasonable attorneys' fees, and (B) other costs, incurred in any proceeding on such petition. If the judgment of the United States Court of Federal Claims on such a petition does not award compensation, the special master or court may award an amount of compensation to cover petitioner's reasonable attorneys' fees and other costs incurred in any proceeding on such petition if the special master or court determines that the petition was brought in good faith and there was a reasonable basis for the claim for which the petition was brought." "(2) If the petitioner, before the effective date of this subpart, filed a civil action for damages for any vaccine-related injury or death for which compensation may be awarded under the Program, and petitioned under section 300aa-11(a)(5) of this title to have such action dismissed and to file a petition for compensation under the Program, in awarding compensation on such petition the special master or court may include an amount of compensation limited to the costs and expenses incurred by the petitioner and the attorney of the petitioner before the effective date of this subpart in preparing, filing, and prosecuting such civil action (including the reasonable value of the attorney's time if the civil action was filed under contingent fee arrangements)." 42 U.S.C. § 300aa-31(c) "The court, in issuing any final order in any action under this section, may award costs of litigation (including reasonable attorney and expert witness fees) to any plaintiff who substantially prevails on one or more significant issues in the action." Social Security Act 42 U.S.C. § 669a(c) "In any action brought under paragraph (1), upon a finding of liability on the part of the defendant, the defendant shall be liable to the plaintiff in an amount equal to the sum of ... (B) the costs (including attorney's fees) of the action." 42 U.S.C. § 673(a)(6)(A) "For purposes of paragraph (1)(B)(i), the term 'non-recurring adoption expenses' means reasonable and necessary adoption fees, court costs, attorney fees, and other expenses which are directly related to the legal adoption of a child with special needs and which are not incurred in violation of State or Federal law." 42 U.S.C. § 1320a-8(b)(4)(G) "The official conducting a hearing under this section may sanction a person, including any party or attorney.... Such sanction may include ... ordering the party or attorney to pay the attorneys' fees and other costs caused by the failure or misconduct...." 42 U.S.C. § 1320 d - 5 (d)(3) "In the case of any successful action under paragraph (1), the court, in its discretion, may award the costs of the action and reasonable attorney fees to the State." United States Housing Act of 1937 42 U.S.C. § 1437d(q)(7) "Appropriate relief that may be awarded by such district courts shall include reasonable attorney's fees and other litigation costs." Civil Money Penalties Against Section 8 Owners 42 U.S.C. § 1437z-1(e)(1)(B) "Any monetary judgment awarded in an action brought under this paragraph may, in the discretion of the court, include the attorney's fees and other expenses incurred by the United States in connection with the action." Homeownership and Opportunity Through HOPE Act 42 U.S.C. § 1437aaa-4(h) ( see also , 42 U.S.C. §§ 12875, 12895) "The parties specified in the preceding sentence shall be entitled to reasonable attorney fees upon prevailing in any such judicial action." Housing Act of 1949 42 U.S.C. § 1490s(b)(5)(A) "The monetary judgment may, in the court's discretion, include the attorney's fees and other expenses incurred by the United States in connection with the action." Voting Rights Act of 1965 42 U.S.C. § 1973 l (e) "In any action or proceeding to enforce the voting guarantees of the fourteenth or fifteenth amendment, the court, in its discretion, may allow the prevailing party, other than the United States, a reasonable attorney's fee, reasonable expert fees, and other reasonable litigation expenses, as part of the costs as part of the costs." Voting Accessibility for the Elderly and Handicapped Act 42 U.S.C. § 1973ee-4(c) "Notwithstanding any other provision of law, no award of attorney fees may be made with respect to an action under this section, except in any action brought to enforce the original judgment of the court." National Voter Registration Act of 1993 42 U.S.C. § 1973gg-9(c) "In a civil action under this section, the court may allow the prevailing party (other than the United States) reasonable attorney fees, including litigation expenses, and costs." Civil Rights Attorney ' s Fees Awards Act of 1976 42 U.S.C. § 1988(b) "In any action or proceeding to enforce a provision of sections 1981, 1981a, 1982, 1983, 1985, and 1986 of this title, title IX of P.L. 92-318, the Religious Freedom Restoration Act of 1993, the Religious Land Use and Institutionalized Persons Act of 2000, title VI of the Civil Rights Act of 1964, or section 40302 of the Violence Against Women Act of 1994, the court, in its discretion, may allow the prevailing party, other than the United States, a reasonable attorney's fee as part of the costs, except that in any action brought against a judicial officer for an act or omission taken in such officer's judicial capacity such officer shall not be held liable for any costs, including attorney's fees, unless such action was clearly in excess of such officer's jurisdiction." Civil Rights Act of 1991 42 U.S.C. § 1988(c) "In awarding an attorney's fee under subsection (b) of this section in any action or proceeding to enforce a provision of section 1981 or 1981a of this title, the court, in its discretion, may include expert fees as part of the attorney's fee." Civil Rights of Institutionalized Persons Act 42 U.S.C. § 1997a(b) "In any action commenced under this section, the court may allow the prevailing party, other than the United States, a reasonable attorney's fee against the United States as part of the costs." 42 U.S.C. § 1997c(d) "In any action in which the United States joins as an intervenor under this section, the court may allow the prevailing party, other than the United States, a reasonable attorney's fee against the United States as part of the costs...." 42 U.S.C. § 1997e(d) "In an action brought by a prisoner who is confined to any jail, prison, or other correctional facility, in which attorney's fees are authorized under section 1988 of this title, such fees shall not be awarded, except to the extent that...." Civil Rights Act of 1964, Title II 42 U.S.C. § 2000a-3(b) "In any action commenced pursuant to this subchapter, the court, in its discretion, may allow the prevailing party, other than the United States, a reasonable attorney's fee as part of the costs, and the United States shall be liable for costs the same as a private party." Civil Rights Act of 1964, Title III 42 U.S.C. § 2000b-1 "In any action or proceeding under this subchapter the United States shall be liable for costs, including a reasonable attorney's fee, the same as a private party." Civil Rights Act of 1964, Title VII 42 U.S.C. § 2000e-5(g)(2)(B) "On a claim in which an individual proves a violation under section 703(m) [42 U.S.C. § 2000e-2(m)] and a respondent demonstrates that the respondent would have taken the same action in the absence of the impermissible motivating factor, the court—(i) may grant declaratory relief, injunctive relief (except as provided in clause (ii)), and attorney's fees and costs demonstrated to be directly attributable only to the pursuit of the claim under section 703(m)...." 42 U.S.C. § 2000e-5(k) "In any action or proceeding under this subchapter the court, in its discretion, may allow the prevailing party, other than the [Equal Employment Opportunity] Commission or the United States, a reasonable attorney's fee (including expert fees) as part of the costs, and the Commission and the United States shall be liable for costs the same as a private person." Privacy Protection Act of 1980 42 U.S.C. § 2000aa-6(f) "A person having a cause of action under this section shall be entitled to recover ... such reasonable attorneys' fees and other litigation costs reasonably incurred as the court, in its discretion, may award...." Atomic Energy Act of 1954 42 U.S.C. § 2184 "If, in any action against such patent licensee, the court shall determine that the defendant is exercising such license, the measure of damages shall be the royalty fee determined pursuant to section 2187(c) of this title, together with such costs, interest and reasonable attorney's fees as may be fixed by the court.... If any such patent licensee shall fail to pay such royalty fee, the patentee may bring an action in any court of competent jurisdiction for such royalty fee, together with such costs, interest and reasonable attorney's fees as may be fixed by the court." Legal Services Corporation Act 42 U.S.C. § 2996e(f) "If an action is commenced by the Corporation or by a recipient and a final order is entered in favor of the defendant and against the Corporation or a recipient's plaintiff, the court shall, upon motion by the defendant and upon a finding by the court that the action was commenced or pursued for the sole purpose of harassment of the defendant or that the Corporation or a recipient's plaintiff maliciously abused legal process, enter an order (which shall be appealable before being made final) awarding reasonable costs and legal fees incurred by the defendant in defense of the action, except when in contravention of a State law, a rule or court, or a statute of general applicability. Any such costs and fees shall be directly paid by the Corporation." Department of Housing and Urban Development Act 42 U.S.C. § 3537a(c)(5) "The monetary judgment may, in the court's discretion, include the attorneys' fees and other expenses incurred by the United States in connection with the action." 42 U.S.C. § 3544(c)(3) "Appropriate relief that may be ordered by such district courts shall include reasonable attorney's fees and other litigation costs." 42 U.S.C. § 3545(i) "The monetary judgment may, in the court's discretion, include the attorneys' fees and other expenses incurred by the United States in connection with the action." Fair Housing Act 42 U.S.C. § 3612(p) "In any administrative proceeding brought under this section, or any court proceeding arising therefrom, or any civil action under section 812 [42 U.S.C. § 3612], the administrative law judge or the court, as the case may be, in its discretion, may allow the prevailing party, other than the United States, a reasonable attorney's fee and costs. The United States shall be liable for such fees and costs to the extent provided by section 504 of title 5, United States Code, or by section 2412 of title 28, United States Code." 42 U.S.C. § 3613(c)(2) "In a civil action under subsection (a), the court, in its discretion, may allow the prevailing party, other than the United States, a reasonable attorney's fee and costs. The United States shall be liable for such fees and costs to the same extent as a private person." 42 U.S.C. § 3614(d)(2) "In a civil action [by the Attorney General] under this section, the court, in its discretion, may allow the prevailing party, other than the United States, a reasonable attorney's fee and costs. The United States shall be liable for such fees and costs to the extent provided by section 2412 of title 28, United States Code." Omnibus Crime Control and Safe Streets Act of 1968 42 U.S.C. § 3789d(c)(4)(B) "In any civil action brought by a private person to enforce compliance with any provision of this subsection, the court may grant to a prevailing plaintiff reasonable attorney fees, unless the court determines that the lawsuit is frivolous, vexatious, brought for harassment purposes, or brought principally for the purpose of gaining attorney fees." National Flood Insurance Act of 1968 42 U.S.C. § 4081(c) "The Director of the Federal Emergency Management Agency ... shall provide any such agent or broker with indemnification, including court costs and reasonable attorney fees, arising out of and caused by an error or omission on the part of the Federal Emergency Management Agency and its contractors." Uniform Relocation Assistance and Real Property Acquisition Policies Act 42 U.S.C. § 4654 "(a) The Federal court ... shall award ... such a sum as will in the opinion of the court reimburse such owner for his reasonable costs, disbursements, and expenses, including reasonable attorney, appraisal, and engineering fees, actually incurred because of the condemnation proceedings, if...." "(c) The court rendering a judgment for the plaintiff in a proceeding brought under section 1346(a)(2) or 1491 of Title 28, awarding compensation for the taking of property by a Federal agency, or the Attorney General effecting a settlement of any such proceeding, shall determine and award or allow to such plaintiff ... reasonable attorney, appraisal, and engineering fees, actually incurred because of such proceeding." Noise Control Act of 1972 42 U.S.C. § 4911(d) "The court, in issuing any final order in any action brought pursuant to subsection (a) of this section, may award costs of litigation (including reasonable attorney and expert witness fees) to any party, whenever the court determines such an award is appropriate." Robert T. Stafford Disaster Relief and Emergency Assistance Act 42 U.S.C. § 5207 ( P.L. 109-295 (2006)) "In any action or proceeding to enforce this section, the court shall award the prevailing party, other than the United States, a reasonable attorney's fee as part of the costs." National Manufactured Housing Construction and Safety Standards Act 42 U.S.C. § 5412(b) "[T]he person bringing the action shall also be entitled to recover any damage sustained by him, as well as all court costs plus reasonable attorneys' fees." Energy Reorganization Act of 1974 42 U.S.C. § 5851(b)(2)(B) "If an order is issued under this paragraph, the Secretary, at the request of the complainant shall assess against the person against whom the order is issued a sum equal to the aggregate amount of all costs and expenses (including attorneys' and expert witness fees) reasonably incurred...." 42 U.S.C. § 5851(e)(2) "The court, in issuing any final order under this subsection, may award costs of litigation (including reasonable attorney and expert witness fees) to any party whenever the court determines such award is appropriate." Age Discrimination Act of 1975 42 U.S.C. § 6104(e)(1) "Such interested person may elect, by a demand for relief in his complaint, to recover reasonable attorney's fees, in which case the court shall award the costs of the suit, including a reasonable attorney's fee, to the prevailing plaintiff." National Oil Heat Research Alliance Act of 2000 42 U.S.C. § 6201 note ( P.L. 106-469 , § 712(e)) "(1) Meritorious Case—In a case in Federal court in which the court grants a public utility injunctive relief under subsection (d), the public utility shall be entitled to recover an attorney's fee from the Alliance and any qualified State association undertaking the consumer education activity with respect to which a complaint under this section is made. (2) Nonmeritorious Case—In any case under subsection (d) in which the court determines a complaint under subsection (b) to be frivolous and without merit, the prevailing party shall be entitled to recover an attorney's fee. Energy Policy and Conservation Act 42 U.S.C. § 6305(d) "The court, in issuing any final order in any action brought pursuant to subsection (a) of this section, may award costs of litigation (including reasonable attorney and expert witness fees) to any party, whenever the court determines such award is appropriate." Solid Waste Disposal Act 42 U.S.C. § 6971(c) "[A] sum equal to the aggregate amount of all costs and expenses (including attorney's fees) ... shall be assessed against the person committing such violation." 42 U.S.C. § 6972(e) "The court, in issuing any final order in any action brought pursuant to this section or section 7006 [42 U.S.C. § 6976], may award costs of litigation (including reasonable attorney and expert witness fees) to the prevailing or substantially prevailing party, whenever the court determines that such award is appropriate." Clean Air Act 42 U.S.C. § 7413(b) "In the case of any action brought by the Administrator under this subsection, the court may award costs of litigation (including reasonable attorney and expert witness fees) to the party or parties against whom such action was brought in any case where the court finds that such action was unreasonable." 42 U.S.C. § 7524(c)(6) "Any person who fails to pay on a timely basis the amount of an assessment of a civil penalty as described in the first sentence of this paragraph shall be required to pay, in addition to that amount and interest, the United States' enforcement expenses, including attorneys fees and costs for collection proceedings...." 42 U.S.C. § 7604(d) "The court, in issuing any final order in any action brought pursuant to subsection (a) of this section, may award costs of litigation (including reasonable attorney and expert witness fees) to any party, whenever the court determines such award is appropriate." 42 U.S.C. § 7607(f) "In any judicial proceeding under this section, the court may award costs of litigation (including reasonable attorney and expert witness fees) whenever it determines that such award is appropriate." 42 U.S.C. § 7622(b)(2)(B) "If an order is issued under this paragraph, the Secretary, at the request of the complainant, shall assess against the person against whom the order is issued a sum equal to the aggregate amount of costs and expenses (including attorneys' and expert witness fees) reasonably incurred...." 42 U.S.C. § 7622(e)(2) "The court, in issuing any final order under this subsection, may award costs of litigation (including reasonable attorney and expert witness fees) to any party whenever the court determines such award is appropriate." Power Plant and Industrial Fuel Use Act 42 U.S.C. § 8435(d) "The court, in issuing any final order in any action brought under subsection (a) of this section, may award costs of litigation (including reasonable attorney and expert witness fees) to any party, whenever the court determines such award is appropriate." Ocean Thermal Energy Conservation Act of 1980 42 U.S.C. § 9124(d) "The court, in issuing any final order in any action brought pursuant to subsection (a) of this section, may award costs of litigation (including reasonable attorney and expert witness fees) to any party whenever the court determines that such an award is appropriate." Comprehensive Environmental Response, Compensation, and Liability Act 42 U.S.C. § 9606(b)(2)(E) "Reimbursement awarded by a court under subparagraph (C) or (D) may include appropriate costs, fees, and other expenses in accordance with subsections (a) and (d) of section 2412 of title 28 of the United States Code." 42 U.S.C. § 9610(c) "Whenever an order is issued under this section to abate such violation, at the request of the applicant a sum equal to the aggregate amount of all costs and expenses (including the attorney's fees) ... shall be assessed against the person committing such violation." 42 U.S.C. § 9612(c)(3) "Upon the request of the President, the Attorney General shall commence an action on behalf of the [Hazardous Substance Response] Fund to recover any compensation paid by the Fund to any claimant pursuant to this subchapter, and, without regard to any limitation of liability, all interest, administrative and adjudicative costs, and attorney's fees incurred by the Fund by reason of the claim...." 42 U.S.C. § 9622(h)(3) "If any person fails to pay a claim that has been settled under this subsection, the department or agency head shall request the Attorney General to bring a civil action in an appropriate district court to recover the amount of such claim plus costs, attorneys' fees, and interest from the date of the settlement." 42 U.S.C. § 9659(f) "The court, in issuing any final order in any action brought pursuant to this section, may award costs of litigation (including reasonable attorney and expert witness fees) to the prevailing or the substantially prevailing party whenever the court determines such an award is appropriate." 42 U.S.C. § 11046(f) "The court, in issuing any final order in any action brought pursuant to this section, may award costs of litigation (including reasonable attorney and expert witness fees) to the prevailing or the substantially prevailing party whenever the court determines such an award is appropriate." Health Care Quality Improvement Act of 1986 42 U.S.C. § 11113 "[T]he court shall award to a substantially prevailing party defending against any such claim the cost of the suit attributable to such claim, including a reasonable attorney's fee, if the claim, or the claimant's conduct during the litigation of the claim, was frivolous, unreasonable, without foundation, or in bad faith...." International Child Abduction Remedies Act 42 U.S.C. § 11607(b)(3) "Any court ordering the return of a child pursuant to an action brought under section 11603 of this title shall order the respondent to pay necessary expenses incurred by or on behalf of the petitioner, including court costs, legal fees ... unless the respondent establishes that such order would be clearly inappropriate." Americans with Disabilities Act 42 U.S.C. § 12205 "In any action or administrative proceeding commenced pursuant to this Act, the court or agency, in its discretion, may allow the prevailing party, other than the United States, a reasonable attorney's fee, including litigation expenses, and costs, and the United States shall be liable for the foregoing the same as a private individual." National and Community Service Act of 1990 42 U.S.C. § 12636(f)(4)((D)(ii) "If a participant, labor organization, or other interested individual described in paragraph (1) prevails under a binding arbitration proceeding, the State or local applicant described in paragraph (1) that is a party to such grievance shall pay the total cost of such proceeding and the attorneys' fees of such participant, labor organization, or individual, as the case may be." Homeownership and Opportunity Through HOPE Act 42 U.S.C. § 12875(e) ( see also , 42 U.S.C. § 1437aaa-4(h)) "The parties specified in the preceding sentence shall be entitled to reasonable attorney fees upon prevailing in any such judicial action." 42 U.S.C. § 12895(d) "The parties specified in the preceding sentence shall be entitled to reasonable attorney fees upon prevailing in any such judicial action." Outer Continental Shelf Lands Act 43 U.S.C. § 1349(a)(5) ( see also , 43 U.S.C. § 1845(e)) "A court, in issuing any final order in any action brought pursuant to subsection (a)(1) or subsection (c) of this section, may award costs of litigation, including reasonable attorney and expert witness fees, to any party, whenever such court determines such award is appropriate." 43 U.S.C. § 1349(b)(2) "Any resident of the United States who is injured in any manner through the failure of any operator to comply with any rule, regulation, order, or permit issued pursuant to this Act may bring an action for damages (including reasonable attorney fee and expert witness fees)...." Alaska Native Claims Settlement Act 43 U.S.C. § 1619(b) "A claim for attorney and consultant fees and out-of-pocket expenses may be submitted to the Chief Commissioner of the United States Court of Claims for services rendered before December 18, 1971 to any Native tribe...." Alaska National Interest Lands Conservation Act 43 U.S.C. § 1631(c)(3) ( see also , 16 U.S.C. § 3117(a)) "If title to land conveyed to a Native Corporation pursuant to the Alaska Native Claims Settlement Act or this Act which underlies a lake, river, or stream is challenged in a court of competent jurisdiction and such court determines that such land is owned by the Native Corporation, the Native Corporation shall be awarded a money judgment against the plaintiffs in an amount equal to its costs and attorney's fees, including costs and attorney's fees incurred on appeal." Outer Continental Shelf Lands Act 43 U.S.C. § 1845(e) ( see also , 43 U.S.C. § 1349) "If the decision of the Secretary under subsection (d) of this section is in favor of the commercial fisherman filing the claim, the Secretary, as a part of the amount awarded, shall include reasonable claim preparation fees and reasonable attorney's fees, if any, incurred by the claimant in pursuing the claim." Railway Labor Act 45 U.S.C. § 153(p) "If the petitioner shall finally prevail he shall be allowed a reasonable attorney's fee to be taxed and collected as part of the costs of the suit." Shipping Code (as codified by P.L. 109-304 (2006)) 46 U.S.C. § 51509(e)(2) "If the Secretary of Defense is unable or unwilling to order an individual to serve on active duty under paragraph (1), or if the Secretary of Transportation determines that reimbursement of the cost of education provided would better serve the interests of the United States, the Secretary of Transportation may recover from the individual the amount of student incentive payments, plus interest and attorney fees." 46 U.S.C. § 51509(f)(2) "If the Secretary of Defense is unable or unwilling to order an individual to serve on active duty under paragraph (1), or if the Secretary of Transportation determines that reimbursement of the cost of education provided would better serve the interests of the United States, the Secretary of Transportation may recover from the individual the amount of student incentive payments, plus interest and attorney fees." 46 U.S.C. § 58106(c) "A person whose business or property is injured by a violation of subsection (a) may bring a civil action in the district court of the United States for the district in which the defendant resides, is found, or has an agent. If the person prevails, the person shall be awarded—(1) 3 times the damages; and (2) costs, including reasonable attorney fees." Communications Act of 1934 47 U.S.C. § 206 "[S]uch common carrier shall be liable to the person or persons injured thereby for ... a reasonable counsel or attorney's fee...." Satellite Home Viewer Improvement Act of 1999 47 U.S.C. § 325(e)(8)(B)(iii) "If the Commission determines that a satellite carrier has retransmitted the television broadcast station to at least one person in the local market of such station and has failed to meet its burden of proving one of the defenses under paragraph (4) with respect to such retransmission, the Commission shall be required to ... issue an order, within 45 days after the filing of the complaint, containing ... an award to the complainant of that complainant's costs and reasonable attorney's fees." 47 U.S.C. § 407 "If the petitioner shall finally prevail, he shall be allowed a reasonable attorney fee to be fixed by the court." Cable Communications Policy Act of 1984 47 U.S.C. § 553(c)(2) "The court may ... direct the recovery of full costs, including awarding reasonable attorneys' fees to an aggrieved party who prevails." 47 U.S.C. § 605(e)(3)(B) "The court may ... direct the recovery of full costs, including awarding reasonable attorneys' fees to an aggrieved party who prevails." Alien Owners of Land 48 U.S.C. § 1506 "[S]uch suit shall be dismissed on payment of costs and a reasonable attorney fee to be fixed by the court." ICC Termination Act of 1995 49 U.S.C. § 11704(d)(3) "The district court shall award a reasonable attorney's fee as a part of the damages for which a rail carrier if found liable under this subsection. The district court shall tax and collect that fee as a part of the costs of the action." 49 U.S.C. § 11707(b) "The court shall award a reasonable attorney's fee to the plaintiff in a judgment against the defendant rail carrier under subsection (a) of this section. The court shall tax and collect that fee as a part of the costs of the action." 49 U.S.C. § 14704(e) "The district court shall award a reasonable attorney's fee under this section. The district court shall tax and collect that fee as a part of the costs of the action." 49 U.S.C. § 14707(c) "In a civil action under subsection (a), the court may determine the amount of and award a reasonable attorney's fee to the prevailing party. That fee is in addition to costs allowable under the Federal Rules of Civil Procedure." 49 U.S.C. § 14708(d) "In any court action to resolve a dispute between a shipper of household goods and a carrier providing transportation or service subject to jurisdiction under subchapter I or III of chapter 135 concerning the transportation of household goods by such carrier, the shipper shall be awarded reasonable attorney's fees if...." 49 U.S.C. § 14708(e) "In any court action to resolve a dispute between a shipper of household goods and a carrier providing transportation, or service subject to jurisdiction under subchapter I or III of chapter 135 concerning the transportation of household goods by such carrier, such carrier may be awarded reasonable attorney's fees by the court only if the shipper brought such action in bad faith...." 49 U.S.C. § 15904(d)(2) "The district court shall award a reasonable attorney's fee as part of the damages for which a carrier is found liable under this subsection. The district court shall tax and collect that fee as a part of the costs of the action." Transportation 49 U.S.C. § 30116(c) (motor vehicle safety) "The action may be brought ... to recover damages, court costs, and a reasonable attorney's fee." 49 U.S.C. § 31105(b)(3)(B) (commercial motor vehicle safety) "[T]he Secretary may assess against the person against whom the order is issued the costs (including attorney's fees) reasonably incurred by the complainant in bringing the complaint." 49 U.S.C. § 32508 (bumper standards) "The court shall award costs and a reasonable attorney's fee to the owner when a judgment is entered for the owner." 49 U.S.C. § 32710(b) (odometers) "The court shall award costs and a reasonable attorney's fee to the person when a judgment is entered for that person." 49 U.S.C. § 42121(b)(3)(C) (whistleblower protection) "If the Secretary of Labor finds that a complaint under paragraph (1) is frivolous or has been brought in bad faith, the Secretary of Labor may award to the prevailing employer a reasonable attorney's fee not exceeding $1,000." 49 U.S.C. § 42121(b)(6)(B) "The court, in issuing any final order under this paragraph, may award costs of litigation (including reasonable attorney and expert witness fees) to any party whenever the court determines such award is appropriate." 49 U.S.C. § 60121(b) (pipelines) "The court may award costs, reasonable expert witness fees, and a reasonable attorney's fee to a prevailing plaintiff in an action under this section. The court may award costs to a prevailing defendant when the action is unreasonable, frivolous, or meritless." 49 U.S.C. § 80114(a) (lost, stolen, and destroyed negotiable bills) "The court may order payment of reasonable costs and attorney's fees to the carrier." Foreign Intelligence Surveillance Act of 1978 50 U.S.C. § 1810 "An aggrieved person ... shall be entitled to recover ... reasonable attorney's fees...." 50 U.S.C. § 1828 "An aggrieved person ... whose premises, property, information, or material has been subjected to a physical search within the United States, or about whom information obtained by such a physical search has been disclosed or used in violation of section 307 shall have a cause of action against any person who committed such violation and shall be entitled to recover—(1) actual damages ... ; (2) punitive damages; and (3) reasonable attorney's fees and other investigative and litigation costs reasonably incurred." Jobs Accountability Act, P.L. 111-5 , 123 Stat. 286, 300 (2009) § 1 553(c)(2) (n ot yet codified ) "Not later than 30 days after receiving an inspector general report under subsection (b), the head of the agency concerned [may] ... (C) Order the employer to pay the complainant an amount equal to the aggregate amount of all costs and expenses (including attorneys' fees and expert witnesses' fees) that were reasonably incurred...." § 1553(c)( 4 ) (not yet codified) "In any action brought under this paragraph, the court may grant appropriate relief, including injunctive relief, compensatory and exemplary damages, and attorneys fees and costs." On the Civil Rights Attorney ' s Fees Awards Act of 1976 House: Committee on the Judiciary. Civil Rights Attorney's Fees Awards Act of 1976; report to accompany H.R. 15460 . Report No. 94-1558. 3 p. (94 th Cong., 2 nd sess.) Senate: Committee on the Judiciary. Civil Rights Attorney's Fees Awards Act of 1976; report to accompany S. 2278 . Report No. 94-1011. 7 p. (94 th Cong., 2 nd sess.) Senate: Committee on the Judiciary. Subcommittee on Constitutional Rights. Civil Rights Attorney's Fees Awards Act of 1976; Source Book: Legislative History, Texts, and Other Documents. Committee Print. 313 p. (94 th Cong., 2 nd sess.) On the Equal Access to Justice Act House: Conference Report. Small Business Assistance and Reimbursement for Certain Fees; report to accompany H.R. 5612 . Report No. 96-1434. 29 p. (96 th Cong., 2 nd sess.) House: Committee on the Judiciary. Equal Access to Justice Act; report to accompany S. 265 . Report No. 96-1418. 30 p. (96 th Cong., 2 nd sess.) House: Committee on Small Business. Small Business Equal Access to Justice Act; report to accompany H.R. 6429 . Report No. 96-1005, Part 1. 29 p. (96 th Cong., 1 st sess.) Senate: Committee on the Judiciary. Equal Access to Justice Act; report to accompany S. 265 . Report No. 96-253. 28 p. (96 th Cong., 1 st sess.) Senate: Committee on the Judiciary. Department of Justice Authorization Act, Fiscal Year 1981; report to accompany S. 2377 (incorporates S. 265 ). Report No. 96-786. 34 p. (96 th Cong., 2 nd sess.) House: Committee on the Judiciary. Equal Access to Justice Act Amendments; report to accompany H.R. 5479 . Report No. 98-992. 26 p. (98 th Cong., 2 nd sess.) Senate: Committee on the Judiciary. Equal Access to Justice Act; report to accompany S. 919 . Report No. 98-586. 39 p. (98 th Cong., 2 nd sess.) House: Committee on the Judiciary. Equal Access to Justice Act Amendments; report to accompany H.R. 2378 . Report No. 99-120. 30 p.; Part 2. 7 p. (99 th Cong., 1 st sess. On Awards of Attorneys ' Fees in Tax Cases House: Committee on Ways and Means. Subcommittee on Select Revenue Measures. Description of Laws and Bills Relating to Awards of Attorney's Fees in Tax Cases ( P.L. 96-481 , H.R. 1095 , H.R. 2555 , and H.R. 3262 ). Joint Committee Print. 10 p. (97 th Cong., 1 st sess.) Senate: Committee on Finance. Subcommittee on Oversight of the Internal Revenue Service. Description of S. 1839 Relating to Awards of Attorney's Fees in Tax Cases. Joint Committee Print. 4 p. (95 th Cong., 1 st sess.) On the Handicapped Children ' s Protection Act of 1985 House: Committee on Education and Labor. Handicapped Children's Protection Act of 1985; report to accompany H.R. 1523 . Report No. 99-296. 18 p. (99 th Cong., 1 st sess.) Senate: Committee on Labor and Human Resources. Handicapped Children's Protection Act of 1985; report to accompany S. 415 . Report No. 99-112. 18 p. (99 th Cong., 1 st sess.) House: Conference Report. Handicapped Children's Protection Act of 1986; report to accompany S. 415 . Report No. 99-687. 8 p. (99 th Cong., 2 nd sess.) On Funding of Participants in Agency Proceedings House: Committee on the Judiciary. Regulation Reform Act of 1980; report together with supplemental and dissenting views to accompany H.R. 3263 . Report No. 96-1393. (96 th Cong., 2 nd sess.) Senate: Committee on Commerce. Agency Comments on the Payment of Reasonable Fees for Public Participation in Agency Proceedings. Committee Print. 75 p. (95 th Cong., 1 st sess.) Senate: Committee on Governmental Affairs. Study of Federal Regulation, Vol. III. Public Participation in Regulatory Agency Proceedings. Document No. 95-71. 162 p. (95 th Cong., 1 st sess.) Senate: Committee on the Judiciary. Participation in Government Proceedings Act of 1976; report together with minority views to accompany S. 2715 . Report No. 94-863. 52 p. (94 th Cong., 2 nd sess.) Senate: Committee on Governmental Affairs and Committee on the Judiciary. Reform of Federal Regulation; report together with additional views to accompany S. 262 . Report No. 96-1018, Part 1. (96 th Cong., 2 nd sess.) On Attorneys ' Fees Limitations House: Committee on Veterans' Affairs. Legislative History of the Ten Dollar Attorney Fee Limitation in Claims for Veterans' Benefits. House Committee Print No. 8. 16 p. (100 th Cong., 1 st sess.) On Attorney Accountability Act of 1995 House: Committee on the Judiciary. Attorney Accountability Act of 1995. H.Rept. 104-62 . 34 p. (104 th Cong., 1 st sess.) House: Committee on Education and Labor. Subcommittee on Select Education. Handicapped Children's Protection Act. Hearings on H.R. 1523 . 67 p. March 12, 1985 (99 th Cong., 1 st sess.) House: Committee on the Judiciary. Subcommittee on Administrative Law and Governmental Relations. Public Participation in Agency Proceedings. Hearings on H.R. 3361 and related bills. 728 p. March 30, 31; April 1, 27 and 28, 1977 (95 th Cong., 1 st sess.) House: Committee on the Judiciary. Subcommittee on Administrative Law and Governmental Relations. Waiver to Obtain Attorney Fee Reimbursement [to Anne Burford]. 55 p. March 20, 1986 (99 th Cong., 2 nd sess.) House: Committee on the Judiciary. Subcommittee on Courts and Intellectual Property. Attorney Accountability. 294 p. February 6 and 10, 1995 (104 th Cong., 1 st sess.) House: Committee on the Judiciary. Subcommittee on Courts, Civil Liberties, and the Administration of Justice. Awarding of Attorneys' Fees. 426 p. October 6, 8, and December 3, 1975 (94 th Cong., 1 st sess.) House: Committee on the Judiciary. Subcommittee on Courts, Civil Liberties, and the Administration of Justice. The Awarding of Attorneys' Fees in Federal Courts. 337 p. November 16 and 17, 1977; April 26 and 27, 1978 (95 th Cong., 1 st and 2 nd sess.) House: Committee on the Judiciary. Subcommittee on Courts, Civil Liberties and the Administration of Justice. Awards of Attorneys' Fees Against the Federal Government. Hearings on S. 265 . 629 p. May 20 and June 24, 1980 (96 th Cong., 2 nd sess.) House: Committee on the Judiciary. Subcommittee on Courts, Civil Liberties, and the Administration of Justice. Implementation of the Equal Access to Justice Act. 302 p. March 18 and April 1, 1982 (97 th Cong., 2 nd sess.) House: Committee on the Judiciary. Subcommittee on Courts, Civil Liberties, and the Administration of Justice. Equal Access to Justice Act Amendments. Hearings on H.R. 5059 . 413 p. March 14, 1984 (98 th Cong., 2 nd sess.) House: Committee on the Judiciary. Subcommittee on Courts, Civil Liberties, and the Administration of Justice. Equal Access to Justice Act Amendments. Hearings on H.R. 2223 . 122 p. April 30, 1985 (99 th Cong., 1 st sess.) House: Committee on the Judiciary. Subcommittee on Courts, Civil Liberties, and the Administration of Justice. Rules Enabling Act of 1985 [Rule 68 of the Federal Rules of Civil Procedure]. Hearings on H.R. 2633 and H.R. 3550 . 342 p. June 6, 1985 (99 th Cong., 1 st sess.) House: Committee on the Judiciary. Subcommittee on Intellectual Property and Judicial Administration. Judicial Immunity Legislation. Hearings on H.R. 3206 and H.R. 671 . 141 p. October 3, 1991 (102 nd Cong., 1 st sess.) House: Committee on Small Business. Subcommittee on SBA and SBIC Authority and General Small Business Problems. Judicial Access/Court Costs— H.R. 5103 and H.R. 6429 . 335 p. April 17, 23, and May 1, 1980 (96 th Cong., 2 nd sess.) House: Committee on Ways and Means. Subcommittee on Select Revenue Measures. Payment of Attorneys' Fees in Tax Litigation. Hearings on H.R. 4584 and Similar Bills. 111 p. October 6, 1980 (96 th Cong., 2 nd sess.) House: Committee on Ways and Means. Subcommittee on Select Revenue Measures. Payment of Attorneys' Fees in Tax Litigation. 100 p. September 28, 1981 (97 th Cong., 1 st sess.) House: Committee on Ways and Means. Subcommittee on Social Security. Attorneys' Fees in Social Security Disability Cases. 299 p. May 13, 1987 (100 th Cong., 1 st sess.) House: Committee on Ways and Means. Subcommittee on Social Security. Processing of Attorney Fees by the Social Security Administration. 93 p. June 14, 2000 (106 th Cong., 2 nd sess.) House: Committee on Ways and Means. Subcommittee on Select Revenue Measures. Award of Attorney's Fees in Tax Cases. 75 p. April 25, 1985 (99 th Cong., 1 st sess.) Senate: Committee on Finance. Subcommittee on Oversight of the Internal Revenue Service. Taxpayer Protection and Reimbursement Act. Hearings on S. 1444 . 192 p. July 19, 1979 (96 th Cong., 1 st sess.) Senate: Committee on Finance. Subcommittee on Oversight of the Internal Revenue Service. Recovery of Attorney's Fees in Tax Cases. Hearings on S. 752 and S. 1673 . 173 p. October 19, 1981 (97 th Cong., 1 st sess.) Senate: Committee on the Judiciary. Subcommittee on Administrative Practice and Procedure. Public Participation in Federal Agency Proceedings. Hearings on S. 2715 . 905 p. January 30 and February 6, 1976 (94 th Cong., 2 nd sess.) Senate: Committee on the Judiciary. Subcommittee on Administrative Practice and Procedure. Public Participation in Federal Agency Proceedings Act of 1977. Hearings on S. 270 . Part 1: 745 p. February 3, 11, and May 9, 1977. Part 2: 425 p. June 14 and 21, 1977 (95 th Cong., 1 st sess.) Senate: Committee on the Judiciary. Subcommittee on Agency Administration. Equal Access to Justice Act. 264 p. December 9, 1982 (97 th Cong., 2 nd sess.) Senate: Committee on the Judiciary. Subcommittee on the Constitution. HUD Attorney's Fees. Hearings on S. 571 . 117 p. April 10, 1978 (95 th Cong., 2 nd sess.) Senate: Committee on the Judiciary. Subcommittee on the Constitution. Attorney's Fees Awards. Hearings on S. 585 . 127 p. March 1, 1982 (97 th Cong., 2 nd sess.) Senate: Committee on the Judiciary. Subcommittee on the Constitution. The Legal Fee Equity Act. Hearings on S. 2802 . 758 p. September 11, 1984 (98 th Cong., 2 nd sess.) Senate: Committee on the Judiciary. Subcommittee on the Constitution. Legal Fees Equity Act. Hearings on S. 1580 , S. 1794 , and S. 1795 . 522 p. October 8 and 29, 1985 (99 th Cong., 1 st sess.) Senate: Committee on the Judiciary. Subcommittee on Courts and Administrative Practice. A Judicial Immunity. Hearings on S. 1482 , S. 1512 , and S. 1515 . 291 p. February 26, 1988 (100 th Cong., 2 nd sess.) Senate: Committee on the Judiciary. Subcommittee on Improvements in Judicial Machinery. Equal Access to Courts. Hearings on S. 2354 . 103 p. March 13, 1978 (95 th Cong., 2 nd sess.) Senate: Committee on the Judiciary. Subcommittee on Improvements in Judicial Machinery. Equal Access to Justice Act of 1979. Hearings on S. 265 . 197 p. April 19-21, 1979 (96 th Cong., 1 st sess.) Senate: Committee on the Judiciary. Subcommittee on Representation of Citizen Interests. The Effect of Legal Fees on the Adequacy of Representation. 1778 p. September 19 and 20; October 1, 2, 4, and 5, 1973 (93 rd Cong., 1 st sess.) Senate: Committee on Labor and Human Resources. Subcommittee on the Handicapped. Handicapped Children's Protection Act of 1985. Hearings on S. 415 . 115 p. May 16, 1986 (99 th Cong., 1 st sess.) House and Senate: Joint Hearing before the Committees on Veterans' Affairs. Issues Arising In Connection with NARS v. Turnage. 424 p. March 17, 1987 (100 th Cong., 1 st sess.)
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In the United States, the general rule, which derives from common law, is that each side in a legal proceeding pays for its own attorney. There are many exceptions, however, in which federal courts, and occasionally federal agencies, may order the losing party to pay the attorneys' fees of the prevailing party. The major common law exception authorizes federal courts (not agencies) to order a losing party that acts in bad faith to pay the prevailing party's fees. There are also roughly two hundred statutory exceptions, which were generally enacted to encourage private litigation to implement public policy. Awards of attorneys' fees are often designed to help to equalize contests between private individual plaintiffs and corporate or governmental defendants. Thus, attorneys' fees provisions are most often found in civil rights, environmental protection, and consumer protection statutes. In addition, the Equal Access to Justice Act (EAJA) makes the United States liable for attorneys' fees of up to $125 per hour in many court cases and administrative proceedings that it loses (and some that it wins) and fails to prove that its position was substantially justified. EAJA does not apply in tax cases, but a similar statute, 26 U.S.C. § 7430, does. Most Supreme Court decisions involving attorneys' fees have interpreted civil rights statutes, and this report focuses on these statutes. It also discusses awards of costs other than attorneys' fees in federal courts, how courts compute the amount of attorneys' fees to be awarded, statutory limitations on attorneys' fees, and other subjects. In addition, it sets forth the language of all federal attorneys' fees provisions, and includes a bibliography of congressional committee reports and hearings concerning attorneys' fees. In 1997, Congress enacted a statute allowing awards of attorneys' fees to some prevailing criminal defendants.
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T rade Adjustment Assistance for Workers (TAA) provides federal assistance to workers who involuntarily lose their jobs due to foreign competition. The primary benefits for TAA-eligible workers are funding for training and reemployment services as well as income support while a worker is enrolled in training. Workers may also be eligible for other benefits, including a tax credit equal to a portion of qualified health insurance premiums. Workers age 50 and over may be eligible for Reemployment Trade Adjustment Assistance, a wage supplement program. After a brief discussion of the program's purpose and most recent reauthorization, this report describes TAA as reauthorized by the Trade Adjustment Assistance Reauthorization Act of 2015 (TAARA, Title IV of P.L. 114-27 ). Reduced barriers to international trade are widely acknowledged to offer benefits to consumers in the form of increased choices and lower prices. Expanded trade may also offer expansionary opportunities to firms that produce goods or services that see increased exports. Reduced barriers to trade may, however, have concentrated negative effects on domestic industries and workers that face increased competition. TAA is designed to provide readjustment assistance to workers who suffer dislocation (job loss) due to foreign competition or offshoring. Generally, TAA provides a more robust set of benefits and services than would be available to a worker who lost his or her job for reasons other than foreign competition. TAA is designed to assist workers who have been adversely affected by reduced trade barriers and increased trade. Its availability to workers who are adversely affected by declines in international trade may be limited. TAA was created in 1962 and, historically, has been reauthorized alongside expansionary trade policies. A detailed legislative history of the program is in the Appendix . In June 2015, TAA was reauthorized by TAARA. The eligibility and benefit provisions of TAARA are authorized to continue through June 30, 2021. TAARA was part of a bill that extended other trade-related policies. TAARA was also passed in conjunction with a separate bill that reauthorized the Trade Promotion Authority (TPA, Title I of P.L. 114-26 ). TPA (also known as "fast track") grants the President authority to negotiate trade agreements, which are then subject to an "up or down" vote in Congress. Since the reauthorization of TPA in 2015, Congress has not voted on any presidentially negotiated trade agreements. This report focuses on the eligibility and benefit provisions of TAA as enacted by TAARA. These provisions apply to all workers certified for TAA after the law's enactment. The law also had retroactivity provisions and, in some cases, workers who were parts of groups certified prior to the 2015 reauthorization may be covered under the TAARA provisions. In other cases, however, a worker who was certified under pre-2015 provisions may continue to receive benefits under the prior provisions. As such, while the version of the program described in this report will apply to all new program participants certified through June 30, 2021, it may not apply to some participants who are covered by a TAA petition that was certified prior to the enactment of TAARA. In these cases, states may operate multiple TAA programs to concurrently serve workers certified under the TAARA provisions and workers certified under other provisions. TAA is jointly administered by the federal government and the states. It is funded by the federal government. The respective roles of federal and state governments in administering and financing the TAA program were in place prior to TAARA and were not substantively changed by the reauthorization law. TAA is jointly administered by the U.S. Department of Labor (DOL) and cooperating state agencies. DOL makes group eligibility determinations, allots appropriated funds to cooperating state agencies, and oversees grantees. Individual benefits are provided through state workforce systems and state unemployment insurance systems. Workers may physically receive benefits and services through local American Job Centers (also known as One-Stop Career Centers). States are responsible for collecting participation and outcome data and reporting these data to DOL. The Health Coverage Tax Credit, which is available to qualified TAA-certified workers who purchase qualified health insurance, is administered by the Internal Revenue Service (IRS). It is administered separately from the TAA program's other benefits and services. TAA is funded by mandatory appropriations. Typically, Congress appropriates a single sum that supports all TAA activities. DOL then allocates these funds to various program activities. Under TAARA, funding for training and reemployment services is capped at $450 million per year. These funds are allotted to the states via a grant allocation formula that considers past and anticipated program usage. States may expend training and reemployment service funds in the year of allotment or in either of the next two fiscal years. Training subsidies are states' primary expenditures out of their reemployment services funding. TAARA specifies that states must allocate at least 5% of their reemployment services funding to case management and no more than 10% to administrative costs. Funds for the Trade Readjustment Allowance income support and Reemployment Trade Adjustment Assistance wage insurance program are not capped. Appropriations for these benefits are based on congressional estimates. Funding for these benefits that is not spent in the year of allotment is returned to the Treasury. TAA is a direct spending (also referred to as "mandatory") program and subject to sequestration under the Budget Control Act of 2011, as amended. For FY2018, the Office of Management and Budget (OMB) determined that the reduction for nonexempt, nondefense spending would be 6.6%. Sequester levels in subsequent years will be determined by OMB. In FY2018, Congress appropriated $790 million for the TAA for Workers programs. Of this amount, $450 million was for training and reemployment services and the remaining $340 million was for income support and wage insurance. The entire $790 million appropriation was subject to 6.6% sequestration ($52.14 million). DOL opted to apply the entirety of the sequestration to the training and reemployment services funding, reducing the funding for training and reemployment services from $450 million to $397.86 million and leaving the $340 million for income support and wage insurance unchanged. Obtaining TAA benefits is a two-stage process. First, a group of workers or their representative (e.g., firm, union, or state) must petition DOL to establish that their job loss was attributable to foreign trade and met statutory criteria. Once a group has been certified by DOL, individual workers covered by the group's petition apply for state-administered benefits at local American Job Centers (AJCs; also known as One-Stop Career Centers). TAA is available to workers in the 50 states, the District of Columbia, and Puerto Rico. To be eligible for TAA group certification, a group of workers from a firm (or a subdivision of a firm) must have become totally or partially separated from their employment or have been threatened with becoming totally or partially separated. Private sector workers who produce goods ("articles" in the law) or services are eligible for TAA. The petitioning workers must establish that foreign trade contributed importantly to their separation. The role of foreign trade can be established in one of several ways: An increase in competitive imports . The sales or production of the petitioning firm have decreased absolutely and imports of articles or services like or directly competitive with those produced by the petitioning firm have increased. A shift in production to a foreign country . The workers' firm has moved production of the articles or services that the petitioning workers produced to a foreign country or the firm has acquired, from a foreign provider, articles or services that are directly competitive with those produced by the workers. Adversely affected secondary workers . The petitioning firm is a supplier or a downstream producer to a TAA-certified firm and either (1) the sales or production for the TAA-certified firm accounted for at least 20% of the sales or production of the petitioning firm or (2) a loss of business with a TAA-certified firm contributed importantly to the workers' job losses. USITC workers . Workers separated from firms that have been publicly identified by the United States International Trade Commission (USITC) as injured by a market disruption or other qualified action. The TAA eligibility criteria are designed to target workers who lose their jobs due to increased international trade and increased imports. The structure of the eligibility criteria mean that the program may not be available to workers who are adversely affected by reductions in international trade or declines in exports. To establish TAA eligibility, a group of workers (or their representative, such as a union, firm, or state) must complete a two-page petition and submit it, along with any supporting documentation, to DOL. An additional copy of the TAA petition must also be filed with the governor of the state in which the affected firm is located. After receiving the petition, DOL investigates to determine if the petition meets any of the criteria outlined in the previous subsection of this report. Determinations of TAA petitions are published in the Federal Register and on the DOL website. If a petition is certified, DOL will also determine an impact date on which trade-related layoffs began or threatened to begin. This date can be as early as one year prior to the petition. A certified petition will cover all workers laid off by the firm (or applicable subdivision of the firm) between the impact date and two years after the certification of the petition. For example, if a petition is certified on November 1, 2015, and the impact date is found to be March 1, 2015, all members of the certified group laid off between March 1, 2015, and November 1, 2017, would be eligible for TAA benefits. If a petition is denied, the group may request administrative reconsideration by DOL. Reconsideration requests must be mailed within 30 days of the publication of the initial denial in the Federal Register . Workers who are denied certification may seek judicial review of DOL's initial petition denial or denial following administrative reconsideration. Appeals for judicial review must be filed with the U.S. Court of International Trade within 60 days of Federal Register publication of the initial denial or the administrative reconsideration denial. After DOL certifies a group of workers as eligible, the individual workers covered by the certification then apply to their local AJCs for individual benefits. To be eligible for Trade Readjustment Allowance payments, a worker must meet all of the following conditions: (1) separation from the firm on or after the impact date specified in the certification but within two years of DOL certification, (2) employment with the affected firm in at least 26 of the 52 weeks preceding layoff, (3) entitlement to state unemployment compensation (UC) benefits, and (4) no disqualification for extended unemployment benefits. Additionally, workers must be enrolled in an approved training program or have received a waiver from training. Group-certified workers who are denied individual benefits can appeal the decision. The determination notice that individual workers receive after filing their applications for each benefit explains their appeal rights and time limits for filing appeals. TAA benefits for individual workers include training and reemployment services and income support for workers who have exhausted their UC benefits and are enrolled in training. Workers age 50 and over may participate in the Reemployment Trade Adjustment Assistance (RTAA) wage insurance program. Certified workers may also be eligible for a tax credit for a portion of the premium costs for qualified health insurance. TAA-certified workers may receive several types of benefits and services to aid them in preparing for and obtaining new employment. The largest reemployment benefit from a budgetary standpoint is training assistance. Workers may also receive case management services and reimbursements for qualified job search and relocation expenses. TAARA caps annual funding for training and reemployment services at $450 million per year. Training and reemployment services funds are granted to state workforce agencies via formula. Eligible workers request training assistance through their local AJCs. Statute specifies that training for a worker shall be approved if all of the following conditions are met: there is no suitable employment available for an adversely affected worker, the worker would benefit from appropriate training, there is a reasonable expectation of employment following completion of such training, training approved by the Secretary is reasonably available to the worker from either governmental agencies or private sources, the worker is qualified to undertake and complete such training, and such training is suitable for the worker and available at a reasonable cost. Once approved, training can be paid on the worker's behalf directly to the service provider or through a voucher system. The range of approved training includes a variety of governmental and private programs. There is no federal limit on the amount of training funding an individual can receive, though some states have a cap. A concise summation of TAA training programs is difficult due to the range of acceptable activities and the decentralized nature of approval and training. Data from DOL, however, offer some insight into the nature and duration of TAA-sponsored training programs. In FY2015, approximately 88% of TAA training participants received what DOL describes as occupational skills training: training in a specific occupation, typically provided in a classroom setting. The remainder of training was classified as remedial, prerequisite, on-the-job, or other customized training. Among program participants who exited the TAA program in FY2015 and participated in training, 70% completed their program of training. Among the training participants who completed their training programs in FY2015, the average duration of enrollment in the program was 512 days and the average training cost was $13,062. TAA does not require training programs to lead to a degree or other credential. In its FY2015 annual report, DOL reported that 89% of workers who completed training earned an industry-recognized credential, or a secondary school diploma or equivalent. TAA funding may be the only source of funding for a worker's training costs. Statute addresses scenarios in which other resources are used in the pursuit of TAA-funded training. In determining if the cost of a training program is reasonable, an administering state agency may consider public and private non-TAA funding available to the worker. For example, a worker may voluntarily offer to pay for a portion of a program with personal funds so that an agency may approve a program for which the costs would not otherwise be reasonable. An administering state agency may not require a TAA-certified worker to contribute personal funds or apply for other assistance as a condition of approving a TAA training program. A key exception of the policy of administering state agencies considering non-TAA aid is that the Higher Education Act specifies that certain types of federal student aid (including Pell Grants) "shall not be taken into account in determining the need or eligibility of any person for benefits or assistance, or the amount of such benefits or assistance, under any Federal, State, or local program financed in whole or in part with Federal funds." As such, a TAA-certified worker's training benefit could not be reduced on the basis of that worker's access to a Pell Grant. Guidance from DOL notes that this policy "allows a worker to use student financial assistance for living expenses instead of tuition and thus provides the worker income support during long-term training." TAARA specifies that, through the administering state agencies and AJC system, DOL shall provide a series of case management and employment services to all TAA-certified workers. These services include a comprehensive assessment of a worker's skills and needs, assistance in developing an individual employment objective and identifying the training and services necessary to achieve that goal, and guidance on training and other services for which a worker may be eligible. Under TAARA, states are required to use at least 5% of their reemployment services allotments for case management and employment services. States may use their reemployment services funding to provide job search and relocation allowances. These allowances target workers who are unable to obtain suitable employment within their commuting areas. Certified workers can receive an allowance equal to 90% of each of their job search and relocation expenses, up to a maximum of $1,250 for each benefit. A Job Search Allowance may be available to subsidize transportation and subsistence costs related to job search activities outside an eligible worker's local commuting area. Subsistence payments may not exceed 50% of the federal per diem rate and travel payments may not exceed the prevailing mileage rate authorized under federal travel regulations. A Relocation Allowance may be available to workers who have secured permanent employment outside their local commuting area. The benefit covers 90% of the reasonable and necessary expenses of moving the workers, their families, and their household items. Relocating workers may also be eligible for a lump sum payment of up to three times their weekly wage, though the total relocation benefit may not exceed $1,250. Trade Readjustment Allowance (TRA) is a weekly income support payment to certified workers who have exhausted their UC benefits and who are enrolled in training. To be eligible for TRA, a worker must be enrolled in training within 26 weeks of separation from the worker's job or within 26 weeks of TAA certification, whichever is later. In limited circumstances, a worker may obtain a training waiver. TRA is funded by the federal government and administered by the states through their unemployment insurance systems. TRA is an individual entitlement and not subject to an annual funding cap. Appropriation levels are based on estimated usage and unused funds are returned to the Treasury at the end of the fiscal year. Individual TRA benefit levels are equal to a worker's final UC benefit. UC benefit levels are based on earnings during a base period of employment (typically, the first four of the last five completed calendar quarters). UC benefits typically replace a portion of a worker's wages up to a statewide maximum. Since states each administer their own UC programs, there is some variation in benefit levels. In July 2015, the highest maximum weekly UC benefit for a worker with no dependents was $698 in Massachusetts and the lowest maximum weekly benefit was $240 in Arizona. There are three stages of TRA Basic TRA. The weekly basic TRA payment begins the week after a worker's UC eligibility expires. To receive the basic TRA benefit, workers must be enrolled or participating in TAA-approved training, have completed such training, or have obtained a waiver from the training requirement. The total amount of basic TRA benefits available to a worker is equal to 52 times the weekly TRA benefit minus the total amount of UC benefits. For example, assuming a constant benefit level, a worker who received 20 weeks of UC benefits would be eligible for 32 weeks of basic TRA. Additional TRA. After basic TRA has been exhausted, workers who are enrolled in a TAA-approved training program are eligible for an additional 65 weeks of income support, for a total of 117 weeks of benefits. Additional TRA is limited to workers who are enrolled in a training program; workers who have received a training waiver are not eligible for additional TRA. TAA participants may only collect additional TRA as long as they remain enrolled in a qualified training program. In cases where a worker's training program is shorter than the maximum TRA duration, the worker is not entitled to the maximum number of TRA weeks. Completion TRA. In cases where a worker has collected 117 weeks of combined TRA and UC and is still enrolled in a training program that leads to a degree or industry-recognized credential, the worker may collect TRA for up to 13 additional weeks (130 weeks total) if the worker will complete the training program during that time. RTAA is an entitlement that provides a wage supplement for workers age 50 and over who are certified for TAA benefits and obtain reemployment at a lower wage. The program provides a cash payment to an eligible worker equal to 50% of the difference between the worker's wage at the trade-affected job and the worker's wage at his or her new job. The maximum benefit is $10,000 over a two-year period. Workers may not receive TRA and RTAA benefits simultaneously. To be eligible for RTAA, a worker must either (1) be reemployed on a full-time basis, as defined by the law of the state in which the worker is employed or (2) be reemployed at least 20 hours a week and be enrolled in a TAA-sponsored training program. Workers who receive RTAA payments while enrolled in training and working less than full time may be subject to a reduced benefit. Workers who are receiving TRA, UC in lieu of TRA, or RTAA benefits may also be eligible for a tax credit that covers a portion of eligible health insurance premiums. The Health Coverage Tax Credit (HCTC) is equal to 72.5% of qualified health insurance premiums. TAARA includes provisions specifying that a worker must elect between the HCTC and premium credits under the Patient Protection and Affordable Care Act ( P.L. 111-148 , amended). Unlike other provisions of TAARA, which are in effect through June 30, 2021, the HCTC is authorized through December 31, 2019. The Trade Act requires DOL to collect and publish specified data on TAA participation, benefits, outcomes, and spending. Data to be collected and reported include (but are not limited to) the following: Data on petitions filed, certified, and denied . These data include the number of petitions filed, certified, and denied, as well as the average processing time for such petitions. Certified petitions must be disaggregated on the basis of eligibility. Data on benefits received . These data include the number of workers receiving TRA and other benefits as well as the average duration for which workers received benefits. Data on training . These data include the number of workers who participated in training, the average duration of such training, and the average per-worker cost of training. Data on outcomes . These data include the percentage of workers who are in unsubsidized employment during the second calendar quarter after exit, the earnings of such workers, the percentage of workers who are in unsubsidized employment in the fourth quarter after exit, and the percentage of workers who received a recognized postsecondary credential. Data on rapid response activities . These data include whether or not a state provided rapid response services to each firm that petitioned for benefits. Data on spending . These data include state and national payments for TRA benefits, training, administration, and job search and relocation allowances. The data required by the Trade Act are collected by the state agencies that administer the TAA program. These data are submitted to DOL, which publishes the data and other relevant information in annual reports. Since 2014, DOL has also published quarterly data and analysis on its website. In addition to participation data, DOL maintains a database of individual firms' TAA petitions. Users can access firm-level information, including the firm's full petition and DOL's assessment and determination of the petition. Early History The first TAA programs were enacted in 1962 but little used until the Trade Act of 1974 eased eligibility requirements. Program use expanded through the 1970s and the number of certified workers increased from about 59,000 in FY1975 to nearly 600,000 in FY1980. In light of rapidly increasing program costs, the Omnibus Budget Reconciliation Act of 1981 ( P.L. 97-35 ) cut spending by reducing benefits and emphasizing training and other reemployment services. TAA participation levels fluctuated throughout the 1980s, but were mostly well below the levels of the 1970s. In 1988, the program was reauthorized through FY1993 by the Omnibus Trade and Competitiveness Act of 1988 ( P.L. 100-418 ). Among other changes, the 1988 reauthorization expanded eligibility for TRA but also placed a new emphasis on training by making it a program requirement. 1990s and NAFTA The Omnibus Reconciliation Act of 1993 ( P.L. 103-66 ) reauthorized TAA through 1998 with reductions in training funding. The North American Free Trade Agreement (NAFTA) Implementation Act of 1993 ( P.L. 103-182 ) established a new component of TAA that offered dedicated benefits to workers whose job loss was attributable to trade with Mexico and Canada. Trade Act of 2002 The next major reauthorization of TAA was part of the Trade Act of 2002 ( P.L. 107-210 ). This law combined TAA, TPA, and other trade-related issues into a single piece of legislation. Among other changes, the 2002 TAA reauthorization merged the NAFTA-TAA program into the general TAA program and created the Health Coverage Tax Credit for TAA workers. The Trade Act of 2002 reauthorized TAA through FY2007. Several short-term extensions continued the program until it was reauthorized in February 2009. American Recovery and Reinvestment Act In February 2009, TAA was reauthorized and expanded by the American Recovery and Reinvestment Act (ARRA; P.L. 111-5 ). Unlike other reauthorizations, which tended to be aligned with expansionary trade policy or budget reconciliations, this reauthorization was aligned with other domestic initiatives to spur economic activity during a time of above-average unemployment. The ARRA reauthorization of TAA expanded the program in several ways. Among other provisions, it increased funding for training, increased the maximum number of weeks that a worker could receive TRA, and extended eligibility to service sector and public sector workers who had been displaced by trade. The ARRA provisions of TAA were scheduled to expire after December 31, 2010. A short-term extension continued the program through February 12, 2011. After that date, TAA reverted to the more limited eligibility and benefit provisions that were in place prior to ARRA. 2011 Reauthorization: Trade Adjustment Assistance Extension Act In October 2011, the Trade Adjustment Assistance Extension Act (TAAEA; Title II of P.L. 112-40 ) was enacted. This reauthorization was aligned with the separate passage of three implementing bills of free trade agreements with Colombia, Panama, and South Korea. TAAEA reinstated some, but not all, of the expansions that had been enacted under ARRA. Most notably, it re-expanded eligibility to service sector (but not public sector) workers and increased training funding to near-ARRA levels. TAAEA also curtailed benefits by reducing the eligible reasons for training waivers from six to three. Sunset and Termination Provisions of 2011 Reauthorization The eligibility and benefit provisions initially enacted by TAAEA were scheduled to remain in place until December 31, 2013. Beginning January 1, 2014, the TAA program reverted to a more limited set of eligibility and benefit provisions ("Reversion 2014 provisions"). Among other changes, the Reversion 2014 provisions ended eligibility for service workers and reduced the cap on training funding to the 2002 levels. The Reversion 2014 provisions were scheduled to remain in place for one year before authorization expired after December 31, 2014, and the program was scheduled to begin to be phased out. The program did not, however, expire as scheduled at the end of 2014. Instead, the Consolidated and Further Continuing Appropriations Act, 2015 ( P.L. 113-235 ) provided funding for full operation of the program under the Reversion 2014 provisions through FY2015. 2015 Reauthorization: Trade Adjustment Assistance Reauthorization Act TAA continued to operate under the Reversion 2014 provisions until the enactment of the Trade Adjustment Assistance Reauthorization Act of 2015 (TAARA; Title IV of P.L. 114-27 ). This reauthorization was aligned with the separate extension of the Trade Promotion Authority (TPA, also known as "fast track"). Any agreements negotiated under TPA are subject to an "up or down" vote in Congress. TAARA reinstated many of the eligibility and benefit provisions that were enacted by TAAEA in 2011. TAARA reinstated eligibility for service workers and increased training funding to a level between those of TAAEA and the Reversion 2014 provisions. Sunset and Termination Provisions of 2015 Reauthorization TAARA contains sunset provisions similar to those in TAAEA that took effect in 2014. Beginning July 1, 2021, the TAA program is scheduled to revert to a more limited set of eligibility and benefit provisions that are similar to the Reversion 2014 provisions. These provisions are scheduled to remain in place for one year until authorization is set to expire after June 30, 2022, and then the program is scheduled to begin to be phased out.
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Trade Adjustment Assistance for Workers (TAA) provides federal assistance to workers who have involuntarily lost their jobs due to foreign competition. It was last reauthorized by the Trade Adjustment Assistance Reauthorization Act of 2015 (TAARA; Title IV of P.L. 114-27). This report discusses the TAA program as enacted by TAARA. To be eligible for TAA, a group of workers must establish that they were separated from their employment either because their jobs moved outside the United States or because of an increase in directly competitive imports. Workers at firms that are suppliers to or downstream producers of TAA-certified firms may also be eligible for TAA benefits. Private sector workers who produce goods or services are eligible for TAA benefits. To establish eligibility for TAA benefits, a group of trade-affected workers (or their representative) must petition the Department of Labor (DOL) and a DOL investigation must verify the role of increased foreign trade in the workers' job losses. Once a petition is certified by DOL, covered workers may apply for individual benefits. Individual benefits are funded by the federal government and administered by state agencies through their workforce systems and unemployment insurance systems. Benefits available to individual workers include the following: Training and reemployment services are designed to assist workers in preparing for and obtaining new employment. Training subsidies are the largest reemployment services expenditure and support workers in developing skills for a new occupation. Workers may also receive case management services and job search assistance. In some cases, workers who pursue employment outside their local commuting area may be eligible for job search or relocation allowances. Trade Readjustment Allowance (TRA) is a weekly income support payment for TAA-certified workers who have exhausted their unemployment compensation (UC) and who are enrolled in an eligible training program. Weekly TRA payments are equal to the worker's final weekly UC benefit. Workers may collect UC and TRA for a combined maximum of 130 weeks, the final 13 of which are only available if necessary for the worker to complete a qualified training program. Reemployment Trade Adjustment Assistance (RTAA) is a wage insurance program available to certified workers age 50 and over who obtain reemployment at a lower wage. The wage insurance program provides a cash payment equal to 50% of the difference between the worker's new wage and previous wage, up to a two-year maximum of $10,000. The Health Coverage Tax Credit is a credit equal to 72.5% of qualified health insurance premiums. Eligibility is aligned with TRA. Unlike other TAA benefits, it is administered through the tax code. TAA is a mandatory program that is supported through annual appropriations. Appropriations for the program in FY2018 were $790 million.
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Three need-based Federal Student Aid (FSA) programs authorized under the Higher Education Act of 1965, as amended (HEA) —the Federal Supplemental Educational Opportunity Grant (FSEOG) program, the Federal Work-Study (FWS) program, and the Federal Perkins Loan program—are collectively referred to as the campus-based financial aid programs. The programs are called the campus-based programs largely because participating institutions of higher education (IHEs) have a significant role in administering the programs and because they must use institutional funds to match the federal funds they receive for the operation of the programs. In contrast to other need-based FSA programs in which aid is awarded to students according to non-discretionary criteria, the financial aid administrators of participating IHEs have discretion in determining the mix and amount of aid individual students receive from funds made available under the programs. The FSEOG program allows IHEs to provide grant aid to undergraduate students who have not yet earned a first baccalaureate degree. The FWS program supports undergraduate and graduate students through subsidized part-time employment. Under the Perkins Loan program, IHEs use federal capital contributions (FCCs) to help establish revolving loan funds from which they make low-interest loans to undergraduate and graduate students. Over $3.8 billion in financial aid is awarded annually to students under the three programs. The programs are popular with many IHEs and financial aid administrators because of the flexibility they provide to tailor aid to meet the specific needs of students and for the ability to shift funds between programs. The programs have come to be criticized, however, for the way in which the majority of funding provided for the programs is allocated to institutions in proportion to the amount they received in previous award years, as opposed to being allocated entirely according to the aggregate financial need of the students attending each institution. The programs have also been criticized because the current distribution of funds allows institutions that receive proportionately more funding on a per-student basis to give larger campus-based awards to more students and to students with higher incomes than can be awarded at other institutions. Some have proposed modifying the campus-based programs' funding procedures to gradually phase out the current practice of allocating the majority of funds to institutions on the basis of the amounts they received in prior years and to require that all funding eventually be provided in proportion to the aggregate financial need of students at participating institutions. Others have expressed concern that amending the allocation procedures without also providing increased funding for the campus-based programs overall might result only in making more aid available to needy students at some institutions at the expense of needy students at those institutions that would experience funding decreases. In the 109 th Congress, H.R. 609 , as introduced in the House, would have amended the allocation procedures for the campus-based programs to gradually phase out provisions that provide for the allocation of funds on the basis of the amounts institutions' received in prior years so that eventually all funds would be allocated to institutions on the basis of their aggregate student financial need. However, these provisions were removed during consideration of the bill, and H.R. 609 as passed by the House would have retained the current allocation procedures. The Senate bill to reauthorize the HEA in the 109 th Congress, S. 1614 , also would have retained the current allocation procedures. While the 110 th Congress will likely consider bills to amend and extend the HEA, it is unclear whether substantive changes to the allocation procedures to the campus-based programs will be proposed. (Additional information on the campus-based programs, including a history of appropriations and basic program data for each of the three programs, and a review and analysis of proposals to amend the programs under bills that would reauthorize the HEA can be found in CRS Report RL31618, Campus-Based Student Financial Aid Programs Under the Higher Education Act , by [author name scrubbed].) This report describes and analyzes the process through which federal funds are currently allocated to IHEs under the campus-based programs and also examines the subsequent distribution of aid to recipients of awards provided under the programs. The report begins with a brief overview of the procedures used to allocate funds to IHEs under each of the three programs. This includes a discussion of the development of the allocation procedures and significant changes to them over the history of the programs. Next, the report analyzes the allocation of funds to IHEs according to the current allocation procedures, focusing on key aspects of these procedures that largely affect the distribution of funds to institutions. The report then discusses issues related to the campus-based programs that may be considered as the 110 th Congress debates reauthorization of the HEA. In particular, it examines how the distribution of funds to institutions might be affected should the current allocation procedures for the programs be amended to phase out the allocation of funds on the basis of prior year allocations in favor of providing institutions with funding entirely on the basis of aggregate student need, as had been proposed in prior Congresses. The report concludes with a review and analysis of the distribution of campus-based financial aid to different types of students at participating IHEs and an examination of the role that the current allocation procedures may have in affecting the distribution of aid. Under each of the campus-based programs, the U.S. Department of Education (ED) allocates funds to participating IHEs according to a complex two-stage procedure. These allocation procedures are specified in the authorizing statute of each program. While there are slight differences between programs, the allocation procedures all share the same basic framework. In the first stage, an IHE that is a continuing participant in a program receives funding based on what it received in prior years. This is commonly referred to as the base guarantee . In general, an IHE's base guarantee is equal to some portion of the funds it received in FY1999; however, there are also procedures for allocating a base guarantee to IHEs that began participating in a campus-based program after FY1999. In the second stage, any funds remaining after the allocation of base guarantees are allocated to IHEs according to need-based formula allocation procedures. Under the allocation formulas for the programs, each IHE receives funding in proportion to its share of the national total of institutional need that is in excess of the amount it received as its base guarantee. (Institutional need is a program-specific measure of the total financial need of all eligible students at an IHE). Under each of the formulas, ED determines the amount of funds each IHE would receive if the entire appropriation for the program were to be allocated in proportion to its share of the national total of institutional need (supposing that no funds were allocated for base guarantees). This amount is referred to as an institution's fair share . If an IHE's fair share is greater than its base guarantee, it has a shortfall in funding and is eligible to receive additional funding—a fair share increase —to help reduce its shortfall. An IHE's total allocation is the sum of its base guarantee and its fair share increase. Figure 1 summarizes the allocation procedures for the campus-based programs. The basic structure for allocating campus-based program funding to institutions—first for base guarantees, and then for fair share increases—can be traced back to procedures developed in the late 1970's and first put into place for the 1979-1980 award year. Funding for the campus-based programs previously was allocated according to a different two-stage procedure in which funds first were apportioned on a state-by-state basis according to the student population in each state, and then sub-allocated to IHEs on the basis of the student need at institutions within each state according to a procedure called the panel review process . Under the panel review process, institutions would apply to receive a share of the funds allocated to their state based on the projected financial need of their students. A regional panel would then review the institutions' applications and determine the amount of funding each IHE would receive. In the mid-1970s, the panel review process became subject to criticism for being too complex and time-consuming, and for leading to inequities in the distribution of aid to students. In response, the U.S. Office of Education convened a panel of experts to study and make recommendations on how to allocate funds to IHEs under the campus-based programs. The panel's recommendations led to the implementation of new allocation procedures. Over time, these procedures have been modified slightly; however, the same basic structure remains. At the time the new allocation procedures were adopted, it was decided that in the first year of their implementation, IHEs would first be allocated funds in amounts comparable to what they had received in the past. Called the conditional guarantee , this was the precursor to the current base guarantee. Funds remaining after the allocation of conditional guarantees would be allocated according to the fair share formulas. In the first year of implementation, conditional guarantees were to be set at the greater of the amount of funds IHEs had expended in either the 1977-1978 or 1978-1979 award years. The next year, they were to receive 90% of that amount. In subsequent years, conditional guarantees were to be gradually reduced until ultimately all funds were allocated according to the fair share allocation procedures. Ultimately, however, conditional guarantees—now called base guarantees—were not phased out. The majority of the funds appropriated for each of the three campus-based programs continues to be allocated for institutional base guarantees. (It is important to note that as appropriations increase, a greater proportion of funding becomes available for fair share increases, while a decrease in appropriations results in proportionally more funding being allocated for base guarantees.) The capacity of an IHE to award campus-based aid to eligible students is directly related to the amount of funds it receives. The major factors determining each IHE's allocation are its base guarantee, its cost of attendance (COA), the number of FSA applicants, and the expected family contributions (EFCs) of those students. The remainder of this first part of the report describes the major components of the campus-based allocation procedures. Under each of the campus-based programs, all participating institutions are eligible to receive a base guarantee. Because most institutions' base guarantees are equal to a portion of the amount of funds they received in prior award years, it is often stated that the procedures for determining base guarantees favor long-term participants over new entrants to the programs. More precisely, the base guarantee component of the allocation procedures gives a funding advantage to an institution with a base guarantee that is greater than its fair share. Base guarantees are determined according to the following procedures: First, from the funds appropriated for any of the programs, each IHE that participated in that particular program in FY1999 is allocated a base guarantee equal to 100% of the sum of (a) its FY1999 base guarantee and (b) its FY1999 pro rata , or proportional, share of the funds that remained after the allocation of all base guarantees. Next, those IHEs that began participation in the program after FY1999, but which are not first- or second-time participants, are allocated a base guarantee equal to the greater of $5,000, or 90% of the amount they received in their second year of participation (100% in the case of Perkins Loan FCCs). Finally, IHEs that are participating in the program for their first or second year receive a base guarantee equal to the greatest of (a) $5,000, (b) 90% of the per-pupil amount allocated to and used by comparable institutions in the second preceding fiscal year, multiplied by the number of students at the IHE, or (c) 90% of what the IHE received in its first year of participation. However, notwithstanding the second and third of these steps, if an institution began participating in the program after FY1999 and received a larger allocation in its second year of participation than in its first, its base guarantee is equal to 90% of the allocation it received in its second year of participation. In cases where the annual appropriation is insufficient to award IHEs their full base guarantee according to any one of the abovementioned steps, base guarantees that are to be allocated according to that step are proportionally reduced and no funds are to be allocated to institutions under any subsequent stages of the allocation procedures. Under each of the programs, after the allocation of base guarantees, any funds remaining from the annual appropriation are allocated to IHEs for fair share increases according to formula-based procedures. The first step in the fair share allocation procedures involves determining each IHE's institutional need. This is referred to as FSEOG need for the FSEOG program, self-help need for the FWS program, and adjusted self-help need for Perkins Loan FCCs. While the calculation of institutional need differs slightly across programs, in general it is an expression of the relationship between the average cost of attendance (COA) at an institution and the average expected family contributions (EFCs) of the students who are FSA applicants in attendance at that institution. The primary components of the formulas and how they enter into the calculation of institutional need are described below. Under the formulas for each of the programs, an IHE's COA is calculated by first dividing the total tuition and fees received by that institution over the course of the award year two years prior to the one for which funds are being allocated, by the total number of students in attendance at the institution at any time during that same year; and then adding to that amount a living cost allowance and an allowance for books and supplies. COA is calculated on the basis of a nine-month academic calendar. For award year (AY) 2004-2005, the living cost allowance was $6,105 and the allowance for books and supplies was $450. Adjustments are made to account for average time in attendance for IHEs with non-traditional calendars, although this adjustment does not take into account whether students attend on a full-time or part-time basis. COA also is calculated separately for undergraduate students and for graduate and professional students. Under the fair share formulas, composite EFCs are assigned to students according to their status as either undergraduate or graduate and professional students, their status as dependent or independent students (although no distinction is made between independent students with dependents other than a spouse, and those without), and where they fit within a series of income bands established by ED. These composite EFCs are used in lieu of the actual EFCs that are calculated for individual students on the basis of their completion of the Free Application for Federal Student Assistance (FAFSA). As part of the allocation procedures, each year ED calculates average EFCs for undergraduate dependent and independent students, and graduate and professional students in each income band using the FAFSA full applicant database. The Table of EFCs is shown in Table 1 . In general, institutional need is an expression of the relationship between an institution's COA and the calculated EFCs of the students at that institution who have applied for FSA aid. It represents the aggregate financial need of students at the institution. Institutional need is obtained by performing a series of calculations involving the relationship between COA and EFC for each of the various categories of students, and then summing the results of these calculations to arrive at a figure representative of the aggregate financial need of all students at the IHE. The procedures used in calculating institutional need for each of the three programs are summarized below. The calculation of FSEOG need is based only on information reported about students eligible to participate in the program—undergraduate students who have not yet earned a first baccalaureate degree. For each participating IHE, institutional FSEOG need is calculated as follows: Step 1: For each undergraduate student income category in the Table of EFCs (see Table 1 ), subtract EFC from 75% of the average undergraduate COA. Then take the greater of this amount, or $0. (The results are approximations of the financial need of students in each income category.) Step 2: For each undergraduate student income category, multiply the number of students in that income category by the corresponding results obtained in Step 1 . Step 3: Sum the results of Step 2 across all undergraduate income categories. Step 4: Subtract the total amount of Pell Grant aid and Leveraging Education Assistance Partnership/Special Leveraging Education Assistance Partnership (LEAP/SLEAP) program aid received by students at the institution from the result obtained in Step 3 . The resulting amount is FSEOG Need. FSEOG Need represents the aggregate financial need of the undergraduate FSA applicants at an institution who are eligible to participate in the FSEOG program. FSEOG Need is specific to the FSEOG program and is the difference between students' estimated EFCs and 75% of their institution's average undergraduate COA, summed across all students, minus the Pell Grant and LEAP/SLEAP aid available to students at the IHE. FSEOG Need thus shows the amount of aid that would need to be provided to students at an institution so that 75% of their cost of attendance, in the aggregate, could be met by the combination of their expected family contribution and federal grant aid (i.e, Pell Grants, LEAP/SLEAP, and FSEOG). The formula is based on the assumption that 25% of need would be met by other sources. Self-Help Need is used in the fair-share allocation formula for the FWS program. Its calculation is based on information reported for all students eligible to participate in the program. For each participating IHE, Self-Help Need is calculated as follows: Step 1: Calculate 25% of the average undergraduate COA. Step 2: For each undergraduate student income category in the Table of EFCs (see Table 1 ), subtract EFC from the average undergraduate COA. Take the greater of this amount, or $0. Step 3: For each undergraduate student income category, multiply the number of students in that income category by the lesser of the results obtained in either Step 1 or Step 2 for the corresponding income category. Step 4: Sum the results obtained in Step 3 across all undergraduate student income categories. Step 5: For each graduate and professional student income category in the Table of EFCs (see Table 1 ), subtract EFC from the average graduate and professional COA. Take the greater of this amount, or $0. Step 6: For each graduate and professional student income category, multiply the number of students in that category by the corresponding results obtained in Step 5 . Step 7: Sum the results obtained in Step 6 across all graduate and professional student income categories. Step 8: Sum the results obtained in Step 3 and Step 6 . This amount is an institution's Self-Help Need. Self-Help Need represents the aggregate financial need of all FSA applicants at an institution who are enrolled in programs eligible for campus-based aid. Self-Help Need is the lesser of either 25% of an institution's average undergraduate COA, or the difference between undergraduate students' estimated EFCs and their institution's average undergraduate COA, summed across all undergraduate students; plus the difference between graduate and professional students' estimated EFCs and their institution's average graduate and professional student COA, summed across all graduate and professional students. Self-Help Need is a composite figure that expresses different characterizations of need for undergraduate students than it does for graduate and professional students. For undergraduate students, it shows the amount of aid that would need to be provided so that an amount up to 25% of undergraduate students' cost of attendance, in the aggregate, could be met by the combination of their EFC and FWS aid. For graduate and professional students, it shows the amount of aid that would need to be provided so that the entire difference between students' EFCs and their institution's COA could be met by FWS aid. Adjusted Self-Help Need is used in the formula for allocating FCCs to institutions under the Perkins Loan program. It is calculated similarly to Self-Help Need, except for being adjusted as indicated below. Step 1 through Step 8: Same as for Self-Help Need. Step 9: Multiply the IHE's collections on previously awarded Perkins Loans in the second year prior to the year in which funds are to be allocated by 1.21. Step 10: Subtract the result obtained in Step 9 from the result obtained in Step 8 . Step 11: If the IHE has a cohort default rate that equals or exceeds 25%, then multiply the result obtained in Step 10 by 0; otherwise, multiply it by 1. This amount is an institution's Adjusted Self-Help Need. Adjusted Self-Help Need expresses aggregate student need for IHEs that are participating in the Perkins Loan program and which are requesting FCCs in a similar manner as does Self-Help Need for the FWS program, except that it adjusts an institution's need by accounting for collections that are expected to be made on outstanding Perkins Loans. It is noteworthy that for IHEs participating in both the FWS and Perkins Loan programs, Self-Help Need and Adjusted Self-Help Need, respectively, each measure what is essentially the 'same' student need. The calculations to determine an institution's fair share of funding, its fair share shortfall, and its fair share increase are relatively straightforward compared with the calculation of institutional need. As was shown in Figure 1 , for any of the campus-based programs, an institution's fair share is the amount of the annual appropriation an institution would receive if all funds were allocated in the same proportion as the ratio of institutional need relative to the national total of the institutional need of all participating IHEs. An institution's fair share shortfall is the difference between its fair share amount and the amount it received as a base guarantee. Funds remaining after the allocation of base guarantees are allocated as fair share increases. IHEs receive fair share increases in proportion to their share of the national total of shortfalls. In general, an institution's total allocation is the sum of its base guarantee and its fair share increase. However, subsequent to the allocation of base guarantees and fair share increases, small adjustments may be made to IHEs' allocations. These include allocation reductions as a penalty for the underutilization of funds in prior award years and the reallocation of such funds to other IHEs with remaining funding shortfalls. This part of the report analyzes the allocation of funds to IHEs according to the current campus-based allocation procedures. This analysis draws upon information from both the Fiscal Operations Report and Application to Participate (FISAP) and from 2004-2005 award year (FY2004) allocations data. The two major components of the allocation procedures are analyzed: the base guarantee and the fair share increase. The primary unit of analysis used throughout the remainder of the report is categories of institutions grouped by average COA. Cost of attendance is used as the primary unit of analysis because, as a variable in the fair share allocation formulas, COA has an important impact in affecting the allocation of funds to institutions. Later, it will be shown that there are also large differences among categories of institutions, grouped by COA, in the percentage of students awarded campus-based aid and in average award amounts. Categories of institutions grouped by COA are the primary unit of analysis used in this report. These categories were created by simply ranking all the IHEs that participate in one or more of the campus-based programs in descending order according to their average COA, and then grouping them into quintiles containing approximately equal numbers of institutions. The top quintile of IHEs was further subdivided into two subgroups, with the top subgroup containing the top 5% of IHEs ranked according to COA, and the other subgroup containing the next 15%. Table 2 shows the number and percent of IHEs in each COA category. It also shows the distribution of institutions within each category by sector. The relationship between institutional sector and COA is noteworthy. As might be expected, most public two-year IHEs are in the two lowest cost categories and the majority of private four-year IHEs are in the high-cost and very high-cost categories. However, some private four-year IHEs are middle cost, and a few are low cost. Public four-year and proprietary institutions are distributed somewhat evenly across the lower-middle to upper-middle cost categories. Since the allocation formulas are based in large part on an institution's COA, yet do not take into account its sector, it is expected that the use of COA as a unit of analysis will lead to more telling observations about how the allocation formulas affect the amount of funds IHEs receive and ultimately, the distribution of aid to students attending those institutions. As explained earlier, under current law, IHEs participating in the campus-based programs receive a base guarantee that bears a direct relationship to the amount of funding they received in prior years. At the time the fair share allocation formulas were introduced, it was anticipated that base guarantees would eventually be phased out, and that this would be done gradually in a manner that would not result in wild fluctuations in the amount of funds institutions received. For the FSEOG program, provisions to phase out the base guarantee were even included as part of the authorizing statute for a period of time. Under the Higher Education Amendments of 1980 ( P.L. 96-374 ), the allocation procedures were amended to call for a 20% decrease in each institution's base guarantee for every $20 million appropriated for the program in excess of $400 million. However, the Higher Education Act Technical Amendments of 1982 ( P.L. 97-301 ) prevented this provision from being implemented. Since then, base guarantees have remained a part of the allocation procedures for each of the campus-based programs. Under the Higher Education Amendments of 1986 ( P.L. 99-498 ) the campus-based allocation procedures were amended to provide IHEs with base guarantees equal to 100% of their 1985 allocation. The revised allocation procedures also provided that after base guarantees were awarded, 25% of the funds remaining from each program's appropriation were then allocated (as pro rata shares ) to IHEs in amounts proportional to their base guarantees. Only 75% of the funds remaining after the allocation of base guarantees were allocated according to the fair share formulas. Under the Higher Education Amendments of 1998 ( P.L. 105-244 ), the procedures for determining base guarantees were revised again. These procedures (described earlier in this report) remain in effect. Prior to the Higher Education Amendments of 1986, the campus-based allocation procedures had specified that funds would first be apportioned to states, primarily on the basis of the population in each state, prior to being allocated to IHEs. Thus, an IHE's allocation depended in part on the state in which it was located. Since the 1986 Amendments, ED has allocated funds directly to IHEs and the state in which an institution is located has not played a direct role in funding allocations. However, the legacy of the base guarantee allocation procedures has had the effect of perpetuating the distribution of funds to IHEs in a manner that to an extent reflects the distribution of the student age population across states and IHE's institutional need as they existed years ago. Given that institutions have grown at different rates, and so has the aggregate financial need of their students, some institutions' base guarantees may be close to or even exceed their fair share of funds, while other's base guarantees may represent only a fraction of their fair share. Often, IHEs have grown faster in some parts of the country than in others. Table 3 shows (a) the total number of IHEs participating in each of the campus-based programs, (b) the number of IHEs with base guarantees that are greater than their fair share, and (c) the number that are eligible to receive a fair share increase above their base guarantee allocation. The table also shows (d) the percentage of total program funding that is allocated for base guarantees. Totals are provided for each program, as well as by COA categories, and by state. The table shows that the majority of the funding provided for each of the campus-based programs is allocated to meet institutions' base guarantees. In the FWS program, two-thirds of funding goes to base guarantees and for the Perkins Loan program, over 92% of funding is provided to meet base guarantees. There does not appear to be a strong relationship between institutional COA and whether IHEs receive funding only according to base guarantee procedures, or if they also receive a fair share increase. However, in each of the programs, middle-cost IHEs receive a somewhat greater proportion of their funding for base guarantees than do IHEs on average. Also, under the FSEOG program, very high-cost IHEs are allocated a much greater proportion of their funding for base guarantees than are IHEs on average. When examining the proportion of funds allocated for base guarantees by state, Table 3 shows wide variation in the FSEOG and FWS programs. In some states, more than 90% of funding goes toward meeting base guarantees, while in others base guarantees comprise less than half of total allocations. This degree of variation may have resulted in part because in some states, IHEs may have seen considerable growth in institutional need since the base guarantee procedures were implemented, whereas in others, base guarantee funding meets or exceeds total institutional need for most institutions. In the Perkins Loan program, more than 90% of funds are allocated for base guarantees in all but a few states. This is likely because, in contrast to the other two campus-based programs, appropriations for Perkins Loan FCCs have decreased substantially since the early 1980s. When appropriations decrease, base guarantees comprise a greater proportion of total funding. Through FY2004, funds remained available for Perkins Loan FCC base guarantees and fair share increases, despite declining appropriations, largely because a considerable number of institutions have ceased participation in the program. Had this not occurred, it is likely that funds would have been available only for the allocation of base guarantees. (No funds were appropriated for Perkins Loan FCCs for FY2005 nor FY2006.) Given that more than half of funds appropriated for the campus-based programs are allocated for base guarantees, if base guarantees were to be reduced or phased out so that all funds were allocated according to the fair share formulas, there could be a noticeable shift in the distribution of funds allocated to IHEs. Any change in the distribution of funds to IHEs would be due to the application of the fair share formulas. The fair share formulas are analyzed in the next section. Under the fair share formulas, IHEs are eligible to receive fair share increases to help reduce the shortfall between their base guarantee and their fair share of funds. Earlier in this report, it was shown that an institution's fair share is the amount of funds it would receive if the total appropriation were allocated entirely on the basis of institutional need. It was also explained that institutional need is an expression of the relationship between the average cost of attendance (COA) at an institution and the average expected family contributions (EFCs) of the FSA applicants who are students at that institution. This section examines the relationship between COA and EFC in detail and shows how this affects the amount of funds IHEs receive for fair share increases. When the fair share formulas were developed, a uniform methodology was adopted in which average EFCs are calculated for categories of students grouped by income bands and dependency status, in lieu of using actual EFCs of the students at each institution. This procedure was adopted, in part, because it could be administratively burdensome for institutions to collect and report EFCs for each student in attendance and because it is presumed that students with the same dependency status and with comparable incomes will have similar EFCs. In implementing the fair-share formulas, ED calculates average EFCs for students categorized into 14 income bands. Students who have received an automatic zero EFC based on the information reported in their FAFSA, are assigned an EFC of $0. (The Table of EFCs is shown in Table 1 ). The income bands used in the Table of EFCs are determined administratively by ED and have been adjusted only a few times since the formulas were first implemented. The last revision to the income bands occurred in 1994 for the 1995-1996 award year, when the highest income bands were raised to $60,000 and above for dependent students, and to $20,000 and above for independent students; and some lower income bands were consolidated. Since the relationship between an institution's COA and students' average EFCs determines its institutional need, it is important that the average EFCs for each income band reflect as closely as possible the actual EFCs of students at participating institutions. It appears, however, that with the growth in incomes that has occurred over the years, the current income bands used in the fair share formulas may no longer be as reliable a proxy of actual student EFCs for upper-income students as they once were because so many students are in the highest income category. At many institutions—particularly high-cost institutions—students in the highest income category often comprise the largest group of students. At low-cost IHEs, students in the higher-income categories do not contribute to the tabulation of institutional need because their composite EFC is typically greater than the IHE's COA. However, at high-cost institutions, the need calculated for students in the upper income bands often constitutes the majority of institutional need. The table of EFCs also does not take into account whether independent students have their own dependents. (In general for FSA purposes, independent students with dependents and those without are categorized separately.) Since slightly more than half of undergraduate students are classified as independent for FSA purposes, and with the significant effect that having dependents typically has on lowering students' EFCs, calculating average EFCs for independent students without taking into account whether they have their own dependents may result in average EFCs that mask or cancel out the differences in EFCs that exist for independent students with dependents and those without dependents. This could affect the calculation of institutional need if independent students with dependents and those without dependents are unevenly distributed across institutions. For example, if independent students with dependents attend certain institutions in greater (or lower) proportions than do independent students without dependents, then the practice of combining all independent students as a single group could result in lower (or higher) amounts of institutional need being calculated for them than otherwise might occur if independent students were treated separately. Figure 2 shows estimates based on data from the 2004 National Postsecondary Student Aid Survey (NPSAS) of the number of undergraduate dependent students in each of the income bands of the Table of EFCs used in the campus-based formulas. The distribution of students is concentrated at the middle- and upper-income categories, with the most students in the highest income band. This distribution suggests that a more accurate reflection of upper-income students EFCs could be obtained if additional income bands were added for dependent students from families with incomes above $60,000. Figure 3 shows estimates of the number of independent undergraduate students, and graduate and professional students in each of the income bands used in the Table of EFCs ( Table 1 ). However, unlike the Table of EFCs, it also distinguishes between independent students with dependents (both undergraduate, and graduate and professional) and those without. Figure 3 shows that independent students are concentrated in the highest income band. It also shows that independent students with dependents and those without dependents are distributed unevenly across income bands. Similar to the case with dependent students, it appears that more accurate calculations of average EFCs might be obtained for independent students if the top income band were broken up into multiple categories. In addition, given the uneven distribution of independent students with and without dependents across the various income bands, it appears that better approximations of students' actual EFCs could be made if average EFCs were calculated separately for independent students with and without dependents. While at any particular institution, students with the lowest incomes may be the primary recipients of campus-based aid, the amount of institutions' allocations as determined under the campus-based fair share formulas, by design, is based on the aggregate need of all students eligible for FSA aid at the institution. In the current postsecondary education environment in which college costs have been rising rapidly in recent years, it is not uncommon under the fair share formulas for institutional need at higher-cost IHEs to be comprised largely of the financial need of middle- and upper-income students, whereas at lower-cost IHEs, institutional need is comprised primarily of the financial need of lower- and middle-income students. In many instances, students attending high-cost institutions who are from upper-income families have more financial need than students attending lower-cost institutions who are from lower-income families. Institutional need is the sum of the financial need of the students attending any particular IHE. The critical factor in the calculation of institutional need is the relationship between institutional COA and students' composite EFCs. At lower-cost IHEs, upper-income students' composite EFCs are often so high relative to COA that under the formulas, they do not contribute to institutional need. However at higher-cost IHEs, the relationship between the EFC assigned to students in the highest-income band and COA often still results in financial need being calculated for those students. Combined with the even greater need calculated for lower-income students, this can result in very high amounts of institutional need being calculated for high-cost IHEs. Figure 4 shows the average amount of need calculated under the fair share formulas for each program, by category of institution, on a per-student basis. Figure 4 demonstrates that on a per-student basis, the largest amounts of need are calculated for IHEs with the highest COAs. While it is not surprising that students with any given EFC will have more need if they attend institutions with high COAs than if they attend lower-cost institutions, the effect that this has on the distribution of aid to institutions and the subsequent availability of aid to students attending these institutions is striking. This is especially so, because as will be shown later in this report, low- and middle-income students constitute the greatest proportion of students at low-cost institutions, and upper-income students make up the greatest proportion of those attending high-cost institutions. The design of the fair share formulas, however, results in significantly greater amounts of need being calculated for students at high-cost institutions than for students at low-cost institutions. In many instances, significantly more need is calculated for upper-income students at high-cost institutions than for students with very low EFCs who attend low-cost institutions. This highlights a very important concept about need-based financial aid—need is relative to the COA at the institution a student attends. The fair share allocation procedures were developed to ensure that campus-based funding would be allocated to IHEs objectively on the basis of need. However, since COAs are so high at some institutions, the amount of need calculated on a per-student basis at higher-cost institutions often far exceeds the maximum amount authorized to be awarded to students under the FSEOG and Perkins Loan programs (see Table 4 ). (There is no specific maximum award amount in the FWS program.) Thus, if sufficient federal funding were to be made available to provide institutions with allocations equal to their institutional need, some conceivably would be unable to distribute it all as campus-based aid to students because of statutory limitations on maximum award amounts and because of the requirement that federal funds must be matched with institutional funds (generally according to a 3:1 ratio). It was just shown that there are stark differences between institutions with high and low COAs in the amount of need calculated on a per-student basis. This section shows that there are also significant differences between categories of IHEs in how the aggregate financial need of different types of students contributes to the tabulation of institutional need. The tabulation of institutional need is examined for each of the three campus-based programs below. Figure 5 shows for each of the categories of IHEs grouped by COA how FSEOG Need is the aggregate financial need attributable to different types of students. It also shows the effect that subtracting total Pell Grant and LEAP/SLEAP aid awarded to students has in the determination of FSEOG need. Each column represents the aggregate financial need of students attending IHEs in each category. Shaded areas within each column represent the portion of aggregate financial need attributable to different types of students. The area in the negative portion of the graph represents Pell Grant and LEAP/SLEAP aid awarded to students at IHEs in each category. Total aggregate FSEOG need per category is indicated by the black bars. (This shows the result of subtracting Pell Grant and LEAP/SLEAP aid from aggregate student financial need.) The table at the bottom of the figure shows dollar amounts of aggregate financial need attributable to different types of students, as well as total Pell Grant and LEAP/SLEAP aid. Upon examination, it is evident that undergraduate independent students, particularly those with incomes of less than $16,000, have the greatest amount of need in the aggregate and that the need calculated for these students represents the greatest portion of total need at the lowest-cost institutions. It is also apparent that significant amounts FSEOG need are calculated for undergraduate dependent students in the highest income band only at institutions with the highest COAs. In each successively higher-cost group of institutions, proportionately greater amounts of need are calculated for students in the higher income bands, while lesser amounts are calculated for students in the lower income bands. Figure 5 also shows how the amount of need calculated for students is offset by the amount of the Pell Grant and LEAP/SLEAP aid students receive. (Nearly all of the aid shown in the Pell Grant and LEAP/SLEAP category is Pell Grant aid). With Pell Grants serving as the foundation of need-based aid for low-income students, it is not surprising that Pell Grants are received in the greatest amounts by students attending the lowest-cost IHEs, which are attended by low-income students in the greatest proportions. With few students at high-cost schools receiving Pell Grants, FSEOG need at these IHEs is affected only slightly by the subtraction of Pell Grant aid. The comparatively small amount of LEAP/SLEAP aid is distributed relatively evenly across categories of IHEs and FSEOG need is not disproportionately affected by its subtraction in any category of institutions. As previously mentioned, the formula for calculating FSEOG need was designed with the presumption that 75% of college costs would be met through the combination of students' EFC, scholarships, and grants (in the current formula, EFC and federal grants). Pell Grant and LEAP/SLEAP aid are subtracted from the amount of aggregate student need calculated in the formula to ensure that FSEOG funding is provided to supplement Pell Grant and other gift aid, but not duplicate it. Since the time when the formulas were last amended, higher education tax benefits (e.g., the Hope and Lifetime Learning Tax Credits, and the Higher Education Deduction) have evolved as a new type of federal financial assistance that shares an essential characteristic with gift aid—namely, that students' (or their parents') receipt of the credits is not conditioned on any non-academic obligation (e.g., repayment of funds, or a service requirement). Gift aid and tax benefits may be referred to as obligation-free aid . The FSEOG need formula, however, does not contain any provision that would account for the receipt of higher education tax benefits by eligible students. The different treatment of the various types of obligation-free aid could be of concern when considering their effect on the calculation of FSEOG need. Pell Grants are targeted to low-income students who disproportionately attend low-cost institutions, while the Hope and Lifelong Learning higher education tax credits are primarily beneficial to middle- and upper-income students. Since Pell Grants (and LEAP/SLEAP aid) are subtracted from the student need computed under the FSEOG need formula and Hope and Lifelong Learning tax credits are not, this may affect how closely FSEOG need, as calculated, represents actual aggregate student need. While it appears that subtracting out tax credit aid might make the FSEOG need formula more equitable than it currently is in determining aggregate student need—especially when distinguishing between institutions attended by students with different incomes—there does not appear to be any easy way for IHEs to gather and report the value of tax credits on the FISAP for use in the allocation of funds. In the FWS program, the aggregate amount of institutional self-help need tabulated for different types of students differs noticeably between categories of IHEs. Figure 6 shows that in the category of institutions with the lowest COAs, more than 80% of all self-help need is attributable to either undergraduate independent students or to undergraduate dependent students who are from families with incomes below $24,000. Conversely, in the category of IHEs with the highest COAs, less than 8% of self-help need is attributable to these types of students, while more than 80% is attributable to either dependent undergraduate students from families with incomes above $60,000 or to graduate and professional students. (For purposes of comparison, it is important to note that the two highest cost categories of IHEs account for the top 5% and 15% of IHEs, respectively, based on COA, while the other four categories each account for 20% of IHEs.) Figure 6 clearly shows that at high-cost IHEs very little self-help need is attributable to undergraduate independent students and lower-income dependent students, while the vast majority of self-help need is attributable to upper-income dependent and graduate and professional students. A major reason why such large amounts of self-help need are calculated for the highest-cost IHEs has to do with the treatment of graduate and professional students in the formula for calculating self-help need. For undergraduate students, self-help need is calculated by multiplying the number of students in each income band by the minimum of either (a) 25% of the IHE's average undergraduate COA or (b) the difference between undergraduate COA and the EFC taken from the Table of EFCs for students in that income band. However, for graduate and professional students, self-help need is calculated exclusively by multiplying the number of students in each income band by the difference between graduate and professional student COA and the EFC taken from the Table of EFCs for students in each respective income band. For undergraduate students, 25% of COA is often the lesser of the two amounts and thus serves to limit the amount of self-help need calculated for undergraduate students. For graduate and professional students, the difference between COA and EFC is often quite large—especially at higher-cost IHEs. With higher-cost IHEs often having large graduate programs, this characteristic of the self-help need formula contributes to high-cost institutions having large amounts of institutional need. This in turn provides them with higher funding allocations. In the tabulation of institutional need for the Perkins Loan program, Figure 7 shows that similar to the FWS program, there is also wide variation across categories of IHEs in the amount of institutional need attributable to different categories of students. However, in the Perkins Loan program, an even greater proportion of adjusted self-help need is accounted for by students attending higher-cost IHEs than is in the FWS program. (This occurs in part because, as was shown in Table 1 , relatively few low-cost IHEs participate in the Perkins Loan program.) Mirroring the FWS program, the majority of institutional need tabulated at high-cost IHEs is attributable to upper-income undergraduate students and graduate and professional students. The provision for adjusting self-help need by subtracting projected collections has a somewhat greater impact on middle- and higher-cost IHEs than on low-cost IHEs, largely because middle- and higher-cost institutions have larger loan portfolios. In this second part of the report, it was shown that the majority of the funding provided for the campus-based programs currently is allocated to institutions on the basis of their base guarantees, while a comparatively smaller, but still significant, portion of funding is allocated for fair share increases. Depending on the degree to which the number of students attending any particular institution and the COA at that institution have changed since the current base guarantees were established, base guarantee funding may be greater than, less than, or equal to that IHE's fair share of the nationwide total of funds available for allocation. Since proposals have been made to phase out base guarantees and require all campus-based funding to be allocated to IHEs on the basis of institutional need, the tabulation of institutional need was analyzed. This analysis has shown that the per-student amount of institutional need calculated for IHEs depends to a large extent on their COA. Significantly, on a per-student basis, greater amounts of institutional need are calculated for high-cost institutions than for low-cost institutions. This occurs despite higher-cost IHEs also generally having student bodies with higher EFCs. It has just been shown that at present, the majority of funding provided for the campus-based programs is allocated for base guarantees. Slightly more than 40% of funding is available for allocation according to fair share criteria for the FSEOG program, one-third for the FWS program, and less than 8% for Perkins Loan FCCs. With most funding being devoted to meeting institutional base guarantees, it might be expected that should the funding of base guarantees be phased out so that all funds would be allocated through the fair share formulas, shifts in the distribution of funds across institutions would occur. This part of the report estimates and analyzes the prospect of eliminating base guarantees in favor of allocating all campus-based funding according to the existing fair share formulas. This is done for each of the three campus-based programs following the framework used throughout this report—categories of institutions grouped by COA. Figure 8 shows a comparison of AY2004-2005 FSEOG allocations and estimates of what IHEs might receive under the FSEOG program if all FSEOG funding were to be allocated according to fair share procedures. A comparison with the information presented in Figure 5 on institutional need by COA category shows that, in the aggregate, AY2004-2005 allocations and estimated allocations based entirely on fair share procedures both roughly follow the distribution of aggregate institutional need across categories of IHEs. However, Figure 8 shows that there would be some redistribution of funds across categories of IHEs. Most notably, if funding for base guarantees were to be eliminated, middle-cost institutions (category 3) as a group would receive almost $5 million less in funding, while upper middle-cost institutions (category 4) would receive almost $3 million in additional funding. It is estimated that smaller changes in funding levels would occur for other categories of IHEs. Since approximately 40% of FSEOG funding is currently provided for fair share increases and because these fair share increases are designed to close any gaps that exist between the amount of funding an IHE receives for its base guarantee and the amount it would be entitled to receive if all funding were allocated according to fair share procedures, it may not be surprising that the elimination of base guarantees would result in only a modest redistribution of funds across categories of institutions. A cursory look at Figure 8 might suggest that eliminating base guarantees in favor of allocating all FSEOG funding according to fair share procedures would not have a significant effect on the distribution of funds. However, looking only at categories of institutions may mask the effects of changes in the allocation procedures on individual institutions. When examining the number of IHEs in each category that would experience a change in funding and the direction of that change, it is found that a considerable amount of churning would likely occur across all categories of IHEs. Table 5 shows estimates of the number of IHEs in each category that would experience an increase, no change, or a decrease in funding. Perhaps of most significance is that if funding for base guarantees were eliminated, vastly more institutions in each COA category would experience an increase in funding than would experience a decrease. However, the number of IHEs that would experience a decrease in funding is greatest in the low-cost category, and declines across categories as COA increases. Since more institutions would experience funding increases than decreases, this also means that on average , funding increases would be less for those institutions receiving more funds than would be funding decreases for those institutions losing funds. (Estimations of potential funding changes for individual institutions are beyond the scope of this report.) Under the FWS program, approximately two-thirds of the funds available are allocated for base guarantees and one-third for fair share increases. With a somewhat greater percentage of funding currently allocated for base guarantees than under the FSEOG program, it might be expected that if base guarantees were to be eliminated, there would be a more noticeable shift than estimated for the FSEOG program in the distribution of funds. Figure 9 shows a comparison across COA categories of AY2004-2005 FWS allocations and estimates of what IHEs might receive if all FWS funding were to be allocated according to fair share procedures. The figure shows that overall, middle-cost (category 3) and upper middle-cost (category 4) IHEs would experience sizable decreases in funding, while very high-cost (category 6) IHEs would experience a sizable funding increase. (Smaller changes in funding would occur in the other categories.) Given that approximately two-thirds of FWS funding is currently allocated for base guarantees, it might be expected that there could also be a greater degree of churning within each category in the amount of funds estimated to be received than was found for the FSEOG program. Table 6 shows estimates of the number of IHEs in each category that would experience an increase, no change, or a decrease in funding if base guarantees were to be eliminated. The table shows that in each category, while more IHEs would experience an increase than a decrease in funding, the numbers are not as skewed as for the FSEOG program. Still, greater proportions of high-cost and very high-cost IHEs would experience funding increases if base guarantees were eliminated than would IHEs in any of the other categories. Under the Perkins Loan program, more than 92% of funding for FCCs was allocated for institutional base guarantees in AY2004-2005, the last year in which funds were appropriated for FCCs. Since only a small amount was allocated for fair share increases, it should be expected that if base guarantees were to be eliminated, the redistribution of FCC allocations (compared with past allotments) would be greater than for the other two programs. Figure 10 shows a comparison across categories of institutions of AY2004-2005 FCC allocations and estimated FCC allocations based on the elimination of the base guarantee. If base guarantees were to be eliminated, it is estimated that in the aggregate, lower middle-cost IHEs (category 2) and very high-cost IHEs (category 6) would experience increases in funding, while across the other categories, aggregate funding would decrease. Table 7 shows estimates of the number of IHEs in each category that would experience an increase, no change, or a decrease in allocations for FCCs if base guarantees were to be eliminated. Unlike the other two programs, the number of IHEs that would experience funding increases relative to the number that would experience decreases is not as great, and in one category—low-cost IHEs—more institutions would experience a decrease than an increase. Consistent with the other two programs, across COA categories, the greatest proportions of institutions that would experience allocation increases are high-cost and very high-cost IHEs. In this part of the report, estimates were presented of shifts that might occur in the distribution of campus-based funding allocations across categories of IHEs should changes be made to phase out base guarantee funding in favor of allocating funding entirely according to fair share criteria. These estimates showed that since it is often higher-cost IHEs that currently receive less than their "fair share" as calculated according to the allocation procedures, these institutions in the aggregate would receive increased allocations if funding were to be allocated solely according to existing fair share procedures. Since the fair share formulas calculate greater amounts of need on a per-student basis for IHEs with high costs than low costs, this is not surprising. The estimates presented in this part were based on the prospect of eliminating base guarantees in favor of allocating all funding according to the existing fair share formulas. In general, it is estimated that this would result in more IHEs experiencing allocation increases than decreases, although across categories of institutions, higher-cost IHEs would experience allocations increases in the greatest proportions. If proposals were also made to modify the calculation of institutional need in some way, this could also affect the distribution of funds. For example, if the amount of FSEOG need or adjusted self-help need calculated on a per-student basis under fair share formulas were to be limited to the federal share of FSEOG or Perkins Loan awards, respectively, the amount of institutional need calculated on a per-student basis would vary significantly less across IHEs based on their cost of attendance. Additionally, more accurate calculations of aggregate student need might also be obtained if the income categories used in the Table of EFCs were revised upward to better reflect the incomes current FSA applicants. Thus, more significant changes in the distribution of funds across institutions could be brought about by both phasing out the funding for institutional base guarantees and by reexamining and modifying the fair share allocation procedures. This last part of the report explores the distribution of aid to students under the campus-based programs. The framework developed earlier in the report—participating IHEs grouped into categories based on their average COA—is used to show the differences that exist between IHEs in the proportion of students with different incomes and dependency status that receive campus-based awards and the value of their awards. The distribution of awards is shown and briefly described for each of the three programs, and for combined aid awarded through all the programs. The distribution of FSEOG aid awarded to students is presented in Table 8 . The table shows for all students combined and for categories of students grouped by income bands and dependency status, the total number of eligible aid applicants, the number and percent awarded FSEOG aid, and average award amounts. This information is presented for each COA category of IHEs. Very high-cost IHEs award FSEOG grants averaging $2,460 to 20.0% of students who applied for federal aid. This compares with low-cost IHEs which provide 12.2% of federal aid applicants with FSEOG aid; however, grants at these IHEs average only $432, or less than one-fifth of the average amount provided to students at very high-cost institutions. When viewed as a percentage of median COA by category, FSEOG grants at very high-cost IHEs cover 8.3% of COA, while grants at low-cost IHEs cover 6.1% of COA. Table 8 also shows that as institutional COA increases, IHEs are able to give larger FSEOG awards to greater proportions of students across almost all income bands. Perhaps what is most striking, however, is that at very high-cost IHEs, a greater percentage of undergraduate dependent students from families with incomes as high as between $42,000 and $60,000 receive FSEOG aid than do students in any income range in the two lowest-cost categories of IHEs. The average FSEOG awards provided to students at the highest-cost IHEs are also approximately four times as great as the amount received by students at low-cost IHEs. These findings are particularly noteworthy because IHEs are required to award FSEOG aid first to students with exceptional financial need (defined as having the lowest EFCs at the institutions), with priority going to recipients of Pell Grants. Thus, at some higher-cost IHEs, even after awarding FSEOG aid to all eligible Pell Grant recipients, there often remain sufficient funds to allow FSEOG aid to be provided to eligible students higher up the income ladder. At lower-cost IHEs, this typically is not the case. Given that at each participating institution, priority in the awarding of FSEOG aid must go to Pell Grant recipients, it may be interesting to see how the distribution of FSEOG aid compares with the distribution of Pell Grant aid. Table 9 shows for both programs, the total amount of aid awarded, the number of aid recipients, and average award amounts, by COA category. In the Pell Grant program, the largest amounts of total aid are awarded to the largest numbers of students at lower- and middle-cost IHEs. Less than 10% of Pell Grant aid goes to students attending IHEs in the high-cost and very high-cost categories. Average Pell Grant award amounts increase slightly across categories of IHEs as COA increases. In the FSEOG program, the greatest number of aid recipients are at middle-cost institutions. However, both the number of students receiving FSEOG aid relative to the number receiving Pell Grants and average FSEOG award amounts increase steadily with average COA. At low-cost IHEs, one-fifth as many students receive FSEOG awards as receive Pell Grants, and the average award amount is approximately one-fifth the amount of the average Pell Grant. At very high-cost IHEs, approximately three-fourths as many students receive FSEOG awards as receive Pell Grants, and average award amounts are approximately 95% of the amount of the average Pell Grant. The data in Table 9 show that under the Pell Grant program, a relatively even amount of aid is awarded to eligible students, largely irrespective of the institution they attend (although Pell Grant recipients tend to be concentrated in low- and middle-cost IHEs). In contrast under the FSEOG program, the proportion of students awarded grants and the average grant amount tend to vary according to the COA of the institution the students attend, with students at very high-cost institutions receiving the largest awards. Information on the distribution of FWS aid to students is presented in Table 10 . Undergraduate students receive FWS award amounts that range on average between $1,093 and $1,673, varying by institutional COA and student dependency and income categories. In many instances, graduate and professional students receive substantially greater award amounts than undergraduates receive, especially at very high-cost IHEs where awards average $2,961. When examining the distribution of aid to different types of students—both within and across categories of institutions— Table 10 shows that average aid per student differs only modestly (the exception being for graduate and professional students), while the proportion of students receiving awards varies widely. Compared with the distribution of FSEOG awards, there is significantly less variation across categories of IHEs in the value of FWS awards provided to students and somewhat greater variation in the proportion of students receiving FWS aid. The modest variation across IHEs in award amounts is likely due in large part to the nature of the program being that aid is provided as compensation for part-time employment and because award amounts are dependent upon the number of hours worked and the hourly wage rate. A national study of the FWS program found that during the 1997-1998 award year, students receiving FWS awards worked an average of 11 hours per week and earned an average wage of $6.10 per hour. Approximately one-third earned the minimum wage of $5.15 per hour and only 30% earned more than $6.00 per hour. The study found only small variations across institutions when controlling for institution type and control, and for institution size and location. Across COA categories, as institutional COA increases, the percentage of students receiving FWS aid also increases, while the proportion of the COA the award covers declines. At low-cost IHEs, while only 3.5% of eligible students received FWS aid, the average award of $1,517 covered 21.3% of median COA. At very high-cost IHEs, 27.0% of eligible applicants received awards; however, the average award of $1,590 covered only 5.4% of median COA. The distribution of Perkins Loan aid to students is presented in Table 11 . Across student types and categories of IHEs, the distribution of aid is quite similar to that for the FWS program. Award amounts vary only slightly across COA categories for any student type. Graduate and professional students are awarded substantially larger loans, consistent with the maximum loan amount being higher for graduate and professional students than it is for undergraduates. For any of the various student types, much higher proportions of students attending high-cost and very high-cost IHEs are awarded Perkins Loan aid than are students at low- to middle-cost IHEs. This pattern becomes readily apparent when making comparisons across both COA categories and student types—20.6% of undergraduate dependent students attending very high-cost institutions who are from families with incomes of $60,000 and above receive Perkins Loan aid, a proportion greater than in any of the income bands shown for the low-, lower middle-, and middle-cost categories of IHEs. Still, for Perkins Loan recipients who attend low-cost IHEs, their awards cover, on average, 25.4% of median COA, whereas for Perkins Loans awarded to students attending very high-cost IHEs, the average award covers only 8.4% of median COA. Institutions may participate in any or all of the three campus-based programs. The largest number of IHEs participate in the FSEOG program, followed by the FWS program. Approximately half as many IHEs participate in the Perkins Loan program as in the other two. Table 12 shows the number of institutions participating in the various combinations of programs across categories of IHE, grouped by COA. Across all COA categories, more than three-quarters of IHEs participate in both the FSEOG and FWS programs. Within the two highest-cost categories of institutions, more than three quarters participate in all three programs. Eligible students may receive campus-based awards under any of the campus-based programs in which their institution participates (however, only undergraduate students pursuing a first baccalaureate course of study may receive FSEOG aid). Thus, students attending institutions participating in all three programs have the advantage of being able to access a larger pool of campus-based aid. This tends to favor students attending higher-cost institutions. In this section, the combinations of campus-based aid awarded to students under the three programs is analyzed according to institutional COA. Only institutions participating in all three campus-based programs are included in the analysis so that comparisons can be made between IHEs that would be able to award aid to students under each of the three programs, consistent with applicable program requirements. (Higher-cost institutions participate in all three programs in the greatest percentages—see Row g. in Table 12 .) Information on the number of eligible applicants, the number receiving campus-based awards, and the percent receiving aid and average award amounts by program are presented in Table 13 for each COA category. This analysis shows that among students attending IHEs participating in all three campus-based programs, at low-cost institutions, only 15.3% of students received any type of campus-based aid with the average total award being $1,086. At very high-cost institutions, 44.0% of students received campus-based aid, with total awards averaging $3,228. When examining all students as a group, both the proportion of students receiving aid and average aid amounts increased steadily with COA across categories of institutions. At low-cost institutions, the average award covered 15.4% of the median COA, while at very high-cost institutions, the average combined award covered 10.9% of the median COA. Graduate and professional students, who may receive aid only under the FWS and Perkins Loan programs, received larger awards on average than did undergraduate students in any category. Both the percentage of students receiving aid and average award amounts increase consistently with institutional COA. In the very high-cost category of institutions, 37.2% of undergraduate dependent students from families with incomes of $60,000 and above receive some form of campus-based aid, with the average total award being $2,127. Both the percentage of students receiving aid and the average award amount are greater for students in this category than for any undergraduate student category in both the low-cost and lower middle-cost categories of IHEs. The procedures currently used to allocate funds to institutions under the campus-based programs were developed several decades ago in response to concerns that had been raised about the inequitable distribution of funds. When these procedures were developed, it was envisioned that funds would be allocated according to a series of formulas designed to provide each institution with funding in proportion to its fair share of aggregate student need. To ease the transition to the new formula-based fair share method of allocating funds, for a limited period, IHEs were to receive a conditional or base guarantee of funding proportional to the amount they had received in a base year. However, instead of being phased out over time, base guarantees remain the primary method for allocating the majority of the funds appropriated for the campus-based programs. In recent years, proposals again have been made to phase out funding for base guarantees and to transition to the allocation of funds to institutions entirely on the basis of their fair share of aggregate student need. To facilitate an understanding of the potential consequences of modifying the current procedures for allocating funds to institutions, this report has set out to explain in detail the functioning of the current allocation procedures and the resulting distribution of aid to students. Throughout the report, the distribution of funding to institutions and the distribution of aid to students was explored by grouping institutions into categories in rank order of their costs of attendance. It was shown that under each of the campus-based programs the majority of funding is currently allocated to institutions on the basis of their institutional base guarantees. In each of the programs, there is only modest variation across categories of institutions in the proportion of total funding allocated to institutions on the basis of their base guarantees, while there is somewhat more variation across institutions grouped by states. Most of the funding provided for the FSEOG and FWS programs is allocated according to institutional base guarantees, and nearly all is for the Perkins Loan program. An analysis of the calculation of institutional need has shown that institutional COA plays a critical role in determining the amount of aggregate need calculated under the fair share formulas for any particular IHE. Since COA varies widely across institutions, vastly different amounts of need can be calculated on a per-student basis depending on the characteristics of the institution. In many instances, for high-cost institutions the average amount of need calculated on a per-student basis greatly exceeds the maximum award amount, and exceeds the federal share by an even greater amount. When examined in the aggregate for categories of institutions, it was shown that at low-cost institutions, institutional need is largely the aggregate need of undergraduate independent students and low-income dependent students; whereas at higher-cost institutions, institutional need is largely the aggregate need of upper-income undergraduate dependent students and graduate and professional students. It was also noted that for the FSEOG program, aggregate student need is offset by Pell Grant aid (which is targeted primarily at low-income students), while no adjustments are made for higher education tax benefits (which are beneficial primarily to middle- and upper-income students). The prospect of eliminating the allocation of funds for institutional base guarantees in favor of providing all funding on the basis of fair share criteria was also examined. It was found that in the FSEOG program, there would only be a modest redistribution of funds across categories of IHEs based on COA. Nonetheless, there would be a considerable amount of churning in the allocation of funds within categories, and more institutions would receive an increase in funding than a decrease. For the FWS and Perkins Loan programs, if funds were to be allocated entirely on the basis of the fair share formulas, very high-cost IHEs, as a category, would receive a funding increase, due to the high aggregate need of their student bodies. Overall, however, more IHEs would receive allocation increases than decreases if base guarantees were eliminated. Analysis of the distribution of aid to students revealed that despite there being a strong correlation between a student's family income and the cost of attendance at the institution a student attends, larger proportions of students at high-cost institutions receive campus-based aid than students at low-cost institutions. In the FSEOG program, award amounts are larger at high-cost IHEs than at low-cost ones, while in the FWS and Perkins Loan programs, awards tend to be of similar values across institutions and student groups. Higher-cost institutions are more likely to participate in all three campus-based programs than are lower-cost institutions. However, even when examining only institutions that participate in all three programs, it is revealed that higher-cost institutions are able to give larger awards to a higher proportion of their students than are lower-cost institutions. The findings presented in this report highlight an important characteristic of need based financial aid—that student financial need is relative to the COA at the institution a student attends. A middle- or upper-income student attending a higher-cost institution may have financial need, whereas a similarly situated student attending a low-cost institution might have no financial need. Under the campus-based programs, this has resulted in higher-cost institutions having greater institutional need, on a per-student basis, than lower-cost institutions. In turn, this has allowed higher-cost IHEs to provide larger awards—even to students with higher incomes—than could be provided by lower-cost IHEs. Still, at higher-cost IHEs, these substantially larger campus-based awards typically cover a much smaller portion of COA than do awards at lower-cost IHEs.
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The Federal Supplemental Educational Opportunity Grant, Federal Work-Study, and Federal Perkins Loan programs are collectively referred to as the campus-based financial aid programs largely because participating institutions play a central role in their operation, and because the aid they make available to students comprises federal funds matched in part with institutional funds. In recent years, the programs have been criticized because a large share of funding is allocated to institutions on the basis of amounts received in prior years for "base guarantees" as opposed to being allocated exclusively on the basis of aggregate student financial need. They also have been criticized because the current funding procedures allow institutions that receive proportionately greater funding on a per-student basis to provide larger awards to students with higher incomes than can be provided to lower-income students at institutions that receive less funding. In recent Congress bills have been introduced to modify the funding procedures by gradually phasing out base guarantee funding and requiring all campus-based funding to be allocated to institutions according to existing need-based "fair share" formulas. This report describes and analyzes (a) the process through which federal funds are allocated to institutions under the campus-based programs, (b) the potential for allocating all campus-based funding according to the existing need-based formulas, and (c) the current distribution of aid to students. It will be updated to track legislative proposals addressing the campus-based allocation procedures. Major findings presented in the report include the following: Under each program, the majority of funds are allocated to institutions on the basis of amounts received in prior years, while only a modest amount are allocated according to aggregate student financial need as calculated according to "fair share" formulas. Under the need-based formulas, the cost of attendance at an institution is the dominant factor in determining institutional need. Much greater amounts of institutional need are calculated on a per-student basis at high-cost institutions than at low-cost institutions. At low-cost institutions, institutional need comprises limited amounts of aggregate student need attributable to large numbers of predominately low-income students, while at high-cost institutions, it tends to comprise greater amounts of need attributable to a smaller number of mostly middle- and upper-income students. It is estimated that if the allocation procedures were to be modified so that funding was allocated entirely on the basis of institutions' proportionate share of institutional need, more institutions would receive allocation increases than would receive allocation decreases. Larger proportions of students at higher-cost institutions receive campus-based aid, and receive larger awards, than do comparable students at lower-cost institutions; however, average awards at higher-cost institutions cover a smaller percentage of costs.
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The Community Services Block Grant traces its roots to the War on Poverty, launched by President Lyndon Johnson more than 50 years ago when he proposed the Economic Opportunity Act of 1964. In his March 1964 message to Congress, President Johnson said the act would "give every American community the opportunity to develop a comprehensive plan to fight its own poverty—and help them to carry out their plans." This was to be achieved through a new Community Action Program that would "strike poverty at its source—in the streets of our cities and on the farms of our countryside among the very young and the impoverished old." A central feature of the new Community Action Program was that local residents would identify the unique barriers and unmet needs contributing to poverty in their individual communities and develop plans to address those needs, drawing on resources from all levels of government and the private sector. The program would be overseen by a newly created Office of Economic Opportunity, which would pay part of the costs of implementing these local plans. President Johnson signed the Economic Opportunity Act into law on August 20, 1964 (P.L. 88-452), and within a few years, a nationwide network of about 1,000 local Community Action Agencies was established. This report provides information on the Community Services Block Grant (CSBG), which is the modern-day program that continues to fund this network of local antipoverty agencies. The report also describes several smaller related programs that are administered by the same federal office that currently oversees the CSBG. The report begins with background information and legislative history of the CSBG and related activities (" Background "); it then summarizes the ways in which CSBG eligible entities use funds and who is served (" CSBG Program Data "). The next section discusses recent funding for CSBG (" Funding for CSBG and Related Activities "), and the final section provides an overview of legislation in the 114 th Congress that would have reauthorized CSBG and related activities (" Reauthorization Proposal in the 114th Congress "). Appendix A has tables showing historical funding for CSBG and related activities dating back to the beginning of the program, in 1982, as well as a table with CSBG funding distributed to states, tribes, and territories in recent years. The most recent review of CSBG by the Government Accountability Office (GAO) is discussed in Appendix B . Administered by the Department of Health and Human Services (HHS), the Community Services Block Grant (CSBG) provides federal funds to states, territories, and Indian tribes for distribution to local agencies in support of a variety of antipoverty activities. As noted above, the origins of the CSBG date back to 1964, when the Economic Opportunity Act (P.L. 88-452; 42 U.S.C. §2701) established the War on Poverty and authorized the Office of Economic Opportunity (OEO) as the lead agency in the federal antipoverty campaign. A centerpiece of OEO was the Community Action Program, which would directly involve low-income people in the design and administration of antipoverty activities in their communities through mandatory representation on local agency governing boards. Currently, these local agencies, generally known as Community Action Agencies (CAAs), are the primary substate grantees of the CSBG. In 1975, OEO was renamed the Community Services Administration (CSA), but remained an independent executive branch agency. In 1981, CSA was abolished and replaced by the CSBG, to be administered by a newly created office in HHS. At the time CSA was abolished, it was administering nearly 900 CAAs, about 40 local community development corporations, and several small categorical programs that were typically operated by local CAAs. The CSBG Act was enacted as part of the Omnibus Budget Reconciliation Act of 1981 ( P.L. 97-35 , Title VI, §671; 42 U.S.C. §9901) as partial response to President Reagan's proposal to consolidate CSA with 11 other social service programs into a block grant to states. Congress rejected this proposal and instead created two new block grants, the Social Services Block Grant under Title XX of the Social Security Act, and the CSBG, which consisted of activities previously administered by CSA. The CSBG Act was reauthorized in 1984 under P.L. 98-558 , in 1986 under P.L. 99-425 , in 1990 under P.L. 101-501 , in 1994 under P.L. 103-252 , and in 1998 under P.L. 105-285 . The authorization of appropriations for CSBG and most related programs expired in FY2003, although Congress has continued to appropriate funds for the programs each year since then. The House and Senate passed reauthorization legislation during the 108 th Congress but it was not enacted. Similar legislation was introduced in the 109 th Congress but not considered. Legislation was introduced in the 113 th Congress to amend and reauthorize the CSBG and related activities through FY2023 ( H.R. 3854 ); however, no further action was taken. Similar legislation was introduced in the 114 th Congress ( H.R. 1655 ), but again received no further action. (For more details, see " Reauthorization Proposal in the 114th Congress .") Several related national activities—Community Economic Development (CED), Rural Community Facilities (RCF), and Individual Development Accounts (IDAs)—receive appropriations separate from the block grant and offer grants to assist local low-income communities with economic development, rural housing and water management, and asset development for low-income individuals. These activities are administered at the federal level by the same Office of Community Services at HHS (part of the Administration for Children and Families) that administers the CSBG, and in some cases, are also authorized by the CSBG Act. Congress has also funded other related activities over the years, but none except CED, RCF, and IDAs have received funding since FY2011. Of funds appropriated annually under the CSBG Act, HHS is required to reserve 1.5% for training and technical assistance and other administrative activities, and half of this set-aside must be provided to state or local entities. In addition, 0.5% of the appropriation is reserved for outlying territories (Guam, American Samoa, the U.S. Virgin Islands, and the Commonwealth of the Northern Mariana Islands). The law further requires that 9% of the total appropriation be reserved for certain related activities, which are described below, and that the remainder be allocated among the states. In practice, however, Congress typically specifies in annual appropriations laws exactly how much is to be made available for the block grant and each of the related activities. Block grant funds are allotted to states, including the District of Columbia and Puerto Rico, based on the relative amount received in each state in FY1981, under a section of the former Economic Opportunity Act. HHS may allow Indian tribes to receive their allotments directly, rather than through the state. See Table A-2 for a history of CSBG appropriations from its first year of funding (FY1982) through FY2017. CSBG funds are used for activities designed to have a "measurable and potentially major impact on causes of poverty." The law envisions a wide variety of activities undertaken on behalf of low-income families and individuals, including those who are welfare recipients, homeless, migrant or seasonal farm workers, or elderly. States must submit an application and plan to HHS, stating their intention that funds will be used for activities to help families and individuals achieve self-sufficiency, find and retain meaningful employment, attain an adequate education, make better use of available income, obtain adequate housing, and achieve greater participation in community affairs. In addition, states must ensure that funds will be used to address the needs of youth in low-income communities; coordinate with related programs, including state welfare reform efforts; and ensure that local grantees provide emergency food-related services. At the state level, a lead agency must be designated to develop the state application and plan. States must pass through at least 90% of their federal CSBG allotment to local eligible entities. States also may use up to $55,000 or 5% of their allotment, whichever is higher, for administrative costs. Remaining funds may be used by the state to provide training and technical assistance, coordination and communication activities, payments to assure that funds are targeted to areas with the greatest need, supporting "asset-building" programs for low-income individuals (such as Individual Development Accounts, discussed later), supporting innovative programs and activities conducted by local organizations, or other activities consistent with the purposes of the CSBG Act. In addition, as authorized by the 1998 amendments, states may use some CSBG funds to offset revenue losses associated with any qualified state charity tax credit. As noted above, states are required to pass through at least 90% of their federal block grant allotments to "eligible entities"—primarily (but not exclusively) Community Action Agencies (CAAs) that had been designated prior to 1981 under the former Economic Opportunity Act. The distribution of these funds among local agencies is left to the discretion of the state, although states may not terminate funding to an eligible entity or reduce its share disproportionately without determining cause, after notice and an opportunity for a hearing. There are more than 1,000 eligible entities around the country, the majority of which are private nonprofit organizations. Many of these organizations contract with others in delivering various services. Once designated as an eligible entity for a particular community, an agency retains its designation unless it voluntarily withdraws from the program or its grant is terminated for cause. Eligible entities are monitored within a systematic schedule; return visits are made when goals are not met. In designating new or replacement entities, states may select a public agency only when no qualified private nonprofit organization is available, in accordance with the 1998 CSBG amendments. Local activities vary depending on the needs and circumstances of the local community. Each eligible entity, or CAA, is governed by a board of directors, of which at least one-third of members are representatives of the low-income community. Under the 1998 amendments to the CSBG Act, low-income board members must live in the community that they represent. Another third of the board members must be local elected officials or their representatives, and the remaining board members represent other community interests, such as business, labor, religious organizations, and education. A public entity must either have a governing board with low-income representation as described above, or another mechanism specified by the state to assure participation by low-income individuals in the development, planning, implementation, and evaluation of programs. There is no typical CAA, since each agency designs its programs based on a local community needs assessment. Examples, however, of CSBG-funded services include emergency assistance, home weatherization, activities for youth and senior citizens, transportation, income management and credit counseling, domestic violence crisis assistance, parenting education, food pantries, and emergency shelters. In addition, local agencies provide information and referral to other community services, such as job training and vocational education, depending on the needs of individual clients. CAAs may also receive federal funds from other sources and may administer federal programs such as Head Start and energy assistance programs. For more information, see the " Use of Federal CSBG Funds " section of this report. In addition to the block grant itself, the CSBG Act has authorized various related activities over the years that have been funded along with CSBG and administered through the Office of Community Services (OCS) within HHS. There have also been programs authorized by other laws but administered by OCS. These programs provided various types of assistance, including food and nutrition assistance and help obtaining jobs, and programs have targeted services to specific populations including migrant farmworkers and people experiencing homelessness. Most of the related activities administered through OCS no longer receive funding, and some have not been funded for many years. See Table A-3 for programs that have been funded from FY1982 to the present. Two of these programs—CED and RCF, both authorized by the CSBG Act—continue to be funded, and have received funding in every year since FY1982. In addition, a third program, Individual Development Accounts (IDAs), is also administered by the Office of Community Services, though it is not directly authorized by the CSBG Act. IDAs were funded in every year since their creation as a demonstration program in 1998 until FY2017, when they were not funded for the first time. This section describes these three recently funded, related activities. The Community Economic Development (CED) program helps support local community development corporations (CDCs) to generate employment and business development opportunities for low-income residents. Projects must directly benefit persons living at or below the poverty level and must be completed within 12 to 60 months of the date the grant was awarded. Preferred projects are those that document public/private partnership, including the leveraging of cash and in-kind contributions; and those that are located in areas characterized by poverty, a Temporary Assistance for Needy Families (TANF) assistance rate of at least 20%, high levels of unemployment or incidences of violence, gang activity, and other indicators of socioeconomic distress. During FY2016, HHS supported 39 grants, all of which were continuations of existing grants, plus three contracts and two interagency agreements, according to agency budget documents. While HHS expected to fund the same number of grantees in FY2017, ultimately Congress reduced CED funding by $10 million (from $30 million to $20 million), so it is unclear whether the same number of grants will be funded. As of the date of this report, information on FY2017 grantees was not available. From FY2011 through FY2016, approximately $10 million per year has been set aside from the CED appropriation for the Healthy Food Financing Initiative (HFFI). HFFI is a multiyear, multiagency effort through which HHS has partnered with the Departments of Agriculture (USDA) and the Treasury to make available a total of $400 million to address the lack of affordable healthy food in many urban and rural communities (areas known as "food deserts"). Under the HHS/CED component, competitive grants go to community development corporations for projects to finance grocery stores, farmers markets, and other sources of fresh nutritious food, creating employment and business opportunities in low-income communities while also providing access to healthy food options. Legislation to formally authorize the program in USDA was passed by Congress as part of the 2014 "farm bill" ( P.L. 113-79 ). As of the date of this report, information on FY2017 grantees was not available. Rural Community Facilities (RCF) funds are for grants to public and private nonprofit organizations for rural housing and community facilities development projects to train and offer technical assistance on the following: home repair to low-income families, water and waste water facilities management, and developing low-income rental housing units. Each year, beginning with its FY2010 budget request to Congress through FY2017, the Obama Administration proposed to terminate RCF, arguing that it does not belong in HHS. Instead, the Administration noted that federal assistance for water treatment facilities is available through two much larger programs in the Environmental Protection Agency (EPA) (i.e., the Clean Water and Drinking Water State Revolving Funds) and through loans and grants administered by USDA. The FY2018 Trump Administration budget proposed to eliminate funding for RCF, stating that "services provided are duplicative of other federal programs." Notwithstanding Administration requests to stop funding RCF, Congress has continued to provide funding for this program. During FY2016, HHS supported eight grants, all of which were continuations of existing grants, plus one contract and one interagency agreement, according to agency budget documents. In FY2017, the department again expected to support eight grants, one contract, and one interagency agreement. As of the date of this report, information on FY2017 grantees was not available. HHS expected no program activity in FY2018 due to the program's proposed termination. The Assets for Independence Act (AFI, Title IV, P.L. 105-285 ), enacted in 1998, initially authorized a five-year demonstration initiative to encourage low-income people to accumulate savings through Individual Development Accounts (IDAs). The Assets for Independence Act expired at the end of FY2003, although Congress continued to provide appropriations for the program under this authority through FY2016. In FY2017, Congress did not provide funding for IDAs for the first time since the demonstration program was enacted. IDAs are dedicated savings accounts that can be used for specific purposes, such as buying a first home, paying for college, or starting a business. Contributions are matched, and participants are given financial and investment counseling. To conduct the demonstration, grants are made to public or private nonprofit organizations that can raise an amount of private and public (nonfederal) funds that is equal to the federal grant; federal matches into IDAs cannot exceed the non-federal matches. The maximum federal grant is $1 million each year. According to Administration budget documents, in FY2016 the IDA program supported 42 new grants, 6 contracts, and 3 interagency agreements. While HHS expected to support a similar number of grants, contracts and agreements in FY2017, ultimately Congress did not appropriate funds. In the 115 th Congress, a bill to amend and reauthorize IDAs, the Stephanie Tubbs Jones Assets for Independence Reauthorization Act ( H.R. 271 ), would fund IDAs at an annual level of $75 million through FY2022. A similar bill with the same title ( H.R. 3367 ) was introduced in the 114 th Congress. Two other bills in the 114 th Congress also would have reauthorized IDAs. Data on the programs administered and people served by CSBG local eligible entities are captured in CSBG Annual Reports. Since 1987, HHS has contracted with the National Association for State Community Services Programs (NASCSP) to collect, analyze, and publish data related to CSBG through a survey of the 50 states, the District of Columbia, and Puerto Rico. HHS also produces annual CSBG Reports to Congress using the data collected for the CSBG Annual Reports. The most recent CSBG Annual Report summarizes data from FY2015. According to the report, the nationwide CSBG network consisted of 1,026 local eligible entities in FY2015, including 907 Community Action Agencies, 79 local government agencies, 16 "limited purpose agencies" that specialized in one or two types of programs, 16 tribes or tribal organizations, 6 migrant or seasonal farmworker organizations, and 2 organizations that fell into other categories. This network of local eligible entities reported spending nearly $13.6 billion in FY2015, with funding coming from federal, state, local, and private sources. Of the total amount spent, $637 million came from the federal CSBG allotment, and another $8.3 billion came from federal programs other than CSBG . Approximately $1.7 billion came from state governments, $1.5 billion came from private agencies, and nearly $1.5 billion came from local governments. In addition to these financial resources, the estimated value of volunteer hours was $298 million. Based on reports from all jurisdictions, local entities spent their CSBG funds in FY2015 for a wide variety of activities, including emergency services (17%); activities to promote self-sufficiency (17%); activities to promote linkages among community groups and other government or private organizations (13%); education-related activities (12%); employment-related activities (13%); housing-related services (9%); nutrition services (7%); income management (6%); health services (3%); and other activities. The bulk of funds spent by local eligible entities come from federal programs other than CSBG. More than half of the funding in FY2015 was dedicated to Head Start or energy assistance. Of nearly $8.3 billion in non-CSBG federal funds spent by local agencies in FY2015, 35% came from Head Start or Early Head Start. Low Income Home Energy Assistance Program (LIHEAP) fuel assistance made up 15% of federal funds spent by local agencies, and LIHEAP weatherization funding, together with funding from the Department of Energy's Weatherization Assistance Program, made up another 5% of funding. States reported that nearly 10% of federal non-CSBG funds received by local agencies came from Agriculture Department nutrition programs, including almost 3% from the Special Supplemental Nutrition Program for Women, Infants and Children (WIC) alone. Another 6% of federal non-CSBG funds came from the TANF block grant, more than 3% came from employment and training programs administered by the Labor Department, and almost 3% came from the Department of Housing and Urban Development (HUD) Section 8 program. The Child Care and Development Block Grant and funding for Medicare/Medicaid each accounted for more than 2% of funding. According to states responding to the survey, the CSBG network provided services to 15.6 million individuals in 6.5 million families in FY2015. Of families for whom the survey captured demographic information, more than 70% had incomes at or below federal poverty guidelines and almost a third of families were "severely poor" with incomes at or below 50% of the poverty guidelines. Some 47% of families reported income that indicated participation in employment. About 88% of families that reported some income included either a worker, an unemployed job-seeker, or a retired worker. Almost half of the families included children; of those, 58% were headed by a single mother, 36% by two parents, and 6% by a single father. Looking at participants by age, the survey found that 37% of individuals served were children age 17 or younger, and 21% were age 55 or older. About 57% of individuals reported they were white and 26% were African American. Almost 19% of individuals reported their ethnicity as Hispanic or Latino, regardless of race. The survey collected information on potential barriers to self-sufficiency and reported that, of people served by the CSBG network in FY2015, approximately 27% had no health insurance (a decline from 32% in FY2013 and the same percentage without insurance as FY2014); 18% had disabilities; and 33% of participating adults older than 24 had no high school diploma or equivalency certificate. As of the date of this report, FY2018 funding for CSBG has been provided via a series of continuing resolutions (CRs). To date, the CRs fund most federal programs, including CSBG, at FY2017 levels less an across-the-board rescission of 0.6791%, through February 8, 2018. For CSBG, the FY2017 funding level was $715 million, while CED received $20 million and RCF $7.5 million. No funding was provided for IDAs in FY2017. Prior to enactment of the CRs, the Administration proposed to eliminate funding for CSBG, CED, and RCF. Additionally, IDAs would have continued at zero funding under the Administration's proposal. HHS budget justifications stated that "[i]n a constrained budget environment, difficult funding decisions were made to ensure that federal funds are being spent as effectively as possible." The House Appropriations Committee approved a bill to fund the Departments of Labor, Health and Human Services, and Education (LHHS) on July 24, 2017 ( H.R. 3358 ). The bill proposed to reduce funding for CSBG to $600 million, to reduce funding for CED to $10 million, and to maintain RCF funding at $7.5 million. Additionally, the bill would not fund IDAs. The House Appropriations Committee report ( H.Rept. 115-244 ) would direct HHS to issue a notice of funding availability prioritizing applicants for CED funds from "rural areas with high rates of poverty, unemployment, and substance abuse." In addition, on August 16, 2017, the full House passed a bill ( H.R. 3354 ) that incorporated multiple FY2018 appropriations bills, including that for LHHS. Funding for CSBG and related programs in H.R. 3354 was the same as the levels proposed in H.R. 3358 . The Senate Appropriations Committee reported its LHHS funding bill on September 7, 2017 ( S. 1771 ). The bill would reduce funding for CSBG by $15 million, from $715 million to $700 million. Funding for CED and RCF would remain the same at approximately $20 million and $7.5 million, respectively, and IDAs would receive no funding. Similar to H.Rept. 115-244 , the Senate Appropriations Committee report ( S.Rept. 115-150 ) encourages CED funds to be prioritized for rural communities "to help them identify community service needs and improve upon the services provided to low-income individuals and families in such communities." For FY2017, Congress provided just over $742 million for CSBG and related activities as part of the FY2017 Consolidated Appropriations Act ( P.L. 115-31 ), enacted on May 5, 2017. Prior to enactment of P.L. 115-31 , CSBG and most federal programs had been funded pursuant to a series of continuing resolutions. Of the amount appropriated, nearly $715 million went to the block grant, the same amount that was appropriated in FY2016. Funding for CED was reduced compared to FY2016, from $30 million to $20 million. Funding for RCF increased by $1 million compared to FY2016, from $6.5 million to $7.5 million. For the first time since IDAs were created in 1998, they received no funding. The accompanying Explanatory Statement did not provide a reason for eliminating funding for IDAs. The Senate Appropriations Committee-reported bill (described below) recommended no funding for IDAs, but the House Appropriations Committee-reported bill would have provided level funding of approximately $19 million. The House Appropriations Committee reported its FY2017 spending bill for the Departments of Labor, HHS, Education, and related agencies on July 22, 2016 ( H.R. 5926 , H.Rept. 114-699 ). The bill included level funding for CSBG and all related programs, except for Rural Community Facilities, which the House committee proposed to increase by $1 million. Recommended spending for CSBG and related activities in FY2017 would have totaled $771 million under H.R. 5926 , compared to FY2016 spending of $770 million. In its report accompanying the FY2017 spending bill, the House committee expressed concern that block grant funds "are not reaching local agencies and community residents promptly." The report contained language urging HHS to "take all necessary action" to ensure funds are allocated and made available in a timely way, and also to "engage with stakeholders" on new data collection and federal reporting initiatives. The committee further stated that it wanted an update on these efforts. The report also explained the House committee's decision to continue funding for CED (which the Obama Administration, as described below, proposed to zero out). The report stated that CED, which requires that low-income individuals fill at least 75% of jobs created, is the only federal economic development program with such highly targeted job creation. Likewise, the committee would have maintained and increased funding for RCF, despite the Obama Administration's request for zero funding, explaining that some of the small rural communities served by the program may not be eligible for larger programs administered by the Department of Agriculture or the Environmental Protection Agency. Finally, the House committee, like the Senate committee and as requested by the Obama Administration (see below), would have required the Secretary to issue performance standards for states and territories receiving block grant funds, and would have required the states and territories to implement these standards by September 30, 2017, and report on their progress. This language built upon language in previous appropriations laws and reflected actions underway at HHS. Additional statutory provisions requested by the Obama Administration, described below, were not included in the recommended House bill language. The Senate Appropriations Committee reported its FY2017 Labor-HHS-ED spending bill on June 9, 2016 ( S. 3040 , S.Rept. 114-274 ), recommending $715 million for the block grant (the same as the House recommendation and the FY2016 level) and no funding for any of the related activities. The committee agreed with the Obama Administration that both CED and RCF are similar to programs administered by the Department of Agriculture and Environmental Protection Agency. The committee further stated that IDAs began in 1998 as a demonstration program and, thus, no further funding is recommended. As noted above, the Senate committee, like the House committee, would have included legislative language requested by the Obama Administration related to the issuance and implementation of performance standards for states and territories. However, the Senate language did not include the Obama Administration's other proposed statutory provisions. President Obama submitted his FY2017 budget to Congress in February 2016, requesting a total of $693 million for CSBG and related activities. This amount included $674 million for the block grant, nothing for either CED or RCF, and level funding ($19 million) for IDAs. The amount requested for the block grant was the same as provided in FY2015, but was $41 million less than appropriated for FY2016. As mentioned above, the Obama Administration requested certain legislative language to be included in the FY2017 appropriations bill, including provisions requiring states and territories to implement national performance standards. This language built on provisions in the FY2016 appropriations law requiring the Secretary to issue such national standards, and was part of a larger effort to establish a new performance management framework for CSBG. In the FY2017 budget request, the Obama Administration also requested language that would provide flexibility in FY2017 and FY2018 for states to exceed the authorizing law's 5% cap on state administrative costs, as long as the excess funds were used for modernization of data systems and integration with other social services programs. The authorization of appropriations for CSBG and related activities expired at the end of FY2003, although Congress has continued to fund these programs through the annual appropriations process. Until 2014, no reauthorization attempt had been made since the 109 th Congress, when legislation was introduced, but not considered, in the House ( H.R. 341 ). That legislation was largely identical to a bill that was passed by the House during the 108 th Congress ( H.R. 3030 ). The Senate also passed a reauthorization bill during the 108 th Congress ( S. 1786 ), but conferees never met to resolve differences between the House and Senate bills. In both the 113 th and 114 th Congresses, for the first time since the 109 th Congress, legislation was introduced in the House to reauthorize CSBG and certain related activities. In the 113 th Congress, Representative Fitzpatrick introduced the Community Economic Opportunity Act, with bipartisan support, on January 13, 2014 ( H.R. 3854 ). The bill was referred to the House Education and the Workforce Committee, but no further action occurred. Representative Fitzpatrick reintroduced a mostly identical version of the bill (with some changes) in the 114 th Congress ( H.R. 1655 ), where it was again referred to the House Education and the Workforce Committee but received no further action. H.R. 1655 would have made numerous changes in language throughout the statute, with more specific provisions regarding the roles and responsibilities of the federal Office of Community Services, state lead agencies, and local agency governing boards. The bill would have required federal, state, and local entities to establish performance requirements and benchmarks, and included provisions intended to increase accountability for the use of federal funds and to ensure timely distribution and expenditure of these funds. The bill had extensive provisions on monitoring of state and local compliance with applicable law and regulations, corrective action, and withholding, reduction, or elimination of federal funds. H.R. 1655 proposed to authorize appropriations of $850 million per year for FY2014-FY2018, with "such sums as necessary" authorized for FY2019-FY2023. Like current law, the bill would have required the Secretary to reserve 0.5% of appropriations for grants to territories, but would have increased the amount reserved for training and technical assistance from 1.5% to 2%. Remaining funds would have been allocated among states (including DC and Puerto Rico). While no change would have been made in the basic state allocation formula, the minimum allotment would have increased to one-half of 1% or, if appropriations exceeded $850 million in a given year, to three-quarters of 1%. Under current law, each state gets at least one-quarter of 1% or, if appropriations exceed $345 million, one-half of 1%. Current law provisions that hold states harmless at their FY1990 levels, and that establish a maximum allotment percentage, would have been eliminated under the bill. The bill would have required states to reserve at least 2% of block grant funds received for a new Community Action Innovations Program. These funds would have gone to local eligible entities or their associations to carry out innovative projects that test or replicate promising practices to reduce poverty conditions, and to disseminate the results of these projects. These funds could have been used to satisfy nonfederal matching requirements when used in conjunction with other federal programs that have such requirements, and could have been used to serve participants with incomes up to 80% of area median income. State applications and plans would have been subject to the Secretary's approval under H.R. 1655 , a change from current law. Likewise, local community action plans would have been newly subject to the state's approval. Like the 113 th Congress version of the bill ( H.R. 3854 ), H.R. 1655 would have allowed states to request waivers from the Secretary to increase the income eligibility level for CSBG activities. However, H.R. 1655 also included a provision found in current law that allows states to increase eligibility to 125% of the poverty line whenever the state determines the change serves the objectives of the program, without the need for a waiver. This provision had not been included in H.R. 3854 . In designating new or replacement eligible entities, H.R. 1655 would have given priority to existing Community Action Agencies (which would have been explicitly defined for the first time) and public agencies could no longer be designated unless they were already serving as an eligible entity. H.R. 3854 would have allowed two or more local eligible entities to propose a merger, subject to state approval, if they determined their local service areas would be better served by a single agency. If approved, these agencies would have been eligible to receive Merger Incentive Funds from amounts reserved by the Secretary. H.R. 1655 had the same language with regard to mergers, but also would have allowed states to approve "privatization" proposals from public organizations that determined they could serve their areas more effectively as private eligible entities. Current law provisions affecting the participation of religious organizations in CSBG-funded activities would have been retained by H.R. 1655 . These provisions require federal, state, or local governments to consider religious organizations on the same basis as other nongovernmental organizations, and prohibit discrimination against such organizations on the basis of their religious character. Like current law, the pending legislation would have provided that a religious organization's exemption under Section 702 of the Civil Rights Act of 1964, regarding its employment practices, is not affected by participating in or receiving funds from programs under the CSBG Act. The bill also would have established a new provision, prohibiting religious organizations that provide assistance under the act from discriminating against a program beneficiary or prospective beneficiary on the basis of that person's religion or religious belief. The bill would have separately authorized "such sums as necessary" for related federal activities, including Community Economic Development and Rural Community Facilities, during FY2014-FY2023. Current law requires that 9% of total appropriations be set aside for these related activities; however, this has never occurred in practice and the bill would have eliminated this language. Appendix A. Additional Funding Information This appendix provides additional funding information for Community Services Block Grants and related activities. Table A-1 shows funding amounts distributed to the states, tribes, and territories from FY2013 through FY2017. Table A-2 shows funding for CSBG (not including related activities) from its first year in FY1982 through FY2017. Table A-3 shows funding for the various related activities that have been funded at different times from FY1982 to FY2017. Appendix B. Government Accountability Office (GAO) Review The Government Accountability Office (GAO) released a report on the CSBG program in July 2006, in response to a request by the House Education and the Workforce Committee. GAO's review focused on three topics related to program monitoring and training and technical assistance: (1) HHS compliance with legal requirements and standards governing its oversight of state efforts to monitor local CSBG grantees; (2) efforts by states to monitor local grantee compliance with fiscal requirements and performance standards; and (3) targeting by HHS of its training and technical assistance funds and the impact of such assistance on grantee performance. GAO concluded that the Office of Community Services (OCS) lacked "effective policies, procedures, and controls" to ensure its own compliance with legal requirements for monitoring states and with federal internal control standards. GAO found that OCS had visited states as mandated by law but failed to issue reports to the states after the visits or annual reports to Congress, which also are mandated by law. OCS failed to meet internal control standards because their monitoring teams lacked adequate financial expertise; moreover, OCS lost the documentation from the monitoring visits to states. Finally, OCS was not systematic in its selection of states to visit, and did not use available information on state performance or collect other data to allow more effective targeting of its limited monitoring resources on states at highest risk of management problems. In connection with its assessment of state efforts to monitor local grantees, GAO visited five states and found wide variation in the frequency with which they conducted on-site monitoring of local grantees, although officials in all states said they visited agencies with identified problems more often. States also varied in their interpretation of the law's requirement that they visit local grantees at least once in a three-year period, and GAO noted that OCS had issued no guidance on this requirement. States reported varying capacities to conduct on-site monitoring and some states cited staff shortages; however, the states all performed other forms of oversight in addition to on-site visits, such as review of local agency reports (e.g., local agency plans, goals, performance data, and financial reports) and review of annual Single Audits where relevant. Several states coordinated local oversight with other federal and state programs, and also used state associations of Community Action Agencies to help provide technical assistance. GAO found, with regard to federal training and technical assistance funds, that OCS targeted at least some of these funds toward local agencies with identified financial and program management problems, but generally was not strategic in allocating these funds and had only limited information on the outcome of providing such training and technical assistance. GAO made five recommendations to OCS in its report (and HHS indicated its agreement and intent to act upon these recommendations). GAO recommended that OCS should conduct a risk-based assessment of states by systematically collecting and using information; establish policies and procedures to ensure monitoring is focused on the highest-risk states; issue guidance to states on complying with the requirement that they monitor local agencies during each three-year period; establish reporting guidance for training and technical assistance grants so that OCS receives information on the outcomes for local agencies that receive such training or technical assistance; and implement a strategic plan for targeting training and technical assistance in areas where states feel the greatest need. HHS Response HHS took a series of steps in response to the GAO report. On October 10, 2006, HHS issued an information memorandum to state agencies responding to GAO's third recommendation and providing guidance on compliance with the statutory requirement that states conduct a full on-site review of each eligible entity at least once during every three-year period. Subsequently, on March 1, 2007, HHS issued another information memorandum, responding to GAO's first two recommendations and providing a schedule of states that would receive federal monitoring in each of the next three years (FY2007-FY2009). The October 2006 memorandum explained that states were selected through a process intended to identify states that would receive the most benefit from federal monitoring visits. This process considered the extent to which eligible entities in the state were considered vulnerable or in crisis; the physical size of the state, its number of eligible entities, and the number of state personnel assigned to the CSBG program; the extent of poverty in the state compared to the number of eligible entities and state CSBG personnel; the number of clients served compared to the number of eligible entities and state CSBG personnel; evidence of past audit problems; and tardiness by the state in submitting CSBG state plans to HHS or responses to information surveys conducted by the National Association of State Community Services Programs. HHS developed a CSBG state assessment tool to help states prepare for federal monitoring, and on August 24, 2007, issued a strategic plan for the CSBG program, which was intended to describe training, technical assistance, and capacity-building activities and promote accountability within the CSBG. As discussed in Appendix A of this report, HHS began funding the national community economic development training and capacity development initiative in FY2009. More recently, HHS issued an information memorandum on May 4, 2011, announcing a reorganization and new "strategy for excellence" in the CSBG training and technical assistance program for FY2011.
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Community Services Block Grants (CSBG) provide federal funds to states, territories, and tribes for distribution to local agencies to support a wide range of community-based activities to reduce poverty. These include activities to help families and individuals achieve self-sufficiency, find and retain meaningful employment, attain an adequate education, make better use of available income, obtain adequate housing, and achieve greater participation in community affairs. In addition, many local agencies receive federal funds from other sources and may administer other federal programs. Smaller related programs—Community Economic Development (CED), Rural Community Facilities (RCF), and Individual Development Accounts (IDAs)—also support antipoverty efforts. CSBG and some of these related activities trace their roots to the War on Poverty, launched more than 50 years ago in 1964. Today, they are administered at the federal level by the Department of Health and Human Services (HHS). Initial FY2018 funding for CSBG is provided by a series of continuing resolutions (CRs). As of the date of this report, the current CR funds most federal programs, including CSBG and related programs, at their FY2017 levels less an across-the-board rescission of 0.6791%, through February 8, 2018. In FY2017, CSBG and related activities were funded at a total level of $742 million through the FY2017 Consolidated Appropriations Act (P.L. 115-31). This was a reduction of nearly $30 million relative to FY2016 appropriations of $770 million, though that total was more than had been appropriated in each year from FY2012-FY2015. While the block grant was funded at the FY2016 level of $715 million, funding for CED was reduced by $10 million (from $30 million to $20 million) and funding for IDAs was eliminated for the first time since the program was created as a demonstration in 1998. Funding for RCF increased slightly to $7.5 million in FY2017, compared to $6.5 million in FY2016. Prior to enactment of the FY2018 continuing resolutions, the Administration's budget proposed to eliminate funding for CSBG, CED, and RCF, and would again have provided no funding for IDAs. Both the Senate and the House appropriations committees reported FY2018 funding bills that rejected the Administration's proposal. The House Appropriations Committee-reported bill to fund the Departments of Labor, Health and Human Services, and Education (LHHS, H.R. 3358) would provide $600 million for CSBG, $10 million for CED, $7.5 million for RCF, and no funding for IDAs. The LHHS bill approved by the Senate Appropriations Committee (S. 1771) would provide $700 million for CSBG, and maintain FY2017 funding levels for CED ($20 million) and RCF ($7.5 million). Neither the House nor the Senate committee-approved bills contain funding for IDAs. In addition, on August 16, 2017, the House passed H.R. 3354, a bill that incorporated multiple appropriations bills, as an omnibus appropriations act. However, the CR was enacted before action on H.R. 3354 was complete. Funding for CSBG and related activities in H.R. 3354 are the same as those in H.R. 3358. The Community Services Block Grant Act was last reauthorized in 1998 by P.L. 105-285. The authorization of appropriations for CSBG and most related programs expired in FY2003, but Congress has continued to make annual appropriations each year. Legislation was introduced in the 114th Congress—with bipartisan cosponsorship—to amend and reauthorize the CSBG Act through FY2023 (H.R. 1655). Similar legislation had been introduced in the 113th Congress (H.R. 3854). According to the most recent survey conducted by the National Association for State Community Services Programs, through a contract with HHS, the nationwide network of more than 1,000 CSBG grantees served 15.6 million people in 6.5 million low-income families in FY2015. States reported that the network spent $13.6 billion of federal, state, local, and private resources, including $637 million in federal CSBG funds.
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On November 26, 2007, U.S. President George W. Bush and Iraqi Prime Minister Nouri Kamel Al-Maliki signed a Declaration of Principles for a Long-Term Relationship of Cooperation and Friendship Between the Republic of Iraq and the United States of America. Pursuant to this Declaration, the parties pledged to "begin as soon as possible, with the aim to achieve, before July 31, 2008, agreements between the two governments with respect to the political, cultural, economic, and security spheres." Among other things, the Declaration proclaims the parties' intention to negotiate a security agreement To support the Iraqi government in training, equipping, and arming the Iraqi Security Forces so they can provide security and stability to all Iraqis; support the Iraqi government in contributing to the international fight against terrorism by confronting terrorists such as Al-Qaeda, its affiliates, other terrorist groups, as well as all other outlaw groups, such as criminal remnants of the former regime; and to provide security assurances to the Iraqi Government to deter any external aggression and to ensure the integrity of Iraq's territory. The New York Times reported in January 2008 that the Bush Administration has crafted a draft proposal for a U.S.-Iraq security agreement which would, if agreed upon by the parties, provide the United States with broad authority to conduct military operations in Iraq, guarantee U.S. military forces and contractors immunity from Iraqi law, and provide the United States with the power to detain Iraqi prisoners. The New York Times also reported that the draft proposal does not call for the establishment of permanent U.S. military bases in Iraq, authorize future troop levels in the country, or describe the specific security obligations of the United States should Iraq come under attack. During testimony before the Senate Committee on Armed Services on February 6, 2008, Secretary of Defense Robert M. Gates stated that the prospective security agreement would not obligate the United States to militarily defend Iraq in the event of a threat to Iraqi security. It is not clear whether the agreement(s) discussed in the Declaration will take the form of a treaty or some other type of international compact. However, in a November 26, 2007, press briefing regarding the Declaration, General Douglas Lute, Assistant to the President for Iraq and Afghanistan, stated that the Administration did not foresee a prospective agreement with Iraq having "the status of a formal treaty which would then bring us to formal negotiations or formal inputs from the Congress." According to a February 5, 2008, report by the Congressional Quarterly , the National Security Council offered to brief Congress on the nature of the prospective U.S.-Iraq security agreement. In a February 13, 2008, op-ed piece for the Washington Post , Secretary of Defense Gates and Secretary of State Condoleezza Rice claimed that the Administration "will work closely with the appropriate committees of Congress to keep lawmakers informed and to provide complete transparency. Classified briefings have already begun, and we look forward to congressional input." On March 4, 2008, during a joint hearing before the House Foreign Affairs Subcommittee on the Middle East and South Asia and the Subcommittee on International Organizations, Human Rights and Oversight, Ambassador David M. Satterfield, Senior Advisor to the Secretary and Coordinator for Iraq, testified that seven background briefings by senior administration officials had been held with Members of Congress concerning the prospective U.S.-Iraq agreement. Presently, the Administration intends to negotiate two separate security agreements with Iraq. The first agreement would constitute a legally binding Status of Forces Agreement (SOFA) to define the legal status of U.S. forces within Iraq. On April 10, 2008, Ambassador Satterfield testified during a hearing before the Senate Foreign Relations Committee regarding the similarities and differences between the proposed Iraq SOFA and the SOFAs that the United States has entered with other countries: This agreement is similar to the many [SOFAs]...we have across the world, which address such matters as jurisdiction over U.S. forces; the movement of vehicles, vessels, and aircraft; non-taxation of U.S. activities and the ability of U.S. forces to use host-government facilities. The SOFA is also unique in that it also takes into account the particular circumstances and requirements for our forces in Iraq, in particular, by providing for consent by the Government of Iraq to the conduct of military operations. Neither we nor the Iraqis intend for this to be a permanent provision of the SOFA. The second agreement, described as a "strategic framework agreement," would broadly address topics outlined in the Declaration of Principles. According to Ambassador Satterfield, the Administration does not at this stage contemplate it as a legally binding agreement.... Should that change in the course of the discussions, we will, of course, so inform the Congress and we'll take appropriate measures in accordance with our constitutional provisions. Regardless of the form any agreement may take, Congress has several tools by which to exercise oversight regarding the negotiation, form, conclusion, and implementation of the arrangement by the United States. This report begins by discussing the current legal framework governing U.S. military operations in Iraq. The report then provides a general background as to the types of international agreements that are binding upon the United States, as well as considerations affecting whether they take the form of a treaty or an executive agreement. Next, the report discusses historical precedents that security agreements have taken, with specific attention paid to past agreements entered with Afghanistan, Germany, Japan, South Korea, and the Philippines. The report then discusses the oversight role that Congress plays with respect to entering and implementing international agreements involving the United States. Finally, the report describes legislation proposed in the 110 th Congress to ensure congressional participation in the conclusion of a security agreement between the United States and Iraq. U.S. military operations in Iraq are congressionally authorized pursuant to H.J.Res. 114 ( P.L. 107-243 ), which authorizes the President to use the armed forces of the United States as he determines to be necessary and appropriate in order to - (1) defend the national security of the United States against the continuing threat posed by Iraq; and (2) enforce all relevant United Nations Security Council resolutions regarding Iraq. It also requires as a predicate for the exercise of that authority that the President determine that diplomatic efforts and other peaceful means will be inadequate to meet these goals and that the use of force against Iraq is consistent with the battle against terrorism. H.J.Res. 114 appears to incorporate any future resolutions concerning the continuing situation in Iraq that the Security Council may adopt, as well as those adopted prior to its enactment. The authority also appears to extend beyond compelling Iraq's disarmament to implementing the full range of concerns expressed in those U.N. resolutions, as well as for the broad purpose of defending "the national security of the United States against the continuing threat posed by Iraq." The United States and Great Britain, along with a number of other countries, invaded Iraq in March of 2003, asserting the authority to enforce compliance with earlier Security Council resolutions that addressed the situation in Iraq and Kuwait. Other Security Council members disagreed with this interpretation of the previous resolutions, denying that these resolutions contained a continuing authorization to use force against Iraq. Despite the initial lack of consensus regarding the legality of the invasion, the Security Council adopted subsequent resolutions recognizing the occupation of Iraq and generally supporting the coalition's plans for bringing about a democratic government in Iraq. The first of these, Resolution 1511 (October 16, 2003), recognized the Coalition Provisional Authority (CPA) and underscored the temporary nature of its obligations and authorities under international law, which it said would cease "when an internationally recognized, representative government established by the people of Iraq is sworn in and assumes the responsibilities of the [CPA]." (Para. 1). In paragraph 13, Resolution 1511 authorized a multinational force under unified command to take all necessary measures to contribute to the maintenance of security and stability in Iraq, including for the purpose of ensuring necessary conditions for the implementation of the timetable and programme [for establishing a permanent government in Iraq] as well as to contribute to the security of the United Nations Assistance Mission for Iraq, the Governing Council of Iraq and other institutions of the Iraqi interim administration, and key humanitarian and economic infrastructure. The Security Council included in Resolution 1511 a commitment to "review the requirements and mission of the multinational force ... not later than one year from the date of this resolution." It further established that "in any case the mandate of the force shall expire upon the completion of the [electoral process outlined previously]," at which time the Security Council would be ready "to consider ... any future need for the continuation of the multinational force, taking into account the views of an internationally recognized, representative government of Iraq." The Security Council resolutions do not provide for the immunity of coalition troops from Iraqi legal processes. No status of forces agreement (SOFA) was deemed possible prior to the recognition of a permanent government in Iraq. Immunity for coalition soldiers, contract workers, and other foreign personnel in Iraq in connection with security and reconstruction was established by order of the CPA, which relied for its authority on the laws and usages of war (as consistent with relevant Security Council resolutions). CPA Order 17, Status of the Coalition Provisional Authority, MNF - Iraq, Certain Missions and Personnel in Iraq, established that all personnel of the multinational force (MNF) and the CPA, and all International Consultants, are immune from Iraqi legal process, which are defined to include "arrest, detention or proceedings in Iraqi courts or other Iraqi bodies, whether criminal, civil, or administrative." Such persons are nevertheless expected to respect applicable Iraqi laws, but are subject to the exclusive jurisdiction of their "Sending States." States contributing personnel to the multinational force have the right to exercise within Iraq any criminal and disciplinary jurisdiction conferred on them by their domestic law over all persons subject to their military law. In June 2004, in anticipation of the dissolution of the CPA and handover of sovereignty to the Interim Government of Iraq, the Security Council adopted Resolution 1546, reaffirming the authorization for the multinational force in Resolution 1511 while noting that its presence in Iraq "is at the request of the incoming Interim Government of Iraq." The terms of the mandate for the MNF are expressed in paragraph 12, in which the Security Council Decides further that the mandate for the multinational force shall be reviewed at the request of the Government of Iraq or twelve months from the date of this resolution, and that this mandate shall expire upon the completion of the political process set out ... above, and declares that it will terminate this mandate earlier if requested by the Government of Iraq. Resolution 1546 incorporated letters from U.S. Secretary of State Colin Powell and Prime Minister of the Interim Government of Iraq Dr. Ayad Allawi. Secretary Powell wrote: In order to continue to contribute to security, the MNF must continue to function under a framework that affords the force and its personnel the status that they need to accomplish their mission, and in which the contributing states have responsibility for exercising jurisdiction over their personnel and which will ensure arrangements for, and use of assets by, the MNF. The existing framework governing these matters is sufficient for these purposes. In addition, the forces that make up the MNF are and will remain committed at all times to act consistently with their obligations under the law of armed conflict, including the Geneva Conventions. Prior to the handover of sovereignty to the interim government, Ambassador Bremer issued CPA Order 100 to revise existing CPA orders, chiefly by substituting the MNF-Iraq for the CPA and otherwise reflecting the new political situation. CPA Order 100 stated, as its purpose, to ensure that the Iraqi Interim Government and all subsequent Iraqi governments inherit full responsibility for these laws, regulations, orders, memoranda, instructions and directives so that their implementation after the transfer of full governing authority may reflect the expectations of the Iraqi people, as determined by a fully empowered and sovereign Iraqi Government. Under Article 26 of the Transitional Administrative Law of Iraq (TAL), "The laws, regulations, orders, and directives issued by the Coalition Provisional Authority pursuant to its authority under international law shall remain in force until rescinded or amended by legislation duly enacted and having the force of law." Accordingly, CPA Order 17 (as revised) survived the transfer of authority to the Iraqi Interim Government, which took no action to amend or rescind it. Iraq's permanent constitution was adopted in 2005. Article 130 of the permanent constitution continues the validity of existing laws, presumably including CPA Orders that were not rescinded by the Transitional Government. The U.N. Security Council extended the mandate for the multinational forces until December 31, 2006, and again until December 31, 2007, and finally, until December 31, 2008. Iraqi Prime Minister al-Maliki requested the Security Council extend the MNF mandate "one last time" until the end of December, 2008, "provided that the extension is subject to a commitment by the Security Council to end the mandate at an earlier date if the Government of Iraq so requests and that the mandate is subject to periodic review before June 2008." By its terms, CPA Order 17 remains in force for the duration of the U.N. mandate and terminates only after the departure of the final element of the MNF from Iraq, or at such time as it is rescinded or amended by duly enacted legislation having the force of law. Neither it nor CPA Order 100 establishes a timetable for the departure of all MNF elements from Iraq after the U.N. mandate ends. Order 17 could be interpreted effectively to expire concomitantly with the U.N. mandate, because it defines Multinational Force with reference to the U.N. resolutions. However, the order appears to have been designed to stay in force for a time after the expiration of the U.N. mandate, for a long enough period at least to allow the departure of all MNF personnel. If the U.N. Security Council or the Iraqi government adopts a timetable for the departure of the MNF, it seems logical that CPA Order 17 would continue in force until the deadline for departure passes. On the other hand, if the government of Iraq invites the United States or any other coalition government to maintain troops in Iraq after the U.N. mandate terminates, it may be expedient for the Iraqi government to continue to recognize CPA Order 17 until a new agreement establishing the role and status of such troops is reached. It bears emphasis that the foregoing is subject to the sole interpretation of the Iraqi government. Whether the immunity of coalition troops and other personnel will continue in force after the U.N. mandate expires depends on whether the Iraqi government deems them to be part of elements of the MNF that have not yet departed or military forces that have overstayed their mandate. It is not clear which branch of the Iraqi government would make that determination. Even more significantly, the Iraqi legislature could decide to repeal, amend, or possibly extend the order at any time, even before the U.N. mandate expires. Another question regarding the status and role of U.S. forces in Iraq post-U.N. mandate is whether the congressional authorization to use military force will also end. H.J.Res. 114 does not contain explicit time requirements or call for the withdrawal of U.S. troops by any specific date or set of criteria. Presumably, continued force is authorized under the resolution only so long as Iraq poses a continuing threat to the United States and the U.S. military presence is not inconsistent with relevant U.N. resolutions. Because the specific threats posed by Iraq during Saddam Hussein's regime that were emphasized in the preamble to H.J.Res 114 no longer exist (with the possible exception of the presence of al Qaeda in Iraq), it may be argued that Iraq no longer poses a danger to the security of the United States, at least, not of the same kind that led Congress to pass H.J.Res 114 in the first place. Once the U.N. mandate for the multinational forces in Iraq expires (and assuming that the U.N. Security Council does not adopt new language supporting a new U.S. military role in Iraq), it is arguable that the U.S. use of military force in Iraq is not necessary or appropriate to enforce U.N. Security Council resolutions regarding Iraq. A determination by the U.N. Security Council that the situation in Iraq no longer poses a threat to international peace and security compelling the exercise of its authority under Chapter VII of the U.N. Charter could also undermine the argument that Iraq continues to pose a threat to the United States. Such conclusions do not necessarily support a view that U.S. troops are automatically required to be withdrawn when the U.N. mandate expires, but suggest that new legislation may be necessary to support a new role for U.S. troops under a possible agreement with Iraq. The Administration has expressed its view that no new congressional authorization will be necessary to support U.S. combat operations in Iraq after the U.N. mandate ends. Under the U.S. system, a legally binding international agreement can be entered into pursuant to either a treaty or an executive agreement. The Constitution allocates primary responsibility for entering such agreements to the executive branch, but Congress also plays an essential role. First, in order for a treaty (but not an executive agreement) to become the "Law of the Land," the Senate must provide its advice and consent to treaty ratification by a two-thirds majority. Alternatively, Congress may authorize congressional-executive agreements. Many treaties and executive agreements are not "self-executing," meaning that in order for them to take effect domestically, implementing legislation is required to provide U.S. bodies with the authority necessary to enforce and comply with the agreements' provisions. While some executive agreements do not require congressional approval, adherence to them may nonetheless be dependent upon Congress appropriating necessary funds or authorizing the activities to be carried out (where compliance with the agreement would contravene some statutory provision). Under U.S. law, a treaty is an agreement negotiated and signed by the executive branch, which enters into force if it is approved by a two-thirds majority in the Senate and is subsequently ratified following Presidential signature. The Senate may, in considering a treaty, condition its consent on certain reservations, declarations and understandings concerning treaty application. If accepted, these reservations, declarations, and understandings may limit and/or define U.S. obligations under the treaty. The great majority of international agreements that the United States enters into are not treaties but executive agreements —agreements made by the executive branch that are not submitted to the Senate for its advice and consent. There are three types of prima facie legal executive agreements: (1) congressional-executive agreements , in which Congress has previously or retroactively authorized an international agreement entered into by the Executive; (2) executive agreements made pursuant to an earlier treaty , in which the agreement is authorized by a ratified treaty; and (3) sole executive agreements , in which an agreement is made pursuant to the President's constitutional authority without further congressional authorization. The Executive's authority to promulgate the agreement is different in each case. Although executive agreements are not specifically discussed in the Constitution, they nonetheless have been considered valid international compacts under Supreme Court jurisprudence and as a matter of historical practice. Starting in the World War II era, reliance on executive agreements has grown significantly. Whereas 27 executive agreements (compared to 60 treaties) were concluded by the United States during the first 50 years of the Republic, between 1939 and 2004 the United States concluded 15,522 executive agreements (compared to 1,035 treaties). Although some have argued that certain agreements may only be concluded as treaties, subject to the advice and consent of the Senate, this view has generally been rejected by scholarly opinion. Adjudication of the propriety of executive agreements has been rare, in significant part because plaintiffs often cannot demonstrate that they have suffered a redressable injury giving them standing to challenge an agreement, or fail to make a justiciable claim. In 2001, the Eleventh Circuit Court of Appeals held that the issue of whether the North American Free Trade Agreement (NAFTA) was a treaty requiring approval by two-thirds of the Senate presented a nonjusticiable political question. It does not appear that an executive agreement has ever been held invalid by the courts on the grounds that it was in contravention of the Treaty Clause. Nonetheless, as a matter of historical practice, some types of agreements have been concluded as treaties, while others have been concluded as executive agreements. In the case of congressional-executive agreements, the "constitutionality...seems well established." Unlike treaties, where only the Senate plays a role in authorization, both Houses of Congress are involved in the authorizing process for congressional-executive agreements. Congressional authorization takes the form of a statute passed by a majority of both Houses of Congress. Historically, congressional-executive agreements cover a wide variety of topics, ranging from postal conventions to bilateral trade to military assistance. NAFTA and the General Agreement on Tariffs and Trade (GATT) are notable examples of congressional-executive agreements. Congressional-executive agreements also may take different forms. Congress may enact legislation authorizing the Executive to negotiate and enter agreements with other countries on a specific matter. A congressional-executive agreement may also take the form of a statute passed following the negotiation of an agreement which incorporates the terms or requirements of the agreement into U.S. law. Such authorization may be either explicit or implied by the terms of the congressional enactment. The legitimacy of agreements made pursuant to treaties is also well established, though controversy occasionally arises as to whether the agreement was actually imputed by the treaty in question. Since the earlier treaty is the "Law of the Land," the power to enter into an agreement required or contemplated by the treaty lies fairly clearly within the President's executive function. However, the Senate occasionally conditions its approval of a treaty upon a requirement that any subsequent agreement made pursuant to the treaty also be submitted to the Senate as a treaty. Sole executive agreements rely on neither treaty nor congressional authority for their legal basis. There are a number of provisions in the Constitution that may confer limited authority upon the President to promulgate such agreements on the basis of his power to conduct foreign affairs. The Litvinov Assignment, under which the Soviet Union assigned to the United States its claims against American nationals, is an example of a sole executive agreement. If the President enters into an executive agreement pursuant to and dealing with an area where he has clear, exclusive constitutional authority—such as an agreement to recognize a particular State for diplomatic purposes—the agreement is legally permissible regardless of Congress's opinion on the matter. If, however, the President enters into an agreement and his constitutional authority over the subject matter is unclear, or if Congress also has constitutional authority over the subject matter, a reviewing court may consider Congress's position in determining whether the agreement is enforceable as U.S. law. If Congress has given implicit approval to the President to enter into the agreement, or is silent on the matter, it is more likely that the agreement will be deemed valid. When Congress opposes the agreement and the President's constitutional authority to enter the agreement is ambiguous, it is unclear if or under what circumstances a court would recognize such an agreement as controlling. Because sole executive agreements do not rely on treaty or congressional authority to support their legality, they do not require congressional approval to become binding, at least as a matter of international law. Courts have recognized, however, that if a sole executive agreement conflicts with pre-existing federal law, the earlier law will remain controlling in most circumstances. Even if a sole executive agreement does not conflict with prior federal law, Congress may still act to limit the agreement's effect through a subsequent legislative enactment, so long as it has constitutional authority to regulate the matter covered by the agreement. In the security context, Congress has clear constitutional authority to enact measures that would limit the effect of sole executive agreements involving military commitments. Article I, § 8 of the Constitution accords Congress the power "To lay and collect Taxes ... to ... pay the Debts and provide for the common Defence," "To raise and support Armies," "To provide and maintain a Navy," "To make Rules for the Government and Regulation of the land and naval Forces," and "To declare War, grant letters of Marque and Reprisal, and make Rules concerning Captures on Land and Water," as well as "To provide for calling forth the Militia to execute the Laws of the Union, suppress Insurrections and repel Invasions" and "To provide for organizing, arming, and disciplining, the Militia, and for governing such Part of them as may be employed in the Service of the United States." Further, Congress is empowered "To make all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers ..." as well as "all other Powers vested by this Constitution in the Government of the United States, or in any Department or Officer thereof." In addition to the constitutional provisions that provide Congress with authority to legislate on matters concerning military affairs, Congress also has virtual plenary power over appropriations—authority not qualified with reference to Congress's enumerated powers under Article I, § 8. The Appropriations Clause provides that "[n]o money can be paid out of the Treasury unless it has been appropriated by an act of Congress." Accordingly, adherence to pledges made in sole executive agreements may be dependent upon the availability of appropriations authorized by Congress. Congress may specify the terms and conditions under which appropriations may be used, so long as it does not impose unconstitutional conditions upon the use of appropriated funds. A recurring concern for the executive and legislative branches is whether an international commitment should be entered into as a treaty or an executive agreement. The Senate may prefer that significant international commitments be entered as treaties, and fear that reliance on executive agreements will lead to an erosion of the treaty power. The House may want an international compact to take the form of congressional-executive agreement, so that it may play a greater role in the consideration. In cases where congressional action is necessary for an agreement to be implemented, the Executive may prefer to submit an international compact as a congressional-executive agreement, so that approval of the agreement and necessary implementing legislation may be accomplished in a single step. The Executive's preference as to whether an international compact takes the form of a treaty or executive agreement may also be influenced by the agreement's prospects for approval by a two-thirds majority of the Senate or a simple majority of both Houses. State Department regulations prescribing the process for coordination and approval of international agreements (commonly known as the "Circular 175 procedure" ) include criteria for determining whether an international agreement should take the form of a treaty or an executive agreement. Congressional preference is one of several factors considered when determining the form that an international agreement should take. According to State Department regulations, In determining a question as to the procedure which should be followed for any particular international agreement, due consideration is given to the following factors: 1. The extent to which the agreement involves commitments or risks affecting the nation as a whole; 2. Whether the agreement is intended to affect state laws; 3. Whether the agreement can be given effect without the enactment of subsequent legislation by the Congress; 4. Past U.S. practice as to similar agreements; 5. The preference of the Congress as to a particular type of agreement; 6. The degree of formality desired for an agreement; 7. The proposed duration of the agreement, the need for prompt conclusion of an agreement, and the desirability of concluding a routine or short-term agreement; and 8. The general international practice as to similar agreements. In determining whether any international agreement should be brought into force as a treaty or as an international agreement other than a treaty, the utmost care is to be exercised to avoid any invasion or compromise of the constitutional powers of the President, the Senate, and the Congress as a whole. In 1978, the Senate passed a resolution expressing its sense that the President seek the advice of the Senate Committee on Foreign Relations in determining whether an international agreement should be submitted as a treaty. The State Department subsequently modified the Circular 175 procedure to provide for consultation with appropriate congressional leaders and committees concerning significant international agreements. Consultations are to be held "as appropriate." Congressional consultation on the substance and form of international agreements is discussed in more detail later in this report. The Bush Administration has characterized the proposed security arrangement with Iraq as being of a kind commonly entered by the United States, and has stated that "[t]he U.S. has security relationships with over 100 countries around the world, including recent agreements with nations such as Afghanistan and former Soviet bloc countries." Some U.S. security relationships take the form of legally binding treaties or executive agreements, whereas others involve non-binding assurances or pledges. Whereas some security agreements are publicly available, others remain classified. Though the Bush Administration and Maliki government have issued a Declaration of Principles setting the parameters for a future security arrangement between the United States and Iraq, it is not yet clear whether the arrangement will be governed by treaty, executive agreement, non-binding pledges, or some combination of the three. The following sections provide a general overview of the categories of security agreements entered into by the United States of a legally binding nature. Such categories of security agreements predominantly take the form of a treaty, while others typically take the form of an executive agreement. Although some categories of security agreements have historically been concluded as treaties and others as executive agreements, this does not necessarily mean that future arrangements must follow the same pattern. An arrangement that has typically been entered into as a treaty might instead be concluded as a congressional-executive agreement, and vice versa. Similarly, while some security arrangements have historically been entered as sole executive agreements, Congress might effectively limit such agreements in the future via statutory enactment —e.g., limiting the availability of appropriations to carry out commitments made in a sole executive agreement. The State Department currently lists the United States as being party to seven collective defense agreements, under which members are obligated to assist in the defense of a party to the agreement in the event of an attack upon it: the Inter-American Treaty of Reciprocal Assistance; the North Atlantic Treaty; the Australia, New Zealand, and United States Security Treaty; the Southeast Asian Treaty; and bilateral security treaties with Japan, the Philippines, and South Korea. All seven agreements take the form of treaties that were ratified by the United States between 1947 and 1960. It is important to note that each of these agreements, with the exception of the Inter-American Treaty of Reciprocal Assistance (the first to be ratified by the United States), includes a provision specifying that the agreement's requirements are to be carried out in accordance with the parties' respective constitutional processes. These provisions were included to assuage congressional concerns these agreements could be interpreted as sanctioning the President to engage in military hostilities in defense of treaty parties without further congressional authorization (i.e., a declaration of war or resolution authorizing the use of military force). In addition to these defense treaties, the United States has also adopted security commitments with respect to several former territories and possessions, including pursuant to congressional-executive agreement. Congress has approved compacts changing the status of certain territories to Freely Associated States (FAS), while also imposing upon the United States the "the obligation to defend the [FAS]...from attack or threats thereof as the United States and its citizens are defended." Arguably, these security commitments are distinct from other international defense arrangements, as they concern commitments to newly sovereign entities over whom the United States formerly exercised extensive and long-standing control. The United States also has established security arrangements with other countries in which the U.S. pledges to take some action in the event that the other country's security is threatened. In a 1992 report to Congress listing U.S. security commitments and arrangements, President George H.W. Bush claimed that unlike "security commitments," which oblige the United States to act in the common defense of a country in case of an armed attack, "security arrangements" generally oblige the United States to consult with a country in the event of a threat to its security. They may appear in legally binding agreements, such as treaties or executive agreements, or in political documents, such as policy declarations by the President, Secretary of State or Secretary of Defense. Most legally binding "security arrangements" listed in the President's report constituted sole executive agreements, including agreements with Israel, Egypt, Pakistan, and Liberia. Only one arrangement, committing the United States to the establishment of the Multinational Force and Observers in the Sinai, could clearly be described as a congressional-executive agreement. Although some scholars and government officials have characterized the terms "security commitment" and "security arrangement" as having distinct and particular meanings, this practice is by no means uniform. Indeed, the question of what constitutes a "security commitment" has long been a subject of dialogue and dispute by the executive and legislative branches. The United States is also a party to a significant number of defense agreements that do not obligate the United States to take action when another country is attacked, but nonetheless involve military affairs. Categories of such agreements include: military basing agreements, permitting the United States to build or use permanent facilities, station forces, and conduct certain military activities within a host country; access and pre-positioning agreements, permitting the stationing of equipment in a host country and the improvement and use of the country's military or civilian facilities, without establishing a permanent military presence; SOFAs, defining the legal status of U.S. forces within a host country and typically according them with certain privileges and immunities from the host country's jurisdiction; burden-sharing agreements, permitting a host country to assume some of the financial obligations incurred by the stationing of U.S. forces within its territory; and agreements providing for arms transfers, military training, and joint military exercises. Historically, almost all agreements have taken a form other than treaty. Sometimes these arrangements have been concluded as sole executive agreements; while others could be deemed executive agreements pursuant to treaty (e.g., military stationing agreements concluded with other NATO parties); while still others have been explicitly or implicitly authorized by statute and may be considered congressional-executive agreements. As a matter of historical practice, the types of agreements described above have not directly authorized the United States to engage in significant military operations in defense of the host country, though such agreements may supplement separate agreements or U.N. mandates that do. For example, although U.S. basing agreements with Germany, Japan, and South Korea do not expressly authorize the United States to use military force to defend those countries in case of attack, they assist the United States in fulfilling security commitments owed to those countries under separate defense treaties. Besides the categories of agreements described above, the United States has, on occasion, entered into long-term agreements that grant the United States the legal right to intervene militarily within the territory of another party to defend it against internal or external threats. Unlike collective defense agreements, these security agreements provide the United States with the right, but not the duty, to militarily intervene when the security of the other country is threatened. Such agreements may also be distinguished from the authority to intervene recognized under the United Nations Charter. Whereas military intervention agreements discussed below provide the United States with the positive legal right to intervene in a country, the U.N. Charter merely provides that its provisions do not " impair the inherent right of individual or collective self-defense if an armed attack occurs against a Member of the United Nations, until the Security Council has taken measures necessary to maintain international peace and security." In the early part of the 20 th Century, the United States entered into legal agreements with several Latin American countries under which the United States was granted the right to use military force either to defend those countries from external threat or to preserve domestic tranquility. All of these agreements were concluded as treaties. In 1903, following the Spanish-American War, the United States concluded a treaty with the newly independent Republic of Cuba under which the United States was expressly given "the right to intervene for the preservation of Cuban independence, the maintenance of a government adequate for the protection of life, property, and individual liberty." Similarly, in the aftermath of the U.S. invasion and occupation of Haiti in 1915, a treaty between the two countries was concluded that provided the United States with the right to intervene in Haiti when the United States deemed it necessary. In 1904, the United States ratified a treaty with Panama that provided the United States "the right, at all times and in its discretion" to employ its armed forces for the safety and protection of the Panama Canal and the shipping occurring therein. In 1907, the United States concluded a treaty with the Dominican Republic establishing plans for the financial rehabilitation of that country, and authorizing the United States to use military force necessary to effectuate the carrying out of those plans. There have been numerous instances where a country has permitted or invited the United States to use military force within its territory, but authority to intervene has not been given via treaty. When the Senate initially opted not to approve a treaty authorizing U.S. military and financial involvement in the Dominican Republic, President Theodore Roosevelt entered a temporary " modus vivendi " executive agreement adopting similar policies as the unapproved treaty. This agreement, which elicited significant opposition from many Members of Congress as an unconstitutional usurpation of the Senate's treaty power, was terminated following Senate approval of a modified version of the treaty in 1907. Another example of a significant security agreement taking a form other than treaty occurred in 1941 when, prior to the United States entering World War II, President Franklin D. Roosevelt concluded sole executive agreements concerning the stationing of U.S. troops in Iceland and Greenland to protect those territories from attack. Although publicly available agreements expressly granting the United States the legal right to intervene militarily in another country have generally taken the form of a treaty, this report does not discuss whether any classified agreements have taken another form. While many security arrangements take the form of a treaty or executive agreement and are intended to impose legal obligations upon the parties, others do not. Some security arrangements are not intended to have legally binding force, though they may nonetheless carry significant political or moral weight. While executive practice of extending political defense commitments to foreign countries can be traced back to the Monroe Doctrine, pledges to assist foreign States in security matters have become more commonplace in the post-World War II era. Such commitments may take several forms, including a unilateral pledge or policy statement by the Executive or a joint declaration between U.S. and foreign officials. For example, bilateral arrangements authorizing U.S. military intervention, when not concluded as treaties, generally have not taken the form of a legally binding, permanent agreement. Instead, in non-treaty arrangements authorizing U.S. intervention, the host country generally appears to retain full discretion as to the degree and duration of U.S. presence within its territory. In 1962, for instance, U.S. Secretary of State Dean Rusk and Thai Foreign Minister Thanat Khoman issued a joint declaration in which Secretary Rusk expressed "the firm intention of the United States to aid Thailand, its ally and historic friend, in resisting Communist aggression and subversion." The United States thereafter deployed armed forces to Thailand to assist the government in combating communist forces. The Executive's authority to enter such arrangements, and, more broadly, to engage in military operations in other countries without congressional approval has been the subject of long-standing dispute between the Congress and the Executive. In 1969, the Senate passed the National Commitments Resolution, stating the sense of the Senate that "a national commitment by the United States results only from affirmative action taken by the executive and legislative branches of the United States government by means of a treaty [or legislative enactment] ... specifically providing for such commitment." The Resolution defined a "national commitment" as including "the use of the armed forces of the United States on foreign territory, or a promise to assist a foreign country ... by the use of armed forces ... either immediately or upon the happening of certain events." According to the committee report accompanying the Resolution, the motivation for the Resolution was concern over the growing development of "constitutional imbalance" in matters of foreign relations, with Presidents frequently making significant foreign commitments on behalf of the United States without congressional action. Among other things, the report criticized a practice it described as "commitment by accretion," by which a sense of binding commitment arises out of a series of executive declarations, no one of which in itself would be thought of as constituting a binding obligation. Simply repeating something often enough with regard to our relations with some particular country, we come to support that our honor is involved in an engagement no less solemn than a duly ratified treaty. The National Commitments Resolution took the form of a sense of the Senate resolution, and accordingly had no legal effect. Although Congress has occasionally considered legislation that would bar the adoption of significant military commitments without congressional action, no such measure has been enacted. The executive branch regularly makes unilateral security pledges or enters non-binding arrangements with foreign countries concerning security matters. The primary means Congress uses to exercise oversight authority over such non-binding arrangements is its appropriations power, by which it may limit or condition actions the United States may take in furtherance of the arrangement. The following sections discuss in greater detail the form, nature, and content of bilateral security agreements made by the United States with Afghanistan, Germany, Japan, South Korea, and the Philippines. The Foreign Assistance Act of 1961 is "an act to promote the foreign policy, security, and general welfare of the United States by assisting peoples of the world in their efforts toward economic development and internal and external security , and for other purposes." Part I of the act, addressing international development, established policy "to make assistance available, upon request, under this part in scope and on a basis of long-range continuity essential to the creation of an environment in which the energies of the peoples of the world can be devoted to constructive purposes, free of pressure and erosion by the adversaries of freedom." Part II of the act, addressing international peace and security, authorizes "measures in the common defense against internal and external aggression, including the furnishing of military assistance, upon request, to friendly countries and international organizations." The act authorizes the President "to furnish military assistance on such terms and conditions as he may determine, to any friendly country or international organization, the assisting of which the President finds will strengthen the security of the United States and promote world peace and which is otherwise eligible to receive such assistance ..." The authorization to provide defense articles and services, noncombatant personnel, and the transfer of funds is codified at 22 U.S.C. § 2311. While this authorization permits the President to provide military assistance, it limits it to "assigning or detailing members of the Armed Forces of the United States and other personnel of the Department of Defense to perform duties of a noncombatant nature ." In 2002, the United States and Afghanistan, by an exchange of notes, entered into an agreement regarding economic grants under the Foreign Assistance Act of 1961, as amended, and for the furnishing of defense articles, defense services and related training, including pursuant to the United States International Military and Education Training Program (IMET), from the United States to the Afghanistan Interim Administration. An agreement exists regarding the status of U.S. military and civilian personnel of the U.S. Department of Defense present in Afghanistan in connection with cooperative efforts in response to terrorism, humanitarian and civic assistance, military training and exercises, and other activities. Such personnel are to be accorded "a status equivalent to that accorded to the administrative and technical staff" of the U.S. Embassy under the Vienna Convention on Diplomatic Relations of 1961. Accordingly, U.S. personnel are immune from criminal prosecution by Afghan authorities, and are immune from civil and administrative jurisdiction except with respect to acts performed outside the course of their duties. In the agreement, the Islamic Transitional Government of Afghanistan explicitly authorized the U.S. government to exercise criminal jurisdiction over U.S. personnel, and the government of Afghanistan is not permitted to surrender U.S. personnel to the custody of another state, international tribunal, or any other entity without consent of the U.S. government. The agreement does not appear to provide immunity for contract personnel. The agreement with Afghanistan does not expressly authorize the United States to carry out military operations within Afghanistan, but it recognizes that such operations are "ongoing." Congress authorized the use of military force there (and elsewhere) by joint resolution in 2001, for targeting "those nations, organizations, or persons [who] planned, authorized, committed, or aided the terrorist attacks that occurred on September 11, 2001...." The U.N. Security Council implicitly recognized that the use of force was appropriate in response to the September 11, 2001, terrorist attacks, and subsequently authorized the deployment of an International Security Assistance Force (ISAF) to Afghanistan. Later U.N. Security Council resolutions provide a continuing mandate for the ISAF (NATO peacekeeping force), calling upon it to "work in close consultation with" Operation Enduring Freedom (OEF—the U.S.-led coalition conducting military operations in Afghanistan) in carrying out the mandate. While there is no explicit U.N. mandate authorizing the OEF, Security Council resolutions appear to provide ample recognition of the legitimacy of its operations, most recently by calling upon the Afghan Government, "with the assistance of the international community, including the International Security Assistance Force and Operation Enduring Freedom coalition, in accordance with their respective designated responsibilities as they evolve, to continue to address the threat to the security and stability of Afghanistan posed by the Taliban, Al-Qaida, other extremist groups and criminal activities...." The United States and Afghanistan entered an acquisition and cross-servicing agreement, with annexes, in 2004. An acquisition and cross-servicing agreement (ACSA) is an agreement providing logistic support, supplies, and services to foreign militaries on a cash-reimbursement, replacement-in-kind, or exchange of equal value basis. After consultation with the Secretary of State, the Secretary of Defense is authorized to enter into an ACSA with a government of a NATO country, a subsidiary body of NATO, or the United Nations Organization or any regional international organization of which the United States is a member. Additionally, the Secretary of Defense may enter into an ACSA with a country not included in the above categories, if after consultation with the Secretary of State, a determination is made that it is in the best interests of the national security of the United States. If the country is not a member of NATO, the Secretary of Defense must submit notice, at least 30 days prior to designation, to the Committee on Armed Services and the Committee on Foreign Relations of the Senate and the Committee on Armed Services and the Committee on International Relations of the House of Representatives. On May 23, 2005, President Hamid Karzai and President Bush issued a "joint declaration" outlining a prospective future agreement between the two countries. It envisions a role for U.S. military troops in Afghanistan to "help organize, train, equip, and sustain Afghan security forces" until Afghanistan has developed its own capacity, and to "consult with respect to taking appropriate measures in the event that Afghanistan perceives that its territorial integrity, independence, or security is threatened or at risk." The declaration does not mention the status of U.S. forces in Afghanistan, but a status of forces agreement can be expected to be part of the final arrangement. In 1951, the United States and Germany entered into an agreement related to the assurances required under the Mutual Security Act of 1951. This act is "an act to maintain the security and promote the foreign policy and provide for the general welfare of the United States by furnishing [material] assistance to friendly nations in the interest of international peace and security." Specifically, the agreement references the "statement of purpose contained in Section 2 of the Mutual Security Act of 1951, and reaffirms that....it [Germany] is firmly committed to join in promoting international understanding and good will and in maintaining world peace and to take such action as may be mutually agreed upon to eliminate causes of international tension." The statement of purpose in Section 2 of the act is to maintain the security and to promote the foreign policy of the United States by authorizing military, economic, and technical assistance to friendly countries to strengthen the mutual security and individual and collective defense of the free world, to develop their resources in the interest of their security and independence and the national interest of the United States and to facilitate the effective participation of those countries in the United Nations system for collective security. In 1955, the United States and Germany, both parties to the North Atlantic Treaty, entered into an agreement on mutual defense assistance, obligating the United States to provide for "such equipment, materials, services, or other assistance as may be agreed" to Germany. The agreement reflected the desire to foster international peace and security through measures which further the ability of nations dedicated to the purposes and principles of the Charter of the United Nations to participate effectively in arrangements for collective self-defense in support of those purposes and principles, and conscious of the determination to give their full cooperation to United Nations collective security arrangements and measures and efforts to obtain agreement on universal regulation of armaments under adequate guarantees against violation or evasion; [and] considering the support which the Government of the United States of America has brought to these principles by enacting the Mutual Security Act of 1954, which authorizes the furnishing of military assistance to certain nations[.] Germany guarantees that it "will not use such assistance for any act inconsistent with the strictly defensive character of the North Atlantic Treaty, or, without the prior consent of the [United States], for any other purpose. The mutual defense assistance agreement is the basis for numerous subsequent agreements between the United States and Germany. In 1959, the countries entered into an agreement implementing the NATO SOFA of 1953. The agreement provided additional supplemental agreements, beyond those contained in the NATO SOFA, specific to the relationship between the United States and Germany. In 1954, the United States and Japan entered into a mutual defense assistance agreement with annexes. The agreement was amended on April 18 and June 23, 2006. The agreement references the Treaty of Peace signed between the countries in San Francisco, California in 1951. The Mutual Defense Assistance Act of 1949 and the Mutual Security Act of 1951 are also referenced in the agreement as they provide for the furnishing of defense assistance by the United States. The agreement provides that the United States and Japan "will make available to the other and to such other governments as the two Governments signatory to the present Agreement may in each case agree upon, such equipment, materials, services, or other assistance as the Government furnishing such assistance may authorize" subject to the conditions and provisions of the Mutual Defense Assistance Act of 1949, the Mutual Security Act of 1951, and appropriation acts which may affect the furnishing of assistance. The countries, in 1960, entered into the Treaty of Mutual Cooperation and Security Between the United States of America and Japan. The treaty was amended on December 26, 1990. Article III of the Treaty provides that the countries, "individually and in cooperation with each other, by means of continuous and effective self-help and mutual aid will maintain and develop, subject to their constitutional provisions, their capacities to resist armed attack. Article V provides that the countries recognize "that an armed attack against either party in the territories under the administration of Japan would be dangerous to its own peace and safety and declares that it would act to meet the common danger in accordance with its constitutional provisions and processes." Under Article VI of the Treaty, the United States is granted "the use by its land, air and naval forces of facilities and areas in Japan" in order to contribute "to the security of Japan and maintenance of international peace and security in the Far East[.]" Article VI provides further that the use of facilities and the status of U.S. armed forces will be governed under a separate agreement. The countries, under Article VI of the Treaty of Mutual Cooperation and Security Between the United States of America and Japan, entered into a SOFA in 1960. The SOFA addresses the use of facilities by the U.S. armed forces, as well as the status of U.S. forces in Japan. The agreement has been modified at least four times since the original agreement. In 1948, the United States and South Korea entered into an agreement related to the transfer of authority to the Government of South Korea and the withdrawal of U.S. occupation forces. Shortly after the initial agreement, the United States and Korea entered into a second agreement concerning interim military and security matters during a transitional period. This executive agreement was between the President of the Republic of Korea and the Commanding General, U.S. Army Forces in Korea. The agreement calls for the "Commanding General, United States Army Forces in Korea, pursuant to directives from his government and within his capabilities" to "organize, train and equip the Security forces of the Republic of Korea" with the obligation to train and equip ceasing "upon the completion of withdrawal from Korea of forces under his command." The agreement also requires the Commanding General, U.S. Army Forces in Korea, to retain authority to exercise over-all operational control of security forces of Korea until withdrawal, as contemplated by Resolution No. II passed by the United Nations General Assembly on November 14, 1948. Article III of the Agreement contains provisions related to the status of U.S. forces during the transition period. The Commanding General, U.S. Army Forces in Korea, "shall retain exclusive jurisdiction over the personnel of his command, both military and civilian, including their dependents, whose conduct as individuals shall be in keeping with pertinent laws of the Republic of Korea." The agreement provides that any individuals under the jurisdiction of the Commanding General who is apprehended by law enforcement agencies of South Korea shall be immediately turned over to the custody and control of the Commanding General; individuals not under jurisdiction of the Commanding General, but apprehended in acts detrimental to the security of personnel or property under his jurisdiction, shall be turned over to the custody and control of the government of South Korea. The countries, in 1950, entered into a mutual defense assistance agreement. The mutual defense agreement references the Military Defense Act of 1949, which provides for the furnishing of military assistance by the United States to South Korea. The mutual defense assistance agreement provides that each country "will make or continue to make available to the other, and to other Governments, such equipment, materials, services, or other military assistance" in support of economic recovery that is essential to international peace and security. The United States and South Korea entered into a mutual security agreement in 1952. The mutual security agreement references the Mutual Security Act of 1951, which provides for military, economic, and technical assistance in order to strengthen the mutual security of the free world. The mutual security agreement provides that South Korea agrees to promote international understanding and good will and to take action, that is mutually agreed upon, to eliminate causes of international tensions. In 1954 the countries entered into a mutual defense treaty. As part of the treaty the countries agree to attempt to settle international disputes peacefully, consult whenever the political independence or security of either party is threatened by external armed attack, and that either party would act to meet the common danger in accordance with their respective constitutional processes. Article IV of the treaty grants the United States "the right to dispose....land, air and sea forces in and about the territory" of South Korea. Pursuant to the treaty, specifically Article IV, the countries entered into a SOFA with agreed minutes and an exchange of notes in 1966; it was subsequently amended January 18, 2001. In 1947 the United States and the Republic of the Philippines entered into an agreement on military assistance. The agreement was for a term of five years, starting July 4, 1946, and provided that the United States would furnish military assistance to the Philippines for the training and development of armed forces. The agreement further created an advisory group to provide advice and assistance to the Philippines as had been authorized by the U.S. Congress. The agreement was extended, and amended, for an additional five years in 1953. A mutual defense treaty was entered into by the United States and the Philippines in 1951. The treaty publicly declares "their sense of unity and their common determination to defend themselves against external armed attack, so that no potential aggressor could be under the illusion that either of them stands alone in the Pacific Area[.]" The Treaty does not address or provide for a SOFA. The countries entered into a mutual security agreement in 1952, as related to the assurances required by the Mutual Security Act of 1951. The assurances required under the Mutual Security Act of 1951 included a commitment to accounting procedures for monies, equipment and materials furnished by the United States to the Philippines. In 1993, the countries entered into a SOFA. The agreement was subsequently extended on September 19, 1994; April 28, 1995; and November 29, December 1, and December 8, 1995. The countries entered into an agreement regarding the treatment of U.S. armed forces visiting the Philippines in 1998. This agreement was amended on April 11 and 12, 2006. The distinction between this agreement and the SOFA originally entered into in 1993 is that this agreement applies to U.S. armed forces visiting, not stationed in the Philippines. The countries also entered into an agreement regarding the treatment of Republic of Philippines personnel visiting the United States. While it appears that a prospective U.S.-Iraqi security arrangement will impose legal obligations upon the parties, it is not yet clear whether the agreement(s) will be in the form of a treaty or executive agreement. Nonetheless, Congress has several tools at its disposal to exercise oversight regarding the negotiation, conclusion, and implementation of any such agreement. One manner in which Congress exercises oversight of international agreements is via notification requirements. Obviously, in cases where an agreement requires action from one or both Houses of Congress to take effect, notification is a requisite. Before a treaty may become binding U.S. law, the President must submit it to the Senate for its advice and consent. Likewise, the Executive needs to inform Congress when it seeks to conclude an executive agreement that requires congressional authorization and/or implementing legislation to become U.S. law, so that appropriate legislation may be enacted. While constitutional considerations necessitate congressional notification in many circumstances, it has historically been more difficult for Congress to keep informed regarding international agreements or pledges made by the Executive that did not require additional legislative action to take effect—i.e., sole executive agreements and executive agreements made pursuant to a treaty. Additionally, even in cases where congressional action is necessary for an agreement to take effect, the Executive has sometimes opted not to inform Congress about an agreement until it has already been drafted and signed by the parties. In response to these concerns, Congress has enacted legislation and the State Department has implemented regulations to ensure that Congress is informed of the conclusion (and in some cases, the negotiation) of legally binding international agreements. The Case-Zablocki Act was enacted in 1972 in response to congressional concern that a number of secret agreements had been entered by the Executive imposing significant commitments upon the United States. It is the primary statutory mechanism used to ensure that Congress is informed of international agreements entered by the United States. Pursuant to the act, all executive agreements are required to be transmitted to Congress within 60 days of their entry into force . If the President deems the immediate public disclosure of an agreement to be prejudicial to national security, the agreement may instead be transmitted to the House Committee on Foreign Affairs and the Senate Committee on Foreign Relations. The President is also required to annually submit a report regarding international agreements that were transmitted after the expiration of the 60-day period, describing the reasons for the delay. Although the Case-Zablocki Act originally only imposed reporting requirements with respect to executive agreements that had entered into force , the act was amended in 2004 to ensure that Congress was regularly notified regarding the status of proposed agreements, as well. The Secretary of State is required to annually report to Congress a list of executive agreements that have not yet entered into force, which (1) have not been published in the United States Treaties and Other International Agreements compilation and (2) the United States has "signed, proclaimed, or with reference to which any other final formality has been executed, or that has been extended or otherwise modified, during the preceding calendar year." The Case-Zablocki Act does not define what sort of arrangements constitute "international agreements" falling under its purview, though the legislative history suggests that Congress "did not want to be inundated with trivia...[but wished] to have transmitted all agreements of any significance." In its implementing regulations, the State Department has established criteria for determining whether an arrangement constitutes a legally binding "international agreement" requiring congressional notification. These include the identity of the parties, and whether they intended to create a legally binding agreement; the significance of the agreed-upon arrangement, with "[m]inor or trivial undertakings, even if couched in legal language and form," not considered to fall under the purview of the Case-Zablocki Act; the specificity of the arrangement; the necessity that the arrangement constitute an agreement by two or more parties; and the form of the arrangement, to the extent that it helps to determine whether the parties intended to enter a legally binding agreement. The State Department's Circular 175 procedure also contemplates that Congress will be notified of developments in the negotiation of "significant" international agreements. Specifically, Department regulations provide that With the advice and assistance of the Assistant Secretary for Legislative Affairs, the appropriate congressional leaders and committees are advised of the intention to negotiate significant new international agreements, consulted concerning such agreements, and kept informed of developments affecting them, including especially whether any legislation is considered necessary or desirable for the implementation of the new treaty or agreement. As stated earlier, Bush Administration officials have stated that Administration "will work closely with the appropriate committees of Congress to keep lawmakers informed" about the prospective U.S.-Iraq agreement, and classified briefings on the agreement have also begun. In addition to the Case-Zablocki Act, Congress has enacted legislation designed to ensure that it remains informed about existing U.S. security arrangements. Section 1457 of the National Defense Authorization Act for FY1991 ( P.L. 101-510 ) requires the President to submit an annual report to specified congressional committees regarding "United States security arrangements with, and commitments to, other nations." The report, produced in classified and unclassified form, is to be submitted by February 1 each year to the Committee on Armed Services and the Committee on Foreign Relations of the Senate, and the Committee on Armed Services and the Committee on Foreign Affairs of the House of Representatives. In addition to legally binding security arrangements or commitments (e.g., mutual defense treaties and pre-positioning agreements), the report must describe non-binding commitments, such as expressed U.S. policy formulated by the executive branch. The report must also include, among other things, "[a]n assessment of the need to continue, modify, or discontinue each of those arrangements and commitments in view of the changing international security situation." Although reports were submitted to the appropriate committees pursuant to this statutory requirement in 1991 and 1992, CRS has been unable to determine whether any subsequent reports have been issued. In January 2008, CRS made an inquiry to the document officers and clerks of several of the designated committees, but they have been unable to find a record of any subsequent report being received. The Federal Reports Elimination and Sunset Act of 1995 (Sunset Act, P.L. 104-66 ) terminated most reporting requirements existing prior to its enactment. The act eliminated or modified several specific reporting requirements, and also generally terminated any reporting requirement that had been listed in House Doc. 103-7, unless such a requirement was specifically exempted. However, the reporting requirement contained in § 1457 of the FY1991 National Defense Authorization Act was neither specifically terminated by the Sunset Act nor listed in House Doc. 103-7. Accordingly, it does not appear that this requirement has been terminated. State Department regulations requiring consultation with Congress regarding significant international agreements may provide a means for congressional oversight as to the negotiation of a security arrangement with Iraq. One of the stated objectives of the Circular 175 procedure is to ensure that "timely and appropriate consultation is had with congressional leaders and committees on treaties and other international agreements." To that end, State Department regulations contemplate congressional consultation regarding the conduct of negotiations to secure significant international agreements. Although these regulations do not define what constitutes a "significant" agreement, it seems reasonable to assume that the prospective U.S.-Iraqi security arrangement would constitute such a compact, as the agreement would (at least as envisioned in the U.S.-Iraqi Declaration of Principles) commit the United States to provide security assurances to Iraq, arm and train Iraqi security forces, and confront Al Qaeda and other terrorist entities within Iraqi territory. Such an agreement appears to call for a more significant commitment of U.S. resources than is required under most international agreements to which the United States is a party. Circular 175 procedures may also provide for congressional consultation concerning the form that a legally binding international agreement should take. When there is question as to whether an international agreement should be concluded as a treaty or an executive agreement, the matter is first brought to the attention of the State Department's Legal Adviser for Treaty Affairs. If the Assistant Legal Adviser for Treaty Affairs believes the issue to be "a serious one that may warrant formal congressional consultation," consultations are to be held with appropriate congressional leaders and committees. State Department regulations specify that "Every practicable effort will be made to identify such questions at the earliest possible date so that consultations may be completed in sufficient time to avoid last minute consideration." Perhaps the clearest example of congressional oversight in the agreement-making context is through its consideration of treaties and congressional-executive agreements. For a treaty to become binding U.S. law, it must first be approved by a two-thirds majority in the Senate. The Senate may, in considering a treaty, condition its consent on certain reservations, declarations and understandings concerning treaty application. For example, it may make its acceptance contingent upon the treaty being interpreted as requiring implementing legislation to take effect, or condition approval on an amended version of the treaty being accepted by other treaty parties. If accepted, these reservations, declarations, and understandings may limit and/or define U.S. obligations under the treaty. As previously discussed, a congressional-executive agreement requires congressional authorization via a statute passed by both Houses of Congress. Here, too, approval may be conditional. Congress may opt to authorize only certain types of agreements, or may choose to approve only some provisions of a particular agreement. In authorizing an agreement, Congress may impose additional statutory requirements upon the Executive (e.g., reporting requirements). Congress may also include a statutory deadline for its authorization of an agreement to begin or expire. Because sole executive agreements do not require congressional authorization to take effect, they need not be approved by Congress to become binding, at least as a matter of international law. Nonetheless, as discussed earlier, Congress may limit a sole executive agreement through a subsequent legislative enactment or through the conditioning of appropriations necessary for the agreement's commitment to be implemented. Similar measures could also be taken to limit or condition U.S. adherence to a non-binding security arrangement. Congress may exercise oversight of international agreements via legislation implementing the agreements' requirements. Certain international treaties or executive agreements are considered "self-executing," meaning that they have the force of law without the need for subsequent congressional action. However, many other treaties and agreements are not considered self-executing, and are understood to require implementing legislation to take effect, as enforcing U.S. agencies otherwise lack authority to conduct the actions required to ensure compliance with the international agreement. Treaties and executive agreements have, in part or in whole, been found to be non-self-executing for at least three reasons: (1) implementing legislation is constitutionally required; (2) the Senate, in giving consent to a treaty, or Congress, by resolution, requires implementing legislation for the agreement to be given force; or (3) the agreement manifests an intention that it shall not become effective as domestic law without the enactment of implementing legislation. Until implementing legislation is enacted, existing domestic law concerning a matter covered by an international agreement that is not self-executing remains unchanged and is controlling law in the United States. However, when a treaty is ratified or an executive agreement is entered, the United States acquires obligations under international law and may be in default of those obligations unless implementing legislation is enacted. Perhaps for this reason, Congress typically appropriates funds necessary to carry out U.S. obligations under international agreements. Although it is unclear what form the U.S.-Iraqi security agreement will take, it is possible that at least some provisions will require implementing legislation. The Department of Defense Appropriations Act FY2008 ( P.L. 110-116 ), the Consolidated Appropriations Act FY2008 ( P.L. 110-161 ), and the National Defense Authorization Act FY2008 ( P.L. 110-181 ), for example, barred funds from being used to establish permanent military bases in Iraq. The Consolidated Appropriations Act also includes a measure intended to prevent the United States from entering an agreement with Iraq that would make members of the U.S. Armed Forces subject to punishment under Iraqi law. After an international agreement has taken effect, Congress may still exercise oversight over executive implementation. It may require the Executive to submit information to Congress or congressional committees regarding U.S. implementation of its international commitments. It may enact new legislation that modifies or repudiates U.S. adherence or implementation of an international agreement. It may limit or prohibit appropriations necessary for the Executive to implement the provisions of the agreement, or condition such appropriations upon the Executive implementing the agreement in a particular manner. Legislation has been introduced in the 110 th Congress to ensure congressional participation in the entering of any agreement emerging from the Declaration of Principles between the United States and Iraq—including an engrossed amendment to H.R. 2642 , the Supplemental Appropriations Act, 2008, which passed the House on May 15, 2008; S. 2426 , the Congressional Oversight of Iraq Agreements Act of 2007, introduced by Senate Majority Leader Harry Reid on behalf of Senator Hillary Clinton on December 6, 2007; H.R. 4959 , Iraq Strategic Agreement Review Act of 2008, introduced by Representative Rosa DeLauro on January 15, 2008; H.R. 5128 , introduced by Representative Barbara Lee on January 23, 2007, and H.R. 5626 , the Protect Our Troops and Our Constitution Act of 2008, introduced by Representative William Delahunt on March 13, 2008. All of these legislative proposals would bar funds from being made available or appropriated to implement certain types of formal agreements emerging from the U.S.-Iraq Declaration of Principles. S. 2426 would deny funds to implement any U.S.-Iraq agreement involving "commitments or risks affecting the nation as a whole," including a SOFA agreement, unless the agreement was approved by the Senate as a treaty or by Congress through legislation. H.R. 4959 , in contrast, would condition appropriations to implement any agreement emerging from the Declaration of Principles upon that agreement being approved as a treaty by the Senate, while H.R. 5128 would condition appropriations for the implementation of such an agreement upon it being approved by an act of Congress. H.R. 5626 would bar appropriations from being used to implement any security agreement emerging from the Declaration of Principles, including any agreement giving the United States "authority to fight" other than for self-defense purposes, unless the agreement is approved as a treaty or an Act of Congress enacted after the date of enactment for H.R. 5626. The House-passed engrossed amendment to H.R. 2642 would condition appropriations from being used to negotiate, enter into, or implement any agreement with Iraq containing security assurances for mutual defense (which is defined to include a binding commitment to defend Iraq, or specifications regarding the nature or duration of the U.S. mission in Iraq or the number of U.S. troops stationed there), unless the agreement takes the form of a treaty or is approved by an Act of Congress. Some of these legislative proposals may raise constitutional questions. For example, H.R. 5128 includes a provision stating that an agreement between the United States and Iraq must be approved by an act of Congress in order to have legal effect. This provision may raise serious legal concerns given the Constitution's specification that treaties approved by the Senate have status as the "Law of the Land." H.R. 4959 and S. 2426 include provisions expressing the sense of Congress that a prospective U.S.-Iraq agreement should take a particular form in order to have legal effect, but these provisions appear to raise less significant constitutional concerns given their non-binding nature. The House-passed engrossed amendment to H.R. 2642 may also raise constitutional concerns to the extent that it would effectively bar the Executive from negotiating (as opposed to implementing) certain types of international agreements. With respect to consultation, H.R. 4959 includes a provision requiring that specified members of the executive branch consult with congressional committees and leadership on any potential long-term security, economic, or political agreement between the United States and Iraq. S. 2426 does not include a consultation requirement, but instead requires the Legal Adviser to the Secretary of State to submit a report to Congress justifying any decision by the Executive not to consult with Congress before concluding a security arrangement with Iraq in the form of a sole executive agreement. H.R. 5626 includes a provision stating that it is the sense of Congress that the Administration should consult fully with Congress, the Iraqi government, Coalition partners, and Iraq's neighbors in determining U.S. policy towards Iraq. In a May 22, 2008, statement concerning administration policy, the White House claimed that The Administration strongly opposes any [legislation] that would attempt to determine the legal effect or content of diplomatic agreements with Iraq before they are negotiated. In that regard, the Administration opposes any attempt to change long-standing legal traditions governing whether certain types of agreements may be concluded as executive agreements rather than as ratified treaties. Similarly, the Administration opposes any [legislation] that would establish a statutory policy that a Status of Forces Agreement (SOFA) between the U.S. and Iraq must include measures requiring the Iraqi Government to provide financial or other types of support for U.S. Armed Forces stationed in Iraq. Under the Constitution, the President has the discretion to initiate and conduct diplomatic negotiations. Congress cannot by statute establish the policy of the United States with regard to such negotiations in advance. Indeed, in this case, such a policy would threaten the ability of the United States to engage in dynamic talks with the Government of Iraq and would risk the timely completion of the status of forces agreement prior to the anticipated expiration of United Nations Security Council Resolution 1790. Accordingly, legislation attempting to limit the scope or effect of a U.S.-Iraq security agreement could be subject to veto.
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On November 26, 2007, U.S. President George W. Bush and Iraqi Prime Minister Nouri Kamel Al-Maliki signed a Declaration of Principles for a Long-Term Relationship of Cooperation and Friendship Between the Republic of Iraq and the United States of America. Pursuant to this Declaration, the parties pledged to "begin as soon as possible, with the aim to achieve, before July 31, 2008, agreements between the two governments with respect to the political, cultural, economic, and security spheres." Among other things, the Declaration proclaims the parties' intention to enter an agreement that would commit the United States to provide security assurances to Iraq, arm and train Iraqi security forces, and confront Al Qaeda and other terrorist entities within Iraqi territory. Officials in the Bush Administration have subsequently stated that the agreement will not commit the United States to militarily defend Iraq. The nature and form of such a U.S.-Iraq security agreement has been a source of congressional interest, in part because of statements by General Douglas Lute, Assistant to the President for Iraq and Afghanistan, who suggested that any such agreement was unlikely to take the form of a treaty, subject to the advice and consent of the Senate, or otherwise require congressional approval. It is not clear whether the security agreement(s) discussed in the Declaration will take the form of a treaty or some other type of international compact. Regardless of the form the agreement may take, Congress has several tools by which to exercise oversight regarding the negotiation, form, conclusion, and implementation of the arrangement by the United States. This report begins by discussing the current legal framework governing U.S. military operations in Iraq. The report then provides a general background as to the types of international agreements that are binding upon the United States, as well as considerations affecting whether they take the form of a treaty or an executive agreement. Next, the report discusses historical precedents as to the role that security agreements have taken, with specific attention paid to past agreements entered with Afghanistan, Germany, Japan, South Korea, and the Philippines. The report then discusses the oversight role that Congress plays with respect to entering and implementing international agreements involving the United States. Finally, the report describes legislation proposed in the 110th Congress to ensure congressional participation in the conclusion of a security agreement between the United States and Iraq, including the engrossed amendment to H.R. 2642, the Supplemental Appropriations Act, 2008, which passed the House on May 15, 2008; S. 2426, the Congressional Oversight of Iraq Agreements Act of 2007; H.R. 4959, Iraq Strategic Agreement Review Act of 2008; H.R. 5128, disapproving of any formal U.S.-Iraq security agreement absent congressional authorization; and H.R. 5626, the Protect Our Troops and Our Constitution Act of 2008. The White House has suggested that the President would veto legislation that attempted to define the legal effect or content of any agreement with Iraq prior to the completion of diplomatic negotiations.
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Interest in using desalination technologies to treat seawater, brackish water, wastewaters, and contaminated sources has increased globally and in the United States, as costs have fallen and pressure to develop drought-proof water supplies has grown. Adoption of desalination, however, remains constrained by financial, environmental, regulatory, and social factors. At issue is the role Congress establishes for the federal government in desalination, particularly in desalination research and development and the federal regulatory environment for desalination projects. Also of congressional interest is what role desalination may play in meeting water demands. Desalination processes generally treat saline or impaired waters to produce a stream of freshwater, and a separate, saltier stream often called waste concentrate or brine . The availability and regulation of disposal options for waste concentrate can limit adoption in some locations; this is a particular challenge for large-scale inland facilities. For seawater desalination, the impacts of intake facilities on marine life also often are raised as concerns. Desalination's attractions are that it can create a new source of freshwater from otherwise unusable waters, and that this source may be more dependable and drought-proof than freshwater sources that rely on annual or multi-year precipitation, runoff, and recharge rates. Another significant application of desalination technologies is for treatment of contaminated waters or industrial water or municipal wastewater. Some communities and industries use desalination technologies to produce drinking water that meets federal standards, to treat contaminated water supplies to meet disposal requirements, or to reuse industrial wastewater. Many of the technologies developed for desalination also can produce high-quality industrial process water. For many of these applications, there may be few technological substitutes that are as effective and reliable as desalination technologies. There are multiple desalination methods. Two common categories of desalination technologies—thermal (e.g., distillation) and membrane (e.g., reverse osmosis)—are the most common, with reverse osmosis technologies dominating in the United States. For more information on traditional and emerging technologies, see Appendix A . Desalination treatment costs have dropped in recent decades, making the technology more competitive with other water supply augmentation and treatment options. Electricity expenses vary from one-third to one-half of the cost of operating desalination facilities. A rise in electricity prices could reverse the declining trend in desalination costs; similarly, drops in electricity costs improve desalination's competitiveness. Costs and cost uncertainties remain among the more significant challenges to implementing large-scale desalination facilities, especially seawater desalination plants. Desalination's energy intensity also raises concerns about the greenhouse gas emissions emitted and desalination's usefulness as part of a climate change adaptation strategy. Substantial uncertainty also remains about the environmental impacts of large-scale desalination facilities. Social acceptance and regulatory processes also affect the technologies' adoption and perceived risks. Research and additional full-scale facilities may resolve uncertainties, alleviate concerns, and contribute to cost reductions and options for mitigating environmental impacts. To date, the federal government primarily has supported research and development, some demonstration projects, and select full-scale facilities (often through congressionally directed spending). The federal government also may support construction of municipal desalination facilities through loans or other credit assistance provided through programs of the U.S. Environmental Protection Agency (EPA). For most municipal desalination facilities, local governments or public water utilities (often with state-level involvement and federal construction loans) have been responsible for planning, testing, building, and operating desalination facilities, similar to their responsibility for treating freshwater drinking water supplies. During recent Congresses, legislative proposals have identified a range of different potential federal roles in desalination. Desalination issues before the 114 th Congress may include how to focus federal research to produce results that provide public benefits, at what level to support desalination research and projects, and how to provide a regulatory context that protects the environment and public health without unnecessarily disadvantaging these technologies. The 113 th Congress authorized a new federal credit assistance program, the Water Infrastructure Finance and Innovation Act (WIFIA, 33 U.S.C. §3901), as part of P.L. 113-121 . The portion of the program administered by EPA may be used in financing a range of water projects, including desalination projects. The Water Desalination Act of 1996, as amended (42 U.S.C. §10301), authorized the main desalination research and demonstration outreach program of the Department of the Interior, which is carried out by the Bureau of Reclamation. The 112 th Congress extended through FY2013 its annual authorization of appropriations at $3 million. Bills in the 113 th Congress proposed another extension, but the 113 th Congress did not extend the authorization of appropriations. Although an extension was not enacted, the 113 th Congress provided appropriations for these desalination research and demonstration activities (e.g., $1.75 million for FY2015) and for operation and maintenance of the Department of the Interior's operation of the Brackish Groundwater National Desalination Research Facility ($1.15 million for FY2015). Several reports since 2000 have aimed to inform the path forward for U.S. desalination research. The first was the 2003 Desalination and Water Purification Technology Roadmap produced by the Bureau of Reclamation and Sandia National Laboratories at the request of Congress. The National Research Council then reviewed the roadmap in a 2004 report, Review of the Desalination and Water Purification Technology Roadmap , which called for a strategic national research agenda. To this end, the National Research Council (NRC) convened a Committee on Advancing Desalination Technology. That NRC committee published its own assessment in 2008, Desalination: A National Perspective . The NRC concluded that research should focus on reducing desalination costs and that substantial further cost savings were unlikely to be achieved through incremental advances in the commonly used technologies, like reverse osmosis. Consequently, the report recommended that federal desalination research funding be targeted at long-term, high-risk research not likely to be attempted by the private sector that could significantly reduce desalination costs. It also recommended a line of research on minimizing or mitigating the environmental impacts of desalination. The NRC specifically identified for federal investment research that had potential for widespread benefit and that the private sector had little willingness to perform. (See "National Research Council 2008 Desalination Research Recommendations" box for more details.) In 2010, the Water Research Foundation, WateReuse Foundation, and Sandia National Laboratories published a report on how to implement the 2003 roadmap. The report identified research agendas for a range of topics—membrane and alternative technologies, concentrate management, and institutional issues such as energy cost reduction and regulatory compliance. No single federal agency has responsibility for all federal desalination and membrane research; instead numerous agencies and departments are involved in research based on their specific missions. In FY2005, FY2006, and FY2007, federal desalination research totaled $24 million, $24 million, and $10 million, respectively. (These are the most recent comprehensive data on federal desalination funding.) The Bureau of Reclamation was responsible for half or less of that spending at $12 million, $11 million, and $4 million, respectively. Other agencies and departments with spending on desalination research included the Army, National Science Foundation, Office of Naval Research, U.S. Geological Survey, and four of the Department of Energy's National Laboratories. Sandia National Laboratory has had the largest role among the national laboratories. In FY2005 and FY2006, much of the federal desalination research was congressionally directed to specific sites and activities. The level of funding fell after FY2006, when the appropriations process began to include less congressionally directed spending. The optimal level and type of federal support for desalination research is inherently a public policy question shaped by factors such as fiscal priorities and views on the appropriate role of the federal government in research, industry development, and water supply. Federal support for desalination research raises questions, such as what should be the respective roles of federal agencies, academic institutions, and the private sector in conducting research and commercializing the results, and should federal research be focused on basic research or promoting the use of available technologies? In addition to federal and private research activities, some states, such as California and Texas, also have supported desalination research. In 2008, the National Research Council recommended a federal desalination research level of roughly $25 million, but recommended that the research be targeted strategically, including being directed at the research activities described above. The NRC drew the following conclusion: There is no integrated and strategic direction to the federal desalination research and development efforts. Continuation of a federal program of research dominated by congressional earmarks and beset by competition between funding for research and funding for construction will not serve the nation well and will require the expenditure of more funds than necessary to achieve specified goals. No recent authoritative estimate of all federal desalination spending is available. Data for Reclamation indicate a reduction in federal desalination spending. Reclamation's desalination funding has declined from $11 million in FY2006 to between $2 million and $4 million in recent years, with FY2015 funding at $3 million. While some traditional avenues for federal desalination research may be receiving less support, new avenues of support may be opening. Two of these are the Advanced Research Projects Agency-Energy (ARPA-E) and the National Science Foundation's Urban Water Engineering Research Center, which was initiated in 2011. Desalination and membrane technologies are increasingly investigated and used as an option for meeting municipal and industrial water supply and water treatment demands. The nation's installed desalination capacity has increased in recent years, reflecting the technology's growing competitiveness and applications and increasing demands for reliable freshwater supplies. As of 2005, approximately 2,000 desalination plants larger than 0.3 million gallons per day (MGD) were operating in the United States, with a total capacity of 1,600 MGD. This represents more than 2.4% of total U.S. municipal and industrial freshwater withdrawals, not including water for thermoelectric power plants. Two-thirds of the U.S. desalination capacity is used for municipal water supply; industry uses about 18% of the total capacity. Municipal use of desalination for saline water and wastewater treatment in the United States expanded from 1990 to 2010; the number of facilities rose from 98 facilities with a total capacity of 100 MGD in 1990 to 324 facilities with 1,100 MGD of capacity in 2010. By 2010, 32 states had municipal desalination facilities. Florida, California, and Texas have the greatest installed desalination capacity and account for 68% of the municipal desalination facilities. Florida dominates the U.S. capacity, with the facility in Tampa being a prime example of large-scale desalination implementation (see box); however, Texas and California are bringing municipal plants online or are in advanced planning stages. Several other efforts also are preliminarily investigating desalination for particular communities, such as Albuquerque. The saline source water that is treated using desalination technologies varies largely on what sources are available near the municipalities and industry with the demand for the water. In the United States, only 7% of the existing desalination capacity uses seawater as its source. More than half of U.S. desalinated water is from brackish sources. Another 25% is river water treated for use in industrial facilities, power plants, and some commercial applications. Globally, seawater desalination represents 60% of the installed desalination capacity. While interest in obtaining municipal water from desalination is rising in the United States, desalination is expanding most rapidly in other world regions, often in places where other supply augmentation options are limited by geopolitical as well as natural conditions, such as arid conditions with access to seawater. The Middle East, Algeria, Spain, and Australia are leading in the installation of new desalination capacity, with Saudi Arabia and the United Arab Emirates leading in annual production of desalinated water. Roughly 98% of the desalination capacity worldwide is outside of North America, with 65% in the Middle East. The cost of desalination for municipal water remains a barrier to adoption. Like nearly all new freshwater sources, desalinated water comes at substantially higher costs than existing municipal water sources. Much of the cost for seawater desalination is for the energy required for operations; in particular, the competitiveness of reverse osmosis seawater desalination is highly dependent on the price of electricity. Reverse osmosis pushes water through a membrane to separate the freshwater from the salts; this requires considerable energy input. Currently the typical energy intensity for seawater desalination using reverse osmosis with energy recovery devices is 3-7 kilowatt-hours of electricity per cubic meter of water (kWh/m 3 ). The typical energy intensity of brackish reverse osmosis desalination is less than seawater desalination, at 0.5-3 kWh/m 3 , because the energy required for desalination is a function of the salinity of the source water. Uncertainty in whether electricity prices will rise or fall creates significant uncertainty in the cost of desalinated water. If electricity becomes more expensive, less electricity-intensive water supply options (which may include conservation, water purchases, and changes in water pricing) become comparatively more attractive. Cost-effectively reducing desalination's energy requirements could help reduce overall costs. In recent decades, one of the ways that desalination cost reductions were achieved was through reduced energy requirements of reverse osmosis processes. Now the energy used in the reverse osmosis portion of new desalination facilities is close to the theoretical minimum energy required for separation of the salts from the water. Therefore, although there still is some room for energy efficiency improvements in using desalination as a water supply, dramatic improvements are not likely to be achieved through enhancements to standard reverse osmosis membranes. Instead energy efficiency improvements are more likely to come from other components of desalination facilities, such as the pretreatment of the water before it enters the reverse osmosis process, enhanced facility and system design, or the use and development of a new generation of technologies (see Appendix A ). For example, energy efficiency advances in the non-membrane portions of water systems and the use of energy recovery technologies are reducing energy use per unit of freshwater produced at desalination facilities. Pumps are responsible for more than 40% of total energy costs at a desalination facility. Energy efficiency advances in a type of pump that is useful for smaller applications (called a positive displacement pump) have made desalination more cost-effective for some applications and locations and less sensitive to electricity price increases. The Affordable Desalination Collaboration is an example of combining federal, state, local, private, and other financial resources to support research; funding from these sources was combined to build and operate a demonstration plant at the U.S. Navy's Desalination Test Facility in Port Hueneme, California. The plant tests the combined use of commercially available reverse osmosis technologies, energy recovery devices and practices, and other energy-efficient technologies to reduce the energy inputs required for seawater and brackish desalination. According to the researchers involved, the energy-efficient demonstration facility has the equivalent energy input per unit of freshwater produced as water imports into southern California from northern California and the Colorado River. While this research is an example of reducing energy demand, other efforts are looking to substitute the type of energy used for desalination from fossil fuels to renewable energy or waste heat. The use of desalination as a climate change adaptation strategy is questioned because of its potential fossil fuel intensity relative to other adaptation and water supply options. Electricity price uncertainty and emissions considerations have driven some desalination proponents to investigate renewable energy supplies and co-location with power plants and industrial facilities to reduce electricity requirements and costs. The extent to which desalination technologies can be coupled with intermittent renewable or geothermal electric generation, use off-peak electricity or waste heat, and operate in areas of limited electric generation or transmission capacity but with renewable energy resources is increasingly receiving attention. Desalinating more water when wind energy is available (which requires facilities that can operate with a variable water inflow) and storing the treated water for when water is demanded can almost be viewed as a means of electricity storage and reduction of peak demand. Efforts to jointly manage water and energy supply and demand and to integrate renewable energy with desalination may bolster support for desalination. The first large-scale photovoltaic-powered reserve osmosis seawater desalination facility is in Saudi Arabia, with multiple additional facilities planned in the country before 2018. Concern over declining aquifer levels in Saudi Arabia was one driver for these investments. With demand for desalination increasing in energy-importing countries like India, China, and small islands, there may be particularly strong interest in facilities combining desalination with renewable energy. Some research also is being directed at opportunities for direct solar distillation desalination technologies, particularly smaller-scale production units in solar-abundant remote areas with available land and low-cost labor. From a regulatory, oversight, and monitoring standpoint, desalination as a significant source of water supply is relatively new in the United States, which means the health and environmental regulations, guidelines, and policies regarding its use are still being developed. Existing federal, state, and local laws and policies often do not address unique issues raised by desalination. This creates uncertainty for those considering adopting desalination and membrane technologies. Environmental and human health concerns often are raised in the context of obtaining the permits required to site, construct, and operate the facility and dispose of the waste concentrate. A draft environmental scoping study for a facility in Brownsville, TX, identified up to 26 permits, approvals, and documentation requirements for construction and operation of a seawater desalination facility. According to the Pacific Institute's report Desalination, With a Grain of Salt , as many as 9 federal, 13 state, and additional local agencies may be involved in the review or approval of a desalination plant in California. For example, during the Corps' process for issuing a seawater desalination facility permits for placing structures in waterways and dredging and filling in navigable waters, the U.S. Coast Guard would consult with the Army Corps of Engineers on whether an intake facility would be a potential navigation hazard and the National Oceanic and Atmospheric Administration would consult on whether intake facilities and discharge of waste concentrate may affect marine resources. As previously noted, most states do not have policies and guidance specifically for desalination facilities, and instead deal with each project individually. California, through its State Water Resources Control Board, is working toward statewide guidance in order to improve statewide consistency in review and permitting of seawater desalination facilities. Some of the regulatory requirements are not seen as particularly onerous; others may be seen as challenging depending on the location and size of the facility. Some stakeholders view the current permit process as a barrier to adoption of desalination. Other stakeholders argue that rigorous review and permitting is necessary because of the potential impact of the facilities on public health and the environment. Particular attention often is paid during permitting to the impingement and entrainment of aquatic species by intake structures for coastal and estuarine desalination facilities and the disposal of waste concentrate. While the quality of desalinated water is typically very high, some health concerns remain regarding its use as a drinking water supply. The source water used in desalination may introduce biological and chemical contaminants to drinking water supplies that are hazardous to human health, or desalination may remove minerals essential for human health. For example, boron, which is an uncommon concern for traditional water sources, is a significant constituent of seawater and can also be present in brackish groundwater extracted from aquifers comprised of marine deposits. Boron levels after basic reverse osmosis of seawater commonly exceed current World Health Organization health guidelines and the U.S. Environmental Protection Agency (EPA) health reference level. While the effect of boron on humans remains under investigation, boron is known to cause reproductive and developmental toxicity in animals and irritation of the digestive tract, and it accumulates in plants, which may be a concern for agricultural applications. Boron can be removed through treatment optimization, but that treatment could increase the cost of desalted seawater. EPA sets federal standards and treatment requirements for public water supplies. In 2008, EPA determined that it would not develop a maximum contaminant level for boron because of its rare occurrence in most groundwater and surface water drinking water sources; EPA has encouraged affected states to issue guidance or regulations as appropriate. Most states have not issued such guidance. Therefore, most U.S. utilities lack clear guidance on boron levels in drinking water suitable for protecting public health. The National Research Council recommended development of boron drinking water guidance to support desalination regulatory and operating decisions; it recommended that the guidance be based on an analysis of the human health effects of boron in drinking water and other sources of exposure. Similarly, the demineralization (particularly the removal of the essential minerals calcium and magnesium) by desalination processes also can raise health concerns. This has prompted researchers to promote the remineralization of desalinated water prior to the water entering the distribution system in communities that are highly dependent on desalinated water. Another health-related concern is the extent to which microorganisms unique to seawater and algal toxins may pass through reverse osmosis membranes and enter the water supply, and how facilities may need to be operated differently when these organisms and algal toxins are present. Algal toxins are a consideration for desalination facilities in locations affected or potentially affected by harmful ocean algal blooms that can produce a range of substances, including neurotoxins (e.g., domoic acid). How to effectively manage desalination facilities in order to avoid public health threats from algal blooms is an emerging area of interest and research. Some of the coastal facilities contemplated in the United States would treat estuarine water. Estuarine water, which is a brackish mixture of seawater and surface water, has the advantage of lower salinity than seawater. The variability in the quality and constituents in estuarine water, as well as the typical surface water contaminants (e.g., infectious microorganisms, elevated nutrient levels, and pesticides), may complicate compliance of desalinated estuarine water with federal drinking water standards. Unlike desalination treatment costs, concentrate disposal costs generally have not decreased. For inland brackish desalination, significant constraints on adoption of the technologies are the uncertainties and the cost of waste concentrate disposal. For coastal desalination projects, the concentrate management options are often greater because of surface water disposal opportunities. EPA is authorized to manage the disposal and reuse of desalination's waste concentrate. The disposal option selected largely is determined by which alternatives are appropriate for the volumes and specific characteristics of the concentrate and the cost-effectiveness of the alternatives, which is largely shaped by the proximity of the disposal option and the infrastructure, land, and treatment investments required. The dominant concentrate disposal options for municipal desalination facilities are surface and sewer disposal; in 26 of the 32 states with municipal desalination facilities, only surface and sewer discharge are used for concentrate disposal. Surface water disposal of waste concentrate is permitted on a project-specific basis based on predicted acute and chronic effects on the environment. Inland surface water disposal is particularly challenging because of the limited capacity of inland water bodies to be able to tolerate the concentrate's salinity. Limited amounts of concentrate also may be sent through sewer systems with large-volume wastewater treatment facility. As of 2010, deep well injection for municipal concentrate disposal had been used primarily in Florida. For injection, EPA generally classifies waste concentrate as an industrial waste, thus requiring that the concentrate be disposed of in deep wells appropriate for industrial waste. Desalination proponents argue that desalination's concentrate is sufficiently different from most industrial waste that it should be reclassified to increase the surface and injection well disposal opportunities. Some states have made efforts to promote the beneficial use of waste concentrate (e.g., use as liquids in enhanced oil and gas recovery) and facilitate its disposal including land application techniques. Notwithstanding these state efforts, land application and evaporation ponds are seldom and decreasingly used disposal options. While states can have such policies and programs in place, federal environmental regulations administered by EPA for the most part define the regulatory context of concentrate disposal. Desalination and membrane technologies are playing a growing role in meeting water supply and water treatment needs for municipalities and industry. The extent to which this role further expands depends in part on the cost-effectiveness of these technologies and their alternatives. Desalination's energy use, concentrate disposal options, and environmental and health concerns are among the top issues shaping the technology's adoption. How to focus federal desalination research and support to produce results that provide public benefits, and how to provide a regulatory context that protects the environment and public health without unnecessarily disadvantaging these technologies, are among the desalination issues before the 114 th Congress. Appendix A. Traditional and Emerging Desalination Technologies There are a number of methods for removing salts from seawater or brackish groundwater to provide water for municipal and agricultural purposes. The two most common processes, thermal distillation and reverse osmosis, are described below; their descriptions are followed by descriptions of some of the more innovative and alternative desalination technologies. The earliest commercial plants used thermal techniques. Improvements in membrane technology have reduced costs, and membrane technology is less energy-intense than thermal desalination (although it is more energy-intense than most other water supply options). Reverse osmosis and other membrane systems account for nearly 96% of the total U.S. desalination capacity and 100% of the municipal desalination capacity. Reverse Osmosis Reverse osmosis forces salty water through a semipermeable membrane that traps salt on one side and lets purified water through. Reverse osmosis plants have fewer problems with corrosion and usually have lower energy requirements than thermal processes. Examples of how research advances in the traditional desalination technologies of reverse osmosis have the potential for improving the competitiveness and use of desalination are: nanocomposite and nanotube membranes and chlorine resistant membranes. Nanocomposite membranes appear to have the potential to reduce energy use within the reverse osmosis process by 20%, and nanotube membranes may yield a 30%-50% energy savings. Membranes are susceptible to fouling by biological growth (i.e., biofouling), which reduces the performance of the membranes and increases energy use. The most widely used biocide is chlorine because it is inexpensive and highly effective. The most common membranes used in reverse osmosis, however, do not hold up well to exposure to oxidizing agents like chlorine. Advancements in chlorine resistant membranes would increase the resiliency of membranes and expand their applications and operational flexibility. Distillation In distillation, saline water is heated, separating out dissolved minerals, and the purified vapor is condensed. There are three prominent ways to perform distillation: multi-stage flash, multiple-effect distillation, and solar distillation. In general, distillation plants require less maintenance and pretreatment before the desalination process than reverse osmosis facilities. While solar distillation is an ancient means for separating freshwater from salt using solar energy, research into improving the technology is increasing. In large part the interest stems from the potential application for the technology to supply freshwater to small remote settlements where saline supplies are the only source and power is scarce or expensive. Innovative and Alternative Desalination Processes Capacitive Deionization Capacitive deionization desalinates saline waters by absorbing salts out of the water using electrically charged porous electrodes. The technology uses the fact that salts are ionic compounds with opposite charges to separate the salts from the water. The limiting factor for this technology is often the salt absorption capacity of the electrodes. Flow-through capacitive deionization shows promise for energy-efficient desalination of brackish waters. Electrodialysis Electrodialysis and capacitive deionization technologies depend on the ability of electrically charged ions in saline water to migrate to positive or negative poles in an electrolytic cell. Two different types of ion-selective membranes are used—one that allows passage of positive ions and one that allows negative ions to pass between the electrodes of the cell. When an electric current is applied to drive the ions, fresh water is left between the membranes. The amount of electricity required for electrodialysis, and therefore its cost, increase with increasing salinity of feed water. Thus, electrodialysis is less economically competitive for desalting seawater compared to less saline, brackish water. Forward Osmosis Forward osmosis is an increasingly used but relatively new membrane-based separation process that uses an osmotic pressure difference between a concentrated "draw" solution and the saline source water; the osmotic pressure drives the water to be treated across a semi-permeable membrane into the draw solution. The level of salt removal can be competitive with reverse osmosis, and forward osmosis membranes may be more resistant to fouling than reverse osmosis membranes. A main challenge is the selection of a draw solute; the solute needs to either be desirable or benign in the water supply, or be easily and economically separated out. Research is being conducted on whether a combination of ammonia and carbon dioxide gases or polymers can be used in the draw solution, and on the effects of marine biology on the membranes. The attractiveness of forward osmosis is that when combined with industrial or power production processes that produce waste heat, its electricity requirements can be significantly less than for reverse osmosis. Potential disadvantages of forward osmosis are a lower quantity of freshwater per unit of water treated and a larger quantity of brine requiring disposal. Freezing Processes Freezing processes involve three basic steps: (1) partial freezing of the feed water in which ice crystals of fresh water form an ice-brine slurry; (2) separating the ice crystals from the brine; and (3) melting the ice. Freezing has some inherent advantages over distillation in that less energy is required and there is a minimum of corrosion and scale formation problems because of the low temperatures involved. Freezing processes have the potential to concentrate waste streams to higher concentration than other processes, and the energy requirements are comparable to reverse osmosis. While the feasibility of freeze desalination has been demonstrated, further research and development remains before the technology will be widely available. Ion Exchange In ion exchange, resins substitute hydrogen and hydroxide ions for salt ions. For example, cation exchange resins are commonly used in home water softeners to remove calcium and magnesium from "hard" water. A number of municipalities use ion exchange for water softening, and industries requiring extremely pure water commonly use ion exchange resins as a final treatment following reverse osmosis or electrodialysis. The primary cost associated with ion exchange is in regenerating or replacing the resins. The higher the concentration of dissolved salts in the water, the more often the resins need to be renewed. In general, ion exchange is rarely used for salt removal on a large scale.
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In the United States, desalination and membrane technologies are used to augment municipal water supply, produce high-quality industrial water supplies, and reclaim contaminated supplies (including from oil and gas development). Approximately 2,000 desalination facilities larger than 0.3 million gallons per day (MGD) operate in the United States; this represents more than 2% of U.S. municipal and industrial freshwater use. At issue for Congress is what should be the federal role in supporting desalination and membrane technology research and facilities. Desalination issues before the 114th Congress may include how to focus federal research, at what level to support desalination research and projects, and how to provide a regulatory context that protects the environment and public health without disadvantaging desalination's adoption. Desalination processes generally treat seawater or brackish water to produce a stream of freshwater, and a separate, saltier stream of water that requires disposal (often called waste concentrate). Many states (e.g., Florida, California, and Texas) and cities have investigated the feasibility of large-scale municipal desalination. Coastal communities look to seawater or estuarine water, while interior communities look to brackish aquifers. The most common desalination technology in the United States is reverse osmosis, which uses permeable membranes to separate freshwater from saline waters. Membrane technologies are also effective for other water treatment applications. Many communities and industries use membranes to remove contaminants from drinking water, treat contaminated water for disposal, and reuse industrial wastewater. For some applications, there are few competitive technological substitutes. Wider adoption of desalination is constrained by financial, environmental, and regulatory issues. Although desalination costs have dropped in recent decades, significant further decline may not happen with existing technologies. Electricity expenses represent one-third to one-half of the operating cost of many desalination technologies. The energy intensity of some technologies raises concerns about greenhouse gas emissions and the usefulness of these technologies for climate change adaptation. Concerns also remain about the technologies' environmental impacts, such as saline waste concentrate management and disposal and the effect of surface water intake facilities on aquatic organisms. Construction of desalination facilities, like many other types of projects, often requires a significant number of local, state, and federal approvals and permits. Emerging technologies (e.g., forward osmosis, capacitive deionization, and chlorine resistant membranes) show promise for reducing desalination costs. Research to support emerging technologies and to reduce desalination's environmental and human health impacts is particularly relevant to future adoptions of desalination and membrane technologies. The federal government generally has been involved primarily in desalination research and development (including for military applications), some demonstration projects, and select full-scale facilities. For the most part, local governments, sometimes with state-level involvement, are responsible for planning, testing, building, and operating desalination facilities. Some states, universities, and private entities also undertake and support desalination research. While interest in desalination persists among some Members, especially in response to drought concerns, efforts to maintain or expand federal activities and investment are challenged by the domestic fiscal climate and differing views on federal roles and priorities.
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Congress has enacted three major laws that govern labor-management relations. The first law, the Railway Labor Act (RLA), was enacted in 1926. The RLA applies to railway and airline carriers. In 1935, Congress passed the National Labor Relations Act (NLRA), which applies to private sector employers other than railroad and airline carriers. Congress enacted the Federal Service Labor-Management Relations Statute (FSLMRS) in 1978. The act applies to most federal employees. This report provides a brief history, including major amendments, of each of the three statutes. The discussion of each law begins with an overview of the statute and then discusses in more detail the key statutory provisions of the law and how the law is administered and enforced. This report uses specific "terms of art" relevant to these three acts. Appendix A defines these terms. Appendix B provides a list of acronyms used in the report. Appendix C compares the provisions of the three statutes. By the late 19 th century, the railroad industry had a significant impact on the U.S. economy. It helped connect the coasts, making settlement of the western United States much easier. Farmers were able to ship their goods to cities hundreds of miles away, and consumers were able to purchase products made in factories across the nation. The railroad industry was also a major consumer of U.S. goods. It used over 75% of the steel produced in the United States and a large portion of the United States' extracted coal, and was the nation's primary employer. As the public began to depend on railroads and their regular availability, railroad workers also began to unionize. Because the nation grew dependent on railroads, labor-management disputes that grew into work stoppages adversely affected the nation's welfare. Enacted in 1926, the Railway Labor Act (RLA) continued a pattern of federal attempts at regulating labor relations in the industry. The act was the product of an agreement between industry and labor. The statute was intended to help maintain labor-management peace in the railway industry and thereby avoid work stoppages that could carry with them adverse economic and social effects. The act's five major purposes are to: prevent any interruption to commerce or to the operation of any carrier; ensure employees the right to organize or join a labor union; ensure railway carriers and employees the right to select bargaining representatives without interference from the other party; provide timely settlement of disputes over rates of pay, rules, or working conditions; and provide timely settlement of disputes growing out of grievances or over interpretation or application of existing union contracts. To accomplish these goals, Congress established a system based on collective bargaining between labor and management, relying on mediation facilitated by the newly created National Mediation Board (NMB) and voluntary arbitration if neither collective bargaining nor mediation worked. The original RLA called for parties to establish by agreement special adjustment boards (SBAs) to resolve disputes over contract interpretation or application concerning changes in rates of pay, rules, or working conditions. These boards could be national, regional, or local in scope and would typically be composed of an equal number of carrier and employee representatives. If an adjustment board was unable to resolve a dispute because of a deadlock, the dispute could be referred to the Board of Mediation. In the 1934 amendments, Congress created the National Railroad Adjustment Board (NRAB), which has jurisdiction over contract interpretation and administration disputes that cannot be resolved through direct negotiations. If the NRAB is deadlocked, it selects a referee to make an award in the dispute. A referee is a neutral person who sits with the NRAB as a member and makes an award in the dispute at issue. Congress later replaced the Board of Mediation with the NMB, which can resolve disputes between parties concerning changes in rates of pay, rules, working conditions, and any other dispute not referable to NRAB. Congress also strengthened the RLA's provisions that allow carriers and employees to select representatives freely and without interference from each other. It added language specifically stating that employees have the right to organize and bargain collectively and added a provision requiring that a majority of employees in a craft or class must support a union before it is recognized as their representative. Additionally, the amendments prohibited carriers from denying or questioning an employee's right to organize or join a union and tasked the NMB with investigating representation disputes. The amendments also provided for both civil and criminal means to enforce the RLA's provisions. Congress explicitly prohibited carriers from unilaterally changing pay rates, rules, and working conditions and added a "status quo" provision, which prohibits changes to pay rates, rules, and working conditions for 30 days after parties are released from the NMB's services. Finally, the definition of "carrier" was broadened to include companies that perform operations integral to railway transportation but not already covered by the act. In 1936, Congress extended most of the RLA's provisions to commercial airline carriers that operate in interstate or foreign commerce and airlines that transport mail for, or under contract with, the U.S. government. Although the airline industry was relatively new in 1936, Congress acknowledged that it was part of the national transportation system that was vital to the economic well-being of the nation and that it too would need mechanisms to assist in dispute resolution and avoiding work stoppages. Although the National Labor Relations Act (NLRA), which covers most private sector employees, was enacted in 1935, labor wanted airline carriers to be included under the RLA, because it believed the RLA's mediation/arbitration dispute resolution mechanisms provided more flexibility for the constantly changing, fledging industry. Between 1951 and 1981, the RLA was the subject of much congressional action. The major changes enacted are discussed below. In 1951, Congress amended the RLA to allow carriers and unions to enter into union security agreements. These agreements require employees to pay union dues equal to the cost of representation as a condition of employment. However, under a union security agreement, employees are not required to become formal members of the union. State right-to-work laws that prohibit or restrict union security agreements are preempted by the RLA. In 1966, Congress amended the RLA to provide for Public Law Boards (PLBs) that can be established upon the request of either party. Unlike an SBA, the parties do not need to agree on the creation of a PLB. PLBs are composed of one person selected by the carrier and one person selected by the union. Each selected board member is compensated by the carrier or union that selected them. If these selected board members deadlock on an issue, they designate a neutral third party to decide the dispute. If the selected board members are unable to agree on a neutral party, the NMB designates the neutral party. The neutral party is compensated by the NMB. Finally, in 1981, Congress established emergency procedures for certain publicly funded and operated carriers that provide commuter rail services. The RLA was most recently amended in 2012 during the 112 th Congress as part of the Federal Aviation Administration (FAA) Modernization and Reform Act of 2012. Under these amendments, for the NMB to conduct an election or otherwise certify a union for a craft of unrepresented employees, the NMB must receive, along with an application for certification, authorization cards signed by at least 50% of the employees in the craft or class seeking representation. Before this amendment, those parties filing an application for certification were required to include authorization cards signed by at least 35% of employees in the craft or class seeking representation. The 2012 amendments also changed the rules for runoff elections. Previously, only the names of the two unions that received the most votes in the first election were on the runoff ballot. If more employees voted not to have a union than voted for either of the two unions that received the most votes, the runoff ballot did not include the choice of not being represented by a union. Under the 2012 amendments, a runoff ballot has the two choices, including the choice not to be represented, that received the most votes in the initial election. The 2012 amendments also mandated periodic NMB evaluations and audits. The RLA seeks to prevent labor-management disputes that could interrupt railroad and airline service and harm the economy. It grants certain rights to both workers and carriers, seeks to prevent practices that could frustrate a peaceful worker-carrier relationship, and provides mechanisms for workers and carriers to resolve disputes. To achieve these goals, the RLA regulates the labor-management relationship between workers and carriers in the railway and airline industries. It provides parties with a standard process for choosing a union to act as an employee representative in the collective bargaining process and details which individuals can participate in the process. Once a union is chosen, the RLA governs which subjects workers and unions can negotiate. The RLA also regulates how workers, carriers, and unions should behave towards each other during the union selection and collective bargaining processes and prohibits certain unfair actions. The RLA provides for several entities to administer and enforce its provisions. The National Mediation Board (NMB) is the primary agency charged with administration and enforcement of the act. It also provides mediation services to parties that cannot reach a resolution in a dispute. The National Railway Adjustment Board (NRAB) is an NMB tribunal that hears and decides (arbitrates) grievances in the railway industry. Additionally, in the railway industry, the RLA allows parties to a dispute to establish their own arbitration tribunals, known as Special Boards of Adjustment (SBAs), or a single party to request that the NMB create a Public Law Board (PLB) to arbitrate the dispute. Various System Boards of Adjustment (System Boards), created jointly by labor and management, arbitrate disputes in the airline carrier industry. Finally, if an unresolved dispute threatens to substantially interrupt commerce, the President can create a Presidential Emergency Board (PEB) to investigate and aid in the resolution of the dispute. The RLA regulates the collective bargaining rights and duties of carriers and employees in the railway and airline carrier industries. "Collective bargaining" refers to the process of negotiation between the parties regarding working conditions. Employers are referred to as "carriers" in the RLA. The term "carrier" is used throughout this discussion for consistency with the act. The preliminary sections of the act define "carrier" and "employee," and those definitions are used to determine who is covered by the act and its accompanying regulations. Under the RLA, a carrier is defined as any company which is directly or indirectly owned or controlled by or under common control with any carrier by railroad and which operates any equipment or facilities or performs any service (other than trucking service) in connection with the transportation, receipt, delivery, elevation, transfer in transit, refrigeration or icing, storage, and handling of property transported by railroad, and any receiver, trustee, or other individual or body, judicial or otherwise, when in the possession of the business of any such "carrier." Congress later extended coverage of the RLA to the airline industry. The RLA also applies to any company that is directly or indirectly controlled by, or under common control with, a railroad or airline carrier that falls under the coverage of the act. The RLA specifically excludes "trucking service" and most "street, interurban, or suburban electric railways" from its scope. However, if a trucking company almost exclusively performs services for a rail carrier, the trucking exemption may not apply. The RLA defines an employee as any "person in the service of a carrier ... who performs any work defined as that of an employee or subordinate official." Temporary, probationary, and furloughed employees generally are within the RLA's definition of "employee." The RLA both mandates and prohibits certain actions of all parties involved in a labor-management dispute. The act grants employees the right to organize and bargain collectively. It also sets forth the procedures and standards to be applied in the selection of a union as an employee representative and the subsequent relations between the union, carrier, and employees. Employees can select a union that will represent their craft or class's interests in bargaining with carriers over working conditions. A craft or class is a group of employees who are or wish to be represented by a union. A union can be recognized as a representative either through a secret ballot election or by voluntary carrier recognition. Certain conduct is prohibited in the carrier-union-employee relationship. Carriers and unions cannot interfere with employees' right to organize and select a union representative. Carriers can only bargain with the employee-selected union, and the parties cannot use self-help until they have reached an impasse in negotiations and have exhausted all of the RLA's dispute resolution mechanisms. Self-help is a way in which one party can exert pressure on the other party and occurs outside of the formal dispute resolution process. Strikes and worker lockouts are forms of self-help. The RLA specifically states that employees have a right to select a union free from carrier interference or influence. A majority of a craft or class determines the union to represent that craft or class. The NMB has exclusive jurisdiction to certify unions. A union can be certified as an employee representative if at least one party to a representation dispute petitions the NMB to conduct a secret ballot election and the union receives a majority of votes cast. However, the NMB will recognize the validity of a carrier-union agreement under which a carrier voluntarily recognizes a union as an employee representative. The NMB also has exclusive jurisdiction to determine a craft or class of employees, and this decision is practically unreviewable by courts. In defining a craft or class, the NMB will consider many factors including historical or traditional crafts and similarity of job functions between employees. The NMB generally adheres to the traditional railroad craft or class distinctions. When Congress extended coverage of the RLA to airlines, the industry was relatively new and did not have historical crafts. However, over the years, the NMB has come to distinguish several crafts within the industry. A union may only be certified on a system-wide basis. Union certification extends to members of that craft throughout the carrier's organization. The craft or class must include all employees who are eligible to be in the craft or class, including those at different locations. Employees who regularly work in a craft or class are eligible to vote in a secret ballot election. Employees who are furloughed, on a leave of absence, or probationary are also eligible to vote. Contractors, retirees, and managers are ineligible to vote. Part-time, temporary, and dismissed employees may be eligible to vote, and the determination is made on a case-by-case basis. To determine a union, the NMB can conduct elections or use "any [other] appropriate method." Before the NMB selects a method to determine a union, it must complete an investigation to determine whether a representation dispute exists. To begin the investigation process, either party can petition for an investigation. The petition must be supported by a showing of interest in which a majority of workers in the craft or class involved sign authorization cards. An NMB investigator compares the authorization cards with the list of system-wide, potentially eligible voters provided by the carrier to determine if a sufficient percentage of authorization cards was submitted. An investigator reports his findings to the NMB's General Counsel (see discussion of " RLA Enforcement and Adjudication Processes " below). If an investigator finds that a dispute exists, the General Counsel will establish the way in which the dispute will be resolved (e.g., by secret ballot election). The NMB may conduct an election by mail, telephone, Internet, or in-person ballot. A union must receive a majority of votes cast to be certified by the NMB as the employees' bargaining representative. In 2010, this rule replaced a 75-year-long NMB practice that required that a majority of eligible workers vote for representation before a union was certified. The former practice effectively counted all those workers who did not vote in the election as "no union" votes. Now, an employee who does not vote is no longer counted in the vote tally. If no choice receives a majority of the votes cast, the NMB may conduct a runoff election between the two choices that receive the most votes. The RLA does not preclude a carrier from voluntarily recognizing a union as an employee representative. If employees are not represented, the union seeking certification is the only organization involved, and the parties agree in writing, the NMB can certify the union based solely on the union's presenting authorization cards signed by a majority of employees in the craft. However, if the union is for a group of employees not generally recognized as a craft or class or if the craft or class is not represented system-wide, the voluntary recognition does not control the NMB's determination in a later representation dispute. A union can have its certification revoked through decertification. The NMB does not have a formal procedure for decertifying a union, but has several practices that effectively remove an incumbent union's certification. A union will be decertified when an individual or union petitions for a secret ballot election and less than 50% of voting employees cast ballots for the incumbent union or when the existing union freely renounces its certification. The RLA expressly mandates that all carriers and employees use "every reasonable effort" to create and maintain agreements on pay rates, rules, and working conditions and to settle all disputes arising out of such agreements (known as "direct negotiations"). The RLA does not specifically list the unfair labor practices that it prohibits. Instead, the NMB looks to general considerations of fair dealing in defining the few bounds that the RLA does set. "Fair dealing" includes both unions' and carriers' responsibility to bargain in good faith, to recognize and respect each parties' representatives and concerns, and to refrain from interfering with each parties' rights. The act protects employees' right to organize by prohibiting "interference, influence, or coercion by either party over the designation of representatives by the other." Carriers may not deny or question an employee's right to organize, and carriers cannot use funds to maintain or assist a union in carrying out its duties or to influence an employee to leave or remain in a union. Carriers cannot require prospective employees to sign an agreement to join or not to join a union. Any carrier that willfully violates any of these provisions may be subject to civil and criminal penalties. Additionally, the NMB can order a rerun election to eliminate the potential effects of any interference. After certification of a union, a carrier has the duty to bargain with the union. A carrier has the duty to bargain only with the union and not directly with employees. A carrier cannot engage in direct communications with employees in a way that gives the impression that the carrier is not willing to negotiate or in a way that may disrupt negotiations or destroy a union's bargaining powers. Self-help is the way in which one party can exert pressure on the other party and occurs outside of the formal dispute resolution process. Self-help includes peaceful striking, picketing, and locking out employees. Parties may not engage in self-help until they have exhausted the RLA's dispute resolution mechanisms; any self-help used afterwards must be lawful. Among the permissible actions employees can take are peaceful picketing, intermittent striking, and selective striking. Additionally, employees may be able to engage in "secondary" activities, through which they exert pressure on an entity with which they do not have a dispute. A carrier may hire permanent replacements for striking employees and keep those replacements at the end of the strike. However, a carrier may not discharge or eliminate the jobs of striking employees as retaliation for a strike. A court may issue an injunction to stop self-help if it finds that a carrier or a union has violated the status quo (i.e., neither party can change the current practices under an agreement). The RLA established several entities to administer and enforce the act. The National Mediation Board (NMB) is the primary agency charged with administration and enforcement and also provides mediation services to parties to a dispute. The National Railroad Adjustment Board (NRAB) is a tribunal under the NMB that hears and decides (arbitrates) grievances in the railway industry. Alternatively, parties in the railway industry can create their own arbitration tribunals, known as Special Boards of Adjustment (SBAs), or a single party can request that the NMB create a Public Law Board (PLB) to arbitrate a dispute. In the airline industry, various System Boards of Adjustment (System Boards), created jointly by labor and management, arbitrate disputes. The decisions of these entities can be reviewed by federal courts in limited circumstances. The NMB is an independent agency that was created to administer and enforce the RLA. It is headed by a three member board. Each member serves full time and is appointed by the President and confirmed by the Senate for a term of three years. No more than two members can be of the same political party. The three members self-designate a chairman on a yearly basis. The NMB has delegated its powers to investigate and adjudicate representation disputes to its General Counsel and oversees mediation and arbitration under the RLA. The NRAB, SBAs, and System Boards are adjustment boards, which are entities that arbitrate disputes. Under the RLA, three types of adjustment boards exist for the railway industry (NRAB, SBAs, and PLBs) and one exists for the airline carrier industry (System Boards). The NRAB is a federal tribunal under the NMB that arbitrates grievances in the railroad industry. The NRAB consists of 34 members; 17 are selected by carriers, and 17 are selected by labor organizations of national scope. The NRAB is divided into four divisions that generally operate independently of each other and process disputes involving specific types of employees. Parties may seek compliance with NRAB decisions in federal district courts. District courts can also affirm or set aside, in whole or in part, NRAB orders. Alternatively, parties to a railway industry dispute can voluntarily agree to create an SBA, an arbitration tribunal. The NMB provides a list of potential arbitrators, known as the Roster of Arbitrators, to the parties. The parties select the arbitrator from that list. Finally, in the railway industry, a single party can request the establishment of a PLB to settle disputes for an individual railroad. Again, the parties choose arbitrators from the NMB's Roster of Arbitrators. The party upon whom the request is made must then enter into an agreement with the requesting party, establishing the board within 30 days of the request. If that party fails to agree to the creation of a PLB or fails to designate a member to the PLB, the requesting party may ask that the NMB designate an arbitrator. In all railway arbitration proceedings, the NMB pays the salaries and travel expenses of the arbitrators. When the RLA was amended to include airline carriers, it maintained the requirement of compulsory arbitration in certain disputes and established the National Air Transit Adjustment Board. However, the board was never created. Rather, airline carriers and unions created their own temporary special boards of adjustment, System Boards. Like railway carrier disputes, parties to an airline carrier dispute are required to engage in direct bargaining, but System Boards have no formal procedures and are limited in the jurisdiction agreed upon by the parties. System Boards must, therefore, look to collective bargaining agreements to determine how to proceed with a grievance. Unlike railway arbitration proceedings, the NMB does not pay the salaries and travel expenses to arbitrators in airline carrier industry disputes. Grounds for judicial review and overturning either an NMB order or an adjustment board award are very narrow. A court can overturn an NMB order releasing parties from mediation if the order is outside of the NMB's jurisdiction or contrary to specific prohibitions in the RLA. Adjustment board awards may be reviewed and overturned if the award is affected by fraud, an adjustment board oversteps its jurisdiction, or the award does not conform to the RLA. Additionally, an award can be called into question, referred to in the RLA as "impeached." To do so, a party must file a petition to impeach within 10 days of the final judgment. A decision can be impeached for several reasons: (1) if the award or proceedings do not conform to the substantive or procedural requirements of the RLA; (2) if the parties made a voluntary agreement to arbitrate and the award does not conform to the agreement; or (3) if a member of the board that rendered the award or a party to the arbitration was found guilty of fraud or corruption, and that fraud or corruption affected the outcome of the arbitration. Any decision reached by an adjustment board is final and binding on the parties and can be enforced in the U.S. district courts. Upon certification, a carrier has the duty to negotiate with, and only with, the certified union. If parties fail to reach an agreement through direct negotiations, further RLA procedures may be invoked. The RLA divides disputes into two categories: major and minor disputes. Each type has its own dispute resolution mechanism. If a dispute cannot be resolved and the President believes that the dispute may substantially disrupt interstate commerce, he may invoke emergency procedures to resolve the dispute. "Major" disputes are those related to the process of collective bargaining (i.e., the parties cannot reach an agreement as to pay rates, rules, and working conditions). In the railway industry, agreements generally do not have expiration dates. Rather, they become subject to change on a specified date within the original agreement. Major disputes, therefore, include both bargaining on the terms of an initial labor-management agreement and on any subsequent changes to the agreement the parties may wish to make. Carriers and employees must give 30 days' written notice of any intended changes to the agreement to the other party. This is known as a "Section 6 notice." The parties must then agree on the time and place of a conference about the proposed changes within 10 days of receipt of the notice, and the conference between the parties must take place within the 30 days. Once the Section 6 notice has been served, each party must maintain the status quo. At any time during this direct bargaining process, either party may invoke the NMB's mediation services. Parties continue to negotiate in the presence of an NMB mediator, and the mediator works with both parties, helping them to resolve their dispute. The NMB has sole discretion to decide when the parties can discontinue mediation because they have either reached an agreement or they are at an impasse and cannot reach an agreement. If the parties cannot reach an agreement, the NMB will "proffer arbitration" and invite the parties to submit their dispute to an arbitrator. This arbitration is voluntary-but-binding and is held before the appropriate adjustment board. If either or both parties refuse arbitration, the NMB sends written notice to the parties terminating its services. The parties then enter into a 30-day "cooling-off" period during which they cannot change the terms of the agreement. After the cooling-off period, if the parties have not reached a mutual agreement, then they may exercise self-help, including strikes, lockouts, and imposition of new rules on the workforce. If parties do agree to arbitration, the arbitration board will comprise three members. Each party will select one arbitrator. These two arbitrators will then select a third. If the two arbitrators fail to select another within five days after their first meeting, the NMB will select the third arbitrator. The arbitrators' decision is final as to all issues placed before them. A "minor" dispute is one involving the interpretation or application of an already existing agreement. As with major disputes, the parties have a duty to first engage in direct negotiations, but, generally, a carrier may act on its own interpretation of the existing agreement while waiting for resolution of the dispute by an Adjustment Board. The RLA mandates that minor disputes be submitted to compulsory arbitration in front of the appropriate adjustment board, the NRAB for the railway industry and System Boards of Adjustment for airline carriers. In arbitration, members of the NRAB conduct hearings and make findings on the disputes. The parties must comply with the orders of the NRAB. Alternatively, the parties can mutually agree to form their own, temporary, adjustment board, a Special Board of Adjustment (SBA) that decides specific issues agreed upon by the parties. If one of the parties is dissatisfied with the SBA, it may give 90 days' notice to the other party to be brought under the jurisdiction of the NRAB or the System Boards of Adjustment. Finally, a single party can request of the other party that a PLB be created to resolve a dispute. The requesting party can select an arbitrator and if the other party does not agree to the establishment of a PLB or fails to select an arbitrator, the NMB will designate an arbitrator to sit on the PLB. If members of the PLB are unable to agree on an issue, they must select a neutral member of the board to decide the matter. If PLB members cannot agree on a neutral member within 10 days of their failure to agree on an issue, either member can request the NMB to appoint a neutral board member. Although a carrier and a union may exercise self-help at the end of the dispute resolution process, the NMB may determine that an unresolved dispute threatens "substantially to interrupt interstate commerce." It may recommend that the President create a Presidential Emergency Board (PEB). The President may, at his discretion, create a PEB to investigate and issue a report on the dispute within 30 days of its creation. Parties must maintain the status quo upon the creation of a PEB and for the 30 days following the release of its report, unless the parties reach an agreement to the dispute. Publicly funded and operated commuter rails have a different set of PEB procedures. If the President decides not to create a PEB under the above mentioned procedures, parties to the dispute or the governor of a state through which the commuter rail runs may request that the President establish a PEB. If the parties have not settled within 60 days of the establishment of the PEB, the NMB is required to conduct a public hearing at which the parties explain why they have not accepted the PEB's dispute resolution recommendations. If the parties still have not reached a resolution 120 days after the PEB's creation, then any party or governor of a state through which the commuter rails run can request a second PEB. Upon such a request, the President must establish a second PEB. The parties must then submit to the NMB an offer for settlement within 30 days. The PEB than has 30 days to report to the President which offer it finds most reasonable. Throughout this process, parties may not engage in self-help. For both commuter and noncommuter rails, Congress may intervene in a dispute to prevent a work stoppage. On several occasions, Congress has either created another study commission or adopted PEB recommendations—effectively imposing an agreement on the parties. In 1933, the United States was in the midst of the Great Depression. President Franklin D. Roosevelt and Congress pursued policies to stabilize a weak economy and reduce unemployment. To these ends, the National Industrial Recovery Act of 1933 (NIRA) was enacted, which guaranteed workers the right to organize and to bargain collectively. By creating the means for workers to negotiate with their employers for higher wages, Congress believed that the NIRA would increase the nation's purchasing power and lower unemployment. The NIRA did not prohibit company-dominated unions, which are organized or assisted by an employer. Some employers refused to recognize employee-selected unions, which prompted some employees to strike. Ultimately, the U.S. Supreme Court declared that the NIRA was unconstitutional. Congress then enacted the National Labor Relations Act (NLRA), which is often called the Wagner Act, after its Senate sponsor, Senator Robert Wagner. Unlike its predecessor, the Wagner Act prohibited company-dominated unions, established the majority rule principle for worker representation, and required employers and unions to negotiate in good faith. The act proved more effective than NIRA in protecting and guaranteeing employee rights. Although the Wagner Act, by many accounts, accomplished Congress's goals, some critiqued it as one-sided and believed it too heavily favored unions, enabling excessive union power and disrupting the labor-management equilibrium. In 1947, Congress passed the Taft-Hartley Act, named after its sponsors Senator Robert Taft and Representative Fred Hartley. This act placed some restrictions on unions and guaranteed certain freedoms of conduct and speech to employers. Specifically, the Taft-Hartley Act enumerated unfair labor practices for unions, required unions to give notification before striking, prohibited closed shops, and outlawed secondary boycotts. The act also allowed states to enact right-to-work laws and gave employers the right to request an election to determine which of multiple unions claiming to represent employees was in fact the employee representative. Supervisors were prohibited from joining unions, and employees were given the right to petition to decertify a union. Additionally, Congress restructured the National Labor Relations Board (NLRB), the federal agency charged with enforcing the NLRA. In 1959, in response to allegations of union corruption, Congress passed the Labor Management Reporting and Disclosure Act (LMRDA), commonly called the Landrum-Griffin Act after its sponsors Representative Phillip Landrum and Senator Robert Griffin. The act applies to parties covered under both the NLRA and the Railway Labor Act (RLA). It established a union member "Bill of Rights" that enumerated five basic rights of union members: equality of rights, safeguards against improper disciplinary actions, freedom of speech, freedom from interference with the right to sue, and freedom from increased dues except by majority vote. The act also increased internal union transparency by mandating that each union enact by-laws and issue yearly financial disclosures. Additionally, the act set forth specific election procedures to help ensure that internal union elections were free of corruption. The NLRA seeks to prevent labor-management disputes that could burden or obstruct commerce and harm the economy. It grants certain rights to both workers and employers, seeks to prevent practices that could frustrate a peaceful worker-employer relationship, and provides mechanisms for workers and employers to resolve disputes. To achieve these goals, the NLRA regulates the labor-management relationship between workers and employers in the private sector, excluding the railway and airline carrier industries. It provides parties with a standard process for choosing a union to act as an employee representative in the collective bargaining process and details which individuals can participate in the process. Once a union is selected, the NLRA governs which subjects workers and unions can negotiate. The NLRA also regulates how workers, employers, and unions should behave towards each other during the union selection and collective bargaining processes and prohibits certain unfair actions. To administer and enforce the act, the NLRA established the National Labor Relations Board (NLRB). The NLRB investigates and adjudicates representation disputes, complaints of unfair labor practices (ULPs), and contract disputes. The NLRB's General Counsel investigates and prosecutes ULP claims. The General Counsel has delegated its authority to issue ULP complaints to regional directors. Additionally, the President has the ability to create a board of inquiry to investigate and aid in dispute resolution when he believes that a threatened or actual strike or lockout will endanger the national economy. The NLRA regulates collective bargaining rights and duties for employers, employees, and unions in the private sector, excluding the railway and airline carrier industries. While commercial airline carriers fall under the RLA's jurisdiction, the aviation manufacturing (defense, space, and commercial) and general aviation (e.g., flight training, intercontinental jet transportation of executives and public officers) industries fall under the NLRA's jurisdiction. As with the RLA, the NLRA's preliminary sections define "employer" and "employee," and those definitions determine who is covered by the act's regulations. The NLRB has jurisdiction over employers whose operations affect interstate commerce. The NLRB can assert jurisdiction over any employer whose operations affect commerce. However, the NLRB has established administrative standards, limiting its jurisdiction to those cases involving employers with a substantial effect on commerce. If an employer meets these administrative standards, the NLRB must review the case. These standards are based on an employer's annual sales or gross revenue. For example, retailers must have annual sales of at least $500,000 and privately operated hospitals must have annual revenue of at least $250,000. The NLRA's definition of employer includes any person "acting as an agent of an employer, directly or indirectly." This definition does not include the United States, a wholly owned government corporation, a state or its subdivisions, or any Federal Reserve Bank. International organizations, while not specifically enumerated, are excluded from NLRA coverage. An employee includes anyone who works for another for hire. Individuals who have stopped working because of a current labor dispute or unfair labor practice and who have not obtained equivalent employment are also included in the definition. Agricultural workers, domestic workers employed by a family or person within their home, individuals employed by their parent or spouse, independent contractors, and supervisors are not employees for the purposes of the NLRA. If a person does not fall under one of the excluded categories, he is assumed to be an employee under the act. Therefore, nonresident aliens and hospital resident physicians are considered employees. However, graduate students working in teaching positions and unpaid volunteers are not employees. A supervisor is not an employee. An individual is a supervisor if he has the authority to "hire, transfer, suspend, lay off, recall, promote, discharge, assign, reward, or discipline other employees, or responsibly direct them, or to adjust their grievances" and if that authority requires the use of independent judgment. Individuals who are temporarily holding a supervisory position are usually considered employees and, therefore, afforded NLRA protections. Managerial employees, although they may not exercise supervisory functions, are exempt from NLRA coverage because they "formulate and effectuate management policies" and have discretion in performing their jobs. The act both mandates and prohibits certain actions of all parties involved in a labor-management dispute. The act grants employees the right to organize and bargain collectively and sets forth the procedures and standards to be applied in the selection of a union as an employee representative and the subsequent relations between the union and the employer. During union organizing, employees can select a union that will represent their bargaining unit's interests in bargaining with employers over working conditions. A bargaining unit is a group of employees who are or wish to be represented by a union. A union can become a bargaining representative through a secret ballot election or voluntary employer recognition. Bargaining topics are divided into those that unions and employers must bargain over (mandatory subjects), those that parties may bargain over (permissive subjects), and those that parties are prohibited from bargaining over (illegal subjects). Certain conduct is prohibited in the employer-union relationship during union organization and collective bargaining. Employers and unions cannot interfere with employees' right to organize and select a union. Employers and unions are required to bargain with each other in good faith over conditions of employment, and employers can only bargain with the employee-selected union. If they have reached an impasse in the bargaining process, the parties can engage in certain forms of self-help. Employees have the right to choose their union representative. A majority vote by the members of an appropriate bargaining unit determines the union. A union must either be certified by the NLRB or voluntarily recognized by the employer before collective bargaining can begin. Unions and employers are generally allowed to enter into union security agreements under which employees may be required, as a condition of employment, to become union members by paying dues and initiation fees. A job applicant cannot be required to be a union member for hiring consideration, but a newly hired employee can be required to become a dues-paying member on or after 30 days of the start of employment. This type of union-security agreement is known as a union shop agreement. Agency shops may also be created. In an agency shop, employees who do not join the union pay a fee to the union for its services as a bargaining agent, in lieu of dues. The union's authority to enter into security agreements can be revoked if a majority of affected employees vote to do so. Only one deauthorization election per 12-month period can be held. Petitions for deauthorization elections must be supported by at least 30% of employees in the affected bargaining unit. Any employees, including those not required to join the union by the terms of the collective bargaining agreement, but excluding supervisors, may petition for a deauthorization election. Most provisions of the NLRA preempt state law. However, the NLRA specifically allows states to enact "right-to-work" laws. Right-to-work laws prohibit or restrict union security agreements and, therefore, give employees the option of employment without requiring them to join a union or to pay union dues. A bargaining unit is a group of employees represented or seeking representation by a union. If a union and employer do not agree on an appropriate bargaining unit, the issue is settled by the NLRB. A bargaining unit is generally determined on the basis of a "community of interest" of the employees involved and whether those employees can be reasonably grouped together. To determine a "community of interest," the NLRB will look to several factors including historical or traditional units; employee wishes; and whether employees have the same or similar interests with respect to pay rates, hours, and other working conditions. A bargaining unit may include the employees of one employer location or multiple employer locations; it may also include employees of multiple employers. A bargaining unit may include both professional and nonprofessional employees. However, a majority of professional employees must vote to be members of the unit. Employees who work in the bargaining unit during the eligibility period set by the NLRB and who are employed at the time of an election may vote in an election. Employees who are on a leave of absence or furloughed are eligible to vote. Economic strikers who have been replaced by permanent employees may be allowed to vote in elections held within 12 months after the beginning of the strike; their permanent replacements can vote in the same election. Unfair labor practice strikers are entitled to vote in elections, but their temporary replacements are not. A union can become an employee representative in a number of ways, including through a secret ballot election. To initiate a secret ballot election, an individual or union must file a representation petition with the NLRB alleging that a "substantial number of employees" want union representation or that a recognized union no longer represents a majority of employees in the bargaining unit. An employer can also file a petition alleging that one or more organizations claim recognition. Petitions filed by employees or unions must be accompanied by authorization cards signed by at least 30% of employees. Consent Agreements Before an election, the NLRB's regional staff will try to secure one of three types of consent-election agreements from the parties. Consent agreements are agreed upon by the parties and lay out the terms of an election, including which choices are to be included on the ballot and the method to determine voting eligibility. A regional director of the NLRB must approve a consent-election agreement. The three types of consent-election agreements are: Pure consent agreement . The parties agree to have the regional director resolve any disputes arising from the election, and the regional director's rulings are final. Stipulated election agreement . The regional director's rulings are subject to review by the adjudicatory arm of the NLRB. Full consent agreement . The parties agree that the regional director will resolve both pre- and post-election disputes. Each type of agreement usually gives the NLRB regional director the authority to conduct the election, but parties can agree to an election conducted by a third party, such as an arbitrator or a mediation board. NLRB-Administered Elections If parties do not enter into a consent-election agreement, a formal representation hearing is held. The hearing provides a forum for the parties to present their arguments regarding the representation election and may include the examination of witnesses and introduction of evidence. After the hearing, the hearing officer gives a summary of the issues and evidence to the regional director and the regional director makes a decision on the issues. After the hearing, the NLRB can direct a secret ballot election. The NLRB can certify a union receiving the majority of votes cast in an election. If an election has more than one union on the ballot and no choice receives a majority of the vote, the two choices with the most votes face each other in a runoff election. Parties can file an objection to the election if they believe the NLRB's election standards have not been met. An election may be set aside if it was accompanied by interference with the employees' freedom of choice. Examples of interference with employee freedom of choice include threats of job or benefits loss, threats of violence, and incentives to influence an employee's vote. If a union is NLRB-certified, the employer must bargain with it in good faith for one year. Voluntary Recognition The NLRA does not preclude employers from voluntarily recognizing a union as an employee representative. An employer may do this if a majority of employees in a bargaining unit have signed authorization cards. A union and employer can also enter into a card check agreement, under which an employer agrees to recognize a union before the union begins to collect authorization cards. A card check agreement may require the union to collect more than a majority of authorization cards from bargaining unit employees. If an employer voluntarily recognizes a union, employees can file a decertification petition or an election petition requesting representation by another union after a reasonable amount of time. A reasonable amount of time is defined by the NLRB as at least six months, but no more than one year after the parties' first bargaining session. The NLRB may also require an employer to recognize and bargain with a union if a majority of employees signed authorization cards and the employer engaged in unfair labor practices that make a fair election unlikely. The employer must bargain with the union, in good faith, for one year. The NLRB requires a secret ballot election to decertify either certified or voluntarily recognized unions. A decertification petition may be filed by employees or a union acting on their behalf. The petition must be signed by at least 30% of the employees in the bargaining unit represented by the union. Parties cannot file a decertification or election petition for unions certified in an NLRB-conducted election until one year after certification. Union recognition can be withdrawn under two circumstances. First, recognition can be withdrawn if, one year after certification, the employer and union have not reached a contract agreement. Both parties must have bargained in good faith, and the employer must doubt that a majority of employees currently support the certified union. The employer's doubt must be based on objective information (e.g., a petition signed by a majority of employees). Second, recognition can be withdrawn if, after a voluntary recognition, no contract agreement has been reached after a reasonable amount of time and the employer has a reasonable doubt, supported by objective information, that the union is no longer supported by a majority of unit employees. The NLRA mandates that employers must bargain with unions regarding "rates of pay, wages, hours of employment, and other conditions of employment." Because the statute does not provide further explanation, the NLRB and courts have divided bargaining subjects into three distinct categories: mandatory, permissive, and illegal. At the request of either the employer or union, both parties must bargain over mandatory subjects. Employers are prohibited from taking unilateral action with respect to mandatory subjects, and cannot make agreements with individual union members about them. The NLRB defines the following terms: "wage," "hours of employment," and "other conditions of employment." The term "wage" includes overtime pay, shift differentials, paid holidays and vacations, commissions, severance pay, pensions, health insurance, and profit-sharing plans. The term "hours of employment" includes work schedules. The term "other conditions of employment" include provisions for grievance procedures, workloads, and sick leave. Permissive bargaining subjects are those that either party may propose for inclusion in collective bargaining but neither party is required to bargain over them. When a permissive subject is included in a collective bargaining agreement, that subject does not then become a mandatory subject. Permissive subjects include the definition of a bargaining unit, selection of bargaining representatives, and union-recognition clauses. The NLRA specifically prohibits either party from requiring the other party to contract for provisions that are illegal or that go against Congress's intent in enacting the NLRA. Closed-shop and hot-cargo clauses are examples of such provisions. Additional illegal subjects of bargaining include separation of employees by race, rules requiring preference for union members, and an employer's right to terminate and employee for union activity. The NLRA defines and prohibits certain conduct as unfair labor practices (ULPs) to protect the rights of both employees and employers. Through its provisions, the NLRA attempts to prevent and remedy, but not punish, ULPs. The NLRB can issue cease-and-desist orders to stop ULPs, and it can require employers to reinstate and give back pay to employees who were improperly discharged for union activities. A union may be required to give an employee back pay if it is responsible for a ULP that caused an employer to discharge a worker. Punitive damages, however, are generally unavailable. The NLRA imposes restrictions on employers and unions during the process of union organization. The act prohibits employers and unions from interfering with or coercing employees who are exercising their right to organize. The NLRB does not require a showing of intent to violate the act, rather, an employer's or union's conduct must tend to interfere with employees' right to organize. During union organization, neither an employer nor a union can threaten discharge, loss of benefits, or plant closure if employees exercise their right to organize. An employer cannot raise wages to discourage workers from unionizing or discriminate against employees regarding conditions of employment (e.g., give unfavorable work assignments), and a union cannot cause an employer to discriminate against employees regarding employment conditions. Employers are prohibited from dominating a union. An employer dominates a union when it has participated in the union's organization and assisted and supported its activities to such an extent that the union appears to be the employer's creation and not the employees' bargaining representative. Additionally, employers cannot interfere with or contribute money or other support to a union, such as supporting one union over another in an election or pressuring employees to financially support a union, absent a valid union security agreement. Unions are prohibited from interfering with employers' choice of selecting who will or will not represent them in the collective bargaining process. A union cannot influence an employee's choice of representative in procedures to address individual employee complaints. Both employers and unions are required to bargain collectively and in good faith with one another over "wages, hours of employment, and other terms and conditions of employment." "Good faith" has not been specifically defined, but factors surrounding the bargaining process are used to determine whether parties bargained in good faith, including the justification for proposals and a willingness to make concessions. Some actions, such as unilateral changes and bargaining directly with employees, are considered by the NLRB to be in and of themselves refusals to bargain and in violation of the requirement to bargain in good faith. Neither employers nor unions can "restrain or coerce employees" in exercising their right to bargain collectively. Employers cannot discriminate against employees to encourage or discourage union membership or because they have filed charges or given testimony under the NLRA. A union cannot cause an employer to discriminate against employees to encourage or discourage union membership. Unions can fine and discipline members, as long as those sanctions are consistent with NLRB policy. For instance, a union cannot fine, expel, or use violence against a member for filing a ULP charge, for testifying against other members in arbitration, or for refusing to participate in unlawful or unprotected activity. A union can, however, fine or suspend a member for violating internal union rules. In certain situations, the NLRA protects employees when they exercise self-help. When self-help is protected, employers violate the act by taking adverse or discriminatory action against employees who are using self-help. Protected activities are those used by employees, in a peaceful manner, to exercise their rights under the act, such as certain economic strikes, sympathy strikes, filing grievances, and activity opposing union leadership. Unprotected activities include those that are violent or unlawful. Unprotected employee activities include sit-down strikes, intermittent strikes, partial strikes, strikes in violation of a contract's no-strike clause, acts of disloyalty, and disruptive or vulgar behavior. During a strike, employee rights differ depending on the reason for the strike. During an economic strike, employees retain their employment status and cannot be discharged, but employers can replace them. After the strike, if the employer has hired replacements, the striking employees are not entitled to job reinstatement. However, if the striking employees cannot find regular and substantially equivalent work, they are entitled to be recalled by the employer to jobs for which they are qualified, when jobs become available. During a strike protesting an employer's unfair labor practices, employees can neither lose their job nor be permanently replaced. After the strike, absent serious misconduct on their part, striking employees are entitled to return to their jobs. Employers can also engage in certain self-help activities. An employer can prevent employees from working (i.e., a lockout) but not over a dispute about nonmandatory bargaining subjects. During a lockout, an employer can unilaterally establish employment terms and conditions for workers hired as striker replacements. But, without a bargaining impasse, an employer may not alter employment terms and conditions of nonstriking employees. The NLRA established the National Labor Relations Board (NLRB) to administer and enforce the act. The NLRB has the power to investigate and adjudicate representation disputes, ULP complaints, and contract disputes. NLRB decisions can be reviewed by federal courts in limited circumstances. The NLRB is an independent federal agency charged with administering and enforcing the NLRA. The NLRB is comprised of a five-member Board ("the Board") and a General Counsel. The Board and General Counsel are appointed by the President and confirmed by the Senate. Traditionally, the Board is comprised of two Democrats, two Republicans, and a fifth member who belongs to the same party as the President. If a position is vacant and the Senate is in recess, the President can make a "recess appointment." The appointment expires at the end of the next Senate session. The Board adjudicates objections and challenges to secret ballot elections, decides questions about the composition of bargaining units, and determines all ULP cases prosecuted by the General Counsel. The General Counsel has authority over ULP investigations and the issuance of ULP complaints; it has delegated its authority to issue ULP complaints to the NLRB's regional offices. Only final orders issued by the Board in ULP cases are subject to judicial review by the courts. Board orders do not have the force of law, and parties can only be compelled to comply with NLRB orders through the U.S. courts of appeals. Generally, U.S. district courts cannot review Board decisions on ULP or representation cases. District courts can review representation decisions in connection with the review of an order in a ULP case. District courts can review representation cases if the Board made an order in excess of its jurisdiction or contrary to a specific provision in the NLRA. The Board and federal courts are not allowed to review General Counsel decisions not to issue a ULP complaint, unless they are in connection with a review of a Board final order. If, after an investigation, the regional director has "reasonable cause to believe" that a ULP charge has merit and that a complaint should be issued, the regional director must petition the district court for appropriate relief. An employee, employer, union, or any other person can initiate a ULP investigation against an employer or a union by filing a charge with the NLRB. The charge must be filed no more than six months after the alleged incident. The charge is then investigated by the regional director, and the regional director determines whether a formal complaint should be issued. A refusal to issue a complaint can be appealed to the General Counsel. However, parties do not have a right to Board or court review. If the General Counsel determines that a charge has merit, he may try to settle the matter either formally or informally. In an informal settlement, parties generally agree to withdraw the charge upon remedial action and notice of the proposed settlement terms to affected employees. If the charged party does not comply with the agreement terms, the settlement will be withdrawn, and the case will be prosecuted. The settlement is not subject to judicial review. Formal settlements are used in cases where the General Counsel finds a persistent or deliberate violation of the NLRA. In a formal settlement, the charged party agrees to the Board's issuing a formal remedial order. If the charged party violates the settlement, the NLRB may institute judicial proceedings, or the party may be held in contempt. When a settlement is not reached in a meritorious case, the regional office will issue a complaint. Hearings are then held before an administrative law judge (ALJ), who issues a decision and makes recommendations to the Board. If a party does not object to the ALJ's decision, the Board can adopt the ALJ's decision as its own. Otherwise, the Board can review the ALJ's decision and issue its own orders. The General Counsel is responsible for ensuring compliance with the Board's orders. Arbitration is the primary mechanism for resolving contract disputes. In arbitration, the union and employer present their positions to an arbitrator who resolves the dispute. When arbitration is not possible, a party can bring a suit for contract violations in either state or federal court. However, if state law regarding contract interpretation or substance contradicts federal law, federal law prevails. The Board also has the authority to interpret collective bargaining contracts, but courts generally do not defer to the Board in contract interpretation. Both courts and the Board can issue injunctions to prevent certain actions, such as strikes that are in breach of a no-strike contract clause that requires arbitration. When the President believes that a threatened or actual strike or lockout that affects an entire industry or a substantial part of it will endanger national health or safety, he may appoint a "board of inquiry" to investigate the issue. A board of inquiry can include a chairman and any other members the President chooses. The board then issues a report on the facts of the dispute to the President. However, the report cannot include recommendations. After a report is issued, the President may direct the Attorney General to petition a U.S. district court to order a party to end the strike or lockout. If the court finds that the activity does indeed affect at least a substantial portion of an industry and threatens national health or safety, it will order a party to end the strike or lockout. A district court's orders may be appealed to a federal court of appeals. While the injunction is in effect, the parties to the dispute are encouraged to settle the matter on their own, and the board of inquiry reconvenes. After 60 days, the board reports to the President the current state of relations between the parties. Within 15 days of the issuance of the report, the NLRB must then conduct a secret ballot election of the employees involved in the dispute on whether they wish to accept a final offer of settlement made by their employer. After either the certification of the secret ballot election or a settlement, the injunction is discharged. The President submits a report detailing the process and any other recommendations of appropriate action to Congress. While many private sector employees gained statutory rights to collective bargaining and remedies to unfair labor practices throughout the 1920s and 1930s, many of their public counterparts did not have such protections until the 1960s. Traditional concepts of government sovereignty and public employees' general satisfaction with their job security contributed to this disparity. However, by the 1960s, many federal public employees found their jobs to be less secure due to organizational and technological changes. Moreover, many commentators thought that the federal government's willingness to extend collective bargaining rights to private employees but not to its own employees was inconsistent. Union recognition bills were introduced in each Congress throughout the 1950s, but both President Harry Truman and President Dwight Eisenhower strongly opposed them. In 1961, President John F. Kennedy formed the Task Force on Employee-Management Relations in the Federal Service, which evaluated and made recommendations about federal employee unionization. In 1962, President Kennedy implemented the recommendations of the Task Force through Executive Order 10988. The order granted federal employees the right to join, or not to join, labor unions and to bargain collectively. These new rights, however, were not as extensive as those of private employees. For instance, federal employees generally could not negotiate over wages or benefits and were prohibited from striking. Additionally, an agency could require that employees negotiate over a collective bargaining agreement only during nonofficial time (i.e., at times when employees were not on duty and entitled to compensation). In 1969, President Richard Nixon issued Executive Order 11491, which further developed the framework of federal labor-management relations. It provided that majority recognition would be the only form of union recognition, established the Federal Labor Relations Council (the predecessor to the current Federal Labor Relations Authority, FLRA) and the Federal Service Impasses Panel (FSIP), and listed prohibited unfair labor practices for both unions and management. It also allowed employees to use limited "official time" to negotiate a collective bargaining agreement. Although federal employees were given collective bargaining rights under the Executive Orders (EOs) issued by Presidents Kennedy and Nixon, those rights were not necessarily secure, as EOs are subject to unilateral change or termination by the President. In 1978, however, Congress codified and adopted many of the EOs' provisions as Title VII of the Civil Service Reform Act of 1978. The law is commonly referred to as the Federal Service Labor-Management Relations Statute (FSLMRS). While the statute followed the general principles of the EOs, it also made certain changes, such as limiting the statute's coverage and allowing employees official time to negotiate collective bargaining agreements. In 2009, President Barack Obama issued Executive Order 13522, directed federal agencies to work with employees and unions to improve the delivery of services to the American people. The EO created the National Council on Federal Labor-Management Relations (the Council). The Council advises the President on matters involving labor-management relations in the executive branch. The Council was charged with creating pilot labor-management forums within the federal government to allow agency managers and unions to discuss labor-management issues in a nonadversarial setting. Although several federal agencies were explicitly excluded from FSLMRS coverage (see " Employer Defined " below), some are covered by separate labor-relations statutes or policies. The Government Accountability Office (GAO) is excluded from FSLMRS coverage, but the General Accounting Office Personnel Act of 1980 gave GAO employees the right to organize and bargain collectively. Neither the FSLMRS nor the Tennessee Valley Authority (TVA) Act of 1933 granted TVA employees collective bargaining rights. However, in 1935, TVA adopted a policy that allows employees to organize and bargain over wages. Without actually changing the language of the National Labor Relations Act (NLRA), Congress incorporated most NLRA provisions into the Postal Reorganization Act of 1970. This action gave enforceable collective bargaining rights to employees of the U.S. Postal Service. The FSLMRS seeks to prevent labor-management disputes that could burden or obstruct federal government operations. It grants certain rights to both workers and employers, seeks to prevent practices that could frustrate a peaceful worker-employer relationship, and provides mechanisms for workers and employers to resolve disputes. To achieve these goals, the FSLMRS regulates the labor-management relationship between workers and employers in most federal agencies. It provides parties with a standard process for choosing a union to act as an employee representative in the collective bargaining process and details which individuals can participate in the process. Once a union is selected, the FSLMRS governs which subjects workers and unions can negotiate. The FSMLRS also regulates how workers, employers, and unions should behave towards each other during the union selection and collective bargaining processes and prohibits certain unfair actions. The Federal Labor Relations Authority (FLRA) administers and enforces the FSLMRS. The FLRA has the authority to investigate and adjudicate representation disputes, ULP complaints, and contract disputes. The Federal Mediation and Conciliation Service (FMCS) is an independent agency that provides voluntary mediation services to parties who cannot resolve a bargaining dispute. The Federal Service Impasses Panel (FSIP) is an entity within the FLRA that provides additional assistance in resolving disputes if FMCS services cannot resolve the dispute or if the parties specifically request FSIP's services. The FSLMRS regulates collective bargaining rights and duties for most federal agencies, employees, and unions. The preliminary sections of the FSLMRS define "employer," "employee," and "labor organization." State and local laws govern state and local public employees. The FSLMRS applies to most federal executive agencies, along with the Library of Congress, the Government Printing Office, and the Smithsonian Institution. Several agencies are specifically excluded from the statute's coverage. Those excluded agencies are the Government Accountability Office, the Federal Bureau of Investigation, the Central Intelligence Agency, the National Security Agency, the Tennessee Valley Authority, the Federal Labor Relations Authority, the Federal Impasses Panel, and the U.S. Secret Service. The President has the power to unilaterally exclude an agency or subdivision from coverage under the FSLMRS if he determines the entity's "primary function" is "intelligence, counterintelligence, investigative, or national security work" and that the provisions of the statute cannot be applied "in a manner consistent with national security requirements and considerations." With this power, the President has excluded additional agencies and agency subdivisions, including the National Nuclear Security Administration, the Federal Air Marshall Service, and several subdivisions of each branch of the military. An employee includes any individual employed in an agency or an individual who is no longer employed at an agency because of unfair labor practices and who has not obtained regular and substantially similar employment elsewhere. The definition specifically excludes some individuals from the definition of employee, including noncitizens, members of the uniformed services, supervisors, management officials, officers or employees in the Foreign Service, and individuals who participate in a strike in violation of the statute. A labor organization is defined as an organization composed, at least in part, of employees who participate in and pay dues to that organization. The organization must have the purpose of dealing with an agency regarding conditions of employment and grievances. Organizations that deny membership on the basis of sex, color, race, creed, national origin, and other similar characteristics; advocate the overthrow of the U.S. government; are sponsored by an agency; or participate or assist in a strike are not labor organizations recognized under the statute. The statute both mandates and prohibits certain actions of all parties involved in labor-management relations. The statute grants employees the right to organize and bargain collectively and sets forth the procedures and standards to be applied in the selection of a union as an employee representative and the subsequent relations between the union and the employer. Unions and agencies can bargain over working conditions but cannot bargain over those topics already governed by another law (e.g., rates of pay as determined by the General Schedule). Working conditions might include work hours and allocation of employee offices. Employees must share a "community of interest" to be recognized as an appropriate unit for union representation. The union selection process is more limited in the federal sector than in the private sector, as a union can only be certified as an employee representative through a secret ballot election and union-security agreements are illegal. Certain conduct is prohibited in the employer-union relationship during union organization and collective bargaining. Employers and unions cannot interfere with employees' right to organize and select a union. Employers and unions are required to bargain with each other in good faith, and employers can only bargain with an employee-selected union. If a bargaining impasse is reached, federal employees are prohibited from participating in strikes, work stoppages, slowdowns, or picketing that interferes with agency operations. The FSLMRS gives federal employees the right to bargain collectively over conditions of employment. Conditions of employment include "personnel policies, practices, and matters ... affecting work conditions." An employee's right to participate in political activities, the classification of positions, and any matters covered by other federal statutes (e.g., wages) are specifically excluded from this definition. Employees and their unions are also not allowed to bargain over the statutory rights of management that are set forth in the statute. These nonnegotiable managerial rights include the authority to determine the organization's mission or budget and the authority to hire, discharge, or assign work to an employee. The parties may, however, bargain over grievance procedures for adversely affected employees, the way in which management will exercise its authority, and, at the agency's election, the number of employees or positions assigned to a work project. Federal employees have the right to select their union, and agencies must give exclusive recognition to the union selected by employees. Union security agreements are prohibited under the FSLMRS. Unions representing federal employees must represent all unit employees, regardless of whether they pay dues. Unions can represent those employees who are grouped together in an appropriate unit. To find a unit "appropriate" for representation, the FSLMRS requires that three criteria be met. 1. The unit must encompass employees who share a clear "community of interest," identifiable employment concerns distinct from those of other groups of employees. 2. The unit must promote an effective relationship with the agency. 3. The unit must promote efficient operations of the agency. Management officials and supervisors cannot be included in a bargaining unit unless they have historically been included in the unit. Additional employees prohibited from a unit include employees who administer FSLMRS provisions and employees whose work affects national security. The Federal Labor Relations Authority (FLRA) determines which employees are eligible to vote in secret ballot elections. Regularly scheduled intermittent employees who work in positions that exist year round or who have a reasonable expectation of continued employment can vote in elections. Temporary employees can also vote, if they have a reasonable expectation of continued employment beyond their initial six months of work and share a community of interest with the permanent employees included in the bargaining unit. Under the FSLMRS, a union can only be certified as an employee representative through a secret ballot election. To initiate a secret ballot election, an individual, union, or agency must first file a representation petition and a "showing of interest" that either 30% or more of unit employees wish to be represented by a union or that at least 30% of unit employees allege that the union no longer represents a majority of the unit employees. The regional director of the FLRA's General Counsel (see discussion of " FSLMRS Enforcement and Adjudication Processes " below) will determine whether the showing of interest is sufficient and meet with parties to resolve any preliminary disputes. It then conducts an investigation into any allegations made, including identifying related cases, identifying other parties who may be affected, and making any other necessary determinations. After an investigation and any hearings, the regional director can order a secret ballot election. If an election is ordered, parties are encouraged to enter into consent-election agreements that include the choices to be on the ballot and the method of election. However, if parties cannot agree to these terms, the regional director will issue a "direction of election." A direction of election sets out the election procedures. Parties have the opportunity to bring any nonprocedural issues before the regional director in a hearing. Once an election is held, a union will be certified as an employee representative if it receives a majority of votes cast. If an election has more than one union on the ballot and no choice receives a majority of the votes, the two choices with the most votes face each other in a runoff election. A party can file an objection to procedural aspects of an election or conduct that may have adversely impacted the election within five days of the vote tally. While the results of an election are pending, parties must maintain the terms of any existing collective bargaining agreement. The FSLMRS gives employees who are unrepresented by a certified union an additional collective bargaining protection. National Consultation Rights (NCRs) entitle a union to be informed of agency-proposed substantive changes in employment conditions and to present its views and recommendations on the matter, even if the union does not have exclusive agency recognition. An agency must consider any views and recommendations submitted to it by a union with NCRs before making a final decision. A union gains NCRs if a unit does not have a recognized exclusive representative within its agency and the union is the exclusive representative of at least 3,500 or 10% of employees in the agency. An election can also be held to determine if a bargaining unit no longer wishes to be represented by its existing union. As with a petition for a representation election, an individual, union, or agency can file a petition for an election, and the petition must be signed by or accompanied by authorization cards of at least 30% of the unit employees who allege that the union no longer represents a majority of the unit employees. Additionally, a regional director can revoke certification if a union disclaims its interest in representing the unit or if the regional director determines that the unit is no longer appropriate because of a "substantial change in character and scope of the unit" and that an election is unnecessary. The FSLMRS defines and prohibits certain conduct as unfair labor practices (ULPs) to protect the rights of both workers and employers. The FLRA can issue cease-and-desist orders to stop a ULP, require employers to reinstate and give backpay to employees who were improperly discharged for union activities, and require parties to renegotiate contracts in accordance with its orders. A union may be required to give an employee backpay if it caused an employer to discharge that employee. The FSLMRS protects employees' right to organize and imposes restrictions on employers and unions during this process. The statute prohibits employers and unions from interfering with or coercing employees exercising their right to organize. For instance, neither an employer nor a union can threaten discharge or make threatening statements to employees to influence their decision to join a union. A union cannot cause an employer to discriminate against employees regarding employment conditions. Agencies are prohibited from sponsoring, controlling, or assisting a union. Prohibited conduct includes actively assisting a union in organizing its employees or campaigning for a particular union or individual running for union office. Both employers and unions are required to negotiate in good faith with one another over conditions of employment. This obligation to negotiate includes, if requested by either party, the duty to enter into a written collective bargaining agreement. This obligation does not require either party to make a concession or agree to a proposal by the other party. The duty to bargain in good faith includes coming to the bargaining table with a willingness to reach a collective bargaining agreement and meeting at reasonable times and places. For instance, both employers and unions are required to bargain on negotiable matters proposed by one or both parties that are not already in the collective bargaining agreement. Additionally, employers cannot unilaterally change working conditions. Working conditions might include work hours or allocation of employee offices. Neither employers nor unions can refuse to cooperate in impasse procedures and decisions. Failure to cooperate includes failing to comply with a final order from the Federal Service Impasses Panel (FSIP), the FLRA's dispute resolution entity. Employers cannot discipline or discriminate against employees who file complaints under the statute. A union cannot coerce, discipline, fine, or attempt to coerce a union member as punishment or to hinder their work. Employees are protected from union harassment when they are performing their official work duties. Additionally, unions cannot discriminate against employees regarding union membership because of race, color, creed, national origin, sex, age, civil service status, political affiliation, marital status, or handicap. Neither employers nor unions can refuse to comply with any other provision of the statute. Federal employees can use self-help to exert pressure on an employer, but the types of self-help available are more limited than under federal labor relations laws that apply to the private sector. Federal employees can engage in peaceful, informational picketing as long as the activity does not interfere with agency operations. However, unlike private-sector employees, federal employees cannot participate in, and unions cannot encourage, strikes, work stoppages, slowdowns, or pickets that interfere with agency operations. Additionally, a union commits a ULP if it fails to prevent such activity. If a union willfully or intentionally supports such actions, the FLRA can revoke its exclusive recognition status. The Federal Labor Relations Authority (FLRA) is the primary agency that administers and enforces the statute. The FLRA has the authority to investigate and adjudicate representation disputes, ULP complaints, and contract disputes. The Federal Mediation and Conciliation Service (FMCS) provides voluntary mediation services to parties who have reached a negotiation impasse. The Federal Service Impasses Panel (FSIP) is an entity within the FLRA that provides additional assistance in resolving disputes if FMCS services cannot resolve the dispute or if the parties specifically request FSIP's services. The FLRA's General Counsel investigates and prosecutes ULP complaints. FLRA decisions can be reviewed by federal courts in limited circumstances. Judicial review of FSIP decisions is unavailable. The FLRA is an independent federal agency charged with administering and enforcing the FSLMRS. It is composed of a three-member Authority, the General Counsel, and the FSIP. The Authority's responsibilities include hearing ULP cases, determining the appropriateness of units, and conducting secret ballot elections. The members of the Authority are appointed by the President for five-year terms. No more than two members can be of the same political party. The General Counsel investigates and prosecutes complaints before the Authority and is appointed by the President for a five-year term. The FLRA can delegate its power to determine election issues and to investigate and prosecute ULP complaints to its regional offices. The FMCS provides mediation services for parties who have reached an impasse in negotiations. FMCS services are available to both private and public workers and employers. In the federal sector, use of FMCS services is voluntary. If federal parties are unable to resolve their dispute using FMCS services, they can request that FSIP consider the matter or they can agree to binding arbitration procedures. The arbitration procedures must be approved by FSIP. To aid in arbitration, the FMCS maintains a list of approximately 1,400 independent arbitrators who can hear and decide disputes over collective bargaining interpretation or application. FSIP is an entity within the FLRA and provides assistance in resolving disputes between agencies and unions over working conditions. FSIP has seven members who are appointed by the President and serve staggered five-year terms. If parties cannot resolve an impasse by using a third-party mediator or if either party requests FSIP's services, FSIP can make recommendations to the parties and assist them in resolving the dispute. If the parties still cannot come to an agreement, FSIP can impose an agreement on the parties. Issues delegated to a regional director or administrative law judge can be reviewed and then affirmed, reversed, or modified by the Authority. In some cases, a party can also seek court review of a final order made by the Authority. For a court to review a decision, generally, the Authority's determinations must be arbitrary or contrary to the law. Direct judicial review of FSIP orders is unavailable. An employee, union, or agency can initiate a ULP investigation by filing a charge with an FLRA regional director. Generally, a charge must be filed no more than six months after the alleged ULP occurred. The charge is investigated by regional office staff. The regional director, at his discretion, may issue a complaint, which sets forth the alleged ULP and the hearing date before an ALJ. If the regional director decides not to issue a complaint, the decision can be appealed to the General Counsel. Throughout the processing of a charge, the Authority offers parties voluntary alternative dispute resolution services, including training, education, and intervention at its Collaboration and Alternative Dispute Resolution Office (CADRO). If the regional director decides to issue a complaint and the parties are still unable to settle the dispute, the General Counsel prosecutes the complaint before an ALJ. The ALJ's decision can be reviewed by the Authority. If the Authority does not review the decision, the decision becomes the Authority's decision. If the Authority finds that a ULP has occurred, it can order an agency to reinstate an employee with backpay, the parties to enter into a collective bargaining agreement, a party to stop committing the ULP (cease-and-desist order), or any other action that would carry out the purpose of the statute. Additionally, district courts can issue temporary relief (e.g., cease-and-desist orders) during the processing of a complaint if the General Counsel believes that not maintaining the status quo would frustrate the intent of the statute. Disputes over whether parties have an obligation to negotiate a specific contract term generally fall into one of two categories: negotiability disputes and bargaining obligation disputes. In a negotiability dispute, the agency and union disagree about whether a proposed contract term is contrary to the law such that the agency is not required to negotiate over it. If the agency contends it is not required to negotiate over a matter, the union may initiate a negotiability appeal in which it asks the Authority to review the matter. In a bargaining obligation dispute, an agency usually argues that it has no obligation to bargain over a matter because the proposal is already covered by an existing collective bargaining agreement, the union has waived the right to bargain, a change initiated by the agency is too minor to warrant bargaining, or the matter does not cover a condition of employment. These disputes can be resolved through ULP resolution procedures, negotiated grievance procedures, or negotiability appeal procedures. To initiate procedures in a negotiability appeal, a union must file a petition with the Authority's Office of Case Control, not the regional office. The parties then explain their dispute to the Authority in a conference and a series of written allegations, and the Authority makes a decision. If at any time during the appeal, the parties express an interest in mediation, they will be referred to CADRO. All collective bargaining agreements are required to contain negotiated grievance procedures, which lay out procedures for settling grievances. These procedures must provide for binding arbitration if a grievance cannot be settled by the parties. Usually, the procedures set forth in negotiated grievance procedures are the only procedures available for resolving grievances. A negotiated grievance procedure automatically covers all issues, except those excluded by law or those that parties explicitly exclude. Those subjects that are excluded from negotiated grievance procedures by the FSLMRS include retirement, life insurance, or health insurance benefits and suspension or removal for reasons of national security. Procedures other than the negotiated grievance procedures exist for disputes involving a removal or demotion for unacceptable performance; serious adverse actions, such as a reduction in grade or pay; employment discrimination allegations; personnel actions prohibited by statute; and unfair labor practices. Either party can file an exception to most arbitration awards with the Authority within 30 days of the award being served on the parties. The Authority can make recommendations and take appropriate action regarding the award if it finds the award is contrary to law or on "other grounds similar to those applied by Federal courts in private sector labor-management relations." Parties have several dispute resolution options when they have reached an impasse in the collective bargaining process. The agency and union may agree on a method to help resolve the dispute, such as binding private arbitration. Parties can also voluntarily go to the FMCS for assistance to resolve an impasse. If parties have exhausted voluntary attempts to settle an impasse, either party can request that FSIP consider the issue. If FSIP asserts jurisdiction, it can either recommend dispute resolution procedures to the parties (e.g., refer the parties to CADRO) or assist them in resolving the impasse. FSIP's procedures are generally informal, but it can hold hearings, administer oaths, issue subpoenas, and take any other necessary actions to resolve the impasse. Afterwards, FSIP makes a final decision and order, which is binding on the parties for the term of their agreement. Unlike the RLA and FLRA, the FSLMRS does not have any emergency dispute resolution provisions. Appendix A. Glossary of Terms Appendix B. List of Acronyms Appendix C. Comparison of RLA, NLRA, and FSLMRS Key Provisions
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Since 1926, Congress has enacted three major laws that govern labor-management relations for private sector and federal employees. An issue for Congress is the effect of these laws on employers, workers, and the nation's economy. The Bureau of Labor Statistics (BLS) estimates that, in 2013, an estimated 14.5 million employees were union members. In the 113th Congress, more than 25 bills were introduced to amend federal labor relations statutes. The proposals ranged from repealing provisions that permit employers to require employees to join a union as a condition of employment to requiring mediation and, if necessary, binding arbitration of initial contract negotiation disputes. These legislative activities, and the significant number of employees affected by federal labor relations laws, illustrate the importance of labor relations issues to legislators and their constituents. The three major labor relations statutes in the United States are the Railway Labor Act, the National Labor Relations Act, and the Federal Service Labor-Management Relations Statute. Each law governs a distinct population of the U.S. workforce. The Railway Labor Act (RLA) was enacted in 1926. Its coverage extends to railway and airline carriers, their employees, and unions. The RLA guarantees employees the right to organize and bargain collectively with their employers over conditions of work and protects them against unfair employer and union practices. It lays out specific procedures for selecting employee representatives and provides dispute resolution procedures that aim to resolve labor disputes between parties, with an emphasis on mediation and arbitration. The RLA provides multiple processes for dispute resolution, depending on whether the dispute is based on a collective bargaining issue or the application of an existing collective bargaining agreement. The National Labor Relations Act (NLRA) was enacted in 1935. The NLRA's coverage extends to most other private sector employers that are not covered by the RLA. Like the RLA, the NLRA guarantees employees the right to organize and bargain collectively over conditions of employment and protects them against unfair employer and union activities. However, its dispute resolution system differs from the RLA's in that it is arguably more adversarial in nature; many disputes are resolved through adjudication, rather than through mediation and arbitration. The Federal Service Labor-Management Relations Statute (FSLMRS) was enacted in 1978, and its coverage extends to most federal employees. The basic framework of the FSLMRS is similar to that of the NLRA; however, employee rights are more restricted under the FSLMRS, given the unique nature of their employer, the federal government. Federal employees have the right to organize and bargain collectively, but they cannot strike. Most federal employees cannot bargain over wages or benefits. Additionally, the President can exclude a federal agency or subdivision from coverage if the organization's primary work concerns national security.
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Behavioral health disorders affect a large number of people and contribute costs to the health care system, even as indicated treatment is often not received by individuals in need. In the United States, an estimated 26% of non-institutionalized adults experience behavioral health disorders in a given year; over the course of a lifetime, the estimate rises to 46%. One study estimated spending on behavioral health care in 2005 to be $135 billion, of which $40 billion was paid by the federal government (including $10 billion by Medicare) and $44 billion by state governments. Both higher and lower cost estimates have been found in other studies. Among U.S. adults suffering from a behavioral health disorder severe enough to interfere with major life activities in 2009, 40% received no treatment. Despite spending on behavioral health care, adults with unmet need report numerous barriers to access, including factors such as cost, lack of time, and not knowing where to go for treatment, among others. The federal government has a role in both the financing and the delivery of behavioral health care services, as a payer, regulator, and provider. It pays for behavioral health care services through the Medicare and Medicaid programs and, in its role as regulator, has required the establishment and coverage of a minimum set of benefits, including behavioral health care services, for many private health plans, as well as the Medicaid program. It supports the delivery of safety net services as a direct provider (e.g., Indian Health Service) and through the development and training of safety net health care providers (e.g., the National Health Service Corps). The federal government supports both clinical training for the behavioral health workforce as well as programs to alleviate provider shortages. Given the investment in these programs, among others, the financing and the delivery of behavioral health care services are likely to be of interest to Congress. Congressional interest in behavioral health care is reflected in the recently enacted health reform law (Patient Protection and Affordable Care Act [PPACA], P.L. 111-148 , as amended). Although transforming the behavioral health care delivery system was not an explicit focus of the law, it includes sections that are expected to increase access to behavioral health services through changes to the financing and the delivery of health care services. Changes to financing affect both financing arrangements (e.g., public programs like Medicare and Medicaid, as well as private health insurance) and coverage of specific services (i.e., covered benefits) under those arrangements. Changes to the delivery system affect (among other things) the delivery of safety net services and the development of the health workforce. PPACA includes sections that are specific to behavioral health, as well as broad reforms to health care financing and delivery that will affect behavioral health. This report provides an overview of sections in PPACA identified as having relevance to behavioral health. It first discusses these sections broadly in the context of both financing and delivery of behavioral health care services. It then presents relevant sections from the law, and selected information about each section, in a series of eight tables (see Tables 1 through 8 ). Access to health care services is determined by multiple factors, including (among other things) financing arrangements and covered benefits. Addressing both components concomitantly may increase access to care more efficiently than addressing each component independently. For example, if existing financing arrangements are augmented or new arrangements are created, access will increase only to those services that are covered. Similarly, if benefits under existing financing arrangements are expanded (as through a coverage mandate) or the terms of those services are altered (as through mental health parity law ), these changes are relevant only for those individuals participating in the financing arrangement. This section briefly discusses sections in PPACA that address these dimensions of access to care and that are relevant to behavioral health. PPACA may increase access to behavioral health services by increasing the availability and affordability of financing arrangements. As of 2006, nonelderly adults with evidence of mental illness had higher rates of uninsurance (37% versus 27%), higher rates of public coverage through Medicaid and/or Medicare (24% versus 6%), and lower rates of coverage by private health insurance (39% versus 66%), when compared to nonelderly adults with no evidence of mental illness. PPACA is expected to increase the number of people with behavioral health disorders who have health coverage, through (1) expansion of Medicaid eligibility, (2) market reforms for private health insurance, and (3) creation of health insurance exchanges. Medicaid Expansion. PPACA creates a new Medicaid eligibility category for specified individuals with incomes up to 133% of federal poverty level. This expansion is particularly relevant for behavioral health, as Medicaid is the largest source of financing for behavioral health services and targets populations that are less likely to have other financing arrangements and more likely to need behavioral health services. Researchers estimate that after the implementation of PPACA, the number of users of behavioral health services in the Medicaid program will increase by approximately 2.3 million. Private Health Insurance Market Reforms. PPACA contains many sections requiring reforms to the private health insurance market; these reforms are expected to increase access to the private market generally by removing many existing coverage eligibility requirements. The numerous reforms include, among others, guaranteed issue and renewal of policies; a prohibition on discrimination based on preexisting conditions or health status; a prohibition on rescissions; and limits on the factors that may be considered when pricing plans (community rating). Considered together, these reforms will allow some individuals with behavioral health disorders to purchase private insurance that previously would have been either unavailable to or unaffordable for them (due, for example, to the designation of a behavioral health disorder as a preexisting condition). Health Insurance Exchanges. PPACA requires and supports states' creation by 2014 of "American Health Benefit Exchanges." State-based exchanges are marketplaces where individuals and employers may purchase comprehensive private health insurance plans. Exchanges may decrease the cost of coverage for certain individuals through risk-pooling, thereby making private health insurance more affordable. Additional responsibilities of the exchanges include certifying plans and identifying individuals eligible for Medicaid, CHIP, and premium and cost-sharing credits. Some individuals with behavioral health disorders who are currently uninsured may be able to purchase insurance through the exchanges. As noted previously, the effect of expanding financing arrangements on access to care is dependent, in part, on the benefits covered under those arrangements. Coverage of benefits may be considered both as a question of whether a particular service is covered at all, and as a question of the conditions under which the service is covered. PPACA contains sections that will affect both the coverage of behavioral health services, as well as the conditions under which those services are covered. Specifically, PPACA addresses coverage of behavioral health care services through (1) essential health benefits and (2) mental health parity. Essential Health Benefits. PPACA creates a partial coverage mandate for mental health and substance use disorder services. As mentioned above, PPACA enables the establishment of exchanges. Plans offered in the exchanges, the Qualified Health Plans (QHPs), must meet a number of requirements, one of which is the offering of a minimum set of benefits (the Essential Health Benefits [EHB]). These benefits are statutorily defined to include mental health and substance use disorder services. PPACA does not require all plans to offer the EHB. It specifically requires four types of plans to offer the EHB: (1) new plans offered through the individual market, (2) new plans offered through the small group market, (3) QHPs offered inside and outside the exchanges, and (4) certain Medicaid plans, specifically, the benchmark and benchmark equivalent plans. Mental Health Parity. PPACA affects the terms under which behavioral health services are offered by expanding the applicability of federal mental health parity law. The goal of federal parity law is to make coverage terms for mental health and substance use disorder services, when those services are offered, no more restrictive than those terms for medical and surgical services. PPACA builds on existing federal parity law by expanding the requirement for compliance with the law to three types of plans: (1) QHPs offered through the exchanges, (2) plans offered through the individual market, and (3) Medicaid benchmark and benchmark-equivalent plans (that are not managed care plans). Access to care is not merely a matter of financing; it also depends on the health care service delivery system. PPACA contains sections that are likely to affect the way in which health care services are delivered. Two major aspects of the health care service delivery system addressed by PPACA are the safety net and the health care workforce. In addition, a number of sections establish models of patient-centered care that aim to improve health outcomes, increase coordination of care, and integrate behavioral health care services into mainstream clinical settings. This section briefly discusses sections in PPACA that address these dimensions of the health care service delivery system and that are relevant to behavioral health. Safety net facilities, such as community health centers (CHCs), are an important source of care for individuals with behavioral health disorders; as of 2003, more clinical visits at CHCs were attributed to behavioral health disorders than to any other condition. PPACA contains sections that directly appropriate funding for the construction and operation of safety net facilities, including CHCs and other types of health centers. PPACA funding is expected to contribute significantly to increased capacity in the safety net; for example, between 2009 and 2015, health center caseloads are expected to increase from 19 million to between 34 million (assuming mandatory funding levels) and 44 million (assuming appropriation of authorized funding levels). PPACA includes sections that are expected to affect the health care workforce providing behavioral health care services through the development of the safety net workforce, incentives to increase the supply of primary care physicians, and efforts to alleviate mental health provider shortages. Between 1998 and 2003, the average number of behavioral health patients per CHC nearly tripled (from 302 to 899); at the same time, the average number of behavioral health providers per CHC remained level, and the average number of primary care providers per CHC increased. Researchers have speculated that primary care providers may be delivering most of the behavioral health care services in CHCs. PPACA incentivizes the development of the safety net workforce through increased National Health Service Corps (NHSC) funding; targeted loan repayment programs; and incentives to teaching health centers to establish or expand residency training programs, among other things. Additionally, PPACA includes funding for training in primary care and for education of primary care providers specifically about behavioral health services, among other workforce sections. As of July 2011, 95 million Americans lived in 3,770 areas designated as mental health professional shortage areas by the Health Resources and Services Administration (HRSA); HRSA estimates that an additional 6,221 practitioners would be required to meet the need for mental health providers in these shortage areas. In addition to the efforts noted above to expand the safety net workforce, and specifically primary care physicians, PPACA creates a program targeting training funds for specific types of mental health professionals who will be treating high-need or vulnerable populations. PPACA includes a number of sections that aim to incentivize changes to the delivery of health care services, and that are likely to affect the delivery of behavioral health services. Specifically, PPACA sections support models of care that are patient-centered with an emphasis on improved care coordination; the integrated delivery of behavioral health care services with other health care services; and an increased emphasis on primary and preventive care. The law creates the option for states to establish "health homes" for individuals with chronic conditions, including behavioral health disorders, in the Medicaid program. New grant programs will support educating primary care physicians about behavioral health care services and the co-location of primary and specialty care in community-based mental health settings. Sections in PPACA identified as being relevant to behavioral health care have been divided into nine tables. The first five tables address topics described under " PPACA and Financing of Behavioral Health Care ": (1) essential health benefits; (2) mental health parity; (3) private health insurance; (4) Medicare; and (5) Medicaid. The remaining tables address topics described under " PPACA and Delivery of Behavioral Health Care ": (6) safety net services; (7) workforce; and (8) miscellaneous sections (e.g., sections on research, education or community-based services, among others). Relevant Indian Health Service (IHS) sections are in Appendix A . In each table, sections are presented by relevant issue area; for example, the private health insurance sections are divided into those relating to (1) private market reforms and (2) the health insurance exchanges. Each table then presents a description of the section, its section number, and whether it is a new or existing authority. Finally, each table indicates whether the section is specific to behavioral health (noted with "S"), or is general in nature (noted with "G"), but affects behavioral health care providers or their patients. Sections may appear in multiple tables, where relevant, as the tables are not mutually exclusive. Appendix A. Indian Health Service Sections Relevant to Behavioral Health in the Patient Protection and Affordable Care Act of 2010 (P.L. 111-148, as amended) Appendix B. Search Strategy This report provides information about sections in the Patient Protection and Affordable Care Act of 2010 (PPACA, P.L. 111-148) that relate directly or indirectly to behavioral health. In order to identify relevant sections, a search was performed of the consolidated Act using the following terms: "behavioral," " mental," "psych," and "substance." In consultation with other CRS analysts, the resulting list of sections was revised by including additional sections that would have an impact on behavioral health care providers and their patients, and excluding sections that would not. Because there is neither a specific part of PPACA dedicated to behavioral health nor standard language applied to all relevant sections, CRS is unable to ensure that the listing it has provided is comprehensive. Appendix C. Acronym Listing The following acronyms appear in this report: Area Health Education Center (AHEC) Centers for Disease Control and Prevention (CDC) Centers for Medicare & Medicaid Services (CMS) Community Health Center Fund (CHCF) Department of Health and Human Services (HHS) Department of the Interior (DOI) Federal medical assistance percentage (FMAP) Food and Drug Administration (FDA) Health Care and Education Reconciliation Act of 2010 (HCERA) Health Professional Shortage Area (HPSA) Home and Community-Based Services (HCBS) Indian Health Care Improvement Act (IHCIA) Indian Health Service (IHS) Indian Tribe (IT) Institutions for Mental Disease (IMD) Long-Term Care (LTC) Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) National Health Service Corps (NHSC) Patient Protection and Affordable Care Act of 2010 (PPACA) Pharmaceutical Research and Manufacturers of America (PhRMA) Public Health Service Act (PHSA) School-Based Health Center (SBHC) Social Security Act (SSA) Substance Abuse and Mental Health Services Administration (SAMHSA) Tribal Organization (TO) Urban Indian Organization (UIO)
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Behavioral health disorders (including both mental disorders and substance use disorders) affect a large number of people and contribute costs to the health care system, even as indicated treatment is often not received by individuals in need. In the United States, an estimated 26% of non-institutionalized adults experience behavioral health disorders in a given year; over the course of a lifetime, the estimate rises to 46%. One study estimated spending on behavioral health care in 2005 to be $135 billion, of which $40 billion was paid by the federal government (including $10 billion by Medicare) and $44 billion by state governments. Both higher and lower cost estimates have been found in other studies. Among U.S. adults suffering from a behavioral health disorder severe enough to interfere with major life activities in 2009, 40% received no treatment; despite spending on behavioral health care, cost remains the most common barrier to treatment reported by adults with unmet need. The federal government has a role in both the financing and delivery of behavioral health care services, as a payer, regulator, and provider, and as such, Congress may have an interest in behavioral health care broadly. This interest was reflected in the recently enacted health reform law (Patient Protection and Affordable Care Act [PPACA], P.L. 111-148, as amended). Although transforming the behavioral health care delivery system was not an explicit focus of the law, it includes sections that are expected to increase access to behavioral health services through changes to the financing and delivery of health care services. This report provides an overview of sections in the health reform law that are expected to affect the financing and delivery of behavioral health care services. Access to health care services is determined by multiple factors, including (among other things) financing arrangements and covered benefits. PPACA may increase access to behavioral health services by increasing the availability and affordability of financing arrangements; the law also contains sections that will affect both the coverage of behavioral health services, as well as the conditions under which those services are covered. In addition, PPACA contains sections that are likely to affect the way in which health care services are delivered, specifically through changes to the workforce, the safety net, and new care delivery models. The report concludes by presenting the relevant sections in a series of nine tables: (1) essential health benefits; (2) mental health parity; (3) private health insurance; (4) Medicare; (5) Medicaid; (6) safety net services; (7) workforce; (8) miscellaneous sections (e.g., sections on research, education, or community-based services, among others); and (9) relevant Indian Health Service (IHS) sections (in an appendix).
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While the Constitution, as amended by the 25 th Amendment, provides that the Vice President will succeed to the nation's highest office on the death, resignation, or removal from office of the President, it delegates authority for succession beyond the Vice President to Congress. Over the past two centuries, Congress has exercised its authority in three succession acts, in 1792, 1886, and 1947. It has also added to, revised, and clarified the succession process by the 20 th Amendment, proposed by Congress in 1932 and ratified by the states in 1933, and the 25 th Amendment, proposed in 1965 and ratified in 1967. The Succession Act of 1947 (61 Stat. 380, 3 U.S.C. § 19) and the two amendments currently govern succession to the presidency. Despite occasional discussions, presidential succession was widely considered a settled issue prior to the terrorist attacks of September 11, 2001. These events demonstrated the potential for a mass "decapitation" of both the legislative and executive branches of government, and raised questions as to whether current arrangements were adequate to guarantee continuity in Congress and the presidency under such circumstances. With respect to presidential succession, there has been a wide range of discussions in both Congress and the public policy community since that time, and Members of both houses have introduced legislation addressing this question in the contemporary context. Legislation proposed in the 109 th Congress fell into two basic categories: bills to expand the line of succession to incorporate the Secretary of Homeland Security (DHS) into the order of succession, and those that sought a more extensive overhaul of succession policies and procedures. The 109 th Congress did not, however, pass a free standing presidential succession bill of either variety; instead, it incorporated the office of Secretary of Homeland Security into the line of succession in Title V of the USA Patriot Improvement and Reauthorization Act of 2005 ( P.L. 109-177 , 120 Stat. 192). Article II of the Constitution, as originally adopted, provided the most basic building block of succession procedures, stating that: In Case of the Removal of the President from Office, or of his Death, Resignation or Inability to discharge the Powers and Duties of the said Office, the Same shall devolve on the Vice President, and the Congress may by Law provide for the Case of Removal, Death, Resignation or Inability, both of the President and Vice President, declaring what Officer shall then act as President, and such Officer shall act accordingly until the Disability be removed, or a President shall be elected. This language evolved during the Constitutional Convention of 1787. The two most important early drafts of the Constitution neither provided for a Vice President nor considered succession to the presidency, and it was only late in the convention proceedings that the office of Vice President emerged and the language quoted above was adopted. While the need for a Vice President was debated during the ratification process, the question of succession received little attention, meriting only one reference in the supporting Federalist papers: "the Vice-President may occasionally become a substitute for the President, in the supreme Executive magistracy." The Second Congress (1791-1793) exercised its constitutional authority to provide for presidential vacancy or inability in the Succession Act of 1792 (1 Stat. 240). After examining several options, including designating the Secretary of State or Chief Justice as successor, Congress settled on the President Pro Tempore of the Senate and the Speaker of the House of Representatives, in that order. These officials were to succeed if the presidency and vice presidency were both vacant. During House debate on the bill, there was considerable discussion of the question of whether the President Pro Tempore and the Speaker could be considered "officers" in the sense intended by the Constitution. If so, they were eligible to succeed, if not, they could not be included in the line of succession. The House expressed its institutional doubts when it voted to strike this provision, but the Senate insisted on it, and it became part of the bill enacted and signed by the President. Although the Speaker and President Pro Tempore were thus incorporated in the line of succession, they would serve only temporarily, however, since the act also provided for a special election to fill the vacancy, unless it occurred late in the last full year of the incumbent's term of office. Finally, this and both later succession acts required that designees meet the constitutional requirements of age, residence, and natural born citizenship. The first succession of a Vice President occurred when President William Henry Harrison died in 1841. Vice President John Tyler's succession set an important precedent and settled a constitutional question. Debate at the Constitutional Convention, and subsequent writing on succession, indicated that the founders intended the Vice President to serve as acting President in the event of a presidential vacancy or disability, assuming "the powers and duties" of the office, but not actually becoming President. Tyler's status was widely debated at the time, but the Vice President decided to take the presidential oath, and considered himself to have succeeded to Harrison's office, as well as to his powers and duties. After some discussion of the question, Congress implicitly ratified Tyler's decision by referring to him as "the President of the United States." This action set a precedent for succession that subsequently prevailed, and was later formally incorporated into the Constitution by Section 1 the 25 th Amendment. President James A. Garfield's death led to a major change in succession law. Shot by an assassin on July 2, 1881, the President struggled to survive for 79 days before succumbing to his wound on September 19. Vice President Chester A. Arthur took office without incident, but the offices of Speaker and President Pro Tempore were vacant throughout the President's illness, due to the fact that the House elected in 1880 had yet to convene, and the Senate had been unable to elect a President Pro Tempore because of partisan strife. Congress subsequently passed the Succession Act of 1886 (24 Stat. 1) in order to insure the line of succession and guarantee that potential successors would be of the same party as the deceased incumbent. This legislation transferred succession after the Vice President from the President Pro Tempore and the Speaker to cabinet officers in the chronological order in which their departments were created, provided they had been duly confirmed by the Senate and were not under impeachment by the House. Further, it eliminated the requirement for a special election, thus ensuring that any future successor would serve the full balance of the presidential term. This act governed succession until 1947. Section 3 of the 20 th Amendment, ratified in 1933, clarified one detail of presidential succession procedure by declaring that, if a President-elect dies before being inaugurated, the Vice President-elect becomes President-elect and is subsequently inaugurated. In 1945, Vice President Harry S Truman succeeded as President on the death of Franklin D. Roosevelt. Later that year, he proposed that Congress revise the order of succession, placing the Speaker of the House and the President Pro Tempore of the Senate in line behind the Vice President and ahead of the cabinet. The incumbent would serve until a special election, scheduled for the next intervening congressional election, filled the presidency and vice presidency for the balance of the term. Truman argued that it was more appropriate to have popularly elected officials first in line to succeed, rather than appointed cabinet officers. A bill incorporating the President's proposal, minus the special election provision, passed the House in 1945, but no action was taken in the Senate during the balance of the 79 th Congress. The President renewed his call for legislation when the 80 th Congress convened in 1947, and legislation was introduced in the Senate the same year. Debate on the Senate bill centered on familiar questions: whether the Speaker and President Pro Tempore were "officers" in the sense intended by the Constitution; whether legislators were well-qualified for the chief executive's position; whether requiring these two to resign their congressional membership and offices before assuming the acting presidency was fair. In the event, the Senate and House passed legislation that embodied Truman's request, but again deleted the special election provisions. Under the act (61 Stat. 380, 3 U.S.C.§19), if both the presidency and vice presidency are vacant, the Speaker succeeds (after resigning the speakership and his House seat). If there is no Speaker, or if he does not qualify, the President Pro Tempore succeeds, under the same requirements. If there is neither a Speaker nor President Pro Tempore, or if neither qualifies, then cabinet officers succeed, under the same conditions as applied in the 1886 act (see Table 3 for departmental order in the line of succession). Any cabinet officer acting as President under the act may, however, be supplanted by a "qualified and prior-entitled individual" at any time. This means that if a cabinet officer is serving due to lack of qualification, disability, or vacancy in the office of Speaker or President Pro Tempore, and, further, if a properly qualified Speaker or President Pro Tempore is elected, then they may assume the acting presidency, supplanting the cabinet officer. The Presidential Succession Act of 1947 has been regularly amended to incorporate new cabinet-level departments into the line of succession, and remains currently in force. One anomaly remedied in the 109 th Congress was the fact that the position of Secretary of Homeland Security was not included in the line of presidential succession when the Homeland Security Act of 2002 ( P.L. 107-296 , 116 Stat. 2135) established the Department of Homeland Security in November, 2002. Free standing legislation to remedy this omission was introduced in the 108 th and 109 th Congresses, but no action was taken on these bills. Instead, the 109 th Congress updated the order of succession when it incorporated the office of Secretary of Homeland Security into the line of succession as a provision of Title V of the USA Patriot Authorization and Improvement Act of 2005 ( P.L. 109-177 , 120 Stat. 192). The 1963 assassination of President John F. Kennedy helped set events in motion that culminated in the 25 th Amendment to the Constitution, a key element in current succession procedures. Although Vice President Lyndon B. Johnson succeeded without incident after Kennedy's death, it was noted at the time that Johnson's potential immediate successor, House Speaker John W. McCormack, was 71 years old, and Senate President Pro Tempore Carl T. Hayden was 86 and visibly frail. In addition, many observers believed that a vice presidential vacancy for any length of time constituted a dangerous gap in the nation's leadership during the Cold War, an era of international tensions and the threat of nuclear war. It was widely argued that there should be a qualified Vice President ready to succeed to the presidency at all times. The 25 th Amendment, providing for vice presidential vacancies and presidential disability, was proposed by the 89 th Congress in 1965 and approved by the requisite number of states in 1967. The 25 th Amendment is the cornerstone of contemporary succession procedures. Section 1 of the amendment formalized traditional practice by declaring that, "the Vice President shall become President [emphasis added]" if the President is removed from office, dies, or resigns. Section 2 empowered the President to nominate a Vice President whenever that office is vacant. This nomination must be approved by a simple majority of Members present and voting in both houses of Congress. Sections 3 and 4 established procedures for instances of presidential disability. Any Vice President who succeeds to the presidency serves the remainder of the term. Constitutional eligibility to serve additional terms is governed by the 22 nd Amendment, which provides term limits for the presidency. Under the amendment, if the Vice President succeeds after more than two full years of the term have expired, he is eligible to be elected to two additional terms as President. If, however, the Vice President succeeds after fewer than two full years of the term have expired, the constitutional eligibility is limited to election to one additional term. Section 2 of the 25 th Amendment has been invoked twice since its ratification: in 1973, when Representative Gerald R. Ford was nominated and approved to succeed Vice President Spiro T. Agnew, who had resigned, and again in 1974, when the former Governor of New York, Nelson A. Rockefeller, was nominated and approved to succeed Ford, who had become President when President Richard M. Nixon resigned (see Table 2 ). While the 25 th Amendment did not supplant the order of succession established by the Presidential Succession Act of 1947, its provision for filling vice presidential vacancies renders recourse to the Speaker, the President Pro Tempore, and the cabinet unlikely, except in the event of an unprecedented national catastrophe. The events of September 11, 2001 and the prospect of a "decapitation" of the U.S. government by an act of mass terrorism have led to a reexamination of many previously long-settled elements of presidential succession and continuity of government on the federal level. A number of proposals to revise the Succession Act of 1947 were introduced in the 108 th and 109 th Congresses. Some of these were in the nature of "housekeeping" legislation; that is, they proposed to insert the office of Secretary of the Department of Homeland Security into the line of succession, as has been done in the past when new cabinet departments are created by Congress. Others proposed more complex changes in the legislation. This growth of concern over succession issues in the wake of 9/11 was further reflected in the fact that the Senate Committees on Rules and Administration and the Judiciary held a joint informational hearing on September 16, 2003, and the House Judiciary Committee's Subcommittee on the Constitution conducted a hearing on the succession question on October 6, 2004. On both occasions, witnesses offered a wide range of viewpoints and various legislative and other options. The question of continuity of government in the executive branch has also been addressed by a non-governmental organization, the Continuity of Government Commission, sponsored by the American Enterprise Institute of Washington, D.C. For additional information on the commission and its activities, consult: http://www.continuityofgovernment.org/home.html . Several issues dominate current discussions over revising the order of presidential succession. Some are "hardy perennials," constitutional questions that have risen in every debate on succession law, and have been cited earlier in this report. There is no question as to Congress's constitutional ability to provide for presidential succession. This power is directly granted by Article II, Section 1, clause 6, modified by the 25 th Amendment, as noted earlier in this report. What the Constitution means by the word "Officer", however, has been perhaps the most durable element in the succession debate over time. The succession acts of both 1792 and 1947 assumed that the language was sufficiently broad as to include officers of Congress, the President Pro Tempore of the Senate and the Speaker of the House of Representatives. Some observers assert that these two congressional officials are not officers in the sense intended by the Constitution, and that the 1792 act was, and the 1947 act is, constitutionally questionable. Attorney Miller Baker explained this hypothesis in his testimony before hearings held jointly by the Senate Committees on the Judiciary Committee and on Rules and Administration in 2003: The Constitution is emphatic that members of Congress are not "Officers of the United States." The Incompatibility Clause of Article I, Section 6, clause 2 provides that "no Person holding any Office under the United States, shall be a Member of either House during his Continuance in Office." In other words, members of Congress by constitutional definition cannot be "Officers" of the United States. This point was raised in congressional debate over both the Succession Act of 1792 and that of 1947. In the former case, opinion appears to have been divided: James Madison (arguably the single most formative influence on the Constitution, and a serving Representative when the 1792 act was debated) held that officers of Congress were not eligible to succeed. Other Representatives who had also served as delegates to the Constitutional Convention were convinced to the contrary. In addition, political issues also contributed to the debate in 1792. Fordham University Law School Dean John D. Feerick, writing in From Failing Hands: The Story of Presidential Succession , noted that the Federalist-dominated Senate insisted on inclusion of the President Pro Tempore and the Speaker, and excluded the Secretary of State, largely because of its distrust of Thomas Jefferson, who was Secretary of State and leader of the Anti-Federalists, a group that later emerged as the Jeffersonian Republican, or Democratic Republican, Party. Questions as to the constitutional legitimacy of the Speaker and the President Pro Tempore as potential successors to the President and Vice President recurred during debate on the 1947 succession act. At that time, Feerick notes, long acceptance of the 1792 act, passed by the Second Congress, which presumably had first-hand knowledge of original intent in this question, was buttressed as an argument by the Supreme Court's decision in Lamar v. United States . Professor Howard Wasserman, of the Florida International University School of Law, introduced another argument in support of the Speaker's and President Pro Tempore's inclusion in the order of succession in his testimony before the 2003 joint hearing held by the Senate Judiciary Committee and the Committee on Rules and Administration: The Succession Clause [of the Constitution] provides that "Congress may by Law provide for the Case of Removal, Death, Resignation or Inability, both of the President and the Vice President, declaring what Officer shall then act as President and such Officer shall act accordingly." ... This provision refers to "officers," unmodified by reference to any department or branch. Elsewhere, the Constitution refers to "Officers of the United States" or "Officers under the United States" or "civil officers" in contexts that limit the meaning of those terms only to executive branch officers, such as cabinet secretaries. The issue is whether the unmodified "officer" of the Succession Clause has a broader meaning. On one hand, it may be synonymous with the modified uses of the word elsewhere, all referring solely to executive branch officials, in which case the Speaker and the President Pro Tem cannot constitutionally remain in the line of succession. On the other hand, the absence of a modifier in the Succession Clause may not have been inadvertent. The unmodified term may be broader and more comprehensive, covering not only executive-branch officers, but everyone holding a position under the Constitution who might be labeled an officer. This includes the Speaker and President Pro Tem, which are identified in Article I as officers of the House and Senate, respectively. Given the diversity of opinion on this question, and the continuing relevance of historical practice and debate, the issue of constitutional legitimacy remains an important element of any congressional effort to amend or replace the Succession Act of 1947. A second category of succession issues includes political questions, and administrative concerns. The latter have become increasingly urgent following the terrorist attacks of September 11, 2001. These interrelated issues collectively comprise what might be termed the political aspect of presidential succession. The first, democratic principle, was perhaps the dominant factor contributing to the passage of the 1947 succession act. Simply stated, it is the assertion that presidential and vice presidential succession should be settled first on popularly elected officials, rather than the appointed members of the Cabinet, as was the case under the 1886 act. According to Feerick, the 1886 act's provisions aroused criticism not long after Vice President Harry Truman became President on the death of Franklin D. Roosevelt. President Truman responded less than two months after succeeding to the presidency, when he proposed to Congress the revisions to succession procedures that, when amended, eventually were enacted as the Succession Act of 1947. The President explained his reasoning in his special message to Congress on the subject of succession to the presidency: ... by reason of the tragic death of the later President, it now lies within my power to nominate the person who would be my immediate successor in the event of my own death or inability to act. I do not believe that in a democracy this power should rest with the Chief Executive. In so far as possible, the office of the President should be filled by an elective officer. There is no officer in our system of government, besides the President and Vice President, who has been elected by all the voters of the country. The Speaker of the House of Representatives, who is elected in his own district, is also elected to be the presiding officer of the House by a vote of all the Representatives of all the people of the country. As a result, I believe that the Speaker is the official in the Federal Government, whose selection next to that of the President and Vice President, can be most accurately said to stem from the people themselves. Conversely, critics of this reasoning assert that the Speaker, while chosen by a majority of his peers in the House, has won approval by the voters only in his own congressional district. Further, although elected by the voters in his home state, the President Pro Tempore of the Senate serves as such by virtue of being the Senator of the majority party with the longest tenure. Against the case for democratic succession urged by President Truman, the value of party continuity is asserted by some observers. The argument here is that a person acting as President under these circumstances should be of the same political party as the previous incumbent, in order to assure continuity of the political affiliation, and, presumably, the policies, of the candidate chosen by the voters in the last election. According to this reasoning, succession by a Speaker or President Pro Tempore of a different party would be a reversal of the people's mandate that would be inherently undemocratic. Moreover, they note, this possibility is not remote: since passage of the Succession Act of 1947, the nation has experienced "divided government," that is, control of the presidency by one party and either or both houses of Congress by another, for 34 of the 58 intervening years. As Yale University Professor Akhil Amar noted in his testimony at the 2003 joint Senate committee hearing, "... [the current succession provisions] can upend the results of a Presidential election. If Americans elect party A to the White House, why should we end up with party B?" At the same hearing, another witness argued that, "This connection to the President ... provides a national base of legitimacy to a cabinet officer pressed to act as President. The link between cabinet officers and the President preserves some measure of the last presidential election, the most recent popular democratic statement on the direction of the executive branch." Some observers also question the potential effect on conduct of the presidency if the Speaker or President Pro Tempore were to succeed. Would these persons, whose duties and experience are essentially legislative, have the skills necessary to serve as chief executive? Moreover, it is noted that these offices have often been held by persons in late middle age, or even old age, whose health and energy levels might be limited. As Miller Baker noted in his testimony before the 2003 joint committee hearings, "... history shows that senior cabinet officers such as the Secretary of State and the Secretary of Defense are generally more likely to be better suited to the exercise of presidential duties than legislative officers. The President pro tempore, traditionally the senior member of the party in control of the Senate, may be particularly ill-suited to the exercise of presidential duties due to reasons of health and age." Conversely, it can be noted that the Speaker, particularly, has extensive executive duties, both as presiding officer of the House, and as de facto head of the extensive structure of committees, staff, and physical installations that comprise the larger entity of the House of Representatives. Moreover, it can be argued that the speakership has often been held by men of widely recognized judgment and ability, e.g., Sam Rayburn, Nicholas Longworth, Joseph Cannon, and Thomas Reed. This question centers on the 1947 Succession Act provision that officers acting as President under the act do so only until the disability or failure to qualify of any officer higher in the order of succession is removed. If the disability is removed, the previously entitled officer can supplant ("bump") the person then acting as President. For instance, assuming the death, disability, or failure to qualify of the President, Vice President, the Speaker, the President Pro Tempore, or a senior cabinet secretary is acting as President. Supplantion could take place under any one of several scenarios. Death of the President, Vice President, Speaker and President Pro Tempore: the senior cabinet secretary is acting as President. The House elects a new Speaker, who, upon meeting the requirements, i.e., resigning as a House Member and as Speaker, then "bumps" the cabinet secretary, and assumes the office of Acting President. If the President Pro Tempore were serving as Acting President, he or she could be similarly bumped by a newly-elected Speaker. Both persons would be out of a job under this scenario: the President Pro Tempore, by virtue of having resigned as Member and officer of Congress in order to become Acting President, and the senior cabinet secretary, by virtue of the fact that, under the act, "The taking the oath of office ... [by a cabinet secretary] shall be held to constitute his resignation from the office by virtue of the holding of which he qualifies to act as President." Disability of the President and Vice President: the Speaker is Acting President. Either the President or Vice President could supplant after recovering, but the Speaker, or the President Pro Tempore, should that officer be acting, would be out of a job, due to the requirements noted above. Failure to Qualify of the Speaker or President Pro Tempore: the President and Vice President are disabled, or the offices are vacant. The Speaker and the President Pro Tempore decline to resign their congressional membership and offices, and the acting presidency passes to the senior cabinet officer. At some point, the Speaker or the President Pro Tempore decides to claim the acting presidency, resigns, and "bumps" the serving cabinet secretary. The same scenario could occur to a President Pro Tem supplanted by the Speaker. Critics assert that the supplantation provisions could lead to dangerous instability in the presidency during a time of national crisis: Imagine a catastrophic attack kills the president, vice-president and congressional leadership. The secretary of state assumes the duties of the presidency. But whenever Congress elects a new Speaker or president pro tem, that new leader may 'bump' the secretary of state. The result would be three presidents within a short span of time. Moreover, as noted previously, any person who becomes acting President must resign his previous position, in the case of the Speaker and President Pro Tempore, or have his appointment vacated by the act of oath taking. It is certainly foreseeable that public officials might hesitate to forfeit their offices and end their careers before taking on the acting presidency, particularly if the prospect of supplantation loomed. The "bumping" question has been used by critics of legislative succession as an additional argument for removing the Speaker and President Pro Tempore from the line of succession. Another suggested remedy would be to amend the Succession Act of 1947 to eliminate the right of "prior entitled" individuals to supplant an acting President who is acting due to a vacancy in the office of President and Vice President. Relatedly, other proposals would amend the law to permit cabinet officials to take a leave of absence from their departments while serving as acting President in cases of presidential and vice presidential disability. They could thus return to their prior duties on recovery of either the President and Vice President, and their services would not be lost to the nation, nor would there be the need to nominate and confirm a replacement. The related issue of succession during presidential campaigns and during the transition period between elections and the inauguration has been the subject of renewed interest since the terrorist attacks of September 11, 2001. The salient elements of this issue come into play only during elections when an incumbent President is retiring, or has been defeated, and the prospect of a transition between administrations looms, but uncertainties about succession arrangements during such a period have been cause for concern among some observers. Procedures governing these eventualities depend on when a vacancy would occur. Between Nomination and Election . This first contingency would occur if there were a vacancy in a major party ticket before the presidential election. This possibility has been traditionally covered by political party rules, with both the Democrats and Republicans providing for replacement by their national committees. For example, in 1972, the Democratic Party filled a vacancy when vice presidential nominee Senator Thomas Eagleton resigned at the end of July, and the Democratic National Committee met on August 8 of that year to nominate R. Sargent Shriver as the new vice presidential candidate. Between the Election and the Meeting of the Electors . The second would occur in the event of a vacancy after the election, but before the electors meet to cast their votes in December. This contingency has been the subject of speculation and debate. Some commentators suggest that, the political parties, employing their rules providing for the filling of presidential and vice presidential vacancies, would designate a substitute nominee. The electors, who are predominantly party loyalists, would presumably vote for the substitute nominee. Given the unprecedented nature of such a situation, however, confusion, controversy, and a breakdown of party discipline among the members of the electoral college might also arise, leading to further disarray in what would already have become a problematical situation. Between the Electoral College Vote and the Electoral Vote Count by Congress . A third contingency would occur if there were a vacancy in a presidential ticket during the period between the time when the electoral votes are cast (Monday after the second Wednesday in December) and when Congress counts and certifies the votes (January 6). The succession process for this contingency turns on when candidates who have received a majority of the electoral votes become President-elect and Vice President-elect. Some commentators doubt whether an official President-and Vice President-elect exist prior to the electoral votes being counted and announced by Congress on January 6, maintaining that this is a problematic contingency lacking clear constitutional or statutory direction. Others assert that once a majority of electoral votes has been cast for one ticket, then the recipients of these votes become the President-and Vice President-elect, notwithstanding the fact that the votes are not counted and certified until the following January 6. If so, then the succession procedures of the 20 th Amendment, noted earlier in this report, would apply as soon as the electoral votes were cast; namely, if the President-elect dies, then the Vice President-elect becomes the President-elect. This point of view receives strong support from the language of the House committee report accompanying the 20 th Amendment. Addressing the question of when there is a President-elect, the report states: It will be noted that the committee uses the term "President elect" in its generally accepted sense, as meaning the person who has received the majority of electoral votes, or the person who has been chosen by the House of Representatives in the event that the election is thrown into the House. It is immaterial whether or not the votes have been counted, for the person becomes the President elect as soon as the votes are cast. Between the Electoral Vote Count and Inauguration . As noted previously, the 20 th Amendment covers succession in the case of the President-elect, providing that in case of his death, the Vice President-elect becomes President-elect. Further, a Vice President-elect succeeding under these circumstances and subsequently inaugurated President would nominate a Vice President under provisions of the 25 th Amendment. A major concern that has risen about this period since the terrorist attacks of September 11, 2001, centers on the order of succession under the Succession Act of 1947. What might happen in the event of a mass terrorist attack during or shortly after the presidential inaugural? While there would be a President, Vice President, Speaker, and President Pro Tempore during this period, who would step forward in the event an attack removed these officials? This question takes on additional importance since the Cabinet, an important element in the order of succession, is generally in a state of transition at this time. The previous administration's officers have generally resigned, while the incoming administration's designees are usually in the midst of the confirmation process. It is not impossible to envision a situation in which not a single cabinet officer will have been confirmed by the Senate under these circumstances, thus raising the prospect of a de facto decapitation of the executive branch. This concern has led to several proposals in the 108 th and 109 th Congresses. Succession-related legislative proposals introduced in the 109 th Congress fell into two basic categories. First was "perfecting" legislation that sought to include the Secretary of the Department of Homeland Security (DHS) in the existing order of succession, but would not otherwise have provided major changes in the Succession Act of 1947. Second were proposals that sought broader changes to the existing law. Both categories are analyzed later in this section. While both the House and Senate considered free-standing bills that provided for inclusion of the Secretary of DHS, this action was incorporated into comprehensive legislation to enhance and reauthorize the USA Patriot Act. Two bills to incorporate the Secretary of Homeland Security in the line of succession, S. 422 and H.R. 1455 , were introduced in the 109 th Congress and received action in their respective chambers. Both are analyzed in detail later in this report. At the same time the House and Senate considered these free-standing bills in autumn, 2005, both chambers were also moving toward enactment of comprehensive legislation revising and extending the USA Patriot Act of 2001 ( P.L. 107-56 , 115 Stat. 272). The vehicle for legislation was H.R. 3199 (Representative James Sensenbrenner), which the House passed on July 21, 2005 and the Senate on July 29. The two chambers voted on different versions of the bill, so a conference committee was convened to arrive at a final version of the bill. Neither the House nor Senate versions passed in July included any provisions relating to presidential succession, but language inserting the Secretary of DHS was included as Title V, Section 503, in the report filed by the conferees on December 8. The House agreed to the report on December 14, while the Senate took longer to concur, agreeing to the report on March 2, 2006. President Bush signed the bill into law on March 9. Section 503 reads as follows, "Section 19(d)(1) of Title 3, United States Code, is amended by inserting ', Secretary of Homeland Security' after 'Secretary of Veterans Affairs.'" The record does not reveal any information about the decision to include the DHS Secretary, but it should be noted that the conference report honored tradition by including the secretary at the end of the line of succession, rather than after the Attorney General, as was proposed in both S. 422 and H.R. 1455 . The report's joint explanatory text is similarly economical: "section 503 of the Conference Report is a new section and fills a gap in the Presidential line of succession by including the Secretary of Homeland Security." Perhaps of most immediate interest in the case of presidential succession was the establishment in 2002 of the Department of Homeland Security (DHS). The secretaries of newly-created cabinet-level departments are not automatically included in the order of succession; this is normally accomplished by an appropriate provision in the legislation authorizing the new department. In some instances, however, the secretary's inclusion has been omitted from the authorizing act, and has been accomplished later in "perfecting" legislation. The act establishing the DHS in the 107 th Congress ( P.L. 107-296 ), did not incorporate the secretary of the new department in the line of presidential succession, leading to the introduction of proposals for the secretary's inclusion in the 108 th and 109 th Congresses. The primary purpose of these two 109 th Congress bills was to include the Secretary of Homeland Security in the line of presidential succession. S. 442 was introduced on February 17, 2005, by Senator Michael DeWine, and was cosponsored by Senator Herb Kohl. The companion bill, H.R. 1455 , was introduced in the House on April 5, 2005, by Representative Tom Davis, and was co-sponsored by Representative Todd Platts. Both bills departed from tradition, however, by proposing to place the Secretary of Homeland Security in the line of succession directly following the Attorney General. In this position, the secretary would have been eighth in line to succeed the President, rather than 18 th , at the end of the order, following the Secretary of Veterans Affairs. Had it passed, this realignment would have had historical significance, as the four offices that would immediately precede the Secretary of Homeland Security constitute the original Cabinet, as established between 1789 and 1792 during the presidency of George Washington—the Secretaries of State, the Treasury, Defense, and the Attorney General. They are sometimes referred to as the "big four." This departure from tradition derived from heightened concern over the question of continuity of government. It was argued that the proposed placement of the DHS secretary will have at least two advantages: first, the Department of Homeland Security is one of the largest and most important executive departments, with many responsibilities directly affecting the security and preparedness of the nation. Both its size and crucial role were cited as arguments for placing the Secretary of DHS high in the order of succession. Second, the Secretary of Homeland Security is charged with critically important responsibilities in these areas, and may be expected to possess the relevant knowledge and expertise that arguably justify placing this official ahead of 10 secretaries of more senior departments, particularly in the event an unprecedented disaster were to befall the leadership of the executive branch. On the other hand, the bill was open to criticism on the grounds that it was an exercise in undue alarmism, and that placing the Secretary of Homeland Security ahead of the secretaries of more senior departments might set a questionable precedent, by seeming to elevate the office to a sort of "super cabinet" level that would arguably be inconsistent with its legal status. S. 442 was read twice and referred to the Senate Committee on Rules and Administration on February 17, 2005. On July 26, the committee was discharged by unanimous consent, and the bill passed the Senate without amendment by unanimous consent the same day. S. 442 was received in the House on July 27; it was referred to the House Judiciary Committee and on September 19 further referred to the Subcommittee on the Constitution. No further action was taken during the balance of the 109 th Congress. On April 5, 2005, H.R. 1455 was referred to the House Committee on Government Reform, and in addition, to the House Committee on the Judiciary for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fell within the jurisdiction of the committee concerned. In Judiciary, the bill was subsequently referred to the Subcommittee on the Constitution (on May 10). On October 20, the bill was considered in the Committee on Government Reform, and was reported favorably to the full House by voice vote. No further action was taken during the balance of the 109 th Congress. Other bills introduced in the 109 th Congress called for substantive changes in the order of succession beyond the Vice President. Some of the concerns expressed by critics of the 1947 act were reflected in these proposals, which are examined below. These similar bills were both introduced on April 27, 2005, by Representative Brad Sherman and Senator John Cornyn, respectively. Both would also have added the Secretary of Homeland Security to the order of succession, but they went beyond S. 422 and H.R. 1455 in several respects, addressing various "post-9/11" concerns. The bills would not only have amended the Succession Act, they also expressed the "sense of Congress" on succession contingencies that could occur between a presidential campaign and the inauguration of an incoming President. Section 1 identified each bill's short title, as noted above. Section 2 in each case sought to revise the Succession Act (3 U.S.C. 19) in several respects. First, it would have incorporated the DHS Secretary in the line of succession, but directly following the Secretary of Veterans Affairs, rather than following the Attorney General. It also added the following United States Ambassadors to order of succession, following the DHS Secretary: (1) the United Nations, (2) the United Kingdom (Great Britain), (3) Russia, (4) China, and (5) France. The intent here was to add high-ranking federal officers to the succession list who are normally not physically present in Washington at any given time, thus assuring there would be a President in the event of a worst case scenario, the mass "decapitation" of the U.S. Government's political leadership by a successful attack on the capital. Section 2 in H.R. 1943 would also have revised existing language to establish the use of the term "Acting President" throughout the section. Although the phrase "act as" or "acting as" President appears frequently throughout the section, this language sought to establish the term and the position more solidly in law. Finally, both bills made major changes with respect to succession by cabinet officers. The present mechanisms of succession by the Speaker of the House of Representatives or the President Pro Tempore of the Senate would not change. If, however, a cabinet officer became Acting President, then he or she would continue to serve the balance of the presidential term of office, unless the service was due to disability of the incumbent. In that case, the President or Vice President would resume office once the disability was removed. This provision would have eliminated supplantation or "bumping" of cabinet officers serving as Acting President, thus reducing the potential for executive instability or "revolving door" Presidents, as discussed earlier in this report. In addition, another change to the act proposed to eliminate the provision that acceptance of the acting presidency by a cabinet officer constitutes an automatic resignation from his or her office. This change would have had the effect of allowing a cabinet officer to take a de facto leave of absence to serve as Acting President, particularly if the succession were connected with a disability on the part of the Vice President. This provision addressed several issues cited earlier in this report that have been noted by critics of the Succession Act of 1947. First, by eliminating the displacement of a cabinet officer acting as President, except in cases of presidential or vice presidential inability, it would have removed a potential source of instability: once installed as acting President, the Cabinet officer would remain in this position for the balance of the presidential term, unless, as noted above, the officer were acting due to the presumably temporary inability of the President or Vice President. Further, under these circumstances it would almost certainly have removed the possibility of a President and Vice President being succeeded by an Acting President of a different party, which has proved to be an issue of continuing concern since passage of the Succession Act of 1947. The section concluded by recasting the requirement that any cabinet officer serving as Acting President must hold his or her permanent office "by and with the advice and consent of the Senate, prior to the time the powers and duties of the President devolve to such officer ... and ... not under impeachment by the House of Representatives at the time the powers and duties of the office of the President devolve upon them." Section 2 of both bills proposed routine conforming amendments to the Succession Act's language in the U.S. Code . Section 3 of both bills declared the sense of Congress concerning electoral college procedures in the event a presidential or vice presidential nominee should die or be permanently incapacitated. First, it advised the presidential and vice presidential nominees of political parties to designate substitute candidates who would receive the electoral votes otherwise cast for them if they were to die or be permanently incapacitated. Second, it advised electors pledged to vote for a presidential nominee to cast their electoral votes for the vice presidential nominee if the presidential nominee had died or was permanently incapacitated. Third, if the vice presidential nominee suffered the same circumstances, then the electors were advised to vote for the substitute vice presidential nominee. Finally, if both candidates died or were permanently incapacitated, then the electors were advised to vote for both substitute nominees for President and Vice President. The section concluded by advising the political parties to establish rules and procedures consistent with these practices. The purpose of Section 3 was to eliminate the uncertainties that would surround the death or permanent incapacity of a presidential or vice presidential nominee at any time between the nomination and casting of electoral votes. These issues have been discussed previously in this report under "Succession During Presidential Campaigns and Transitions." Although the political parties would not have been compelled to accept Section 3's recommendations, they (the recommendations) would carry considerable weight as the expressed sense of Congress, while their apparent prudence and common sense might have persuaded the national committees of the major parties to consider them seriously or to adopt them. In this sense, the section provided a template or "model legislation" for the parties. Section 4 declared the sense of Congress that continuity of leadership in the federal government should be assured during periods of presidential transition and inauguration. Section 4 of H.R. 1943 included a preamble that cited the Presidential Transition Act of 1963 (3 U.S.C. 102), which seeks to avoid disruption in the U.S. Government's functions during these periods, and also noted that the National Commission on Terrorist Attacks Upon the United States (the 9/11 Commission) made specific recommendations concerning continuity of government during the transition from an outgoing presidential administration to an incoming one, particularly with respect national security officials. The remainder of Section 4was identical in both bills. It specifically suggested that outgoing Presidents should submit nominations proposed by the President-elect for appointed offices in the line of succession during the transition period. It further urged that the Senate conduct and finalize its confirmation proceedings for these nominations between January 3, the date on which new Congresses convene, and January 20, when new presidential terms begin. Finally, outgoing Presidents were urged to sign and deliver the commissions for these officials before leaving office on January 20. The intention here was to address the contingency identified earlier in this report: the awkward period around the inauguration when the outgoing Cabinet has resigned, but the newly nominated cabinet officers have yet to be approved, and are not yet eligible to succeed to the presidency. Traditionally, Presidents-elect announce their cabinet choices during the transition period that normally takes place between election day and January 20 of the following year, when the newly-elected President actually assumes office. Also during this period, the outgoing President's cabinet officers traditionally submit their resignations, generally effective on or before inauguration day. Although investigations of and hearings on cabinet nominees for an incoming administration are often under way before the changeover, official nominations by an incoming President, and subsequent advice and consent by the Senate, cannot occur until after the new President has assumed office. Frequently, this process continues for some weeks, or longer in the case of controversial or contested nominations, so that the full Cabinet may not be sworn until well after the inauguration. Representative Sherman and Senator Cornyn, sponsors of H.R. 1943 and S. 920 , respectively, and other observers, viewed this gap, particularly in the confirmation and swearing-in of cabinet officers included in the line of succession, as a threat to continuity in both the presidency and in executive branch management. One advantage conferred by this proposal would be that cabinet secretaries, unlike elected officials, do not serve set terms of office which expire on a date certain. Further, the process recommended by H.R. 1943 and S. 920 had the additional advantage of being able to be implemented without legislation or a constitutional amendment. If the level of interpersonal and bipartisan cooperation envisaged in these bills could have been attained, an incoming President might assume office on January 20 with a full Cabinet, or at least key officers in the line of succession (e.g., the Secretaries of State, the Treasury, Defense, and the Attorney General) already sworn and installed, thus reducing the potential for disruption of the executive branch by a terrorist attack. In addition to the national security-related advantage this would confer, it arguably provided an impetus to streamlining the sometimes lengthy and contentious transition and appointments process faced by all incoming administrations. It would also, however, have faced substantial obstacles, since its success would be dependent on high levels of good will and cooperation between incumbent Presidents and their successors, and between the political parties in the Senate. Moreover, it would have imposed a sizeable volume of confirmation-related business on both the lame duck and newly-sworn Congresses during the 10 weeks following a presidential election. During this period, the expiring Congress traditionally adjourns sine die, while the new Congress generally performs only internal business and counts the electoral votes between its own installation on January 3 and the presidential inauguration. H.R. 1943 was referred to the House Committee on the Judiciary on April 27, 2005, while S. 920 was referred to the Senate Committee on Rules and Administration on the same day. No further action was taken on either bill for the balance of the 109 th Congress. Additional succession-related proposals have been offered that have not been introduced as legislation. They seek particularly to address post-9/11 concerns over the prospect of a "decapitation" of the U.S. government by a terrorist attack or attacks, possibly involving the use of weapons of mass destruction. One proposal, suggested by John C. Fortier at joint Senate committee hearings held in September, 2003, would have Congress establish a number of additional federal officers whose specific duties and function would be to be ready to assume the acting presidency if necessary. Fortier envisions that the President would appoint them, subject to Senate confirmation, and that obvious candidates would be governors, former presidents, vice presidents, cabinet officers, and Members of Congress, in other words, private citizens who have had broad experience in government. They would receive regular briefings, and would also serve as advisors to the President. A further crucial element is that they would be located outside the Washington, D.C. area, in order to be available in the event of a governmental "decapitation." Fortier further suggested that these officers should be included ahead of cabinet officers "lower in the line of succession." Although he was not more specific in his testimony, it could be argued that these officers might be inserted after the "big four", i.e., the Secretaries of State, the Treasury, and Defense, the Attorney General, and, possibly the Secretary of Homeland Security, should that officer be included at that place, as proposed in some pending legislation. Miller Baker offered other proposals during his testimony at the September, 2003, hearings, all of which would require amending the Succession Act of 1947. Under one, the President would be empowered to name an unspecified number of state governors as potential successors. The constitutional mechanism here would be the President's ability to call state militias (the National Guard) into federal service. Baker argues that, by virtue of their positions as commanders-in-chief of their state contingents of the National Guard, governors could, in effect be transformed into federal "officers" by the federalization of the Guard. Another proposal by Fortier would amend the Succession Act to establish a series of assistant vice presidents, nominated by the President, and subject to approval by advice and consent of the Senate. These officers would be included in the order of succession at an appropriate place. They would be classic "stand-by" equipment: their primary function would be to be informed, prepared, and physically safe, ready to serve as Acting President, should that be required. Professor Akhil Amar proposed a similar measure, that the cabinet position of assistant vice president established by law, again, nominated by the President and subject to confirmation by the Senate. In his testimony before the September, 2003, joint Senate committee hearings, he suggested that presidential candidates should announce their choices for this office during the presidential campaign. This would presumably enhance the electoral legitimacy of the assistant vice president, as voters would be fully aware of the candidates' choices for this potentially important office, and include this in their voting decisions. A further variant was offered by Howard Wasserman during his joint Senate committee hearing testimony. He suggested establishment of the cabinet office of first secretary, nominated by the President and confirmed by the Senate. The first secretary's duties would be the same as those of the offices proposed above, with special emphasis on full inclusion and participation in administration policies, "This officer must be in contact with the President and the administration, as an active member of the cabinet, aware of and involved in the creation and execution of public policy." Finally, Fortier proposed a constitutional amendment that would eliminate the requirement that successors be officers of the United States, empowering the President to nominate potential successors beyond the Cabinet, subject to advice and consent by the Senate. Such an amendment, he argues, would "... eliminate any doubts about placing state governors in the line of succession, and could provide for succession to the Presidency itself (as opposed to the acting Presidency)." Fortier envisions that these persons would be "eminently qualified" to serve. As examples, he suggested that President George W. Bush might nominate, "... former President George H.W. Bush and former Vice President Dan Quayle, both of whom no longer live in Washington, to serve in the line of succession. Similarly, a future Democratic President might nominate former Vice Presidents Al Gore and Walter Mondale to serve in the statutory line of succession." Seemingly a long-settled legislative and constitutional question, the issue of presidential and vice presidential succession in the United States gained a degree of urgency following the events of September 11, 2001. Old issues have been revisited, and new questions have been asked in light of concerns over a potentially disastrous "decapitation" of the U.S. Government as the result of a terrorist attack, possibly by use of weapons of mass destruction. The 109 th Congress acted to insert the office of Secretary of Homeland Security into the current line of succession—remedying an oversight in the legislation that created the department in 2002—in Title V of the USA Patriot Improvement and Reauthorization Act of 2005 ( P.L. 109-177 , 120 Stat. 192). Further revisions to current succession legislation, especially substantive changes, are less likely in the short run, however, although the foundations for future consideration have been laid. In the private sector, the American Enterprise Institute's Continuity of Government Commission is scheduled to address continuity in the presidency, having completed studies on continuity of the Congress. Further, the hearings conducted in September, 2003 by the Senate Committees on the Judiciary and Rules and Administration and by the House Committee on the Judiciary's Subcommittee on the Constitution in October, 2004, provided a forum for public discussions of current succession provisions, their alleged shortcomings, and a wide range of proposals for change. In the final analysis, however, it could require strong and consistent support from congressional leadership, the pressure of an aroused public, or a galvanizing event in the form of some disaster, or threat of disaster, to move the question of presidential succession in the post 9/11 era to the legislative front burner.
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When the office of President of the United States becomes vacant due to "removal ... death or resignation" of the chief executive, the Constitution provides that "the Vice President shall become President." When the office of Vice President becomes vacant for any reason, the President nominates a successor, who must be confirmed by a majority vote of both houses of Congress. If both offices are vacant simultaneously, the Speaker of the House of Representatives becomes President, after resigning from the House and as Speaker. If the speakership is also vacant, the President Pro Tempore of the Senate becomes President, after resigning from the Senate and as President Pro Tempore. If both offices are vacant, then cabinet officers are eligible to succeed, in the order established by law. All potential successors must be duly sworn in their previous offices and meet the presidency's constitutional requirements of 35 years of age, "natural born" citizenship, and 14 years residence "within the United States." Presidential succession was widely considered a settled issue prior to the terrorist attacks of September 11, 2001. These events demonstrated the potential for a mass "decapitation" of both the legislative and executive branches of government, and raised the question of whether current arrangements are adequate to guarantee continuity in government under such circumstances. Legislation proposed in the 109th Congress fell into two basic categories: bills to expand the line of succession to incorporate the Secretary of the Department of Homeland Security (DHS) into the order of succession, and those that proposed a more extensive overhaul of succession policies and procedures. The 109th Congress did not, however, pass a free-standing presidential succession bill of either variety; instead, it incorporated the Secretary of DHS as 18th in the line of succession, following the Secretary of Veterans Affairs. The legislative vehicle was Title V, Section 503, of the USA Patriot Improvement and Reauthorization Act of 2005 (H.R. 3199, (Representative James Sensenbrenner), P.L. 109-177, 120 Stat. 192). Of proposed legislation that was not enacted, H.R. 1455, (Representative Tom Davis), and S. 442 (Senator Mike DeWine) fell into the first category, seeking to incorporate the Secretary of DHS into the line of succession, but as eighth in line, after the Attorney General. S. 442 passed in the Senate without amendment by unanimous consent on July 26, 2005; it was received in the House and referred on September 19 to the House Judiciary Committee's Subcommittee on the Constitution. H.R. 1455 was referred to the Committee on Government Operations, which reported it favorably to the full House on October 20, 2005. No further action was taken on either bill during the 109th Congress. H.R. 1943, (Representative Brad Sherman), and S. 920, (Senator John Cornyn) were of the second variety, seeking not only to incorporate the Secretary of DHS in the line of succession, but also to include provisions to ensure presidential continuity in the event of a catastrophic attack on the U.S. Government. No action beyond committee referral was taken on either bill during the 109th Congress. This report will not be updated.
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This report provides background information and issues for Congress on China's naval modernization effort and its implications for U.S. Navy capabilities. The question of how the United States should respond to China's military modernization effort, including its naval modernization effort, is a key issue in U.S. defense planning and budgeting. Many U.S. military programs for countering improving Chinese military forces (particularly its naval forces) fall within the U.S. Navy's budget. The issue for Congress is how the U.S. Navy should respond to China's military modernization effort, particularly its naval modernization effort. Decisions that Congress reaches on this issue could affect U.S. Navy capabilities and funding requirements and the U.S. defense industrial base. For an overview of the strategic and budgetary context in which China's naval modernization effort and its implications for U.S. Navy capabilities may be considered, see Appendix A . This report focuses on China's naval modernization effort and its implications for U.S. Navy capabilities. For an overview of China's military as a whole, see CRS Report R44196, The Chinese Military: Overview and Issues for Congress , by [author name scrubbed] and David Gitter. This report is based on unclassified open-source information, such as the annual Department of Defense (DOD) report to Congress on military and security developments involving China, 2015 and 2009 reports on China's navy from the Office of Naval Intelligence (ONI), published reference sources such as IHS Jane's Fighting Ships , and press reports. For convenience, this report uses the term China's naval modernization effort to refer to the modernization not only of China's navy, but also of Chinese military forces outside China's navy that can be used to counter U.S. naval forces operating in the Western Pacific, such as land-based anti-ship ballistic missiles (ASBMs), land-based surface-to-air missiles (SAMs), land-based Air Force aircraft armed with anti-ship cruise missiles (ASCMs), and land-based long-range radars for detecting and tracking ships at sea. China's military is formally called the People's Liberation Army (PLA). Its navy is called the PLA Navy, or PLAN (also abbreviated as PLA[N]), and its air force is called the PLA Air Force, or PLAAF. The PLA Navy includes an air component that is called the PLA Naval Air Force, or PLANAF. China refers to its ballistic missile force as the PLA Rocket Force (PLARF). This report uses the term China's near-seas region to refer to the Yellow Sea, East China Sea, and South China Sea—the waters enclosed by the so-called first island chain . The so-called second island chain encloses both these waters and the Philippine Sea that is situated between the Philippines and Guam. China's naval modernization effort has been underway for more than 25 years: Design work on the first of China's newer ship classes, for example, appears to have begun in the late 1980s. Some observers believe that China's military (including naval) modernization effort may have been reinforced or accelerated by China's observation of U.S. military operations against Iraq in Operation Desert Storm in 1991, and by a 1996 incident in which the United States deployed two aircraft carrier strike groups to waters near Taiwan in response to Chinese missile tests and naval exercises near Taiwan. One observer states that "since the end of [China's] ninth Five-Year Plan in 2000, China has embarked on an ambitious naval construction program. The goal was to dramatically increase the ability of the PLA Navy and the Chinese Coast Guard (CCG) to stage 'blue-water' operations within the first and second island chains (including the Philippines and Indonesia) while enabling 'far-seas' deployments around much of the globe." Although press reports on China's naval modernization effort sometimes focus on a single element, such as China's aircraft carrier program or its anti-ship ballistic missiles (ASBMs), China's naval modernization effort is a broad-based effort with many elements. China's naval modernization effort includes a wide array of platform and weapon acquisition programs, including programs for ASBMs, anti-ship cruise missiles (ASCMs), land-attack cruise missiles (LACMs), surface-to-air missiles, mines, manned aircraft, submarines, aircraft carriers, destroyers, frigates, corvettes, patrol craft, amphibious ships, mine countermeasures (MCM) ships, underway replenishment ships, hospital ships, unmanned vehicles (UVs), and supporting C4ISR systems. Some of these acquisition programs are discussed in further detail below. China's naval modernization effort also includes improvements in maintenance and logistics, doctrine, personnel quality, education and training, and exercises. Until recently, China's naval modernization effort appeared to be focused less on increasing total platform (i.e., ship and aircraft) numbers than on increasing the modernity and capability of Chinese platforms. Changes in platform capability and the percentage of the force accounted for by modern platforms had generally been more dramatic than changes in total platform numbers. In some cases (such as submarines and coastal patrol craft), total numbers of platforms actually decreased over the past 20 years or so, but aggregate capability nevertheless increased because a larger number of older and obsolescent platforms have been replaced by a smaller number of much more modern and capable new platforms. ONI stated in 2015 that "China's force modernization has concentrated on improving the quality of its force, rather than its size. Quantities of major combatants have stayed relatively constant, but their combat capability has greatly increased as older combatants are replaced by larger, multi-mission ships." Some categories of ships, however, are now increasing in number; examples include (but are not necessarily limited to) the following: Ballistic missile submarines . Through 2008, China had only one ballistic missile submarine. By 2016, that figure had grown to four. Aircraft carriers . Until 2012, China had no aircraft carriers. China's first carrier entered service in 2012. China is building two additional carriers, and observers speculate China may eventually field a total force of four to six carriers. Corvettes (i.e., light frigates) . Until 2014, China had no corvettes. Since then, China has built corvettes at a rapid rate, and 41 had reportedly entered service as of July 2018, with some observers projecting an eventual force of 60. In addition, as shown in the 2017 column of Table 6 , total numbers of destroyers and LST/LPD-type amphibious ships may now be increasing above the levels at which they had been over the last decade or so. China is also building large numbers of cutters for its coast guard, and total numbers of larger cutters have grown substantially in recent years. Whether they are to replace older ships or increase total numbers of ships, new ships are entering service with China's navy at a relatively high rate. A February 22, 2017, press report states the following: In 2016, the PLA Navy commissioned 18 ships, including a Type 052D guided missile destroyer, three Type 054A guided missile frigates as well as six Type 056 corvettes. These [18] ships have a total displacement of 150,000 tons, roughly half of the overall displacement of the [British] Royal Navy. In January alone, the Navy commissioned three ships—one destroyer, one electronic reconnaissance ship and one corvette. A May 1, 2018, blog post states that "since 2014, China has launched more submarines, warships, principal amphibious vessels and auxiliaries than the total number of ships currently serving in the navies of Germany, India, Spain, Taiwan and the United Kingdom," and that "since 2014, China has launched naval vessels with a total tonnage greater than the tonnages of the entire French, German, Indian, Italian, South Korean, Spanish or Taiwanese navies…." China in late 2016 or early 2017 may have decided to increase its role on the world stage beyond previously planned levels, perhaps in part in reaction to a perception, correct or not, that the United States is reducing its role on the world stage. Such a decision by China could affect its naval modernization effort: pursuing a larger role on the world stage than previously planned could lead China to shift to a naval modernization effort that, while maintaining a focus on improving quality, also focuses more than previously planned on increasing total numbers of platforms. Put differently, while China until recently may have been aiming at developing a regionally powerful Navy with an added capability for conducting occasional, limited, or tightly focused naval operations in more distant waters, it might now be pursuing a more ambitious goal of developing a navy with more extensive capabilities for global operations. The planned ultimate size and composition of China's navy is not publicly known. In contrast to the U.S. Navy—which makes public its force-level goal and regularly releases a 30-year shipbuilding plan that shows planned procurements of new ships, planned retirements of existing ships, and resulting projected force levels, as well as a five-year shipbuilding plan that shows, in greater detail, the first five years of the 30-year shipbuilding plan —China does not release a navy force-level goal or detailed information about planned ship procurement rates or total quantities, planned ship retirements, and resulting projected force levels. This difference between the U.S. Navy and China's navy can be viewed as a major instance of how China's military modernization effort is less transparent or more opaque than the U.S. military's modernization effort. It is possible that the ultimate size and composition of China's navy is an unsettled issue even among Chinese military and political leaders. Just as there is frequent debate among U.S. military and political leaders about future U.S. military force structure, so too might there be such debate among Chinese military and political leaders about future Chinese military force structure. In addition, as noted in the previous section, if China has decided, correctly or not, that the United States is reducing its role on the world stage, and consequently has decided to increase China's role on the world stage beyond previously planned levels, this could lead to changes in any previously settled force-level goals, shipbuilding rates, and total shipbuilding quantities for China's navy. Although China's naval modernization effort has substantially improved China's naval capabilities in recent years, observers believe China's navy currently has limitations or weaknesses in certain areas, including joint operations with other parts of China's military, antisubmarine warfare (ASW), a dependence on foreign suppliers for some ship components, long-range targeting, and a lack of recent combat experience. China is working to overcome such limitations and weaknesses. ONI states that "Although the PLA(N) faces some capability gaps in key areas, it is emerging as a well equipped and competent force." The sufficiency of a country's naval capabilities is best assessed against that navy's intended missions. Although China's navy has limitations and weaknesses, it may nevertheless be sufficient for performing missions of interest to Chinese leaders. As China's navy reduces its weaknesses and limitations, it may become sufficient to perform a wider array of potential missions. Observers believe China's naval modernization effort is oriented toward developing capabilities for doing the following: addressing the situation with Taiwan militarily, if need be; asserting and defending China's territorial claims in the South China Sea (SCS) and East China Sea (ECS), and more generally, achieving a greater degree of control or domination over the SCS; enforcing China's view—a minority view among world nations—that it has the legal right to regulate foreign military activities in its 200-mile maritime exclusive economic zone (EEZ); defending China's commercial sea lines of communication (SLOCs), particularly those linking China to the Persian Gulf; displacing U.S. influence in the Western Pacific; and asserting China's status as a leading regional power and major world power. Most observers believe that, consistent with these goals, China wants its military to be capable of acting as an anti-access/area-denial (A2/AD) force—a force that can deter U.S. intervention in a conflict in China's near-seas region over Taiwan or some other issue, or failing that, delay the arrival or reduce the effectiveness of intervening U.S. forces. (A2/AD is a term used by U.S. and other Western writers. During the Cold War, U.S. writers used the term sea-denial force to refer to a maritime A2/AD force.) ASBMs, ASCMs, attack submarines, and supporting C4ISR systems are viewed as key elements of China's emerging maritime A2/AD force, though other force elements are also of significance in that regard. China's maritime A2/AD force can be viewed as broadly analogous to the sea-denial force that the Soviet Union developed during the Cold War with the aim of denying U.S. use of the sea and countering U.S. naval forces participating in a NATO-Warsaw Pact conflict. One difference between the Soviet sea-denial force and China's emerging maritime A2/AD force is that China's force includes conventionally armed ASBMs capable of hitting moving ships at sea. Additional missions for China's navy include conducting maritime security (including antipiracy) operations, evacuating Chinese nationals in foreign countries when necessary, and conducting humanitarian assistance/disaster response (HA/DR) operations. DOD states that As China's global footprint and international interests have grown, its military modernization program has become more focused on supporting missions beyond China's periphery, including power projection, sea lane security, counterpiracy, peacekeeping, and humanitarian assistance/disaster relief (HA/DR). DOD also states that China's maritime emphasis and attention to missions guarding its overseas interests have increasingly propelled the PLA beyond China's borders and its immediate periphery. The PLAN's evolving focus—from "offshore waters defense" to a mix of "offshore waters defense" and "far seas protection"—reflects the high command's expanding interest in a wider operational reach. Similarly, doctrinal references to "forward edge defense" that would move potential conflicts far from China's territory suggest PLA strategists envision an increasingly global role. DOD also states that The PLAN continues to develop into a global force, gradually extending its operational reach beyond East Asia and into what China calls the "far seas." The PLAN's latest naval platforms enable combat operations beyond the reaches of China's land-based defenses. In particular, China's aircraft carrier and planned follow-on carriers, once operational, will extend air defense umbrellas beyond the range of coastal systems and help enable task group operations in "far seas." The PLAN's emerging requirement for sea-based land-attack will also enhance China's ability to project power. More generally, the expansion of naval operations beyond China's immediate region will also facilitate non-war uses of military force. DOD states that China's 2015 defense white paper, labeled a "military strategy" and released in May 2015, "elevated the maritime domain within the PLA's formal strategic guidance and shifted the focus of its modernization from 'winning local wars under conditions of informationization' to 'winning informationized local wars, highlighting maritime military struggle." The white paper states that With the growth of China's national interests, its national security is more vulnerable to international and regional turmoil, terrorism, piracy, serious natural disasters and epidemics, and the security of overseas interests concerning energy and resources, strategic sea lines of communication (SLOCs), as well as institutions, personnel and assets abroad, has become an imminent issue.... To implement the military strategic guideline of active defense in the new situation, China's armed forces will adjust the basic point for PMS [preparation for military struggle]. In line with the evolving form of war and national security situation, the basic point for PMS will be placed on winning informationized local wars, highlighting maritime military struggle and maritime PMS.... In line with the strategic requirement of offshore waters defense and open seas protection, the PLA Navy (PLAN) will gradually shift its focus from "offshore waters defense" to the combination of "offshore waters defense" with "open seas protection," and build a combined, multi-functional and efficient marine combat force structure. The PLAN will enhance its capabilities for strategic deterrence and counterattack, maritime maneuvers, joint operations at sea, comprehensive defense and comprehensive support.... The seas and oceans bear on the enduring peace, lasting stability and sustainable development of China. The traditional mentality that land outweighs sea must be abandoned, and great importance has to be attached to managing the seas and oceans and protecting maritime rights and interests. It is necessary for China to develop a modern maritime military force structure commensurate with its national security and development interests, safeguard its national sovereignty and maritime rights and interests, protect the security of strategic SLOCs and overseas interests, and participate in international maritime cooperation, so as to provide strategic support for building itself into a maritime power. In his prepared statement for a January 30, 2014, hearing on China's military modernization and its implications for the United States before the U.S.-China Economic and Security Review Commission, Jesse L. Karotkin, ONI's Senior Intelligence Officer for China, summarized China's naval modernization effort. For the text of Karotkin's statement, see Appendix B . China is fielding an ASBM, referred to as the DF-21D, that is a theater-range ballistic missile equipped with a maneuverable reentry vehicle (MaRV) designed to moving hit ships at sea. A second type of Chinese theater-range ballistic missile, the DF-26, also has an anti-ship capability. DOD states that China's conventionally armed CSS-5 Mod 5 (DF-21D) anti-ship ballistic missile (ASBM) gives the PLA the capability to attack ships, including aircraft carriers, in the western Pacific Ocean. In 2016, China began fielding the DF-26 intermediate-range ballistic missile (IRBM), which is capable of conducting conventional and nuclear precision strikes against ground targets and conventional strikes against naval targets in the western Pacific Ocean. Observers have expressed strong concern about China's ASBMs, because such missiles, in combination with broad-area maritime surveillance and targeting systems, would permit China to attack aircraft carriers, other U.S. Navy ships, or ships of allied or partner navies operating in the Western Pacific. The U.S. Navy has not previously faced a threat from highly accurate ballistic missiles capable of hitting moving ships at sea. For this reason, some observers have referred to ASBMs as a "game-changing" weapon. Due to their ability to change course, the MaRVs on an ASBM would be more difficult to intercept than nonmaneuvering ballistic missile reentry vehicles. DOD has been reporting on the DF-21D in its annual reports to Congress since 2008. One observer states that "based on Chinese defense documents, what sets the [DF]-21D apart from the others is that it has a maneuverable re-entry vehicle with synthetic aperture radar (SAR) and optical sensors, which could enable it to hit a moving target." According to press reports, the DF-21D has been tested over land but has not been tested in an end-to-end flight test against a target at sea. A January 23, 2013, press report about a test of the weapon in the Gobi desert in western China stated the following: The People's Liberation Army has successfully sunk a US aircraft carrier, according to a satellite photo provided by Google Earth, reports our sister paper Want Daily —though the strike was a war game, the carrier a mock-up platform and the "sinking" occurred on dry land in a remote part of western China. A January 30, 2018, press report states the following: Media reports suggest that a new variant of China's mighty DF-21D missile has just gone through pre-deployment tests by a specialist brigade of the People's Liberation Army's Rocket Force, and that it has ramped-up assault capabilities that could put an aircraft-carrier strike group out of action. State broadcaster China Central Television and Sina Military reported that the new missile was "30%" more powerful than the previous-generation DF-21D, but no details of its specifications or the parameters of the tests were provided. It is believed that the series' launch vehicle has received a big boost to its ability to travel off-road, as compared with the previous model that required support vehicles and would need to park on a huge solid-surface area prior to a launch. It is not clear if the missile itself has been improved in terms of range or speed. On September 3, 2015, at a Chinese military parade in Beijing that displayed numerous types of Chinese weapons, an announcer stated that the DF-26 may have an anti-ship capability. The DF-26 has a reported range of 1,800 miles to 2,500 miles, or more than twice the reported range of the DF-21D. China reportedly is developing a hypersonic glide vehicle that, if incorporated into Chinese ASBMs, could make Chinese ASBMs more difficult to intercept. Among the most capable of the new ASCMs that have been acquired by China's navy are the Russian-made SS-N-22 Sunburn (carried by China's four Russian-made Sovremenny-class destroyers) and the Russian-made SS-N-27 Sizzler (carried by 8 of China's 12 Russian-made Kilo-class submarines). China's large inventory of ASCMs also includes several indigenous designs, including some highly capable models. DOD states that China deploys a wide range of advanced ASCMs with the YJ-83 series as the most numerous, which are deployed on the majority of China's ships as well as multiple aircraft. China has also outfitted several ships with YJ-62 ASCMs and claims that the new LUYANG III class DDG and future Type 055 CG will be outfitted with a vertically launched variant of the YJ-18 ASCM. The YJ-18 is a long-range torpedo-tube-launched ASCM capable of supersonic terminal sprint which has likely replaced the older YJ-82 on SONG, YUAN, and SHANG class submarines. China has also developed the long range supersonic YJ-12 ASCM for the H-6 bomber. At China's military parade in September 2015, China displayed a ship-to-ship variant of the YJ-12 called the YJ-12A. China also carries the Russian SS-N-22 SUNBURN on four Russian built SOVREMENNYY-class DDGs and the Russian SS-N-27b SIZZLER on eight Russian built KILO-class submarines. DOD also states that The PLAN continues to emphasize anti-surface warfare (ASUW). Older surface combatants carry variants of the YJ-83 ASCM (65 nm, 120 kilometers (km)), while newer surface combatants such as the LUYANG II DDG are fitted with the YJ-62 (150 nm, 222 km). The LUYANG III DDG and RENHAI CG will be fitted with a variant of China's newest ASCM, the YJ-18 (290 nm, 537 km). Eight of China's 12 KILO SS are equipped with the SS-N-27 ASCM (120 nm, 222 km), a system China acquired from Russia. China's newest indigenous submarine-launched ASCM, the YJ-18 and its variants, represents an improvement over the SS-N-27, and will be fielded on SONG SS, YUAN SSP, and SHANG SSN units. China's submarine modernization effort has attracted substantial attention and concern. DOD states, "The PLAN places a high priority on the modernization of its submarine force." ONI states that China has long regarded its submarine force as a critical element of regional deterrence, particularly when conducting "counter-intervention" against modern adversary. The large, but poorly equipped [submarine] force of the 1980s has given way to a more modern submarine force, optimized primarily for regional anti-surface warfare missions near major sea lines of communication. China since the mid-1990s has acquired 12 Russian-made Kilo-class non-nuclear-powered attack submarines (SSs) and put into service at least four new classes of indigenously built submarines, including the following: a new nuclear-powered ballistic missile submarine (SSBN) design called the Jin class or Type 094 ( Figure 1 ); a new nuclear-powered attack submarine (SSN) design called the Shang class or Type 093/093A; a new SS design called the Yuan class or Type 039A/B/C ( Figure 2 ); and another (and also fairly new) SS design called the Song class or Type 039/039G. The Kilos and the four new classes of indigenously built submarines are regarded as much more modern and capable than China's previous older-generation submarines. At least some of the new indigenously built designs are believed to have benefitted from Russian submarine technology and design know-how, and from knowledge from scientists who had worked at the Los Alamos National Laboratory in New Mexico and the Lawrence Livermore National Laboratory in California before moving back to China. Figure 3 and Figure 4 , which are taken from the August 2009 ONI report, show the acoustic quietness of Chinese nuclear- and non-nuclear-powered submarines, respectively, relative to that of Russian nuclear- and non-nuclear-powered submarines. In Figure 3 and Figure 4 , the downward slope of the arrow indicates the increasingly lower noise levels (i.e., increasing acoustic quietness) of the submarine designs shown. In general, quieter submarines are more difficult for opposing forces to detect and counter. The green-yellow-red color spectrum on the arrow in each figure might be interpreted as a rough indication of the relative difficulty that a navy with capable antisubmarine warfare forces (such as the U.S. Navy) might have in detecting and countering these submarines: Green might indicate submarines that would be relatively easy for such a navy to detect and counter, yellow might indicate submarines that would be less easy for such a navy to detect and counter, and red might indicate submarines that would be more difficult for such a navy to detect and counter. China's submarines are armed with one or more of the following: ASCMs, wire-guided and wake-homing torpedoes, and mines. Eight of the 12 Kilos purchased from Russia (presumably the ones purchased more recently) are armed with the highly capable Russian-made SS-N-27 Sizzler ASCM. In addition to other weapons, Shang-class SSNs may carry LACMs. Although ASCMs are often highlighted as sources of concern, wake-homing torpedoes are also a concern because they can be very difficult for surface ships to counter. China has announced that it is developing electric-drive propulsion systems using permanent magnet motors, as well as electrically powered, rim-driven propellers that could help make future Chinese submarines quieter. Regarding ballistic missile submarines, a January 10, 2017, press report states the following: New photos of China's latest nuclear ballistic missile submarine, the "Jin" Type 094A, hints at a much-improved vessel—one that is larger, with a more pronounced "hump" rear of the sail that lets it carry 12 submarine-launched ballistic missiles. First seen in late November 2016, the Type 094A differs from the previous four Type 094 SSBNs, what with its curved conning tower and front base that's blended into the submarine hull, possibly to reduce hydrodynamic drag. The Type 094A's conning tower has also removed its windows. Additionally, the Type 094A has a retractable towed array sonar (TAS) mounted on the top of its upper tailfin, which would make it easier for the craft to "listen" for threats and avoid them. While the original Type 094 is considered to be nosier (and thus less survivable) than its American counterpart (the Ohio-class SSBN), the Type 094A is likely to include acoustic quieting technologies found on the Type 093A. Regarding nuclear-powered attack submarines, DOD states, "Over the next decade, China probably will construct a new variant of the SHANG class, the Type 093B guided-missile nuclear attack submarines (SSGN), which not only would improve the PLAN's anti-surface warfare capability but might also provide it with a more clandestine land-attack option." ONI states that The SHANG-class SSN's initial production run stopped after only two hulls that were launched in 2002 and 2003. After nearly 10 years, China is continuing production with four additional hulls of an improved variant, the first of which was launched in 2012. These six total submarines will replace the aging HAN class SSN on nearly a one-for-one basis in the next several years. Following the completion of the improved SHANG SSN, the PLA(N) will progress to the Type 095 SSN, which may provide a generational improvement in many areas such as quieting and weapon capacity. A February 4, 2018, press report states that China is working to update the rugged old computer systems on nuclear submarines with artificial intelligence to enhance the potential thinking skills of commanding officers, a senior scientist involved with the programme told the South China Morning Post. A submarine with AI-augmented brainpower not only would give China's large navy an upper hand in battle under the world's oceans but would push applications of AI technology to a new level, according to the researcher, who spoke on condition of anonymity because of the project's sensitivity.... Joe Marino, CEO of Rite-Solutions, a technical company supporting the US Naval Undersea System Command, touted the value of using AI to enhance submarine commanding officers' decision-making powers. "[Without matching other countries' advances in AI submarine technology] our CO (commanding officers) would be fighting an opponent who could make faster, more informed and better decisions," Marino wrote in an article on the company's website. "Combined with undersea technology advancements by near-peer competitors such as Russia and China in areas such as stealth, sensors, weapons, this 'cognitive advantage' could threaten US undersea dominance," he wrote. Some of China's newer non-nuclear-powered submarines reportedly are equipped with so-called air-independent propulsion (AIP) systems. Examples of AIP systems include fuel cells, Sterling engines, and close-cycle diesel engines. In comparison with traditional non-nuclear-powered submarines (i.e., diesel-electric submarines), which generally have a low-speed or stationary submerged endurance of a few days, AIP-equipped non-nuclear-powered submarines reportedly can have a low-speed or stationary submerged endurance of perhaps up to two or three weeks. (At high submerged speeds, both traditional and AIP-equipped non-nuclear-powered submarines drain their batteries quickly and consequently have a high-speed submerged endurance of perhaps a few hours.) A January 5, 2017, press report states the following: Images posted on Chinese online forums in December show three new Yuan-class (Type 039B) patrol submarines being fitted out in the water at the Wuchang Shipyard in Wuhan, central China: a clear indication that China has resumed production of these diesel-electric boats after a near-three-year hiatus. The latest of the three submarines appears to have been launched around 12 December, [2016] according to online forums. Although China's aged Ming-class (Type 035) submarines are based on old technology and are much less capable than China's newer-design submarines, China may decide that these older boats have continued value as minelayers or as bait or decoy submarines that can be used to draw out enemy submarines (such as U.S. SSNs) that can then be attacked by other Chinese naval forces. China in 2012 commissioned into a service a new type of non-nuclear-powered submarine, called the Type 032 or Qing class according to IHS Jane's Fighting Ships 201 7 -201 8 , that is about one-third larger than the Yuan-class design. Observers believe the boat may be a one-of-kind test platform; IHS J ane's Fighting Ships 201 7 -201 8 refers to it as an auxiliary submarine (SSA). A June 29, 2015, press report showed a 2014 satellite photograph of an apparent Chinese mini- or midget-submarine submarine that "has not been seen nor heard of since." Table 1 shows actual and projected commissionings of Chinese submarines by class since 1995, when China took delivery of its first two Kilo-class boats. The table includes the final nine boats in the Ming class, which is an older and less capable submarine design. As shown in Table 1 , China by the end of 2016 was expected to have a total of 43 relatively modern attack submarines—meaning Shang-, Kilo-, Yuan-, and Song-class boats—in commission. As shown in the table, much of the growth in this figure occurred in 2004-2006, when 18 attack submarines (including 8 Kilo-class boats and 8 Song-class boats) were added, and in 2011-2012, when 8 Yuan-class attack submarines were added. The figures in Table 1 show that between 1995 and 2016, China was expected to place into service a total of 57 submarines of all kinds, or an average of about 2.6 submarines per year. This average commissioning rate, if sustained indefinitely, would eventually result in a steady-state submarine force of about 52 to 78 boats of all kinds, assuming an average submarine life of 20 to 30 years. A May 16, 2013, press report quotes Admiral Samuel Locklear, then-Commander of U.S. Pacific Command, as stating that China plans to acquire a total of 80 submarines. As shown in Table 1 , most of the submarines built in China have been non-nuclear-powered submarines. By contrast, as shown in the first two data columns of Table 1 , China has built nuclear-powered submarines in small numbers and at annual rates of less than one per year. Excluding the 12 Kilos purchased from Russia, the total number of domestically produced submarines placed into service between 1995 and 2016 is 44, or an average of 2.05 per year. This average rate of domestic production, if sustained indefinitely, would eventually result in a steady-state force of domestically produced submarines of about 41 to 61 boats of all kinds, again assuming an average submarine life of 20 to 30 years. Projections of the potential size of China's submarine force in 2020 include the following: DOD states that "By 2020, [China's submarine] force will likely grow to between 69 and 78 submarines." ONI stated in 2015 that "by 2020, the [PLA(N)] submarine force will likely grow to more than 70 submarines." In an accompanying table, ONI provided a more precise projection of 74 submarines in 2020, including 11 nuclear-powered boats and 63 non-nuclear-powered boats. An October 4, 2017, blog post from two nongovernment observers projects that China's submarine force in 2020 will include a total of 58 boats, including four Jin-class (Type-094) SSBNs, six Shang-class SSNs (two Type 093 and four Type 093A), and 48 SSs (20 Yuan-class boats, 12 Song-class boats, 12 Kilo-class boats, and four Ming-class boats). A December 9, 2015, press report stated that China had sent a Jin-class SSBN out on its first deterrent patrol. Each Jin-class SSBN is expected to be armed with 12 JL-2 nuclear-armed submarine-launched ballistic missiles (SLBMs). DOD states that China's four operational JIN-class SSBNs represent China's first credible, sea-based nuclear deterrent. China's next-generation Type 096 SSBN, will likely begin construction in the early-2020s, and reportedly will be armed with the JL-3, a follow-on SLBM. A range of 7,400 km for the JL-2 SLBM could permit Jin-class SSBNs to attack targets in Alaska (except the Alaskan panhandle) from protected bastions close to China; targets in Hawaii (as well as targets in Alaska, except the Alaskan panhandle) from locations south of Japan; targets in the western half of the 48 contiguous states (as well as Hawaii and Alaska) from midocean locations west of Hawaii; and targets in all 50 states from midocean locations east of Hawaii. China reportedly is developing a new SLBM, potentially to be called the JL-3, as a successor to the JL-2. China has modernized its substantial inventory of naval mines. ONI states that China has a robust mining capability and currently maintains a varied inventory estimated at more than 50,000 [naval] mines. China has developed a robust infrastructure for naval mine-related research, development, testing, evaluation, and production. During the past few years, China has gone from an obsolete mine inventory, consisting primarily of pre-WWII vintage moored contact and basic bottom influence mines, to a vast mine inventory consisting of a large variety of mine types such as moored, bottom, drifting, rocket-propelled, and intelligent mines. The mines can be laid by submarines (primarily for covert mining of enemy ports), surface ships, aircraft, and by fishing and merchant vessels. China will continue to develop more advanced mines in the future such as extended-range propelled-warhead mines, antihelicopter mines, and bottom influence mines more able to counter minesweeping efforts. A July 22, 2018, press report states China is developing large, smart and relatively low-cost unmanned submarines that can roam the world's oceans to perform a wide range of missions, from reconnaissance to mine placement to even suicide attacks against enemy vessels, according to scientists involved in these artificial intelligence (AI) projects. The autonomous robotic submarines are expected to be deployed in the early 2020s. While not intended to entirely replace human-operated submarines, they will challenge the advantageous position established by Western naval powers after the second world war. The robotic subs are aimed particularly at the United States forces in strategic waters like the South China Sea and western Pacific Ocean, the researchers said. The project is part of the government's ambitious plan to boost the country's naval power with AI technology…. The new class of unmanned submarines will join the other autonomous or manned military systems on water, land and orbit to carry out missions in coordinated efforts, according to the researchers…. Current models of unmanned underwater vehicles, or UUVs, are mostly small. Their deployment and recovery require another ship or submarine. They are limited in operational range and payload capacity. Now under development, the AI-powered subs are "giants" compared to the normal UUVs, according to the researchers. They station in dock as conventional submarines. Their cargo bay is reconfigurable and large enough to accommodate a wide range of freight, from powerful surveillance equipment to missiles or torpedoes. Their energy supply comes from diesel-electric engines or other power sources that ensure continuous operation for months. The robotic submarines rely heavily on artificial intelligence to deal with the sea's complex environment…. They can gather intelligence, deploy mines or station themselves at geographical "chockpoints" [sic: "chokepoints"] where armed forces are bound to pass to ambush enemy targets. They can work with manned submarines as a scout or decoy to draw fire and expose the position of the adversary. If necessary, they can ram into a high-value target. Lin Yang, marine technology equipment director at the Shenyang Institute of Automation, Chinese Academy of Sciences, confirmed to the South China Morning Post this month that China is developing a series of extra-large unmanned underwater vehicles, or XLUUVs. "Yes, we are doing it," he said. The institute, in China's northeast Liaoning province, is a major producer of underwater robots to the Chinese military. Lin developed China's first autonomous underwater vehicle with operational depth beyond 6km. He is now chief scientist of the 912 Project, a classified programme to develop new-generation military underwater robots in time for the 100-year anniversary of the Chinese Communist Party in 2021. Lin called China's unmanned submarine programme a countermeasure against similar weapons now under intensive development in the United States. He declined to elaborate on technical specifications because the information was "sensitive". "It will be announced sooner or later, but not now," he added. China's first aircraft carrier entered service in 2012. China's second aircraft carrier (and its first indigenously built carrier) was launched (i.e., put into the water for the final stages of construction) in April 2017 and reportedly began sea trials in May 2018. China reportedly has begun construction of a third aircraft carrier. Observers speculate China may eventually field a force of four to six aircraft carriers. On September 25, 2012, China commissioned into service its first aircraft carrier—the Liaoning or Type 001 design ( Figure 5 ), a refurbished ex-Ukrainian aircraft carrier, previously named Varyag , that China purchased from Ukraine in 1998 as an unfinished ship. The Liaoning is conventionally powered, has an estimated full load displacement of almost 60,000 tons, and might accommodate an eventual air wing of 30 or more aircraft, including fixed-wing airplanes and helicopters. A September 7, 2014, press report, citing an August 28, 2014, edition of the Chinese-language Shanghai Morning Post , stated that the Liaoning's air wing may consist of 24 J-15 fighters, 6 anti-submarine warfare helicopters, 4 airborne early warning helicopters, and 2 rescue helicopters, for a total of 36 aircraft. The Liaoning lacks aircraft catapults and instead launches fixed-wing airplanes off the ship's bow using an inclined "ski ramp." By comparison, a U.S. Navy aircraft carrier is nuclear powered (giving it greater cruising endurance than a conventionally powered ship), has a full load displacement of about 100,000 tons, can accommodate an air wing of 60 or more aircraft, including fixed-wing aircraft and some helicopters, and launches its fixed-wing aircraft over both the ship's bow and its angled deck using catapults, which can give those aircraft a range/payload capability greater than that of aircraft launched with a ski ramp. The Liaoning , like a U.S. Navy aircraft carrier, lands fixed-wing aircraft using arresting wires on its angled deck. Some observers have referred to the Liaoning as China's "starter" carrier. DOD states that "When fully operational, Liaoning will be less capable than the U.S. Navy's NIMITZ-class carriers in projecting power. Its smaller size limits the number of aircraft it can embark and the ski-jump configuration limits aircraft fuel and ordnance loads." ONI states that LIAONING is quite different from the U.S. Navy's NIMITZ-class carriers. First, since LIAONING is smaller, it will carry far fewer aircraft in comparison to a U.S.-style carrier air wing. Additionally, the LIAONING's ski-jump configuration significantly restricts aircraft fuel and ordnance loads. Consequently, the aircraft it launches have more a limited flight radius and combat power. Finally, China does not yet possess specialized supporting aircraft such as the E-2C Hawkeye. The PLA Navy is currently learning to operate aircraft from the ship. ONI states that "full integration of a carrier air regiment remains several years in the future, but remarkable progress has been made already," and that "it will take several years before Chinese carrier-based air regiments are operational." In November 2016, the ship was reportedly described as being ready for combat. An October 26, 2017, press report states that "despite its inauguration in 2012, it appears the vessel's genuine war-readiness is still in doubt." On May 31, 2018, China's Ministry of National Defense reportedly announced that the aircraft carrier group formed around Liaoning had reached initial operational capability (IOC), although that term might not mean the same as it does when used by DOD in connection with U.S. weapon systems. China's second aircraft carrier (and its first indigenously built carrier), referred to as the Type 001A design ( Figure 6 ), was launched (i.e., put into the water for the final stages of construction) on April 26, 2017, reportedly conducted its first sea trial on May 13-18, 2018, and as of early July 2018 was reportedly being made ready for a second sea trial. The ship—which reportedly might be given the name Shandong , for the Chinese province—is a modified version of the Liaoning design that incorporates some design improvements. A December 11, 2017, press report states that the ship may embark up to 35 J-15 carrier-based fighters, as opposed to 24 on the Liaoning . As stated earlier, observers speculate China may eventually field a force of four to six aircraft carriers, meaning Liaoning , the Type 001A carrier, and two to four additional carriers. Press reports state that China's third and subsequent carriers may use catapults rather than ski ramps, that the catapults might be new-technology electromagnetic catapults rather than traditional steam-powered catapults, and that at least some of the ships might be nuclear-powered rather than conventionally powered. A June 20, 2018, press report states the following: A photograph published on social media by one of the companies that develops China's aircraft carriers appears to suggest that the latest vessel will be equipped with a catapult launch system, unlike either of its predecessors. China Shipbuilding Industry Corporation (CSIC) uploaded the picture on Wednesday, the state-backed tabloid Global Times reported, although it was taken down later the same day. The image – which appeared to be an artist's impression rather than an actual photograph – showed China's Type 002 carrier – the country's third carrier and second to be domestically developed – with a flat flight deck installed with three catapult-like devices. The image was apparently a snapshot of a large poster that hangs on a wall inside CSIC's boardroom. A March 1, 2018, press report states the following: One of China's largest shipbuilders has revealed plans to speed up the development of China's first nuclear-powered aircraft carrier, as part of China's ambition to transform its navy into a blue-water force by the middle of the next decade. In a since-amended news release outlining the company's future strategic direction in all of its business areas, the state-owned China Shipbuilding Industry Corporation, or CSIC, said the shipbuilding group will redouble efforts to achieve technological breakthroughs in nuclear-powered aircraft carriers, new nuclear-powered submarines, quieter conventionally powered submarines, underwater artificial intelligence-based combat systems and integrated networked communications systems.... The company release added that these breakthroughs are required for China's People's Liberation Army Navy, or PLAN, to enhance its capability to globally operate in line with the service's aim to become a networked, blue-water navy by 2025. The original news release, which Defense News has seen and translated, has since been deleted from CSIC's website and replaced by one missing all references to the details listed above. Another March 1, 2018, press report states the following: China is ready to build larger aircraft carriers having mastered the technical ability to do so, a major state-run newspaper said on Friday [March 2] ahead of the release of the country's annual defense budget.... Liu Zheng, chairman of Dalian Shipbuilding Industry in Liaoning province, said his company and its parent, China Shipbuilding Industry Corp, the world's largest shipbuilder, could design and build carriers. "We have complete ownership of the expertise, in terms of design, technology, technique, manufacturing and project management, that is needed to make an advanced carrier," Liu told the official China Daily ahead of Monday's opening of the annual session of parliament. "We are ready to build larger ones," he said. China Shipbuilding said earlier this week they were developing technologies to build a nuclear-powered aircraft carrier. A January 19, 2018, press report states the following: China's third aircraft carrier is under construction and will likely see several technological improvements over the country's first two. The ship, known for now only as 002, has been under construction since 2015. The new carrier will likely be larger than her predecessors and sport an electromagnetic launch system for aircraft, allowing for larger, heavier aircraft to conduct longer distance flights with more weaponry.... The third aircraft carrier, 002, began construction in March 2015 at the Jiangnan Changxingdao Shipyard in Shanghai. The first two ships were studied and built as learning experiences with minimal changes or improvements. The third ship, however, is expected to be substantially different. One of the major differences between the three carriers is size. The first carrier, Liaoning, was locked into the size of the existing 67,000 ton hull. The second carrier is expected to be about the same size, as China learned how to make a copy of an aircraft carrier. The third carrier is expected to tip the scales at about 80,000 tons, and 002 will also likely be slightly longer than Liaoning's 999 feet. A larger carrier will mean several things. 002 will carry more fuel, both for its aircraft and itself, enabling the carrier to operate farther from China and the aircraft to fly more sorties from the carrier. The newer, larger carrier will also have more room for aircraft, both in the hangar and on the flight deck itself. The second carrier, 001A, has a smaller island than Liaoning, freeing up deck space, and 002 will likely shrink her island even more. As a result, the carrier's air wing can be expected to grow substantially larger. Liaoning can carry up to 24 Shenyang J-15 "Flying Shark" multi-role fighters, while 001A will probably increase that to 30 J-15s. 002's air wing could grow to 40 fighters plus a handful of propeller-driven carrier onboard delivery transports and airborne early warning aircraft.... Another major difference is that, unlike Liaoning and 001A, 002 is expected ditch the bow-mounted ski ramp and use an aircraft catapult launching system.... China is reportedly skipping over steam-driven aircraft catapults to instead build an electromagnetic aircraft launching system (EMALS), similar to that recently put into service on the U.S. Navy's newest carrier, USS Gerald R. Ford. A report from Defense News in November 2017 stated that Chinese leader Xi Jinping had wanted EMALS installed on 002, but engineers couldn't reconcile a conventional power plant with the huge power demands of the electromagnetic launch system. Chinese naval engineers have now apparently solved the power issue.... 002 will undoubtedly come with other improvements. A more robust air defense weapons suite is likely, with close-in weapons such as the HQ-10 Flying Leopard short-range air defense system similar to the American RIM-116 Rolling Airframe Missile (RAM). Passive anti-missile and anti-torpedo defenses will be expanded to give the ship a fighting chance under attack. Expanded medical and water desalination capabilities, already a necessity, could make the ship useful in humanitarian assistance and disaster relief missions as American carriers already are. A January 4, 2018, press report updated on January 5, 2018, states the following: China started building its third aircraft carrier, with a hi-tech launch system, at a Shanghai shipyard last year, according to sources close to the People's Liberation Army. One of the sources said Shanghai Jiangnan Shipyard Group was given the go-ahead to begin work on the vessel after military leaders met in Beijing following the annual sessions of China's legislature and top political advisory body in March. "But the shipyard is still working on the carrier's hull, which is expected to take about two years," the source said. "Building the new carrier will be more complicated and challenging than the other two ships."... The sources all said it was too early to say when the third vessel would be launched, but China plans to have four aircraft carrier battle groups in service by 2030, according to naval experts. Shipbuilders and technicians from Shanghai and Dalian are working on the third vessel, which will have a displacement of about 80,000 tonnes – 10,000 tonnes more than the Liaoning, according to another source close to the PLA Navy. "China has set up a strong and professional aircraft carrier team since early 2000, when it decided to retrofit the Varyag [the unfinished vessel China bought from Ukraine] to launch as the Liaoning, and it hired many Ukrainian experts ... as technical advisers," the second source said. The sources also confirmed that the new vessel, the CV-18, will use a launch system that is more advanced than the Soviet-designed ski-jump systems used in its other two aircraft carriers. Its electromagnetic aircraft launch system will mean less wear and tear on the planes and it will allow more aircraft to be launched in a shorter time than other systems.... Sources said the layout of the new aircraft carrier, including its flight deck and "island" command centre, would be different from the other two. "The new vessel will have a smaller tower island than the Liaoning and its sister ship because it needs to accommodate China's carrier-based J-15 fighter jets, which are quite large," the first source said. A March 15, 2018, press report states that following the Type 002 carrier design, China will begin building a Type 003 carrier design: The biggest item in CSIC's [China Shipbuilding Industry Corporation's] not-so-secret portfolio is China's first nuclear-powered carrier. Popularly identified as the Type 003, it will be the largest non-American warship in the world when its launched in the late 2020s. CSIC's Dalian Shipyard, which refurbished the aircraft carrier Liaoning, and launched China's first domestically built carrier, CV-17, in 2017, will presumably build China's first "Type 003" CVN. The Type 003 will displace between 90,000-100,000 tons and have electromagnetically assisted launch system (EMALS) catapults for getting aircrafts off the deck. It'll likely carry a large air wing of J-15 fighters, J-31 stealth fighters, KJ-600 airborne early warning and control aircraft, anti-submarine warfare helicopters, and stealth attack drones. China has developed a carrier-capable fighter, called the J-15 or Flying Shark, that can operate from the Liaoning ( Figure 7 ). DOD states that the J-15 is "modeled after the Russian Su-33 [Flanker]," and that "although the J-15 has a land-based combat radius of 1,200 km, the aircraft will be limited in range and armament when operating from the carrier, because the ski-jump design does not provide as much airspeed and, therefore, lift at takeoff as a catapult design." A December 6, 2017, press report states the following: China's future straight-deck aircraft carriers with the electromagnetic launcher system will carry fifth-generation jet fighters like [the] J-20 and J-31, Chinese experts said on Wednesday [December 6].... The J-20 and J-31 will surely be installed on future Chinese aircraft carriers with the catapult system, to protect the carriers, Yin Zhuo, a senior researcher at the PLA Naval Equipment Research Center, told the Military Time. Yin predicted the J-15 fighters on the Type 001A will be around 40, about the same as that for Liaoning ship. Song Zhongping, a TV commentator and military expert, told the Global Times that "It is more likely that J-15 fighters and improved versions will be on board together with stealth fighters such as the J-20 and J-31, as they will be playing different roles." However, Song pointed out that since the J-20 and J-31 are primarily designed for the air force, adapting them as navy fighters will entail some costs. "The J-20 will be more expensive to modify than the J-31." A January 23, 2018, press report states the following: China's carrier aviation programs continue apace with the focus starting to shift toward the development and introduction of training and specialized aircraft as China's first domestically built carrier approaches the start of sea trials.... Currently, the PLAN only has a single type of fixed-wing carrierborne aircraft in service. This is the Shenyang J-15 Flying Shark multirole fighter.... Approximately two dozen J-15s have been produced so far in two production batches, and these are currently only able to operate from the ski jump-equipped Liaoning aircraft carrier and the Type 002 carrier being fitted out in the city of Dalian. China is known to have at least one of the six J-15 prototypes fitted with catapult launch accessories on its nose landing gear, and the country is carrying out catapult tests with this aircraft, using what are believed to be a steam catapult and EMALS at an air base near Huludao, Liaoning province in northern China. In addition, China is developing a twin-seat variant of the J-15, with at least a single prototype known to be flying from Shenyang Aircraft Corporation's facilities located in its namesake city. It is likely this variant, designated the J-15S, will operate from the future, catapult-equipped carrier China will build after the Type 002 as a two-seat multirole fighter alongside single-seat J-15s, much like the mix of single-seat Boeing F/A-18E Super Hornets and twin-seat F/A-18Fs onboard a typical U.S. Navy carrier air wing. Future production batches of J-15s are also expected to be fitted with more modern avionics, such as those already fitted to the J-16 fighter that will included an active electronically scanned array radar. The electronic warfare/electronic attack technology being developed for a specialized variant of the J-16 may also be introduced on the J-15. However, these are unlikely to be fielded in the near term, but rather are expected to enter service in the early part of the next decade, at the earliest.... The PLAN is also revamping its pilot training program with the intention of streamlining the process of training its pilots. The service sees an urgent need for 400 new pilots in the coming years with the introduction of new land- and carrier-based aircraft types.... However, the PLAN lacks a dedicated trainer aircraft used to qualify carrier pilots, with the J-15 currently being used in this role. An attempt was made to develop a carrier trainer version of the JL-9 for this purpose, but this was unsuccessful; reports suggest the JL-9's fuselage was unable to cope with the stress involved in arrested landings onboard carriers.... As Defense News previously reported, if China were to build its third carrier equipped with an EMALS as expected, the PLAN will be able to operate a wider variety of aircraft from its carriers, opening up the possibility of equipping its air wings with an aircraft similar to the Northrop Grumman E-2 Hawkeye airborne early-warning aircraft. The PLAN's current shipboard airborne early-warning asset is the Changhe Z-8 helicopter fitted with a radar that can be stowed when not in use.... China previously built a mock-up of a Xi'an Y-7 with a heavily modified tailplane and a radar rotodome on top of its fuselage around the year 2010. Yet, there has been no further development of that project since then. A similar mock-up was seen on the carrier flight deck test bed at a naval testing facility in Wuhan, Hubei province, in early 2017, indicating that China is still interested in developing such a platform. A July 4, 2018, press report states the following: China is developing a new fighter jet for aircraft carriers to replace its J-15s after a series of mechanical failures and crashes, as it tries to build up a blue-water navy that can operate globally, military experts and sources said. The J-15 was based on a prototype of the fourth-generation Russian Sukhoi Su-33 twin-engined air superiority fighter, a design that is more than 30 years old. It was developed by Shenyang Aircraft Corporation, a unit of state-owned Aviation Industry Corporation of China. With a maximum take-off weight of 33 tonnes, the aircraft is the heaviest active carrier-based fighter jet in the world, used on China's first aircraft carrier, the Liaoning. China needs to develop the new fighter jet as it plans to create at least four aircraft carrier groups to fulfil its global navy ambitions and defend its growing overseas interests, Beijing-based naval expert Li Jie said. "In order to improve the combat effectiveness of the Chinese aircraft carrier strike groups, it is necessary to develop a new carrier-based fighter," [Beijing-based naval expert Li Jie] said, adding that the FC-31 stealth fighter could be used as a model to replace the J-15…. Two sources close to the military told the Post there had been at least four crashes involving the J-15, although only two of them have been reported by state media. "The J-15 is a problematic aircraft – its unstable flight control system was the key factor behind the two fatal accidents two years ago," one of the sources said. Pilot Zhang Chao, 29, died in a crash in April 2016 as he tried to save his J-15 fighter jet, whose flight control system was breaking down during a mock landing on an aircraft carrier, according to state media reports. Three weeks later, his colleague Cao Xianjian, believed to be in his 40s, was seriously injured as he tried to deal with the same problem on a J-15. It took him more than a year to recover. All J-15s were grounded for three months after the crashes, which undermined morale in the air force and navy. The navy called for an investigation after Zhang's death, the sources said. "But the aviation experts at first refused to acknowledge that the J-15 has design problems," one of the sources said. "They only agreed there were problems after Cao encountered the same trouble." Many of China's home-grown fighter jets have had problems with their engines, aircraft design and modifications. But a PLA Navy veteran said that instead of carrying out more test flights, pilots were pushed to fly the warplanes, even though they had faults. "Of course it's impossible to prevent any accident from ever happening during training. But unlike their counterparts in Western countries, Chinese air force pilots are asked to work around these mechanical errors," the navy veteran said. A February 1, 2107, press report speculates that China may be developing a carrier-based airborne early warning and control aircraft broadly similar to the U.S. Navy's E-2 Hawkeye carrier-based airborne early warning and control aircraft. Press reports in April 2018 stated that China is developing carrier-based UAVs. Although aircraft carriers might have some value for China in Taiwan-related conflict scenarios, they are not considered critical for Chinese operations in such scenarios, because Taiwan is within range of land-based Chinese aircraft. Consequently, most observers believe that China is acquiring carriers primarily for their value in other kinds of operations, and to demonstrate China's status as a leading regional power and major world power. Chinese aircraft carriers could be used for power-projection operations, particularly in scenarios that do not involve opposing U.S. forces, and to impress or intimidate foreign observers. Chinese aircraft carriers could also be used for humanitarian assistance and disaster relief (HA/DR) operations, maritime security operations (such as antipiracy operations), and noncombatant evacuation operations (NEOs). Politically, aircraft carriers could be particularly valuable to China for projecting an image of China as a major world power, because aircraft carriers are viewed by many as symbols of major world power status. In a combat situation involving opposing U.S. naval and air forces, Chinese aircraft carriers would be highly vulnerable to attack by U.S. ships and aircraft, but conducting such attacks could divert U.S. ships and aircraft from performing other missions in a conflict situation with China. DOD states that Liaoning will probably focus on fleet air defense missions, extending air cover over a fleet operating far from land-based coverage. It probably also will play a significant role in developing China's carrier pilots, deck crews, and tactics for future carriers. DOD also states that Last year, China continued to learn lessons from operating its first aircraft carrier, Liaoning, while constructing its first domestically produced aircraft carrier—the beginning of what the PLA states will be a multi-carrier force. China's next generation of carriers will probably have greater endurance and be capable of launching more varied types of aircraft, including EW, early warning, and ASW aircraft. These improvements would increase the potential striking power of a potential "carrier battle group" in safeguarding China's interests in areas beyond its immediate periphery; it would also be able to protect nuclear ballistic missile submarines stationed on Hainan Island in the South China Sea. The carriers would most likely also perform such missions as patrolling economically important SLOCs, conducting naval diplomacy, regional deterrence, and HA/DR operations. ONI states that Unlike a U.S. carrier, LIAONING is not well equipped to conduct long-range power projection. It is better suited to fleet air defense missions, where it could extend a protective envelope over a fleet operating in blue water. Although it possesses a full suite of weapons and combat systems, LIAONING will likely offer its greatest value as a long-term training investment. China since the early 1990s has purchased four Sovremenny-class destroyers from Russia and put into service 10 new classes of indigenously built destroyers and frigates (some of which are variations of one another) that demonstrate a significant modernization of PLA Navy surface combatant technology. DOD states that "The PLAN also remains engaged in a robust surface combatant construction program that will provide a significant upgrade to the PLAN's air defense capability. These assets will be critical as the PLAN expands operations into distant seas beyond the range of shore-based air defense systems." ONI states that In recent years, shipboard air defense is arguably the most notable area of improvement on PLA(N) surface ships. China has retired several legacy destroyers and frigates that had at most a point air defense capability, with a range of just several miles. Newer ships entering the force are equipped with medium-to-long range area air defense missiles. China is also building a new class of cruiser (or large destroyer) and a new class of corvettes (i.e., light frigates), and previously put into service a new kind of missile-armed fast attack craft that uses a stealthy catamaran hull design. ONI states, "The JIANGKAI-class (Type 054A) frigate series, LUYANG-class (Type 052B/C/D) destroyer series, and the upcoming new cruiser (Type 055) class are considered to be modern and capable designs that are comparable in many respects to the most modern Western warships." A June 1, 2017, press report states that China is exploring potential design concepts for submersible or semi-submersible arsenal ships—ships equipped with large numbers of missiles that that could operate with part or most of their hulls below the waterline so as to reduce their detectability. China is also building substantial numbers of new cutters for the China Coast Guard (CCG), which China often uses for asserting and defending its maritime territorial claims in the East and South China Seas. In terms of numbers of ships being built and put into service, production of corvettes for China's navy and cutters for the CCG are currently two of China's most active areas of noncommercial shipbuilding. Russia reportedly has assisted China's development of new surface warfare capabilities. China is building a new class of cruiser (or large destroyer), called the Renhai-class or Type 055 ( Figure 8 ), that reportedly displaces more than 10,000 tons, and possibly as much as 13,000 tons. A November 3, 2017, press report states that "an expert with the PLA Naval University of Engineering revealed at a forum at the end of last month that the nation's first super-destroyer, [had dimensions of] of 186 meters [about 610 feet] long and 21 meters [about 69] wide with a displacement of up to 12,300 tons...." By way of comparison, the U.S. Navy's Ticonderoga (CG-47) class cruisers and Arleigh Burke (DDG-51) class destroyers (aka the U.S. Navy's Aegis cruisers and destroyers) displace about 10,100 tons and 9,300 tons, respectively, while the U.S. Navy's Zumwalt (DDG-1000) class destroyers displace about 15,600 tons. DOD refers to the Type 055 design as a cruiser. China is the only country known to be planning to build a ship referred to (by some sources at least) as a cruiser. (The U.S. Navy's current 30-year shipbuilding plan includes destroyers but no cruisers.) The Type 055 is expected to be equipped with sensors and weapons broadly similar to those on China's newest indigenously built destroyers (see next section). Since the Type 055 is larger than those destroyers, it will likely carry a larger total number of weapons. The first Type 055 ship reportedly was launched (i.e., put into the water for the final stages of construction) on June 28, 2017, the second was reportedly launched on April 28, 2018, and the third and fourth were reportedly launched on July 3, 2018. IHS Jane's Fighting Ships 2017-2018 (which refers to the Type 055 design as a destroyer) states that the first Type 055 ship is expected to enter service in 2019, and the second and third ships in 2020. A March 15, 2018, press report stated that China had begun construction of the sixth Type 055 ship. A July 3, 2018, press report states that "experts [in China] say the People's Liberation Army (PLA) needs to commission at least 10" of the ships. China in 1996 ordered two Sovremenny-class destroyers from Russia; the ships entered service in 1999 and 2001. China in 2002 ordered two additional Sovremenny-class destroyers from Russia; the ships entered service in 2005 and 2006. Sovremenny-class destroyers displace about 8,100 tons and are equipped with the Russian-made SS-N-22 Sunburn ASCM, a highly capable ASCM. China since the early 1990s has put into service six new classes of indigenously built destroyers, including three variations of one class. The classes are called the Luhu (Type 052A), Luhai (Type 051B), Louzhou (Type 051C), Luyang I (Type 052B), Luyang II (Type 052C), and Luyang III (Type 052D) designs. Compared to China's remaining older Luda (Type 051) class destroyers, which entered service between 1971 and 1991, these six new indigenously built destroyer classes are substantially more modern in terms of their hull designs, propulsion systems, sensors, weapons, and electronics. The Luyang II-class ships ( Figure 9 ) and the Luyang III-class ships, which displace about 7,100 tons and 7,500 tons, respectively, appear to feature phased-array radars that are outwardly somewhat similar to the SPY-1 radar used in the U.S.-made Aegis combat system. Like the older Luda-class destroyers, these six new destroyer classes are armed with ASCMs. As shown in Table 2 , China between 1994 and 2007 commissioned only one or two ships in its first four new indigenously built destroyers classes, suggesting that these classes were intended as stepping stones in a plan to modernize the PLA Navy's destroyer technology incrementally before committing to larger-scale series production of Luyang II- and Luyang III-class destroyers. As also shown in Table 2 , after commissioning no new destroyers in 2008-2012—a hiatus that may have been caused in part by the relocation of a shipyard —commissionings of new Luyang II- and Luyang III-class destroyers resumed. IHS Jane's Fighting Ships 2017-2018 states that a class of at least 10 ships is expected. China since the early 1990s has put into service four new classes of indigenously built frigates, two of which are variations of two others. The classes are called the Jiangwei I (Type 053 H2G), Jiangwei II (Type 053H3), Jiangkai I (Type 054), and Jiangkai II (Type 054A) designs. Figure 10 shows a Jiangkai II-class ship. Compared with China's remaining older Jianghu (Type 053) class frigates, which entered service between the mid-1970s and 1989, the four new frigate classes feature improved hull designs and systems, including improved AAW capabilities. DOD states that "China continues to produce the JIANGKAI II-class guided-missile frigate (FFG) (Type 054A), with more than 20 ships currently in the fleet and several more in various stages of construction." A December 25, 2016, blog post states that "the production run for [the] Type 054A appears to be coming to a close. Only 2 Type 054As joined service earlier this year with 2 more ready to join service soon." The 26 th Type 054A reportedly was commissioned into service on January 12, 2018. The 29 th Type 054A reportedly was launched (i.e., put into the water for the final stages of construction) on December 16, 2017. Table 3 shows commissionings of new frigates since 1991. China is building a new type of corvette (i.e., a light frigate, or FFL) called the Jiangdao class or Type 056/056A ( Figure 11 ). Jingdao-class ships are reportedly being built at a high annual rate in four shipsyards. IHS Jane's Fighting Ships 201 7 -201 8 states that the first 8 ships were commissioned into service in 2013, followed by 10 more in 2014, 5 more in 2015, 7 more in 2016, and 11 more projeccted for 2017, for a projected total of 41 through 2017, and that "a large class (possibly 60 ships) is expected if the class is to consolidate replacement of older classes such as the Jianghu-class frigates and Houxin-xlass attack craft." A June 12, 2018, press report states the 41 st Type 056 ship appears to have entered service. A November 30, 2017, blog post states that that a total of 60 might eventually be built. DOD states that The PLAN is augmenting its littoral warfare capabilities, especially in the South China Sea and East China Sea, with the production of the JIANGDAO-class corvettes (FFL) (Type 056). More than 25 were in service during 2016. The latest ships are anti-submarine warfare (ASW) variants with a towed-array sonar. China may build more than 60 of this class, ultimately replacing older PLAN destroyers and frigates. ONI states that In 2012, China began producing the new JIANGDAO-class (Type 056) corvette (FFL), which offers precisely the flexibility that the HOUBEI lacks. The JIANGDAO is equipped to patrol China's claimed EEZ and assert Beijing's interests in the South China and East China Seas. The 1500-ton JIANGDAO is equipped with 76mm, 30mm, and 12.7mm guns, four YJ-83 family ASCMs, torpedo tubes, and a helicopter landing area. The JIANGDAO is ideally-suited for general medium-endurance patrols, counterpiracy missions, and other littoral duties in regional waters, but is not sufficiently armed or equipped for major combat operations in blue-water areas. At least 20 JIANGDAOs are already operational and 30 to 60 total units may be built, replacing both older small patrol craft as well as some of the PLA(N)'s aging JIANGHU I-class (Type 053H) frigates (FF). As a replacement for at least some of its older fast attack craft, or FACs (including some armed with ASCMs), China in 2004 introduced a new type of ASCM-armed fast attack craft, called the Houbei (Type 022) class ( Figure 12 ), that uses a stealthy, wave-piercing, catamaran hull. Each boat can carry eight C-802 ASCMs. The Houbei class was built in at least six shipyards; construction of the design appeared to stop in 2009 after a production run of about 60 units. ONI states the following: During the past two decades, China phased out hundreds of Cold War-era OSA and HOUKU-class missile patrol boats and gun-armed SHANGHAI and HAINAN-class patrol craft (among others) as the PLA(N) transitioned from coastal defense missions towards offshore and far seas operations. However, China retains a modern coastal-defense and area-denial capability with 60 HOUBEI (Type 022) class missile patrol craft (PTG) built in the mid-2000s to supplement 25 1990s-vintage HOUJIAN and HOUXIN-class missile patrol combatants. The HOUBEI design integrates a high-speed wave-piercing catamaran hull, waterjet propulsion, signature-reduction features, and the YJ-83 family ASCM. Although poorly equipped for offshore patrol duties, the HOUBEI is valuable for reacting to specific threats in China's exclusive economic zone (EEZ) and slightly beyond. As noted in the previous section, these ships eventually may be replaced by Type 056 corvettes. China in 2013 consolidated four of its five maritime law enforcement (MLE) agencies into a new China Coast Guard (CCG). China usually uses CCG ships, rather than PLAN ships, to assert and defend its maritime territorial claims and fishing interests in the South China Sea and East China Sea, although PLAN ships are available as backup forces. While China's CCG ships are often unarmed or lightly armed, they can nevertheless be effective in confrontations with unarmed fishing vessels or other ships. Figure 13 shows a picture of a CCG ship. China is rapidly modernizing its inventory of CCG ships, and some of China's newest CCG ships are relatively large. DOD states that The CCG is responsible for a wide range of missions, including enforcement of China's sovereignty claims, anti-smuggling, surveillance, protection of fisheries resources, and general law enforcement. China primarily uses civilian maritime law enforcement agencies in maritime disputes, and employs the PLAN in an overwatch capacity in case of escalation. The enlargement and modernization of the CCG forces has improved China's ability to enforce its maritime claims. The CCG is increasing its total force level at a rapid pace. Since 2010, the CCG's large patrol ship fleet (more than 1,000 tons) has more than doubled in size from approximately 60 to more than 130 ships, making it by far the largest coast guard force in the world and increasing its capacity to conduct extended offshore operations in a number of disputed areas simultaneously. Furthermore, the newer ships are substantially larger and more capable than the older ships, and the majority are equipped with helicopter facilities, high-capacity water cannons, and guns ranging from 30mm to 76mm. Among these ships, a number are capable of long-distance, long-endurance out-of-area operations. In addition, the CCG operates more than 70 fast patrol combatants (more than 500 tons), which can be used for limited offshore operations, and more than 400 coastal patrol craft (as well as approximately 1000 inshore and riverine patrol boats). By the end of the decade, the CCG is expected to add another 25-30 patrol ships and patrol combatants before the construction program levels off. ONI states that During the last decade, China's MLE force has undergone a major modernization, which increased both the sizes of its ships and their overall capability. These civilian maritime forces have added approximately 100 new large patrol ships (WPS), patrol combatants/craft (WPG/WPC), and auxiliary/support ships, not including small harbor and riverine patrol boats. The current phase of the construction program, which began in 2012, will add over 30 large patrol ships and over 20 patrol combatants to the force by 2015. This will increase by 25 percent the overall CCG force level in a fleet that is also improving rapidly in quality. Most MLE ships are either unarmed or armed only with light deck weapons (12.7mm, 14.5mm, and 30mm guns) and generally use commercial radars and communications equipment. Several of the largest ships are equipped with helicopter landing and hangar facilities as well. DOD states that The PLA continues to make modest gains in amphibious warfare by integrating new capabilities and training consistently. Its amphibious warfare capability focuses on two geographic areas: the PLAA [PLA Army] focuses its amphibious efforts on a Taiwan invasion while the PLAN Marine Corps (PLANMC) focuses on small island seizures in the South China Sea, with a potential emerging mission in the Senkakus. Both the PLAA and the PLANMC continue to integrate closely with the PLAN's amphibious forces and the PLAA's Maritime Transport Squadron. In 2016, amphibious elements of the PLAA's 1 st Group Army and 31 st Group Army continued to improve their ability to conduct and sustain amphibious operations. The 1 st Group Army's training in the newly formed Eastern Theater featured new components, including real-time ISR, precision targeting for close air support assets, and nighttime reconnaissance and attack training. The 31 st Group Army's training in the Southern Theater demonstrated a combined ground warfare concept in which amphibious and ground forces used an integrated command information system to coordinate a multi-pronged assault. This exercise included armor, infantry, and artillery units from both regular army and amphibious units, integrated with army aviation, chemical defense, and special warfare units. The two PLANMC brigades conducted battalion-level amphibious training at their respective training areas in Guangdong (Southern Theater). The training focused on swimming amphibious armored vehicles from sea to shore, small boat assault, and deployment of special forces by helicopter. The PLANMC also participated in two bilateral exercises, one with Russia and one with Thailand; however, these exercises do not appear to have been very advanced. The PLAN added the fourth YUZHAO-class LPD to its amphibious fleet in 2016, along with three new LSTs. Both classes are integrated into PLAA and PLANMC routine amphibious training. DOD also states that Large-scale amphibious invasion is one of the most complicated and difficult military operations. Success depends upon air and sea superiority, the rapid buildup and sustainment of supplies onshore, and uninterrupted support. An attempt to invade Taiwan would strain China's armed forces and invite international intervention. These stresses, combined with China's combat force attrition and the complexity of urban warfare and counterinsurgency (assuming a successful landing and breakout), make an amphibious invasion of Taiwan a significant political and military risk. Taiwan's investments to harden infrastructure and strengthen defensive capabilities could also decrease China's ability to achieve its objectives. The PLA is capable of accomplishing various amphibious operations short of a full-scale invasion of Taiwan. With few overt military preparations beyond routine training, China could launch an invasion of small Taiwan-held islands in the South China Sea such as Pratas or Itu Aba. A PLA invasion of a medium-sized, better-defended island such as Matsu or Jinmen is within China's capabilities. Such an invasion would demonstrate military capability and political resolve while achieving tangible territorial gain and simultaneously showing some measure of restraint. However, this kind of operation involves significant, and possibly prohibitive, political risk because it could galvanize pro-independence sentiment on Taiwan and generate international opposition. China has put into service a new class of amphibious ships called the Yuzhao or Type 071 class ( Figure 14 ). The Type 071 design has an estimated displacement of more than 19,855 tons, compared with about 15,900 tons to 16,700 tons for the U.S. Navy's Whidbey Island/Harpers Ferry (LSD-41/49) class amphibious ships, which were commissioned into service between 1985 and 1998, and about 25,900 tons for the U.S. Navy's new San Antonio (LPD-17) class amphibious ships, the first of which was commissioned into service in 2006. IHS J ane's Fighting Ships 201 7 -201 8 states that the first four ships in the class were commissioned into service in 2007, 2011, 2012, and 2016, and that the fifth and sixth ships in the class are expected enter service in 2018 and 2019. A December 5, 2017, blog post shows a photo of what the post described as the sixth ship in the class under construction. DOD states that The PLAN has four large YUZHAO-class (Type 071) amphibious transport docks (LPD). The YUZHAO LPD provides a greater and more flexible capability for "far seas" operations than the PLAN's older landing ships. It can carry up to four of the new YUYI-class air-cushion medium landing craft and four or more helicopters, as well as armored vehicles and PLAN Marines for long-distance deployments. Observers for the past few years have been expecting China to begin building a class of LHD-type amphibious assault ships that would be larger than the Type 071 design. The expected new class was earlier referred to as the Type 081 design, but is more recently being referred to as the Type 075 design. DOD states that "the PLAN probably will continue YUZHAO [Type 071] LPD construction, even as it pursues a follow-on amphibious assault ship that is not only larger, but also incorporates a full flight deck for helicopters." A March 29, 2017, press report states that China has begun building an LHD-type amphibious assault ship. The press report included an unofficial artist's rendering of the ship ( Figure 15 ) stating that the ship would have a displacement of 40,000 tons. (By comparison, U.S. Navy LHD/LHA-type amphibious assault ships displace 41,000 tons to 45,000 tons.) IHS Jane's Fighting Ships 201 7 -201 8 states the following: It was reported in April 2017 that a new Type 075 Landing Helicopter Dock (LHD) ship is under construction at Hudong-Zhonghua Shipyard, Shanghai. The ship is reported to have a displacement on the order of 40,000 tonnes and a length of 245m[eters] [about 804 feet]. The ship is believed to be capable of operating of the order of 30 helicopters and to be equipped with a well-deck aft from which amphibious craft can be operated. A June 30, 2018, blog post states that China has begun construction of three Type 075 ships that are "almost identical in size and appearance" to U.S. Navy amphibious assault ships. The March 29, 2017, press report stated the following: China has started building a new generation of large amphibious assault vessels that will strengthen the navy as it plays a more dominant role in projecting the nation's power overseas, military sources said. The 075 Landing Helicopter Dock [LHD] is now under construction by a Shanghai-based shipbuilding company, the sources said. The amphibious vessel is far larger than similar ships previously constructed for the PLA Navy. The 075 can serve as a form of aircraft carrier and military experts said it would give China's navy the ability to launch various types of helicopters to attack naval vessels, enemy ground forces or submarines in the East or South China Sea.... China's navy commander, Vice-Admiral Shen Jinlong, visited the Hudong Zhonghua Shipbuilding Company on Sunday, which specialises in building Landing Helicopter Docks, the company said on its website. One source close to the navy said Shen's inspection trip confirmed construction work was underway on the new class of vessel. "Construction of the Type 075 ships will take two more years," the source said. "The first vessel may be launched as early as 2019 and put into full service in 2020."... The Macau-based military observer Antony Wong Dong said building the bigger Type 075 vessels, which are similar in size to the largest American Wasp-class amphibious ships, would help the navy match the US in the use of helicopters in its fleet. "China has so many giant warships, including four Type 071 amphibious vessels and two aircraft carriers, but its vertical landing capability is still limited due to a lack of the largest helicopter dock vessels," Wong said. " The launch of Type 075 will let the navy become the world's No 2 powerful navy after the US." The Type 075 is able to deploy and house up to 30 armed helicopters. Six helicopters will be able to take off from the flight deck at the same time. The vessels will also be able to deploy landing craft and troops, plus house command and control operations. Although larger amphibious ships such as the Type 071 and the expected Type 075 would be of value for conducting amphibious landings in Taiwan-related conflict scenarios, some observers believe that China is building such ships as much for their value in conducting other operations, such as operations for asserting and defending China's territorial claims in the East China Sea and South China Sea, humanitarian assistance and disaster relief (HA/DR) operations, maritime security operations (such as antipiracy operations), and noncombatant evacuation operations (NEOs). Politically, amphibious ships can also be used for naval diplomacy (i.e., port calls and engagement activities) and for impressing or intimidating foreign observers. DOD states that "China's investments in its amphibious ship force signal its intent to develop expeditionary amphibious assault, HA/DR, and counterpiracy capabilities." In June 2013, it was reported that China in May 2013 had taken delivery of four large, Ukrainian-made Zubr-class air-cushioned landing craft (LCACs). The craft reportedly have a range of 300 nautical miles, a maximum speed of 63 knots, and a payload capacity of 150 tons. China in July 2014 used at least one of the craft in an amphibious assault exercise in the South China Sea. In February 2017, it was reported that China has begun mass producing a new type of LCAC, called the Type 726, capable of carrying a Chinese tank and moving at speeds of more than 60 knots. In July 2015, it was reported that China's navy had commissioned into service a ship similar to the U.S. military's Expeditionary Transfer Dock (ESD) Ship (previously called the Mobile Landing Platform, or MLP, ship). China's ship, like the U.S. ESD, is a semi-submersible ship that can support ship-to-shore movement of equipment by serving as a "pier at sea" for ships that lack a well deck for accommodating landing craft. China's ESD-like ship, with an estimated displacement of about 20,000 tons, is smaller than the U.S. ESD. Some observers have commented over the years on the possibility that China could use civilian ships to assist in an amphibious operation. In June 2015, it was reported that China had approved a plan to ensure that civilian ships can support maritime military operations in the event of a crisis. China has developed a large new amphibious aircraft (aka seaplane—an aircraft that can take off from, and land back onto, the surface of the water) called the AG-600 ( Figure 16 ). The four-engine aircraft, which was shown at a Chinese airshow in 2016, reportedly has a cruising speed of about 270 knots and a flying range of roughly 2,400 nautical miles to 2,800 nautical miles, and can carry 50 passengers or 12 tons of water when used for firefighting. The aircraft's reported missions are civilian in nature, including primary missions of maritime search and rescue and firefighting, and potential additional missions such as observing and protecting the marine environment, resource exploration, resupplying reef outposts, protection against smuggling operations, and enforcing China's maritime claims. Some observers have speculated about the potential for using the aircraft for military missions. It is unclear whether the aircraft will be put into serial production, how many in total might be built, or for which Chinese government agencies. China reportedly is building or preparing to build one or more large floating sea bases. The bases (see Figure 17 ) are referred to in press reports as very large floating structures (VLFSs). They are broadly similar in appearance to a concept known as the Mobile Offshore Base (MOB) that U.S. defense planners considered at one point years ago. VLFSs could be used for supporting operations by aircraft and surface ships and craft. An August 10, 2015, press report states the following: China's military wants the ability to create large modular artificial islands that can be repositioned around the world as necessary. And it's not as outlandish a goal as it might seem. According to Navy Recognition, China's Jidong Development Group unveiled its first design for a Chinese-built Very Large Floating Structure (VLSFs) at its National Defense Science and Technology Achievement exhibition in Beijing at the end of July. The structures are comprised of numerous smaller floating modules that can be assembled together at sea in order to create a larger floating platform. VLSFs have a number of uses. The artificial islands can be used as fake islands for touristic purposes, or can also be constructed to function as piers, military bases, or even floating airports, Navy Recognition notes. An August 19, 2015, press report states the following: Two Chinese companies are to build 3.2-kilometer [2-mile] long platforms that could host airstrips, docks, helipads, barracks, or even "comprehensive security bases", the Financial Times quoted Feng Jun, chairman of Hainan Offshore Industry as saying on August 18. [The] Financial Times says Jidong Development Group have confirmed its contribution to most of the 3.7 billion yuan in research funding of the project. Hainan Offshore Industry will also play a part in the project. Although the "Floating Fortresses" so far "are only in the design and research phase", western media are already paying close attention on the project, which also drew criticism from military observers. "Planting one of these in the middle of the South China Sea would be a terribly provocative act," said Richard Bitzinger, a U.S. authority on maritime security. However, experts incline to the view that these platforms are more likely to serve large oil drilling rigs. The two companies also emphasize on the peaceful application of the giant platforms, mentioning duty-free shopping malls and exotic tourist destinations. The first VLFS (very large floating structure) of the project is currently under construction at dry dock in Caofeidian near Beijing. A September 25, 2017, press report states that China is developing autonomous unmanned surface vehicles (USVs) for potential use by China's navy that could be equipped with sensors and weapons for tracking and attacking surface ships and submarines. A February 3, 2018, press report stated that China had conducted its first test run of a USV. A June 6, 2018, press report stated that a Chinese company had tested a formation of 56 USVs and was "working with the military to develop a 'shark swarm' for sea battles and military patrols." ONI states that During the past two decades, the PLANAF has made great strides in moving beyond its humble origins. Antiquated fixed-wing aircraft such as the Nanchang Q-5 Fantan and the Harbin H-5 Beagle have given way to an array of relatively high-quality aircraft. This force is equipped for a wide range of missions including offshore air defense, maritime strike, maritime patrol, antisubmarine warfare, and, in the not too distant future, carrier-based operations. Just a decade ago, this air modernization relied very heavily on Russian imports. Following in the footsteps of the People's Liberation Army Air Force (PLAAF), the PLA(N) has recently begun benefitting from domestic combat aircraft production. Historically, the PLA(N) relied on older Chengdu J-7 variants and Shenyang J-8B/D Finback fighters for offshore air defense. These aircraft offered limited range, avionics, and armament. The J-8 is perhaps best known in the West as the aircraft that collided with a U.S. Navy EP-3 reconnaissance aircraft in 2001. The PLA(N)'s first major air capability upgrade came with the Su-30MK2 FLANKER. While the PLAAF had received numerous FLANKER variants from Russia between 1992 and 2002, the PLA(N) did not acquire its initial aircraft until very late in that process. In 2002, China purchased 24 Su-30MK2, making it the first 4 th -generation fighter aircraft fielded with the PLA(N). These aircraft feature both an extended range and maritime radar systems. This allows the Su-30MK2 to strike enemy ships at long distances, while maintaining a robust air-to-air capability. Several years later, the PLA(N) began replacing its older J-8B/D with the newer J-8F variant. The J-8F featured improved armament such as the PL-12 radar-guided air-to-air missile, upgraded avionics, and an improved engine with higher thrust. Today, the PLA(N) is taking deliveries of modern domestically produced 4 th - generation fighter aircraft such as the J-10A Firebird and the J-11B FLANKER. Equipped with modern radars, glass cockpits, and armed with PL-8 and PL-12 air-to-air missiles, PLA(N) J-10A and J-11B are among the most modern aircraft in China's inventory. For maritime strike, the PLA(N) has relied on the H-6 BADGER bomber for decades. The H-6 is a licensed copy of the ex-Soviet Tu-16 BADGER medium jet bomber, maritime versions of which can employ advanced ASCMs against surface targets. Despite the age of the design, the Chinese H-6 continues to receive electronics and payload upgrades, which keep the aircraft viable. We think as many as 30 of these aircraft remain in service.... With at least five regiments fielded across the three fleets, the JH-7 FLOUNDER augments the H-6 for maritime strike. The JH-7 is a domestically produced tandem-seat fighter/bomber, developed as a replacement for obsolete Q-5 Fantan light attack aircraft and H-5 Beagle bombers.... In addition to combat aircraft, the PLA(N) is expanding its inventory of fixed-wing maritime patrol aircraft (MPA), airborne early warning (AEW), and surveillance aircraft. China has achieved significant new capabilities by modifying several existing airframes. The Y-8, a Chinese license-produced version of the ex-Soviet An-12 Cub, forms the basic airframe for several PLA(N) special mission variants. All of these aircraft play a key role in providing a clear picture of surface and air contacts in the maritime environment. As the PLA(N) pushes farther from the coast, long-range aircraft capable of extended on-station times to act as the eyes and ears of the fleet become increasingly important. Internet photos from 2012 indicated the development of a Y-9 naval variant that is equipped with a MAD (magnetic anomaly detector) boom, typical of ASW aircraft. This Y-9 ASW variant features a large surface search radar mounted under the nose as well as multiple blade antennae on the fuselage for probable electronic surveillance. DOD states that China also continues to upgrade its older H-6 bomber fleet to increase operational effectiveness by integrating standoff weapons. The H-6K is a redesign of an older model with turbofan engines to extend range and the capability to carry six land-attack cruise missiles (LACM), giving the PLA a long-range standoff precision strike capability that can reach Guam. PLAN Aviation fields the H-6G, with systems and four weapons pylons for ASCMs to support maritime missions. China reportedly is developing and fielding a range of UAV designs. DOD states that the acquisition and development of longer-range unmanned aerial vehicles (UAVs) will increase China's ability to conduct long-range ISR and strike operations. In 2015, media reported the development of the Shendiao (Sacred Eagle or Divine Eagle) as the PLA's newest high-altitude, long-endurance UAV for a variety of missions such as early warning, targeting, EW, and satellite communications. Also in 2015, the PLAAF used a Yilong UAV (also known as the Wing Loong or Pterodactyl) to assist in HA/DR in the aftermath of an earthquake in China's west—the first public acknowledgment of PLAAF UAV operations. ONI states that The PLA(N) will probably emerge as one of China's most prolific UAV users, employing UAVs to supplement manned ISR aircraft as well as to aid targeting for land-, ship-, and other air-launched weapons systems.... In addition to land-based systems, the PLA(N) is also pursuing ship-based UAVs as a supplement to manned helicopters. In an interview published in an October 15, 2017, blog post, one observer states the following: Chinese military objectives primarily include the projection of sovereign power close to the landmass of China, recovering its ability to control or manage its sovereign sea space along Chinese borders, control of the South China Sea, and project power throughout Asia—though not necessarily project power globally. That is their military doctrine. It has been very clear over the last several years that the Chinese are considering the use of drones, and incorporating them into doctrine as part of the asymmetric approach of closing the gap between themselves and the United States. Drones provide an asymmetric capability that is going to give the Chinese the ability to perform a number of both lethal and nonlethal roles with these platforms. The U.S. is completely dependent on large and major weapons systems, whereas the Chinese are pursuing some major weapons systems development, but are really focusing on mass platforms—the term of art is "swarms." They are not spending as much money and effort on the larger autonomous or remotely operated vehicle platforms. Instead, they are looking at a deeply historic Chinese military ethos and philosophy that says a well structured, yet conventionally inferior adversary can still defeat a superior adversary—the United States.... This is where the swarming aspect comes into play. Should a U.S. warship all of sudden get swarmed by hundreds if not a thousand small unarmed drones, it could have disruptive and distracting effects—impacting electronics and target acquisition for U.S. weapons systems by blinding them. There an infinite number of roles swarms of nonlethal drones could play. By having the nonlethal drone military capability, it also gives the Chinese a non-kinetic way to conduct military operations in the prosecution of the sovereign Chinese seas—expedite control of a disputed island or interdict maritime traffic to control the waters. This allows them to project tactical military power that doesn't cross that threshold into armed conflict—another dimension of Chinese military doctrine. As noted earlier, press reports dated April 3 and 4, 2018, stated that China is developing carrier-based UAVs. Press reports in beginning in January 2018 stated that China is developing an electromagnetic railgun, and has installed what observers speculate may be a prototype version of such a weapon on a Chinese amphibious ship. The U.S. Navy is developing a ship-based electromagnetic railgun for potential use in missions such as naval surface fire support, air defense, and ballistic missile defense. A July 22, 2011, press report states that "China's military is developing electromagnetic pulse weapons that Beijing plans to use against U.S. aircraft carriers in any future conflict over Taiwan, according to an intelligence report made public on Thursday [July 21].... The report, produced in 2005 and once labeled 'secret,' stated that Chinese military writings have discussed building low-yield EMP warheads, but 'it is not known whether [the Chinese] have actually done so.'" China reportedly is developing and deploying maritime surveillance and targeting systems that can detect U.S. ships and submarines and provide targeting information for Chinese ASBMs, ASCMs, and other Chinese military units. These systems reportedly include land-based over-the-horizon backscatter (OTH-B) radars, land-based over-the-horizon surface wave (OTH-SW) radars, electro-optical satellites, radar satellites, UAVs, and seabed sonar networks. DOD states that The PLAN also is improving its over-the-horizon (OTH) targeting capability with sky wave and surface wave OTH radars, which can be used in conjunction with reconnaissance satellites to locate targets at great distances from China, thereby supporting long-range precision strikes, including employment of ASBMs. DOD also states that The PLAN recognizes that long-range ASCMs require a robust, over-the-horizon targeting capability to realize their full potential, and China is investing in reconnaissance, surveillance, command, control, and communications systems at the strategic, operational, and tactical levels to provide high-fidelity targeting information to surface and subsurface launch platforms. ONI states that China is developing a wide array of sensors to sort through this complex environment and contribute to its maritime picture. The most direct method is reporting from the ships and aircraft that China operates at sea. These provide the most detailed and reliable information, but can only cover a fraction of the needed space. A number of ground-based coastal radars provide overlapping coverage of the area immediately off the coast, but their range is similarly limited. To gain a broader view of the activity in its near and far seas, China has turned to more sophisticated sensors. The skywave OTH radar provides awareness of a much larger area than conventional radars by bouncing signals off the ionosphere. At the same time, China operates a growing array of reconnaissance satellites, which allow it to observe maritime activity anywhere on the earth. Two civilian systems also contribute to China's maritime awareness. The first is a coastal monitoring network for the Automatic Identification System (AIS)—an automated system required on most commercial vessels by the International Maritime Organization. China's Beidou system, installed on several thousand of its fishing boats, provides GPS-like navigation to the boats as well as automatic position reporting back to a ground station in China, allowing the location of the fishing fleet to be constantly monitored by fishing enforcement authorities. ONI states that Strategic Chinese military writings do not specifically deal with how China would employ cyber operations in a maritime environment, although they do make clear the importance of cyber operations. The PLA highlights network warfare as one of the "basic modes of sea battle" alongside air, surface, and underwater long-range precision strikes." As the PLA's larger military investment in emerging domains such as cyber matures, the application of cyber operations in the maritime realm will consequently bolster the PLA(N)'s capability. A November 29, 2017, press report states the following: The China Shipbuilding Industry Corporation (CSIC) and the University of Science and Technology of China (USTC) have signed a landmark agreement to collaborate on quantum technologies supporting the development of advanced naval mission systems. Under the joint programme, the two parties will establish three laboratories in Wuhan, central China, which will be focused on developing quantum navigation, quantum communications, and quantum detection respectively. Citing CSIC, the government's State Administration for Science, Technology and Industry for National Defense (SASTIND) said on 28 November that the project will be funded by the state-owned shipbuilder and represents "a significant move to increase investment and promote industrialisation in forward-looking and disruptive technologies". Regarding potential future developments for China's navy, an October 24, 2017, blog post states the following: Potential modernization plans or ambitions of the People's Liberation Army Navy (PLAN) were revealed in unprecedented detail by a former PLAN Rear Admiral in a university lecture, perhaps within the last 2-3 years. The Admiral, retired Rear Admiral Zhao Dengping, revealed key programs such as: a new medium-size nuclear attack submarine; a small nuclear auxiliary engine for conventional submarines; ship-based use of anti-ship ballistic missiles (ASBMs); next-generation destroyer capabilities; and goals for PLAN Air Force modernization. Collections of PowerPoint slides from Zhao's lecture appeared on multiple Chinese military issue webpages on 21 and 22 August 2017, apparently from a Northwestern Polytechnical University lecture. Notably, Zhao is a former Director of the Equipment Department of the PLAN. One online biography notes Zhao is currently a Deputy Minister of the General Armaments Department of the Science and Technology Commission and Chairman of the Navy Informatization Committee, so he likely remains involved in Navy modernization programs. However, Zhao's precise lecture remarks were not revealed on these webpages. Also unknown is the exact date of Zhao's lecture, though it likely took place within the last 2-3 years based on the estimated age of some of his illustrations. His slides mentioned known PLAN programs like the Type 055 destroyer (DDG), a Landing Helicopter Dock (LHD) amphibious assault ship (for which he provided added confirmation), the Type 056 corvette, and the YJ-12 supersonic anti-ship missile. Most crucially, it is Zhao's mention of potential PLAN programs that constitutes an unprecedented revelation from a PLAN source.... While there is also a possibility of this being a deception exercise, this must be balanced by the fact that additional slides were revealed on some of the same Chinese web pages on 23 September. The failure of Chinese web censors to remove both the earlier and later slides may also mean their revelation may be a psychological operation to intimidate future maritime opponents.... Admiral Zhao described a new unidentified 7,000-ton nuclear-powered attack submarine (SSN) that will feature a "new type of powerplant…new weapon system [and] electronic information system." An image shows this SSN featuring a sound isolation raft and propulsor which should reduce its acoustic signature, 12 cruise missile tubes in front of the sail, and a bow and sail similar to the current Type 093 SSN.... Zhao also revealed the PLAN may be working on a novel low power/low pressure auxiliary nuclear powerplant for electricity generation for fitting into conventional submarine designs, possibly succeeding the PLAN's current Stirling engine-based air independent propulsion (AIP) systems.... Zhao's slides detailed weapon and technical ambitions for future surface combatant ships. While one slide depicts a ship-launched ASBM flight profile, another slide indicates that future ships could be armed with a "near-space hypersonic anti-ship ballistic missile," perhaps meaning a maneuverable hypersonic glide vehicle (HGV) warhead already tested by the PLA, and a "shipborne high-speed ballistic anti-ship missile," perhaps similar to the land-based 1,500km range DF-21D or 4,000km range DF-26 ASBMs.... Another slide details that surface ships could be armed with "long-range guided projectiles," perhaps precision guided conventional artillery, a "shipborne laser weapon" and "shipborne directed-energy weapon."... A subsequent slide details that a future DDG may have an "integrated electric power system," have "full-spectrum stealthiness," use an "integrated mast and integrated RF technology, plus "new type laser/kinetic energy weapons," and a "mid-course interception capability." These requirements, plus a subsequent slide showing a tall stealthy superstructure integrating electronic systems, possibly point to a ship with the air defense and eventual railgun/laser weapons of the U.S. Zumwalt-class DDG.... Zhao's lecture also listed requirements for future "PLAN Aviation Follow Developments," to include: a "new type carrier-borne fighter;" a "carrier-borne EW [electronic warfare] aircraft;" a "carrier borne fixed AEW [airborne early warning];" a "new type ship-borne ASW [anti-submarine warfare] helicopter;" a "medium-size carrier-borne UAV [unmanned aerial vehicle];" a "stratospheric long-endurance UAV;" and a "stratospheric airship." Chinese navy ships are conducting increasing numbers of operations away from China's home waters, including the broader waters of the Western Pacific, the Indian Ocean, and the waters surrounding Europe, including the Mediterranean Sea and the Baltic Sea. Although many of China's long-distance naval deployments have been for making diplomatic port calls, some of them have been for other purposes, including conducting training exercises and carrying out antipiracy operations in waters off Somalia. China has been conducting antipiracy operations in waters off Somalia since December 2008 via a succession of rotationally deployed naval escort task forces. DOD states that China's naval modernization effort aligns with China's ongoing shift from "near sea" defense to a hybrid strategy of "near sea" defense and "far seas" protection, with the PLAN conducting operational tasks outside the so-called "first island chain" with multi-mission, long-range, sustainable naval platforms that have robust self-defense capabilities. DOD also states that China's maritime emphasis and attention to missions guarding its overseas interests have increasingly propelled the PLA beyond China's borders and its immediate periphery. The PLAN's evolving focus—from "offshore waters defense" to a mix of "offshore waters defense" and "far seas protection"—reflects the high command's expanding interest in a wider operational reach. Similarly, doctrinal references to "forward edge defense" that would move potential conflicts far from China's territory suggest PLA strategists envision an increasingly global role. DOD also states that The PLAN continues to develop into a global force, gradually extending its operational reach beyond East Asia and into what China calls the "far seas." The PLAN's latest naval platforms enable combat operations beyond the reaches of China's land-based defenses. In particular, China's aircraft carrier and planned follow-on carriers, once operational, will extend air defense umbrellas beyond the range of coastal systems and help enable task group operations in "far seas." The PLAN's emerging requirement for sea-based land-attack will also enhance China's ability to project power. More generally, the expansion of naval operations beyond China's immediate region will also facilitate non-war uses of military force. DOD also states that The PLAN's missions in the "far seas" include protecting important sea lanes from terrorism, piracy, and foreign interdiction; providing HA/DR; conducting naval diplomacy and regional deterrence; and training to prevent a third party, such as the United States, from interfering with operations off China's coast in a Taiwan contingency or conflict in the East or South China Sea. The PLAN's ability to perform these missions is modest but growing as it gains more experience operating in distant waters and acquires larger and more advanced platforms. The 2015 ONI report states that Although the PLA(N)'s primary focus remains in the East Asia region, where China faces multiple disputes over the sovereignty of various maritime features and associated maritime rights, in recent years, the PLA(N) has increased its focus on developing blue-water naval capabilities. Over the long term, Beijing aspires to sustain naval missions far from China's shores. When we wrote the 2009 publication [i.e., the 2009 ONI report], China had just embarked on its first counterpiracy missions in the Gulf of Aden, but most PLA(N) operations remained close to home. Nearly six years later, these missions have continued without pause, and China's greater fleet has begun to stretch its legs. The PLA(N) has begun regular combat training in the Philippine Sea, participated in multinational exercises including Rim of the Pacific (RIMPAC) 2014, operated in the Mediterranean, increased intelligence collection deployments in the western Pacific, and for the first time deployed a submarine to the Indian Ocean.... With a greater percentage of the force consisting of these modern combatants capable of blue water operations, the PLA(N) will have an increasing capability to undertake missions far from China. A March 9, 2016, press report states the following: China's People's Liberation Army Navy (PLAN) has stepped out onto the international scene in recent years with sustained deployments of counter-piracy escort task groups to the Indian Ocean and the Gulf of Aden. These deployments, numbering 22 and counting since 26 December 2008, have enabled the PLAN to sustain presence around the Horn of Africa and even deploy onwards into the Mediterranean Sea and beyond. China is now looking to bolster this strategic presence in both scope and scale by investing in supply ships, using Chinese commercial shipping lines, and exploiting its emerging access to commercial ports around the world as it seeks to provide logistics support to deployed naval vessels. China has never had a sustained overseas presence or foreign basing footprint. Yet it is building a fleet that will enable the PLAN to deploy not only at high intensity in China's immediate periphery ('Near Seas', including the Yellow, East, and South China seas), but also with gradually increasing tempo and regularity throughout the Asia-Pacific region and the Indian Ocean ('Far Seas' operations). This ongoing effort, if Beijing seeks for it to become more continuous in nature, will require greater power projection capabilities, as well as enhanced logistics support, and maybe even a long-term presence on foreign soil. A March 29, 2017, press report states the following: The People's Liberation Army Navy [PLAN] Marine Corps is in the midst of a massive reorganization and build out that will greatly enhance China's ability to project power abroad. At the center of the plan multiplying the relatively small force five times—from about 20,000 uniformed personnel to potentially over 100,000 Marines. This force increase is largely accomplished through folding up to eight PLA amphibious brigades, which were Army units responsible for amphibious missions, into the PLANMC order of battle. This expansion will make the PLANMC more of a full spectrum expeditionary force like the Marine Corps in the United States. Historically, China's Marine Corps was an elite light infantry formation akin to the British Royal Marines.... The expansion and reorganization of China's Marine force is another key aspect of China building up the traditional tools of global power. Akin to the role that U.S. Marines play, they can be stationed at home, potentially based abroad (such as in a future at ports like Gwadar, Pakistan or Dijibouti, to secure Chinese trade routes), or aboard PLAN ships. Focus on the maritime will enhance China's ability to carry out amphibious landings as well as deploy light expeditionary forces. A force with the motto of "Tiger of the land, dragon of the sea" is taking a big step forward. A May 18, 2017, blog post states the following: On 25 December 2016, the PLAN deployed its Liaoning carrier group beyond the First Island Chain for the first time.... The PLAN's naval drills are not only political exercises and a warning to the US, but also a basis for routine PLAN activities in the future. China's maritime strategy is clearly moving beyond the traditional 'island chain' boundary that has limited the PLAN's operations and development in the past.... The Chinese media's reaction is highly significant in the signals it sends about China's future naval intentions. It makes clear that the most significant barrier to China's development of sea power is not the geopolitical environment or lack of capability but a psychological fixation over the island chains which has become an obstacle to PLAN's formulation of a comprehensive maritime strategy. This intangible mental boundary needlessly prevented development of true sea power.... If China is breaking self-imposed barriers, expect expeditionary deployments to become a routine PLAN activity in the near future. That would also require greater operational support from other PLA arms. In this context, the PLA and PLAAF's Far Sea joint exercise on 2 March suggests that China's Eastern Theater Command aims to increase its ability to project power and gain air superiority beyond the mainland to support naval operations. Prior to the establishment of its new military base in Djibouti—China's first overseas military base (see discussion below)—observers for years had speculated and debated whether, where, and when China might build bases or other logistic support facilities outside China to support Chinese naval operations beyond China's near-seas region, and particularly along the sea line of communication linking China to Persian Gulf oil sources. DOD stated in 2016 that "in late November 2015, China acknowledged its intent to build military support facilities in Djibouti. When completed, this facility is to be China's first overseas logistics station." DOD stated in 2017 that In February 2016, China began construction of a military base in Djibouti and probably will complete it within the next year. China claims this facility is designed "to help the navy and army further participate in United Nations peacekeeping operations (PKO), carry out escort missions in the waters near Somalia and the Gulf of Aden, and provide humanitarian assistance." This initiative, along with regular naval vessel visits to foreign ports, both reflects and amplifies China's growing influence, extending the reach of its armed forces. The facility in Djibouti reportedly was officially "established" on July 11, 2017, and formally opened on August 1, 2017. A September 27, 2017, press report states the following: China is planning to build a multi-purpose wharf that would allow a naval flotilla to dock at its first overseas military base in Djibouti, according to military sources. The wharf project will be started only when construction work on accommodation for the People's Liberation Army marines, engineers and workers stationed in the Horn of Africa nation is completed, one of the sources who is familiar with the project told the South China Morning Post. "Projects such as the multi-purpose naval wharf are complicated. The Chinese navy needs a large-scale pier to offer logistical support for its flotillas conducting anti-piracy operations in Somali waters," the source said. "The scale of the wharf should allow for the docking of a four-ship flotilla at least, including China's new generation Type-901 supply ship with a displacement of more than 40,000 tonnes, destroyers and frigates, as well as amphibious assault ships for combat and humanitarian missions." China began building what it describes as a 36-hectare logistics base in Djibouti last year, but satellite images suggest its docking facilities for naval vessels, barracks and other pieces of military infrastructure are still under development.... The source said Beijing was considering the possibility it would have to assist in the mass evacuation of Chinese citizens in an operation similar to the one conducted in war-torn Yemen in 2015—meaning the capacity of the wharf would be designed to be as "big as possible" to allow more warships to dock. Beijing said the base would resupply vessels taking part in peacekeeping and humanitarian missions off the coasts of Yemen and Somalia. But another source close to the navy said the wharf had originally been designed as a "naval maintenance and repair port" because of an "accident" in 2010. "China decided to set up a ship maintenance and repair stop in Djibouti after the power system of its Type-052B destroyer Guangzhou broke down when it was carrying out anti-piracy missions in the Gulf of Aden in May of 2010," the second source said. "Sailors on the Guangzhou were facing the most embarrassing situation as they didn't know where they could go and who they should seek help from because Beijing and Djibouti hadn't formally set up military ties in that time." A September 27, 2017, blog post states the following: The amount of money Chinese firms have spent in Djibouti is just a fraction of what the headlines routinely state. Although this money has engendered considerable goodwill toward China in Djibouti, it is simply too soon to tell whether and to what extent China will be able to translate its financial largesse into influence. Meanwhile, as some analysts suspect, China's logistics facility in Djibouti probably will be used for more than just refueling and resupplying Chinese navy ships conducting counterpiracy operations in the Gulf of Aden.... ... China's new base is a concrete manifestation of the PLA Navy's "near seas defense far seas protection"... China's base in Djibouti is situated in a highly strategic location, directly on the Bab el Mandeb Strait connecting the Gulf of Aden to the Red Sea and on through to the Mediterranean, and near China's growing economic and commercial interests in East Africa. Given the position of China's Djibouti base, located along a critical maritime chokepoint and near China's growing economic and commercial interests in East Africa, it appears the establishment of this facility is an example of China's new naval strategy in action. An October 1, 2017, press report states the following: Beijing has described its military outpost [in Djibouti] as a logistics facility for resupplying Chinese vessels on peacekeeping and humanitarian missions. But satellite imagery and unofficial reports show the base has military infrastructure, including barracks and storage and maintenance units, and docking facilities that can handle most vessels in its naval fleet. China was the seventh country to establish a military presence in the small African nation, one of the poorest in the region, following in the footsteps of the United States, France and Japan, among others. But its base in Djibouti—situated en route to the strategically important Suez Canal, at the mouth of the Red Sea—has stoked concerns it would be a platform for Beijing's geopolitical ambitions overseas.... Many other countries have a presence in Djibouti, a factor that was critical in Beijing's decision to build its first overseas military base in the African nation. For example, Djibouti houses the US' only permanent military installation on the continent. "It's less controversial for China to be in Djibouti simply because there are many other countries with a presence there," said Zhang Baohui, a Lingnan University professor of Chinese foreign policy. Djibouti is also far from China's main competitors—a base at Gwadar Port in Pakistan, for example, would have raised alarm in New Delhi. Zhang said the base's siting in Djibouti meant China could credibly claim it was for humanitarian missions such as anti-piracy efforts off the coasts of Somalia and Yemen.... China also wants to be able to protect its interests along its "21 st century maritime Silk Road", the sea-based part of Beijing's expansive "Belt and Road Initiative", according to Malcolm Davis, Asian security expert at the Australian Strategic Policy Institute. "There's lots of Chinese diaspora and investment, and also trade flows in that region," he said. "It primarily is about being able to have a presence in a strategically important area."... According to the CNA report, the Djibouti base can help support China's missions for "far seas protection" to support operations such as combatting piracy, the evacuation of Chinese citizens, peacekeeping, counterterrorism, intelligence collection and protection of strategic sea lanes. Analysts say Beijing could use the base to project its power into North Africa, as well as to strengthen its position in the Indian Ocean. "What it could mean for Chinese ship deployments into the Indian Ocean is they could [maintain] much longer periods of patrolling in the Indian Ocean," said Rahul Roy-Chaudhury, senior fellow for South Asia at the London-based International Institute for Strategic Studies. "The familiarity of the Chinese navy with the Indian Ocean has increased tremendously." But this has raised concern in India about regional maritime security, particularly in view of China's other regional naval bases in countries such as the Maldives and Sri Lanka, analysts say. In March 2016, remarks from China's Foreign Minister were interpreted by some observers as hinting that China might establish additional overseas bases in the future. DOD stated in 2017 that China's expanding international economic interests are increasing demands for the PLAN to operate in more distant maritime environments to protect Chinese citizens, investments, and critical sea lines of communication (SLOC). China most likely will seek to establish additional military bases in countries with which it has a longstanding friendly relationship and similar strategic interests, such as Pakistan, and in which there is a precedent for hosting foreign militaries. China's overseas military basing may be constrained by the willingness of countries to support a PLA presence in one of their ports. China's leaders may judge that a mixture of military logistics models, including preferred access to overseas commercial ports and a limited number of exclusive PLAN logistic facilities—probably collocated with commercial ports—most closely aligns with China's future overseas military logistics needs. A greater overseas naval logistics and basing footprint would better position the PLA to expand its participation in non-combatant evacuation operations, search-and-rescue, humanitarian assistance/disaster relief (HA/DR), and SLOC security. A more robust overseas logistics and basing infrastructure would also be essential to enable China to project and sustain military power at greater distances from China. In March 2017, it was reported that China might deploy a contingent of Chinese marines to the commercial port at Gwadar, Pakistan, to help maintain security at that port. A June 19, 2017, press report states that a senior Pakistani diplomat confirmed to NBC News that his country invited China to build a naval facility on its territory back in 2011. "What better way for China to demonstrate clout than to build a military base right in your rival's backyard?" "What better way for China to demonstrate clout than to build a military base right in your rival's backyard?" Speaking on the condition of anonymity, the diplomat said this request came just days after U.S. Navy SEALs conducted a secret raid to kill Osama bin Laden in the Pakistani city of Abbottabad, when relations between Washington and Islamabad took a nosedive. A September 27, 2017, blog post states that while it is likely that Djibouti will not be China's only military outpost abroad, it may be some time before China establishes another one given China's cautious approach to Djibouti.... ... China is indeed considering other locations for additional overseas bases. An article written by Adm. Sun Jianguo, the deputy chief of the joint staff department responsible for the PLA's overseas engagement portfolio, and published in Qiushi, the official journal of the Central Committee of the Communist Party of China School, President Xi Jinping has instructed the PLA to "steadily advance overseas base construction." In March 2016, in response to a reporter's question about how China will protect its overseas interests, China's foreign minister Wang Yi simply stated, "We are willing to try to carry out the construction of infrastructure facilities and logistic capacity in the regions where China's interest is involved." This is a far cry from past statements by China's Foreign Ministry spokesmen, who would decry as "groundless" the first hint of any such rumor that the PLA may be interested setting up overseas. Chinese military analysts have already publicly speculated about several potential locations. Analysts at China's Naval Research Institute, the PLA Navy's top think tank, have proposed locations ranging from Gwadar, Pakistan and Hambantota, Sri Lanka in South Asia, to Sittwe, Myanmar in Southeast Asia, and even Dar es Salaam, south of Djibouti on Africa's east coast in Tanzania. Each of these locations have their own unique sets of challenges for China, however, and given the excessive caution with which China moved in establishing its first location in Djibouti, it may be quite some before we see a second. An October 5, 2017, press report states the following: China's first overseas military base in the small African country of Djibouti is "probably the first of many" the country intends to build around the world, which could bring its interests into conflict with the U.S., according to American intelligence officials. "China has the fastest-modernizing military in the world next to the United States," according to insights provided Thursday by U.S. intelligence officials, who asked not to be identified discussing the information. That will create "new areas of intersection—and potentially conflicting—security interests between China and the United States and other countries abroad," according to the officials. A January 3, 2018, press report states the following: The facility will be built at Jiwani, a port close to the Iranian border on the Gulf of Oman, according to two people familiar with deal. Plans call for the Jiwani base to be a joint naval and air facility for Chinese forces, located a short distance up the coast from the Chinese-built commercial port facility at Gwadar, Pakistan. Both Gwadar and Jiwani are part of Pakistan's western Baluchistan province. Plans for the base were advanced during a visit to Jiwani on Dec. 18 by a group of 16 Chinese People's Liberation Army officers who met with about 10 Pakistani military officers. Jiwani is located on a peninsula about 15 miles long on a stretch of land with one small airfield. According to sources, the large naval and air base will require the Pakistani government to relocate scores of residents living in the area. Plans call for their relocation to other areas of Jiwani or further inland in Baluchistan province. The Chinese also asked the Pakistanis to undertake a major upgrade of Jiwani airport so the facility will be able to handle large Chinese military aircraft. Work on the airport improvements is expected to begin in July. The naval base and airfield will occupy nearly the entire strategic peninsula. A January 30, 2018, press report stated the following: According to recent reports, China may be about to construct a naval and air base near Gwadar, in west Pakistan. This would be China's second base in the Indian Ocean and indicates that it may be moving fast to establish a network of military bases across the region.... The Djibouti base is only the first step in what is likely to become a network of Chinese bases across the Indian Ocean. Many analysts had long thought that the next Chinese naval base would be established at Gwadar. The port city is on track to become a major waypoint in China's Belt and Road Initiative and the Indian Ocean node of a new overland pathway to western China. China's plans for Gwadar are ambitious. There are reports that it is planning to build accommodation for up to 500,000 Chinese nationals in Gwadar within five years, and it seems likely they will be accompanied by a large contingent of Chinese marines. This would overwhelm Gwadar's existing population of around 100,000 people, effectively making Gwadar China's first colony in the Indian Ocean.... This month, a US report claimed that China is about to start construction of a new naval base and airfield at Jiwani, some 60 kilometres west of Gwadar. While this has not been confirmed by Beijing, Jiwani would make a good location for a base. It would separate Chinese naval forces from commercial shipping at Gwadar.... Chinese facilities at Djibouti and Gwadar/Jiwani are unlikely to be the end of China's expanding military presence in the Indian Ocean. China will also require facilities or staging points in or around east Africa, to help protect its massive energy trade from West Africa travelling around the Cape. There are a number of potential candidates among the weak and underdeveloped countries in that part of the world. Many analysts think Tanzania would be a good location. China has a close and longstanding relationship with Tanzania and recently took control of the newly built port of Bagamoyo, around 50 kilometres north of the Dar es Salaam. China will also likely require naval facilities in the central and/or eastern Indian Ocean as part of a new Indian Ocean network. China recently took control of the port of Hambantota in southern Sri Lanka, leading to a lot of speculation about Beijing's intentions. But the Sri Lankan government strenuously denies that China will be permitted to develop any naval presence there, and it has previously given formal undertakings to India that it would not do so. Other analysts look at the Maldives islands south of India as a likely place for a Chinese base. Although traditionally within India's strategic sphere, in recent years the Maldives has become unstable, impoverished and increasingly desperate. An April 9, 2018, press report states the following: China has approached Vanuatu [a South Pacific country located east of Australia and north of New Zealand] about building a permanent military presence in the South Pacific in a globally significant move that could see the rising superpower sail warships on Australia's doorstep. Fairfax Media can reveal there have been preliminary discussions between the Chinese and Vanuatu governments about a military build-up in the island nation. While no formal proposals have been put to Vanuatu's government, senior security officials believe Beijing's plans could culminate in a full military base. The prospect of a Chinese military outpost so close to Australia has been discussed at the highest levels in Canberra and Washington. A base less than 2000 kilometres from the Australian coast would allow China to project military power into the Pacific Ocean and upend the long-standing strategic balance in the region, potentially increasing the risk of confrontation between China and the United States. It would be the first overseas base China has established in the Pacific, and only its second in the world. Australian intelligence and security figures, along with their partners in the United States and New Zealand, have been watching with concern as Beijing deepens its influence with Pacific island governments through infrastructure building and loans…. Multiple sources said Beijing's military ambition in Vanuatu would likely be realised incrementally, possibly beginning with an access agreement that would allow Chinese naval ships to dock routinely and be serviced, refuelled and restocked. This arrangement could then be built on…. Fairfax Media understands there are senior figures within China's People's Liberation Army who would like to move quickly to establish a proper base on Vanuatu. A May 15, 2018, blog post states the following: China is moving to establish a network of naval and air bases in the Indian Ocean to support its growing strategic imperatives in the region. This likely includes plans to build bases in the eastern Indian Ocean, in waters much closer to Australia. Australia cannot afford to play onlooker to these developments. In July 2017, China opened its first overseas military base in Djibouti, and Beijing is currently in negotiations with Pakistan to establish an additional base at or near Gwadar on the Arabian Sea. But it will not be enough for China to only have capabilities in the north-west Indian Ocean, far from Australia. China's strategic imperatives, and the Indian Ocean's distance from Chinese territory, mean that Beijing will likely see a need to develop a network of military facilities of various types across the ocean, including in its central/eastern zone. These bases will be required if China wants to be able to protect the entire length of its east–west sea lines across the Indian Ocean. Just as importantly, Beijing has growing political imperatives to protect the large number of Chinese nationals and assets across the region. Chinese naval presence in the Indian Ocean is forecast to grow from the current 4–5 vessels to around 20 or more surface vessels and submarines in coming years. This will require a network of naval logistics facilities, including submarine support facilities, particularly if China is to pursue a serious sea denial or sea control strategy across the northern Indian Ocean. It is not only about naval bases. China will also require air bases in at least three quadrants of the Indian Ocean (north-west, north-east, and south-west) to provide adequate air cover for its Indian Ocean fleet. The People's Liberation Army Air Force will not be able to provide adequate coverage with long-range maritime surveillance aircraft (let alone short-range strike aircraft), based in southern/western China. The deployment of aircraft carriers to the Indian Ocean or the use of air tankers based in China are unlikely to be enough to bridge the gap…. There has been much controversy over the port of Hambantota in Sri Lanka. This sits close to sea lanes across the northern Indian Ocean and would make a fine logistics facility. The takeover of Hambantota by a Chinese company in an equity-for-debt swap last year heightened concerns that the uneconomic port may be converted into a naval base. Sri Lanka has gone to great lengths to reassure India that Hambantota would not be used for this purpose. But Delhi remains sceptical of Sri Lanka's claims, fearing that Chinese economic power will eventually force that country to bow to its demands…. India was less concerned about restoring democracy in the Maldives and more about the potential for a Chinese base there, particularly on the island of Gan at the southern end of the archipelago. This is the location of an old British naval and air base which was used up until the 1970s. Its position, relatively close to the US base on Diego Garcia, makes it well placed to cover the central Indian Ocean. For a decade the Indian navy has, with the consent of the Maldives Government, maintained a small maritime surveillance presence at Gan. But the Indian presence may now have become a bargaining point. In April, Yameen ordered the withdrawal of an Indian naval helicopter from Gan. There are strong suspicions this was done to make way for China. Indeed, the development of a Chinese naval and air base on Gan or elsewhere in the Maldives would be a game changer in the Indian Ocean, potentially threatening the US military presence at Diego Garcia…. Myanmar is another good location. A Chinese naval base there would be well placed to threaten India's naval dominance of the Bay of Bengal and protect (or threaten) the sea lanes that cross the bay and transit the Strait of Malacca. Although Myanmar's previous military regime was a close collaborator with Beijing for almost three decades, it was able to successfully resist Chinese efforts to build a military presence in its country (despite some reports to the contrary). But Myanmar's new government may not be able to resist Chinese approaches forever. Chinese companies have built a new port at Kyaukpyu in Rakhine State as the terminus of a road and pipeline that links China's Yunnan province with the ocean. Last October, China acquired a 70% stake in the port and might well increase that share if Myanmar can't come up with further funding. In addition to the above points about potential future military bases, it was reported in November and December 2015 that a Chinese commercial firm had purchased a port near Darwin, Australia, leading to a discussion among Australian and U.S. observers as to whether this development posed a security threat to U.S. naval forces that might operate out of Darwin. As noted earlier, the planned ultimate size and composition of China's navy is not publicly known. In contrast to the U.S. Navy—which makes public its force-level goal and regularly releases a 30-year shipbuilding plan that shows planned procurements of new ships, planned retirements of existing ships, and resulting projected force levels, as well as a five-year shipbuilding plan that shows, in greater detail, the first five years of the 30-year shipbuilding plan —China does not release a navy force-level goal or detailed information about planned ship procurement rates or total quantities, planned ship retirements, and resulting projected force levels. This difference between the U.S. Navy and China's navy can be viewed as a major instance of how China's military modernization effort is less transparent or more opaque than the U.S. military's modernization effort. It is possible that the ultimate size and composition of China's navy is an unsettled issue even among Chinese military and political leaders. Just as there is frequent debate among U.S. military and political leaders about future U.S. military force structure, so too might there be such debate among Chinese military and political leaders about future Chinese military force structure. In addition, as noted in the previous section, if China has decided, correctly or not, that the United States is reducing its role on the world stage, and consequently has decided to increase China's role on the world stage beyond previously planned levels, this could lead to changes in any previously settled force-level goals, shipbuilding rates, and total shipbuilding quantities for China's navy. The 2015 ONI report states that "the PLA(N) currently possesses more than 300 surface combatants, submarines, amphibious ships, and missile-armed patrol craft"; that "the PLA(N) [surface force] consists of approximately 26 destroyers (21 of which are considered modern), 52 frigates (35 modern), 20 new corvettes, 85 modern missile-armed patrol craft, 56 amphibious ships, 42 mine warfare ships (30 modern), more than 50 major auxiliary ships, and more than 400 minor auxiliary ships and service/support craft"; and that "currently, the [PLA(N)] submarine force consists of five nuclear attack submarines, four nuclear ballistic missile submarines, and 57 diesel attack submarines." Table 4 shows figures provided by ONI in 2013 on numbers of Chinese navy ships in 2000, 2005, and 2010, and projected figures for 2015 and 2020, along with the approximate percentage of ships within these figures considered by ONI to be of modern design. Table 5 shows figures provided by ONI in 2009 on numbers of Chinese navy ships and aircraft from 1990 to 2009, and projected figures for 2015 and 2020. The figures in the table lump older and less capable ships together with newer and more capable ships discussed above. DOD states that "the PLAN is the largest navy in Asia, with more than 300 surface ships, submarines, amphibious ships, and patrol craft" and that "the PLAN has the largest force of principal combatants, submarines, and amphibious warfare ships in Asia." Table 6 shows numbers of Chinese navy ships as presented in annual DOD reports to Congress on military and security developments involving China (previously known as the annual report on China military power). As with Table 5 , the figures in Table 6 lump older and less capable ships together with newer and more capable ships discussed above. DOD stated in 2011 that the percentage of modern units within China's submarine force has increased from less than 10% in 2000 and 2004 to about 47% in 2008 and 50% in 2009, and that the percentage of modern units within China's force of surface combatants has increased from less than 10% in 2000 and 2004 to about 25% in 2008 and 2009. U.S. and Chinese naval capabilities are sometimes compared by showing comparative numbers of U.S. and Chinese ships. Although numbers of ships (or aggregate fleet tonnages) are of analytical value in the context of an overall evaluation of a fleet's capabilities relative to its missions and can be relatively easy to compile from published reference sources, they are highly problematic as a means of assessing relative U.S. and Chinese naval capabilities, for the following reasons: A fleet's total number of ships (or its aggregate tonnage) is only a partial metric of its capability. In light of the many other significant contributors to naval capability, navies with similar numbers of ships or similar aggregate tonnages can have significantly different capabilities, and navy-to-navy comparisons of numbers of ships or aggregate tonnages can provide a highly inaccurate sense of their relative capabilities. In recent years, the warfighting capabilities of navies have derived increasingly from the sophistication of their internal electronics and software. This factor can vary greatly from one navy to the next, and often cannot be easily assessed by outside observation. As the importance of internal electronics and software has grown, the idea of comparing the warfighting capabilities of navies principally on the basis of easily observed factors such as ship numbers and tonnages has become increasingly less valid, and today is highly problematic. Total numbers of ships of a given type (such as submarines, destroyers, or frigates) can obscure potentially significant differences in the capabilities of those ships, both between navies and within one country's navy. The potential for obscuring differences in the capabilities of ships of a given type is particularly significant in assessing relative U.S. and Chinese capabilities, in part because China's navy includes significant numbers of older, obsolescent ships. Figures on total numbers of Chinese submarines, destroyers, frigates, and coastal patrol craft lump older, obsolescent ships together with more modern and more capable designs. This CRS report shows numbers of more modern and more capable submarines, destroyers, and frigates in Table 1 , Table 2 , and Table 3 , respectively. A focus on total ship numbers reinforces the notion that increases in total numbers necessarily translate into increases in aggregate capability, and that decreases in total numbers necessarily translate into decreases in aggregate capability. For a Navy like China's, which is modernizing in some ship categories by replacing larger numbers of older, obsolescent ships with smaller numbers of more modern and more capable ships, this is not necessarily the case. As shown in Table 5 , for example, China's submarine force today has fewer boats than it did in 1990, but has greater aggregate capability than it did in 1990, because larger numbers of older, obsolescent boats have been replaced by smaller numbers of more modern and more capable boats. A similar point might be made about China's force of missile-armed attack craft. For assessing navies like China's, it can be more useful to track the growth in numbers of more modern and more capable units. This CRS report shows numbers of more modern and more capable submarines, destroyers, and frigates in Table 1 , Table 2 , and Table 3 , respectively. Comparisons of total numbers of ships (or aggregate tonnages) do not take into account the differing global responsibilities and homeporting locations of each fleet. The U.S. Navy has substantial worldwide responsibilities, and a substantial fraction of the U.S. fleet is homeported in the Atlantic. As a consequence, only a certain portion of the U.S. Navy might be available for a crisis or conflict scenario in China's near-seas region, or could reach that area within a certain amount of time. In contrast, China's navy has limited responsibilities outside China's near-seas region, and its ships are all homeported along China's coast at locations that face directly onto China's near-seas region. In a U.S.-China conflict inside the first island chain, U.S. naval and other forces would be operating at the end of generally long supply lines, while Chinese naval and other forces would be operating at the end of generally short supply lines. Comparisons of numbers of ships (or aggregate tonnages) do not take into account maritime-relevant military capabilities that countries might have outside their navies, such as land-based anti-ship ballistic missiles (ASBMs), land-based anti-ship cruise missiles (ASCMs), and land-based Air Force aircraft armed with ASCMs or other weapons. Given the significant maritime-relevant non-navy forces present in both the U.S. and Chinese militaries, this is a particularly important consideration in comparing U.S. and Chinese military capabilities for influencing events in the Western Pacific. Although a U.S.-China incident at sea might involve only navy units on both sides, a broader U.S.-China military conflict would more likely be a force-on-force engagement involving multiple branches of each country's military. The missions to be performed by one country's navy can differ greatly from the missions to be performed by another country's navy. Consequently, navies are better measured against their respective missions than against one another. Although Navy A might have less capability than Navy B, Navy A might nevertheless be better able to perform Navy A's intended missions than Navy B is to perform Navy B's intended missions. This is another significant consideration in assessing U.S. and Chinese naval capabilities, because the missions of the two navies are quite different. A 2015 RAND report attempts to take factors like those discussed above more fully into account with the aim of producing a more comprehensive assessment of relative U.S. and Chinese military capabilities for potential conflict scenarios involving Taiwan and the Spratly Islands in the South China Sea. The report states the following: Over the past two decades, China's People's Liberation Army (PLA) has transformed itself from a large but antiquated force into a capable, modern military. In most areas, its technology and skill levels lag behind those of the United States, but it has narrowed the gap. Moreover, it enjoys the advantage of proximity in most plausible scenarios and has developed capabilities that capitalize on that advantage.... ... four broad trends emerge: • Since 1996, the PLA has made tremendous strides, and, despite improvements to the U.S. military, the net change in capabilities is moving in favor of China. Some aspects of Chinese military modernization, such as improvements to PLA ballistic missiles, fighter aircraft, and attack submarines, have come extraordinarily quickly by any reasonable historical standard. • The trends vary by mission area, and relative Chinese gains have not been uniform across all areas. In some areas, U.S. improvements have given the United States new options, or at least mitigated the speed at which Chinese military modernization has shifted the relative balance. • Distances, even relatively short distances, have a major impact on the two sides' ability to achieve critical objectives. Chinese power projection capabilities are improving, but present limitations mean that the PLA's ability to influence events and win battles diminishes rapidly beyond the unrefueled range of jet fighters and diesel submarines. This is likely to change in the years beyond those considered in this report, though operating at greater distances from China will always work, on balance, against China. • The PLA is not close to catching up to the U.S. military in terms of aggregate capabilities, but it does not need to catch up to the United States to dominate its immediate periphery. The advantages conferred by proximity severely complicate U.S. military tasks while providing major advantages to the PLA. This is the central finding of this study and highlights the value of campaign analysis, rather than more abstract assessments of capabilities. Over the next five to 15 years, if U.S. and PLA forces remain on roughly current trajectories, Asia will witness a progressively receding frontier of U.S. dominance. The United States would probably still prevail in a protracted war centered in virtually any area, and Beijing should not infer from the above generalization that it stands to gain from conflict. U.S. and Chinese forces would likely face losses on a scale that neither has suffered in recent decades. But PLA forces will become more capable of establishing temporary local air and naval superiority at the outset of a conflict. In certain regional contingencies, this temporal or local superiority might enable the PLA to achieve limited objectives without "defeating" U.S. forces. Perhaps even more worrisome from a military-political perspective, the ability to contest dominance might lead Chinese leaders to believe that they could deter U.S. intervention in a conflict between it and one or more of its neighbors. This, in turn, would undermine U.S. deterrence and could, in a crisis, tip the balance of debate in Beijing as to the advisability of using force.... Although trends in the military balance are running against the United States, there are many actions that the United States could take to reinforce deterrence and continue to serve as the ultimate force for stability in the Western Pacific. The Trump Administration's December 2017 National Security Strategy (NSS) and the 11-page unclassified summary of its January 2018 National Defense Strategy (NDS) reorient U.S. national security strategy and, within that, U.S. defense strategy, toward an explicit primary focus on great power competition with China and Russia and on countering Chinese and Russian military capabilities. The new U.S. strategy orientation set forth in the 2017 NSS and 2018 NDS is sometimes referred to a "2+3" strategy, meaning a strategy for countering two primary challenges (China and Russia) and three additional challenges (North Korea, Iran, and terrorist groups). In addition to the 2017 NSS and 2018 NDS, the Trump Administration has highlighted the concept of a free and open Indo-Pacific (FOIP), with the term Indo-Pacific referring to the Indian Ocean, the Pacific Ocean, and the countries (particularly those in Eurasia) bordering on those two oceans. The concept, which is still being fleshed out by the Trump Administration, appears to be a general U.S foreign policy and national security construct for the region, but observers view it as one that includes a military component. DOD in recent years has taken a number of actions in recent years that are intended to help maintain U.S. military superiority over improving military capabilities of other countries, such as China. During the Obama Administration, these steps included the following: Strategic Capabilities Office (SCO) . DOD in 2012 created the Strategic Capabilities Office (SCO), an organization that Secretary of Defense Ashton Carter described on February 2, 2016, as one that "re-imagine[s] existing DOD and intelligence community and commercial systems by giving them new roles and game-changing capabilities to confound potential enemies," with an emphasis on fielding capabilities within a few years, rather than in 10 or 15 years. Defense Innovation Initiative. To help arrest and reverse an assessed decline in the U.S. military's technological and qualitative edge over the opposing military forces, DOD in November 2014 announced a new Defense Innovation Initiative. A Long-Range Research and Development Plan (LRRDP). In February 2015, DOD stated that in October 2014, it had launched a Long-Range Research and Development Plan (LRRDP) to "identify high-payoff enabling technology investments that could help shape future U.S. materiel investments and the trajectory of future competition for technical superiority. The plan will focus on technology that can be moved into development programs within the next five years." Third Offset Strategy . DOD in 2015 also announced that it was seeking a new general U.S. approach—a so-called "third offset strategy"—for maintaining U.S. superiority over opposing military forces that are both numerically large and armed with precision-guided weapons. A December 5, 2016, press report suggests that the Third Offset Strategy includes something called "The China Strategic Initiative." It is not yet clear how the above initiatives will be maintained or altered by the Trump Administration. The 2018 NDS, however, places a strong emphasis on achieving greater speed in developing and deploying new weapons and military technologies: Deliver performance at the speed of relevance. Success no longer goes to the country that develops a new technology first, but rather to the one that better integrates it and adapts its way of fighting. Current processes are not responsive to need; the Department is over-optimized for exceptional performance at the expense of providing timely decisions, policies, and capabilities to the warfighter. Our response will be to prioritize speed of delivery, continuous adaptation, and frequent modular upgrades. We must not accept cumbersome approval chains, wasteful applications of resources in uncompetitive space, or overly risk-averse thinking that impedes change. Delivering performance means we will shed outdated management practices and structures while integrating insights from business innovation. DOD has developed a concept, originally called Air-Sea Battle (ASB) and later called Joint Concept for Access and Maneuver in the Global Commons (JAM-GC), for increasing the joint operating effectiveness of U.S. naval and Air Force units, particularly in operations for countering adversary anti-access/area-denial (A2/AD) forces. DOD announced the concept in the 2010 Quadrennial Defense Review. Although DOD officials stated that the concept is not directed at any particular adversary, many observers believe it is focused to a large degree, if not principally, on countering Chinese, Russian, and Iranian anti-access forces. On June 3, 2013, DOD released an unclassified summary of the concept; the document builds on earlier statements from DOD officials on the topic. A January 6, 2016, press report states the following: The Defense Department's Joint Concept for Access and Maneuver in the Global Commons is nearing completion, as the military services and combatant commands are currently reviewing the draft document, according to an official involved in the concept's development. The concept, termed JAM-GC, is in the second round of coordination with the services and the COCOMs, according to Capt. Michael Hutchens, director of the Air-Sea Battle office within the Office of the Chief of Naval Operations (N3/N5). Following their review, the document will then go through "tank sessions" for the operational deputies and the Joint Chiefs of Staff sometime in 2016.... For more on JAM-GC, see Appendix C . A May 17, 2017, white paper by Admiral John Richardson, the Chief of Naval Operations (CNO), on the future U.S. Navy states the following in part: There is broad agreement that the current security environment is faster paced, more complex, and increasingly competitive. Time is an unforgiving characteristic of that environment—things are moving faster, including our competitors. More and more often you hear one word to describe the pace: exponential. In many ways, information technology is driving this. But the pace is quickening everywhere. As Chairman of the Joint Chiefs of Staff General Dunford has made clear, more and more of our challenges are multi-domain, trans-regional, and multi-functional. This exponential and complex dynamic is playing out on the seas.... These changes are shifting the character of naval competition and warfare, and are being exploited, to varying degrees, by a range of competitors. Both China and Russia are able to compete on a global scale, in all domains, and at competitive speed. They both possess considerable space, cyber, and nuclear forces. Both are challenging U.S. influence and interests in expanding areas of the world, often in maritime spaces. They have been very explicit about their maritime intentions, and have moved out smartly to advance them. China's 2015 white paper asserted that "[t]he traditional mentality that land outweighs sea must be abandoned…It is necessary for China to develop a modern maritime military force structure commensurate with its national security and development interests…so as to provide support for building itself into a maritime power." This goal is reflected in China's shipbuilding efforts, which analysts recently characterized as proceeding at a "frenetic pace," with the fleet "modernizing at an incredible rate [that] shows no signs of abating." As just two examples, until 2009, China had a single ballistic missile submarine; it has added another three since. And the Chinese Navy commissioned 18 ships last year. China has used this growing and modernized fleet to sail all over the world, visiting ports across the globe and establishing new overseas bases.... To address this rapidly changing security environment and achieve its mission, the Navy must provide a balanced fleet that offers U.S. leaders credible options, in places of strategic importance, at a relevant speed. That Navy is achieved through a fleet design and a resultant fleet architecture that is powerful enough to achieve U.S. aims without conflict, but, if deterrence fails, to win quickly and decisively. The pace at which potential competitors are moving demands that we in turn increase the speed at which we act. Our advantage is shrinking—we must reverse this trend.... The fleet must be larger and more powerful. But the urgent problem before us is that all studies show the need for more naval power, and without determined action, we will indeed see the Navy becomes less powerful. So we must rapidly increase the number and capability of platforms: we must get to a higher build rate from which we continue to work our way forward. We must arm those platforms with more effective, modernized payloads. We must make better use of sensor and communications apertures. We must operate on networks that will degrade more gracefully and heal faster than those of our rivals. Most importantly, the future fleet must be on station ASAP! We need this more powerful fleet in the 2020s, not the 2040s. To do that, we must get more capability out of what we already own, and bring new technologies and platforms into the mix as rapidly as possible.... The competition is on, and pace dominates. In an exponential competition, the winner takes all. We must shake off any vestiges of comfort or complacency that our previous advantages may have afforded us, and move out to build a larger, more distributed, and more capable battle fleet that can execute our mission. The foundation of that fleet will be leaders and teams who learn and adapt to achieve maximum possible performance, ready for decisive operations and combat. Time is of the essence. The U.S. Navy has taken a number of steps in recent years that appear intended, at least in part, for improving the U.S. Navy's ability to counter Chinese maritime A2/AD capabilities, including but not limited to those discussed below. Navy force posture and basing actions include the following, among others: The final report on the 2006 Quadrennial Defense Review (QDR) directed the Navy "to adjust its force posture and basing to provide at least six operationally available and sustainable carriers and 60% of its submarines in the Pacific to support engagement, presence and deterrence." More generally, the Navy intends to increase the share of its ships that are homeported in the Pacific from the current figure of about 55% to 60% by 2020. The Navy stated in 2014 that, budgets permitting, the Navy will seek to increase the number of Navy ships that will be stationed in or forward-deployed to the Pacific on a day-to-day basis from 51 in 2014 to 58 in 2015 and 67 by 2020. The Navy will increase the number of attack submarines homeported at Guam to four, from a previous total of three. The Navy has announced an intention to station up to four Littoral Combat Ships (LCSs) at Singapore, and an additional seven LCSs in Japan. In terms of qualitative improvements, the Navy has stated that it will assign its newest and most capable ships and aircraft, and its most capable personnel, to the Pacific. In April 2014, the United States and the Philippines signed an agreement that to provide U.S. forces with increased access to Philippine bases. In addition to the above actions, U.S. Marines began six-month rotational training deployments through Darwin, Australia, with the number of Marines in each deployment scheduled to increase to 2,500 by 2020 or later (a delay from an earlier target date of 2016). As mentioned earlier (see " Limitations and Weaknesses " in " Background "), China's navy exhibits limitations or weaknesses in several areas, including antisubmarine warfare (ASW). Countering China's naval modernization might thus involve, among other things, actions to exploit such limitations and weaknesses, such as developing and procuring Virginia (SSN-774) class attack submarines, torpedoes, and unmanned underwater vehicles (UUVs). Many of the Navy's programs for acquiring highly capable ships, aircraft, and weapon systems can be viewed as intended, at least in part, at improving the U.S. Navy's ability to counter Chinese maritime A2/AD capabilities. Examples of highly capable ships now being acquired include Ford (CVN-78) class aircraft carriers, Virginia (SSN-774) class attack submarines, and Arleigh Burke (DDG-51) class Aegis destroyers. Examples of highly capable aircraft now being acquired by the Navy and Marine Corps include F-35C carrier-based Joint Strike Fighters (JSFs), F-35B STOVL (short takeoff, vertical landing) JSFs, F/A-18E/F Super Hornet strike fighters and EA-18G Growler electronic attack aircraft, E-2D Hawkeye early warning and command and control aircraft, and the P-8A Multi-mission Maritime Aircraft (MMA). Examples of new weapon technologies that might be of value in countering Chinese maritime A2/AD capabilities include new and more capable versions of the Aegis ballistic missile defense (BMD) system, as well as solid state lasers (SSLs), the electromagnetic rail gun (EMRG), and a hypervelocity projectile (HPV) for the 5-inch guns on Navy cruisers and destroyers. The Navy in recent years has increased antisubmarine warfare (ASW) training for Pacific Fleet forces and conducted various forward-deployed operations in the Western Pacific, including exercises and engagement operations with Pacific allied and partner navies, as well as operations that appear to have been aimed at monitoring Chinese military operations. U.S. Navy forces in recent years have taken steps to increase cooperation with naval forces from allies and other countries, such as Japan, Australia, and India. Some of these efforts appear to involve expanding existing bilateral forms of naval cooperation (e.g., U.S.-Japan, U.S.-Australia, U.S.-India) into trilateral (e.g., U.S.-Japan-Australia, U.S.-Australia-India) or quadrilateral (U.S.-Japan-Australia-India) forms that are sometimes discussed in connection with the term "Indo-Pacific," a term that gained prominence in 2017 among U.S., Japanese, Australian, and Indian observers as a way of referring to the Indian and Pacific Ocean areas as one large, connected area. One potential oversight issue for Congress, particularly in the context of the constraints on U.S. defense spending established by the Budget Control Act of 2011 as amended, is whether the U.S. Navy in coming years will be large enough and capable enough to adequately counter improved Chinese maritime A2/AD forces while also adequately performing other missions around the world of interest to U.S. policymakers. Some observers are concerned that a combination of growing Chinese naval capabilities and budget-driven limitations on the size and capability of the U.S. Navy could encourage Chinese military overconfidence, demoralize U.S. allies and partners in the Pacific, and destabilize or make it harder for the United States to defend its interests in the region. Current Navy plans, announced in December 2016, call for achieving and maintaining a fleet of 355 ships of various types and numbers. Many observers are concerned that constraints on Navy budgets in coming years will result in a fleet with considerably fewer than 355 ships—or a fleet with 355 ships but not enough new technology, weapons, and readiness. The issue of whether the U.S. Navy in coming years will be large enough and capable enough to adequately counter improved Chinese maritime A2/AD forces while also adequately performing other missions around the world of interest to U.S. policymakers is part of a larger debate about whether stated U.S. national defense strategy will be adequately resourced. Another potential oversight issue for Congress is whether the Navy's plans for developing and procuring long-range carrier-based aircraft and long-range ship- and aircraft-launched weapons are appropriate and adequate. Aircraft and weapons with longer ranges could help Navy ships and their aircraft achieve substantial military effects while the ships remain outside the ranges of Chinese A2/AD systems that can pose a threat to their survivability—a stand-off capability that some observers deem important and believe the Navy currently lacks. Some observers have stressed a need for the Navy to proceed with its plans for developing and deploying a long-range, carrier-based, unmanned UAV, as one measure for extending the operational range of Navy carrier air wings. These observers view the acquisition of a long-range carrier-based UAV as key to maintaining the survivability and mission effectiveness of aircraft carriers against Chinese A2/AD systems in coming years. Navy plans for doing this had centered on a program called the Unmanned Carrier Launched Airborne Surveillance and Strike (UCLASS) aircraft. The operational requirements for the UCLASS aircraft were a matter of some debate, with a key issue being whether the UCLASS should be optimized for penetrating heavily defended air space and conducting strike operations at long ranges, or for long-endurance intelligence, surveillance, and reconnaissance (ISR) operations (with a limited secondary capacity for conducting strike operations). The Navy subsequently restructured the UCLASS program into a new program, called the Unmanned Carrier Aviation (UCA)/MQ-25 Stingray program, for developing a carrier-based, unmanned tanker aircraft for conducting in-flight refueling of manned carrier-based aircraft. In its FY2019 budget submission, the Department of the Navy states that The Unmanned Carrier‐Launched Airborne Surveillance and Strike (UCLASS) program underwent a restructure with near term focus on the new Unmanned Carrier Aviation (UCA)/MQ‐25 Stingray program and accelerating fielding timelines. The MQ‐25 Stingray program rapidly develops an unmanned capability to embark on CVNs as part of the Carrier Air Wing (CVW) to conduct aerial refueling as a primary mission and provide some ISR capability as a secondary mission. MQ‐25 Stingray extends CVW mission effectiveness range, partially mitigates the current Carrier Strike Group (CSG) organic ISR shortfall and fills the future CVW‐tanker gap, mitigating Strike Fighter shortfall and preserving F/A‐18E/F Fatigue Life. As the first carrier‐based, group 5 Unmanned Aircraft System (UAS), MQ‐25 Stingray will pioneer the integration of manned and unmanned operations, demonstrate mature complex sea‐based C4I UAS technologies, and pave the way for future multifaceted multi‐mission UAS to pace emergent threats. FY 2019 will leverage previous work completed under UCLASS, focusing on the three segment areas: air, control system and connectivity, and carrier development. MQ‐25 Stingray is expected to provide an IOC [initial operational capability] to the fleet in FY 2026. The Department of the Navy also states the following: Navy is committed to unmanned carrier aviation. MQ-25 Stingray will deliver the Navy's first carrier-based UAS to function primarily as a mission tanker to extend the range, reach, and lethality of the carrier air wing with secondary recovery tanking and ISR capabilities. MQ-25 will reduce current use of F/A-18E/Fs as carrier air wing tankers, freeing F/A-18E/Fs to execute strike fighter missions, effectively increasing strike fighter capacity within the carrier air wing. MQ-25 is a rapid acquisition program designed to significantly reduce its development and delivery timeline. The program has established a short chain of command to mitigate risk and expedite programmatic and technical trade decisions. Some observers have stressed a need for the Navy to develop and field longer-ranged anti-ship and land-attack missiles, so that U.S. Navy ships would not be out-ranged by Chinese navy ships armed with long-range ASCMs, and so that U.S. Navy ships would be able to achieve substantial military effects while operating outside the ranges of other Chinese A2/AD weapons. The U.S. Navy now has a number of efforts underway to develop and field such weapons. Some of these efforts focusing on modifying existing weapons so as to achieve new capabilities in the near term; other efforts involve developing new-design, next-generation weapons that would be fielded in later years. In its FY2019 budget submission, the Department of the Navy states that it has aligned its Cruise Missile Strategy along warfighter domains to pursue maximized lethality while minimizing overall costs to the taxpayer. The first tenet of our strategy is to sustain the highly successful, combat proven, Tomahawk cruise missile inventory through its anticipated service-life via a mid-life recertification program starting in the first quarter of FY 2019. This recertification program will increase missile service-life by an additional 15 years (total of 30 years) and enable the Department to support Tomahawk in our active inventory through the mid-late 2040s. In concert with our recertification program we will integrate modernization and technological upgrades and address existing obsolescence issues. In addition, we are developing a Maritime Strike Tomahawk capability to deliver a long-range anti-surface warfare capability. The Department will field the Long-Range Anti-Ship Missile (LRASM) as the air-launched Offensive Anti-Surface Warfare/Increment 1 (OASuW/Inc[rement]. 1) material solution to meet near to mid-term anti-surface warfare threats. LRASM is pioneering accelerated acquisition processes. We anticipate LRASM will meet all Joint Chiefs of Staff-approved warfighting requirements, and deliver on-time within cost. Finally, the Department plans to develop follow-on next generation strike capabilities such as the surface and submarine launched Next Generation Land Attack Weapon (NGLAW). NGLAW will have both a long-range land strike and maritime ASuW capability that initially complements, and then replaces, the highly successful Tomahawk Weapon System. Another potential issue for Congress is whether the Navy should develop and procure a long-range air-to-air missile for its carrier-based strike fighters. Such a weapon might improve the survivability of Navy carrier-based strike fighters in operations against Chinese aircraft armed with capable air-to-air missiles, and help permit Navy aircraft carriers to achieve results while remaining outside the ranges of Chinese A2/AD systems that can pose a threat to their survivability. During the Cold War, Navy F-14 carrier-based fighters were equipped with a long-range air-to-air missile called the Phoenix. The F-14/Phoenix combination was viewed as key to the Navy's ability to effectively counter Soviet land-based strike aircraft equipped with long-range ASCMs that appeared designed to attack U.S. Navy aircraft carriers. A successor to the Phoenix called the Advanced Air-to-Air Missile (AAAM) was being developed in the late 1980s, but the AAAM program was cancelled as a result of the end of the Cold War. The Navy today does not have a long-range air-to-air missile, and DOD has announced no program to develop such a weapon. A September 22, 2015, press report states the following: Beyond visual range air-to-air missiles (BVRAAM) are long-range missiles used by fighters to knock out enemy fighters, bombers, tankers, drones and other aircraft from ranges beyond 30km. On September 15, 2015, China successfully test fired its latest iteration, the PL-15, firing from a fighter to destroy a target drone. The PL-15 is developed by the 607 Institute. It is the replacement for China's current BVRAAM, the radar guided, PL-12, which reportedly has a range of approximately 100km. Compared to the PL-12, the PL-15 has an improved active radar seeker and jam-resistant datalinks, along with a dual pulse rocket motor to extend its range. Even in the prototype stage, the PL-15 is already an international star. Speaking at the 2015 Air Force Association conference the same week as the test, USAF Air Combatant Commander General Hawk Carlisle cited the PL-15 as the reason for Congress to fund a new missile to replace the American AMRAAM. His reasons for concern is the PL-15's range. By incorporating a ramjet engine, its range could reach 150-200km, was well as its terminal maneuverability. That would out-range existing American air-to-air missiles, making the PL-15 not just a threat to fighters like the F-35, but also to US bombers and aerial tankers critical to American air operations across the vast Pacific. General Carlisle called "out-sticking" the PL-15 a high priority for the USAF. As the PL-15 moves to deployment stage, it will equip Chinese stealth fighter jets, such as the J-20 and J-31, as well as the older J-10, J-11, J-15 and J-16 fighters. This makes keeping up with the PL-15 an important part of American efforts to out-do an innovative and improving Chinese military system. A November 22, 2016, press report states the following: In November 2016, a Chinese J-16 strike fighter test-fired a gigantic hypersonic missile, successfully destroying the target drone at a very long range. Looking at takeoff photos, we estimate the missile is about 28 percent of the length of the J-16, which measures 22 meters (about 72 feet). The puts the missile at about 19 feet, and roughly 13 inches in diameter. The missile appears to have four tailfins. Reports are that the size would put into the category of a very long range air to air missile (VLRAAM) with ranges exceeding 300 km (roughly 186 miles), likely max out between 250 and 310 miles. (As a point of comparison, the smaller 13.8-foot, 15-inch-diameter Russian R-37 missile has a 249-mile range). This is a big deal: this missile would easily outrange any American (or other NATO) air-to-air missile. Additionally, the VLRAAM's powerful rocket engine will push it to Mach 6 speeds, which will increase the no escape zone (NEZ), that is the area where a target cannot outrun the missile, against even supersonic targets like stealth fighters. The new, larger missile's added value is not just in range. Another key feature: its large active electronically scanned (AESA) radar, which is used in the terminal phase of flight to lock onto the target. The AESA radar's large size—about 300-400% larger than that of most long range air-to-air missiles—and digital adaptability makes it highly effective against distant and stealthy targets, and resilient against electronic countermeasures like jamming and spoofing. The VLRAAM's backup sensor is a infrared/electro-optical seeker that can identify and hone in on high-value targets like aerial tankers and airborne early warning and control (AEW&C) radar aircraft. The VLRAAM also uses lateral thrusters built into the rear for improving its terminal phase maneuverability when engaging agile targets like fighters.... The gains in range and speed of the VLRAAM pose another significant risk to the concepts of the U.S. military's "Third Offset." U.S. operations are highly dependent on assets like aerial tankers, dedicated electronic warfare aircraft, and AEW&C. For example, without aerial tankers, the relatively short range of the F-35s would become even more of a liability in long range operations in the South China Seas and Taiwan Straits. Similarly, without AEW&C aircraft, F-22s would have to use onboard radars more, raising their risk of detection. Even for stealthy tanker platforms like the planned MQ-25 Stingray drone and proposed KC-Z tanker will be vulnerable to VLRAAMs if detected by emerging dedicated anti-stealth systems such as the Divine Eagle drone and Yuanmeng airship. By pushing the Chinese air defense threat bubble hundreds of miles out further, they also offer to turn the long range tables on the putative U.S. "Arsenal" Plane concept, a Pentagon plan to launch missiles from non-stealthy planes from afar. In sum, VLRAAM is not just a big missile, but a potential big deal for the future of air warfare. A July 9, 2018, press report states the following: Russia's Ministry of Defense (MoD) announced that a new weapon is very near completion of its test validation trials and will soon be placed into service. If reports of its operational performance are accurate, it will threaten the survivability of every U.S. combat aircraft currently in service—particularly the newest U.S. fighter, the Lockheed Martin F-35. The weapon is the Vympel R-37M air-to-air missile. Launched from a fighter aircraft, it is designed to hit targets at ranges of up to 188 miles, its warhead section contains 132 lbs of explosive material, and it is reported to be capable of speeds of up to Mach 6. This missile gives Russian aircraft an advantage over U.S. combat aircraft in both speed and reach. The most advanced versions of the US-made Raytheon AIM-120 air-to-air missile top out at about Mach 4 and have a range of only about 110 miles…. Defense experts are concerned about how soon the R-37M will be in service with the People's Liberation Army Air Force. Chinese Su-35 aircraft have been seen recently transiting Novosibirsk while flying back to Russian flight test facilities further to the West. Speculation is that some of the aircraft are returning to evaluate having this new weapon added to their Su-35s…. The F-35 is one of the aircraft most vulnerable to this new weapon, an air combat specialist told the Washington Free Beacon. "The aircraft does not supercruise and does not have the 'acceleration to escape speed' that other aircraft are capable of. The F-35's stealth characteristics have also been designed to contend with an increasingly older generation of threats, which means the aircraft is more detectable to newer sensors and weapon systems." Another potential oversight issue for Congress concerns the Navy's ability to counter China's ASBMs. Although China's projected ASBM, as a new type of weapon, might be considered a "game changer," that does not mean it cannot be countered. There are several potential approaches for countering an ASBM that can be imagined, and these approaches could be used in combination. The ASBM is not the first "game changer" that the Navy has confronted; the Navy in the past has developed counters for other new types of weapons, such as ASCMs, and is likely exploring various approaches for countering ASBMs. Countering China's projected ASBMs could involve employing a combination of active (i.e., "hard-kill") measures, such as shooting down ASBMs with interceptor missiles, and passive (i.e., "soft-kill") measures, such as those for masking the exact location of Navy ships or confusing ASBM reentry vehicles. Employing a combination of active and passive measures would attack various points in the ASBM "kill chain"—the sequence of events that needs to be completed to carry out a successful ASBM attack. This sequence includes detection, identification, and localization of the target ship, transmission of that data to the ASBM launcher, firing the ASBM, and having the ASBM reentry vehicle find the target ship. Attacking various points in an opponent's kill chain is an established method for countering an opponent's military capability. A September 30, 2011, press report, for example, quotes Lieutenant General Herbert Carlisle, the Air Force's deputy chief of staff for operations, plans, and requirements, as stating in regard to Air Force planning that "We've taken [China's] kill chains apart to the 'nth' degree." To attack the ASBM kill chain, Navy surface ships, for example, could operate in ways (such as controlling electromagnetic emissions or using deception emitters) that make it more difficult for China to detect, identify, and track those ships. The Navy could acquire weapons and systems for disabling or jamming China's long-range maritime surveillance and targeting systems, for attacking ASBM launchers, for destroying ASBMs in various stages of flight, and for decoying and confusing ASBMs as they approach their intended targets. Options for destroying ASBMs in flight include the SM-3 midcourse BMD interceptor missile (including the new Block IIA version), the SM-6 terminal-defense BMD interceptor missile, and accelerating development and deployment of the hypervelocity projectile (HVP), electromagnetic rail gun (EMRG), and solid state lasers (SSLs). Options for decoying and confusing ASBMs as they approach their intended targets include equipping ships with systems, such as electronic warfare systems or systems for generating radar-opaque smoke clouds or radar-opaque carbon-fiber clouds, that could confuse an ASBM's terminal-guidance radar. An October 4, 2016, press report states the following: Several times in the past, [Chief of Naval Operations John] Richardson has stressed that long range weapons developments from adversarial nations like Russia and China aren't the end-all, be-all of naval conflicts. Just because China's "carrier-killer" missile has a greater range than the planes aboard a US aircraft carrier doesn't mean the US would shy away from deploying a carrier within that range, Richardson has stated on different occasions. Again, Richardson challenged the notion that a so-called A2/AD zone was "an impenetrable keep out zone that forces can only enter at extreme peril to their existence, let alone their mission." Richardson took particular issue with the "denial" aspect of A2/AD, repeating his assertion that this denial is an "aspiration" not a "fait accompli." The maps so common in representing these threats often mark off the limits of different system's ranges with "red arcs that extend off coastlines," with the implication that military forces crossing these lines face "certain destruction." But this is all speculation according to Richardson: "The reality is far more complex, it's actually really hard to achieve a hit. It requires the completion of a really complex chain of events.... these arcs represent danger for sure... but the threats they are based on are not insurmountable, and can be managed, will be managed." "We can fight from within these defended areas, and we will... this is nothing new and has been done before," said Richardson. So while Russia and China can develop missiles and radars and declare their ranges on paper, things get a lot trickier in the real world, where the US has the most and best experience in operating. "Potential adversaries actually have different geographic features like choke points, islands, ocean currents, mountains," said Richardson, who urged against oversimplifying complicated, and always unique circumstances in so-called A2/AD zones. "Have no doubt, the US navy is prepared to go wherever it needs to go, at any time, and stay there for as long as necessary in response to our leadership's call to project our strategic influence," Richardson concluded. Similarly, an August 29, 2016, press report states the following: The United States Navy is absolutely confident in the ability of its aircraft carriers and carrier air wings to fly and fight within zones defended by so-called anti-access/area denial (A2/AD) weapons.... In the view of the U.S. Navy leadership, A2/AD—as it is now called—has existed since the dawn of warfare when primitive man was fighting with rocks and spears. Overtime, A2/AD techniques have evolved as technology has improved with ever-greater range and lethality. Rocks and spears eventually gave way to bows and arrows, muskets and cannons. Thus, the advent of long-range anti-ship cruise and ballistic missiles is simply another technological evolution of A2/AD. "This is the next play in that," Adm. John Richardson, chief of naval operations, told The National Interest on Aug. 25 during an interview in his office in the Pentagon. "This A2/AD, well, it's certainly a goal for some of our competitors, but achieving that goal is much different and much more complicated." Indeed, as many U.S. Navy commanders including Richardson and Rear Adm. (Upper Half) DeWolfe Miller, the service's director of air warfare, have pointed out, anti-access bubbles defended by Chinese DF-21D or DF-26 anti-ship ballistic missile systems or Russian Bastion-P supersonic anti-ship missile systems are not impenetrable 'Iron Domes.' Nor do formidable Russian and Chinese air defense systems such as the S-400 or HQ-9 necessarily render the airspace they protect into no-go zones for the carrier air wing. Asked directly if he was confident in the ability of the aircraft carrier and its air wing to fight inside an A2/AD zone protected by anti-ship cruise and ballistic missiles as well as advanced air defenses, Richardson was unequivocal in his answer. "Yes," Richardson said—but he would not say how exactly how due to the need for operational security. "It's really a suite of capabilities, but I actually think we're talking too much in the open about some of the things we're doing, so I want to be thoughtful about how we talk about things so we don't give any of our competitors an advantage."... Miller said that there have been threats to the carrier since the dawn of naval aviation. In many ways, the threat to the carrier was arguably much greater during the Cold War when the Soviet Union massed entire regiments of Tupolev Tu-22M3 Backfires and deployed massive cruise missile-armed Oscar-class SSGN submarines to hunt down and destroy the Navy's flattops. The service developed ways to defeat the Soviet threat—and the carrier will adapt to fight in the current environment. "We could have had this interview twenty-years-ago and there would have been a threat," Miller said. "The nature of war and A2/AD is not new—that's my point. I don't want to downplay it, but our improvements in information warfare, electronic warfare, payloads, the weapons systems that we've previously talked about—plus our ability to train to those capabilities that we have—we will create sanctuaries, we'll fight in those sanctuaries and we're a maneuver force." An October 18, 2017, blog post states the following: Assuming the DF-21D is ready for battle, can America defend against China's mighty missile? While opinions are clearly mixed—in speaking to many sources over the last several years on this topic—it seems clear there is great nervousness in U.S. defense circles. However, as time has passed, initial fears have turned towards a more optimistic assessment.... In the end, the weapon might not be the great "game-changer" that many point it out to be, but a great complicator. Another potential oversight issue for Congress concerns the Navy's ability to counter China's submarines. Some observers raised questions about the Navy's ability to counter Chinese submarines following an incident on October 26, 2006, when a Chinese Song-class submarine reportedly surfaced five miles away from the Japan-homeported U.S. Navy aircraft carrier Kitty Hawk (CV-63), which reportedly was operating at the time with its strike group in international waters in the East China Sea, near Okinawa. In November 2015, it was reported that during the weekend of October 24, 2015, a Chinese attack submarine closely trailed the U.S. Navy aircraft carrier Ronald Reagan (CVN-76) while it was steaming around the southern end of Japan toward the Sea of Japan; the event was reported to be the closest encounter between a Chinese submarine and a U.S. Navy aircraft carrier since 2006. In December 2015, it was reported that during the encounter, the submarine conducted a simulated missile attack on the carrier. Improving the Navy's ability to counter China's submarines could involve further increasing ASW training exercises, procuring platforms (i.e., ships and aircraft) with ASW capabilities, and/or developing technologies for achieving a new approach to ASW that is distributed and sensor-intensive (as opposed to platform-intensive). Countering wake-homing torpedoes more effectively could require completing development work on the Navy's new anti-torpedo torpedo (ATT) and putting the weapon into procurement. An August 30, 2016, press report states the following: Enemy submarines remain the single most dangerous threat to the United States Navy's aircraft carriers and its surface fleet at large. However the service is working on improving its anti-submarine warfare (ASW) capabilities as the once-dormant Russian undersea force reemerges and China grows its fleet.... [Chief of Naval Operations John] Richardson said that the U.S. Navy is focusing more on ASW with a combination of air, sea and undersea forces. One way to ensure the safety of the U.S. Navy's surface fleet is to ensure that the service's attack submarine (SSN) force remains dominant in the undersea realm. "We spend a lot of time on that dynamic," said Richardson, who spent most of his long naval career onboard nuclear-powered submarines. "One is for our own submarines, we want to make sure they can get into those really influential places and stay there—and part of staying there is being stealthy enough to remain hidden and keep that undersea superiority we have." But increasingly, for the first time since the 1991 collapse of the Soviet Union, the U.S. Navy finds itself challenged under the waves. "There is an awful lot of competition for that space," Richardson said. "So we can't get complacent, we can't rest on our laurels for one minute, otherwise that window will close and we'll find—that they're achieved parity undersea. So we've got to continue to push and also to develop our own anti-submarine warfare systems—which is an area of really big emphasis."... "In terms of just a capacity challenge, the Chinese are building a lot of submarines," Richardson said. "Some of them—at least from a quietness standpoint, it's going to take some time to find them—they're diesels, they're [equipped with] AIP [air-independent propulsion systems]—those sorts of things. They're just inherently quiet... it's just something that's going to take a while to achieve because you have to find them and get to them. And then quantity has a quality of its own." Some observers, viewing China's maritime anti-access/area-denial (A2/AD) forces, have raised the question of whether the U.S. Navy should respond by shifting over time to a more highly distributed fleet architecture featuring a reduced reliance on aircraft carriers and other large ships and an increased reliance on smaller ships. The question of whether the U.S. Navy concentrates too much of its combat capability in a relatively small number of high-value units, and whether it should shift over time to a more highly distributed fleet architecture, has been debated at various times over the years, in various contexts. Supporters of shifting to a more highly distributed fleet architecture argue that the Navy's current architecture, including its force of 11 large aircraft carriers, in effect puts too many of the Navy's combat-capability eggs into a relatively small number of baskets on which an adversary can concentrate its surveillance and targeting systems and its anti-ship weapons. They argue that although a large Navy aircraft carrier can absorb hits from multiple conventional weapons without sinking, a smaller number of enemy weapons might cause damage sufficient to stop the carrier's aviation operations, thus eliminating the ship's primary combat capability and providing the attacker with what is known as a "mission kill." A more highly distributed fleet architecture, they argue, would make it more difficult for China to target the Navy and reduce the possibility of the Navy experiencing a significant reduction in combat capability due to the loss in battle of a relatively small number of high-value units. Opponents of shifting to a more highly distributed fleet architecture argue that large carriers and other large ships are not only more capable, but proportionately more capable, than smaller ships, that larger ships are capable of fielding highly capable systems for defending themselves, and that they are much better able than smaller ships to withstand the effects of enemy weapons, due to their larger size, extensive armoring and interior compartmentalization, and extensive damage-control systems. A more highly distributed fleet architecture, they argue, would be less capable or more expensive than today's fleet architecture. Opponents of shifting to a more highly distributed fleet architecture could also argue that the Navy has already taken important steps toward fielding a more distributed fleet architecture through its plan to acquire 40 LCSs and 12 JHSVs, and through the surface fleet's recently announced concept of distributed lethality, under which offensive weapons are to be distributed more widely across all types of Navy surface ships and new operational concepts for Navy surface ship formations are to be implemented. The Navy's future fleet architecture is discussed further in another CRS report. A variety of CRS reports cover U.S. Navy programs that in varying degrees can be viewed as responses to China's naval modernization effort, among other things. These reports include but are not limited to the following: CRS Report RL32665, Navy Force Structure and Shipbuilding Plans: Background and Issues for Congress , by [author name scrubbed] CRS Report RS20643, Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress , by [author name scrubbed] CRS Report RL30563, F-35 Joint Strike Fighter (JSF) Program , by [author name scrubbed] (the JSF program is a joint DOD program with Navy participation) CRS Report RL32418, Navy Virginia (SSN-774) Class Attack Submarine Procurement: Background and Issues for Congress , by [author name scrubbed] CRS Report RL32109, Navy DDG-51 and DDG-1000 Destroyer Programs: Background and Issues for Congress , by [author name scrubbed] CRS Report RL33745, Navy Aegis Ballistic Missile Defense (BMD) Program: Background and Issues for Congress , by [author name scrubbed] CRS Report R44175, Navy Lasers, Railgun, and Hypervelocity Projectile: Background and Issues for Congress , by [author name scrubbed] In H.R. 5515 as reported by the House Armed Services Committee ( H.Rept. 115-676 of May 15, 2018), Section 1242 states the following: SEC. 1252. United States strategy on China. (a) Findings.—Congress finds the following: (1) The United States has a national strategic interest in ensuring that the United States maintains political, diplomatic, economic, military, and technological advantages over competitive adversaries. (2) The 2018 National Defense Strategy states that "the central challenge to the U.S. prosperity and security is the reemergence of long-term, strategic competition by what the National Security Strategy classifies as revisionist powers. It is increasingly clear that China and Russia want to shape a world consistent with their authoritarian model—gaining veto authority over other nations' economic, diplomatic, and security decisions". (3) The 2018 National Defense Strategy further states that "China is leveraging military modernization, influence operations, and predatory economics to coerce neighboring countries to reorder the Indo-Pacific region to their advantage. As China continues its economic and military ascendance, asserting power through an all-of-nation long term strategy, it will continue to pursue a military modernization program that seeks Indo-Pacific regional hegemony in the near-term and displacement of the United States to achieve global preeminence in the future". (4) Statements by officials of the United States and leading experts have emphasized that the United States requires a whole-of-government response, across the full spectrum of capabilities, to address the challenges posed by China. (b) Statement of policy.—Congress declares that long-term strategic competition with China is a principal priority for the United States that requires the integration of multiple elements of national power, including diplomatic, economic, intelligence, law enforcement, and military elements, to protect and strengthen national security. (c) Strategy required.— (1) IN GENERAL.—Not later than March 1, 2019, the President shall submit to the appropriate congressional committees a report containing a whole-of-government strategy with respect to the People's Republic of China. (2) ELEMENTS OF STRATEGY.—The strategy required by paragraph (1) shall include the following: (A) Strategic assessments of and planned responses to address the following activities by the Chinese Communist Party: (i) The use of political influence, information operations, censorship, and propaganda to undermine democratic institutions and processes, and the freedoms of speech, expression, press, and academic thought. (ii) The use of intelligence networks to exploit open research and development. (iii) The use of economic tools, including market access and investment to gain access to sensitive United States industries. (iv) Malicious cyber activities. (v) The use of investment, infrastructure, and development projects, such as China's Belt and Road Initiative, in Africa, Europe, Central Asia, South America, and the Indo-Pacific region, and the Polar Silk Road in the Arctic, as a means to gain access and influence. (vi) The use of military activities, capabilities, and defense installations, and hybrid warfare methods, short of traditional armed conflict, against the United States or its allies and partners. (B) Available or planned methods to enhance strategic communication to counter Chinese influence and promote United States interests. (C) An identification of the key diplomatic, development, intelligence, military, and economic resources necessary to implement the strategy. (D) A plan to maximize the coordination and effectiveness of such resources to counter the threats posed by the activities described in subparagraph (A). (E) Available or planned interagency mechanisms for the coordination and implementation of the strategy. (3) FORM.—The report required by paragraph (1) shall be submitted in unclassified form, but may include a classified annex. (4) ANNUAL BUDGET SUBMISSION.—The President shall ensure that the annual budget submitted to Congress pursuant to section 1105 of title 31, United States Code clearly highlights the programs and projects proposed to be funded that relate to the strategy required by paragraph (1). (5) APPROPRIATE CONGRESSIONAL COMMITTEES.—In this section, the term "appropriage congressional committees" means— (A) the Committee on Armed Services, the Committee on Foreign Relations, the Select Committee on Intelligence, the Committee on Finance, the Committee on Homeland Security and Governmental Affairs, the Committee on the Judiciary, the Committee on Commerce, Science, and Transportation, and the Committee on the Budget of the Senate; and (B) the Committee on Armed Services, the Committee on Foreign Affairs, the Permanent Select Committee on Intelligence, the Committee on Financial Services, the Committee on Homeland Security, the Committee on the Judiciary, the Committee on Energy and Commerce, and the Committee on the Budget of the House of Representatives. Section 1261 of H.R. 5515 as reported by the committee states the following: SEC. 1261. Report and public notification on China's military, maritime, and air activities in the Indo-Pacific region. (a) Sense of Congress.—It is the sense of Congress that greater transparency of China's provocative military, maritime, and air activities in the Indo-Pacific region would— (1) aid in raising awareness of these activities in regional and international forums; (2) enable regional security partners to more effectively protect their sovereignty and defend their rights under international law; and (3) maintain stability within the region to enable constructive relations with China. (b) Report.— (1) IN GENERAL.—The Secretary of Defense, in consultation with the Director of National Intelligence and the Secretary of State, shall submit to the appropriate congressional committees on a quarterly basis a report describing China's provocative military, maritime, and air activities in the Indo-Pacific region. (2) ELEMENTS.—The report shall, at minimum, address China's provocative military, maritime, and air activities, military deployments, and operations and infrastructure construction in the East China Sea, South China Sea, Taiwan Strait, and Indian Ocean. (3) DISSEMINATION TO REGIONAL ALLIES.—The report shall be disseminated to regional allies and partners, as appropriate, in the Indo-Pacific region. (4) IMAGERY AND SUPPORTING ANALYSIS.—The report may include imagery from military aircraft and other sources with supporting analysis to describe China's provocative maritime and air activities. (5) FORM.—The report shall be available to the public and shall be submitted or carried out in unclassified form. (c) Public notification.— (1) IN GENERAL.—The Secretary of Defense, in consultation with the Director of National Intelligence and the Secretary of State, shall provide notice to the public of any activities described in paragraph (2) immediately after the initiation of any such activities. (2) ACTIVITIES DESCRIBED.—The activities described in this paragraph are any significant destabilizing or deceptive activities of China, including reclamation or militarization activity in the Indo-Pacific region, use of military, government, or commercial aircraft or maritime vessels to intimidate regional neighbors. (3) WRITTEN SUMMARY.—As soon as practicable after the notification to the public under paragraph (1) of any activities described in paragraph (2), the Secretary of Defense shall distribute to the appropriate congressional committees and United States allies and security partners in the Indo-Pacific region a written summary to include imagery and supporting analysis describing such activities. (d) Requirements relating to national security and protection of classified national security information.—The dissemination and availability of the report under subsection (b) and the notification to the public under subsection (c) shall be made in a manner consistent with national security and the protection of classified national security information. (e) Appropriate congressional committees defined.—In this section, the term "appropriate congressional committees" means— (1) the congressional defense committees; and (2) the Committee on Foreign Relations and the Select Committee on Intelligence of the Senate and the Committee on Foreign Affairs and the Permanent Select Committee on Intelligence of the House of Representatives. H.Rept. 115-676 states the following: Long-range naval carrier aviation The committee notes that section 1067 of the National Defense Authorization Act for Fiscal Year 2016 (Public Law 114–92) directed the Secretary of Defense to provide three independent studies of alternative future fleet platform architectures for the Navy in the 2030 timeframe. The committee further notes that the three studies concur as to the need for an enhanced carrier-based unmanned long-range strike capability beyond current plans and programs. The committee remains concerned that while the MQ–25 program leverages Unmanned Carrier-Launched Airborne Surveillance and Strike requirements justification, the most recent documentation sent to industry did not include precision strike capability as a requirement. The committee believes that the Navy may be unnecessarily excluding a critical capability and precluding future growth in a platform that will likely be integrated into the carrier air wing for the next 30 years. Therefore, the committee encourages the Navy to develop an unmanned anti-access penetrating long-range strike capability from the aircraft carrier, in addition to the current focus on the MQ–25A. (Page 15) H.Rept. 115-676 also states the following: Surface ship torpedo defense The evolving challenges and tensions in the Indo-Asia-Pacific region underscore the ongoing requirement for a surface ship torpedo defense (SSTD) capability for the Navy's high-value units. The committee understands that the Chief of Naval Operations highlighted this requirement in a 2010 urgent operational need statement and that since that time, potential regional adversaries have continued to improve their submarine and torpedo capabilities. Despite this increasing threat to Navy carrier strike groups and surface platforms, and the continued SSTD testing success and program maturation, the budget request and the Future Years Defense Program inadequately support currently deployed systems and cancel further development of this SSTD capability. The committee is concerned that this decision is based on the need to balance several years of inadequate funding resources across a range of priorities and that this budgetary dynamic is forcing decisions that put at risk the readiness and security of U.S. naval and Marine forces without adequate alternative plans to mitigate that threat. As raised in previous communications with Navy officials, the committee also has concerns that the Navy has distributed various SSTD program responsibilities among various Navy resource sponsors, which has led to a lack of determined support for efficient program execution and a lack of focused leadership. In light of these concerns, the committee directs the Secretary of the Navy to provide a briefing to the House Committee on Armed Services by October 1, 2018, that includes, but is not limited to, the following: an assessment of the current and foreseeable torpedo threats facing high-value units and the Navy's plan to adequately protect them, a description of the requirements for SSTD, an assessment of the development program concerning each of the SSTD capability elements, the plan to consolidate responsibility of the SSTD program, and the plan to manage and sustain currently fielded SSTD systems. (Page 19) H.Rept. 115-676 also states the following: Briefing for the Senate Committee on Armed Services and the House Committee on Armed Services on US Navy's efforts to expand carrier air wing long-range strike capability The committee notes that the aircraft carrier air wing has been optimized for striking power and sortie generation and believes that it may not be configured to support the long-range strike required by current and future threat systems. While the introduction of the F–35C will significantly expand stealth capabilities, the F–35C could require increased range to address necessary targets. The committee believes that several options could be used to address this issue to include developing a stealth tanker capability, improved engine technology or to develop and procure a strike capability that is purposely built to strike at increased range. The committee further notes that the Navy previously desired to significantly increase the carrier air wing range with the development of the A–12 aircraft. The committee understands that the A–12 would have included a 5,000-pound internal carriage payload, stealth, and a range of 800 nautical miles. While the committee believes that requirements to support this capability remain relevant and the technology available, the development of the A–12 aircraft was mired in acquisition challenges that eventually resulted in the cancellation of the program. While the committee further believes that the Department of Defense has successfully developed a suite of long-range intelligence, surveillance and reconnaissance capabilities, the committee also believes that it is vital that the Navy develop a carrier-based long-range strike capability. Therefore, the committee directs the Secretary of the Navy to provide a briefing to the Senate Committee on Armed Services and the House Committee on Armed Services by January 25, 2019, on options to expand the strike range of a carrier air wing in a contested environment, including manned and unmanned capabilities, and, Department of the Navy capabilities it plans to pursue in the Next Generation Air Dominance capability. (Page 46) H.Rept. 115-676 also states the following: MQ–25 Unmanned Carrier Aviation program The budget request contained $718.9 million for the MQ–25 Unmanned Carrier Aviation program. The committee supports the Navy's efforts to develop and field a carrier-based unmanned aerial system to provide refueling as well as intelligence, surveillance, and reconnaissance support to the fleet. The committee notes that the Chief of Naval Operations intends to accelerate this program by 2 years in order to provide this capability by 2026. To date, the Navy has provided insufficient air vehicle justification. Budget documents state that $598.78 million will go to Air Segment Primary Hardware Development with very little further justification or cost estimates. The committee recommends a decrease of $116.9 million, for a total of $602.0 million, to procure one test article for the MQ–25 Unmanned Carrier Aviation program. (Pages 50-51) On May 22, 2018, as part of its consideration of H.R. 5515 , the House agreed to by voice vote H.Amdt. 644 , an en bloc amendment including, inter alia, amendment number 91 as printed in H.Rept. 115-698 of May 21, 2018, providing for consideration of H.R. 5515 . Amendment 91 added Section 1298, which states the following: SEC. 1298. Modification to annual report on military and security developments involving the People's Republic of China. Paragraph (22) of section 1202(b) of the National Defense Authorization Act for Fiscal Year 2000 (Public Law 106–65; 10 U.S.C. 113 note), as most recently amended by section 1261 of the National Defense Authorization Act for Fiscal Year 2018 (Public Law 115–91; 131 Stat. 1688), is further amended by striking "activities in the South China Sea" and inserting the following: ""activities— "(A) in the South China Sea; "(B) in the East China Sea, including in the vicinity of the Senkaku islands; and "(C) in the Indian Ocean region.". On May 23, 2018, as part of its consideration of H.R. 5515 , the House agreed to by voice vote H.Amdt. 645 , an en bloc amendment including, inter alia, amendment number 40 as printed in H.Rept. 115-702 of May 22, 2018, on H.Res. 908 , providing for the further consideration of H.R. 5515 . Amendment number 40 added Section 1299C, which states the following: SEC. 1299C. Briefing on China's military installation in the Republic of Djibouti. (a) Briefing required.—Not later than 30 days after the date of the enactment of this Act, the Secretary of Defense, in coordination with the Secretary of State, shall brief the appropriate congressional committees on the following: (1) An assessment of the impact of the People's Republic of China's first overseas military installation in the Republic of Djibouti on the ability of the United States forces to operate in the region. (2) An assessment of China's ability to obtain sensitive information and impact operations conducted from Camp Lemmonier in Djibouti, the largest United States military installation on the African continent. (3) An assessment of the ability of the President of Djibouti to terminate by all methods, including by simple decree, the Department of Defense's lease agreement governing operation of Camp Lemmonier. (4) An assessment of the impact of the Chinese base in Djibouti on security and safety of United States personnel in Djibouti. (5) An assessment of the status of China's compliance with the "Protocol on Blinding Laser Weapons" that forbids employment of laser weapons. (6) An assessment of the laser attack in Djibouti that injured United States airmen. (7) An assessment of Djibouti's compliance with its treaty obligations under the Ottawa Convention to end the use of landmines. (b) Appropriate congressional committees defined.—In this section, the term "appropriate congressional committees" means— (1) the Committee on Armed Services and the Committee on Foreign Relations of the Senate; and (2) the Committee on Armed Services and the Committee on Foreign Affairs of the House of Representatives. In S. 2987 as reported by the Senate Armed Services Committee ( S.Rept. 115-262 of June 5, 2018), Section 1242 states the following: SEC. 1242. Modification of annual report on military and security developments involving the People's Republic of China. Section 1202(b) of the National Defense Authorization Act for Fiscal Year 2000 (10 U.S.C. 113 note) is amended— (1) by redesignating paragraphs (6) through (16) and (17) through (23) as paragraphs (7) through (17) and (19) through (25), respectively; (2) by inserting after paragraph (5) the following new paragraph (6): "(6) China's overseas military basing and logistics infrastructure."; (3) in paragraph (8), as so redesignated, by striking "including technology transfers and espionage" in the first sentence and inserting "including investment, industrial espionage, cybertheft, academia, and other means of technology transfer"; (4) by inserting after paragraph (17), as so redesignated, the following new paragraph (18): "(18) An assessment of relations between China and the Russian Federation with respect to security and military matters."; and (5) by adding at the end the following new paragraphs: "(26) The relationship between Chinese overseas investment, including initiatives such as the Belt and Road Initiative, and Chinese security and military strategy objectives. "(27) Efforts by China to influence the media, cultural institutions, business, and academic and policy communities of the United States to be more favorable to its security and military strategy and objectives. "(28) Efforts by China to monitor and influence, in support of its security and military strategy and objectives, the following: "(A) Chinese citizens in the United States. "(B) United States citizens of Chinese descent.". Regarding Section 1242, S.Rept. 115-262 states the following (emphasis added): Modification of annual report on military and security developments involving the People's Republic of China (sec. 1242) The committee recommends a provision that would amend section 1202(b) of the National Defense Authorization Act for Fiscal Year 2000 (Public Law 106–65), and modify the annual report on military and security developments involving the People's Republic of China. While significant attention has been focused on Russian malign influence in recent years, the committee is also concerned by China's increasingly active influence operations, which exploit the openness of democratic systems, including in the United States. Therefore, among other elements that would be added to the matters included in the annual report for analyses and forecasts, the provision would add efforts by China to influence the media, cultural institutions, business, and academic and policy communities of the United States to be more favorable to its [i.e., China's] security and military strategy and objectives . The committee recognizes that the Department of Defense (DOD) is not the agency primarily responsible for countering Chinese malign influence in the United States. However, the committee encourages the Secretary of Defense to examine how DOD can make appropriate use of existing authorities and resources to support interagency efforts to counter Chinese malign influence. For example, the committee is concerned about China's use of Confucius Institutes—which are under the supervision of Hanban, a Chinese state agency—as a tool of malign influence at American universities. Multiple reports by academic organizations have highlighted the threat to academic freedom and open debate posed by Confucius Institutes, and have called on universities to terminate or substantially renegotiate agreements with Hanban. In order to protect free inquiry and free expression, the Secretary of Defense could examine whether DOD should terminate research and development partnerships with universities that fail to terminate or substantially renegotiate agreements with Hanban. (Pages 297-298) S.Rept. 115-262 also states the following: Long range anti-ship missile The budget request included $81.2 million in line number 17 of [the] Weapons Procurement, Navy (WPN) [account], for the long range anti-ship missile. The committee notes that after several years of assuming risk in the procurement of munitions, the current level of munitions inventory is low. In an attempt to address this, the Department of Defense has requested many munitions be funded at the maximum production capacity. However, there are several munitions that are not funded at maximum capacity within the budget request. The long range anti-ship missile is a highly-capable system that is critical for the warfight. The committee recommends an increase of $30.0 million in line number 17 of WPN for an additional 10 missiles. This increases procurement to the maximum capacity for the long range anti-ship missile. This was on the Chief of Naval Operations' unfunded priorities list. (Page 22) S.Rept. 115-262 also states the following: Surface ship torpedo defense The budget request included $11.3 million in line number 42 of [the] Other Procurement, Navy (OPN) [account], for surface ship torpedo defense programs. The committee notes a delay in the AN/SLQ–25E contract award. Therefore, the committee recommends a decrease of $5.0 million in line number 42 of OPN. Additionally, the committee is concerned by the termination of the Torpedo Warning System (TWS), which addressed a critical capability gap. Accordingly, not later than January 1, 2019, the committee directs the Chief of Naval Operations to provide the congressional defense committees with a report on the specific capability gap or gaps that the TWS was rapidly fielded to address, the performance of the TWS in addressing such gap or gaps, the warfighting risk that will be accepted without the TWS deployed, and the Navy's plans to address the specific capability gap or gaps without the TWS deployed. (Page 29) S.Rept. 115-262 also states the following: Report on Navy's current and future state of long range strike capability The Secretary of the Navy is directed to submit a report to the congressional defense committees not later than February 1 st , 2019 that describes the current and future state of the Navy's long range strike strategy. This report should include a comprehensive description of the Navy's plan to use all the various Navy munitions programs to meet operational requirements for land and maritime strike. The report should include discussion of the Next Generation Long-Range Attack Weapon (NGLAW), the Tomahawk and follow-on upgrades like the Maritime Strike Tomahawk and the Joint Multi-Effects Warhead System (JMEWS), Conventional Prompt Strike, Over-the-Horizon missile, SM–6, the Long Range Anti-Ship Missile (LRASM), and any follow-on programs. The report should include how the Navy strategy will impact to the missile industrial base. (Page 49) In the conference report ( H.Rept. 115-874 of July 25, 2018) on H.R. 5515 , Section 1260 states (emphasis added): SEC. 1260. MODIFICATION OF ANNUAL REPORT ON MILITARY AND SECURITY DEVELOPMENTS INVOLVING THE PEOPLE'S REPUBLIC OF CHINA. Section 1202(b) of the National Defense Authorization Act for Fiscal Year 2000 (10 U.S.C. 113 note) is amended— (1) by redesignating paragraphs (6) through (16) and (17) through (23) as paragraphs (7) through (17) and (19) through (25), respectively; (2) by inserting after paragraph (5) the following new paragraph (6): ''(6) China's overseas military basing and logistics infrastructure .''; (3) in paragraph (8), as so redesignated, by striking ''including technology transfers and espionage'' in the first sentence and inserting ''including by espionage and technology transfers through investment, industrial espionage, cybertheft, academia, and other means''; (4) by inserting after paragraph (17), as so redesignated, the following new paragraph (18): ''(18) An assessment of relations between China and the Russian Federation with respect to security and military matters.''; and (5) by adding at the end the following new paragraphs: ''(26) The relationship between Chinese overseas investment, including initiatives such as the Belt and Road Initiative, and Chinese security and military strategy objectives. ''(27) Efforts by the Government of the People's Republic of China to influence the media, cultural institutions, business, and academic and policy communities of the United States to be more favorable to its security and military strategy and objectives. ''(28) Efforts by the Government of the People's Republic of China to use nonmilitary tools in other countries, including diplomacy and political coercion, information operations, and economic pressure, including predatory lending practices, to support its security and military objectives.''. H.Rept. 115-874 states: Briefing on China's military installation in the Republic of Djibouti The House bill contained a provision (sec. 1299C) that would require a briefing from the Secretary of Defense and Secretary of State on an assessment of Chinese military operations in Djibouti and its compliance with international treaty obligations related to laser weapons and landmines. The Senate amendment contained no similar provision. The House recedes. The conferees direct not later than 90 days after the date of enactment of this Act the Secretary of Defense, in coordination with the Secretary of State, to provide a briefing to the Armed Services Committees of the Senate and House of Representatives and the Foreign Relations Committee of the Senate and Foreign Affairs Committee of the House of Representatives on China's military installation in the Republic of Djibouti. The briefing shall include the following: (1) An assessment of the impact of the People's Republic of China's first overseas military installation in the Republic of Djibouti on the ability of the United States forces to operate in the region. (2) An assessment of China's ability to obtain sensitive information and impact operations conducted from Camp Lemonier in Djibouti, the largest United States military installation on the African continent. (3) An assessment of the ability of the President of Djibouti to terminate by all methods, including by simple decree, the Department of Defense's lease agreement governing operation of Camp Lemonier. (4) An assessment of the impact of the Chinese base in Djibouti on security and safety of United States personnel in Djibouti. (5) An assessment of the status of China's compliance with the 'Protocol on Blinding Laser Weapons' that forbids employment of laser weapons for the purposes of blinding. (6) An assessment of the laser attack in Djibouti that injured United States airmen. The House Appropriations Committee, in its report ( H.Rept. 115-769 of June 20, 2018) on H.R. 6157 , states the following: TOMAHAWK PRODUCTION The Committee is concerned by the Navy's mismanagement of the Tomahawk missile program. In the previous two fiscal years, the Congress has added funding above the budget requests for the Tomahawk program due to the fact that the Navy has requested fewer missiles than necessary to maintain a minimum sustainment rate and that missiles have been expended in the Central Command area of operations. The Department of Defense Appropriations Act, 2018, included $102,000,000 above the request to procure additional munitions, as requested by the Navy in its updated unfunded requirements list. However, despite the request by the Navy and the direction by the Congress to procure additional Tomahawks, the Navy has now proposed to not procure any missiles, but to use the funding to purchase support and test equipment. Therefore, the Committee recommendation includes a rescission of $115,657,000 of fiscal year 2018 funds from the Tomahawk program and directs the Secretary of the Navy to submit a report to the congressional defense committees not later than 90 days after the enactment of this Act that details the inventory requirement and current level for the Tomahawk missile and the feasibility of restarting missile production in fiscal year 2020. (Page 154) The Senate Appropriations Committee, in its report ( S.Rept. 115-290 of June 28, 2018) on S. 3159 states the following: Next Generation Land Attack Weapon [NGLAW] and Interim Capabilities .—The fiscal year 2019 President's budget request includes $16,900,000 to continue the Analysis of Alternatives [AoA] for the NGLAW. The Committee understands that NGLAW is intended to address the Navy's cruise missile strategy against future threats and targets in time to replace or modify existing weapons programs. The Committee notes that a capabilities based assessment conducted by the Navy deferred the NGLAW initial operating capability [IOC] requirement by several years and the Committee further notes that the AoA, which commenced in fiscal year 2017, has expanded in scope and its completion is delayed. Therefore, the Committee has supported efforts to sustain the industrial base and provide incremental improvements to existing capabilities as interim solutions. This includes investments in multiple capability upgrades and the acquisition of additional Tomahawk all-up rounds [AUR], most recently by providing $102,000,000 above the President's budget request in the Department of Defense Appropriations Act, 2018 (Public Law 115–141), pursuant to the Navy's fiscal year 2018 enhancement request following enactment of the Bipartisan Budget Act of 2018 (Public Law 115–123). The fiscal year 2019 President's budget request for Tomahawk does not include funding for new production AURs, reflecting the Navy's strategy to transition from new production to recertification and modernization activities. In addition, the Navy has proposed to repurpose the fiscal year 2018 appropriated increase for new production missiles, in contradiction to the Navy's request. The Committee directs the Secretary of the Navy to conduct a full review of the Tomahawk program including: an analysis of the viability of new production in fiscal year 2020; an analysis of the capacity for concurrent new production and recertification activities within existing facilities; revised cost and schedule projections for modification and recertification activities, to include alternatives with and without concurrent new production; a detailed review of the execution of the fiscal year 2017 and 2018 new production congressional adds; certified courses of action and cost estimates for the $102,000,000 new production funding added in fiscal year 2018, to include detailed actions and milestones; and an analysis of surface and sub-surface launched land attack weapons inventory and requirements projections through the NGLAW IOC date, to include Tomahawk and other weapons systems that may provide an interim capability. The Secretary of the Navy shall provide a report detailing the results of the review to the congressional defense committees not later than 90 days after enactment of this act. In addition, the Committee is aware that a surface launched variant of the Long Range Anti-Ship Missile [LRASM] offers the potential to increase the fleet's surface warfare capability at a relatively low cost-per-kill while leveraging existing capability. Therefore, the Committee directs the Deputy Chief of Naval Operations for Warfare Systems to provide a report to the congressional defense committees not later than 90 days after the enactment of this act identifying the capabilities the surface launched LRASM could bring to the fleet. Further, the Assistant Secretary of the Navy (Financial Management and Comptroller) is directed to identify costs to validate a surface launch LRASM and the benefits of fielding such a system. (Page 98-99) S.Rept. 115-290 also states the following: Offensive Anti-Surface Warfare Increment I/Long Range Anti-Ship Missile Operational Test .—The Offensive Anti-Surface Warfare [OASuW] Increment I/Long Range Anti-Ship Missile [LRASM] will provide an early operational capability in 2018 in support of an Urgent Operational Needs Statement [UONS] from US. Pacific Fleet. The Committee notes that in the fiscal year 2019 President's budget request, the Navy has included $129,400,000 in fiscal years 2019 and 2020 for OASuW Increment I/LRASM capability improvements, which the Committee fully supports. However, the Committee is concerned that the Navy has not agreed to a test plan for these capability improvements with the Director, Operational Test and Evaluation, nor budgeted for any operational test requirements. The Committee does not agree with this approach and directs that of the funds requested in fiscal year 2019 for OASuW Increment I/LRASM capability improvements, no less than $20,000,000 be applied toward operational test. Further, the Committee directs the Director, Operational Test and Evaluation, in coordination with the Deputy Chief of Naval Operations for Warfare Systems to provide to the congressional defense committees, with the fiscal year 2020 President's budget request, a plan for OASuW Increment I/LRASM full independent operational test [IOT&E]; the Assistant Secretary of the Navy (Research, Development and Acquisition) is directed to submit an acquisition strategy that supports that test strategy; and the Assistant Secretary of the Navy (Financial Management and Comptroller) is directed to certify that the fiscal year 2020 President's budget request for OASuW Increment I/LRASM fully funds the development of capability improvements and the associated operational test strategy. Finally, the Committee directs that not more than $25,000,000 may be obligated for OASuW Increment I/LRASM capability improvements in fiscal year 2019 until the Deputy Chief of Naval Operations for Warfare Systems certifies the requirements for capability improvements to the congressional defense committees. (Pages 175-176) Appendix A. Strategic and Budgetary Context This appendix provides an overview of the strategic and budgetary context in which China's naval modernization effort and its implications for U.S. Navy capabilities may be considered. There is also a broader context of U.S.-China relations and U.S. foreign policy toward the Asia-Pacific that is covered in other CRS reports. Shift in International Security Environment World events have led some observers, starting in late 2013, to conclude that the international security environment has undergone a shift from the familiar post-Cold War era of the past 20 to 25 years, also sometimes known as the unipolar moment (with the United States as the unipolar power), to a new and different situation that features, among other things, renewed great power competition with China and Russia and challenges by these two countries and others to elements of the U.S.-led international order that has operated since World War II. China's improving naval capabilities can be viewed as one reflection of that shift. Uncertainty Regarding Future U.S. Role in the World The overall U.S. role in the world since the end of World War II in 1945 (i.e., over the past 70 years) is generally described as one of global leadership and significant engagement in international affairs. A key aim of that role has been to promote and defend the open international order that the United States, with the support of its allies, created in the years after World War II. In addition to promoting and defending the open international order, the overall U.S. role is generally described as having been one of promoting freedom, democracy, and human rights, while criticizing and resisting authoritarianism where possible, and opposing the emergence of regional hegemons in Eurasia or a spheres-of-influence world. Certain statements and actions from the Trump Administration have led to uncertainty about the Administration's intentions regarding the future U.S. role in the world. Based on those statements and actions, some observers have speculated that the Trump Administration may want to change the U.S. role in one or more ways. A change in the overall U.S. role could have profound implications for U.S. defense strategy, plans, and programs, including those relating to countering improved Chinese naval capabilities. U.S. Grand Strategy The above-mentioned shift in the international security environment and uncertainty over the future U.S. role in the world has led to a renewed emphasis in discussions of U.S. security and foreign policy on grand strategy and geopolitics. From a U.S. perspective, grand strategy can be understood as strategy considered at a global or interregional level, as opposed to strategies for specific countries, regions, or issues. Geopolitics refers to the influence on international relations and strategy of basic world geographic features such as the size and location of continents, oceans, and individual countries. From a U.S. perspective on grand strategy and geopolitics, it can be noted that most of the world's people, resources, and economic activity are located not in the Western Hemisphere, but in the other hemisphere, particularly Eurasia. In response to this basic feature of world geography, U.S. policymakers for the past several decades have chosen to pursue, as a key element of U.S. national strategy, a goal of preventing the emergence of a regional hegemon in one part of Eurasia or another, on the grounds that such a hegemon could represent a concentration of power strong enough to threaten core U.S. interests by, for example, denying the United States access to some of the other hemisphere's resources and economic activity. Although U.S. policymakers have not often stated this key national strategic goal explicitly in public, U.S. military (and diplomatic) operations in recent decades—both wartime operations and day-to-day operations—can be viewed as having been carried out in no small part in support of this key goal. Some observers view China's military (including naval) modernization effort as part of broader Chinese effort to become a regional hegemon in its part of Eurasia. Renewed Focus on Great Power Competition As noted earlier, the Trump Administration's December 2017 National Security Strategy (NSS) and the 11-page unclassified summary of its January 2018 National Defense Strategy (NDS) reorient U.S. national security strategy and, within that, U.S. defense strategy, toward an explicit primary focus on great power competition with China and Russia and on countering Chinese and Russian military capabilities. The new U.S. strategy orientation set forth in the 2017 NSS and 2018 NDS is sometimes referred to a "2+3" strategy, meaning a strategy for countering two primary challenges (China and Russia) and three additional challenges (North Korea, Iran, and terrorist groups). Emphasis on Indo-Pacific Region As also noted earlier, in addition to the 2017 NSS and 2018 NDS, the Trump Administration has highlighted the concept of a free and open Indo-Pacific (FOIP), with the term Indo-Pacific referring to the Indian Ocean, the Pacific Ocean, and the countries (particularly those in Eurasia) bordering on those two oceans. The concept, which is still being fleshed out by the Trump Administration, appears to be a general U.S foreign policy and national security construct for the region, but observers view it as one that includes a military component. Declining U.S. Technological and Qualitative Edge DOD officials have expressed concern that the technological and qualitative edge that U.S. military forces have had relative to the military forces of other countries is being narrowed by improving military capabilities in other countries. China's improving naval capabilities contribute to that concern. Challenge to U.S. Sea Control and U.S. Position in Western Pacific Observers of Chinese and U.S. military forces view China's improving naval capabilities as posing a challenge in the Western Pacific to the U.S. Navy's ability to achieve and maintain control of blue-water ocean areas in wartime—the first such challenge the U.S. Navy has faced since the end of the Cold War. More broadly, these observers view China's naval capabilities as a key element of a broader Chinese military challenge to the long-standing status of the United States as the leading military power in the Western Pacific. Implications of Military Balance in Absence of a Conflict Some observers consider a U.S.-Chinese military conflict in the Pacific over Taiwan or some other issue to be very unlikely because of significant U.S.-Chinese economic linkages and the tremendous damage that such a conflict could cause on both sides. In the absence of such a conflict, the U.S.-Chinese military balance in the Pacific could nevertheless influence day-to-day choices made by other Pacific countries on whether to align their policies more closely with China or the United States. In this sense, decisions that Congress and the executive branch make regarding U.S. Navy programs for countering improved Chinese maritime military forces could influence the political evolution of the Pacific and consequently the ability of the United States to pursue various policy goals. China's "Salami-Slicing" Tactics in East and South China Seas China's actions for asserting and defending its maritime territorial and exclusive economic zone (EEZ) claims in the East China (ECS) and South China Sea (SCS), particularly since late 2013, have heightened concerns among observers that ongoing disputes over these waters and some of the islands within them could lead to a crisis or conflict between China and a neighboring country, and that the United States could be drawn into such a crisis or conflict as a result of obligations the United States has under bilateral security treaties with Japan and the Philippines. More broadly, China's actions for asserting and defending its maritime territorial and EEZ claims, including recent land reclamation and construction activities at several sites in the SCS, have led to increasing concerns among some observers that China is seeking to dominate or gain control of its near-seas region. Some observers characterize China's approach for asserting and defending its territorial claims in the ECS and SCS as a "salami-slicing" strategy that employs a series of incremental actions, none of which by itself is a casus belli, to gradually change the status quo in China's favor. Regional U.S. Allies and Partners The United States has certain security-related policies pertaining to Taiwan under the Taiwan Relations Act ( H.R. 2479 / P.L. 96-8 of April 10, 1979). The United States has bilateral security treaties with Japan, South Korea, the Philippines, and an additional security treaty with Australia and New Zealand. In addition to U.S. treaty allies, certain other countries in the Western Pacific can be viewed as current or emerging U.S. security partners. Limits on Defense Spending in Budget Control Act of 2011 as Amended Limits on the "base" portion of the U.S. defense budget established by Budget Control Act of 2011, or BCA ( S. 365 / P.L. 112-25 of August 2, 2011), as amended, combined with some of the considerations above, have led to discussions among observers about how to balance competing demands for finite U.S. defense funds, and about whether programs for responding to China's military modernization effort can be adequately funded while also adequately funding other defense-spending priorities, such as initiatives for responding to Russia's actions in Ukraine and elsewhere in Europe and U.S. operations for countering the Islamic State organization in the Middle East. U.S. Navy officials have stated that if defense spending remains constrained to levels set forth in the BCA as amended, the Navy in coming years will not be able to fully execute all the missions assigned to it under the 2012 DOD strategic guidance document. Appendix B. 2014 ONI Testimony on China's Navy This appendix presents the prepared statement of Jesse L. Karotkin, ONI's Senior Intelligence Officer for China, for a January 30, 2014, hearing before the U.S.-China Economic and Security Review Commission on China's military modernization and its implications for the United States. The text of the statement is as follows: TRENDS IN CHINA'S NAVAL MODERNIZATION US CHINA ECONOMIC AND SECURITY REVIEW COMMISSION TESTIMONY JESSE L. KAROTKIN Introduction At the dawn of the 21 st Century, the People's Liberation Army Navy (PLA(N)) remained largely a littoral force. Though China's maritime interests were rapidly changing, the vast majority of its naval platforms offered very limited capability and endurance, particularly in blue water. Over the past 15 years the PLA(N) has carried out an ambitious modernization effort, resulting in a more technologically advanced and flexible force. This transformation is evident not only the PLA(N)'s Gulf of Aden counter-piracy presence, which is now in its sixth year, but also in the navy's more advanced regional operations and exercises. In contrast to its narrow focus a just decade ago, the PLA(N) is evolving to meet a wide range of missions including conflict with Taiwan, enforcement of maritime claims, protection of economic interests, as well as counter-piracy and humanitarian missions. The PLA(N) currently possesses approximately 77 principal surface combatants, more than 60 submarines, 55 medium and large amphibious ships, and roughly 85 missile-equipped small combatants. Although overall order-of-battle has remained relatively constant in recent years, the PLA(N) is rapidly retiring legacy combatants in favor of larger, multi-mission ships, equipped with advanced anti-ship, anti-air, and anti-submarine weapons and sensors. During 2013 alone, over fifty naval ships were laid down, launched, or commissioned, with a similar number expected in 2014. Major qualitative improvements are occurring within naval aviation and the submarine force, which are increasingly capable of striking targets hundreds of miles from the Chinese mainland. The introduction of long-range anti-ship cruise missiles across the force, coupled with non-PLA(N) weapons such as the DF-21D anti-ship ballistic missile, and the requisite C4ISR architecture to support targeting, will allow China to significantly expand its "counter-intervention" capability further into the Philippine Sea and South China Sea over the next decade. Many of these capabilities are designed specifically to deter or prevent U.S. military intervention in the region. Even if order-of-battle numbers remain relatively constant through 2020, the PLA(N) will possess far more combat capability due to the rapid rate of acquisition coupled with improving operational proficiency. Beijing characterizes its military modernization effort as a "three-step development strategy" that entails laying a "solid foundation" by 2010, making "major progress" by 2020, and being able to win "informationized wars by the mid-21 st century." Although the PLA(N) faces capability gaps in some key areas, including deep-water anti-submarine warfare and joint operations, they have achieved their "strong foundation" and are emerging as a well equipped, competent, and more professional force. A Multi-Mission Force As China began devoting greater resources to naval modernization in the late 1990s, virtually all of its ships, submarines were essentially single-mission platforms, poorly equipped to operate beyond the support of land-based defenses. The PLA(N) has subsequently acquired larger, multi-mission platforms, capable of long-distance deployments and offshore operations. China's latest Defense White Paper, released in 2013, noted that the PLA(N) "endeavors to accelerate the modernization of its forces for comprehensive offshore operations… [and] develop blue water capabilities." The LUYANG III-class DDG (052D), which will likely enter service this year, embodies the trend towards a more flexible force with advanced air defenses and long-range strike capability. China has made the most demonstrable progress in anti-surface warfare (ASuW), deploying advanced, long-range ASCMs throughout the force. With the support from improved C4ISR, this investment significantly expands the area that surface ships, submarines, and aircraft and are able to hold at risk. The PLA(N) has also made notable gains in anti-air warfare (AAW), enabling the recent expansion of blue-water operations. Just over a decade ago, just 20 percent of PLA(N) combatants were equipped with a rudimentary point air defense capability. As a result, the surface force was effectively tethered to the shore. Initially relying on Russian surface to air missiles (SAMs) to address this gap, newer PLA(N) combatants are equipped with indigenous medium-to-long range area air defense missiles, modern combat management systems, and air-surveillance sensors. Although progress in anti-submarine warfare (ASW) is less pronounced, there are indications that the PLA(N) is committed to addressing this gap. More surface platforms are being equipped with modern sonar systems, to include towed arrays and hangars to support shipboard helicopters. Additionally, China appears to be developing aY-8 naval variant that is equipped with a magnetic anomaly detector (MAD) boom, typical of ASW aircraft. Over the next decade, China is likely to make gains in ASW, both from improved sensors and operator proficiency. China's submarine force remains concentrated almost exclusively on ASuW, with exception of the JIN SSBN, which will likely commence deterrent patrols in 2014. The type-095 guided missile attack submarine, which China will likely construct over the next decade, may be equipped with a land-attack capability. The deployment of LACMs on future submarines and surface combatants could enhance China's ability to strike key U.S. bases throughout the region, including Guam. Naval aviation is also expanding its mission set and capability in maritime strike, maritime patrols, anti-submarine warfare, airborne early warning, and logistics. Although it will be several years before the Liaoning aircraft carrier and its air wing can be considered fully operational, this development signals a new chapter in Chinese naval aviation. By 2020, carrier-based aircraft will be able to support fleet operations in a limited air-defense role. Although some older air platforms remain in the inventory, the PLA(N) is clearly shifting to a naval aviation force that is equipped to execute a wide variety of missions both near and far from home. PLA(N) Surface Force China analysts face a perpetual challenge over how to accurately convey the size and capability of China's surface force. As U.S. Navy CAPT Dale Rielage noted in [the U.S. Naval Institute] Proceedings last year, key differences in the type of PLA(N) ships (in comparison to the U.S. Navy) make it extremely difficult to apply a common basis for comparing the order of battle. A comprehensive tally of ships that includes hundreds of small patrol craft, mine warfare craft, and coastal auxiliaries provides a deceptively inflated picture of China's actual combat capability. Conversely, a metric based on ship displacement returns the opposite effect, given the fact that many of China's modern ships, such as the 1,500 ton JIANGDAO FFL, are small by U.S. standards, and equipped primarily for regional missions. To accurately capture potential impact of China's naval modernization, it is necessary to provide a more detailed examination of the ships and capabilities in relation to the missions they are likely intended to fulfill. For the sake of clarity, the term "modern" is used in this paper to describe a surface combatant that possesses a multi-mission capability, incorporates more than a point air defense capability, and has the ability to embark a helicopter. As of early 2014, the PLA(N) possesses 27 destroyers (17 of which are modern), 48 frigates (31 of which are modern), 10 new corvettes, 85 modern missile-armed patrol craft, 56 amphibious ships, 42 mine warfare ships, over 50 major auxiliary ships, and over 400 minor auxiliary ships and service/support craft. During the 1990s, China began addressing immediate capability gaps by importing modern surface combatants, weapon systems, and sensors from Russia. Never intended as a long-term solution, the PLA(N) simultaneously sought to design and produce its own weapons and platforms from a mix of imported and domestic technology. Less than a decade ago China's surface force could be characterized as an eclectic mix of vintage, modern, converted, imported, and domestic platforms utilizing a variety weapons and sensors and with widely ranging capabilities and varying reliability. By the second decade of the 2000s, surface ship acquisition had shifted entirely to Chinese designed units, equipped primarily with Chinese weapons and sensors, though some engineering components and subsystems remain imported or license-produced in-country. Until recently, China tended to build small numbers of a large variety of ships, often changing classes rapidly as advancements were made. In the period between 1995 and 2005 alone, China constructed or purchased major surface combatants and submarines in at least different 15 classes. Using a combination of imported technology, reverse engineering, and indigenous development, the PRC has rapidly narrowed the technology and capability gap between itself and the world's modern navies. Additionally, China is implementing much longer production runs of advanced surface combatants and conventional submarines, suggesting a greater satisfaction in their recent ship designs. The PLA(N) surface force has made particularly strong gains in anti-surface warfare (ASuW), with sustained development of advanced anti-ship cruise missiles (ASCMs) and over-the-horizon targeting systems. Most PLA(N) combatants carry variants of the YJ-8A ASCM (~65-120nm), while the LUYANG II-class (052D) destroyer is fitted with the YJ-62 (~120nm), and the newest class, LUYANG III-class destroyer is fitted with a new vertically-launched ASCM. As these extended range weapons require sophisticated over-the-horizon-targeting (OTH-T) capability to realize their full potential, China has invested heavily in maritime reconnaissance systems at the national and tactical levels, as well as communication systems and datalinks to enable the flow of accurate and timely targeting data. In addition to extended range ASCMs, the LUYANG III DDG, which is expected to enter the force in 2014, may also be equipped with advanced SAMs, anti-submarine missiles, and possibly an eventual land-attack cruise missile (LACM) from its multipurpose vertical launch system. These modern, high-end combatants will likely provide increased weapons stores and overall flexibility as surface action groups venture more frequently into blue water in the coming years. Further enabling this trend, China's surface force has achieved sustained progress in shipboard air defense. The PLA(N) is retiring legacy destroyers and frigates that possess at most a point air defense capability, while constructing newer ships with medium-to-long range area air defense missiles. The PLA(N) has produced a total of six LUYANG II DDG with the HHQ-9 surface-to-air missile (~55nm), and the LUYANG III DDG will carry an extended-range variant of the HHQ-9. At least fifteen JIANGKAI II FFGs (054A), with the vertically-launched HHQ-16 (~20-40nm) are now operational, with more under construction. Sometimes referred to as the "workhorse" of the PLA(N) these modern frigates have proven instrumental in sustaining China's counter-piracy presence in the Gulf of Aden. The new generation of destroyers and frigates utilize modern combat management systems and air-surveillance sensors, such as the Chinese SEA EAGLE and DRAGON EYE phased-array radars. While older platforms with little or no air defense capability remain in the inventory, the addition of these newer units allows the PLA(N)'s surface force to operate with increased confidence outside of shore-based air defense systems, as one or two ships can now provide air defense for the entire task group. Currently, approximately 65 percent of China's destroyers and frigates are modern. By 2020 that figure will rise to an estimated 85 percent. The PLA(N) has also phased out hundreds of Cold War-era missile patrol boats and patrol craft as they shifted from a coastal defense orientation to a more active, offshore orientation over the past two decades. During this period China acquired a modern coastal-defense and area-denial capability with 60 HOUBEI class guided missile patrol boats. The HOUBEI design integrates a high-speed wave-piercing catamaran hull, waterjet propulsion, considerable signature-reduction features, and the YJ-8A ASCM. While not equipped for coastal patrol duties, the HOUBEI is an essential component of the PLA(N)'s ability to react at short notice to threats within China's exclusive economic zone (EEZ) and slightly beyond. In 2012 China began producing the new JIANGDAO class corvette (FFL), which, in contrast to the HOUBEI, is optimized to serve as the primary naval patrol platform in China's EEZ and potentially defend China's territorial claims in the South China Sea (SCS) and East China Sea (ECS). The 1500-ton JIANGDAO is equipped for littoral warfare with 76mm, 30mm, and 12.7mm guns, four YJ-8 ASCMs, torpedo tubes, and a helicopter landing area. The JIANGDAO is ideally-suited for general medium-endurance patrols, counter-piracy, and other littoral duties in regional waters, but is not sufficiently armed or equipped for major combat operations in blue-water. At least ten JIANGDAOs are already operational and thirty or more units may be built, replacing both older small patrol craft as well as some of the PLA(N)'s aging JIANGHU I frigates. The rapid construction of JIANGDAO FFLs accounts for a significant share of ship construction in 2012 and 2013. In recent years, China's amphibious acquisition has shifted decisively towards larger, high-end, ships. Since 2007 China has commissioned three YUZHAO class amphibious transport docks (LPD), which provide a considerably greater capacity and flexibility compared to previous landing ships. At 20,000 tons, the YUZHAO is the largest domestically produced Chinese warship and has deployed as far as the Gulf of Aden. The YUZHAO can carry up to four of the new air cushion landing craft YUYI LCUA (similar to LCAC), as well as four or more helicopters, armored vehicles, and troops on long-distance deployments. Additional YUZHAOs are expected to be built, as well as a follow-on amphibious assault ship (LHA) design that is larger and with a full-deck flight deck for additional helicopters. The major investment in a large-deck LPD signaled the PLA(N)'s emerging interest in expeditionary warfare and over-the horizon amphibious assault capability, as well as a flexible platform for humanitarian assistance/disaster relief (HA/DR) and counter-piracy capabilities. In contrast, the PLA(N) appears to have suspended all construction of lower-end tank landing ships (LST/LSM) since 2006, following a spate of acquisition in the early 2000s. The expanded set of missions further into the western Pacific and Indian Ocean, including counter-piracy deployments, HA/DR missions, survey voyages and goodwill port visits have increased demands on PLA(N)'s limited fleet of ocean-going replenishment and service vessels. In 2013 the PLA(N) added two new FUCHI replenishment oilers (AORs) bringing the total AOR force level to seven ships. These ships constantly rotate in support of Gulf of Aden (GOA) counter-piracy deployments. In addition, the PLA(N) recently added three state-of-the-art DALAO submarine rescue ships (ASR) and three DASAN fast-response rescue ships (ARS). Other recent additions include the ANWEI hospital ship (AH), the DANYAO AF (island resupply), YUAN WANG 5&6 (satellite and rocket launch telemetry), three KANHAI AG (SWATH-hull survey ships), two YUAN WANG 21 missile tenders (AEM), and the large DAGUAN AG, which provides berthing and logistical support to the KUZNETSOV aircraft carrier Liaoning . Traditionally, anti-submarine warfare (ASW) has lagged behind ASuW and AAW as a priority for the PLA(N). Some moderate progress still continues, with more surface ships possessing modern sonars, to include towed arrays, as well as hangars to support shipboard helicopters. Given these developments, the PLA(N) surface force may be more capable of identifying adversary submarines in limited areas by 2020. Over the past decade, China's surface force has made steady proficiency gains and become much more operationally focused. Beginning in 2009, the Gulf of Aden deployments have provided naval commanders and crews with their first real experience with extended deployments and overseas logistics. We have also witnessed an increase in the complexity of training and exercises and an expansion of operating areas both within and beyond the First Island Chain. To increase realism, the force engages in opposing force training and employs advanced training aids. In 2012 the surface force conducted an unprecedented seven deployments to the Philippine Sea. This was followed by nine Philippine Sea deployments in 2013. Extended surface deployments and more advanced training build core warfare proficiency in ASuW, ASW and AAW. Furthermore, these deployments reflect efforts to "normalize" distant seas training in line with General Staff Department (GSD) guidelines. China's Aircraft Carrier Program With spectacular ceremony in September 2012, China commissioned its first carrier, the Liaoning. China is currently engaged in the long and complicated path of learning to operate fixed wing aircraft from the carrier's deck. The first launches and recoveries of the J-15 aircraft occurred in November 2012, with additional testing and training occurring in 2013. Despite recent progress, it will take several years before Chinese carrier-based air regiments are operational. The PLA's newspaper, Jiefangjun Bao recently noted, "Aircraft Carrier development is core to the PLA(N), and could serve as a deterrent to countries who provoke trouble at sea, against the backdrop of the U.S. pivot to Asia and growing territorial disputes in the South China Sea and East China Sea." The Liaoning is much less capable of power projection than the U.S. Navy's NIMITZ-class carriers. Not only does Liaoning's smaller size limit the total number of aircraft it can carry, but also the ski-jump configuration significantly limits aircraft fuel and ordnance load for take offs. Furthermore, China does not yet possess specialized supporting aircraft such as the E-2C Hawkeye, which provides tactical airborne early warning (AEW). The Liaoning is suited for fleet air defense missions, rather than US-style, long range power projection. Although it has a full suite of weapons and combat systems, Liaoning's primary role for the coming years will be to develop the skills required for carrier aviation and to train its first groups of pilots and deck crews. China's initial carrier air regiment will consist of the Shenyang J-15 Flying Shark , which is externally similar to the Russian Su-33 Flanker D . However, the aircraft is thought to possess many of the domestic avionics and armament capabilities of the Chinese J-11B Flanker . Likely armament for the J-15 includes PL-8 and PL-12 air-to-air missiles and modern ASCMs. Six J-15 prototypes are currently involved in testing and at least one two-seat J-15S operational trainer has been observed. China is fully aware of the inherent limitations of the mid-sized, ski-jump carrier. While Beijing has provided no public information on the size and configuration of its next carrier, there is intense speculation that China may adopt a catapult launching system. Recent media reports suggest that China recently commenced construction of its first indigenously produced carrier. Finally, as China expands carrier operations beyond the immediate region, it will almost certainly be constrained by a lack of distant bases and support infrastructure. Although commercial ports can provide some peacetime support, Beijing may eventually find it expedient to abandon its longstanding, self-imposed prohibition on foreign basing. PLA(N) Submarine Force China has long regarded its submarine force as a critical element of regional deterrence, particularly when conducting "counter-intervention" against modern adversary. The large, but poorly equipped force of the 1980s has given way to a more modern submarine force, optimized primarily for regional anti-surface warfare missions near major sea lines of communication. Currently, the submarine force consists of five nuclear attack submarines, four nuclear ballistic missile submarines, and 53 diesel attack submarines. In reference to the submarine force, the term "modern" applies to second generation submarines, capable of employing anti-ship cruise missiles or submarine-launched intercontinental ballistic missiles. By 2015 approximately 70 percent of China's entire submarine force will be modern. By 2020, 75 percent of the conventional force will be modern and 100 percent of the SSN force will be modern. Currently, most of the force is conventionally powered, without towed arrays, but equipped with increasingly long range ASCMs. Submarine launched ASCMs with ranges well in excess of 100nm not only enhance survivability of the shooter, but also enable a small number of units to hold a large maritime area at risk. A decade ago, only a few of China's submarines were equipped to launch a modern anti-ship cruise missile. Given the rapid pace of acquisition, well over half of China's nuclear and conventional attack submarines are now ASCM equipped, and by 2020, the vast majority of China's submarine force will be armed with advanced, long-range ASCMs. China's small nuclear attack submarine force is capable of operating further from the Chinese mainland, conducting intelligence, surveillance and reconnaissance (ISR), as well as ASuW missions. Currently, China's submarines are not optimized for either anti-submarine warfare or land attack missions. Like the surface force, China's submarine force is trending towards a more streamlined mix of units, suggesting the PLA(N) is relatively satisfied with recent designs. For its diesel-electric force alone, between 2000 and 2005, China constructed MING SS, SONG SS, the first YUAN SSP, and purchased 8 KILO SS from Russia. While all of these classes remain in the force, only the YUAN SSP is currently in production. Reducing the number of different classes in service helps streamline maintenance, training and interoperability. The YUAN SSP is China's most modern conventionally powered submarine. Eight are currently in service, with as many as 12 more anticipated. Its combat capability is similar to the SONG SS, as both are capable of launching Chinese-built anti-ship cruise missiles, but the YUAN SSP also possesses an air independent power (AIP) system and may have incorporated quieting technology from the Russian-designed KILO SS. The AIP system provides a submarine a source of power other than battery or diesel engines while still submerged, increasing its underwater endurance, thereby reducing its vulnerability to detection. The remainder of the conventional submarine force is a mix of SONG SS, MING SS, and Russian-built KILO SS. Of these, only the MING SS and four of the older KILO SS lack an ability to launch ASCMs. Eight of China's 12 KILO SS are equipped with the SS-N-27 ASCM, which provides a long-range anti-surface capability out to approximately 120nm. Although China's indigenous YJ-82 ASCM has a much shorter range, trends in surface and air-launched cruise missiles suggest that a future indigenous submarine-launched ASCM will almost certainly match or exceed the range of the SS-N-27. China is now modernizing its relatively small nuclear-powered attack submarine force, following a protracted hiatus. The SHANG SSN's initial production run stopped after just two launches in 2002 and 2003. After nearly 10 years, China resumed production with four additional hulls of an improved variant, the first of which was launched in 2012. These six submarines will replace the aging HAN SSN on nearly a 1-for-1 basis over the next several years. Following the completion of the improved SHANG SSN, the PLA(N) will likely progress to the Type 095 SSN, which may provide a generational improvement in many areas such as quieting and weapon capacity, to include a possible land-attack capability. Perhaps the most anticipated development in China's submarine force is the expected operational deployment of the JIN SSBN in 2014, which would mark China's first credible at-sea second-strike nuclear capability. With a range in excess of 4000nm, the JL-2 submarine launched ballistic missile (SLBM), will enable the JIN to strike Hawaii, Alaska, and possibly western portions of CONUS from East Asian waters. The three JIN SSBNs currently in service would be insufficient to maintain a constant at-sea presence for extended periods of time, but if the PLA Navy builds five units as some sources suggest, a continuous peacetime presence may become a viable option for the PLA(N). Historically, the vast majority of Chinese submarine operations have been limited in duration. In recent years however, leadership emphasis on more realistic training and operational proficiency across the PLA appears to have catalyzed an increase in submarine patrol activity. Prior to 2008, the PLA(N) typically conducted a very small number of extended submarine patrols, typically fewer than 5 or 6 in a given year. Since that time, it has become common to see more than 12 patrols in a given year. This trend suggests the PLA(N) seeks to build operational proficiency, endurance, and training in ways that more accurately simulate combat missions. PLA(N) Air Forces The capabilities and role of the PLANAF have steadily evolved over the past decade. As navy combatants range further from shore and more effectively provide their own air defense, the PLANAF is able to concentrate on an expanded array of missions, including maritime strike, maritime patrols, anti-submarine warfare, airborne early warning, and logistics. Both helicopters and fixed wing aircraft will play an important role in enabling fleet operations over the next decade. Additionally, in the next few years the PLANAF will possess its first-ever sea-based component, with the Liaoning CV [aircraft carrier]. Every major PLA(N) surface combatant currently under construction is capable of embarking a helicopter, increasing platform capabilities in areas such as over the horizon targeting, anti-submarine warfare, and search and rescue (SAR). The PLA(N) operates three main helicopter variants: the Z-9, the Z-8, and the Helix . In order to keep pace with the rest of the PLA(N), the helicopter fleet will almost certainly expand in the near future. The PLA(N)'s primary helicopter, the Z-9C, was originally obtained under licensed production from Aerospatiale (now Eurocopter) in the early 1980s. The Z-9C is capable of operating from any helicopter-capable PLA(N) combatant. It can be fitted with the KLC-1 search radar, dipping sonar, and is usually seen with a single lightweight torpedo. A new roof-mounted electro-optical (EO) turret, unguided rockets, and 12.7 mm machine gun pods have been observed on several Z-9Cs during counter piracy deployments. There are now approximately twenty operational Z-9Cs in the PLA(N) inventory and the helicopters are still under production. An upgraded naval version of the Z-9, designated the Z-9D, has been observed with ASCMs. Like the Z-9, the Z-8 is a Chinese-produced helicopter based on a French design. In the late 1970s, the PLA(N) purchased and reverse engineered the SA 321 Super Frelon. This medium lift helicopter is capable of performing a wide variety of missions but is most often utilized for SAR, troop transport, and logistical support roles. It is usually observed with a rescue hoist and a nose radome and typically operates unarmed. The Z-8's size provides a greater cargo capacity compared to other PLA(N) helicopters, but is limited in its ability to deploy from most PLA(N) combatants. An AEW variant of the Z-8 has been observed operating with the Liaoning . In 1999, the PLA(N) took delivery of an initial batch of eight Russian-built Ka-28 Helix helicopters. The PLA(N) typically uses the Ka-28 for ASW. They are fitted with a search radar, dipping sonar and can employ sonobuoys, torpedoes, depth charges, or mines. In 2010 China also ordered nine Ka-31 Helix AEW helicopters. Fixed-wing Aircraft Over the last two decades, the PLANAF has significantly upgraded its fighters and expanded the type of aircraft it operates. As a consequence, it can successfully perform a wide range of missions including offshore air defense, maritime strike, maritime patrol/antisubmarine warfare, and in the not too distant future, carrier-based operations. A decade ago, this modernization was largely reliant on exports from Russia, however, the PLANAF has recently benefited from the same domestic combat aircraft production that has propelled earlier PLAAF modernization. Historically, the PLA(N) relied on older Chengdu J-7 variants and Shenyang J-8B/D Finback fighters for the offshore air defense mission. These aircraft were limited in range, avionics, and armament. The J-8 is perhaps best known in the West as the aircraft that collided with a U.S. Navy EP-3 reconnaissance aircraft in 2001. In 2002, the PLA(N) purchased 24 Su-30MK2, making it the first 4 th generation fighter fielded with the navy. These aircraft feature an extended range and maritime radar systems, enabling the Su-30MK2 to strike enemy ships at long distances, while still maintaining a robust air-to-air capability. Several years later, the PLA(N) began replacing older J-8B/Ds with the newer J-8F variant. The J-8F featured improved armament such as the PL-12 radar-guided air-to-air missile, upgraded avionics, and an improved engine with higher thrust. Today, the PLA(N) is taking deliveries of modern domestically produced 4 th generation fighter aircraft such as the J-10A Vigorous Dragon and the J-11B Flanker . Equipped with modern radars, glass cockpits, and armed with PL-8 and PL-12 air-to-air missiles, PLA(N) J-10A and J-11B aircraft are among the most modern aircraft in China's inventory. For maritime strike, the PLA(N) has relied on the H-6 Badger for decades. The H-6 is a licensed copy of the ex-Soviet Tu-16 Badger , which can employ advanced ASCMs against surface targets. As many as 30 Badgers likely remain in service with the PLA(N). Despite the older platform design, Chinese H-6 Badgers benefit from upgraded electronics and payloads. Noted improvements include the ability to carry a maximum of four ASCMs, compared with two on earlier H-6D variants. Some H-6s have been modified as tankers, increasing the PLA(N)'s flexibility and range. The JH-7 Flounder , with at least five regiments fielded across the three fleets also provides a maritime strike capability. The JH-7 is a domestically produced tandem-seat fighter/bomber, developed as a replacement for obsolete Q-5 Fantan light attack aircraft and H-5 Beagle bombers. The JH-7 can carry up to four ASCMs and two PL-5 or PL-8 short-range air-to-air missiles, providing it with considerable payload for maritime strike missions. In addition to combat aircraft, the PLANAF is expanding its inventory of fixed-wing Maritime Patrol Aircraft (MPA), Airborne Early Warning (AEW), and surveillance aircraft. The Y-8, a Chinese license-produced version of the ex-Soviet An-12 Cub , forms the basic airframe for several PLA(N) special mission variants. As the navy pushes farther from the coast, long-range aircraft play a key role in providing a clear picture of surface and air contacts in the maritime environment. Internet photos from 2012 suggest that the PLA(N) is also developing a Y-8 naval variant, equipped with a MAD (magnetic anomaly detector) boom, typical of ASW aircraft. This ASW aircraft features a large surface search radar mounted under the nose and multiple blade antennae on the fuselage for probable electronic surveillance. It also appears to incorporate a small EO/IR turret and an internal weapons bay forward of the main landing gear. The aircraft appeared in a primer yellow paint scheme, suggesting that it remains under development. Unmanned Aerial Vehicles In recent years China has developed several multi-mission UAVs for the maritime environment. There are some indications the PLA(N) has begun to integrate UAVs into their operations to enhance situational awareness. For well over a decade, China has actively pursued UAV technology and they are emerging among the worldwide leaders in UAV development. China's latest achievement was the unveiling of their first prototype unmanned combat aerial vehicle (UCAV), the Lijan , which features a blended-wing design as well as low observable technologies. The PLA(N) will probably employ significant numbers of land and ship based UAVs to supplement manned ISR aircraft and aid targeting for various long-range weapons systems. UAVs will probably become one of the PLA(N)'s most valuable ISR assets in on-going and future maritime disputes and protection of maritime claims. UAVs are ideally suited for this mission set due to their long loiter time, slow cruising speed, and ability to provide near real-time information through the use of a variety of onboard sensors. The PLA(N) has been identified operating the Austrian Camcopter S-100 rotary-wing UAV from several combatants. Following initial evaluation and deployment of the Camcopter S-100, the PLA(N) will likely adopt a domestically produced UAV into ship-based operations. Naval Mines China has a robust mining capability and currently maintains a varied inventory estimated at over 50,000 mines. China also has developed a robust infrastructure for naval mine related research, development, testing, evaluation, and production. During the past few years China has gone from an obsolete mine inventory, consisting primarily of pre-WWII vintage moored contact and basic bottom influence mines, to a robust mine inventory consisting of a large variety of mine types including moored, bottom, drifting, rocket propelled and intelligent mines. China will continue to develop more advanced mines in the future, possibly including extended-range propelled-warhead mines, anti-helicopter mines, and bottom influence mines equipped to counter minesweeping efforts. Maritime C4ISR (Command, Control, Computers, Communication, Intelligence Surveillance and Reconnaissance) China's steady expansion of naval missions beyond the littoral, including counter-intervention missions are enabled by a dramatic improvement in maritime C4ISR over the past decade. The ranges of China's modern anti-ship cruise missiles extend well beyond the range of a ship's own sensors. Emerging land-based weapons, such as the DF-21D anti-ship ballistic missile, with a range of more than 810nm are even more dependent on remote targeting. Modern navies depend heavily on their ability to build and disseminate a picture of all activities occurring in the air and sea. For China, this provides a formidable challenge. In order to characterize activities in the "near seas," China must build a maritime and air picture covering nearly 875,000 square nautical miles (sqnm). The Philippine Sea, which could become a key interdiction area in a regional conflict, expands the battlespace by another 1.5 million sqnm. In this vast space, many navies and coast guards converge along with tens of thousands of fishing boats, cargo ships, oil tankers, and other commercial vessels. In order to sort through this complex environment and enable more sophisticated operations, China has invested in a wide array of sensors. Direct reporting from Chinese ships and aircraft provides the most detailed and reliable information, but can only cover a fraction of the regional environment. A number of ground-based coastal radars provide overlapping coverage of coastal areas, but their range is limited. To gain a broader view of activity in its near and far seas, China requires more sophisticated sensors. The skywave over-the-horizon radar provides awareness of a much larger area than conventional radars by bouncing signals off the ionosphere. China also operates a growing array of reconnaissance satellites, which allow observation of maritime activity virtually anywhere on the earth. Conclusion The PLA(N) is strengthening its ability to execute a range of regional missions in a "complex electromagnetic environment" as it simultaneously lays a foundation for sustained, blue water operations. Over the next decade, China will complete its transition from a coastal navy to a navy capable of multiple missions around the world. Current acquisition patterns, training, and operations provide a window into how the PLA(N) might pursue these objectives. Given the pace of PLA(N) modernization, the gap in military capability between the mainland and Taiwan will continue to widen in China's favor over the coming years. The PRC views reunification with Taiwan as an immutable, long-term goal and hopes to prevent any other actor from intervening in a Taiwan scenario. While Taiwan remains a top-tier priority, the PLA(N) is simultaneously focusing resources on a growing array of potential challenges. China's interests in the East and South China Seas include protecting its vast maritime claims and preserving access to regional resources. Beijing prefers to use diplomacy and economic influence to protect maritime sovereignty, and generally relies on patrols by the recently-consolidated China Coast Guard. However, ensuring maritime sovereignty will remain a fundamental mission for the PLA(N). PLA(N) assets regularly patrol in most of China's claimed territory to conduct surveillance and provide a security guarantee to China's Coast Guard. In the event of a crisis, the PLA(N) has a variety of options to defend its claimed territorial sovereignty and maritime interests. The PLA(N) could lead an amphibious campaign to seize key disputed island features, or conduct blockade or SLOC interdiction campaigns to secure strategic operating areas. China's realization of an operational aircraft carrier in the coming years may also enable Beijing to exert greater pressure on its SCS rivals. Recent acquisitions speak to a future in which the PLA(N) will be expected to perform a wide variety of tasks including assuring the nation's economic lifelines, asserting China's regional territorial interests, conducting humanitarian assistance and disaster relief, and demonstrating a Chinese presence beyond region waters. Appendix C. Joint Concept for Access and Maneuver in Global Commons (JAM-GC) This appendix provides additional background information Joint Concept for Access and Maneuver in the Global Commons (JAM-GC), previously known as Air-Sea Battle (ASB). October 10, 2013, Hearing On October 10, 2013, the Seapower and Projection Forces subcommittee of the House Armed Services Committee held a hearing with several DOD officials as the witnesses that focused to a large degree on the Air-Sea Battle concept. One of the witnesses—Rear Admiral Upper Half James G. Foggo III, Assistant Deputy Chief of Naval Operations (Operations, Plans and Strategy) (N3/N5B)—provided the following overview of ASB in his opening remarks: So let me begin by answering the question, what is the AirSea Battle concept? The AirSea Battle concept was approved by the Secretary of Defense in 2011. It is designed to assure access to parts of the global commons, those areas of the AirSea, Cyberspace, and Space that no one necessarily owns but which we all depend on such as sea lines of communication. Our adversaries' Anti-Access/Area Denial strategies employ a range of military capabilities that impede the free use of these ungoverned spaces. These military capabilities include new generations of cruise, ballistic, air to air, surface to air missiles with improved range, accuracy and lethality that are being produced and proliferated. Quiet, modern submarines and stealthy fighter aircraft are being procured by many nations while naval mines are being equipped with mobility, discrimination and autonomy. Both space and cyberspace are becoming increasingly important and contested. Accordingly, AirSea Battle in its concept is intended to defeat such threats to access and provide options to national leaders and military commanders to enable follow-on operations which could include military activities as well as humanitarian assistance and disaster response. In short, it is a new approach to warfare. The AirSea Battle concept is also about force development in the face of rising technological challenges. We seek to build at the service level a pre-integrated joint force which empowers U.S. combatant commanders, along with allies and partners to engage in ways that are cooperative and networked across multiple domains—the land, maritime, air, space and cyber domains. And our goal includes continually refining and institutionalizing these practices. When implemented, the AirSea Battle concept will create and codify synergies within and among our services that will enhance our collective war fighting capability and effectiveness. So that's, in a nutshell, what the AirSea Battle concept is. But now, what is it not? Sir, you pointed out the AirSea Battle concept is not a strategy—to answer your question on the difference between AirLand Battle and the AirSea Battle concept. National or military strategies employs ways and means to a particular and/or end-state, such as deterring conflict, containing conflict or winning conflict. A concept in contrast is a description of a method or a scheme for employing military capabilities to attain specific objectives at the operational level of war. The overarching objective of the AirSea Battle concept is to gain and maintain freedom of action in the global commons. The AirSea Battle does not focus on a particular adversary or a region. It is universally applicable across all geographic locations, and by addressing access challenges wherever, however, and whenever we confront them. I said earlier that the AirSea Battle represents a new approach to warfare. Here's what I meant by that. Historically, when deterrence fails, it's our custom to amass large numbers of resources, leverage our allies for a coalition support and base access or over flight and build up an iron mountain of logistics, weapons and troops to apply overwhelming force at a particular space and time of our choosing. This approach of build up, rehearse and roll back has proven successful from Operation Overlord in the beaches of Normandy in 1944 to Operation Iraqi Freedom in the Middle East. But the 21 st Century operating environment is changing. Future generations of American service men and women will not fight their parents' wars. And so I'll borrow a quote from Abraham Lincoln, written in a letter to this House on 1 December, 1862 when he said, "We must think anew, act anew. We must disenthrall ourselves from the past, and then we shall save our country." New military approaches are emerging specifically intended to counter our historical methods of projecting power. Adversaries employing such an approach would seek to prevent or deny our ability to aggregate forces by denying us a safe haven from which to build up, rehearse, and roll back. Anti-Access is defined as an action intended to slow deployment of friendly forces into a theater or cause us to operate from longer distances than preferred. Area Denial impedes friendly operations or maneuver in a theater where access cannot be prevented. The AirSea Battle concept mitigates the threat of Anti-Access and Area Denial by creating pockets and corridors under our control. The reason conflict in Libya, Operation Odyssey Dawn in 2011, is a good example of this paradigm shift. Though AirSea Battle was still in development, the fundamental idea of leveraging access in one domain to provide advantage to our forces in another was understood and employed against Libya's modest Anti-Access/Area Denial capability. On day one of combat operations, cruise missiles launched from submarines and surface ships in the maritime domain targeted and destroyed Libya's lethal air defense missile systems; thereby enabling coalition forces to conduct unfettered follow-on strikes and destroy the Libyan Air Force and control the air domain. Establishing a no-fly zone, key to interdicting hostile regime actions against innocent civilians—and that was our mission, to protect civilians—was effectively accomplished within 48 hours of receiving the execution order from the President. I was the J3 or the operations officer for Admiral Sam Locklear, Commander of Joint Task Force, Odyssey Dawn. And I transitioned from U.S.-led coalition operations to Operation Unified Protector as a taskforce commander for NATO. During the entire campaign which lasted seven months, NATO reported in its UN After Action Report that there were just under 18,000 sorties flown, employing 7,900 precision guided munitions. That's a lot. More than 200 Tomahawk Land Attack Missiles were used, over half of which came from submarines. The majority of the Libyan Regime Order of Battle, which included 800 main battle tanks, 2,500 artillery pieces, 2,000 armored personnel carriers, 360 fixed wing fighters and 85 transports were either disabled or destroyed during the campaign. Not one American boot set foot on the ground; no Americans were killed in combat operations. We lost one F-15 due to mechanical failure but we recovered both pilots safely. Muammar Gaddafi, as you know, was killed by Libyan rebels in October. 2011. The AirSea Battle Concept, in its classified form, was completed in November 2011, one month later. I provided Admiral Locklear with a copy of the AirSea Battle concept and we reviewed it on a trip to United Kingdom. Upon reading it, I thought back to the Libya campaign plan and I wondered how I might leverage the concepts of AirSea Battle to fight differently, to fight smarter. Operation Odyssey Dawn accelerated from a non-combatant evacuation operation and humanitarian assistance to kinetic operations in a very short period. There was very little time for build-up and rehearse our forces. To coin a phrase from my boss, this was like a pickup game of basketball. And we relied on the flexibility, innovation and resiliency of the commanders of the forces assigned to the joint taskforce. The Libyan regime's Anti Access Area Denial capability was limited as I said. And we were able to overwhelm and defeat it with the tools that we had. But we must prepare for a more stressing environment in the future. AirSea Battle does so, by providing commanders with a range of options, both kinetic and non-kinetic to mitigate or neutralize challenges to access in one or many domains simultaneously. This is accomplished through development of networked integrated forces capable of attack in-depth to disrupt, destroy and defeat the adversary. And it provides maximum operational advantage to friendly joint and coalition forces. I'm a believer and so are the rest of the flag and general officers here at the table with me. DOD Unclassified Summary Released June 2013 On June 3, 2013, DOD released an unclassified summary of the Air-Sea Battle concept.
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The question of how the United States should respond to China's military modernization effort, including its naval modernization effort, is a key issue in U.S. defense planning and budgeting. China has been steadily building a modern and powerful navy since the early to mid-1990s. China's navy has become a formidable military force within China's near-seas region, and it is conducting a growing number of operations in more-distant waters, including the broader waters of the Western Pacific, the Indian Ocean, and waters around Europe. Observers view China's improving naval capabilities as posing a challenge in the Western Pacific to the U.S. Navy's ability to achieve and maintain control of blue-water ocean areas in wartime—the first such challenge the U.S. Navy has faced since the end of the Cold War. More broadly, these observers view China's naval capabilities as a key element of a broader Chinese military challenge to the long-standing status of the United States as the leading military power in the Western Pacific. China's naval modernization effort encompasses a wide array of platform and weapon acquisition programs, including anti-ship ballistic missiles (ASBMs), anti-ship cruise missiles (ASCMs), submarines, surface ships, aircraft, unmanned vehicles (UVs), and supporting C4ISR (command and control, communications, computers, intelligence, surveillance, and reconnaissance) systems. China's naval modernization effort also includes improvements in maintenance and logistics, doctrine, personnel quality, education and training, and exercises. Observers believe China's naval modernization effort is oriented toward developing capabilities for doing the following: addressing the situation with Taiwan militarily, if need be; asserting and defending China's territorial claims in the South China Sea and East China Sea, and more generally, achieving a greater degree of control or domination over the SCS; enforcing China's view that it has the right to regulate foreign military activities in its 200-mile maritime exclusive economic zone (EEZ); defending China's commercial sea lines of communication (SLOCs), particularly those linking China to the Persian Gulf; displacing U.S. influence in the Western Pacific; and asserting China's status as a leading regional power and major world power. Consistent with these goals, observers believe China wants its military to be capable of acting as an anti-access/area-denial (A2/AD) force—a force that can deter U.S. intervention in a conflict in China's near-seas region over Taiwan or some other issue, or failing that, delay the arrival or reduce the effectiveness of intervening U.S. forces. Additional missions for China's navy include conducting maritime security (including antipiracy) operations, evacuating Chinese nationals from foreign countries when necessary, and conducting humanitarian assistance/disaster response (HA/DR) operations. Potential oversight issues for Congress include the following: whether the U.S. Navy in coming years will be large enough and capable enough to adequately counter improved Chinese maritime A2/AD forces while also adequately performing other missions around the world; whether the Navy's plans for developing and procuring long-range carrier-based aircraft and long-range ship- and aircraft-launched weapons are appropriate and adequate; whether the Navy can effectively counter Chinese ASBMs and submarines; and whether the Navy, in response to China's maritime A2/AD capabilities, should shift over time to a more distributed fleet architecture.
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T he February 14, 2018, shooting at Marjory Stoneman Douglas High School in Parkland, FL; the March 20, 2018, shooting at Great Mills High School in Great Mills, MD; and the May 18, 2018, shooting at Santa Fe High School in Santa Fe, TX, are the latest school shootings to grab the country's attention. While school shootings have occurred at least as far back as 1974, it was the 1999 mass shooting at Columbine High School in Littleton, CO, that led many people to identify school shootings as a social problem. As one scholar noted, "[a]t the turn of the millennium, school shootings were an ascendant social problem, often because the events garnered public interest, which contributed to the perception that school shootings were a new form of violence occurring with increased frequency and intensity." Concerns about school shootings have led to an expansion of school violence prevention programs. Program actions range from removing graffiti on school grounds to the use of metal detectors and camera systems and the enforcement of zero-tolerance policies that mandate punishment for students who commit certain serious infractions. School resource officer (SRO) programs have emerged as one of the most popular strategies for increasing school safety. After the recent school shootings in Florida, Maryland, and Texas, policymakers have expressed an interest in what Congress could do to promote the expansion of SRO programs in schools. This report provides an overview of some of the relevant issues policymakers might consider. While recent interest in expanding SRO programs has focused on SROs' potential to deter or respond to active shooters, these officers are more than armed sentries waiting to engage a shooter. The duties of SROs can vary from one community to another, which makes it difficult to develop a single list of SRO responsibilities, but their roles can be placed into three general categories: (1) safety expert and law enforcer, (2) problem solver and liaison to community resources, and (3) educator. SROs may serve as safety experts and law enforcers by assuming primary responsibility for handling calls for service from the school, making arrests, issuing citations on campus, taking actions against unauthorized persons on school property, and responding to off-campus criminal activities that involve students. They serve as first responders in the event of critical incidents at the school. SROs can also help solve problems that are not necessarily crimes (e.g., bullying or disorderly behavior) and those that might contribute to criminal incidents (e.g., gang activity). Problem-solving activities conducted by SROs can include developing and expanding crime prevention efforts and community or restorative justice initiatives for students. SROs can also present courses on topics related to policing or responsible citizenship for students, faculty, and parents. The most recent data from the U.S. Department of Education on how many U.S. schools have SROs comes from the National Center for Education Statistics' (NCES') spring 2016 School Survey on Crime and Safety (SSOCS). The 2016 SSOCS was based on a nationally representative stratified random sample of 3,553 public schools and collected data on a variety of topics including the location, enrollment size, and the type of schools (i.e., primary school, middle school, high school, or combined) that have SROs. Completed surveys were returned by 2,092 schools, yielding a response rate of 63% once the data was weighted to account for original sampling probabilities. NCES reports that 42% of U.S. public schools that participated in the SSOCS survey indicated they had at least one full-time or part-time SRO during the 2015-2016 school year (SY). At a minimum, these schools had one SRO present at activities happening in school buildings, on school grounds, on school buses, or at places that hold school-sponsored events or activities at least once a week. NCES reports that 22% of schools had a full-time SRO while 21% had a SRO who was as the school part-time. Data from the SSOCS for SY2015-2016 show that a greater proportion of high schools and schools with enrollments of 1,000 or more reported the presence of SROs. NCES reports that 68% of high schools had an SRO present at least once a week during SY2015-2016, compared to 59% of middle schools and 30% of elementary schools. Similarly, 77% of schools with enrollments of 1,000 or more students had an SRO present at least one day a week, compared to 47% of schools with enrollments of 999-500 students, 36% of schools with enrollments of 499-300 students, and 24% of schools with enrollments of less than 300 students. One limitation of the data is that they did not account for schools where SROs were present less than weekly. The SSOCS questionnaire for SY2015-2016 asked "during the 2015–16 school year, did you have any sworn law enforcement officers (including School Resource Officers) present at your school at least once a week? [emphasis original]." Another question, "how many of the following were present in your school at least once a week?", was followed by a list of security personnel, including full-time and part-time SROs, with instructions to "include all career sworn law enforcement officers with arrest authority, who have specialized training and are assigned to work in collaboration with school organizations." SROs, other sworn law enforcement officers, and security personnel who are at schools less frequently than weekly are not captured in the SSOCS data. There are multiple issues policymakers might consider should Congress take up legislation to promote SRO programs, including the following: What is the likelihood that children will be killed at school? Can the presence of an SRO at a school prevent a shooting? What effect do SROs have on the school environment? What steps can be taken to maximize the benefits of SRO programs? One issue policymakers might consider is whether there is a need for a large-scale expansion of SRO programs. Policymakers might have an interest in increasing the presence of SROs stationed at schools across the country as a way of promoting school safety. If the desire to expand SRO programs is principally related to concerns about potential shootings, it may be worth considering whether there is an epidemic of schools shootings. Some suggest that the widespread media coverage of school shootings creates a "moral panic" that gives people a sense that the threat of children being victims of a school shooting is greater than it really is. Others say that the clarion call for a response to school shootings that protects children is well founded. In the sections that follow, available data are reviewed and discussed to better understand whether there is a need for additional resources to prevent school-based homicides. Figure 1 presents data on the number of at-school homicides of children ages 5-18 each school year from SY1992-1993 to SY2014-2015. On average, there have been 23 at-school homicides each school year from SY1992-SY1993 to SY2014-2015. While there were instances where there was a noticeable change in the number of at-school homicides from one school year to the next, the trend line (the dashed line in the figure) indicates that there has been a general downward trend in the number of at-school homicides during this period. Multiple-victim shooting incidents at schools in the United States can cause a spike in the number of at-school homicides. For example, the 20 students killed at Sandy Hook Elementary School in Connecticut accounted for nearly two-thirds of the at-school homicides during SY2012-2013. Without those deaths, the number of at-school homicides would have been in-line with the number of at-school homicides in SY2011-2012 and SY2013-2014. However, not all spikes in at-school homicides are attributable to multiple-victim schools shootings. There were 32 at-school homicides during SY2006-2007, and the deadliest school shooting during that year involved the deaths of five students at the Nickel Mines school in Pennsylvania. While any homicides that occur at schools would likely undermine a community's sense of their children's safety, data from this period indicate that most children who are victims of homicide are killed when they are not at school. NCES reported that during SY2014-2015 there were 1,168 homicides of children ages 5-18, of which 20 occurred at schools. Fighting, bullying, and other problem behaviors at schools are generally not driving the current debate about the potential expansion of SRO programs; it is multiple-victim shootings at schools that are driving the discussion. While data on the number of homicides at schools provides insight into the prevalence of violent deaths that occur at schools each school year, they do not indicate how many students are the victims of multiple-victim shooting incidents. Researchers at Northeastern University report that since 1996 there have been 16 multiple-victim shootings in schools (defined as shootings involving four or more victims and at least two deaths by firearms, excluding the assailant), and of those, eight were mass shootings (defined as incidents involving four or more deaths by firearm, excluding the assailant). The researchers characterized mass school shootings as rare and "not an epidemic." Their data also indicate that the number of fatal school shootings (defined as incidents where at least one individual is killed by firearms at school), of which mass school shootings is a subset, have decreased since the early 1990s. In SY2014-2015, approximately one per 6.7 million students was killed in fatal school shootings, and for most of the past 15 years the number of children killed in fatal school shootings was below this rate. Throughout most of the 1990s, the number of children killed in fatal school shootings was more than one per 5 million students, with a peak of approximately one per 1.8 million students in SY1992-1993 (the first year for which data were collected). Interest in potentially expanding SRO programs has generally stemmed at least in part from the belief that the presence of an SRO could deter school shootings or, if a school shooting were to occur, that the SRO would be able to respond quickly and confront the attacker. Thus far, no publicly available research has evaluated whether SROs serve as an effective deterrent to school shootings or whether SROs reduce the loss of life when school shootings occur. In part, this may be due to methodological challenges when trying to measure things, in this case school shootings and deaths due to school shootings, that did not happen. There is some research on the effectiveness of SRO programs vis-à-vis school crime, but the findings are mixed. Several groups of researchers used data from the 2005-2006 School Survey on Crime and Safety (SSOCS) to evaluate the effect of SROs and security guards on school crime. Jennings et al. found that the number of SROs in a school had a statistically significant negative effect on the number of reported serious violent crimes, but not on the number of reported violent crimes. Maskaly et al. found that violent crime was generally higher in larger-sized schools and middle schools regardless of whether SROs or security guards were present. However, in a separate study researchers found that violent crime was higher in schools with only security personnel relative to schools with SROs, which suggests that SROs might be able to mitigate violent crime to some degree. Crawford and Burns found that the effect of SROs on serious violence and weapons-related offenses depended on whether SROs were stationed in high schools or schools with other grade levels. The presence of SROs did not have a statistically significant effect on reported serious violence in high schools, but there was a positive statistically significant effect of SROs on reported serious violence in schools of other grade levels. The presence of SROs also resulted in fewer reported attacks with a weapon and gun possession in lower grades, but not in high schools. SROs also had a positive statistically significant association with reported threatened attacks with a weapon and gun possession in high schools. The conclusions of all the studies that utilized the 2005-2006 SSOCS data for their analyses are limited by the fact that the data are cross-sectional (i.e., they look at all schools in the survey at one point in time). Since the researchers did not collect data on reported crimes at schools included in the 2005-2006 SSOCS before or after the survey was conducted, they were unable to determine if crime was increasing prior to SROs being stationed at the schools or what happened to crime after SROs started working at the schools. As Maskaly et al. note, any relationships identified here are correlational, and this precludes us from making any definitive statements about the causal order of security personnel and school crime. For instance, we are unable to determine if schools that were experiencing high crime decided to employ either SROs or private security guards to combat the school crime problem and/or whether the presence of and use-of-force capabilities of the SROs or private security guards specifically caused a reduction in school crime. Na and Gottfredson merged SSOCS data from three iterations of the survey (2003-2004, 2005-2006, and 2007-2008) which allowed them to attempt to evaluate whether the reported number of offenses decreased after schools started SRO programs (some schools, by chance, were included in more than one survey). The results of the analysis show that schools that added SROs did not have a statistically significant change in the rate of serious violent, non-serious violent, or property crimes. However, schools that added SROs reported a statistically significant increase in the rate of weapon and drug offenses. There are some limitations to this study, including the sample of schools included in the study is not representative of all schools in the United States (it over-represents secondary schools, large schools, and non-rural schools) and the effects of adding SROs may be confounded by the installation of other security devices (e.g., metal detectors) or other security-related policies. The body of research on the ability of SRO programs to reduce school crime is limited. There are only a handful of studies on the effects of SROs on school crime and there are important limitations to the reported crime data utilized in the studies that have been published. For example, the SSOCS asks principals to provide data on the number of crimes at their schools, and it is possible that principals are not aware of all crimes in their schools and they might under-report crime out of fear of the effects of bad publicity. Additionally, there are limitations in the methods employed to isolate the effects of SROs on the outcomes of interest. The research that is available draws conflicting conclusions about whether SRO programs are effective at reducing school violence. While research on the effectiveness of SRO programs largely focuses on their effect on school crime, studies have also evaluated what effect they have on student and staff perceptions of school safety. Some research suggests that the presence of SROs reduces fear of crime among students and increases feelings of safety, while other research suggests that the presence of SROs indicates to students that schools are unsafe places. Research by Travis and Coons shows how there can be conflicting opinions about the presence of SROs. In interviews with focus groups at 14 schools, many participants stated that one of the downsides to having an SRO at the school is that it gives the impression that there was something wrong with the school. On the other hand, participants from schools with at least one dedicated SRO also indicated that the presence of an SRO was accepted and generally desirable. The researchers noted that at no school did participants unanimously agree that they did not want an SRO at the school. Students' acceptance of an SRO presence appeared to be related to how the officer interacted with students. Students who felt the SRO was friendly and helpful had a more positive reaction to the officer's presence while students who felt their SRO was intrusive or used accusatory approaches had a more negative opinion. However, a study by Bachman, Randolph, and Brown suggests that students' perception of schools safety can be influenced by other factors, such as whether students have been victims of crime and whether gangs are present at the school. Their study also suggests that the presence of security guards increases fear of victimization at school in white students but not black students. Research has also found that teachers and principals tend to have positive attitudes toward SROs and believe that their presence deters student misconduct and reduces school crime. For example, in focus groups conducted by Travis and Coon, high school teachers, more so than elementary and middle school teachers, thought the presence of an SRO was desirable. Also, teachers that worked in schools that served more impoverished communities wanted a greater police presence to assist with behavioral problems. The research on how SROs effect the perception of crime in schools is also limited. Of the handful of studies on this topic, many collected data by surveying students from a small number of schools in one geographic area (e.g., schools in one city or in a certain portion of a state) or they relied on focus groups. This might raise questions about how generalizable the results of these studies are to students and schools in other areas. Also, these studies rely upon students and school employees' perception of school safety. Perception of school safety can be subjective. What is perceived to be a dangerous school by one student might be considered a relatively safe place by another student. As was revealed in research summarized above, this may be due to students' experience with victimization or a gang presence in the school. However, this is not to say that students' perceptions of school safety are unimportant. As one scholar notes, "[t]he reduction of student perception of danger at school should be viewed as an essential function of [SROs] because perception of danger at school has consistently been shown to negatively impact students' attendance, confidence, and academic performance." As noted above, there is not a robust body of research addressing these issues. However, the role of SROs as first responders to school shootings has received increased attention since the Parkland, FL, school shooting. A recent Washington Post examination offers some insights on issues related to SROs and school shootings. Washington Post reporters identified more than 1,000 incidents of gunfire at primary or secondary schools using Nexis, news articles, open-source databases, law enforcement reports, information from school websites, and calls to schools and police departments between April 1999 and March 2018. They included only shootings that happened on school premises immediately before, during or just after classes in their examination, which reduced the number of incidents to 197. In those 197 incidents, the Washington Post found one instance in which an SRO stopped an active school shooter by returning fire. After the Washington Post published its article on school shootings, there were two incidents where SROs intervened after someone had opened fire at a school. In Dixon, IL, an SRO shot and wounded a shooter after the shooter fired at the officer while he was trying to flee. Also, an SRO interceded during the shooting at Great Mills High School in Maryland, but the shooter was later determined to have died of a self-inflicted gunshot wound. Of the nearly 200 recorded incidents of gunfire in primary and secondary schools and on school grounds during school hours between 1999 and 2018, at least 68 of the schools employed an SRO or a security guard, including 4 of the 5 schools where, according to the Washington Post , the "worst rampages" took place. Whether the presence of an SRO at a school makes a shooter more or less likely to attack the school may depend in part on the shooter's desired outcome. Multiple examples of students who wanted to commit suicide by provoking armed security personnel to shoot them were found in the Washington Post' s analysis. However, in at least one instance a school shooter deliberately selected an elementary school with no security personnel instead of the middle school he attended because his middle school had an armed security officer. As mentioned previously, many schools reported that they either did not have an SRO, or that the SRO works part-time. Having an SRO who works part-time could limit whatever deterrent effect an SRO's presence might have on a potential active shooter. For example, if the shooter is familiar with the SRO's schedule, the shooter might attempt to commit his crime when the SRO is not at the school. Also, it is possible that an SRO could not respond to an active shooter situation quicker than regular law enforcement if he or she is not at the school. However, a part-time SRO might provide some deterrent effect if it is known that an SRO is stationed at the school but a potential shooter is not familiar with the SRO's schedule. While recent interest in SROs programs has stemmed from proposals to use SROs as a strategy to prevent school shootings, it should be noted that SROs are more than armed sentries whose sole purpose is to stand guard and wait for an attack. SROs are sworn law enforcement officers who, among other things, patrol the school, investigate criminal complaints, and handle violators of the law. Therefore, while assigning an SRO to a school might improve relationships between law enforcement and youth, serve as a deterrent to a potential school shooter, or provide a quicker law enforcement response in cases where a school shooting occurs, it will also establish a regular law enforcement presence in the school. There might be some concern that onsite benefits and any potential deterrent effect generated by placing SROs in schools could be offset by the social costs that might arise by potentially having more children suspended or expelled from school or entering the juvenile justice system for relatively minor offenses. Similarly, concerns may arise about the monetary cost of adding SROs if a wide-scale expansion is envisioned. The use of SROs has occurred in the context of increasing concern about school security and the concomitant adoption of more security measures in schools and the adjustment of school discipline policies. Fisher and Hennessy provide a systematic review and meta-analysis of research on the association between the presence of SROs in high schools and the use of exclusionary discipline (i.e., suspensions and expulsions). The question driving the research was whether the presence of SROs leads to greater use of suspensions and expulsions. Their analysis utilized two models, one that tested the effects of SROs on exclusionary discipline using studies with a pre-post design (i.e., evaluating discipline before and after SROs were assigned to the school) and one that used a comparison school design (i.e., evaluating differences in discipline at schools with and without SROs). The model using pre-post studies revealed that SROs are associated with a statistically significant increase in exclusionary discipline. The model using comparison school studies did not achieve statistical significance, but the authors note that the results were consistent with the pre-post model. They conclude that the presence of SROs in high schools is associated with higher levels of exclusionary discipline. The authors caution that much of the research on the effect that SROs have on school discipline is not methodologically rigorous (e.g., studies did not randomly assign SROs to schools, not enough data were collected to test changes in crime and disciplinary trends before and after an SRO was assigned to a school, studies that compared schools with and without SROs were poorly matched based on variables that could affect crime and school discipline), and the strength of their conclusions is only as viable as the underlying research. Also, reflecting the lack of robust research on SROs and their relationship with the use of exclusionary discipline, both models had small sample sizes. Theriot used data from a school district in the southeastern United States to test the criminalization of student misconduct theory. Theriot's analysis indicated that middle and high schools with SROs had higher arrest rates than schools without them, but the relationship between SROs and arrest rates disappeared when the analysis controlled for school-level poverty. More-nuanced results of the study indicated that students in schools with SROs were more likely than students in schools without them to be arrested for disorderly conduct, even when controlling for school-level poverty, which lends credence to the idea that student misbehavior is being criminalized. The research also revealed that schools with SROs had lower arrest rates for assault and possessing a weapon on school grounds. The researcher opined that this suggests SROs might serve as a deterrent for more serious crimes. For example, students might be less likely to bring a weapon to school if an SRO is present because they fear they might be caught. Students might also be less likely to fight if they believe they will be arrested for assault. A critique of Theriot's study notes that the analysis did not include data for a long enough period of time before SROs were assigned to some schools, and the control group (i.e., the non-SRO schools) still had some contact with law enforcement. Na and Gottfredson, discussed previously, also included an analysis of whether schools that added SROs had a greater percentage of crimes reported to law enforcement and whether a greater proportion of students were subject to "harsh discipline" (i.e., the student was removed, transferred, or suspended for five or more days). The researchers found that schools that added SROs were more likely to report non-serious violent crimes (i.e., physical attack or fights without a weapon and threat of physical attack without a weapon) to the police than schools that did not add SROs. The reporting of other types of crime and the reporting of crime overall were not affected by the addition of SROs. Na and Gottfredson conclude that their findings are "consistent with our prediction that increased use of SROs facilitates the formal processing of minor offenses." However, their analysis also found that students at schools that added SROs were not any more likely than students at schools that did not add SROs to be subject to harsh discipline for committing any offense that was reported to the police. Together, these studies suggest that the concern about the presence of SROs leading to increased use of the juvenile justice system for school-based minor offenses may be warranted, but many unanswered questions remain about the full range of potential positive and negative consequences of SROs. Policymakers could have an interest in encouraging the expansion of SRO programs as a means to promote school safety, but at the same time be concerned about what effect SROs could have on the school environment. While evaluation research on the efficacy of particular program models or characteristics is limited, the Community Oriented Policing Services (COPS) Office, an office within the Department of Justice, has identified several elements of a successful SRO program. First, the COPS guide suggests that all schools should develop a comprehensive school safety plan based on their school safety goals and a thorough analysis of the problem(s) the school is facing before determining if it is necessary to employ an SRO. In some instances, school safety plans might not require the deployment of an SRO. However, if after composing a school safety plan the school decides to use an SRO, there should be clear goals for the program. SROs should engage in problem-solving policing activities that directly relate to school safety goals and address identified needs, and data should be collected to determine whether the program is achieving its goals. Second, the COPS guide suggests that schools and the law enforcement agencies that SROs work for should be aware of any pitfalls before agreeing to establish an SRO program. There may be philosophical differences between school administrators and law enforcement agencies about the role of the SRO. Law enforcement agencies focus on public safety while schools focus on educating students. Establishing an agreed-upon operating protocol or MOU is considered a critical element of an effective school-police partnership. The MOU should clearly state the roles and responsibilities of the actors involved in the program. Third, the COPS guide suggests that selecting officers who are likely to succeed in a school environment—such as officers who can effectively work with students, parents, and school administrators; have an understanding of child development and psychology; and have public speaking and teaching skills—and properly training those officers are important components of a successful SRO program. While it is possible to recruit officers with some of the skills necessary to be effective SROs, it is nonetheless considered important to provide training so officers can hone skills they already have or develop new skills that can make them more effective. The Police Foundation, for instance, recommends that training for SROs focus on the following: child and adolescent development, with an emphasis on the effect of trauma on student behavior, health, and learning; subconscious (or implicit) bias that can disproportionately affect youth of color and youth with disabilities or mental health issues; crisis intervention for youth; alternatives to detention and incarceration, such as peer courts, restorative justice, etc.; and legal issues like special protections for students with disabilities.
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The school shootings at Marjory Stoneman Douglas High School in Parkland, FL, Great Mills High School in Great Mills, MD, and Santa Fe High School in Santa Fe, TX, have generated renewed interest in what Congress might consider to enhance security at the nation's schools. School resource officer (SRO) programs have been discussed as a possible strategy for increasing school safety. SROs are sworn law enforcement officers who are assigned to work at a school on a long-term basis. While there are no current figures on the number of SROs in the United States, data indicate that 42% of U.S. public schools reported that they had at least one full-time or part-time SRO present at least once a week during the 2015-2016 school year (SY). There are multiple issues policymakers might consider should Congress take up legislation to promote SRO programs as a solution to school shootings, including the following: How common are at-school homicides? On average, annually, 23 children ages 5-18 were victims of homicide at school from SY1992-1993 to SY2014-2015. There was a general downward trend in the number of school-related homicides of children between these two time periods. Also, to place the number of school-related homicides in context, during SY2014-2015 there were 1,168 homicides of children ages 5-18, of which 20 occurred at schools. Can the presence of an SRO at a school prevent a school shooting? Much of the research evaluating the effectiveness of SRO programs has examined their effect on more common crimes and not school shootings, and the findings are mixed. Also potentially illuminating is a recent effort undertaken by the Washington Post that examined school shootings since 1999. It identified 197 incidences of gun violence during and near school hours and uncovered one instance when an SRO killed an active school shooter. Since the Post published its story there have been two other incidents where an SRO intervened during a school shooting. The extent to which the presence of an SRO has prevented a school shooting, however, is unknown. What effect do SROs have on the school environment? SROs may have varied effects on school environments. While assigning an SRO to a school might serve as a deterrent to a potential school shooter, or provide a quicker law enforcement response in cases where a school shooting occurs, it may also escalate the consequences associated with students' actions. SROs establish a regular law enforcement presence in schools and there is some concern their presence might result in more children either being suspended or expelled or entering the criminal justice system for relatively minor offenses. There is a limited body of research available regarding the effect SROs have on the school setting. One meta-analysis suggests the presence of SROs is associated with more suspensions and expulsions. Research findings regarding the effect SROs have on student arrests suggest that the presence of SROs might increase the chances that students are arrested for some low-level offenses such as disorderly conduct. What steps can be taken to maximize the benefits of SRO programs? The Community Oriented Policing Services Office in the Department of Justice has identified several steps that can be taken that might improve outcomes for SRO programs, including developing a comprehensive school safety plan to help assess whether it is necessary to employ an SRO, being aware of potential pitfalls before agreeing to establish an SRO program, and selecting officers who are likely to succeed in a school environment and properly training those officers.
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"Price gouging" is a term commonly used to refer to sellers inflating prices to "unfair" levels in order to take advantage of certain circumstances causing a decrease in supply, including emergencies. Currently, no federal law specifically addresses price gouging. However, bills have been introduced in the 112 th Congress that would prohibit price gouging of gasoline and other fuels. In addition, price-gouging laws already exist in many states and are generally applicable in situations arising from a declared emergency. An increase in prices alone does not constitute price gouging under most of these state statutes. Generally, protections and prohibitions in these statutes are triggered only when prices increase following a statutorily designated event. Federal antitrust and consumer protection laws also afford consumers some protection from unfair pricing schemes. This report begins with a discussion of state price-gouging laws, including their triggers and applications, and then moves to a discussion of proposed federal legislation aimed at prohibiting price gouging. Finally, the report analyzes existing federal law regarding anticompetitive behavior and how it might apply to the market for gasoline or other petroleum products. Many states have enacted some type of prohibition or limitation on price increases during declared emergencies. Generally, these state laws take one of two basic forms. Some states prohibit the sale of goods and services in the designated emergency area at what are deemed to be "unconscionable" or "excessive" prices during a designated emergency period. Other states have enacted legislation that caps the amount by which the prices for retail goods can be increased during a designated emergency period. Many statutes of both kinds include an exemption if price increases are the result of increased costs incurred for procuring the goods or services in question. One common format found in state statutes that attempt to address price gouging is a ban on prices that are considered to be "excessive" or "unconscionable" or another term, as defined in the statute or left to the discretion of the courts. These statutes generally bar such increases during designated emergency periods; the process for emergency designation is also usually defined in the statute. Frequently the state's governor is granted authority to designate an emergency during which the price limitations are in place. For example, the New York statute provides that, During any abnormal disruption of the market for consumer goods and services vital and necessary for the health, safety and welfare of consumers, no party within the chain of distribution of such consumer goods or services or both shall sell or offer to sell any such goods or services or both for an amount which represents an unconscionably excessive price. The statute defines an "abnormal disruption of the market" as a real or threatened change to the market "resulting from stress of weather, convulsion of nature, failure or shortage of electric power or other source of energy, strike, civil disorder, war, military action, national or local emergency ... which results in the declaration of a state of emergency by the governor." The statute leaves the ultimate decision as to whether a price is "unconscionably excessive" to the courts, but it does note that if there is a "gross disparity" between the price during the disruption and the price prior to the disruption, or if the price "grossly exceeds" the price at which the same or similar goods are available in the area, such disparity will be consider prima facie evidence that a price is unconscionable. Similarly, Florida's statute bars "unconscionable" pricing during states of emergency. The Florida law establishes a prima facie case of unconscionable pricing if the amount being charged represents a "gross disparity" from the average price at which the product or service was sold in the usual course of business, or available in the "trade area," during the 30 days immediately prior to a declaration of a state of emergency. However, unconscionable pricing does not exist if the increase is attributable to additional costs incurred by the seller or is the result of national or international market trends. As with the New York statute, the statute offers guidance but the question of whether certain prices during an emergency are deemed "unconscionable" is ultimately left to the courts. Many state price-gouging laws are triggered only by a declaration of emergency in response to localized conditions. Thus, in areas not directly affected by a particular emergency or natural disaster, state price-gouging laws are not likely to apply to any price increases subsequent to an emergency or disaster occurring elsewhere. However, at least two states have laws prohibiting excessive pricing that do not require the declaration of any type of emergency as a trigger to the prohibition. Maine law prohibits "unjust or unreasonable" profits in the sale, exchange, or handling of necessities, defined to include fuel. Michigan's consumer protection act simply prohibits "charging the consumer a price that is grossly in excess of the price at which similar property or services are sold." While some state statutes attempt to address price gouging by banning "excessive" or "unconscionable" pricing during emergencies and leaving it to the courts to determine whether such pricing has occurred in accordance with the statute's guidance, other state statutes leave less to the courts' discretion and instead place hard caps on pricing of certain goods during emergencies. For example, California's anti-price-gouging statute states that for a period of 30 days following the proclamation of a state of emergency by the President of the United States or the governor of California or the declaration of a local emergency by the relevant executive officer, it is unlawful to sell or offer certain goods and services (including emergency and medical supplies, building and transportation materials, fuel, etc.) at a price that represents an increase of more than 10% over the price of the good prior to the proclamation of emergency. The statute does provide that a price above this threshold would not be unlawful if the seller can prove that the price increase was directly attributable to additional costs imposed on it by the supplier of the goods or additional costs for the labor and material used to provide the services. The prohibition on price increases lasts for 30 days from the date of the emergency proclamation. West Virginia has also adopted an anti-price-gouging measure based on caps to percentage increases in price during times of emergency. The West Virginia statute provides that upon a declaration of a state of emergency by the President of the United States, the governor, or the state legislature, it is unlawful to sell or offer to sell certain critical goods and services "for a price greater than five percent above the price charged by that person for those goods and services on the tenth day immediately preceding the declaration of emergency." As with the California statute and the other percentage-based price gouging statutes, there is an exception under the West Virginia statute if the price increase is attributable to increased costs on the seller imposed by the supplier or to added costs of providing the goods or services during the emergency. Some states use language barring "unconscionable" or "excessive" pricing in a manner similar to the state statutes described in the previous section, but define these terms with hard caps instead of leaving their exact definition to the discretion of the courts. For example, the Alabama statute makes it unlawful for anyone to "impose unconscionable prices for the sale or rental of any commodity or rental facility during the period of a declared state of emergency." However, it provides that prima facie evidence of unconscionable pricing exists "if any person, during a state of emergency declared pursuant to the powers granted to the Governor, charges a price that exceeds, by an amount equal to or in excess of 25%, the average price at which the same or similar commodity or rental facility was obtainable in the affected area during the last 30 days immediately prior to the declared state of emergency." However, as with most other state price-gouging statutes, there is no unconscionable pricing if the price increase is attributable to reasonable costs incurred by the seller in connection with the rental or sale of the commodity. A few other states have imposed a cap on price increases during emergencies even tighter than the one imposed by the aforementioned statutes. Some state statutes ban any price increase during periods of emergency. For example, in Georgia, it is considered an "unlawful, unfair and deceptive trade practice" for anyone doing business in an areas where a state of emergency has been declared to sell or offer for sale at retail any goods or services identified by the Governor in the declaration of the state of emergency necessary to preserve, protect, or sustain the life, health, or safety of persons or their property at a price higher than the price at which such goods were sold or offered for sale immediately prior to the declaration of a state of emergency. However, as with other state gouging statutes, the Georgia statute provides an exception for price increases which reflect "an increase in cost of the goods or services to the person selling the goods or services or an increase in the cost of transporting the goods or services into the area." In some states anti-price-gouging measures have been implemented by the state's executive branch pursuant to a more generic authority to protect consumers granted by the legislature. For example, in Massachusetts there is no statute that specifically addresses "price gouging." However, the state's regulatory code includes a price-gouging provision similar to those found in state statutes as described above. The Massachusetts regulation provides that "[i]t shall be an unfair or deceptive act or practice, during any market emergency, for any petroleum-related business to sell or offer to sell any petroleum product for an amount that represents an unconscionably high price." The regulation defines an "unconscionable high price" as a price that represents a gross disparity between the price of the petroleum product and 1. the price at which the same product was sold or offered for sale by the petroleum-related business in the usual course of business immediately prior to the onset of the market emergency, or 2. the price at which the same or similar petroleum product is readily obtainable by other buyers in the trade area; and the disparity is not substantially attributable to increased prices charged by the petroleum-related business suppliers or increased costs due to an abnormal market disruption. These regulations were promulgated by the Massachusetts attorney general pursuant to a provision in the Massachusetts code that authorizes the attorney general to make such rules and regulations as are necessary to make unlawful "[u]nfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce." This statutory language is similar to the language found in the Federal Trade Commission Act, which makes unlawful "unfair or deceptive acts or practices in or affecting commerce" and authorizes the Federal Trade Commission to take action to prevent the use of "unfair methods of competition in or affecting commerce and unfair or deceptive acts or practices in or affecting commerce." Iowa has also chosen to address price gouging through regulations authorized by a generic statutory grant of authority to regulate unfair commercial practices. Iowa's Consumer Fraud Act prohibits unfair and deceptive trade practices in the sale of a product or service and authorizes the state attorney general to adopt rules and to file lawsuits for injunctive relief or civil penalties for parties in violation of the act. Pursuant to this authority, the Iowa attorney general adopted a regulation declaring that "the charge of excessive prices for merchandise needed by victims of disasters" constitutes an unfair practice under the Iowa Consumer Fraud Act. The regulation defines an excessive price as "one that is not justified by the seller's actual costs of acquiring, producing, selling, transporting, and delivering the actual product sold, plus a reasonable profit." As mentioned above, currently there is no federal law that deals specifically with price gouging. However, federal antitrust laws may apply to behavior generally regarded as price gouging. The Federal Trade Commission (FTC) monitors gas prices and investigates possible antitrust violations in the petroleum industry. In addition, the Energy Policy Act of 2005 required the FTC to investigate whether the price of gasoline is being "artificially manipulated by reducing refinery capacity or by any other form of market manipulation or price gouging practices." In May 2006, the FTC released its report, finding generally that sellers behaved competitively following Hurricane Katrina and that the price increases were the result of increased costs, although there were limited instances of price gouging. At least three bills introduced in the 112 th Congress would create a federal law that specifically addresses price gouging in response to emergencies. H.R. 964 , introduced on March 9, 2011, addresses the sale of wholesale or retail gasoline (or any other petroleum distillate) at a price that is "unconscionably excessive" and that "indicates that the seller is taking unfair advantage of the circumstances related to an international crisis to increase prices unreasonably." The bill would make it unlawful to engage in this behavior during an "international crisis affecting the oil markets" as declared by the President, within the affected area as designated by the President. The bill creates both civil and criminal penalties for violations. The Federal Trade Commission would be tasked with enforcement, although the bill would also authorize state attorneys general to bring civil actions on behalf of the state residents to enforce the provisions of the bill and to recover civil penalties. Title III of H.R. 1899 , introduced on May 13, 2011, contains language identical to the language in H.R. 964 discussed above. The bill's two other titles also attempt to address gasoline prices. Title I would amend the Sherman Act (discussed below) to make it illegal for foreign states to act collectively to limit the production or distribution of petroleum products, to set or maintain the price of such products, or to take any other action that would restrain trade for petroleum products. Title II would expand the Clayton Act to create a new prohibition on refusal to sell, export or divert supplies of petroleum products for purposes of increasing prices or creating a shortage in a particular market. Title II also sets forth the factors to be considered in determining whether a party has engaged in this sort of activity. Like H.R. 1899 , H.R. 1748 is comprehensive legislation intended to address gasoline pricing through a few different avenues, one of which is a prohibition on price gouging. Title III of H.R. 1748 is identical to both Title III of H.R. 1899 and H.R. 964 . All three would create the same ban on "unconscionable pricing" during a time of crisis as declared by Presidential proclamation. In addition to this, H.R. 1748 also contains language focused on the tax treatment of "major integrated oil companies," as well as language that would bar certain lessees who hold leases that grant exemption from royalties from bidding on new offshore leases until those lessees renegotiate their royalty-exempt leases and language that would direct the sale of petroleum from the Strategic Petroleum Reserve. Antitrust laws aim to foster free and unfettered competition on the assumption that such competition will produce the best result for consumers—the lowest and most reasonable prices. In some ways, the antitrust laws could be looked upon as the opposite of price gouging laws, because the antitrust laws seek to remove unreasonable restraints upon trade, allowing market forces to govern, while price gouging laws operate by placing restrictions on prices in certain circumstances effectively placing legal limits or restraints upon trade. However, "price gouging," as noted above, has no singular definition. The term generally refers to the inflation of prices to "unfair" levels in certain circumstances, particularly following natural disasters. It could be argued that activities such as "price gouging" in the oil industry might constitute a restraint on free and fair competition, because prices may be raised to "unreasonable" levels. It is possible that in some circumstances the antitrust laws would prohibit such activity. Agreements among competitors to accomplish what is commonly referred to as "price gouging" would most likely violate Section 1 of the Sherman Act (15 U.S.C. §1). Section 1 prohibits contracts or conspiracies in restraint of trade. That is, section 1 forbids two or more persons or entities from, for example, agreeing to limit output or set prices. While the literal phrasing of Section 1 forbids all agreements in restraint of trade, the Supreme Court has long acknowledged that the statute forbids only unreasonable restraints of trade. As a result, most antitrust cases are examined by courts in light of a variety of factors. In the oil and gas price gouging context, this section might apply, for example, to a group of competitors who agreed to fix prices in the market for gasoline. Such a case may be difficult to prove, however. Recently, the First Circuit Court of Appeals affirmed a grant of summary judgment for the defendants in a case in which a group of gasoline station owners on Martha's Vineyard were accused of violating Section 1 of the Sherman Act in the aftermath of Hurricane Katrina. It was alleged that the gas station owners conspired to raise prices to a level far above prices at the gas stations nearest to the island. However, the appellate panel concluded, in that case, that the plaintiffs had failed to sufficiently prove the existence of an agreement to raise prices in such a fashion. As a result, the antitrust claims failed. If an agreement were proven, however, and a Section 1 violation was found, a number of penalties might be imposed upon the convicted persons. The most commonly cited penalty for violation of the antitrust laws is the civil penalty requiring treble damages. In other words, if found to have violated Section 1 of the Sherman Act, a person may be required to pay to the person injured or to the United States (when injured in its business or property) three times the damages caused by the violation of the antitrust laws, as well as court costs, and, for private plaintiffs, attorneys' fees. The antitrust laws may also be enforced criminally by the Department of Justice. Every natural person found guilty of violating Section 1 of the Sherman Act has committed a felony and may be fined up to $1 million or imprisoned for up to 10 years, or both. Every corporation that violates Section 1 may be fined up to $1 million.
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Fluctuations in gasoline prices in recent years have renewed focus on the role of the government in discouraging "price gouging," a term commonly used to refer to sellers inflating prices to "unfair" levels in order to take advantage of certain circumstances causing a decrease in supply, including emergencies. There have been legislative efforts to create a federal law addressing gasoline price gouging, including bills that would bar certain commercial practices as well as legislation that mandated the study of pricing of gasoline in the wake of Hurricane Katrina. While the federal government has not enacted legislation aimed specifically at addressing price gouging for gasoline, a majority of states have enacted statutes to curtail price gouging for certain critical goods and services, including fuel, during emergencies. Some of these statutes attempt to address price gouging by barring pricing during emergencies that is considered to be "unconscionable" or "excessive" or otherwise is in violation of a subjective standard. Other statutes place a hard cap on prices during periods of emergency based on percentage increases from prices charged for the good or service in question prior to the emergency. All of these state statutes provide leeway if it can be shown that the price increases are the result of increased costs rather than simply a change in the marketplace. At least three bills introduced in the 112th Congress would create a federal law that specifically addresses price gouging in response to emergencies. H.R. 964, H.R. 1748, and H.R. 1899 all contain language similar to the language found in the state statutes that attempt to curtail price gouging through limits or controls on pricing during declared periods of emergency. As of the date of this report, all three bills had been referred to House subcommittees, but no further action on them had been taken. Although there is no federal law aimed specifically at price gouging, federal antitrust laws do forbid various types of anticompetitive business practices. For example, Section 1 of the Sherman Act prohibits unreasonable restraints of trade. It is possible that if a group of gasoline retailers or other retailers collaborated to set prices unreasonably high during an emergency, this "price gouging" could be a violation of Section 1 of the Sherman Act. In addition, while not necessarily tied to retail price gouging, federal statutes addressing monopolies and vertical integration may play a role in evaluating retail gasoline price changes.
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For decades, the United States and Israel have maintained strong bilateral relations based on a number of factors, including robust domestic U.S. support for Israel and its security; shared strategic goals in the Middle East; a mutual commitment to democratic values; and historical ties dating from U.S. support for the creation of Israel in 1948. U.S. foreign aid has been a major component in cementing and reinforcing these ties. Although successive Administrations have disapproved of some Israeli policies, including settlement construction in the West Bank, U.S. officials and many lawmakers have long considered Israel to be a vital partner in the region, and U.S. aid packages for Israel have reflected this calculation. Some observers, including opponents of U.S. aid to Israel, argue that U.S. assistance to Israel supports Israeli arms purchases without providing sufficient scrutiny of controversial Israeli military actions that—these observers assert—contravene various laws and international norms, particularly regarding treatment of Palestinians. While overall U.S. public support for Israel remains strong, American public attitudes toward Israel are growing more polarized. In January 2018, the Pew Research Center released poll results about the dispute between Israel and the Palestinians. Among other findings, Pew reported that "46% of Americans say they sympathize more with the Israelis, 16% say they sympathize more with the Palestinians and about four-in-ten (38%) either volunteer that their sympathies are with both (5%), neither (14%) or that they do not know (19%)." Pew also highlighted a widening partisan divide between Republicans and Democrats over their support for Israel, noting that 79% of Republicans sympathize more with Israel than the Palestinians, compared with 27% of Democrats. Almost all current U.S. aid to Israel is in the form of military assistance. U.S. military aid has helped transform Israel's armed forces into one of the most technologically sophisticated militaries in the world. U.S. military aid for Israel has been designed to maintain Israel's "qualitative military edge" (QME) over neighboring militaries. The rationale for QME is that Israel must rely on better equipment and training to compensate for being much smaller in land area and population than its potential adversaries. U.S. military aid also has helped Israel build its domestic defense industry, which ranks as one of the top global suppliers of arms. Successive Administrations have routinely affirmed the U.S. commitment to strengthening Israel's QME. However, for years, no official or public U.S. definition of QME existed. In order to clarify U.S. policy on preserving Israel's QME, Congress has passed several pieces of legislation addressing the issue. For example, in 2008, Congress passed legislation ( P.L. 110-429 , the Naval Vessel Transfer Act of 2008) that defined QME as the ability to counter and defeat any credible conventional military threat from any individual state or possible coalition of states or from non-state actors, while sustaining minimal damage and casualties, through the use of superior military means, possessed in sufficient quantity, including weapons, command, control, communication, intelligence, surveillance, and reconnaissance capabilities that in their technical characteristics are superior in capability to those of such other individual or possible coalition of states or non-state actors. Section 201 of P.L. 110-429 required the President to carry out an "empirical and qualitative assessment on an ongoing basis of the extent to which Israel possesses a qualitative military edge over military threats to Israel." The 2008 law also amended Section 36 of the Arms Export Control Act (AECA) to require certifications for proposed arms sales "to any country in the Middle East other than Israel" to include "a determination that the sale or export of the defense articles or defense services will not adversely affect Israel's qualitative military edge over military threats to Israel." What might constitute a legally defined adverse effect to QME is not clarified in U.S. legislation. Congress has passed additional legislation addressing Israel's QME. In 2012, Congress passed the United States-Israel Enhanced Security Cooperation Act ( P.L. 112-150 ), which, among other things, reiterated that it is the policy of the United States to "to help the Government of Israel preserve its qualitative military edge amid rapid and uncertain regional political transformation." In 2014, Congress passed The U.S.-Israel Strategic Partnership Act ( P.L. 113-296 ). This act amended Section 36 of the AECA to require that the Administration explain, in cases of sales or exports of major U.S. defense equipment to other Middle Eastern states, what is "Israel's capacity to address the improved capabilities provided by such sale or export." The act also requires the Administration to Evaluate "how such sale or export alters the strategic and tactical balance in the region, including relative capabilities; and Israel's capacity to respond to the improved regional capabilities provided by such sale or export." Include "an identification of any specific new capacity, capabilities, or training that Israel may require to address the regional or country-specific capabilities provided by such sale or export; and a description of any additional United States security assurances to Israel made, or requested to be made, in connection with, or as a result of, such sale or export." Finally, P.L. 113-296 amends Section 201(c) of the Naval Vessel Transfer Act of 2008 (22 U.S.C. 2776) by requiring Administration reports on QME every two years rather than (as previously required) every four. Israeli officials periodically express concern over U.S. sales of sophisticated weaponry, particularly aircraft, airborne radar systems, and precision-guided munitions, to Arab Gulf countries. As the United States has been one of the principal suppliers of defense equipment and training to both Israel and the Arab Gulf states, U.S. policymakers and defense officials have sought to carefully navigate U.S. defense commitments, while following the legal requirement to maintain Israel's QME. Although at times Israel and the Arab Gulf states have coalesced against a commonly perceived Iranian threat, U.S. arms sales to states such as Saudi Arabia still periodically raise Israeli QME concerns. In May 2017, the Trump Administration announced that the United States and Saudi Arabia had completed and proposed defense sales with a potential value of more than $110 billion. While most Israeli government officials refrained from publicly objecting to the deal, several did express concern over whether new U.S. arms sales to Saudi Arabia would erode Israel's QME. According to Israeli Minister of Energy Yuval Steinitz, "We have also to make sure that those hundreds of billions of dollars of weapons to Saudi Arabia will not, by any means, erode Israel's qualitative edge, because Saudi Arabia is still a hostile country without any diplomatic relations and nobody knows what the future will be." The American Israel Public Affairs Committee (AIPAC) also called for the preservation of Israel's QME in light of proposed U.S. arms sales to Saudi Arabia, specifically warning that the U.S. sale to Saudi Arabia of the Terminal High Altitude Area Defense (THAAD) system (notified to Congress in October 2017) could "negatively impact Israel's QME" and would "also improve the kingdom's ability to track Israeli F-15 and F-16 fighters." Some experts note that even after a sale of U.S. major defense systems to Saudi Arabia, U.S. personnel are often involved in the operation, maintenance, and end-use monitoring of equipment, thereby serving as a possible bulwark against client misuse. United Arab Emirates (UAE) interest in becoming the first Arab state operator of the F-35 Joint Strike Fighter also may raise Israeli QME concerns. The Trump Administration reportedly has agreed to enter into preliminary talks with the UAE on procurement of the F-35. Previously, U.S. officials had said that the United States would not sell the aircraft to the UAE before Israel receives the weapon. In addition to satisfying QME concerns before considering a F-35 sale to the UAE, the United States may also require the UAE to improve its protection of data security due to the sensitive technologies in the F-35's hardware and software. To date, no specific decision has been announced to begin preliminary U.S.-UAE talks on the subject. Since 1999, overall U.S. assistance to Israel has been outlined in 10-year government-to-government Memoranda of Understanding (MOUs). MOUs are not legally binding agreements like treaties, and thus do not require Senate concurrence. Also, Congress may accept or change year-to-year assistance levels for Israel, or provide supplemental appropriations. Nevertheless, past MOUs have significantly influenced the terms of U.S. aid to Israel; Congress has appropriated foreign aid to Israel largely according to the terms of the current MOU. At a signing ceremony at the State Department on September 14, 2016, representatives of the U.S. and Israeli governments signed a new 10-year Memorandum of Understanding (MOU) on military aid covering FY2019 to FY2028. Under the terms of this MOU, the United States pledges to provide $38 billion in military aid ($33 billion in FMF grants, plus $5 billion in defense appropriations for missile defense programs) to Israel. According to the terms of the MOU, "Both the United States and Israel jointly commit to respect the FMF levels specified in this MOU, and not to seek changes to the FMF levels for the duration of this understanding." The agreement also acknowledges that "the funding levels in this understanding assume continuation of adequate funding levels for U.S. foreign assistance and missile defense overall, and are subject to the appropriation and availability of funds for these purposes." The new MOU will replace the current $30 billion, 10-year agreement, which runs through FY2018. The terms of the 2019-2028 MOU differ from previous agreements on such issues as Phasing out Off-Shore Procurement ( OSP ) . Under the terms of the new MOU, OSP will remain until FY2024, but will then be gradually phased out, ending entirely in FY2028. The MOU calls on Israel to provide the United States with "detailed programmatic information related to the use of all U.S. funding, including funds used for OSP." In response to the planned phase-out of OSP, some Israeli defense contractors may be seeking to merge with U.S. companies or open U.S. subsidiaries in order to continue their eligibility for defense contracts financed through FMF. Missile Defense . Under the terms of the new MOU, the Administration pledges to request $500 million in annual combined funding for missile defense programs with joint U.S.-Israeli elements—such as Iron Dome, Arrow II and Arrow III, and David's Sling. Previous MOUs did not include missile defense funding, which has traditionally been appropriated via separate interactions between successive Administrations and Congresses. While the MOU commits both the United States and Israel to a $500 million annual U.S. missile defense contribution, it does stipulate that under exceptional circumstances (major armed conflict involving Israel), both sides may agree on U.S. support above the $500 million annual cap. No FMF for Fuel . According to the new MOU, Israel will no longer be permitted to use a portion of its FMF to purchase fuel ("or other consumables") from the United States. Under the previous MOU, Israel had budgeted an estimated $400 million a year in FMF to purchase jet fuel from the United States." No "extra FMF" for 2017/2018 . Prime Minister Netanyahu, in a letter to Secretary of State John Kerry accompanying the MOU, pledged to reimburse the U.S. government if Israel receives more congressional assistance than specified ($3.1 billion a year) in the last years (FY2017 and FY2018) of the current 2009-2018 MOU. Some lawmakers criticized this addendum to the MOU, asserting that appropriations are the prerogative of the legislative branch. According to Senator Lindsey Graham, Chairman of the Senate Appropriations Subcommittee on State, Foreign Operations, and Related Programs, the MOU is "not a treaty, and we're not a party to this." Section 7041(d) of P.L. 115-31 , the Consolidated Appropriations Act, 2017, provided $75 million in FMF-Overseas Contingency Operations (OCO) for FY2017, which was in addition to the $3.1 billion in regular FMF provided in Title IV in the same Act. In fall 2017, news reports surfaced questioning whether Israel would receive the $75 million of "extra FMF" appropriated in P.L. 115-31 . In response, State Department spokesperson Heather Nauert remarked that Israel is "going to get the money." Israel is the largest recipient of U.S. Foreign Military Financing. For FY2019, the President's request for Israel would encompass approximately 61% of total requested FMF funding worldwide. Annual FMF grants to Israel represent approximately 19% of the overall Israeli defense budget. Israel's defense expenditure as a percentage of its Gross Domestic Product (5.8% in 2016) is one of the highest in the world. Section 23 of the Arms Export Control Act (22 U.S.C. §276351) authorizes the President to finance the "procurement of defense articles, defense services, and design and construction services by friendly foreign countries and international organizations, on such terms and conditions as he may determine consistent with the requirements of this section." Successive Administrations have used this authority to permit Israel to finance multiyear purchases through installment payments, rather than having to pay the full amount of such purchases up front. Known as "cash flow financing," this benefit enables Israel to negotiate major arms purchases with U.S. defense suppliers with payments scheduled over a longer time horizon. Since FY1991 ( P.L. 101-513 ), Congress has mandated that Israel receive its FMF aid in a lump sum during the first month of the fiscal year. The FY2017 Consolidated Appropriations Act ( P.L. 115-31 ) states that "the funds appropriated under this heading for assistance for Israel shall be disbursed within 30 days of enactment of this Act." Once disbursed, Israel's military aid is transferred to an interest bearing account with the U.S. Federal Reserve Bank. Israel has used interest collected on its military aid to pay down its bilateral debt (nonguaranteed) to U.S. government agencies, which, according to the U.S. Department of the Treasury, stood at $148.8 million as of December 2015. Israel cannot use accrued interest for defense procurement inside Israel. Israel is the first international operator of the F-35 Joint Strike Fighter, the Department of Defense's fifth-generation stealth aircraft considered to be the most technologically advanced fighter jet ever made. In September 2008, the Defense Security Cooperation Agency (DSCA) notified Congress of a possible Foreign Military Sale of up to 75 F-35s to Israel in a deal with a possible total value of $15.2 billion. Since then, Israel has purchased 50 F-35s in three separate contracts (see table below) using FMF grants. Israel is to install Israeli-made C4 (command, control, communications, computers) systems in the F-35s it receives, and call these customized F-35s " Adirs. " As part of the F-35 deal, the United States agreed to make reciprocal purchases of equipment (known as "offsets") from Israeli defense companies. If Israel elects to purchase all 75 F-35s, it is estimated that its business offsets could be as high as $4 billion. As of 2017, Israeli firms had received more than one billion dollars' worth of business from Lockheed Martin in building components for the F-35. The Excess Defense Articles (EDA) program provides a means by which the United States can advance foreign policy objectives—assisting friendly and allied nations through provision of equipment in excess of the requirements of its own defense forces. This program, managed by DSCA, enables the United States to reduce its inventory of outdated equipment by providing friendly countries with necessary supplies at either reduced rates or no charge. As a designated "major non-NATO ally," Israel is eligible to receive EDA under Section 516(a) of the Foreign Assistance Act and Section 23(a) of the Arms Export Control Act. According to DSCA, from 2007 to 2017, Israel received $374.399 million in EDA deliveries (current value only). Congress and successive Administrations have demonstrated strong support for joint U.S.-Israeli missile defense projects designed to thwart a diverse range of threats. The range spans from short-range missiles and rockets fired by nonstate actors, such as Hamas and Hezbollah, to mid- and longer-range ballistic missiles in Syria's and Iran's arsenals. Congress provides regular U.S. funding for Israeli and U.S.-Israeli missile defense programs in defense authorization and appropriations bills. Israel and the United States each contribute financially to several weapons systems and engage in codevelopment, coproduction, and/or technology sharing in connection with them. The following section provides background on Israel's four-layered active defense network: Iron Dome (short range), David's Sling (low to mid-range), Arrow II (upper-atmospheric), and Arrow III (exo-atmospheric). Iron Dome is a short-range antirocket system developed by Israel's Rafael Advanced Defense Systems and originally produced in Israel. Iron Dome's targeting system and radar are designed to fire its Tamir interceptors only at incoming projectiles that pose threats to the area being protected (generally, strategically important sites, including population centers); it is not configured to fire on rockets headed toward unpopulated areas. Israel can move Iron Dome batteries as threats change. Israel recently developed a naval version of Iron Dome, which it will install on its corvettes to protect off-shore natural gas facilities. Iron Dome was declared operational in early 2011. Its first major test came in November 2012 during a weeklong Israel-Hamas conflict (termed "Operation Pillar of Cloud/Defense" by Israel). Israeli officials claim that Iron Dome intercepted 85% of the more than 400 rockets fired by Gaza-based militants. Between 2012 and 2014, Israel upgraded Iron Dome's various tracking and firing mechanisms and expanded the number of batteries deployed from five to nine. During Israel's 2014 conflict with Hamas and other Palestinian militants, media reports (generally based on Israeli claims) seem to indicate that Iron Dome had a successful interception rate close to 90%. According to statistics reported by the Israeli Defense Forces (IDF), Gaza-based terrorist groups fired 35 projectiles into Israel in 2017, of which the vast majority landed in open territory and an estimated 10 struck in residential areas or were intercepted by Iron Dome. To date, the United States has provided $1.397 billion to Israel for Iron Dome batteries, interceptors, coproduction costs, and general maintenance. Because Iron Dome was developed by Israel alone, Israel initially retained proprietary technology rights to it. The United States and Israel have had a decades-long partnership in the development and coproduction of other missile defense systems (such as the Arrow). As the United States began financially supporting Israel's development of Iron Dome in FY2011, U.S. interest in ultimately becoming a partner in its coproduction grew. Congress then called for Iron Dome technology sharing and coproduction with the United States. In March 2014, the United States and Israeli governments signed a coproduction agreement to enable components of the Iron Dome system to be manufactured in the United States, while also providing the U.S. Missile Defense Agency (MDA) with full access to what had been proprietary Iron Dome technology. U.S.-based Raytheon is Rafael's U.S. partner in the coproduction of Iron Dome. On September 30, 2014, Raytheon received a $149 million contract from Rafael to provide parts for the Tamir interceptor. The FY2014 Emergency Supplemental Appropriations Resolution, P.L. 113-145 , exempted $225 million in Iron Dome funding—requested by Israel on an expedited basis during the summer 2014 Israel-Gaza conflict—from the coproduction requirements agreed upon in March 2014. Section 1684 of P.L. 115-91 , the National Defense Authorization Act (NDAA) for Fiscal Year 2018, authorizes "not more than" $92 million to Israel for the procurement of Tamir interceptors for Iron Dome. It also requires U.S. defense officials to certify that before the United States provides funds to Israel, both the United States and Israel are properly implementing their coproduction agreement for Tamir interceptors. In August 2008, Israel and the United States officially signed a "project agreement" to codevelop the David's Sling system. David's Sling (aka Magic Wand) is a short/medium-range system designed to counter long-range rockets and slower-flying cruise missiles fired at ranges from 40 km to 300 km, such as those possessed by Iran, Syria, and Hezbollah in Lebanon. David's Sling is designed to intercept missiles with ranges and trajectories for which Iron Dome and/or Arrow interceptors are not optimally configured. It is being developed jointly by Rafael Advanced Defense Systems and Raytheon. David's Sling uses Raytheon's Stunner missile for interception, and each launcher can hold up to 16 missiles. Once the United States and Israel reach a coproduction agreement for the Stunner, the interceptors may be built in Tucson, Arizona by Raytheon. In April 2017, Israel declared David's Sling operational and, according to one analysis, "two David's Sling batteries are sufficient to cover the whole of Israel." Since FY2006, the United States has contributed over $1.39 billion to the development of David's Sling. The United States and Israel are negotiating a coproduction agreement to jointly manufacture the Stunner interceptor. Section 1684 of P.L.115-91, the National Defense Authorization Act (NDAA) for Fiscal Year 2018, authorizes a total of $183.848 million for David's Sling in two tranches ($63.848 million in Title XLII and $120 million in Title XLI). For the $120 million in procurement funds, the act requires a certification regarding coproduction of components. The act also specifies that prior to the transfer of funds, the Under Secretary of Defense for Acquisition and Sustainment must certify that, among other things, Israel has successfully demonstrated production readiness reviews required by bilateral agreements. Since 1988, Israel and the United States have been jointly developing the Arrow Anti-Missile System. The Arrow is designed to counter short-range ballistic missiles. The United States has funded just under half of the annual costs of the development of the Arrow Weapon System, with Israel supplying the remainder. The Arrow II program (officially referred to as the Arrow System Improvement Program or ASIP), a joint effort of Boeing and Israel Aerospace Industries (IAI), is designed to defeat longer-range ballistic missiles. One Arrow II battery is designed to protect large swaths of Israeli territory. In March 2017, media sources reported the first known use of the Arrow II, when it successfully intercepted a Syrian surface-to-air missile (SAM) that had been fired on an Israeli jet returning to Israel from an operation inside Syria. Under the 1986 agreement (see footnote 44 ) allowing Israel to participate in the Strategic Defense Initiative (SDI), the United States and Israel have codeveloped different versions of the Arrow anti-ballistic missile. The total U.S. financial contribution exceeds $2.9 billion. The system became operational in 2000 in Israel and has been tested successfully. Since 2001, Israel and the United States have conducted a joint biennial exercise, called Juniper Cobra, to work on integrating their weapons, radars, and other systems. Citing a potential nuclear threat from Iran, Israel has sought a missile interceptor that operates at a higher altitude and greater range than the original Arrow systems. In October 2007, the United States and Israel agreed to establish a committee to evaluate Israel's proposed "Arrow III," an upper-tier system designed to intercept medium-range ballistic missiles. The Arrow III is a more advanced version—in terms of speed, range and altitude—of the current Arrow II interceptor. In 2008, Israel decided to begin development of the Arrow III and the United States agreed to co-fund its development despite an initial proposal by Lockheed Martin and the Department of Defense (DOD) urging Israel to purchase the Terminal High-Altitude Area Defense (THAAD) missile defense system instead. The Arrow III, made (like the Arrow II) by Israel Aerospace Industries (IAI) and Boeing, has been operational since January 2017. In July 2010, the United States and Israel signed a bilateral agreement (The Upper-Tier Interceptor Project Agreement) to extend their cooperation in developing and producing the Arrow III, including an equitable U.S.-Israeli cost share. In 2018, the Israel Missile Defense Organization plans to hold a series of Arrow III interception tests conducted from Alaska. Since codevelopment began in 2008, Congress has appropriated $743.7 million for Arrow III. Section 1684 of P.L.115-91, the National Defense Authorization Act (NDAA) for Fiscal Year 2018, authorizes a total of $253.139 million for Arrow III in two tranches ($133.139 in Title XLII and $120 million in Title XLI). For the $120 million in procurement funds, the act requires a certification regarding coproduction of components. The act also specifies that prior to the transfer of funds, the Under Secretary of Defense for Acquisition and Sustainment must certify that, among other things, Israel has "demonstrated the successful completion of the knowledge points, technical milestones, and production readiness reviews required by the research, development, and technology agreements for the Arrow 3 Upper Tier Development Program." The certification also requires that missile defense funds for Israel will be provided "on the basis of a one-for-one cash match made by Israel or in another matching amount that otherwise meets best efforts (as mutually agreed to by the United States and Israel)." One observer has identified some congressional concern about whether the United States has sufficient data to determine Israeli contributions relative to U.S. contributions in funding missile defense systems. The FY2018 NDAA did include a waiver, allowing the Under Secretary to waive the certification requirement if the United States receives sufficient data from Israel demonstrating that, among other things, U.S. contributions are provided to Israel "solely for funding the procurement of long-lead components and critical hardware in accordance with a production plan, including a funding profile detailing Israeli contributions for production, including long-lead production, of the Arrow 3 Upper Tier Interceptor Program." An earlier Senate version of the FY2018 NDAA (S. 1519) included a provision that would have withheld funding for Arrow III until "after the successful completion of two flight tests at a test range in the United States to validate Arrow Weapon System capabilities and interoperability with ballistic missile system components of the United States." According to one account, some lawmakers sought further testing of the Arrow III since "the Israeli military tends to deploy its systems with only limited testing, which is essentially the opposite of the U.S. government's general approach." In the early 1980s, Israeli leaders sought to expand what they called their "strategic collaboration" with the U.S. military by inviting the United States to stockpile arms and equipment at Israeli bases for use in wartime. In 1989, the United States agreed to establish munitions stockpiles in Israel for use by the United States and, with U.S. permission, by Israel in emergency situations. Section 514 of the Foreign Assistance Act of 1961 (22 U.S.C. §2321h) enables U.S. defense articles stored in war reserve stocks to be transferred to a foreign government through Foreign Military Sales or through grant military assistance, such as FMF. The United States European Command (EUCOM) manages the War Reserves Stock Allies-Israel (WRSA-I) program. The United States stores missiles, armored vehicles, and artillery ammunition in Israel. According to one Israeli officer, "Officially, all of this equipment belongs to the US military…. If however, there is a conflict, the IDF [Israel Defense Forces] can ask for permission to use some of the equipment." According to one analyst, "WRSA-I is a strategic boon to Israel. The process is streamlined: No 60-day congressional notification is required, and there's no waiting on delivery." During the 2006 war against Hezbollah in Lebanon, the United States granted Israel access to the stockpile. In July 2014, during Israeli military operations against Hamas in the Gaza Strip, the Defense Department permitted Israel to draw from the stockpile, paid with FMF, to replenish 120 mm tank rounds and 40 mm illumination rounds fired from grenade launchers. Section 7034(k)(11)(A) of P.L. 114-113 , the FY2016 Consolidated Appropriations Act, extended the authorization of WRSA-I through FY2017. At times, Congress has passed legislation that has authorized EUCOM to increase the value of materiel stored in Israel. If EUCOM contributed the maximum amount legally permitted in each applicable fiscal year, then the noninflation adjusted value of materiel stored in Israel would currently stand at $2.2 billion. The following legislation authorized increases in value to the stockpile: FY1991: P.L. 101-513 , the Foreign Operations, Export Financing, and Related Programs Appropriations Act for FY1991, authorized additions to defense articles in Israel up to $200 million in value for FY1991. FY1993: P.L. 102-391 , the Foreign Operations, Export Financing, and Related Programs Appropriations Act for FY1993, authorized additions to defense articles in Israel up to $100 million in value for FY1993. FY1994: P.L. 103-87 , the Foreign Operations, Export Financing, and Related Programs Appropriations Act for FY1994, authorized additions to defense articles in Israel up to $200 million in value for FY1994. FY1995: P.L. 103-306 , the Foreign Operations, Export Financing, and Related Programs Appropriations Act for FY1995, authorized additions to defense articles in Israel up to $100 million for FY1995. FY2007-FY2008: Section 13(a)(2)(A)(i) of the Department of State Authorities Act of 2006 ( P.L. 109-472 ) amended Section 514 of the Foreign Assistance Act of 1961, as amended (P.L. 87-195; 22 U.S.C. §2321h) to authorize additions to defense articles in Israel of up to $200 million in value for each of FY2007 and FY2008. FY2011-FY2012: P.L. 111-266 , the Security Cooperation Act of 2010, authorized additions to defense articles in Israel up to $200 million in value for each of FY2011 and FY2012. FY2014-FY2015: P.L. 113-296 , the United States-Israel Strategic Partnership Act of 2014, authorized additions to defense articles in Israel up to $200 million in value for each of FY2014 and FY2015. FY2016-FY2017: Section 7034(k)(11)(B) of.P.L.114-113, the FY2016 Consolidated Appropriations Act, authorized additions to defense articles in Israel up to $200 million in value for each of FY2016 and FY2017. In 2016, the Israeli and U.S. governments began collaborating on a new system to detect underground smuggling tunnels and counter cross-border tunnels used (most prominently by Hamas in the summer 2014 conflict) to infiltrate Israel. Reportedly, this new technology uses acoustic or seismic sensors and software to detect the sounds of digging by monitoring vibrations underground. Section 1279 of P.L. 114-92 , the FY2016 National Defense Authorization Act, authorized the establishment of a U.S.-Israeli anti-tunnel cooperation program. This authorization allowed funds from the research, development, test, and evaluation defense-wide account to be used (in combination with Israeli funds) to establish anti-tunnel capabilities that detect, map, and neutralize underground tunnels that threaten the United States or Israel. The authorization requires the Secretary of Defense to report to Congress on, among other things, the sharing of research and development costs between the United States and Israel. Section 1278 of P.L.115-91, the FY2018 National Defense Authorization Act, extended the authority of the anti-tunnel cooperation program through December 31, 2020. It also required that not less than 50% of U.S. contributions to the program should be used for "research, development, test, and evaluation activities in the United States in connection with such support." U.S. aid and arms sales to Israel, like those to other foreign recipients, are subject to U.S. law. Some U.S. citizens and interest groups periodically call upon Congress to ensure that U.S. military assistance to Israel is conditioned on the Israeli government's compliance with applicable U.S. laws and policies and with international humanitarian law. The 1952 Mutual Defense Assistance Agreement and subsequent arms agreements between Israel and the United States limit Israel's use of U.S. military equipment to defensive purposes. The Arms Export Control Act (AECA, 22 U.S.C. §2754) authorizes the sale of U.S. defense articles and services for specific purposes, including "legitimate self-defense." The AECA (22 U.S.C. §2753) states that recipients may not use such articles "for purposes other than those for which [they have been] furnished" without prior presidential consent. The act stipulates that sale agreements entered into after November 29, 1999, must grant the U.S. government the right to verify "credible reports" that articles have been used for unauthorized purposes. The Foreign Assistance Act of 1961, as amended, also contains general provisions on the use of U.S.-supplied military equipment. In the late 1970s and early to mid-1980s, the Carter and Reagan administrations questioned Israel's use of U.S.-supplied equipment during various military operations in the region. After Israel's 2006 war in Lebanon, the State Department issued a preliminary report to Congress concluding that Israel may have violated the terms of agreements with the United States that restrict Israel's use of U.S.-supplied cluster munitions to certain military targets in noncivilian areas. Section 620M of the Foreign Assistance Act of 1961 (FAA), as amended, prohibits the furnishing of assistance authorized by the FAA and the AECA to any foreign security force unit where there is credible information that the unit has committed a gross violation of human rights. The State Department and U.S. embassies overseas implement Leahy vetting to determine which foreign security individuals and units are eligible to receive U.S. assistance or training. In February 2016, Senator Leahy and 10 other Members of Congress sent a letter to Secretary of State John Kerry asking the State Department to determine whether alleged extrajudicial killings or torture by Israeli military and police (and Egypt separately) should trigger Leahy law restrictions. In its response to Congress, the State Department stated that no Israeli individual or unit potentially involved in the letter's alleged incidents had been submitted to receive U.S. assistance. In some instances, U.S. assistance to Israel may be used only in areas subject to the administration of Israel prior to June 1967 (see "Loan Guarantees"). For example, U.S. State Department-provided Migration and Refugee (MRA) assistance (see below), per agreement between the State Department and United Israel Appeal, may only be used for absorption centers, ulpanim (intensive Hebrew-language schools with particular focus on immigrants to Israel), or youth aliyah (relocation to Israel) institutions located within Israel's pre-June 1967 area of control. In addition, according to agreements between the U.S. and Israeli governments, programs funded by certain U.S.-Israeli binational foundations, such as the U.S.-Israel Binational Science Foundation (see below), "may not be conducted in geographic areas which came under the administration of the Government of Israel after June 5, 1967 and may not relate to subjects primarily pertinent to such areas." Since 1973, Israel has received grants from the State Department's Migration and Refugee Assistance account (MRA) to assist in the resettlement of migrants to Israel. Funds are paid to the United Israel Appeal, a private philanthropic organization in the United States, which in turn transfers the funds to the Jewish Agency for Israel. Between 1973 and 1991, the United States gave about $460 million for resettling Jewish refugees in Israel. Annual amounts have varied from a low of $12 million to a high of $80 million, based at least partly on the number of Jews leaving the former Soviet Union and other areas for Israel. Congress has changed the earmark language since the first refugee resettlement funds were appropriated in 1973. At first, the congressional language said the funds were for "resettlement in Israel of refugees from the Union of Soviet Socialist Republics and from Communist countries in Eastern Europe." But starting in 1985, the language was simplified to "refugees resettling in Israel" to ensure that Ethiopian Jews would be covered by the funding. Technically, the legislative language designates funds for refugee resettlement, but in Israel little differentiation is made between Jewish "refugees" and other Jewish immigrants, and the funds are used to support the absorption of all immigrants. Since 1972, the United States has extended loan guarantees to Israel to assist with housing shortages, Israel's absorption of new immigrants from the former Soviet Union and Ethiopia, and its economic recovery following the 2000-2003 recession, which was probably caused in part by the Israeli-Palestinian conflict known as the second intifada. Loan guarantees are a form of indirect U.S. assistance to Israel, since they enable Israel to borrow from commercial sources at lower rates. Congress directs that subsidies be set aside in a U.S. Treasury account in case of a possible Israeli default. These subsidies, which are a percentage of the total loan (based in part on the credit rating of the borrowing country), have come from the U.S. or the Israeli government. Israel has never defaulted on a U.S.-backed loan guarantee. In 2003, then-Prime Minister Ariel Sharon requested an additional $8 billion in loan guarantees to help Israel's ailing economy. The loan guarantee request accompanied a request for an additional $4 billion in military grants to help Israel prepare for possible attacks during an anticipated U.S. war with Iraq. P.L. 108-11 , the FY2003 Emergency Wartime Supplemental Appropriations Act, authorized $9 billion in loan guarantees over three years for Israel's economic recovery and $1 billion in military grants. P.L. 108-11 stated that the proceeds from the loan guarantees could be used only within Israel's pre-June 5, 1967, area of control; that the annual loan guarantees could be reduced by an amount equal to the amount Israel spends on settlements outside of Israel's pre-June 1967 area of control; that Israel would pay all fees and subsidies; and that the President would consider Israel's economic reforms when determining terms and conditions for the loan guarantees. On November 26, 2003, the Department of State announced that the $3 billion in loan guarantees for FY2003 were reduced by $289.5 million because Israel continued to build settlements in the occupied territories and continued construction of a security barrier separating key Israeli and Palestinian population centers. In FY2005, the U.S. government reduced the amount available for Israel to borrow by an additional $795.8 million. Since then, Israel has not borrowed any funds. According to the U.S. Department of the Treasury, Israel is legally obligated to use the proceeds of guaranteed loans for refinancing its government debt and also has agreed that proceeds shall not be used for military purposes or to support activities in areas outside its pre-June 5, 1967, areas of control (the West Bank—including East Jerusalem—and Gaza and the Golan Heights). However, U.S. officials have noted that since Israel's national budget is fungible, proceeds from the issuance of U.S.-guaranteed debt that are used to refinance Israeli government debt free up domestic Israeli funds for other uses. As of 2018, Israel has issued $4.1 billion in U.S.-backed bonds. After deducting the amounts mentioned above, Israel might still be authorized to issue up to $3.814 billion in U.S.-backed bonds. However, if the Israeli government sought to issue new U.S.-backed bonds, it is unclear whether the loan guarantees available to Israel might be subject to reduction based on Israel's estimated expenditures for settlements in the occupied territories. Since the original loan guarantee program authorization for Israel in 2003, Congress has extended the program four times. The program is currently authorized through the end of FY2019. In general, Israel may view U.S. loan guarantees as a "last resort" option, which its treasury could use if unguaranteed local and international bond issuances become too expensive. According to one Israeli official in 2012, "We consider the loan guarantees as preparation for a rainy day.... This is a safety net for war, natural disaster and economic crisis, which allows Israel to maintain economic stability in unstable surroundings." Israeli officials may believe that although they have not used the loan guarantees in the last 13 years, maintaining the program boosts the country's fiscal standing among international creditors in capital markets. Through foreign operations appropriations legislation, Congress has funded the ASHA program as part of the overall Development Assistance (DA) appropriation to the United States Agency for International Development (USAID). According to USAID, ASHA is designed to strengthen self-sustaining schools, libraries, and medical centers that best demonstrate American ideals and practices abroad. ASHA has been providing support to institutions in the Middle East since 1957, and a number of universities and hospitals in Israel have been recipients of ASHA grants. In FY2015 (the most recent year for which data are available), ASHA grant recipients in Israel included Shaare Zedek Medical Center in Jerusalem, St. John Eye Hospital Group, Nazareth Hospital, and the Hadassah Medical Organization. According to USAID, institutions based in Israel have received the most program funding in the Middle East region. In the early 1970s, Israeli academics and businessmen began looking for ways to expand investment in Israel's nascent technology sector. The sector, which would later become the driving force in the country's economy, was in need of private capital for research and development at the time. The United States and Israel launched several programs to stimulate Israeli industrial and scientific research, and Congress has on several occasions authorized and appropriated funds for this purpose to the following organizations: The BIRD Foundation (Israel-U.S. Binational Research & Development Foundation). BIRD, which was established in 1977, provides matchmaking services between Israeli and American companies in research and development with the goal of expanding cooperation between U.S. and Israeli private high-tech industries. The mission of the Foundation is "to stimulate, promote and support joint (nondefense) industrial R&D of mutual benefit to…" the two countries. Projects are supported in the areas of homeland security, communications, electronics, electro-optics, software, life sciences, and renewable and alternative energy, among others. According to the Foundation, $339 million in grants have been awarded to almost a thousand projects. Awards typically range from $700,000 to $900,000. The award size varies based on total project budget and other considerations. The recipients must provide at least 50% of the total project budget. While support for military projects are not a part of the program, several of the completed ventures have yielded products that might be useful in a military setting, including the Aircraft Enhanced Vision System (EVS) camera, "which is designed to provide day/night improved orientation during taxiing or flying. It allows visual landing in reduced visibility conditions, such as fog, haze, dust, smog etc." The Foundation also funded the creation of a Through-Wall Location and Sensing System that is portable and "detects whether people are present behind walls, how many, and where they are situated." The BSF Foundation (U.S.-Israel Binational Science Foundation). BSF, which was started in 1972, promotes cooperation in scientific and technological research. The BARD Foundation (Binational Agriculture and Research and Development Fund). BARD was created in 1978 and supports U.S.-Israeli cooperation in agricultural research. In 1995, the United States and Israel established The U.S.-Israel Science and Technology Foundation (USISTF) to fund and administer projects mandated by the U.S.-Israel Science and Technology Commission (USISTC), a bilateral entity jointly established by the United States Department of Commerce and the Israel Ministry of Industry, Trade, and Labor in 1994 to foster scientific, technological, and economic cooperation between the two countries. In 2005, Congress began to consider legislation to expand U.S.-Israeli scientific cooperation in the field of renewable energy. Lawmakers reviewed legislation in the House and the Senate entitled, "The United States-Israel Energy Cooperation Act." Various forms of the bill would have authorized the Department of Energy to establish a joint U.S.-Israeli grant program to fund research in solar, biomass, and wind energy, among other directives. Section 917 of P.L. 110-140 , the Renewable Fuels, Consumer Protection, and Energy Efficiency Act of 2007, contains the original language of the U.S.-Israel Energy Cooperation Act ( H.R. 1838 ). Although it did not appropriate any funds for joint research and development, it did establish a grant program to support research, development, and commercialization of renewable energy or energy efficiency. The law also authorized the Secretary of Energy to provide funds for the grant program as needed. Congress authorized the program for seven years from the time of enactment, which was on December 19, 2007. Then, in December 2014, the President signed into law P.L. 113-296 , the United States-Israel Strategic Partnership Act of 2014, which reauthorized the U.S.-Israeli Energy Cooperation program for an additional 10 years until September 30, 2024. To date, Congress and the Administration have provided a total of $15 .7 million for the grant program, known as BIRD Energy. As of 2017, total combined U.S. and Israeli investment in BIRD Energy for 37 approved projects stands at $30 million. As one of the world's leaders in water reuse and desalination technology, Israel has expanded its cooperation with various U.S. states to export water reuse technology. At the federal level, Congress has supported U.S.-Israeli cooperation through legislation. P.L.114-322, the WIIN Act (Water Infrastructure Improvements for the Nation Act), calls on the White House Office of Science and Technology Policy to develop a coordinated strategic plan that, among other things, strengthens "research and development cooperation with international partners, such as the State of Israel, in the area of desalination technology." In 2016, Congress passed P.L.114-304, the United States-Israel Advanced Research Partnership Act of 2016, a law that permanently authorized the expansion of an existing joint research-and-development program at the U.S. Department of Homeland Security and expanded it to include cybersecurity technologies. In January 2017, the House passed H.R. 612, the United States-Israel Cybersecurity Cooperation Enhancement Act of 2017. If enacted, the bill would "establish a grant program to support cybersecurity research and development in accordance with existing bilateral agreements between the United States and Israel."
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This report provides an overview of U.S. foreign assistance to Israel. It includes a review of past aid programs, data on annual assistance, and analysis of current issues. For general information on Israel, see CRS Report RL33476, Israel: Background and U.S. Relations, by [author name scrubbed]. Israel is the largest cumulative recipient of U.S. foreign assistance since World War II. To date, the United States has provided Israel $134.7 billion (current, or noninflation-adjusted, dollars) in bilateral assistance and missile defense funding. Almost all U.S. bilateral aid to Israel is in the form of military assistance, although in the past Israel also received significant economic assistance. At a signing ceremony at the State Department on September 14, 2016, representatives of the U.S. and Israeli governments signed a new 10-year Memorandum of Understanding (MOU) on military aid covering FY2019 to FY2028. Under the terms of the MOU, the United States pledges to provide $38 billion in military aid ($33 billion in Foreign Military Financing grants plus $5 billion in missile defense appropriations) to Israel. This MOU replaces a previous $30 billion 10-year agreement, which runs through FY2018. Israel is the first international operator of the F-35 Joint Strike Fighter, the Department of Defense's fifth-generation stealth aircraft, considered to be the most technologically advanced fighter jet ever made. To date, Israel has purchased 50 F-35s in three separate contracts. P.L. 115-141, the FY2018 Consolidated Appropriations Act, provides the following for Israel: $3.1 billion in Foreign Military Financing, of which $815.3 million is for off-shore procurement; $705.8 million for joint U.S.-Israeli missile defense projects, including $92 million for Iron Dome, $221.5 million for David's Sling, $310 million for Arrow 3, and $82.3 million for Arrow 2; $47.5 million for the U.S.-Israeli anti-tunnel cooperation program; $7.5 million in Migration and Refugee Assistance; $4 million for the establishment of a U.S.-Israel Center of Excellence in energy and water technologies; $2 million for the Israel-U.S. Binational Research & Development Foundation (BIRD) Energy program; and The reauthorization of War Reserves Stock Allies-Israel (WRSA-I) program through fiscal year 2019. For FY2019, the Trump Administration is requesting $3.3 billion in Foreign Military Financing for Israel and $500 million in missile defense aid to mark the first year of the new MOU. The Administration also is seeking $5.5 million in Migration and Refugee Assistance (MRA) funding for humanitarian migrants to Israel.
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The Balanced Budget Act of 1997 ( P.L. 105-33 , BBA-97) established the State Children's Health Insurance Program (CHIP) under a new Title XXI of the Social Security Act. CHIP builds on Medicaid by providing health care coverage to low-income, uninsured children in families with incomes above applicable Medicaid income standards. This report provides a summary of major changes to CHIP enacted in public laws beginning with the legislation authorizing the program in 1997. Creation of CHIP . Under BBA 97, the State Children's Health Insurance Program was established, effective August 5, 1997. A number of provisions specified eligibility criteria; coverage requirements for health insurance; federal allotments and the state allocation formula; payments to states and the enhanced federal medical assistance percentage (FMAP) formula; the process for submission, approval and amendment of state CHIP plans; strategic objectives and performance goals, and plan administration; annual reports and evaluations; options for expanding coverage of children under Medicaid; and diabetes grant programs. CBO Scoring . In making its cost estimates, the Congressional Budget Office (CBO) is required to assume that programs in existence on or before the enactment of BBA97 (which would include CHIP) that lack future appropriations but with current-year outlays of at least $50 million will continue operating at the last appropriated level. Increased Appropriation. This law increased the FY1998 CHIP appropriation from $4.275 billion to $4.295 billion. Increased Appropriation for Territories. For FY1999, an additional appropriation of $32 million for the territories was provided, bringing the FY1999 total appropriation to $4.307 billion. Freeze Each State's Share of Appropriation. Each state's percentage of the total appropriation available to states for the FY1998 CHIP allotments was also used for determining the FY1999 allotments. Change in Allotment Formula Affecting Some Native American Children. For FY1998 and FY1999, the law changed the annual state allotment formula by stipulating that children with access to health care funded by the Indian Health Service and no other health insurance would be counted as uninsured (rather than as insured as required under the previously existing law). Stabilizing the CHIP Allotment Formula . Annual federal allotments to each state are determined in part by states' success in covering previously uninsured low-income children under CHIP. Under prior law, the more successful a state was in enrolling children in CHIP, especially early in the program, the greater the potential reduction in subsequent annual allotments. To limit the amount a state's allocation could fluctuate from one year to the next, BBRA 99 modified the allotment distribution formula and established new floors and ceilings. Targeted, Increased Allotments . Additional allotments for the commonwealths and territories were provided for FY2000-FY2007. Improved Data Collection. The law provided new funding for the collection of data to produce reliable, annual state-level estimates of the number of uninsured children. These data changes were to improve research and evaluation efforts, and to improve the reliability of the estimates using in the formula that determines annual state-specific allotments from federal CHIP appropriations. Federal Evaluation . New funding was also provided for a federal evaluation to identify effective outreach and enrollment practices for both CHIP and Medicaid, barriers to enrollment, and factors influencing beneficiary drop-out. Additional Reports and a Clearinghouse. The law also required (a) an inspector general audit and Government Accountability Office (GAO) report on enrollment of Medicaid-eligible children in CHIP, (b) states to report annually the number of deliveries to pregnant women and the number of infants who receive services under the Maternal and Child Health Services Block Grant or who are entitled to CHIP benefits, and (c) the Secretary of Health and Human Services to establish a clearinghouse for the consolidation and coordination of all federal databases and reports regarding children's health. Information Sharing. This law allowed schools operating federally subsidized school meal programs to take a more active role in identifying children eligible for, and enrolling such children in, the Medicaid and CHIP programs. It permitted schools to share income and other relevant information collected when determining eligibility for free and reduced-price school meals with state Medicaid and CHIP agencies, as long as there is a written agreement that limits use of the information and parents are notified and given a chance to "opt out." Demonstration Project . The law also established a demonstration project in one state in which administrative funds under the Special Supplemental Nutrition Program for Women, Infants and Children (WIC) may be used to help identify children eligible for, and enroll such children in, the Medicaid and CHIP programs. Rights of Institutionalized Children. The law required that general hospitals, nursing facilities, intermediate care and other health care facilities receiving federal funds, including CHIP, protect the rights of each resident, including the right to be free from physical or mental abuse, corporal punishment, and any restraints or involuntary seclusions imposed for the purposes of discipline or convenience. Restraints and seclusion may be imposed in such facilities only to ensure the physical safety of the resident, a staff member or others. Additional requirements govern reporting of resident deaths, promulgation of regulations regarding staff training, and enforcement. Children's Rights in Community-Based Settings. The law also included requirements for protecting the rights of residents of certain non-medical, community-based facilities for children and adolescents, when that facility receives funding under this act or under Medicaid. (Existing regulations did not clarify if and how these rights apply to such facilities funded by CHIP.) For such individuals and facilities, restraints and seclusion may only be imposed in emergency circumstances and only to ensure the physical safety of the resident, a staff member or others, and where less restrictive interventions have been determined to be ineffective. Additional requirements govern reporting of resident deaths, promulgation of regulations regarding staff training, and enforcement. Special Redistribution Rules for Unspent FY1998 and FY1999 Allotments . For each of these years separately, a pool of unspent funds was created from the unused allotment amounts of those states that did not fully expend their original allotments within the applicable three-year time frame. From this pool, 1.05% was set aside for the territories that fully exhaust their original allotments. Each such territory received a percentage of the available 1.05% pool equal to that territory's original allotment divided by the sum of original allotments for such territories. Then the states that did fully expend their original allotments within the three-year deadline received access to redistributed funds from the remaining pool equal to the amount by which their three-year spending exceeds their original allotments. The remaining states that did not use all their original allotments for the year retained access to a portion of the remaining funds in the pool, equal to the ratio of such a state's unspent original allotment to the total amount of unspent funds for that fiscal year. These latter states were permitted to use up to 10% of their retained FY1998 funds for outreach activities. This allowance was over and above spending for such activities under the general administrative cap described above. The deadline for spending all redistributed and retained funds from FY1998 and FY1999 was September 30, 2002, although this date was extended by P.L. 108-74 as described below. (See the text for additional information on redistribution of unspent CHIP funds.) Presumptive Eligibility. Under Medicaid presumptive eligibility rules, states are allowed to temporarily enroll children whose family income appears to be below Medicaid income standards, until a final formal determination of eligibility is made. BIPA clarified states' authority to conduct presumptive eligibility determinations, as defined in Medicaid law, under separate (non-Medicaid) CHIP programs. Authority to Pay CHIP Medicaid Expansion Costs from Title XXI Appropriation . Under prior law, states' allotments under CHIP paid only the federal share of costs associated with separate (non-Medicaid) CHIP programs. The federal share of costs associated with covering targeted low-income children under Medicaid was paid for by Medicaid. State CHIP allotments were reduced by the amounts paid by Medicaid for such costs. BIPA authorized the payment of the costs of targeted low-income children under Medicaid, and the costs of benefits provided during periods of presumptive eligibility, from the CHIP appropriation rather than the Medicaid appropriation, and as a conforming amendment, eliminated the requirement that state CHIP allotments be reduced by these (former) Medicaid payments. Also, for FY1998-FY2000 only, BIPA authorized the transfer of unexpended CHIP appropriations to the Medicaid appropriation account for the purpose of reimbursing payments made on behalf of targeted low-income children under Medicaid. Waiver of Provider Requirements and Medicare+Choice Payment Limits . The law authorized the Secretary to temporarily waive conditions of participation and other certification requirements for any entity that furnishes health care items or services to Medicare, Medicaid, or CHIP beneficiaries in an emergency area during a declared disaster or public health emergency. During such an emergency, the Secretary may waive: (1) participation, state licensing (as long as an equivalent license from another state is held and there is no exclusion from practicing in that state or any state in the emergency area), and pre-approval requirements for physicians and other practitioners; (2) sanctions for failing to meet requirements for emergency transfers between hospitals; (3) sanctions for physician self-referral; and (4) limitations on payments for health care and services furnished to individuals enrolled in Medicare+Choice (M+C) plans when services are provided outside the plan. To the extent possible, the Secretary must ensure that M+C enrollees do not pay more than would have been required had they received care within their plan network. Notification to Congress . The law also required the Secretary to provide Congress with certification and written notice at least two days prior to exercising this waiver authority. It also provided for this waiver authority to continue for 60 days, and permits the Secretary to extend the waiver period. Evaluation. The Secretary was further required, within one year after the end of the emergency, to provide Congress with an evaluation of this approach and recommendations for improvements under this waiver authority. Study of Migrant Farm Workers. This law required the Secretary to conduct a study of the problems experienced by farm workers and their families under Medicaid and CHIP, specifically, barriers to enrollment, and lack of portability of Medicaid and CHIP coverage for farm workers eligible in one state who move to other states on a periodic basis. The Secretary must also identify possible strategies to increase enrollment and access to benefits for these families. Strategies to be examined must include (1) use of interstate compacts to establish portability and reciprocity, (2) multi-state demonstration projects, (3) use of current law flexibility for coverage of residents and out-of-state coverage, (4) development of programs of national migrant family coverage, (5) use of incentives to private coverage alternatives, and (6) other solutions as deemed appropriate. In conducting the study, the Secretary must consult with several groups. The Secretary must submit a report on this study to the President and Congress in October 2003. This report was to address findings and conclusions and provide recommendations for appropriate legislative and administrative action. Extension of Available CHIP Reallocated Funds from FY1998 and FY1999 . This law extended the availability of FY1998 and FY1999 reallocated funds through the end of FY2004 (rather than the end of FY2002). Revision of Methods for Reallocation of Unspent FY2000 and FY2001, and Extension of the Availability of Such Funds . The law also established a new method for reallocating unspent funds from FY2000 and FY2001 allotments. For each of these years separately, a pool of unspent funds was created from the unused allotment amounts of those states that did not fully expend their original allotments within the applicable three-year time frame. From this pool, 1.05% was set aside for the territories that fully exhausted that original allotment. Each such territory received a percentage of the available 1.05% pool equal to that territory's original allotment divided by the sum of original allotments for such territories. For each year separately, each state that did not spend its full original allotment by the three-year deadline retained 50% of its unspent funds. Then the remaining pool was allocated to each state that fully expended (exceeded) its original allotment by the three-year deadline. The redistribution amount for each such state was based on the proportion of its excess spending relative to the total amount of excess spending for all such states. Reallocated funds for FY2000 and FY2001 were available until the end of FY2004 and FY2005, respectively. Authority for Qualifying States to Use Certain Funds for Medicaid Expenditures . For specific expenditures occurring after August 15, 2003, the law in §2105(g) permitted certain states to apply federal CHIP funds toward the coverage of certain children enrolled in regular Medicaid (not a CHIP Medicaid expansion). Specifically, qualifying states could spend their available balances from FY1998-FY2001 (up to a maximum of 20% of those original allotments) for services delivered to Medicaid beneficiaries under age 19 who were not otherwise eligible for CHIP and had family income that exceeded 150% of the FPL. For such services, these federal CHIP funds could be used to pay the difference between the CHIP enhanced federal matching rate and the regular Medicaid federal matching rate the state received for these children. Qualifying states included those that on or after April 15, 1997 had an income eligibility standard of at least 185% of the FPL for at least one category of children, other than infants. (Other qualifications applied to states with statewide waivers under Section 1115 of the Social Security Act.) Under this law, the qualifying states included Connecticut, Minnesota, New Hampshire, Tennessee, Vermont, Washington, and Wisconsin. Change in the Income Standard and Applicable Dates . This law modified P.L. 108-74 by changing the income eligibility standard affecting some qualifying states from 185% to 184% of the FPL. It also modified applicable dates with respect to certain states with Section 1115 waivers that covered children in families with income of at least 185% of the FPL. The effect of these changes was to add four states (i.e., Hawaii, Maryland, New Mexico, and Rhode Island) to the set of qualifying states, thus allowing them to also use certain funds for Medicaid expenditures (see above description for P.L. 108-74 ). Additional allotments to eliminate FY2006 funding shortfalls. This law appropriated $283 million for shortfall states and territories in FY2006. A shortfall state was defined as a state that the Secretary estimated would have expenditures in FY2006 that exceeded the sum of all available CHIP funds in that year (i.e., reallocated unspent FY2003 funds, balances remaining from FY2004 and FY2005 original allotments, and FY2006 original allotments), based on the most recent CHIP data as of December 31, 2005. From the new FY2006 appropriation, after a 1.05% set-aside for the territories, each FY2006 shortfall state received an allotment intended to cover its projected shortfall. On October 1, 2006, any remaining unspent additional allotments were to revert to the Treasury. The additional FY2006 appropriation was restricted to payments for benefits provided to targeted low-income children only. Prohibition against covering non-pregnant, childless adults with CHIP funds. The Secretary of HHS was prohibited from approving new 1115 waivers, on or after October 1, 2005, that would use CHIP funds to provide coverage to non-pregnant, childless adults. The Secretary could continue to approve projects that expanded CHIP to caretaker relatives of Medicaid- or CHIP-eligible children, and to pregnant adults. Existing waivers that used CHIP funds to cover non-pregnant, childless adults (including extensions, amendments, and renewals of such waivers) that were approved before enactment of DRA were allowed to continue. Continued authority for qualifying states to use CHIP funds for certain Medicaid expenditures . The law allowed qualifying states to use any available FY2001, FY2004, and FY2005 CHIP funds (i.e., original allotments and/or reallocated funds, as applicable) for coverage of certain children enrolled in regular Medicaid (not an CHIP Medicaid expansion) for such Medicaid payments made on or after October 1, 2005, up to the 20% allowance. See the discussion of P.L. 108-74 and P.L. 108-127 for more details. Prioritizing Redistribution of Unspent FY2004 Original Allotments . The Secretary of HHS was required to redistribute unspent FY2004 original allotments to states in the order in which they were projected to exhaust their federal CHIP funds. Early, Partial Redistribution of Unspent FY2005 Original Allotments . An initial redistribution was required of up to half of states' unspent FY2005 original allotments as of March 31, 2007 (capped at $20 million per state)—after 2½ years of availability. For a state to forgo unspent FY2005 funds on that date, the state's total CHIP balances (from the FY2005-FY2007 original allotments) as of March 31, 2007, had to be at least double what the state projected to spend in federal CHIP funds in FY2007. These funds were also targeted to shortfall states in the order in which those shortfalls were experienced. The initial redistribution of unspent FY2005 funds did not replace the regular redistribution at the end of the allotment's three-year period of availability. Thus, among the states that did forgo half of their unspent FY2005 funds on March 31, 2007, any amount still unspent at the end of FY2007 was redistributed to other states after having been available for three years. Limitations on Spending . The FY2004 and FY2005 redistributed funds available in FY2007 could only be used to cover populations eligible in a state's CHIP program as of October 1, 2006. The FY2004 and FY2005 redistributed funds could pay only the regular FMAP, rather than the enhanced CHIP FMAP, for non-pregnant adults enrolled in CHIP. The Secretary was authorized to alter the amount of FY2004 and FY2005 redistributed funds received by states on the basis of actual end-of-FY2007 expenditures, to account for how actual expenditures may differ from the projections on which the initial redistributions were based, with some limitations. The territories did not receive any FY2004 and FY2005 redistributed funds in FY2007. Continued authority for qualifying states to use CHIP funds for certain Medicaid expenditures. The law allowed qualifying states to use any available FY2006 and FY2007 CHIP funds (in addition to the FY2005 funds) for coverage of certain children enrolled in regular Medicaid (not an CHIP Medicaid expansion), up to the 20% allowance. See the discussion of P.L. 108-74 and P.L. 108-127 for more details. Elimination of remainder of CHIP funding shortfalls, tiered match, and other limitation on expenditures . This law required the Secretary of HHS to allot to certain shortfall states the amount determined by the Secretary to eliminate each such state's estimated FY2007 shortfall, not to exceed a total of $650 million for all such states. Shortfall states were defined as those for which projected FY2007 federal expenditures would exceed the sum of (1) the amount of the state's unspent FY2005 and FY2006 allotments still available by the end of FY2006, (2) the state's FY2007 allotment, and (3) the amounts of redistributed FY2004 and FY2005 funds available to the state in FY2007 (if any). It also eliminated the requirement in P.L. 109-482 that redistributed FY2004 and FY2005 funds pay only the regular FMAP for non-pregnant adults in CHIP. Prohibition. P.L. 110-28 also prohibited the Secretary of HHS from taking an administrative action to finalize or otherwise implement Medicaid administrative proposals related to intergovernmental transfers (payments for government providers) and graduate medical education for one year from the date of enactment of this law. Requirement for use of tamper-resistant prescription pads under the Medicaid Program. The law required the use of tamper-resistant pads for Medicaid prescriptions executed after September 30, 2007. It also allowed any state operating a Medicaid Pharmacy Plus waiver that would otherwise expire on June 30, 2007, to continue operating the waiver through December 31, 2009. FY2008 allotments . Each continuing resolution provided FY2008 CHIP allotments of $5.04 billion, the same amount used in FY2007, through the specified termination dates (respectively, November 16, December 14, December 21, and December 31, 2007). FY2005 redistribution . Each continuing resolution redistributed unspent FY2005 funds to those states that experienced shortfalls in FY2008, through the specified termination dates. Qualifying states . Each continuing resolution permitted the use of FY2008 allotments for expenditures allowed for qualifying states under §2105(g), through the specified termination dates. CHIP allotments . The law made the $5.04 billion FY2008 allotments available through March 31, 2009. It also appropriated $5.04 billion for FY2009 allotments, available through March 31, 2009. The allotment to states in FY2008 and FY2009 continued to be based on the statutory formula using the estimated number of low-income children and low-income uninsured children in each state, adjusted slightly by a geographic cost factor. Redistribution. The law made the method in the continuing resolutions for redistributing unspent FY2005 funds permanent. In addition, FY2006 allotments unspent at the end of FY2008 were to be redistributed to states projected to exhaust all of their CHIP funds in FY2009 before March 31, 2009. The redistributed FY2006 funds were to be provided, until exhausted, to states in the order in which those shortfalls occur. Additional appropriations for states' shortfalls of federal CHIP funds . Such sums as necessary, not to exceed $1.6 billion, were appropriated in FY2008 to (1) eliminate states' shortfalls of federal CHIP funds and (2) provide 1.05% of states' projected shortfall amounts to the territories. These funds were only available for FY2008, and unspent funds were not available for redistribution. Such sums as necessary, not to exceed $275 million, were appropriated in FY2009 to (1) eliminate states' shortfalls of federal CHIP funds in the first two quarters of FY2009, and (2) provide 1.05% of states' projected shortfall amounts to the territories. These funds were only available for the first two quarters of FY2009, and unspent funds were not available for redistribution. Qualifying states . The ability of qualifying states to use their FY2008 allotments for expenditures under §2105(g), as initially permitted under the continuing resolutions, is made permanent. Qualifying states' ability to use FY2009 allotments under §2105(g) is permitted through March 31, 2009. Improving data collection . Due to concerns about inadequate sample sizes in the Current Population Survey (CPS) for making estimates of states' number of low-income children, for the purpose of determining states' federal CHIP allotments, $10 million was appropriated in CHIP statute annually beginning in FY2000 (see description of P.L. 106-113 above). This law provided $20 million, instead of $10 million, in CHIP statute for the CPS in FY2008. Allotments for s tates and territories for fiscal years 2009 through 2013 . The law provided a national appropriation for CHIP allotments totaling $68.9 billion over five years (which represents an increase of $43.6 billion over the prior law baseline of $25.3 billion), distributed to states and territories using a new formula primarily based on their past and/or projected federal CHIP spending. For FY2009 onward, annual allotments would be available for two years, with unspent funds available for redistribution first to shortfall states and then toward bonus payments, described below. Child Enrollment Contingency Fund . The law established a new contingency fund (for making payments to states for certain shortfalls of federal CHIP funds), which receives deposits through a separate appropriation each year through FY2013, and makes payments of up to 20% of the available national allotment for CHIP to each eligible shortfall state. CHIP performance bonus payment s to offset additional enrollment costs resulting from enrollment and retention efforts. The law established new performance bonus payments (for states exceeding certain child enrollment levels and states that implement certain outreach and enrollment initiatives), which are funded with a FY2009 appropriation of $3.225 billion and deposits of certain unspent CHIP funds through FY2013. Option for s tates to receive the enhanced portion of the CHIP matching rate for Medicaid coverage of certain children. The law allows qualifying states to use FY2009-13 CHIP allotments for additional funding of children above 133% FPL enrolled in regular Medicaid (not a CHIP Medicaid expansion) without the 20% limitation. See the above discussion of P.L. 108-74 and P.L. 108-127 for more details. State option to cover low-income pregn ant women under CHIP through a s tate plan amendment. The law created a state option to extend coverage to pregnant women under CHIP through a state plan amendment when certain conditions are met. Termination of coverage for nonpregnant childless adults under CHIP; conditions for coverage of parents. The law terminated CHIP adult coverage waivers, and established conditions to continue existing waivers under Medicaid. Limitation on matching rate and availability of federal funds, and reduce federal CHIP paym ents for certain higher-income CHIP children. The law specified that the regular FMAP would be used for CHIP enrollees whose effective family income exceeds 300% of poverty (with an exception for certain grandfathered states), and gave states the option to draw Medicaid funds at the regular FMAP for Medicaid-expansion SCHIP children above this level. Grants and enhanced administrative funding for outreach and enrollment. CHIPRA provided additional grants for outreach and enrollment totaling $100 million each year through FY2013 . Ten percent of the allocation would be directed to a national enrollment campaign, and 10 percent would be targeted to outreach for Native American children. The remaining 80 percent would be distributed among state and local governments and to community-based organizations for purposes of conducting outreach campaigns with a particular focus on rural areas and underserved populations and that address cultural and linguistic barriers to enrollment. State option to rely on findings from an Express Lane agency to conduct simplified eligibility determinations . CHIPRA included a state option to rely on findings from specified "Express Lane" agencies for eligibility determinations in Medicaid and CHIP, and a requirement that state plans describe the procedures used to reduce the administrative barriers to the enrollment of children and pregnant women in Medicaid and CHIP. Verification of declaration of citizenship or nationality for purposes of eligibility for Medicaid and CHIP. The law included a provision to provide a specific alternative for states to verify proof of citizenship, and added a requirement for citizenship documentation in SCHIP. Permitting s tates to ensure coverage wi thout a five -year delay of legal immigrant children and pregnant women under the Medicaid program and CHIP. The law created a state option to waive the five-year bar for Medicaid or SCHIP coverage to pregnant women and children who are lawfully residing in the United States and are otherwise eligible for such coverage when certain requirements are met. State option for providing premium assistance. The law established a state plan option for premium assistance to enroll in employer-based health insurance, and eliminated barriers to providing such premium assistance. States were also required to provide outreach, education, and enrollment assistance for families of children likely to be eligible for premium assistance subsidies under CHIP, or a waiver approved under §1115, and amended the Employee Retirement Income Security Act (ERISA) to streamline coordination between public and private coverage, including making the loss of Medicaid/CHIP eligibility a "qualifying event" for the purpose of purchasing employer-sponsored coverage. Quality of care and health o utcomes. The law included provisions to strengthen quality of care and health outcomes of children under Medicaid and CHIP. Improving access to benefits . CHIPRA added or modified several benefits available to children under CHIP (e.g., dental, mental health). Specifically, dental services became a required benefit under CHIP, and subject to certain conditions, states were permitted to provide dental-only supplemental coverage to children enrolled in group or employer coverage who otherwise meet CHIP eligibility criteria. With regard to mental health coverage, the law ensures that the financial requirements and treatment limits applicable to mental health or substance use disorder benefits must be no more restrictive than the financial requirements and treatment limitations applicable to substantially all medical and surgical benefits covered under the state CHIP plan. Application of a prospective payment system for services provided by f ederally qualified health centers and rural health clinics . The law required states that operate separate and/or combination CHIP programs to reimburse FQHCs and RHCs based on the Medicaid prospective payment system, and the Secretary is required to report to Congress on the effects of the new prospective payment system on access to benefits, provider payment rates or scope of benefits. Premium grace p eriod. CHIPRA required states to provide CHIP enrollees with a grace period of at least 30 days from the beginning of a new coverage period to make premium payments before the individual's coverage may be terminated, and states must provide notice that failure to make a premium payment within the grace period will result in termination of coverage. Medicaid and CHIP Payment and Access Commission . The law established a Medicaid and CHIP Payment and Access Commission to review program policies under both Medicaid and CHIP affecting children's access to benefits, and will make recommendations to Congress concerning such access policies. Program integrity and miscellaneous provisions . The law included provisions to improve program integrity and data collection (including some provisions that affected the Medicaid program), and required the Secretary of HHS to conduct a new, independent federal evaluation of 10 states. Extension of Medicaid DSH allotments for Tennessee and Hawaii. The law extended the special DSH allotment arrangements for Tennessee and Hawaii through a portion of FY2012. Allotment amounts are equal to $30 million for Tennessee for each full fiscal year—2010 and 2011—and one quarter of that amount is available for the first quarter of FY2012. Hawaii's $10 allotment is extended for each full fiscal year—2010 and 2011—and $2.5 million is available for the first quarter of FY2012. Increase in excise tax rate under tobacco products and time for payment of corporate estimated taxes. The law increased taxes on cigarettes and tobacco-related products (effective April 1, 2009), and included provisions affecting floor stock taxes that would apply to items removed from the manufacturer before the April 1, 2009, and subsequently sold after that date. With regard to corporate estimated taxes, the law increased the ratio to 120.5% and shifted $300 million of corporate taxes from FY2014 to FY2013. The prior-law 120% withholding provision does not apply to firms with assets of less than $1 billion, and the withholding increased under CHIPRA did not alter that exemption.
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The Balanced Budget Act of 1997 (P.L. 105-33, BBA-97) established the State Children's Health Insurance Program (CHIP) under a new Title XXI of the Social Security Act. CHIP builds on Medicaid by providing health care coverage to low-income, uninsured children in families with incomes above applicable Medicaid income standards. This report provides a summary of major changes to the State Children's Health Insurance Program (CHIP) enacted in public laws beginning with the legislation authorizing the program in 1997. It will be updated as legislative activity warrants.
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This report provides a description and status report on Brazil's challenge to certain aspects of the U.S. cotton program under the rules of the World Trade Organization's (WTO's) dispute settlement process in case DS267. The "Brazil-U.S. cotton case" had its WTO origins in 2002 and evolved into a sprawling legal dispute that reached an apparent final resolution on October 1, 2014. For a detailed description of the case's origin and progress through the WTO dispute settlement process to the point in April 2011 when Brazil and the United States reached a temporary agreement to avoid trade retaliation (referred to as the U.S.-Brazil framework agreement), readers may refer to archived CRS Report RL32571, Brazil's WTO Case Against the U.S. Cotton Program . Although a brief summary of the dispute is included, this report focuses on developments in the cotton case since 2011; in particular, on two aspects of the WTO cotton case: the current status of efforts to resolve the WTO trade dispute including the final resolution; and changes to U.S. agricultural policy that have occurred as a direct result of the WTO cotton case. Each of these case aspects remains highly germane to U.S. farm policy and programs—at one point in the case, Brazil had the WTO-granted authority to impose millions of dollars of trade retaliation against U.S. goods and services. In addition, with the world closely watching the resolution of the Brazil-U.S. cotton case, the final terms and circumstances of the resolution could serve either as catalyst or as precedent for future trade disputes related to the agricultural sector, and/or as progenitor of new, more restrictive WTO rules for domestic commodity support programs. The so-called "Brazil-U.S. cotton case" is a long-running WTO dispute settlement case (DS267) initiated by Brazil—a major cotton export competitor—in 2002 against specific provisions of the U.S. cotton program. Brazil charged that U.S. cotton programs were depressing international cotton prices and thus artificially and unfairly reducing the quantity and value of Brazil's cotton exports, causing economic harm to Brazil's domestic cotton sector. In September 2004, after nearly a year-long period of hearings and review, a WTO dispute settlement panel found that certain U.S. agricultural support payments and guarantees were inconsistent with WTO commitments and resulted in market distortions that depressed international cotton prices, as asserted by Brazil. In addition, certain U.S. agricultural export programs were found to be illegal under WTO rules. As a result, U.S. support programs were found to violate two different types of WTO rules and thus required two different types of responses from the United States to remedy the inconsistencies. First, actionable subsidies were those subsidies identified as having distorted normal market conditions and resulted in adverse effects to Brazil. The WTO panel recommended that the United States take appropriate steps by September 21, 2005, to remove the adverse effects or to withdraw the subsidy measures singled out as price-contingent—marketing loan provisions, market loss assistance payments, Step 2 (domestic user marketing) payments, and counter-cyclical program (CCP) payments. It is noteworthy that the panel found that certain other U.S. domestic support programs—direct payments and crop insurance payments—did not cause serious prejudice and consequent adverse effects. Second, prohibited subsidies were those subsidies deemed illegal under WTO rules. The panel identified export credit guarantee programs—GSM-102, GSM-103, and the Supplier Credit Guarantee Program (SCGP) —that assisted cotton and other "unscheduled" agricultural products entering international markets, and Step 2 payments to exporters of upland cotton. The WTO panel recommended that the United States withdraw these programs by July 1, 2005. In 2005, the United States made several changes to both its cotton farm support programs and export credit guarantee programs in an attempt to bring them into compliance with WTO recommendations. However, Brazil argued that the U.S. response was inadequate and requested authority to impose $3 billion in retaliation against prohibited U.S. subsidies. Retaliation generally takes the form of higher tariffs, above WTO bound levels. The United States objected to Brazil's requested retaliation amount and called for WTO arbitration; however, arbitration was mutually suspended in July 2006. Shortly thereafter (August 2006), Brazil requested a WTO compliance panel to review whether the United States had brought its cotton programs into compliance with the original WTO panel ruling. In December 2007, a WTO compliance panel ruled in favor of Brazil's noncompliance charge against the United States, and the ruling was upheld on appeal in June 2008. In August 2008, Brazil requested resumption of arbitration over its proposed retaliation value of $3 billion. In August 2009, the WTO arbitration panel announced that Brazil's trade countermeasures against U.S. goods and services could include two components: a fixed annual amount of $147.3 million in response to the actionable subsidies (i.e., market-distorting U.S. cotton program payments), and a variable formula-derived retaliation amount based on annual spending made under the U.S. GSM-102 program in response to the prohibited subsidies. According to WTO rules, trade retaliation should take place within the sector where the violation occurred. In this case, retaliation normally would be restricted to punitive tariffs on U.S. goods entering Brazil. However, Brazil argued that limiting retaliation to the goods sector alone would have a more deleterious effect on the Brazilian economy (via higher input costs) and Brazilian consumers (via higher inflation) than on U.S. exporters due to the asymmetries between the two economies. Instead, Brazil proposed to suspend tariff concessions as well as obligations under the WTO Agreement on Trade-Related Intellectual Property Rights (TRIPS) and the General Agreement on Trade in Services (GATS). In response to Brazil's concerns regarding applying retaliation entirely in the goods sector based on trade between the two countries, the arbitrators ruled that Brazil would be entitled to cross-retaliation if the overall retaliation amount exceeded a formula-based, variable annual threshold—different from the earlier formula used for calculating the total annual retaliation. Cross-retaliation involves countermeasures in sectors outside of the trade in goods—for example, in the area of U.S. copyrights, patents, and other intellectual property rights (IPR). Based on the arbitrators' formulas, using 2008 data, Brazil announced in December 2009 that it would impose trade retaliation for the year starting on April 6, 2010, against up to $829.3 million in U.S. goods, including $268.3 million in eligible cross-retaliatory countermeasures. The threat of sanctions led to intense negotiations between Brazil and the United States to find a mutual agreement and avoid trade retaliation. While U.S. exporters were anxious about losing trade with the emerging Brazilian domestic market, Brazil's domestic manufacturing and business sectors were concerned that trade retaliation in the form of higher tariffs could be counter-productive if it resulted in restricting access by domestic industry to key inputs. In April 2010, the two parties agreed to a memorandum of understanding (MOU) that spelled out certain actions which, if undertaken by the United States, would lead to a temporary suspension of Brazil's threatened retaliation. These actions included (1) the annual payment by the United States of $147.3 million (or $12.275 million per month) to Brazil for a fund to be used for certain authorized activities—primarily to provide technical assistance and capacity-building for Brazil's cotton sector, but explicitly excluding research—and (2) the United States working jointly with Brazil "on an understanding that is mutually satisfactory that will provide a framework for reaching a mutually agreed solution to the cotton dispute." The joint work period would start on April 22, 2010, and last for 60 days, during which Brazil would not impose countermeasures. On June 17, 2010, U.S. and Brazilian trade negotiators concluded the Framework for a Mutually Agreed Solution to the Cotton Dispute in the WTO . The "Framework Agreement," which laid out a number of "steps and discussions," represented a path forward toward the ultimate goal of reaching a negotiated solution to the dispute, while avoiding WTO-sanctioned trade retaliation by Brazil against U.S. goods and services and possibly intellectual property rights (IPR). As a result, Brazil suspended trade retaliation pending U.S. compliance with the Framework Agreement measures. The four major aspects of the Framework Agreement are as follows. 1. Discussions towards a mutually agreed solution would have as a basis an annual limit on trade-distorting U.S. domestic cotton support as measured by the following criteria: a. the limit would be significantly less than the average annual level of trade-distorting support provided to upland cotton during the 1999 to 2005 period; b. the extent to which any domestic support program counts against the limit would depend on its degree of trade-distortion; and c. green box (i.e., minimally or non-trade distorting) support measures would not be counted against the limit. 2. The United States would undertake some near-term modifications to the operation of the GSM-102 program, and would convene with Brazil for a semi-annual review of whether U.S. GSM-102 program implementation satisfies certain performance benchmarks. If benchmarks were not being met, the United States would adjust operating fees to bring the program into line with the benchmarks. 3. Brazil and the United States would meet for quarterly discussions and information exchanges regarding potential limits of trade-distorting U.S. cotton subsidies (recognizing that actual changes would not occur prior to the next farm bill). 4. Upon enactment of the 2014 farm bill, the parties would consult with a view to determining, with respect to measures of domestic support for cotton and the GSM-102 program, whether a mutually agreed solution to the WTO cotton dispute (WT/DS267) had been reached. These U.S. commitments were intended to delay any trade retaliation until after the 2014 farm bill, when potential changes to U.S. cotton programs would be evaluated. See the section " U.S. Policy Changes in Response to the Cotton Case ," below, for a discussion of the changes made in the enacted 2014 farm bill ( P.L. 113-79 ). On October 1, 2014, Brazil and the United States reached an agreement to resolve the long-running cotton dispute in the World Trade Organization (WTO). The two countries signed a new memorandum of understanding (MOU) that spelled out the terms of the agreement: Brazil relinquishes its rights to countermeasures against U.S. trade or any further proceedings in the dispute; the United States agreed to new rules governing fees (i.e., must be risk-based fees with an additional fee component for longer tenors of greater than 12 but less than 18 months, or of 18 months) and tenor (i.e., maximum tenor of 18 month) for the GSM-102 export credit guarantee program; Brazil agreed to a temporary Peace Clause with respect to any new WTO actions against U.S. cotton support programs while the 2014 farm bill ( P.L. 113-79 ) is in force or against any agricultural export credit guarantees under the GSM-102 program as long as the program is operated consistent with the agreed terms; the United States would make a one-time final payment of $300 million to the Brazil Cotton Institute (BCI) with explicit use-of-fund conditions that included an expansion of the uses beyond technical and capacity-building activities related to cotton production in Brazil as defined under the Framework Agreement—additional uses are for infrastructure and for research conducted in conjunction with a U.S. institution (the provision was included in the 2014 farm bill); and both counties agreed to routine semi-annual reporting of compliance with the terms of the MOU. The MOU will terminate on September 30, 2018, with the 2014 farm bill, except for those conditions regarding use of CBI funds (which last until such funds are entirely expended) and GSM -102 program operations (which remain in force as long as the program complies with the MOU requirements). Since 2005, the United States has made several changes to both its cotton and export credit guarantee programs in an attempt to bring them into compliance with WTO recommendations. This includes both changes made prior to the 2014 farm bill, changes made as part of the 2014 farm bill ( P.L. 113-79 ), and changes made to conform with the final MOU of October 1, 2014. Because the price and income support programs contained in omnibus farm bills could only be modified or removed by an act of Congress—and such changes generally only occur within the context of a new farm bill —the Administration had been limited in its ability to respond to the WTO panel recommendations, but instead resorted to using whatever flexibility existed in implementing such programs. However, in the interim years between farm bills, Congress took steps of its own by including relevant amendments to non-farm-bill legislation to address several of the outstanding case-related issues. In order to address the issue of actionable subsidies in the Brazil-U.S. cotton case, the Step 2 cotton program was eliminated by a provision (§1103) in the Deficit Reduction Act of 2005 ( P.L. 109-171 ) on August 1, 2006. From 1991 through 2006, nearly $3.9 billion in payments were made under the Step 2 cotton program. In order to address the issue of export credit guarantees containing an implicit export subsidy prohibited under WTO rules—that is, the idea that benefits returned under the program are insufficient to cover the operating costs and losses of program implementation—several steps were taken by both USDA and Congress. On July 1, 2005, USDA instituted a temporary fix whereby the Commodity Credit Corporation (CCC) would use a risk-based fee structure for export credit guarantee programs—GSM-102 and SCGP. Higher program participation fees would help to ensure that the financial benefits returned by these programs fully cover their long-run operating costs, and thus would eliminate the subsidy component. USDA adopted the risk-based fee structure since a 1% fee cap was required by statute (7 U.S.C. 5641) and could not be removed administratively. In addition, the CCC stopped accepting applications for payment guarantees under GSM-103—a long-term credit guarantee program covering periods of from 3 to 10 years. On June 18, 2008, the date of enactment of the 2008 farm bill ( P.L. 110-246 ), a provision (§3101(a)) in the Trade title (Title III) eliminated both the GSM-103 and SCGP programs, and removed the 1% cap on fees that could be charged under the GSM-102 program. In addition, the same 2008 farm bill provision explicitly required the Secretary of Agriculture, in carrying out the GSM-102 program, to "work with the industry to ensure, to the maximum extent practicable, that risk-based fees associated with the guarantees cover, but do not exceed, the operating costs and losses over the long-term." However, the 2008 farm bill defined the "long-term" as a period of 10 or more years. While the WTO panel did not explicitly define its view of the "long-term," it clearly is less than 10 years and more likely is on the order of a period of two years —that is, a net loss in one year must be offset by a net gain in the following year. These alterations to the GSM-102 program have contributed to a drop in Brazil's retaliatory rights, as mentioned earlier. This is in spite of the fact that total usage of the GSM-102 program actually increased since 2008. In particular, two additional changes to GSM-102 operation made in 2010 helped lower Brazil's retaliation rights. First, USDA blocked Brazilian banks from being able to enjoy the loan guarantees for the financing of U.S. agricultural exports. Second, USDA disqualified Brazil as an export destination for third-country banks seeking such loan guarantees. The WTO formula for calculating annual retaliatory authority assumes that GSM-102-backed loans by Brazilian banks to importers in Brazil have a particularly negative impact on Brazilian agricultural producers. As a result, the existence of such loans prior to 2010 had the effect of driving up Brazil's retaliatory rights by a significant amount, as those measures were meant to counteract the harm done to Brazilian agricultural producers. These alterations have had the effect of driving down Brazil's retaliation rights since 2010. Under the April 2010 Brazil-U.S. memorandum of understanding, the United States was to make payments to a Brazilian cotton fund of $12.275 million every month, for a total of $147.3 million annually. Money from the fund was to be used for certain authorized activities to aid the development of Brazil's cotton sector—primarily technical assistance and capacity building, but specifically excluding research—and for international cooperation in the cotton sector with developing countries. Although the Framework Agreement and its monthly payments succeeded in avoiding, at least temporarily, the imposition of harmful trade countermeasures, the U.S. proposal was met with both praise and criticism. During 2011, several amendments were introduced in the House that would have eliminated or banned the payments to Brazil; however, none of these amendments was enacted. In September 2013, USDA—claiming that the effects of the federal budget sequestration process were at play—reduced the monthly payment to Brazil by an amount equal to 5% of the annual total (i.e., $7.365 million out of $147.3 million), leaving a payment of just $4.9 million. In October, USDA completely stopped the payments. By October 2013, the United States had already made cumulative payments to Brazil's cotton fund of nearly $496 million (assuming that payments started in May 2010, the month after the memorandum of understanding was agreed to). In addressing the cessation of payments, Agriculture Secretary Tom Vilsack claimed without elaboration that the U.S. government lost the authority on October 1, 2013, to continue making payments to Brazil, in part because funding for said payments had been explicitly excluded from the President's 2014 budget proposal. In summary, by 2008 Congress had passed legislation to permanently eliminate the Step 2 program as well as the GSM-103 and SCGP export credit guarantee programs. By late 2010, the United States was making monthly payments of $12.275 million to Brazil's cotton fund, and was meeting twice a year to discuss and modify GSM-102 program operations and quarterly to discuss potential market distortions under then-current U.S. cotton support programs. As a result, the United States argued that the basket of potentially distorting programs in question had been so transformed as to render moot the issue of adverse effects or threat of serious prejudice. However, Brazil continued to argue that the U.S. policy response was inadequate. In an attempt to definitively resolve the cotton dispute, and in accordance with the June 2010 Framework Agreement, Congress proposed a complete revamping of the then-existing cotton price and income support programs and replacement of most of them with an insurance-like program (described below) as part of the 2014 farm bill. The National Cotton Council played an active role in helping to design the new cotton support program to ensure that it addressed the WTO cotton case's outstanding issues. As a result, both the Senate-passed ( S. 954 ) and House-passed ( H.R. 2642 ) farm bill proposals were in agreement over proposed changes, and conferees adopted the new program in the final bill ( P.L. 113-79 ). These changes have resulted in cotton being singled out and treated differently from all other U.S. program crops. U.S. cotton no longer has access to the price and income support programs offered for other program crops, but instead will rely on a within-year, market-based insurance guarantee as its primary support measure. Under the new cotton program, producers have to pay into the program in order to participate, a loss (albeit at the county level) has to occur before a payment is made, and the sum of program payments is prohibited from exceeding the value of the crop insured in order to minimize any potential incentive. Because the program price guarantee is based on within-year prices, cotton will eventually have no safety net against multiple-year low returns, an unlikely outcome without the WTO ruling in the U.S.-Brazil cotton case. The major cotton-related provisions in the enacted 2014 farm bill are briefly described here (the related 2014 farm bill provision is cited in brackets for easy reference). 1. Current cotton support programs are repealed . The price and income support programs direct payments (DP), counter-cyclical program (CCP), and Average Crop Revenue Election (ACRE) available under the 2008 farm law are repealed [ § 1101, § 1102, § 1103] . This represents a significant concession for the U.S. cotton sector. Under the direct payment program, national average direct payments of $6.67/hundredweight (cwt.) or $39.82/acre (using the national yield of 597 lbs./acre) were made annually to cotton base acres irrespective of market conditions. Since 1996, owners of upland cotton base acres have received over $10 billion in direct payments. Similarly, owners of upland cotton base acres have received nearly $7.6 billion in CCP payments since their origin in FY2003. 2. Cotton is ineligible for most new price and income support programs . Cotton is not eligible for coverage under the following new price and income programs: Price Loss Coverage (PLC), Agricultural Risk Coverage (ARC) [ § 1111(6)] ; and the shallow-loss insurance program Supplemental Coverage Option (SCO) [ § 11003(C)(iv)] . As a result, cotton producers do not benefit from yield and base updating available to other program crops under these programs. 3. Reduced marketing loan program benefits for cotton . Marketing loan benefits continue for all major program crops, including upland cotton, but at a reduced marketing loan rate for upland cotton. The new marketing loan rate for upland cotton is to be calculated as the simple average of the adjusted world price for the two preceding marketing years within a range of 45 cents/lb. to 52 cents/lb. (down from a fixed 52 cents/lb. in the 2008 farm bill) [ § 1202(a)(6)] . 4. Stacked Income Protection Plan (STAX) . The 2014 farm bill handles upland cotton separately from the other major program crops. In lieu of the farm revenue programs available to program crops—PLC, ARC, and SCO—upland cotton producers are eligible for a stand-alone, county-based revenue insurance policy called the Stacked Income Protection Plan (STAX). Producers can purchase this policy in addition to their individual crop insurance policy or as a stand-alone policy [ § 11017] . a. STAX covers county-wide revenue losses of greater than 10% but not more than 30% of expected county revenue, offered in 5% increments. In other words, a loss of at least 10% must occur at the county level (and relative to the county-level guarantee) before any indemnity is made under STAX. b. Total indemnity payments received—including both STAX and other crop insurance—cannot exceed the total insured value of the crop. c. Participating producers must pay 20% of the STAX policy premium, while the federal government pays the remaining 80% share. The government subsidy rate of 80% for STAX is more generous than for other insurance products, but is viewed by U.S. interests as a partial offset for the other program benefits sacrificed to obtain STAX. In addition, this is unlike all previous cotton support programs over the past eight decades when producers did not have to pay to participate. Under STAX, producers must pay to participate. d. Premiums are based on the risk of loss and the value of the insured crop. As a result, when crop prices move higher the cost of premiums also rises. e. In years where no loss or STAX indemnity is incurred, cotton producers will still be required to make premium payments under the program, thus incurring costs with no offsetting monetary benefits (although producers would implicitly benefit from the reduced risk of loss). f. Under STAX, the expected price used in determining the program's revenue guarantee is based on market conditions. STAX only provides within-year protection. The initial price guarantee is determined in February based on the price of a harvest-time futures contract, although a Harvest Revenue Option allows the expected price to be replaced by the actual harvest-time price, if higher than the initial guarantee. In other words, the price component of the revenue guarantee moves up and down from year to year with market conditions—a recommendation of the WTO panel. Thus, as mentioned earlier, under STAX, cotton will eventually have no safety net against multiple-year low returns. g. Because it is designed as an insurance product, STAX (like all other crop insurance programs) is not subject to a cap on individual payments. However, the restriction that combined STAX and crop insurance indemnities may not exceed the insured value of the crop is itself a type of payment limitation. h. The STAX payment rate multiplier of 120% available to producers seeking higher per-acre protection is poorly understood by casual observers. Brazil has expressed dismay over this program feature. However, it simply allows producers to improve their risk management coverage relative to the county average. The restriction on total STAX plus crop insurance indemnities not exceeding the value of the insured crop dampens the potential for abnormal production incentives and subsequent market distortion. 5. Temporary Upland Cotton Transition Payments . Cotton producers will be given special transition payments in 2014 and possibly 2015 [ § 1119] in light of the repeal of Direct Payments; the ineligibility of cotton producers for PLC, ARC, or SCO; reduced marketing loan benefits; and the delayed implementation of STAX. However, the transition payments are only a partial offset to the previous benefits under DP, CCP, and the reduced marketing loan program benefits. In 2014, an estimated transition assistance rate of $53.73/acre will be made on 60% of cotton base acres in existence in the 2013 crop year (i.e., a national average DP equivalency of $32.24/acre. 6. Brazil Cotton Institute spending concessions . The 2014 farm bill allows for funds that have already been disbursed to Brazil's special cotton fund created under the 2010 memorandum of understanding to be used for agricultural research in Brazil, provided that it is conducted in collaboration with USDA or a college, university, or research foundation located in the United States [ § 1615] . 7. Additional changes made to the GSM-102 program . The maximum contract length (i.e., tenor) was capped at 24 months, down from 36 months under the 2008 farm bill [ § 3101(a)(1)] ; and USDA was given additional flexibility to negotiate with Brazil on GSM-102 use in order to ensure compliance with the WTO cotton case recommendations [ § 3101(a)(5)E] . Some additional provisions related to the U.S. cotton sector, but unrelated to the WTO cotton case, were also extended in the 2014 farm bill ( P.L. 113-79 ), including payment of upland cotton storage costs, but at reduced rates (down 10%) [ § 1204(g)] , and special marketing provisions to help keep the U.S. upland cotton spinning industry competitive. These include a special import quota [ § 1207(a)] and a limited global import quota [ § 1207(b)] when certain market price conditions are met. Also, domestic users of upland cotton (from all sources, regardless of origin) are eligible for an economic adjustment assistance (EEA) payment of 3 cents/lb. [ § 1207(c)] . It is unclear to what extent the expected net indemnity (i.e., expected indemnity minus the producer-paid, 20%-share of the premium) might provide an incentive for greater cotton area to be planted than would occur in the absence of STAX. This would have to be determined by empirical analysis, but it is likely that relative returns from other program crops will play a much larger role in producer planting decisions than the size of the federal premium subsidy under STAX ( Figure 1 ). Furthermore, total indemnity payments under both STAX and any other cotton-specific crop insurance are prohibited from exceeding the value of the insured crop, thus further minimizing any potential production incentive. Market forces have already played a large role in allocating resources away from cotton and toward other crops. Since 2006 the rapid rise in prices of corn and other feed grain and oilseed crops has pulled area away from upland cotton ( Figure 2 ) while contributing to lower levels of government support payments ( Figure 3 ). Globalization and the search for low-cost, unskilled labor markets have contributed to the steady decline of the U.S. textile sector and domestic mill use of U.S. upland cotton in recent decades ( Figure 4 ). As this phenomenon has played out it has coincided with increasing U.S. costs of production to impair upland cotton's relative competitiveness against other program crops. The rapid decline of corn and feed grain prices of 2013—due in part to a return to normal weather conditions and trend yields after two years of poor weather and below-trend yields, but also reflecting a plateauing of corn-for-ethanol demand as fuel markets reached the ethanol blend wall—encouraged some acres to return to cotton in 2014 based on regional comparative advantage. However, it has been suggested that the increase in cotton plantings in 2014 more likely reflects relative market conditions than government program incentive. At first glance, it would appear that upland cotton's treatment under the 2014 farm bill falls within the WTO criteria of causing minimal distortion in domestic and international markets. The principal cotton support program is now the insurance-like STAX program. A key finding of the original WTO panel hearing the cotton case was that crop insurance payments did not cause serious prejudice to Brazil's interests because Brazil was unable to show a necessary causal link between crop insurance programs and significant price suppression—such a link was established for Step 2 payments, market loss assistance payments, marketing loan program payments, and counter-cyclical payments. Both U.S. and Brazilian commercial interests appeared ready to see the dispute come to a satisfactory resolution. In accordance with the Framework Agreement, officials from Brazil and the United States were to meet to review and evaluate the farm bill changes and to attempt to finalize a solution to this long-running WTO dispute case. However, according to news media, the Brazilian government prepared a report on the 2014 farm bill that was presented to CAMEX, a group of Brazilian ministers responsible for deciding whether to retaliate in the cotton case, in early February. Then, on February 19, 2014, CAMEX announced its recommendation that Brazil request a WTO panel to assess whether the new farm bill brings the United States into compliance with the original 2004 WTO decision that faulted U.S. subsidies to upland cotton producers and the agricultural export credit guarantee program GSM-102. The decision to proceed with a compliance panel is based on Article 21.5 of the Dispute Settlement Understanding. Where there is disagreement as to the existence or consistency with a covered agreement of measures taken to comply with the recommendations and rulings such dispute shall be decided through recourse to these dispute settlement procedures, including wherever possible resort to the original panel. The panel shall circulate its report within 90 days after the date of referral of the matter to it. When the panel considers that it cannot provide its report within this time frame, it shall inform the DSB in writing of the reasons for the delay together with an estimate of the period within which it will submit its report. The next day, February 20, the Brazilian government informed the U.S. government that it would seek negotiations to achieve a mutually agreeable resolution before moving ahead with a WTO compliance panel request. The offer for new negotiations was positively received by the United States. By seeking negotiations with the possibility of moving to a WTO compliance panel, CAMEX and Brazil once again postponed trade retaliation for which Brazil had received WTO authority in 2009. On October 1, 2014, Brazil and the United States reached an agreement to resolve the long-running cotton dispute in the World Trade Organization (WTO). The two countries signed a new memorandum of understanding (MOU) that spelled out the terms of the agreement as described earlier in this report. With respect to U.S. farm policy, perhaps the most notable conditions defined by the MOU were new rules governing fees and tenor for the GSM-102 export credit guarantee program. The 2014 farm bill had explicitly granted USDA additional flexibility to negotiate with Brazil on GSM-102 use in order to ensure compliance with the WTO cotton case recommendations. USDA used this flexibility to agree to a shorter maximum tenor of 18 months (down from the 24-month tenor established by the 2014 farm bill) and a new risk-based fee system that includes an additional fee component for longer tenors of greater than 12 months but less than 18 months, or of 18 months. These policy concessions were supplemented with a one-time payment of $300 million to the Brazil Cotton Institute. In return, Brazil agreed to drop the WTO cotton dispute and to abide by a temporary Peace Clause with respect to any new WTO actions against U.S. cotton support programs while the 2014 farm bill ( P.L. 113-79 ) is in force or against any agricultural export credit guarantees under the GSM-102 program as long as the program is operated consistent with the agreed terms. In the end, the successful resolution of the WTO cotton dispute avoided a trade war between two of the world's major agricultural trading nations, the United States and Brazil, while resulting in substantial and substantive changes in U.S. domestic support programs for upland cotton and the U.S. export credit guarantee program in general. The resolution to the cotton case could have an important bearing on how domestic support programs are treated in future WTO trade negotiations or in future dispute settlement cases. In addition to the implications for domestic support policy, the heightened attention surrounding the WTO Brazil-U.S. cotton case has set precedent by singling out cotton for special treatment within ongoing WTO trade negotiations. Whether this case becomes a role model for future domestic support-related trade disputes remains to be seen. However, the inability of the WTO to move forward with its multilateral trade negotiations (i.e., the Doha Round) or to successfully implement the December 2013 Bali Agreement suggests that the WTO may not rapidly achieve the global trade goals of its members. As a result, the WTO's dispute settlement mechanism—which remains a primary forum for allowing members to resolve trade grievances—could likely serve as the primary mechanism for effecting future change in domestic support policies.
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On October 1, 2014, Brazil and the United States reached an agreement to resolve the long-running cotton dispute in the World Trade Organization (WTO). The two countries signed a new memorandum of understanding (MOU) that spelled out the terms of the agreement: Brazil relinquishes its rights to countermeasures against U.S. trade or any further proceedings in the dispute; the United States agreed to new rules governing fees and tenor for the GSM-102 export credit guarantee program; Brazil agreed to a temporary Peace Clause with respect to any new WTO actions against U.S. cotton support programs while the 2014 farm bill (P.L. 113-79) is in force or against any agricultural export credit guarantees under the GSM-102 program as long as the program is operated consistent with the agreed terms; the United States would make a one-time final payment of $300 million to the Brazil Cotton Institute (BCI) with explicit use-of-fund conditions; and both counties agreed to routine semi-annual reporting under the MOU. The cotton dispute settlement case (DS267) was initiated by Brazil—a major cotton export competitor—in 2002 against specific provisions of the U.S. cotton program. In September 2004, a WTO dispute settlement panel ruled that (1) certain U.S. agricultural support payments for cotton distorted international agricultural markets and should be either withdrawn or modified to end the market distortions; and (2) U.S. Step-2 payments and agricultural export credit guarantees for cotton and other unscheduled commodities were prohibited subsidies under WTO rules and should be withdrawn. In 2005, the United States made several changes to both its cotton and export credit guarantee programs in an attempt to bring them into compliance with WTO recommendations; however, Brazil argued that the U.S. response was inadequate. A WTO compliance panel ruled in Brazil's favor and was upheld on appeal. The United States made additional changes to its export credit program in the 2008 farm bill, but Brazil found the overall level of changes to fall short of the WTO ruling. The threat of retaliation led Brazil and the United States to negotiate a temporary agreement, referred to as the Framework Agreement (June 17, 2010), to avoid trade retaliation with the understanding that the WTO cotton dispute would be resolved definitively within the context of the next U.S. farm bill. In this regard, the 2014 farm bill (P.L. 113-79) included several substantive changes to both U.S. cotton support programs and the export credit guarantee program. These changes have resulted in cotton being singled out and treated differently from all other U.S. program crops. Cotton no longer has access to the price and income support programs offered for other program crops, but instead will rely on a within-year, market-based insurance guarantee—referred to as the Stacked Income Protection Program or STAX—as its primary support measure. Under this new cotton program, producers would have to pay into the program in order to participate, a loss (albeit at the county level) would have to occur before an indemnity payment would be made, and the sum of program indemnity payments under STAX and any other crop insurance policy would be prohibited from exceeding the value of the insured crop to minimize any production incentive. In addition, U.S. export credit guarantee programs have been substantially reformed, including a shortened tenor (i.e., contract length) of only 24 months—down from 36 months—and increased user fees to ensure that the program's operating costs are fully covered by fees so as to avoid any implicit subsidy. New farm legislative language also included expanded flexibility for USDA to negotiate with Brazil concerning the compliance of export credit guarantee implementation.
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The Federal Employee Dental and Vision Benefits Enhancement Act of 2004 was enacted on December 23, 2004, requiring the Office of Personnel Management (OPM) to establish arrangements under which supplemental dental and vision benefits are available to federal employees, Members of Congress, annuitants, and dependents. OPM established the Federal Employees Dental and Vision Insurance Program (FEDVIP), with coverage first available on December 31, 2006. Enrollees are responsible for 100% of the premiums, and OPM does not review disputed claims. Employees who are eligible to enroll in the Federal Employees Health Benefits (FEHB) program, whether or not they are actually enrolled, may enroll in FEDVIP. Annuitants, survivor annuitants, and compensationers (someone receiving monthly compensation from the Department of Labor's Office of Workers' Compensation program) may also enroll in FEDVIP. Eligible family members include a spouse, unmarried dependent children under age 22, and continued coverage for qualified disabled children 22 years or older. Former spouses receiving an apportionment of an annuity, deferred annuitants, and those in FEHB temporary continuation of coverage are not eligible to enroll in FEDVIP. There are four nationwide dental plans, and three additional dental plans that are only available regionally. The nationwide plans also provide coverage overseas. There are three vision plans, which all provide both nationwide and overseas coverage. Eligible individuals may enroll in a FEDVIP plan during the standard open season for FEHB plans (for 2008 coverage, open season is from November 12 through December 10, 2007). Individuals may change plans during open season each year, or following a qualifying life event. As with FEHB, new employees have 60 days to enroll. FEDVIP enrollment can be done through the Internet at http://www.BENEFEDS.com , or, for those without Internet access, by calling 1-877-888-FEDS. Individuals may choose a self-only, self +1, or a family plan. This set of options differs from the FEHB plans, which only allow for two choices: a self-only or a family plan. Individuals who choose to enroll in FEDVIP are not required to enroll in both a dental and a vision plan; they may choose only one type of coverage or both. Individuals are not required to enroll in the dental plan offered by their FEHB plan; for example, an individual whose health insurance is provided by GEHA may enroll in MetLife's dental plan and in Blue Cross Blue Shield's vision plan. However, any coverage for dental and/or vision services provided under the individual's FEHB plan is the primary source of coverage, and the FEDVIP supplemental dental and vision plans pay secondary. Additionally, active workers (not annuitants) may still contribute to a Flexible Spending Account (FSA) to cover any qualified unmet medical expenses, such as dental copayments or deductibles. Premiums vary by plan, by whether the enrollment includes other family members, and by residency (for dental plans only). Unlike nationwide FEHB plans, individuals enrolled in a FEDVIP dental plan pay different premiums depending on where they live in the country or overseas. Active employees pay FEDVIP premiums on a pre-tax basis (called premium conversion). However, unlike FEHB plans, employees may not opt out of premium conversion. Pre-tax premiums are not available to annuitants, survivor annuitants, or compensationers. While there are no preexisting condition exclusions for this coverage, there are waiting periods for orthodontia. Individuals must be in the same plan for the entire waiting period, and switching to a new plan may require beginning the waiting period over again. There are no waiting periods for vision services. While the statutes allow for more stringent waiting periods for individuals who do not enroll at their first enrollment opportunity, the brochures for 2008 do not indicate that plans have imposed additional restrictions. Enrollees will pay less out-of-pocket costs if they use in-network services. For 2008, the four nationwide dental plans are Aetna, GEHA, MetLife, and United Concordia. Both GEHA and MetLife have two optionsâa high and a standard option. There are also three regional plans: Triple-S (covering Puerto Rico), GHI (covering New York and parts of Pennsylvania, Connecticut, and New Jersey), and CompBenefits (covering 19 states, Washington, D.C., and parts of Maryland). Only the nationwide plans also provide coverage overseas. The benefits provided by these plans include, but are not limited to, the following: (1) Class A (Basic) servicesâoral examinations, prophylaxis, diagnostic evaluations, sealants, and X-rays; (2) Class B (Intermediate) servicesârestorative procedures such as fillings, prefabricated stainless steel crowns, periodontal scaling, tooth extractions, and denture adjustments; (3) Class C (Major) servicesâendodontic services such as root canals, periodontal services such as gingivectomy, major restorative services such as crowns, oral surgery, and bridges, and prosthodontic services such as complete dentures; and (4) Class D (Orthodontic) service. Premiums for these plans vary by geographic area. For example, an Aetna enrollee in Washington, D.C., will pay a monthly premium of $28.97 for self-only coverage. Monthly premiums for Aetna's plan range from $26.35 to $36.83, depending on where the enrollee resides. For all dental plans, self + 1 premiums are approximately twice the plan's self-only premium, and family premiums are about three times the plan's self-only premium. Thus, comparing plan premiums is slightly more complex than comparing nationwide FEHB plan premiums, for which everyone in the same self-only plan pays the same premium, regardless of where they live, and for which there is no self + 1 option. Similar to the FEHB program, premiums also vary by high or standard options. Table 1 , below, compares the national dental plans, including the monthly premiums for the Washington, D.C., area. Monthly self-only premiums range from $22.71 for MetLife's standard plan to $37.90 for GEHA's high option plan. Only Aetna had no premium increase over last year, with other plans increasing self-only premiums from about $1 per month (GEHA high option, with about a 2% increase) to $4.50 per month (United Concordia, with about a 15% increase) per month. The percentage of services covered by a plan varies by class of service, with only GEHA's standard plan requiring a copayment for preventive services. Enrollees who choose out-of-network services pay their coinsurance plus any amount over the plan's payment. The United Concordia plan pays only for emergency out-of-network services. All of the plans cover underserved areas, as well as those overseas. The plans also impose an annual benefit limit for total Class A through C services of $1,200 for all plans, except MetLife's high option plan with a $3,000 limit. There is a lifetime orthodontia limit, which is $1,500 for all plans, except MetLife's high option plan, which has a $3,000 limit. For 2008, the three vision plans are FEP BlueVision (Blue Cross and Blue Shield), Spectera, and Vision Service Plans (VSP). Each of these plans has both a high and a standard option, and also provides both nationwide and overseas coverage. Annual premiums for the three plans are similar; annual self-only coverage is $71.76 for Spectera, $99.36 for VSP, and $103.20 for FEP BlueVision's plan. The high-option plans cost about $20 to $40 more per year. Premiums for self + 1 plans are about double the costs of self-only plans, and premiums for family plans are about triple the costs. For 2008, Spectera had a very small premium increase (for self-only standard coverage, premiums increased by $0.20 per month, and high plan premiums increased by $0.39 per month, each about a 5% increase). The other vision plans' premiums remained the same. The more significant differences are found in benefits and network limitations. For example, under the FEP BlueVision plan, enrollees must stay in-network for covered services, with two exceptions: those who living in a limited access area or those who receive services overseas. Enrollees are responsible for any difference between the amount billed by the provider and the actual plan payment. Spectera and VSP both allow for reimbursement for visits to out-of-network providers. Generally, covered services are limited to eye exams, a choice between lenses for glasses or contacts, and extra discounts and savings on non-covered services, such as progressive lenses and additional glasses. The services are provided according to a schedule, such as eye exams every 12 months and new frames every 24 months. Additionally, plans cover low vision coverage on a limited basis. As shown in Table 2 , an individual enrolled in either of Spectera's plans could have an exam and new lenses and frames once during the course of a year. The copayment would be $10 for the exam and $10 for the lenses, or $25 for both lenses and frames, if new frames were purchased. Spectera's standard option includes scratch-resistant coating and polycarbonate lenses, and the high option also covers basic progressive lenses, tinted lenses, and UV coating. Plan brochures provide more detail on the differences between the standard and high options. The choice of covered frames is also limited. For those using services outside the network, the plans provide a schedule of payments. Enrollees may opt for contact lenses in lieu of glasses, subject to each plan's limits (i.e., generally a limit on disposable contacts, supplying only enough for part of the year). Several factors should be considered in deciding whether or not to enroll in FEDVIP, including (1) coverage of these services in a FEHB planâmore likely for those enrolled in a Health Maintenance Organization (HMO), (2) likelihood of using services covered by the plans, and (3) placing the same dollar amount that would be used toward dental and/or vision benefits premiums in an FSA (available to employees and not annuitants). Each prospective enrollee must weigh these considerations and others against his or her own level of risk aversion, as well as the fact that the individual pays 100% of the premium. Under the FEDVIP program, any coverage provided by an individual's FEHB health plan is primary, and the FEDVIP plans are the secondary payers. However, generally, the nationally available FEHB plans, have limited dental and vision coverage. This year, GEHA added limited vision coverage under its plans, offering an annual eye exam with a $25 copayment. GEHA, similar to some of the other national plans, has an arrangement with certain providers for discounted eyewear, but the enrollee would still be responsible for 100% of the discounted cost. In contrast, some of the FEHB HMO-type plans offer more comprehensive dental and vision benefits. Some high-deductible plans also provide some coverage. It is important to compare FEHB coverage to determine if also enrolling in FEDVIP is beneficial. While some enrollees know that they will use services, such an individual who wears glasses or a dependent who will need orthodontics, some services cannot be as easily predicted, such as an individual needing a root canal. Individuals must weigh their expected benefits against the premiums. For example, an individual who wears glasses, has a yearly eye exam, and uses a provider in-network may find that paying the premium will result in lower costs than paying for each of these services separately, even with pre-tax FSA funds for employees. On the other hand, an individual who does not wear glasses may not benefit from vision supplemental insurance. There is not, however, a one-to-one correlation between buying any insurance and the expectation of using the services. There is still a large share of unknown risk that any insurance protects against, so that some individuals may find themselves using services that they did not anticipate using. Both FEDVIP premiums and FSA contributions are pre-tax for employees, so that they may decide to enroll in one, none, or both. (Annuitants can not contribute to an FSA or pay premiums with pre-tax dollars.) Enrollees who choose both can use funds in the FSA for any copayments, coinsurance amounts, deductibles, amounts exceeding annual or lifetime maximums, or amounts above the plan's payment for out-of-network services. Some individuals may decide that they prefer to only contribute to an FSA and not enroll in either the dental or vision plan, and instead use their FSA funds to pay for any dental or vision expenditures. While using FSA funds provides the most flexibility, it may be that the dental and vision premiums cover more than the same dollars in the FSA. Individuals who are not sure they will use the services provided under FEDVIP can "wait and see," and if they do not use dental or vision services, they can use the FSA dollars for other qualified medical expenses. Others may choose to enroll only in FEDVIP and minimize their out-of-pocket expenditures by staying in-network. Decisions about FEDVIP and FSA can be revisited every year during open season.
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The Federal Employee Dental and Vision Benefits Enhancement Act of 2004 was enacted on December 23, 2004 ( P.L. 108-496 ), directing the Office of Personnel Management (OPM) to establish a supplemental dental and vision benefits program. OPM created the Federal Employees Dental and Vision Insurance Program (FEDVIP), with coverage first available on December 31, 2006. Enrollees are responsible for 100% of premiums and may choose a self-only, self + 1, or family plan. Coverage for dental and/or vision services provided through Federal Employees Health Benefits (FEHB) plans is the primary source of coverage, and the supplemental dental and vision plan is secondary. Employees may still contribute to a Flexible Spending Account (FSA) to cover any qualified unmet medical expenses.
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This first section provides the context for the debate on extending public financing to congressional elections, beginning with a discussion of two major political realities that inform that debate. The first is the presidential public financing system that has been in place since 1976 and has had mixed success in realizing the goals of its original sponsors. The second is the interplay between the concepts of public financing and campaign spending limits, which are often linked but which have very distinct characteristics; the 1976 landmark Supreme Court decision in Buckley v. Valeo contributed to that linkage because of its allowance for only voluntary spending limits, such as in conjunction with a public financing system. The section concludes with a summary of arguments for and against public financing, arguments which have not changed in essence over time but which have been shaped by the political realities noted above. The second section provides a historical review of efforts in Congress to enact public financing of its elections (although some attention is paid to presidential public financing as a precursor). The section begins with a brief review of early congressional interest and activity in the 20 th century, followed by a more detailed Congress-by-Congress discussion beginning with the 90 th Congress. Special attention is paid to the two periods in which congressional activity on public financing was the greatest: the Watergate-focused 93 rd Congress and the 100 th -103 rd Congresses. Public finance bills were passed by at least one chamber in those two periods, although the latter period was marked by a move toward downplaying public funds per se in favor of the broader concept of public benefits. The section concludes with a review of the major features of congressional proposals, presented as policy options to choose from in devising a congressional public finance system. The third section examines the experience of the 16 states that provide some form of public subsidies to candidates for state office. This section features a table ( Table 1 ) detailing these systems, and concludes with an analysis of the impact of public finance programs in the states. It is important to note from the outset, however, that this report does not examine recent constitutional and other legal challenges to some states' public financing programs. As developments in this area become clearer over time, this report will be updated. The fourth section offers a discussion of public opinion data on support for public financing of elections, as well as for the related idea of campaign spending limits. Public opinion is not as extensive on these questions as in the 1970s, when the idea of public financing was particularly prominent. The final section reviews the experience from public finance systems at both the state and presidential levels to offer some overarching observations for Congress possibly to consider in devising a public finance system for its elections, should it choose to do so. The report concludes with appendices to augment the information in the section on congressional proposals. Appendix A is a table ( Table A -1 ) providing details of the public finance (or benefits) measures that have passed either chamber (from 1973 -1993); because they passed at least one chamber, these bills are perhaps the most important for Congress to review before beginning a fresher look at the idea. To allow a more contemporary look at how recent public finance proposals have evolved, appendices provide detailed summaries of public financing legislation introduced in recent congresses. Two bills that propose to publicly finance congressional campaigns have been introduced in the 112 th Congress. Both bills, H.R. 1404 (Larson) and S. 750 (Durbin), are companion measures. These latest versions of the Fair Elections Now Act (FENA) are substantially similar, with some changes in proposed benefits to participating candidates, to versions introduced during the 111 th Congress. A third bill introduced in the 112 th Congress, S. 749 (Durbin), provides a separate funding mechanism for the public financing program proposed in S. 750 . Specifically, S. 749 would fund the public financing program through a 0.5% tax on those holding government contracts of more than $10 million. Additional discussion appears in the " 112th Congress " section of this report and in Appendix E at the end of this report. While public financing of congressional elections has been advocated for a century, contemporary discussions of these proposals are informed by two basic political realities of the past 30 years. First, the nation has had public financing in presidential elections since 1976. That system serves both as a model for proposals to extend public financing to congressional elections and as a case study of how a congressional system might and might not be structured. Second, in striking down mandatory expenditure limits in 1976 while allowing voluntary limits in the context of a public finance system, the Supreme Court's Buckley v. Valeo ruling resulted in a closer linkage between the distinct concepts of public subsidies for election campaigns and limitations on campaign spending. Since 1976, public funds have helped finance presidential elections, with the level of funds determined by a taxpayer designations on a voluntary check-off. This system was established initially under the Revenue Act of 1971 and augmented by the Federal Election Campaign Act (FECA) Amendments of 1974. Candidates who meet eligibility requirements and agree to voluntary limits on campaign expenditures are eligible for matching funds in the primaries. In the general election, major party candidates automatically qualify for full subsidies equal to the spending limit; minor party and independent candidates may also qualify for public funds by meeting specified criteria. Also, political parties may receive funding for their nominating conventions. Additional discussion of the provisions and evolution of the presidential public financing program appear in another CRS product. At the outset of any discussion on public financing proposals, it is important to address the question of expenditure limits because, almost invariably, legislative proposals for public funding are linked with candidates' adherence to spending limits. (In fact, the absence of spending limits in some public financing proposals, first offered in the 111 th Congress, marks a notable departure from most proposed public financing programs.) Despite this common linkage, public financing and spending limits are distinct concepts, with distinct potential benefits and drawbacks. Public financing of elections, at its core, is aimed at reducing reliance by politicians on private, interested sources of money for their elections. Expenditure limits are essentially aimed at curbing rising and, in the view of many, excessive amounts of money spent on elections. In fact, from the time public financing was first proposed by President Theodore Roosevelt in 1907 until the Supreme Court's 1976 ruling in Buckley v. Valeo (424 U.S. 1 (1976)), the impetus for passage stemmed more from the concern over the source of campaign money than the overall amount spent. In that landmark ruling, the Court struck down mandatory spending limits (such as those imposed on congressional candidates by the FECA Amendments of 1974), but allowed that in a voluntary system of public financing, it was permissible to require candidate adherence to spending limits as a condition of a government-provided benefit (i.e., public funds). Hence, spending limits in conjunction with public funding would be permissible because candidates voluntarily accepted them. In light of the Buckley decision, the prevailing view among policymakers has been that public financing offers the only realistic means of controlling campaign expenditures in congressional elections, short of enacting a constitutional amendment to allow mandatory limits (which Congress has refused to support on several occasions). Finally, it should be noted that some of the goals sought in the public funding and spending limit measures have been addressed in other legislation, which has been less sweeping yet often with significant bipartisan support. Proposals to lower campaign costs, without spending limits, have been prominent in Congress at least until enactment of the Bipartisan Campaign Reform Act of 2002 (BCRA). Bills to provide free or reduced-rate broadcast time and postal rates have sought to reduce campaign costs and the need for money, without the possibly negative effects of arbitrary limits. Bills to provide for tax credits for small individual contributions have sought to encourage a greater role for citizens vis-à-vis organized interest groups. These measures offer the potential of realizing some of the aims of the more comprehensive measures but without some of the perceived pitfalls. A few major points are common arguments in favor of public financing. Supporters say that public financing can reduce the threat of political corruption, enhance electoral competition, and allow candidates to focus on issues rather than raising money. To many observers, the amount of money spent in elections today is arguably corrupting the political system, forcing candidates and officeholders to spend increasing amounts of time raising money, possibly creating pressure on them to rely on affluent individuals and special interests for campaign assistance, conceivably deterring candidates without personal fortunes from attempting to run for office, and leaving an impression among some voters that elections are "bought and sold." Accordingly, one of the most prominent goals behind public financing is reducing the potential for corruption or the appearance of corruption. As political scientists Donald A. Gross and Robert K. Goidel have explained, "Public subsidies to candidates, whether in the form of direct grants or matching funds, are seen as a way to minimize the undue influence and corruption often ascribed to contributors and partisan fundraising." Many former lawmakers, interest group representatives, political professionals, and academic experts submitted written testimony for the McConnell v. FEC lawsuit heard by a U.S. District Court and the Supreme Court of the United States in their consideration of BCRA. Some of this testimony included empirical analysis of claims about potentially corrupting influences from private money in campaign politics and related issues. Other public financing goals relate to electoral competition. Public financing provides candidates—regardless of personal wealth—with financial resources to wage campaigns. This allows candidates who might not otherwise run for office to do so. As is noted in the discussion of states' experiences with public financing, most programs require that candidates demonstrate political viability before being eligible for funds. If more candidates have access to funds, supporters say that electoral competition should increase. Finally, public financing is attractive to some because it is one of the few constitutional ways to limit campaign spending—a major concern among campaign reformers. Although the Supreme Court's 1976 Buckley v. Valeo ruling held that campaign spending generally could not be subjected to mandatory limits, candidates could be required to limit spending in exchange for receiving public funding. As is discussed elsewhere in this report, some public financing systems—including the presidential one—are today in jeopardy because major candidates fear that observing spending limits associated with public financing will preclude them from spending enough money to wage competitive campaigns. Objections to public financing are also varied. Many are rooted in philosophical opposition to funding elections with taxpayer money, compelling taxpayers to support candidates whose views are antithetical to theirs, and adding another government program in the face of some cynicism toward government spending. Opponents also raise administrative concerns: how can a system be devised that accounts for different natures of districts and states, with different styles of campaigning and disparate media costs, and is fair to all candidates—incumbent, challenger, or open-seat, major or minor party, serious or "longshot"? Similarly, opponents assert that public financing could distort elections by imposing the same system on 50 different states with different degrees of competitiveness in individual races and by providing even greater advantages to incumbents than already exist, thereby decreasing the competitiveness of elections. In view of the relatively low rate of participation in the voluntary check-off for the existing presidential system, they see little evidence that the public would favor such a plan. Some public financing opponents believe that government-funded campaign subsides amount to "welfare for politicians," and are an inappropriate use of taxpayer dollars. These opponents argue that public financing could coerce candidates into limiting their campaign spending—viewed as a form of political speech—in exchange for funding, or that it could force taxpayers to indirectly fund campaign messages they might find objectionable. On a related note, opponents suggest that public financing could waste taxpayer money on "fringe" candidates who represent political views that may be far outside the mainstream and who have little chance of winning elections. In response to arguments that public funding is necessary to limit campaign expenditures, those opposed to public financing often argue that campaign spending is not high, especially compared with commercial advertising budgets or spending on consumer goods. They argue that worthy candidates will win public support without government intervention via public financing. Some researchers also suggest that concerns about rising campaign costs are overstated, and that most campaign fundraising comes from individuals who give less than the legal limit. Finally, opponents of public financing sometimes argue that proponents fail to sufficiently support their arguments in favor of public financing, relying instead on the "self-evidence" of its appeal. For example, although the appearance of corruption or potential corruption is a common argument in favor of public financing, political scientists Jeffrey Milyo and David Primo have found that scholarly research on the topic is limited or anecdotal. The same, they say, is true for fears about declining trust in government and declining voter turnout, which some contend could be buoyed by public financing. While the idea of public financing of federal elections was first proposed in 1907, it was not until the 1950s that bills were first introduced in Congress to implement such a plan. Since that time, legislative proposals have been offered in nearly every Congress, while the extent of legislative activity around the issue has varied according to the political climate and circumstances. In two very active periods, bills to extend public financing to congressional elections have passed one or both houses but were never enacted. In the first period, during the 93 rd Congress (1973-1974), the Senate twice passed bills for public funding in congressional elections, widely seen as a response to the unfolding Watergate scandal. In 1973, a bill was passed providing full subsidies (equal to mandatory spending limits) to major party candidates in House and Senate general elections. In 1974, a bill was passed providing matching funds in House and Senate primaries and full subsidies (equal to the voluntary spending limits) to major party candidates in House and Senate general elections. Both provisions were later deleted in conference, in view of some strong opposition in the House. In the second period, the 100 th through 103 rd Congresses (1987-1993), the House and Senate spent considerable amounts of time debating bills that featured the twin ideas of voluntary spending limits and public financing. In the 101 st , 102 nd , and 103 rd Congresses, both chambers actually passed such bills; the 102 nd Congress bill was vetoed by President George H.W. Bush, but the bills in the other two Congresses were never reconciled in conference. In contrast to the first period, when one of the Senate-passed bills covered both primary and general elections, bills in the second period offered benefits only for general election candidates. More broadly, efforts in the more recent period reflected a move toward paring down the level of public treasury funds going to campaigns, in light of a less favorable political climate. The emphasis in this second period shifted from public funds per se to public benefits . Public benefits were those either financed with public resources—whether directly, as with public subsidies, or indirectly, as with revenue forgone from tax incentives or postal discounts—or mandated by government action, such as requirements for reduced broadcast rates, at no cost to the U.S. Treasury. The common element was that they all constituted incentives to participation in a voluntary system based on campaign spending limits. The earliest suggestion to Congress of public subsidies for election campaigns was apparently made by President Theodore Roosevelt in 1907 in his annual message to Congress. Roosevelt saw reforms such as requiring disclosure and prohibiting corporate contributions as worthwhile but difficult to enforce and inadequate in deterring "an unscrupulous man of unlimited means from buying his own way into office." He suggested an admittedly radical approach of providing ample appropriations to the major national political parties to fund their "organization and machinery." Parties receiving federal monies were to be limited to a fixed amount that could be raised from individual contributors, all of which would be disclosed to the public. It is unclear from the text of his message (the relevant portion of which is reprinted below) whether Roosevelt intended this plan to be limited to presidential, as opposed to all federal, campaigns. At the time, given the political parties' central role in financing all election campaigns, the distinction may not have been as great as it would be today, when candidates take the lead role in financing their campaigns. In any case, the section of the message was titled "Presidential Campaign Expenses." Under our form of government voting is not merely a right but a duty, and, moreover, a fundamental and necessary duty if a man is to be a good citizen. It is well to provide that corporations shall not contribute to Presidential or National campaigns, and furthermore to provide for the publication of both contributions and expenditures. There is, however, always danger in laws of this kind, which from their very nature are difficult of enforcement; the danger being lest they be obeyed only by the honest, and disobeyed by the unscrupulous, so as to act only as a penalty upon honest men. Moreover, no such law would hamper an unscrupulous man of unlimited means from buying his own way into office. There is a very radical measure which would, I believe, work a substantial improvement in our system of conducting a campaign, although I am well aware that it will take some time for people so to familiarize themselves with such a proposal as to be willing to consider its adoption. The need for collecting large campaign funds would vanish if Congress provided an appropriation for the proper and legitimate expenses of each of the great national parties, an appropriation ample enough to meet the necessity for thorough organization and machinery, which requires a large expenditure of money. Then the stipulation should be made that no party receiving campaign funds from the Treasury should accept more than a fixed amount from any individual subscriber or donor; and the necessary publicity for receipts and expenditures could without difficulty be provided. Roosevelt was not exaggerating when he commented that it would take "some time" for people to familiarize themselves with such a proposal. From the mid-1920s through the 1970s, select and special committees had been established by every Congress (predominantly on the Senate side) to investigate campaign expenditures—presidential or congressional—in recent elections. Reports issued at the conclusion of the work of these committees often included recommendations designed to correct shortcomings perceived in existing campaign finance practices. In 1937, during the 75 th Congress, the report of the Senate's Special Committee to Investigate Campaign Expenditures of Presidential, Vice Presidential, and Senatorial Candidates in 1936 was released. Included in its section of recommendations was a proposal for public funding of all federal elections, which the committee passed along without judgment as to its merits. All private contributions were to be prohibited under this plan. Under recommendation no. 9, the report said, It has been suggested that private contributions to political campaigns be prohibited entirely and that instead all election campaign expenses should be defrayed from public funds. Congress apparently took no action on this proposal. Interest in public funding of political campaigns has often been aroused by allegations of unethical conduct by public officials for accepting particular campaign contributions. Such was the case on July 6, 1949, when Senator Henry Cabot Lodge, Jr., introduced a resolution to commission a study by the Committee on Rules and Administration on the mechanics of establishing a system of public funding of presidential campaigns. In introducing his resolution, Lodge responded to rumors government corruption. The resolution—S.Res. 132—read as follows: Resolved. That the Senate Committee on Rules and Administration is authorized and directed to make a full and complete study and investigation for the purpose of obtaining such information with respect to the problems involved in financing with governmental funds presidential election campaigns in the United States as may be necessary to enable the committee to formulate and report at the earliest practicable date a bill providing for such method of financing presidential election campaigns. Lodge's support for this concept, the details of which he envisioned coming out of a congressional study, was summed up in this excerpt from his floor statement: All this talk of an "office market," and of putting high executive and diplomatic positions on the auction block—all this breeding of suspicion and cynicism would disappear, I believe, overnight if the primary cause of the evil were obliterated at its root. If no private individual or officer of a corporation were permitted by statute to contribute one cent to a presidential campaign there would be a far cleaner atmosphere surrounding political appointments, and this would encourage public-spirited men holding public office. If there are no bidders, there can be no auction. Lodge acknowledged that the same principle could also be applied to other offices, but he was limiting his suggestion to presidential races because of the enormous number of appointments to public office at the President's disposal. Apparently the type of corruption which motivated Lodge in S.Res. 132 was the selling of government positions rather than the broader notion of trading influence or access on policy questions for campaign contributions. A concern over the latter possibility would be a likely prerequisite for any proposal for public financing of congressional campaigns. No action was taken on S.Res. 132 by the Committee on Rules and Administration. During the 84 th Congress, the name of Theodore Roosevelt was invoked when the first public funding bills were introduced in Congress, almost 50 years after being suggested by Roosevelt. On February 20, 1956, Senator Richard Neuberger introduced S. 3242, to provide for direct public subsidies for all major party campaigns for federal office, co-sponsored initially by Senators Wayne Morse, James Murray, Paul Douglas, John Sparkman, and Mike Mansfield. The identical bill was submitted two days later in the House as H.R. 9488 by Representative Frank Thompson. "Sometimes I call my bill the Teddy Roosevelt bill, because of its origin," observed Neuberger; Thompson commented that the bill could "appropriately, enough, I think be called the Theodore Roosevelt Campaign Contributions Act of 1956." Neuberger, who quickly became identified as the chief congressional proponent of public financing at the time, declared that S. 3242 was "the most far-reaching bill ever proposed to strike loose the financial fetters from our democratic processes of government." The final impetus for the bill was the recent revelation of a large campaign contribution offered to a Senator by an oil company during debate on removing federal controls from natural gas prices. The alleged bribery attempt contributed to Neuberger's view that, These contributions, in my opinion, have become an unbearable yoke to many of the men who must accept them. They even have become onerous and objectionable to the individuals who parcel out such contributions. Neuberger based his proposal on the belief that the system of raising campaign funds from private sources hampered the independence of public officials, created doubts among the public about the integrity of the government, and created an inequality in gaining access to voters by various candidates. He continued in his statement to articulate what would remain the major motivation for later advocates of publicly financed elections: An undemocratic element is introduced when one nominee can eclipse his opponent not because of superiority of ability or of his policies, but merely through a preponderance of coin of the realm .... We would not dream of permitting our Presidents or our Senators and Representatives to draw their pay from a private payroll or in the form of private contributions; they get paid by the public for whom they act. Why, then, leave their campaigns for these offices to be lavishly financed from private sources? Neuberger's bill provided for the allotment of federal funds to the major political parties, to be used for campaign expenditures of its candidates for federal office. (In the 1950s, election financing was still substantially conducted by the parties, in contrast with today, when party support is considered ancillary to the expenditures of the candidates themselves.) A major party was defined as one which received at least 10% of the vote in the previous national election. The total federal contribution for a two-year period would be determined by multiplying 20 cents by the average number of votes cast in the previous two presidential elections (for presidential election years) and 15 cents by the average number of votes cast in the previous two House elections (for non-presidential election years). The system would be conducted on a voluntary basis and would allow for parties to accept donations from private sources, provided that no individual's contribution exceeded $100 and that the total raised from these sources did not exceed the total federal donation. The term "matching funds" was used by Neuberger to describe the system, but it differed from the present system of matching funds in presidential primaries in that the federal subsidy in the latter case is determined by the amount raised privately; in the Neuberger proposal, the amount that could be raised privately was to be determined by how much the federal subsidy would be. The proposed system was to be administered by a Federal Campaign Contributions Board, to include an administrator and one representative from each major party. During the 1950s and 1960s, Congress turned its attention to the Federal Corrupt Practices Act, the law governing campaign financing since 1925, and to its perceived inadequacies both in limiting amounts of money raised and spent in elections and in promoting transparency. Numerous hearings were held and bills introduced aimed at improving the nation's campaign finance laws generally. A few bills providing direct public financing were introduced in nearly every Congress since the 84 th Congress (1955-1956), but most of these were proposed and supported by a small minority of Members. A greater number of proposals, in this period, however, did include indirect public financing of elections, in the form of tax credits and deductions. In 1962, a report was released by the President's Commission on Campaign Costs, established the previous year by President John F. Kennedy to make recommendations for improving campaign finance practices and laws. While the report was ostensibly focused on presidential elections, its findings were more broadly applicable to all federal elections because of the extent to which the political parties were at that time the major financiers of all federal campaigns. Its recommendations, which included tax incentives to encourage individual donations to political parties, did not include the proposal urged on it by many for direct public subsidies. Rather, the commission expressed concern for public financing's potential to discourage citizen participation in campaigns, to redistribute power arbitrarily within the parties, to encourage fraud, and to be administered unfairly. However, the commission expressed interest in a "matching incentive system," whereby small individual donations to parties would be equally matched with U.S. Treasury funds. Such a system found favor with the commission because the amount of subsidy would be determined not by governmental action but by "private voluntary action." The 1962 commission report thus advanced the concept of direct government subsidies of campaigns for federal office. In 1966, Congress took its first step toward public subsidies in federal elections when it enacted the Presidential Campaign Fund Act, providing public subsidies to major political parties for their presidential campaigns. The proposal, sponsored by Senator Russell Long (and which he initially introduced as S. 3469), was added by the Senate Finance Committee as an amendment to H.R. 13103, the Foreign Investors Tax Act. The act was signed into law November 13, 1966, by President Johnson, as P.L. 89-809. The following year, amidst congressional pressure to repeal the act, an amendment was added to the Investment Tax Credit bill (H.R. 6950) to make the act inoperative until Congress provided written guidelines on how the funds were to be distributed. With approval of the bill as P.L. 90-26, the Presidential Campaign Fund Act was effectively killed before it was ever implemented. In the 90 th Congress, the first public finance bill that covered congressional elections was reported from committee. As reported by the Senate Finance Committee, H.R. 4890, the Honest Elections Act of 1967, provided for optional public financing for general election campaigns of presidential, vice presidential, and senatorial candidates (the committee left the extension of the system to House elections to that body). The system was based on permanent appropriations of the funding necessary, with the stipulation that no private funds could be raised from 60 days before to 30 days after the general election. Funds were to be provided directly to candidates, not through the parties, as earlier bills had done, perhaps in recognition of the onset of candidacies in the 1960s that were more independent of the party structure. The bill was opposed by the committee's six Republican members, who protested its financial burden to taxpayers and its unfairness to taxpayers who were thus forced to support candidates they opposed. The measure never came to the Senate for a vote. The 92 nd Congress marked a milestone in the federal government's evolving role in election finance, with enactment of FECA to replace the Corrupt Practices Act of 1925 as the nation's chief statute governing campaign finance and also the enactment of public financing in presidential general elections. The latter was added as a floor amendment by Senator John Pastore during Senate consideration of the Revenue Act of 1971. It set up the Presidential Election Campaign Fund, financed through a $1 tax check-off (as was first enacted in 1966), to fund presidential general election campaigns. The Pastore amendment also included tax credits and deductions for political contributions, an indirect form of public financing. The amendment survived Senate debate and the House-Senate conference; the underlying legislation survived a veto threat by President Nixon by delaying implementation of the public finance system to the 1976 election. The Revenue Act of 1971 was signed into law December 10, 1971 (P.L. 92-178). In the 93 rd Congress, public financing of elections became a major and continuing issue before Congress for the first time, largely in response to the Watergate scandal unfolding in 1973 and 1974. To the extent that large and unaccountable sums of campaign money seemed to be connected to the scandal, many Members came to see the newly enacted FECA of 1971, which essentially required uniform disclosure of campaign money, as inadequate in preventing the kinds of abuses then being uncovered. In addition, public financing of presidential elections was not due to begin until 1976. Those focusing on campaign finance law amendments came to center on the ideas of limits on contributions and expenditures, and on extending public financing to congressional elections. Some 76 bills were introduced in the House and Senate to provide direct subsidies in congressional elections; in the House, more than 140 Members cosponsored such bills. In July 1973, public finance supporters, led by Senators Edward Kennedy and Hugh Scott, tried to add congressional public funding to the 1973 FECA Amendments. The Kennedy-Scott amendment (no. 406) to S. 372 would have provided public subsidies in House and Senate general elections, with major party candidates eligible for a subsidy equal to the proposed spending limit. The amendment was tabled on a 53-38 vote. Later in 1973, the Senate passed public financing of congressional elections, the first time either chamber had ever done so. It took the form of amendment no. 651, offered by Senators Kennedy, Scott, and others, to H.R. 11104 , the Public Debt Ceiling bill. As added on the Senate floor by a 52-40 vote, the amendment provided for mandatory public financing in House and Senate general elections. Major party House candidates were eligible to receive the greater of 15 cents per eligible voter, or $90,000; major party Senate candidates were eligible for the greater of 15 cents per eligible voter, or $175,000; private contributions were essentially eliminated in the general election (minor party candidates were eligible for funding based on their parties' vote share in the previous election). H.R. 11104 , as amended, passed the Senate that day by a 58-34 vote. This provision was removed, however, when the House refused to accept the Senate amendments. A leadership agreement resulted in the matter being dropped from the public debt limit bill and killing the issue for the first session of the 93 rd Congress. see Appendix A for details on this measure.) By 1974, after a year of the unfolding Watergate scandal, support for public financing of elections was growing in Congress. In February 1974, the Senate Rules and Administration Committee reported a new version of the FECA Amendments (in lieu of S. 372 ), which included public funding in presidential and congressional primary and general elections. As reported with only one dissenting vote, S. 3044 created a system for all federal elections, which is still in place in presidential elections: a voluntary system, with matching funds in the primaries and a fixed subsidy in the general election, all funded from the check-off on federal tax returns. The committee report expressed the view then in ascendancy about the need for public funding: The only way in which Congress can eliminate reliance on large private contributions and still ensure adequate presentation to the electorate of competing candidates is through comprehensive public financing.... The election of federal officials is not a private affair. It is the foundation of our government. As Senator Mansfield recently observed, it is now clear that "we shall not finally come to grips with the problems except as we are prepared to pay for the public business of elections with public funds." Senate debate on S. 3044 lasted for 13 days, in which proponents were able to defeat four amendments to drop public financing completely, two amendments to reduce the level of public funds, one amendment to reduce funding to incumbents by 30%, and one amendment to add three free mass mailings to general election candidates. The Senate passed S. 3044 on April 11, 1974, by a 53-32 vote, following a second, and successful, vote to invoke cloture. (See Appendix A for details on this measure.) Public financing of congressional elections, however, was not included in the House Administration Committee's reported version of the 1974 FECA Amendments, H.R. 16090 . Supporters, led by Representatives John Anderson and Morris Udall, attempted to add a voluntary matching system for House and Senate general elections, but their amendment to H.R. 16090 was defeated by a 187-228 vote. Public financing of congressional elections was a particularly contentious issue in the House-Senate conference on S. 3044 , but ultimately it was dropped, while the presidential public financing provisions were left intact. That bill did, however, leave spending limits (without public funding) in place for congressional elections, at different levels than in S. 3044 initially: $70,000 for House primaries and general elections, the greater of eight cents per eligible voter, or $100,000, in Senate primaries, and the greater of 12 cents per eligible voter, or $150,000, in Senate general elections. Also, limits on spending from personal and family resources were imposed on House candidates ($25,000) and Senate candidates ($35,000). Activity on behalf of public financing of congressional elections subsided considerably after the 93 rd Congress, which had seen particularly strong momentum for governmental and electoral reforms as the Watergate scandal was unfolding. Public finance supporters did, however, make several unsuccessful attempts to revive the issue in the 94 th through 96 th Congresses. During consideration of the FECA Amendments of 1976 in the 94 th Congress, Senate supporters of public financing failed to get congressional public financing included in the bill reported by the Rules and Administration Committee ( S. 3065 ). House supporters, led by Representative Phil Burton, offered a floor amendment to the FECA Amendments ( H.R. 12406 ), providing for matching funds in House and Senate general elections; the amendment failed on a 121-274 vote. The 95 th Congress began auspiciously for public finance supporters with the announced support of House Speaker Thomas P. O'Neill, Jr., and Senate Majority Leader Robert Byrd, with the elevation of public finance supporter Frank Thompson to House Administration chairman, and with a series of election reform measures, including public financing of congressional elections, by President Jimmy Carter. The Senate Rules and Administration Committee considered S. 926 , which, as introduced by Senators Kennedy, Dick Clark, Alan Cranston, Charles Mathias, and Russell Schweicker, proposed matching funds in Senate primaries and a combination of subsidies and matching funds in Senate general elections. The reported version of S. 926 , however, deleted funding for primary elections, as suggested by sponsors, in order to increase chances for passage in the House. Opposition to public financing was strong enough to force three cloture votes to limit debate on S. 926 . After the final cloture vote failed, the Senate voted 58-39 for an amendment by Senator James Allen to delete public financing of Senate general elections. The new House leadership support led to six days of House Administration Committee hearings on public financing of congressional elections, although no consensus developed over what approach to choose. An attempt to report a bill for partial public funding of House general elections failed in October 1977, after approval of two amendments offered by public finance opponents which added to the costs of the system and were seen as making the bill more difficult to pass (one extended funding to primaries; the other extended funding to all candidates who met a contribution threshold). Following adoption of these amendments, Chairman Thompson discontinued the markup, saying the votes were lacking to report a measure. On two occasions during the second session of the 95 th Congress, the House narrowly defeated rules to allow consideration of public finance measures. An amendment to H.R. 11315 , intended as a non-controversial set of amendments to federal campaign finance law, was offered in March 1978 by Representatives Thomas Foley and Barber Conable, proposing a matching fund system in House general elections. The underlying bill became embroiled in controversy, however, thus poisoning the atmosphere for House consideration of the public finance amendment as well. The open rule, allowing for consideration of the Foley-Conable amendment, was defeated on a 198-209 vote on March 21, 1978. Included in those voting against the rule were some 25 Republicans who had reportedly committed to voting for the public finance amendment. A second effort by public finance supporters came with a proposed amendment to the Federal Election Commission (FEC) authorization bill for FY1979 ( H.R. 11983 ). The amendment, similar to the one offered in March 1978, was offered by Representatives Foley, Conable, Anderson, and Abner Mikva. In contrast with the situation in March, the reported rule was a closed one, thus prohibiting amendments on the floor. An effort to defeat the proposed rule was made by public finance supporters, but it failed on a 213-196 vote on July 19, 1978. That vote, which observers saw as reflecting congressional sentiment on public financing, ended consideration of the issue for the 95 th Congress. As the 96 th Congress began, the House leadership accorded the efforts of public finance advocates—led by Representatives Foley, Conable, Anderson, Udall, Mikva, and Tim Wirth—priority status by designating their proposal H.R. 1 . Similar to the failed amendments of the 95 th Congress, the bill provided for matching funds in House general elections, in conjunction with voluntary spending limits. The House Administration Committee held five days of hearings in March 1979 on this and other public finance bills. On May 24, 1979, despite efforts by supporters to gain more support, the bill failed to be reported, on a 8-17 vote. With that vote, the momentum for extending public financing to congressional elections that had begun in the 93 rd Congress came to an end. While public financing remained an objective for many in Congress and bills continued to be introduced, the 97 th through 99 th Congresses saw no concerted effort in pursuit of this goal. In part, this reflected a changed political environment, with Senate control during this period (1981-1987) shifting to Republicans, generally less supportive of public financing than Democrats, and with frustration over the failure to enact public financing in the 93 rd through 96 th Congresses. Those advocating campaign finance reform set their sights on a less sweeping goal during the 1980s, and much of the 1990s: restricting the growing role of political action committees (PACs), the political agents of interest groups, in the financing of congressional elections. Like public financing, curbs on PACs were intended to lessen the importance of money, particularly "interested" money, in elections. Unlike public financing, restrictions on PACs did not involve the highly controversial issue of using tax revenues to fund campaigns and the invariably associated goal of limits on campaign spending. But, despite 19 days of hearings in the 97 th through 99 th Congresses, partisan stalemate on the PAC issue kept any major campaign finance bills from floor votes. The political environment again shifted in the 100 th Congress, with a Democratic majority in the Senate following the 1986 elections. With this change, the goal of campaign reform advocates quickly extended from curbs on PACs to their longer-standing objective of public financing and campaign spending limits in congressional elections. The twin ideas of voluntary spending limits and participation incentives in the form of public funds or some form of cost-saving benefits became the cornerstone of the leading reform proposals through the 105 th Congress. On the first day of the 100 th Congress, Senate Majority Leader Robert Byrd joined Senator David Boren in cosponsoring S. 2 , which became the focus of reform efforts and eventually gained 50 additional cosponsors. As reported by the Rules and Administration Committee, the bill featured public funding for Senate general election candidates who agreed to spending limits (in both their primary and general election campaigns) and aggregate PAC receipts limits for House and Senate candidates. The public funding amount for major party candidates was equal to 80% of the state's spending limit for the general election. The measure was brought to the floor in June 1987, in the face of strong Republican opposition and the stated intention of opponents to filibuster the measure. After a failed vote to invoke cloture, sponsors of S. 2 offered an amendment to change the public funding component from a full subsidy for major party candidates to a matching fund system, thereby reducing in half the cost of the subsidy (and changing the expenditure limit formula as well). Opponents were not mollified, and four successive cloture votes in June 1987 also failed. Sponsors made yet another attempt to scale back the public funds component of the bill, in an effort to gain the needed votes to overcome the filibuster. The second substitute amendment provided subsidies only to those whose opponents exceeded the voluntary limits, as both a disincentive to the large spender and as a means of "leveling the playing field." In addition, the substitute offered lower postal and broadcast rates to candidates who agreed to abide by the voluntary spending limits, both as an incentive to participation in the system and as a means of curbing campaign costs. This change also proved insufficient to ameliorate the opposition, and, following three additional failed cloture votes, the measure was pulled from further consideration in February 1988. House and Senate leaders offered and enabled passage of bills featuring spending limits and public benefits (the concept of public financing per se became broadened to public benefits as Members sought ways to reduce the level of direct treasury funding to campaigns). The Senate Rules and Administration Committee reported S. 137 (Boren-Mitchell), based on the final version of S. 2 in the 100 th Congress, with spending limits, public benefits, and a PAC receipts cap. A substitute was offered May 11, 1990, reflecting several features aimed at increasing support for a public benefits and spending limits system. Public funds per se, in the form of direct cash payments to candidates, were to be triggered only on a contingency basis, to compensate participating candidates against free-spending opponents and independent expenditures against them (or for their opponents). The principal subsidy for all participants was to take the form of broadcast communication vouchers, whereby broadcasters would be reimbursed with federal funds but no funds would be transmitted directly to candidates. The other benefits were a reduced broadcast rate, through requiring the lowest unit rate be made available only to participating candidates (and making such time not subject to preemption), and a reduced postal rate; neither of these benefits involved direct payments to candidates although the postal benefit did involve revenue loss to the U.S. Postal Service. Even the spending limits, based on the same population-based formula as was used in the 100 th Congress bill, were adjusted as a means of increasing Senate support, with the provision for an additional 25% in allowable spending from small in-state donors. Senate debate began July 30, 1990, and encompassed 16 roll-call votes on amendments, including one by Senator Mitch McConnell to strike public funds entirely (defeated by 46-49) and another by Senator John Kerry to greatly increase the level of public funds (defeated by 38-60). On August 1, 1990, the Senate passed S. 137 on a 59-40 vote, with five Republicans for and only one Democrat against. It featured voluntary Senate spending limits, communication vouchers, postal and broadcast discounts, and subsidies to match independent expenditures and wealthy opponents, plus other campaign finance provisions. (See Appendix A for details on this measure.) In the House, the Democratic leadership offered a measure which went even further than the Senate bill in reducing the role of public funds as an incentive to adhering to spending limits. In exchange for agreeing to spending limits, which were set at $550,000 for a two-year election cycle (and an additional $165,000 in the case of a nominee who won a competitive primary), H.R. 5400 (Swift) offered House general election candidates three benefits, none of which involved direct payments to candidates. These included lower rates on first- and third-class mailings in the last 90 days of an election, one free radio or TV spot for every two purchased, and a 100% tax credit for in-state contributors (up to $50, or $100 on joint returns). While public funding was involved in H.R. 5400 , it took a less direct form than with candidate subsidies. H.R. 5400 was passed by the House on August 3, 1990, by a 255-155 vote. (See Appendix A for details on this measure.) A conference committee was appointed, but, faced with large differences between H.R. 5400 and S. 137 and a presidential veto, it never met. Public financing of congressional elections advanced further in the legislative process during the 102 nd Congress than ever before or since. Bills comparable to those passed in the 101 st Congress were approved by the Senate and House and reconciled in conference, but vetoed by President George H.W. Bush. On March 20, 1991, the Senate Rules and Administration Committee reported S. 3 (Mitchell-Boren), similar to S. 137 (101 st Congress). When Senate debate began May 15, the Boren substitute amendment was incorporated into S. 3 . Debate took place over six days and encompassed 21 roll-call amendment votes, including one by Senator McConnell to eliminate the public funding and spending limits from the bill (defeated on a 42-56 vote) and one by Senator Kerry to increase vastly the public funding level in the bill (defeated on a 39-58 vote). On May 23, 1991, the Senate passed S. 3 on a 56-42 vote, with all but five Republicans voting against and all but five Democrats in favor. As passed, S. 3 included voluntary Senate spending limits, an extra 25% allowance in spending from small in-state donations, broadcast communication vouchers, broadcast and postal discounts, and conditional subsidies to match non-complying opponents and independent expenditures. (See Appendix A for details on this measure.) The House Administration Committee's Task Force on Campaign Finance Reform led to a Democratic bill, H.R. 3750 (Gejdenson), reported by the committee on November 12, 1991, and amended by the Rules Committee on November 23. The bill replaced the free TV and radio time and the tax credit in the 101 st Congress bill with a matching fund system, while leaving some form of reduced mailing rates. But concerns over perceived unpopularity of public funding led sponsors to omit provisions to finance benefits, beyond allowing voluntary contributions to the Make Democracy Work Fund, in the version brought to the House floor. The House passed H.R. 3750 on November 25, 1991, by a 273-156 vote. As passed, it featured voluntary House spending limits, in exchange for matching funds and lower postal rates, with extra spending for runoffs or close primaries and extra matching funds to offset non-complying opponents and independent expenditures. (See Appendix A for details on this measure.) A conference committee was appointed to reconcile the two passed bills and filed its report April 3, 1992 (amended on April 8). The conference bill combined features of S. 3 and H.R. 3750 , leaving House and Senate spending limits and public benefits largely intact for their own candidates. Major changes in the conference version centered around other issues, such as PAC contribution limits, soft money, and bundling. The conference also delayed implementation of the spending limits and public funding systems pending enactment of a funding mechanism. (See Appendix A for details on this measure.) The House passed the conference report on April 9 by a 259-165 vote. The Senate followed suit on April 30 with a 58-42 vote. President Bush, citing his opposition to spending limits and public financing, vetoed the bill May 9. On May 13, a Senate override vote failed by 57-42, thus ending debate on the issue for the 102 nd Congress. At the start of the 103 rd Congress, Democratic leaders introduced bills identical to those in the 102 nd Congress: H.R. 3 (Gejdenson) and S. 3 (Boren). With a President of the same party in favor, 1993 reform prospects seemed improved. On March 18, 1993, the Senate Rules and Administration Committee reported S. 3 (largely the bill vetoed in 1992, including the House provisions). Prior to the Senate debate, President William J. Clinton made his own recommendations on May 7, 1993, which added such provisions to the vetoed 102 nd Congress bill as congressional broadcast vouchers and an increased tax check-off financed by an end to lobbying expense deductions. On May 21, Senate began debate on a leadership substitute to the committee version of S. 3 , focused solely on Senate elections and reflecting the Clinton proposal and a federal PAC ban. Debate lasted for three weeks, encompassing three cloture votes and 24 recorded amendment votes. The filibuster was not broken until agreement was reached between Democratic leaders and seven Republicans to add the Durenberger/Exon Amendment. This provision dropped the bill's broadcast vouchers, allowed subsidies only to offset independent spending and spending in excess of the limits by non-complying opponents, and repealed the exempt function income exclusion on principal campaign committees of candidates who exceeded spending limits (in effect, subjecting them to a 34% tax on income). Passage of this amendment cleared the way for a successful vote to invoke cloture and passage of S. 3 the next day on a 60-38 vote. (See Appendix A for details on this measure.) The House leadership bill, H.R. 3 , was reported from the House Administration Committee on November 10, 1993, as amended by the committee and focused only on House elections. The reported bill featured voluntary House spending limits and communication vouchers (based on matching donations); other than contingency funds to compensate for non-complying opponents and independent expenditures, no other benefits were offered. After defeating a rule to allow votes on more alternatives, the House, on November 22, 1993, passed H.R. 3 by 255-175. (See Appendix A for details on this measure.) House and Senate compromise efforts were impeded by differences on PAC limits and funding sources; both bills avoided establishing a funding mechanism for the public benefits, deferring implementation until revenue legislation could be enacted. Late in the second session, on September 29, 1994, Democratic leaders announced a deal, but Senate Republicans led a filibuster against appointing conferees, ending with a failed cloture vote (52-46) on September 30, 1994. The shift to Republican control of the House and Senate in 1995 effectively killed the momentum for public financing in Congress, given generally strong Republican opposition to both public financing and spending limits. Public finance bills continued to be introduced in every Congress, including in the 104 th when Senators John McCain and Russell Feingold introduced their first campaign finance reform bill, establishing themselves as the Senate's leading reform advocates. That bill ( S. 1219 ) was the successor to the bills passed in the previous three Congresses, and it reflected the same pre-1996 consensus among campaign finance reform advocates that prioritized curbing the high cost of congressional elections and replacing private funds with other funding sources. The election of 1996 proved to be a watershed in the campaign finance debate, as largely unregulated campaign activity (party soft money and election-related issue advocacy) seemed to overshadow the regulated activity. In response, the leading reform advocates in Congress made significant changes in their proposed legislation at the start of the 105 th Congress. S. 25 (McCain-Feingold), as well as its companion H.R. 493 (Shays-Meehan), added provisions to the comparable 104 th Congress bills to allow federal regulation of election-related activity then being conducted as "issue advocacy." Following the most intensive congressional activity on campaign finance reform since the 1970s, a revised S. 25 was offered in the fall of 1997, featuring provisions on party soft money and issue advocacy. What was striking was that the provisions on congressional spending limits and public benefits, and on PACs, the key elements of reformers' objectives for at least the previous 10 years, were eliminated from the bill entirely. Thus, in one year's time, the very nature of the campaign finance debate had shifted from efforts to improve the existing regulatory system to efforts to save it from becoming meaningless in the face of newly emerging campaign practices. This debate, in the wake of the 1996 elections, was to last until 2002, when BCRA, commonly known as McCain-Feingold, was enacted. Appendix B contains summaries of the four public finance bills introduced in the 109 th Congress. All were House bills, dealing only with House elections. Two of the bills— H.R. 2753 (Andrews) and H.R. 4694 (Obey)—would have provided public funding only in the general election. The Andrews bill would have provided up to $750,000 (based on media costs in the district) to candidates who met certain criteria, such as a $100 limit on individual donations and an 80% in-state funding requirement; but, unlike others introduced, the bill would have imposed no spending limit. The Obey bill would have established a mandatory spending limit, based on the median household income in the district, and would have provided public funds to equal those limits. The benefit would have been financed in part by a tax on corporate income. The bill provided for fast-track consideration of a constitutional amendment to allow mandatory spending limits if the limits in the bill were struck down. The other two bills— H.R. 3099 (Tierney) and H.R. 5281 (Leach)—would have offered benefits in both primary and general elections. The Leach bill would have provided funds to match contributions from in-state contributors and would have imposed a $500,000 per election spending limit. The Tierney bill was the Clean Money, Clean Elections measure, which would have provided public subsidies equal to the spending limit in the primary and general election, specified allotments of free broadcast time, and additional broadcast time at 50% of the lowest unit rate. Candidates would have qualified by raising specified numbers of small donations. (The clean money model is discussed in greater detail under the States' Experience section of this report.) Five congressional public financing bills were introduced in the 110 th Congress: H.R. 1614 (Tierney), H.R. 2817 (Obey), H.R. 7022 (Larson), S. 936 (Durbin), and S. 1285 (Durbin). Appendix C at the end of this report and the discussion below provide additional detail. All five bills proposed comprehensive public financing programs, but did so in different ways. H.R. 2817 (Obey) proposed perhaps the most direct change to the status quo because it would have essentially made public financing mandatory in general elections. By contrast, candidates operating under the other four bills could have chosen to participate in public financing—and would have had to meet specific criteria to do so. H.R. 1614 , H.R. 7022 , S. 936 , and S. 1285 explicitly proposed public financing for primary elections. Overall, while H.R. 2817 would replaced the private campaign financing system in general elections, H.R. 1614 , H.R. 7022 , S. 936 , and S. 1285 proposed a benefits package designed to allow publicly financed candidates to compete within the current system. The public financing program proposed in H.R. 2817 would only have covered general elections, but the bill also specifies spending limits for primary elections. H.R. 2817 would have banned independent expenditures in House elections. By contrast, H.R. 1614 , H.R. 7022 , S. 936 , and S. 1285 proposed "fair fight funds" to counter high-spending opponents and those airing independent expenditures against participating candidates or in favor of their opponents. Only S. 1285 received a hearing during the 110 th Congress. On June 20, 2007, the Senate Committee on Rules and Administration heard testimony on the bill from Senators, a former FEC chairman, and interest group representatives. At that hearing, Senators Durbin and Specter (and former senator Warren Rudman) testified in favor of the bill, saying that it was a "modest" step toward reducing the role of money in elections and a means to restoring public trust in government. In particular, Senator Durbin emphasized what he called an "unsustainable" current system of private fundraising that potentially separates lawmakers from average voters and distracts them from policymaking. Minority Leader McConnell testified against the bill, citing declining public participation in the presidential public financing system and philosophical opposition to public financing for politicians. Chairman Feinstein and Ranking Member Bennett both expressed concerns at the hearing about the possibility of "fringe" candidates receiving public funds. In a letter to committee members, the National Association of Broadcasters (NAB) expressed "great concern" about proposed LUC reductions for participating candidates and sections of S. 1285 that would bar broadcasters from preempting candidate advertising and fund public financing through spectrum usage fees. Five congressional public financing bills were introduced in the 111 th Congress. Additional summary material appears in Appendix D at the end of this report. The first bill introduced, H.R. 158 (Obey), would have, essentially, mandated public financing during House general elections by prohibiting candidate spending other than from a proposed public financing fund. In exchange, candidates would have received grants designed to cover full campaign costs. H.R. 158 was virtually identical to H.R. 2817 (discussed above), which Representative Obey introduced during the 110 th Congress. The second bill, H.R. 2056 (Tierney), like H.R. 158 , would have required participants to limit spending. H.R. 2056 was virtually identical to H.R. 1614 (Tierney), introduced in the 110 th Congress. The Tierney bills were traditional "clean elections" measures. They proposed full public financing for participating candidates, a "seed money" period in which candidates would demonstrate viability by raising small start-up contributions, and additional funds for participating candidates facing non-participating opponents or attacks by outside groups. Three other bills, H.R. 6116 (Larson), H.R. 1826 (Larson) and S. 752 (Durbin), proposed an alternative to the bills discussed above: voluntary public financing that would have provided a base subsidy and matching funds. These three bills were the focus of most attention thus far in the 111 th Congress. The Committee on House Administration held a hearing on H.R. 1826 during the first session of the 111 th Congress. In September 2010, the committee marked up a successor bill, H.R. 6116 , and ordered it reported favorably to the House. No additional legislative action occurred. Candidates would have received a variety of incentives to participate in public financing under H.R. 6116 , H.R. 1826 , and S. 752 . Under both House versions of FENA, publicly financed candidates would have received two major benefits to finance their campaigns: a base subsidy and a 400% match of small contributions of $100 or less. These bills were substantially similar to the versions of the Fair Elections Now Act introduced in the 112 th Congress. Additional discussion appears below. The two current versions of the Fair Elections Now Act, also known as FENA ( S. 750 and H.R. 1404 ), are similar to H.R. 6116 (which superseded H.R. 1826 ) and S. 752 from the 111 th Congress. Like their predecessors, the current versions of FENA propose to provide participating candidates with a mix of base subsidies, matching funds, and other incentives in exchange for limiting private fundraising to small contributions. The discussion below and bullet-point summary in Appendix E at the end of this report provide additional information. Neither S. 750 nor H.R. 1404 would require participating candidates to limit their spending—provided that the campaign spent no funds beyond the public financing allocation and small-dollar contributions (i.e., $100 or less). The legislation would, however, limit other forms of spending. In particular, party coordinated expenditures (except, in some cases, in the Senate bill), joint fundraising, and leadership political action committee (PAC) activities would all be limited or prohibited under the current FENA proposals. Publicly financed House candidates would receive two major benefits to finance their campaigns: a base subsidy of 80% of the national average of spending by winning House candidates during the previous two election cycles (approximately $1.1 million based on 2010 and 2008 data; and a 500% match of small contributions of $100 or less raised from individuals (capped at 300% of the base subsidy). Under S. 750 , Senate candidates would be eligible for a base subsidy of $750,000 plus $150,000 for each congressional district in the state; a 500% match of small contributions of $100 or less raised from individuals (capped at 300% of the base subsidy); and broadcast vouchers equal to $100,000 for each congressional district in the state. In addition, the Senate bill would not limit coordinated party expenditures made on behalf of publicly financed candidates—if the funds used for those expenditures came from individual contributions of no more than $500. As noted previously, the House and Senate versions of FENA are substantially similar. Notable differences between the bills are summarized below. H.R. 1404 would apply only to House campaigns. S. 750 would apply only to Senate campaigns. The base subsidies in the House and Senate bills would be allocated differently, as noted above. The House bill would base the allocation on the winning average spending by previous House candidates; the Senate bill would allocate the base subsidy by a formula that emphasizes more funding for candidates from states with multiple congressional districts. Broadcast provisions in the bills vary. Unlike the House bill, the Senate bill would provide broadcast-advertising vouchers of $100,000 for each congressional district in the state. The House bill contains no voucher provisions. The Senate bill would also extend the lowest unit charge (LUC, also called the lowest unit rate ) to national party committees. (The LUC guarantees candidates the ability to purchase broadcast advertising at the cheapest available rates.) Participating candidates would receive a 20% discount on the current LUC, and time purchased under LUC provisions could not be preempted. The House bill contains no LUC provision. Unlike the House bill, the Senate bill would permit unlimited coordinated party expenditures if those expenditures were funded by individual contributions of no more than $500. The two bills would be financed differently. H.R. 1404 would finance the proposed public financing program through appropriations, unused allocations from previous elections, and penalty amounts. S. 749 , a stand-alone measure, would fund the public financing program proposed in S. 750 through a 0.5% tax on government contracts of more than $10 million. The tax could not exceed $500,000 annually. The 112 th and 111 th Congress versions of FENA are substantially similar. Notably, however, there are a few major differences. They are summarized below. The matching rate proposed in the 111 th Congress was 400% instead of the current 500%. Matching-fund benefits in the 112 th Congress versions of the bill would be capped at 300% of the base subsidy, unlike the 111 th Congress cap of 200% of the base. For Senate campaigns, S. 750 would not limit coordinated party expenditures made on behalf of publicly financed candidates—if the funds used for those expenditures came from individual contributions of no more than $500. No such provision was included in the 111 th Congress versions of FENA. Broadcast provisions in the bills vary. In particular, previous proposals regarding spectrum auctions have been omitted for the 112 th Congress versions of the legislation. H.R. 1404 also omits lowest unit charge provisions found in previous versions of the legislation (although some of these provisions were also excluded from H.R. 6116 during the 111 th Congress). As noted previously, broadcast-voucher provisions have also changed. Based on the previous discussion of proposals that advanced in the legislative process, one can see the wide range of features that any public finance proposal might embody. This section discusses some of the basic options facing Congress in any consideration of such proposals. (Further potential considerations for congressional public financing are discussed in the conclusion of this report. These considerations are based in part on experiences in the states, which are discussed in the following section.) CRS takes no position on any of the options presented here. Establishing the limits on campaign expenditures is perhaps the thorniest aspect of devising a public financing system. It has become widely accepted in the political science community that, to the extent that high spending in elections reflects a desirable level of competitiveness, low spending limits can inhibit real competition. In other words, low spending limits may reduce the chances for lesser known candidates to defeat candidates with higher visibility and name recognition. It was this principle that has often led public finance and spending limit proposals to be labeled by critics as "incumbent protection" measures, because incumbents typically start elections with much higher visibility than their challengers. Spending limits for House campaigns have almost always been a specified across-the-board amount ($600,000 in the last bill to pass the House, in 1993), whereas the Senate limits have generally reflected a population-based formula. As late as 1997 when the initial McCain-Feingold bill was offered in the 105 th Congress, the formula in Senate elections was essentially the same one incorporated into S. 2 (the leadership substitute) in the 100 th Congress (in a general election—the lesser of: (a) $5.5 million, or (b) the greater of (i) $950,000, or (ii) $400,000, plus 30 cents times the voting age population (VAP), up to 4 million, and 25 cents times the VAP over 4 million; in a primary—67% of general election limit, up to $2.75 million; and for a runoff—20% of the general election limit). The challenge for policymakers is to choose a spending limit that takes into account the realities of today's campaigns, allowing sufficient opportunity for a genuine competition which serves the public's interest. One way to offset potential damage to the vibrancy of the electoral process resulting from too stringent limits would be to increase the generosity of public funds and benefits, to lessen the need for both raising and spending money. As noted above, some legislation proposed in the 111 th Congress would not impose spending limits on participating candidates. This change is reportedly due, at least in part, to concern about the viability of the spending limits and "rescue funds" following the Supreme Court's 2008 decision in Davis v. FEC . Davis did not consider public financing per se, but its content regarding additional fundraising for those facing high-spending opponents is potentially applicable to public financing questions. While the bills that advanced in the 1970s included public funds in the primaries, most measures in more recent Congresses have covered only general elections. This has been the case not so much because the sponsors have not favored such coverage but more because of strategic decisions about the reduced likelihood of enacting a more complicated and more expensive system. Some have stated that they would settle for public funding in general elections for now and hopefully later return to the primary issue after some experience with a general election system. To some, however, the lack of inclusion of primaries may represent a serious flaw in recent proposals, with the prospect of private money entering the electoral system earlier and expenditures aimed at influencing the general election made during primaries, all to evade the restrictions of the general election system. The bills debated in the 100 th —103 rd Congresses incorporated the concept of providing benefits only in the general election but conditioning those benefits on adherence to voluntary spending limits in the primary as well as the general election. Invariably, proposals condition receipt of benefits on adherence to voluntary spending limits, whether solely in the election where the benefits are offered or in the primary as well as the general election. Most also require candidates to limit spending from personal and immediate family funds to a specified amount (generally applicable to loans as well). Some bills have added a requirement that candidates participate in a specified number of debates, and bills that passed in the 1990s added the requirement that broadcast ads must include closed-captioning. There is considerable latitude in what conditions may be imposed on candidates participating in this voluntary system. In addition to requiring adherence to spending limits, proposals typically have some sort of qualifying requirement to prove a candidate is "serious" (i.e., that he or she has some degree of public support). Most often, the qualifying requirement is a fundraising threshold, comprising relatively small donations from a specified number of voters in that jurisdiction. Petition signatures is another option. This choice may be informed by the experience the nation has had under the presidential system for the past 30 years, in which matching funds are available in the primaries and fixed subsidies are offered to candidates in the general election. As is discussed in the next section, the states also use a mix of these two forms of subsidies. Fixed subsidies offer the advantage of simplicity and providing candidates greater ability to plan their campaigns, but, depending on the percentage of the spending limit the grant is intended to constitute, it can result in a much greater cost (in the presidential system, for example, major candidates in the general election get a subsidy equal to the spending limit). The matching fund approach would generally be less expensive and would offer the advantage of linking the receipt of public money with a demonstration of voter appeal by the candidate. Matching fund systems may offer the advantage of avoiding complex legislative or regulatory judgments about who is and is not a "serious" candidate, with the meeting of fundraising thresholds and the continuing raising of small donations considered an adequate means of so doing. If a matching fund system is preferred, there is also the consideration of whether funds should match contributions on an equal basis or a higher percentage (some bills have proposed a two- or three-to-one match, at least in some circumstances). Whereas the bills that advanced in Congress during the post-Watergate 1970s were based on either direct subsidies or matching funds, the most prominent measures of the late 1980s and early 1990s reflected a move away from direct public funding to candidates. Instead, those bills featured either more indirect forms of public funding or cost-reducing benefits that did not involve public funds at all. These indirect public funding and public benefits measures, often designed to increase chances for passage in the face of perceived public opposition to use of public funds in elections, offer additional ideas in structuring a spending limits and public benefits package. Several ideas have gained support in Congress at various times that make use of public funds in ways other than direct payments from the U.S. Treasury to the candidates, including the following: Tax credits for contributions to candidates abiding by limits—This could provide a grassroots fundraising incentive to candidates who agree to limit their expenditures. Most commonly, this takes the form of a 100% tax credit for contributions to participating candidates. Such a form of public funding is determined by citizens' decisions at the grassroots level, rather than decisions of a government agency, which supporters see as an important advantage. Presumably, the prospect of raising small donations much more easily would provide sufficient incentive for candidates to agree to limit spending. Most observers of the political system argue that the best kind of political money is that from individual citizens in small amounts. (It should be noted that from 1972-1986, the federal government allowed tax deductions or credits for political contributions, but they were eliminated as part of overall tax reform; also, many states have such incentives applicable to contributions in their elections.) Broadcast vouchers to candidates—The single largest component of the typical campaign budget (at least for statewide and national offices) and the biggest single factor in the rise of campaign costs in recent years has been broadcast advertising. Proposals have been advanced whereby candidates would be allocated specified amounts of broadcast vouchers, for which broadcasters would be reimbursed from the federal treasury. Under this plan, public monies do not get distributed directly to candidates, thus at least ostensibly avoiding some of the objections to public financing per se while focusing on what many consider the biggest single problem in campaign financing—the high cost of media. However, the mechanics of implementing such a plan, particularly in districts served by high density, high-cost media markets, pose potential concerns in terms of fairness and the particulars of individual campaigns. Lower postal rates for candidates abiding by limits—Another proposal which seeks to draw candidates into acceptance of campaign spending limits is one which offers participating candidates lower postal rates, such as those currently available to political party committees. This proposal involves public funds, but only indirectly, because the U.S. Postal Service would have to be reimbursed for revenue forgone as a result of its implementation. It is not clear to what extent a lower postal rate may serve as an inducement to candidates to limit spending, since postage is not a large component in a typical campaign budget, although it may well be more important in House than Senate races (especially in high-density media markets where media costs are seen as often prohibitively expensive). Lower postal rates do offer the advantage of acting to reduce campaign costs, generally seen as a worthwhile goal, regardless of one's position on spending limits or public financing. Proposals that passed in the 101 st —103 rd Congresses (and the Senate-passed version of the BCRA (McCain-Feingold) in the 107 th Congress) looked to broadcasters to offer some of the incentive toward candidate participation. Because of broadcasters' public interest obligations as part of their license agreements, sponsors sought to require broadcasters to offer lower rates to candidates participating in public funding, as a condition of their licenses and at no cost to the U.S. treasury. (On the basis of this principle, the federal government has since 1972 required broadcasters to charge political candidates at the lowest unit rate (LUR) available to commercial advertisers for the same time and class of advertising time.) Some proposals have gone beyond requiring still-lower rates to requiring broadcasters to provide specified amounts of free time to participating candidates. To the extent that these costs are removed from candidates, the overall cost of elections could be significantly curbed, which, as with lower postal rates, would appeal to many observers regardless of their views on spending limits and public financing. Yet such proposals invariably invite strong opposition from the broadcast industry. While the Senate version of BCRA in the 107 th Congress offered substantial reductions in broadcast rates to candidates, this provision was removed in the House on a floor amendment. One concept present in most bills offered since the 100 th Congress but absent from the presidential system is protection offered to candidates who participate in public financing but are faced with large expenditures by non-participating opponents or are targeted in independent expenditures from outside groups. Most commonly, provisions designed to remedy such situations would: increase spending limits on participants to match expenditures by opponents in excess of the spending limits and by independent expenditures in amounts above a specified level; and/or provide participants with additional public funds to match excessive spending from non-participating opponents or for opposing independent expenditures, perhaps with a cap on overall funds provided in this circumstance. Providing additional funds, or allowing for supplementary private funding, to participating candidates facing non-participating opponents offers protection against being greatly outspent and presumably would deter candidates considering forgoing public financing. A potential problem with these disincentives is the increased costs they would add to a public funding system, costs not easily predictable. What has not been reflected in recent proposals but may have to be addressed in future ones is the activity by outside groups (such as 527 political organizations) that spend money outside the purview of federal election law (i.e., soft money). While public finance bills have typically focused on offering benefits as an inducement toward agreeing to expenditure limits, more recent proposals have also looked to add disincentives as well, to impose some sort of penalty on candidates not participating in the system (beyond providing benefits to the participating opponent). These proposals appeal to those who would like to lessen the role of public funds but still wish to achieve meaningful levels of participation in the system. Critics see these proposals as heavy-handed measures designed to bludgeon candidates into participating, thus casting doubts on whether participation can fairly be deemed to be voluntary. Some of the disincentives advanced in recent years include the following: requiring a disclaimer on campaign advertisements of a candidate's non-participation—This provision, requiring non-participants to state in their ads that they do not abide by spending limits, was included in Senate bills passed in the 101 st -103 rd Congresses; disallowing lowest unit rate requirement for non-participants—This provision, included in the 101 st Congress Senate bill, as passed, would have removed the lowest unit rate requirement for candidates not participating in the system; and tax campaigns of non-participating candidates—Political campaigns are generally exempt from paying taxes on money raised. The Senate bill passed in the 103 rd Congress removed the exempt function income exclusion on principal campaign committees of candidates who exceeded spending limits, thus in effect subjecting those campaigns to a 34% tax. One idea closely related to the proposals in the prior two sections is to provide public funds only as a last resort, when a participant is faced by an opponent who exceeded spending limits or by opposing independent expenditures. As is explained in the "State Experiences" section that follows, some states feature such a provision, aimed at curbing arguably excessive campaign spending without incurring the expense to the taxpayers that most public finance systems would incur. It would be applied on a very selective basis and would presumably act as a strong inhibitor against only the most excessive campaign spending. The Senate bill passed in the 103 rd Congress contained this feature, in addition to the direct incentives of lower postal and broadcast rates. Clearly, the decisions made about the aforementioned variables will determine the cost of any public finance system. Estimates of costs of public finance systems vary considerably, according to the details of the systems envisioned. For bills considered in the 101 st —103 rd Congresses, one can look to the required Congressional Budget Office (CBO) cost estimates, bearing in mind that the bills passed were often changed substantially from those reported and for which estimates were provided. At the start of the 103 rd Congress, the Senate Rules and Administration Committee reported S. 3 , which was essentially the bill vetoed during the 102 nd Congress and thus contained provisions affecting both House and Senate elections. Benefits for House elections consisted of matching funds (accounting for up to one-third of the spending limit) and reduced mailing rates; Senate election benefits consisted of voter communication vouchers (of up to 20% of the general election limit), reduced mailing rates, and contingent public grants to compensate candidates opposed by free-spending opponents and by independent expenditures. CBO estimated that this rather modest system (in terms of level of public funds) would range in cost from $90 million to $175 million in the 1996 election cycle and from $95 million to $190 million in the 1998 election cycle. At the other extreme, the most generous proposal currently being advanced at both federal and state levels is the "Clean Money, Clean Elections" measure, advocated by interest group Public Campaign. H.R. 1614 (Tierney, 110 th Congress), S. 936 (Durbin, 110 th Congress), S. 1285 (Durbin 110 th Congress), H.R. 3099 (Tierney, 109 th Congress), and S. 719 (Wellstone, 107 th Congress) are variations on the clean elections model and would (or would have) provide public funds in the primary and general elections; such funds are intended to lower all candidate spending in those elections. Public Campaign's website states, The cost of implementing such a system for Congressional elections is estimated to be less than a billion dollars per year out of a federal budget of close to two trillion dollars (that's about a half of a 10 th of a percent of the federal budget: 0.05%). That amounts to less than $10 per-taxpayer, per-year. Thus, by Public Campaign's estimates, congressional elections would cost somewhat less than $2 billion every election cycle. Most proposals since the mid-1970s have relied upon a tax check-off, based on the presidential model, whereby taxpayers could designate a certain number of tax dollars to go into the fund to pay for congressional elections. This idea is intended to mitigate negative images that might arise from "taxpayer funding" of elections, because of the direct role provided citizens in the distribution of tax revenues. Because of those perceptions, however, the 101 st —103 rd Congresses sought creative ways to offset any losses to the U.S. Treasury, or remained silent on funding sources, leaving those decisions to subsequent "enacting legislation." Proposals since that time have looked to such things as broadcast licensing fees, a tax on lobbyists, and a tax on corporate income to offset treasury losses. State public financing programs emerged primarily in the 1970s, although a few states provided limited assistance to campaigns early in the 20 th century. Prior to the 1970s, many programs that did exist provided funding to political parties rather than directly to candidate campaigns. (As noted previously, political parties were historically the major funders of congressional campaigns, especially before the 1960s.) States vary considerably in whether they offer public financing, how they do so, and why. Sixteen states offer some form of direct public financing to candidates' campaigns (see Figure 1 ). Of those, seven states fund only statewide races (Florida, Maryland, Michigan, New Mexico, North Carolina, Rhode Island, and Vermont). Nine states fund legislative and statewide races (Arizona, Connecticut, Hawaii, Maine, Massachusetts, Minnesota, Nebraska, New Jersey, and Wisconsin; see Figure 2 ), although which statewide campaigns are eligible for funding varies. Some state public financing programs have been, or are, subject to litigation—a topic that is beyond the scope of this report. States have chosen two major public-financing frameworks. First, the "clean money, clean elections" model (hereafter, clean money) is a national initiative developed by an interest group and is designed to cover full campaign costs. Clean money programs generally offer fixed subsidies to candidates once they meet basic qualifying requirements. All qualifying candidates receive the same amount of funding, which is, at least in theory, sufficient to cover all campaign costs. Clean money programs also typically make additional funding available on a contingency basis to counter spending by non-participating opponents. All clean money programs are similar, with adaptations in each state (e.g., which offices are covered). Second, and in contrast to the clean money model, other state public financing mechanisms vary considerably. These programs are typically older, and developed more individually. Through matching funds and other benefits, these programs are designed to reduce the need for and impact from private fundraising, but are less likely than clean money programs to offer full public financing to participating candidates. States fund both approaches through a combination of tax check-offs, direct appropriations from state legislatures, revenues from various fines and fees, and other sources. Additional details are discussed below. As Table 1 and Figure 2 show, seven states offer some form of the clean money model of public financing. The clean money model offers full public financing to candidates who agree to certain restrictions, particularly spending limits. Candidates who agree to those restrictions, which vary by state, receive public funds via fixed subsidies. Specific amounts are determined by each state. The plan originated with the interest group Public Campaign, which describes itself as "a non-profit, non-partisan organization dedicated to sweeping reform that aims to dramatically reduce the role of big special interest money in American politics." The group advocates the clean money program at the local, state, and federal levels around the country. Currently, clean money programs in Arizona, Connecticut, Maine, New Jersey (a pilot legislative program), New Mexico, North Carolina, and Vermont offer public financing to the candidates for the offices noted in Table 1 . Although all clean money programs are adapted to states' individual needs (e.g., different offices are covered in each state), the major components of the program are similar nationwide. All programs were approved by voters or state legislatures between 1997 and 2005 (some have since been amended). By contrast, 10 states offer public financing through programs other than the clean money model: Hawaii, Florida, Nebraska, Maryland, Massachusetts, Michigan, Minnesota, New Jersey (gubernatorial campaigns), Rhode Island, and Wisconsin. While the clean money system features a uniform model for public financing and is a relatively recent initiative, other public financing programs in the states vary widely. Many of the latter programs were initiated in the 1970s, in the Watergate aftermath. Some of the most notable differences between clean money models and other programs are how candidates receive public funding and how much money is available to those candidates. Although clean money funds are generally distributed through subsidies that allocate fixed amounts to candidates, states that employ other programs rely primarily on matching funds. The amount of matching funds candidates receive depends on the amount of private contributions raised. States generally match 100%, and sometimes more, of the amount a candidate raises through private contributions. Whether clean money models or other systems, public financing programs do not guarantee unlimited funds. States generally limit the percentage of contributions that may be matched, or cap the total amount of funds that may be disbursed. Available revenues often influence these decisions. For example, in Michigan, a tax check-off system funds public financing for qualifying gubernatorial candidates. Just as in the presidential public-financing system, general-election funding in Michigan takes priority. Funding is first reserved for general-election subsidies. If additional funds are available, primary candidates may qualify for matching funds, which are distributed on a pro-rated basis. Proponents of public financing generally argue that unlimited private funding encourages corruption, or at least forces candidates to spend too much time raising money. Therefore, states often require that recipients of public funding observe certain conditions on campaign conduct, which are designed to increase public confidence in campaigns and limit or eliminate large amounts of time spent raising private funds. Publicly financed candidates must agree to limits on spending and fundraising. Some states also require publicly financed candidates to participate in debates. Public funding recipients must demonstrate that they are politically viable by raising a minimum level of private contributions before becoming eligible for public funding. Some states' individual contributions are limited to as little as $5. Once candidates meet that threshold and other qualifying requirements, they become eligible for public financing. In most cases, campaigns qualifying for public financing may spend their privately raised contributions directly. In others, privately raised "seed money" is transferred to a central state fund for redistribution among all publicly financed candidates. How widely candidates take advantage of public financing depends largely on whether opponents choose to participate in public financing, how various states structure their public financing programs, or both. Public financing programs often become dormant because potential participants believe that spending limits are too low. In Maryland, for example, although public financing is available for gubernatorial tickets, no major candidate has accepted that funding since 1994. Since that time, major candidates have reportedly viewed the 30-cent-per-voter spending limit as too low to enable effective campaigning. Low participation by candidates in public financing does not necessarily mean that the program fails to influence campaigns. At least one state's program appears to have the most impact when public financing is not utilized at all. Nebraska's public financing program has offered matching funds to a variety of statewide and legislative candidates since 1992, although it is rarely accepted. According to Frank Daley, Executive Director of the state's Accountability and Disclosure Commission, public financing in Nebraska becomes available only if one candidate adheres to spending limits while the other does not. If both candidates exceed spending limits, or if neither candidate exceeds spending limits, neither is eligible for public financing. Essentially, public financing in the state offers "extra" money for those facing high-spending opponents. Given the threat of opponents receiving public funds, most candidates have chosen to limit spending voluntarily. As a result, public financing's greatest impact in Nebraska appears to be keeping private spending down, rather than infusing greater amounts of public money into elections. Despite recent scholarly research, there is little certainty about how changes in American campaign finance law affect electoral outcomes. Research on the impact of public financing is particularly limited, dated, or both. Public financing programs in the states vary widely and were implemented at different times. Even basic terminology can vary across states. All these factors limit opportunities for comparing data. In answering whether public financing has achieved the various goals proponents ascribe, one group of scholars wrote in 2006: The short answer is that nobody knows because there has been no comprehensive evaluation of public finance systems to identify what conditions and program elements lead to successful outcomes. The conventional wisdom is based on either a limited amount of data or anecdotal impression. Similarly, much of what is known about public financing is based on relatively narrow evaluations of particular states or races. Finally, it is important to note that this report does not examine recent constitutional and other legal challenges to some states' public financing programs. As developments in this area become clearer over time, this report will be updated. One of the major questions surrounding public financing is whether publicly funded campaigns are more or less competitive than those that are privately financed. Research often considers at least two different measures of "competition" surrounding public financing: (1) the amount of money at each campaign's disposal; and (2) the margin of victory on election day. In theory, public financing should foster lower-cost campaigns because public financing generally requires observing spending limits and reduces fundraising costs. If more candidates have access to funding through public financing, races might also be closer on election day. Evidence on both fronts is mixed. In general, research suggests that public financing can foster more competitive elections. However, research on competition and public financing commonly emphasizes that most public financing programs are in their infancy, and that more time and cases are needed to draw definitive conclusions. Public financing does appear to reduce financial disparities among candidates, provided that all candidates participate in public financing. For example, research on state legislative elections has found that public financing in Minnesota and Wisconsin decreased financial disparities between challengers and incumbents. More access to money via public funding does not always foster closer races, although it can provide ballot access for candidates who might not otherwise be able to run. From this perspective, public financing provides an avenue to consistent competition in elections, but not necessarily closer elections. On the other hand, in a comparative analysis of legislative elections in five states that offer public financing—Arizona, Hawaii, Maine, Minnesota, and Wisconsin—political scientists Kenneth R. Mayer, Timothy Werner, and Amanda Williams found that competition generally increased after public financing was enacted, both in terms of the number of incumbents facing challengers, and the number of "competitive" races. These findings, however, were contingent upon sufficient funding to make the programs attractive to candidates. There is some anecdotal evidence of public financing favoring challengers or Democrats, although these findings are not systematic, and other research disputes such findings. Finally, preliminary evidence from Arizona and Maine suggests that female candidates are more likely to accept public funds in state house races, but availability of those funds has not made women more likely to seek office. Regardless of candidates eligible for funding or the particulars of individual campaigns, public financing becomes less popular, and therefore has less impact, if not all major candidates have incentives to participate. Recent experience with Wisconsin's program, for example, suggests that publicly financed elections in that state have not become more competitive. Some observers suggest that Wisconsin's program provides too little funding to be a major component of candidate's overall expenditures. Hawaii has reportedly experienced similar problems. Some who support public financing suggest that it can lead to more substantive campaigns by freeing candidates from the burdens of raising large private contributions, providing more time to connect with voters and discuss policy issues. Research indicates that public financing does decrease the amount of time state legislative candidates spend raising money, but the finding holds only for full public financing. A national survey of candidates who ran for state legislatures in 2000 revealed that "[f]ull public funding can free candidates from spending large amounts of time 'dialing for dollars' or making personal appeals to prospective donors. By comparison, candidates who accepted partial public funds devoted about the same time to fundraising as did candidates in states that did not provide public funding." If this finding holds in other kinds of races, it suggests that partial public financing might do little to alleviate what has been called "the money chase" of continual fundraising. By contrast, existing models of full public financing can reduce candidates' fundraising duties for individual campaigns. Nonetheless, despite the assertion that full public funding "can free candidates to spend less time with wealthy donors raising money and more time on other aspects of campaigning," it is unclear whether public financing makes campaigns more "substantive," or how such concepts would be measured. In addition, public financing would not necessarily free candidates from fundraising for leadership PACs or other entities that may serve to benefit their elections indirectly. Those favoring public financing suggest that it democratizes campaigns by providing more "average" people with the resources to run, and enhances the role of small donations from ordinary citizens. There is some evidence that public financing allows candidates who would not otherwise do so, including minorities and women, to run for office. Clean Money programs requiring candidates to collect small private contributions (e.g., $5 in Maine) also potentially expand the donor universe by creating an important financial role for ordinary citizens who might be unable to make large private contributions. Much of the recent attention to public financing has occurred because of notable ballot initiatives in two states. In 1996 and 1998, respectively, Maine and Arizona became the first states to provide full public financing for qualified candidates for statewide and legislative offices. These two states are often considered test cases for public financing because their programs are so comprehensive. In both states, the first disbursements under these programs were made in the 2000 election cycle. Both states adopted public financing modeled on the clean money program, advocated by Public Campaign. Arizona and Maine offer similar full public financing to statewide and legislative candidates. Connecticut's public financing program, which is similar to the Arizona and Maine programs, was fully implemented for the 2008 election cycle. Although the program appears to have been popular with candidates, it is too early to fully assess the impact of public financing in that state. Various accounts about the Arizona and Maine programs are available, although research (especially from secondary sources) tends to be limited or is produced by groups that support or oppose public financing. The Government Accountability Office (GAO, then the General Accounting Office) issued one of the first governmental assessments of the Arizona and Maine programs. The GAO report, issued in May 2003 and based on public financing offered in the 2000 and 2002 election cycles, found "inconclusive" and "mixed" results. According to GAO, "In sum, with only two elections from which to observe legislative races and only one election from which to observe most statewide races, it is too early to draw causal linkages to changes, if any, that resulted from the public financing programs in the two states." GAO also found "inconclusive" and "mixed" results when examining whether the states met program goals in five areas: (1) voter choice (measured in candidate emergence and participation in public financing); (2) electoral competition (measured in percentage of competitive elections, decreases in incumbent reelection rates, or smaller victory margins for reelected incumbents); (3) interest group influence (measured by candidate and interest group reports through interviews and surveys); (4) campaign spending (measured in candidate spending and independent expenditures); and (5) voter participation (measured in turnout and awareness in surveys of public financing). GAO revisited the topic in a 2010 report. In brief, the new GAO report found that participation greatly increased over time, as noted elsewhere in this report. As with the 2003 report, however, many of the 2010 findings could not necessarily be attributed to public financing in Arizona and Maine. In general, the 2010 report suggests that findings continue to be inconclusive, not clearly attributable to public financing, or both. Other recent research generally suggests that public financing has enhanced competition and diversity among candidates and donors in Arizona and Maine. One group of scholars found that the number of contested races in Arizona legislative elections increased by more than 10% from 2002 to 2004. A 2008 report issued by the advocacy group Public Campaign found that small donors to publicly financed candidates in Arizona were more racially, economically, and geographically diverse than traditional donors to privately financed candidates. After reviewing Maine's public financing program between 2000 and 2006 the state's Ethics Commission determined that public financing had tightened competition between incumbents and challengers, and between winning and losing candidates. The Ethics Commission report also found (among other points) that public financing had: "sharply reduc[ed]" total private contributions to legislative candidates, increased the amount of time candidates had to spend communicating with voters, and encouraged more first-time candidates (including more women) to run for office. A 2009 report released by the Brennan Center for Justice at New York University, which advocates public financing, also found evidence of increased competition in states with public financing. In the Maine case, the Brennan Center study found that accepting public financing slightly increased vote share among challengers (3 percentage points) and incumbents (2 percentage points). Some observers, however, have questioned the Arizona and Maine programs on ideological or legal grounds. Fundamental to those arguments is that citizens could be indirectly forced to provide financial support to politicians with whom they disagree, since Arizona's program is financed through various fines and fees. Some critics of Arizona's program also contend that increased competition in the state's elections could be due to other factors, such as the impact of term limits. In addition, Maine's program is, according to one report favoring public financing, "plagued by private contributions to candidate leadership PACs." Political scientists Ray La Raja and Matthew Saradjian have raised the possibility that public financing could increase independent expenditures by interest groups and other organizations. An increase in independent expenditures is one of the drawbacks to public financing identified in the 2007 Ethics Commission review of Maine's public financing program. Despite contradictory data on effectiveness, candidate participation in both states' public financing programs has steadily increased over time. As Table 2 and Table 3 below show, about one-quarter of legislative candidates participated in Arizona's inaugural public financing effort in 2000, compared with about one-third of legislative candidates in Maine. By 2002, however, participation in both states reached at least 50%, and has increased during subsequent election cycles. By 2008, large majorities of legislative candidates in each state chose to participate in public financing. Data on differences between Democrats and Republicans (or members of third parties or independents) are not uniformly available. The same is true for House versus Senate candidates. A review of data that are available, however, suggests that House and Senate candidates have embraced public financing in roughly equal numbers. More Democrats than Republicans typically participate in public financing, but majorities of candidates from both parties have done so in states with comprehensive programs. In Maine in 2008, for example, 94% of Democratic House candidates received public funds, compared with 70% of their Republican counterparts. In the Senate, 81% of Democratic candidates accepted public funds in 2008, compared with 75% of Republicans. Connecticut's program for legislative public financing was fully implemented for the 2008 election cycle. The Connecticut program appears not to have been fully evaluated thus far. Although it is too early to tell how consistent participation in Connecticut's program will be, approximately 75% of all candidates reportedly participated in public funding during the 2008 election cycle. Surveys indicate that Americans generally support campaign finance "reform" (generally meaning more regulation of money in politics) and are concerned about the amount of money in campaigns. Nonetheless, public opinion about campaign finance can be contradictory. These patterns are evident in the relatively limited available data about attitudes on public financing. Historically, surveys reveal that large pluralities or even majorities of Americans support public financing in principle, but are hesitant to invest tax dollars to facilitate public financing. These findings indicate that the wording, source, and timing of individual questions vary greatly and can affect campaign finance polling results, as is always the case with survey research, regardless of topic. Majorities tend to support public financing when asked questions suggesting favorable information about public financing, or in surveys conducted for pro-reform clients. On the other hand, majorities tend to respond negatively to questions focusing on costs of public financing or taxation. Survey respondents say that they are neutral or positive toward public financing if question wording suggests that public financing can limit the influence of "special interests" or campaign costs. On the other hand, survey questions that emphasize spending "taxpayer dollars" to support public financing often yield disapproval from respondents. Americans have been more willing in polls to support public financing after perceived scandals, such as during the 1970s and 1990s. In Gallup polling conducted between 1972 and 1996, between 50% and 65% of respondents favored "provid[ing] a fixed amount of money" for presidential and congressional campaigns, while banning private contributions. Similarly, in a 1997 Washington Post poll, 49% of campaign contributors answered favorably when asked if they would "favor or oppose having all federal elections financed out of public funds, with strict limits on how much each candidate for president, US Senator or Congressman could spend"; 48% were opposed. In the same poll, but with spending limits omitted from question wording, only 26% responded favorably when asked whether they would "favor or oppose the federal government financing presidential and congressional elections out of tax money." The polling data reviewed above illustrate that Americans have more consistently supported containing campaign spending—a hallmark of public financing programs—than public funding per se. For example, in a 1997 New York Times /CBS News poll, 60% of respondents said that "limit[ing] the amount of money that campaigns can spend" should be a "top" or "high" priority within campaign finance reform efforts. In a Gallup poll from the same year, 79% of respondents favored "putting a limit on the amount of money" congressional candidates could "raise and spend on their political campaigns." However, like all survey questions, answers to spending questions are also affected by wording. For example, in a 1999 NBC News poll, only 17% of respondents (but the second-most-common answer) presented with a list of potential campaign finance concerns said that "unlimited contributions" concerned them most, compared with 37% who were most concerned about "special interests." More generally, in a 2002 ABC News/ Washington Post poll, 66% of respondents favored "stricter laws controlling the way political campaigns raise and spend money." It appears that regular, national polling about public financing has been uncommon since the mid-1990s. Public financing has been debated in Congress and the states for decades. This suggests that interest in the topic will continue. As Congress considers how, or whether, to change the status quo, state experiences with public financing, as well as the nation's presidential public financing system, offer several potential lessons. However, the great diversity among state programs makes interpreting those lessons challenging. At the federal level, the presidential public financing system provides partial matching funds to qualifying candidates in primaries, but far more substantial fixed subsidies to candidates in the general election. At the state level, which campaigns are eligible for public funding, how much funding is available, what requirements are placed on candidates accepting public funding, and when programs were implemented vary. The presidential public financing system and those in the states all rely on either fixed subsidies (in the states, especially clean money models) or matching funds to distribute public financing. Despite similar ways of delivering funds to candidates, details about each program can vary greatly. These differences have produced research that describes individual components of public financing programs, but rarely draws systematic comparisons across states. In addition, only two states—Arizona and Maine—currently provide full public financing for legislative elections. (Others provide partial public financing for legislative elections, but, again, vary widely.) Consequently, there are few certainties about how public financing might apply to congressional campaigns. Nonetheless, several potential considerations remain. State models suggest two approaches to national public financing if Congress decides to pursue subsidized congressional campaigns. First, most public financing programs infuse public money into campaigns in hopes of limiting the impact of private money. This approach essentially provides candidates with money so that they do not have to raise their own—or can at least raise less. Second, some models, such as Nebraska's public funding program, have reportedly encouraged the vast majority of candidates to limit spending on their own. Rather than providing public funding to candidates based on the assumption that they will spend those funds, the Nebraska program reserves public financing for candidates whose opponents refuse to abide by relatively low spending limits. These two approaches suggest a choice for Congress between public funding that concentrates primarily on distributing money in anticipation of campaign needs versus creating incentives for candidates to need less money by observing spending limits. In addition, creating a public financing system requires a choice between funding primary elections or general elections, or both. Most existing state programs have funded both types of elections, although general elections sometimes take priority over primary elections and might be funded differently from primary elections. While early congressional proposals generally covered primaries as well as general elections, most prominent proposals since the 100 th Congress have dealt only with general election financing to reduce both costs and program complexity, and to enhance chances for enactment. Regardless of the chosen approach, public financing does not altogether eliminate private money in politics. Even clean money programs require some private fundraising to establish viability, albeit far less than under private financing. In addition, some observers fear that public financing creates opportunities for more financial influence from less accountable non-candidate sources—such as independent expenditures and election-related "issue advocacy" by interest groups—compared with the current system of private financing. Public financing systems generally do not regulate fundraising or spending outside candidate campaigns, although legislation could address such issues. Congress might also wish to consider why some public financing programs have been curtailed. In a few states, decisions by voters and candidates—not state governments—appear to be most responsible for public financing programs falling into disfavor. Experiences in the states suggest that in order to be viable, public financing must have sufficient funding to make participation attractive to candidates. As with public funds for presidential candidates, if public financing provides too little money—or sets accompanying spending limits too low—to convince candidates that they can wage effective campaigns, major candidates are likely to opt out of the system, ultimately making it relevant only for minor candidates. (In 2004, for example, both of the eventual major-party nominees for President opted out of matching funds in the primaries.) Public support can also be important to enact and maintain public financing. Despite regular congressional interest in public financing since at least the 1950s, disagreements over many of the issues noted in this report have thus far thwarted efforts to adopt public financing in legislative elections. On a related note, effective public financing requires resources not only adequate to make participation attractive to candidates, but also sufficient to administer and enforce public financing. As law professor Richard Briffault has explained, Public [campaign] funding requires administrators to determine who qualifies for public funds, to disburse the funds, and to enforce whatever restrictions accompany the funds. Can public administrators handle the job? In fact, administrators have successfully handled the qualification of candidates and disbursement of public funds in presidential elections. The real question is whether they can enforce the rules—particularly the spending limits—that are likely to accompany public funding. Comprehensive congressional public financing would, therefore, almost certainly require substantial administrative and enforcement resources for the Federal Election Commission. Finally, public financing regulates only one area of campaign conduct. If Congress were to adopt public financing for its elections, other regulations—including those currently in place—would still be required to shape other areas of campaign politics, such as political advertising and party activities. Public financing would also not necessarily affect other factors that shape individual races. As one pair of scholars wrote in 1995, public financing of congressional elections, by itself, will not eliminate the problem of uncompetitive elections. As in Wisconsin, public subsidies may increase or prevent further deterioration in the competitiveness of contested congressional races by giving challengers more of a level playing field. They might not, however, encourage challengers to emerge in districts where the incumbent is perceived as unbeatable. Public financing could have diverse impacts on congressional elections. Data from the states show some evidence that public financing decreases financial disparities between candidates and fosters closer margins of victory. However, these findings are generally preliminary and are based on specific conditions in specific states. Because public financing limits the amount of private financing of campaigns, it is likely that public financing in congressional elections would reduce the amount of time candidates spend raising money—at least for their own or others' candidate campaigns. On its own, however, public financing of candidate campaigns would not affect activities by 527s, political parties, or other organizations. The same is true for leadership PACs, unless they were prohibited by public financing legislation. Evidence from the states also suggests that if Congress chooses to fund congressional elections publicly, faith in the system and patience will be required. As is discussed throughout this report, much about the impact of public financing is simply unknown. Relatively few states offer public financing for legislative elections. Individual components of those programs, such as funding levels, conditions on candidates, and other factors, can vary substantially, making it difficult to compare public financing across states or to draw firm inferences about how state lessons might translate to congressional elections. It is clear from the presidential public financing program, and state programs, that assessing the impact of public financing takes multiple election cycles. As more states experiment with legislative public financing, and do so for longer periods of time, potential lessons for adopting congressional public financing will become clearer. It is also clear that in order to be effective, public financing programs require levels of funding sufficient to make them attractive to serious candidates, and to maintain those levels of funding over time. Similarly, spending limits associated with public financing must be high enough to convince candidates that they can compete in modern campaigns, including in expensive broadcast media markets. Appendix A. Public Finance Bills Passed by the House or Senate: 1973 -1993 Appendix B. Public Finance Bills in the 109 th Congress: Summary of Key Provisions H.R. 2753 (Andrews)—Public Campaign Financing Act of 2005 (Introduced June 7, 2005; referred to Committee on House Administration) Public finance provisions: Would have provided public funding in House general elections in amounts based on media costs in the area, up to $750,000 (with indexing for future inflation), for specified campaign purposes (but not a salary for candidate), within four months of general election, for candidates who: (a) gather petitions signed by at least 3% of registered voters or whose party received at least 25% of the vote in prior general election; (b) limit individual donations to $100; (c) raise at least 80% of funds in-state; and (d) participate in at least two debates; would have required broadcasters to accept participating candidate ads, until they constituted 40% of station's total advertising time. Other provisions: Would have required FEC to allow state parties to file copies of reports filed under state law if they contain substantially the same information as required under federal law; Would have required prompt disclosure by non-party entities for spending on "federal election activities" (as defined by BCRA), once $2,000 threshold level is reached; Would have required candidate reports to be broken down by primary, general, or runoff election; Would have prohibited bundling by PACs, parties, lobbyists, unions, corporations, or national banks, or employees or agents acting on their behalf. H.R. 3099 (Tierney)—Clean Money, Clean Elections Act (Introduced June 28, 2005; jointly referred to Committees on House Administration, Energy and Commerce, and Government Reform) Public finance provisions: Would have applied to House candidates voluntarily participating in public financing; Would have provided full public subsidies, 30 minutes of free broadcast time in primary and 75 minutes in general election, and additional broadcast time at 50% of lowest unit rate for House candidates who participate in "clean money" system and spend no private funds beyond subsidy once qualified; Would have allowed candidates, prior to qualification, to raise seed money ($35,000, in contributions of $100 or less) for specified uses by raising $5 donations from 1,500 state residents; others would have qualified by raising 150% of amount raised by major party candidates; Subsidy would have equaled applicable percentage (60% for general election, 40% for major party candidate in primary, and 25% for other primary candidates) of 80% of base amount per election (base amount would have been national average of winning House candidate expenditures in three most recent general elections), but amount was never to be less than amount provided in previous election cycle; Would have reduced subsidy to 40% of amount otherwise determined for unopposed candidates; Additional subsidies would have been provided to candidates targeted in opposing independent expenditures and by non-complying opponents once such spending exceeded 125% of spending limit (maximum additional funds equals 200% of limit); Would have denied lowest unit rate to non-participating House candidates; Would have financed benefits from House of Representatives Election Fund using appropriated funds, qualifying contributions, and unused seed money. Other provisions: In House races with at least one "clean money" candidate, would have limited party spending on behalf of a candidate to 10% of general election candidate's subsidy; Regarding "clean money" candidates: would have required 48-hour notice of independent expenditures above $1,000 up to 20 days before election and 24-hour notice of amounts above $500 in last 20 days; Would have amended "contribution" to include anything of value for purpose of influencing a federal election and that was coordinated with candidate; Would have defined "payment made in coordination with a candidate" to include payments (1) in cooperation or consultation with, or at request or suggestion of, a candidate or agent; (2) using candidate-prepared materials; (3) based on information about campaign plans provided by candidate's campaign for purpose of expenditure; (4) by a spender who during that election cycle had acted in an official position for a candidate, in an executive, policymaking, or advisory capacity; and (5) by a spender who had used the same consultants as an affected candidate during election cycle; would have deemed payments made in coordination with a candidate as a "contribution" or "expenditure" (but exempted a payment by a party in coordination with a "clean money" candidate); Would have added one FEC commissioner, recommended by other members; Would have allowed random audits of campaigns; Would have given FEC authority to seek injunctions; Would have changed standard to begin enforcement proceedings to "reason to investigate"; Would have allowed FEC to petition Supreme Court; Would have expedited enforcement in last 60 days of election, with clear and convincing evidence that violation had occurred, was occurring, or was about to occur; Would have allowed subpoenas without chair's signature; Would have required electronic filing of disclosure reports; Would have required 24-hour notice of all contributions received in last 90 days of election; Would have prohibited preemption of House campaign broadcast ads, unless beyond broadcasters' control; Would have prohibited franked mass mailings from start of primary election period through general election, unless Member was not a candidate or mailing promotes public forum with candidate name only; Included statement of findings and declarations; If any provision of act or this statute were held unconstitutional, the remainder of act and statute would have been unaffected. H.R. 4694 (Obey)—Let the Public Decide Campaign Finance Reform Act (Introduced February 1, 2006; jointly referred to Committees on House Administration, Ways and Means, and Rules) Public finance provisions: Would have set mandatory limits on House general election spending based on median household income per district, with maximum of $1.5 million for all major party candidates in highest level district; Other districts' limits would have been determined by subtracting from $1.5 million: two-thirds of percentage difference between the median household income in the district involved and the highest-median-household-income district, multiplied by $1.5 million; Maximum expenditure by a major party candidate would have been in the same ratio to the district-wide limit as the votes for that candidate's party in the last two House general elections in the district were to the votes for all major party candidates in those two elections; For purposes of establishing major party limit, only elections in which there were at least two major party candidates were to have been counted, and, if no such elections occurred, votes for Senate elections during the same period were to be used as the basis; Maximum expenditure for minor party or independent candidates would have been based on comparable ratios concerning that party's (or all independent candidates') votes in House general elections in the district, all federal offices in the state, or for presidential elections in the state (whichever amount was highest); Would have established mechanism for candidates to increase their spending limits based on submission of petition signatures (not applicable to candidate with highest limit in the race); Payments were to have been made to candidates for election expenses in amounts equal to the expenditure limits calculated above from a Grassroots Good Citizenship Fund, established within the Treasury; Fund would have been financed by voluntary taxpayer designations of any refunds owed them of at least $1, plus any additional contributions they wished to make, and by a tax on corporations of 0.1% on taxable income above $10 million; Would have directed FEC to make extensive public service announcements from January 15 to April 15 to promote the fund; Would have allowed only one other source for campaign expenditures—contributions from national and state political parties, of up to 5% of the applicable spending limit; Would have limited spending in non-general House elections (e.g., primaries) to one-third of the general-election spending limit; If any part of the act or these amendments were held unconstitutional by the Supreme Court of the United States, would have provided for expedited (fast-track) consideration by Congress of a constitutional amendment to allow reasonable restrictions on contributions, expenditures, and disbursements in federal campaigns; any legislation enacted to enforce such an amendment would have expired four presidential elections after enactment, unless extended by Congress; Unless otherwise specified, legislation would have taken effect in 2007 and expired in 2020. Other provisions: Would have banned independent expenditures in connection with House elections (but would have provided for fast-track consideration of a constitutional amendment to allow reasonable limits if the ban were held unconstitutional); Would have banned soft money spending in connection with House elections (but would have provided for fast-track consideration of a constitutional amendment to allow reasonable limits if the ban were held unconstitutional). H.R. 5281 (Leach)—Campaign Reform Act of 2004 (Introduced May 3, 2006; referred to Committee on House Administration) Public finance provisions: Would have created House of Representatives Election Campaign Account, within the Presidential Election Campaign Fund, to provide matching payments to eligible House candidates; Eligibility would have been established by (1) raising at least $10,000 from individuals in that election cycle; (2) qualifying for the primary or general election ballot; (3) having an opponent in the primary or general election; and (4) limiting receipts and expenditures in election to $500,000 or the aggregate matching payment limit, whichever was greater; Would have provided for an equal match of contributions from in-state individuals whose aggregate contributions to that candidate for that election did not exceed $500; Aggregate matching payments were not to exceed $175,000 in an election, unless (1) a non-eligible opponent raised more than $500,000 for that election, in which case the matching fund payment could have equaled the opponent's receipts; (2) any opponent in a contested primary raised more than $50,000, in which case the payments could have been increased by up to $75,000; or (3) a runoff occurred, in which case the payments could have been increased by up to $50,000; Payments for House candidates were to have come from House of Representatives Election Campaign Account, once Secretary of Treasury determined that there were adequate funds for presidential campaigns, and from supplemental authorizations by Congress. Appendix C. Public Finance Bills in the 110 th Congress: Summary of Key Provisions H.R. 1614 (Tierney)—Clean Money, Clean Elections Act of 2007 (Introduced March 20, 2007; jointly referred to Committees on House Administration, Energy and Commerce, Ways and Means, and Oversight and Government Reform) Public finance provisions: Would have established voluntary public financing system for House candidates; Would have provided full public subsidies, 30 minutes of free broadcast time in primary and 75 minutes in general election, and additional broadcast time at 50% of lowest unit rate for House candidates who participate in public financing system and spend no private funds beyond subsidy once qualified; Would have allowed candidates, prior to qualification, to raise seed money (up to $50,000, in contributions of $100 or less); Major party candidates would have qualified for public financing by raising 1,500 $5 contributions from state residents; Subsidy would have equaled applicable percentage (60% for general election, 40% for major party candidate in primary, and 25% for other primary candidates) of 80% of base amount per election; Base amount would have been national average of winning House candidate expenditures in two most recent general elections, but not less than amount provided in previous election cycle (and would include annual adjustments based on media costs in the state in which the participating candidate is running); Would have reduced subsidy to 40% of amount otherwise determined for unopposed candidates; Would have provided additional subsidies to compensate for spending by opponents, opposing independent expenditures, and electioneering communications above specified thresholds; Would have denied lowest unit rate to non-participating House candidates; Would have created Clean Elections Review Commission to monitor functioning of House public financing program and make legislative recommendations; Would have authorized tax credits for contributions to the House Clean Elections Fund, subject to restrictions specified in the bill; Would have financed benefits from House of Representatives Election Fund using appropriated funds, qualifying contributions, unused seed money, and voluntary donations. Other provisions: In House races with at least one publicly financed candidate, would have limited party spending on behalf of a candidate to the lesser of 10% of general election candidate's subsidy or the coordinated party expenditure limit established in FECA ; Would have amended "contribution" to include anything of value for purpose of influencing a federal election and that was coordinated with candidate; Would have set specific reporting requirements for participating and non-participating candidates, particularly in final weeks of election or when specified financial thresholds are met; Would have limited the amount of party coordinated expenditures on behalf of publicly financed candidates; Would have defined "payment made in coordination with a candidate" to include payments (1) in cooperation, consultation or concert with, or at request or suggestion of a candidate or agent; (2) using candidate-prepared materials; (3) based on information about campaign plans provided by candidate's campaign for purpose of expenditure; (4) by a spender who during that election cycle had acted in an official position for a candidate, in an executive, policymaking, or advisory capacity; and (5) by a spender who had used the same consultants as an affected candidate during election cycle; would have deemed payments made in coordination with a candidate as a "contribution" or "expenditure" (but exempted a payment by a party in coordination with a "clean money" candidate); Would have required electronic filing of disclosure reports; Would have prohibited preemption of House campaign broadcast ads, unless beyond broadcasters' control; Would have prohibited franked mass mailings from 90 days before a primary election period through general election, unless Member was not a candidate or mailing promotes public forum with candidate name only; Would have authorized imposition of civil penalties for excessive contributions or expenditures (penalty may not exceed 10 times amount of excessive contribution or expenditure); Would have set specific reporting requirements for participating and non-participating candidates, particularly in final weeks of election or when specified financial thresholds are met; Included statement of findings and declarations; Would have allowed FEC to petition Supreme Court; If any provision or act of this statute were held unconstitutional, the remainder of act and statute would have been unaffected; would have provided for direct appeals to the Supreme Court. H.R. 2817 (Obey)—Let the Public Decide Clean Campaign Act (Introduced June 21, 2007; referred to Committees on House Administration, Ways and Means, and Rules) Public finance provisions: Would have set mandatory limits on House general election spending based on median household income per district, with a maximum of $2 million for all major party candidates in the wealthiest district; actual amount would be distributed according to the ratio of district-wide votes the nominees of each major-party received in the district during the three most recent general elections; In other (non-wealthiest) districts, the "maximum combined expenditures" for major-party candidates would have been $2 million minus two-thirds of the percentage difference between the median household incomes in the wealthiest district and the district in question, multiplied by $2 million; actual amount would have been distributed according to the ratio of district-wide votes the nominees of each major-party candidate received in the district during the three most recent general elections If no elections occurred with two major-party candidates, the vote-ratio for Senate elections during the same period would have been used to determine House spending limits noted above; Maximum expenditure for minor party or independent candidates would have been based on comparable ratios concerning that party's (or all independent candidates') votes in House general elections in the district, all federal offices in the state, or for presidential elections in the state (whichever amount were highest); Would have established a mechanism for candidates to increase their spending limits based on submission of specified number of petition signatures (not applicable to candidate with highest limit in the race); Would have limited House candidates' spending to funds from a proposed Grassroots Good Citizenship Fund, to be established within the U.S. Treasury, and to specified amounts from state and national party committees Grassroots Good Citizenship Fund would have been financed by voluntary taxpayer contributions (of at least $1) from any refunds owed, plus any additional contributions they wished to make, and by a tax on corporations of 0.1% on taxable income of more than $10 million; Would have directed FEC to make extensive public service announcements, through time made available by television networks, from January 15 to April 15 to promote the public financing fund; Would have allowed only one other source of campaign expenditures: contributions from national and state political parties, of up to 5% of the candidate's applicable spending limit; Would have limited spending in non-general House elections (i.e., primaries) to one-third of the general-election spending limit; If any part of the act or these amendments were held unconstitutional by the Supreme Court, would have provided for expedited consideration by Congress of a constitutional amendment to allow reasonable restrictions on contributions, expenditures, and disbursements in federal campaigns; any legislation enacted to enforce such an amendment would have expired four presidential elections after enactment, unless extended by Congress; Unless otherwise specified, legislation would have taken effect in 2009 and expired in 2022 (without legislative extension). Other provisions: Would have banned independent expenditures in connection with House elections (but would have provided for expedited consideration of a constitutional amendment to allow reasonable limits if the ban were held unconstitutional); Would have banned "soft money" spending in connection with House elections (but specified expedited consideration of a constitutional amendment to allow reasonable limits if the ban were held unconstitutional). H.R. 7022 (Larson)—Fair Elections Now Act (Introduced September 23, 2008; referred to the Committees on House Administration, Energy and Commerce, Oversight and Government Reform, and Rules) Public finance provisions: Would have established voluntary public financing system for House candidates; Would have provided full public subsidies, political advertising vouchers up to $100,000 (authority to use vouchers could be transferred to political parties for cash value), and additional broadcast time at 80% of lowest unit rate for House candidates who participate in public financing system and spend no private funds beyond subsidy once qualified; Would have allowed candidates, prior to qualification, to raise seed money (up to $75,000 in contributions of $100 or less) by raising $5 donations from at least 1,500 state residents; others would qualify by raising 150% of amount raised by major party candidates; Subsidy would have equaled applicable percentage (60% for general election, 40% for major party candidate in primary, and 25% for other primary candidates) of base amount per election; Base amount would have been 80 percent of the national average spending for the cycle by winning candidates in the last two election cycles; base would have been adjusted based on state media-market index to be determined by the FEC and FCC; additional indexing would have been based on the consumer price index; Would have reduced subsidy to 40% of amount otherwise determined for unopposed general election candidates; Would have allowed leadership PACs associated with participating candidates to accept contributions from individuals if those contributions did not exceed $100 annually, and disbursements did not benefit the participant's campaign; Would have created House Fair Elections Review Commission to monitor functioning of House public financing program (including debate functioning compared with similar state requirements for publicly funded candidates) and make legislative recommendations (bill includes provisions for expedited Senate consideration of such recommendations); Would have provided additional subsidies to compensate for spending by opponents, opposing independent expenditures, and electioneering communications above specified thresholds; Would have financed benefits from House Fair Elections fund using proceeds from "recovered spectrum" auctions, spectrum user fees, voluntary contributions, qualifying contributions, unused seed money, and voluntary donations. Other provisions: In House races with at least one publicly financed candidate, would have limited party spending on behalf of a candidate to the lesser of 10% of general election candidate's subsidy or the coordinated party expenditure limit established in FECA; Included statement of findings and declarations; Would have required publicly financed candidates to participate in debates; Would have extended the lowest unit rate (also known as the "lowest unit charge") to national political party committees; Would have prohibited preemption of House campaign broadcast ads, unless beyond broadcasters' control; Would have required electronic filing of disclosure reports; Would have prohibited franked mass mailings from 90 days before a primary election period through general election, unless Member is not a candidate or mailing promotes public forum with candidate name only; Would have authorized imposition of civil penalties for excessive contributions or expenditures (penalty may not exceed three times amount of excessive contribution or expenditure); Would have limited the amount of party coordinated expenditures on behalf of publicly financed candidates; Would set have specified reporting requirements for participating and non-participating candidates, particularly in final weeks of election or when specified financial thresholds are met; Would have allowed FEC to petition Supreme Court; Appeals related to the act's constitutionality could have been taken directly to the Supreme Court of the United States. S. 936 (Durbin)—Fair Elections Now Act (Introduced March 20, 2007; referred to the Committee on Finance) Public finance provisions: Would have established voluntary public financing system for Senate candidates; Would have provided full public subsidies, political advertising vouchers up to $100,000 multiplied by the number of congressional districts in the state in which the candidate is running (authority to use vouchers could be transferred to political parties for cash value), and additional broadcast time at 80% of lowest unit rate for Senate candidates who participate in public financing system and spend no private funds beyond subsidy once qualified; Would have allowed candidates, prior to qualification, to raise seed money (up to $75,000 plus $7,500 for each congressional district in the state in excess of one district, in contributions of $100 or less) by raising $5 donations from state residents (number of contributions must be at least equal to the sum of 2,000 plus 500 for each congressional district in the state in excess of one district) others would qualify by raising 150% of amount raised by major party candidates; Subsidy would have equaled applicable percentage (100% for general election, 67% for major party candidate in primary, and 25% for other primary candidates) of base amount per election; Base amount would have been $750,000 plus $150,000 for each congressional district in the state in excess of one congressional district; base would have been adjusted based on state media-market index to be determined by the FEC and FCC; additional indexing would have been based on the consumer price index; Would have reduced subsidy to 25% of amount otherwise determined for unopposed general election candidates; Would have allowed leadership PACs associated with participating candidates to accept contributions from individuals if those contributions did not exceed $100 annually, and disbursements did not benefit the participant's campaign; Would have created Senate Fair Elections Commission to monitor functioning of House public financing program (including debate functioning compared with similar state requirements for publicly funded candidates) and make legislative recommendations (bill includes provisions for expedited Senate consideration of such recommendations); Would have authorized tax credits for contributions to the Senate Fair Elections Fund, subject to restrictions specified in the bill; Would have provided additional subsidies to compensate for spending by opponents, opposing independent expenditures, and electioneering communications above specified thresholds; Would have financed benefits from Senate Fair Elections fund using proceeds from "recovered spectrum" auctions, spectrum user fees, voluntary contributions, qualifying contributions, unused seed money, and voluntary donations. Other provisions: In Senate races with at least one publicly financed candidate, would have limited party spending on behalf of a candidate to the lesser of 10% of general election candidate's subsidy or the coordinated party expenditure limit established in FECA; Included statement of findings and declarations; Would have required publicly financed candidates to participate in debates; Would have extended the lowest unit rate (also known as the "lowest unit charge") to national political party committees; Would have prohibited preemption of Senate campaign broadcast ads, unless beyond broadcasters' control; Would have required electronic filing of disclosure reports; Would have prohibited franked mass mailings from 90 days before a primary election period through general election, unless Member was not a candidate or mailing promotes public forum with candidate name only; Would have authorized imposition of civil penalties for excessive contributions or expenditures (penalty may not exceed three times amount of excessive contribution or expenditure); Would have limited the amount of party coordinated expenditures on behalf of publicly financed candidates; Would have set specific reporting requirements for participating and non-participating candidates, particularly in final weeks of election or when specified financial thresholds were met; Would have allow FEC to petition Supreme Court; If any provision of the act were held unconstitutional, the remainder of act and statute would have been unaffected; Appeals related to the act's constitutionality could have been taken directly to the Supreme Court of the United States. S. 1285 (Durbin)—Fair Elections Now Act (Introduced May 3, 2007; referred to the Committee on Rules and Administration) Public finance provisions: Would have established voluntary public financing system for Senate candidates; Would have provided full public subsidies, political advertising vouchers up to $100,000 multiplied by the number of congressional districts in the state in which the candidate is running (authority to use vouchers could be transferred to political parties for cash value), and additional broadcast time at 80% of lowest unit rate for Senate candidates who participate in public financing system and spend no private funds beyond subsidy once qualified; Would have allowed candidates, prior to qualification, to raise seed money (up to $75,000 plus $7,500 for each congressional district in the state in excess of one district, in contributions of $100 or less) by raising $5 donations from state residents (number of contributions must be at least equal to the sum of 2,000 plus 500 for each congressional district in the state in excess of one district) others would have qualified by raising 150% of amount raised by major party candidates; Subsidy would have equaled applicable percentage (100% for general election, 67% for major party candidate in primary, and 25% for other primary candidates) of base amount per election; Base amount would have been $750,000 plus $150,000 for each congressional district in the state in excess of one congressional district; base would have been adjusted based on state media-market index to be determined by the FEC and FCC; additional indexing would be based on the consumer price index; Would have reduced subsidy to 25% of amount otherwise determined for unopposed general election candidates; Would have allowed leadership PACs associated with participating candidates to accept contributions from individuals if those contributions did not exceed $100 annually, and disbursements did not benefit the participant's campaign; Would have created Senate Fair Elections Review Commission to monitor functioning of House public financing program (including debate functioning compared with similar state requirements for publicly funded candidates) and make legislative recommendations (bill includes provisions for expedited Senate consideration of such recommendations); Would have provided additional subsidies to compensate for spending by opponents, opposing independent expenditures, and electioneering communications above specified thresholds; Would have financed benefits from Senate Fair Elections fund using proceeds from "recovered spectrum" auctions, spectrum user fees, voluntary contributions, qualifying contributions, unused seed money, and voluntary donations. Other provisions: In Senate races with at least one publicly financed candidate, would have limited party spending on behalf of a candidate to the lesser of 10% of general election candidate's subsidy or the coordinated party expenditure limit established in FECA; Included statement of findings and declarations; Would have required publicly financed candidates to participate in debates; Would have extended the lowest unit rate (also known as the "lowest unit charge") to national political party committees; Would have prohibited preemption of Senate campaign broadcast ads, unless beyond broadcasters' control; Would have required electronic filing of disclosure reports; Would have prohibited franked mass mailings from 90 days before a primary election period through general election, unless Member is not a candidate or mailing promotes public forum with candidate name only; Would have authorized imposition of civil penalties for excessive contributions or expenditures (penalty may not exceed three times amount of excessive contribution or expenditure); Would have limited the amount of party coordinated expenditures on behalf of publicly financed candidates; Would set have specified reporting requirements for participating and non-participating candidates, particularly in final weeks of election or when specified financial thresholds were met; Would have allowed FEC to petition Supreme Court; If any provision of the act were held unconstitutional, the remainder of act and statute would have been unaffected. Appeals related to the act's constitutionality could have been taken directly to the Supreme Court of the United States. Appendix D. Public Finance Bills in the 111 th Congress: Summary of Key Provisions H.R. 158 (Obey)—Let the P ublic Decide Clean Campaign Act (Introduced January 6, 2009; referred to Committees on House Administration, Ways and Means, and Rules) Public finance provisions: Would have set mandatory limits on House general election spending based on median household income per district, with a maximum of $2 million for all major party candidates in the wealthiest district; actual amount would have been distributed according to the ratio of district-wide votes the nominees of each major-party received in the district during the three most recent general elections; In other (non-wealthiest) districts, the "maximum combined expenditures" for major-party candidates would have been $2 million minus two-thirds of the percentage difference between the median household incomes in the wealthiest district and the district in question, multiplied by $2 million; actual amount would have been distributed according to the ratio of district-wide votes the nominees of each major-party candidate received in the district during the three most recent general elections If no elections occurred with two major-party candidates, the vote-ratio for Senate elections during the same period would have been used to determine House spending limits noted above; Maximum expenditure for minor party or independent candidates would have been based on comparable ratios concerning that party's (or all independent candidates') votes in House general elections in the district, all federal offices in the state, or for presidential elections in the state (whichever amount were highest); Would have established a mechanism for candidates to increase their spending limits based on submission of specified number of petition signatures (not applicable to candidate with highest limit in the race); Would have limited House candidates' spending to funds from a proposed Grassroots Good Citizenship Fund, to be established within the U.S. Treasury, and to specified amounts from state and national party committees Grassroots Good Citizenship Fund would have been financed by voluntary taxpayer contributions (of at least $1) from any refunds owed, plus any additional contributions they wished to make, and by a tax on corporations of 0.1% on taxable income of more than $10 million; Would have directed FEC to make extensive public service announcements, through time made available by television networks, from January 15 to April 15 to promote the public financing fund; Would have allowed only one other source of campaign expenditures: contributions from national and state political parties, of up to 5% of the candidate's applicable spending limit; Would have limited spending in non-general House elections (i.e., primaries) to one-third of the general-election spending limit; If any part of the act or these amendments were held unconstitutional by the Supreme Court, would have provided for expedited consideration by Congress of a constitutional amendment to allow reasonable restrictions on contributions, expenditures, and disbursements in federal campaigns; any legislation enacted to enforce such an amendment would expire four presidential elections after enactment, unless extended by Congress; Unless otherwise specified, legislation would have taken effect in 2012 and expire in 2026 (without legislative extension). Other provisions: Would have banned independent expenditures in connection with House elections (but would provide for expedited consideration of a constitutional amendment to allow reasonable limits if the ban were held unconstitutional); Would have banned "soft money" spending in connection with House elections (but specifies expedited consideration of a constitutional amendment to allow reasonable limits if the ban were held unconstitutional). H.R. 1826 (Larson)—Fair Elections Now Act (Introduced March 31, 2009; referred to Committees on House Administration, Energy and Commerce, and Ways and Means) Public finance provisions: Would have applied to House candidates voluntarily participating in public financing; Would have provided base subsidy (allocation) of 80% of the national average of spending by winning House candidates in the previous two election cycles; base subsidy would be adjusted to 40% of the base for primary elections; the remaining 60% would be allocated to the general election; Would have provided matching funds equal to 400% (up to 200% of the base) of "small dollar" contributions (no more than $100 per individual contributor, per election); Would have provided $100,000 in broadcast vouchers for the general election; Would have provided lesser amounts of the benefits discussed above to minor-party candidates or those in uncontested or runoff elections; Would have permitted participants to purchase additional broadcast time at 80% of the lowest unit charge (lowest unit rate) for 45 days before the primary and 60 days before the general election; Would have extended lowest unit charge to national parties Participants would have qualified for public financing by raising qualifying contributions of no more than $100 per individual contributor (limited to state residents) to the greater of 1,500 contributions or $50,000; Would have prohibited participating candidates from spending funds other than qualifying contributions, "small dollar" contributions, allocations from the proposed Fair Elections Fund, and broadcast vouchers; Would have limited the amount of party coordinated expenditures on behalf of publicly financed candidates to the lesser of 10% of the candidate's base allocation amount or established limits in FECA; Would have funded public financing through appropriations (unspecified amount), proceeds from fines and voluntary contributions, "check-off" designations on individual federal income tax returns ($10 for individuals; $20 for married couples filing jointly), and spectrum auctions; Would have created Fair Elections Oversight Board within the FEC to monitor functioning of congressional public financing program, including program benefits and limitations, and perform other duties delegated by the FEC; Would have established penalties for prohibited spending (or accepting prohibited contributions) by publicly financed candidates. Other provisions: Would have required participating candidates to participate in debates; Would have required participating candidates to accept public funds both during primary and general elections; Would have required FCC to initiate a rulemaking to develop a standard form for broadcasters to report certain information about campaign advertising, which broadcasters would have to make available via the Internet; Would have prohibited preemption of candidates' paid broadcast advertising, unless beyond broadcaster's control; Would have allowed leadership PACs associated with participating candidates to accept contributions from individuals if those contributions did not exceed $100 annually and disbursements did not benefit the participant's campaign; Would have prohibited participating candidates' authorized political committees (principal campaign committees) from establishing joint fundraising committees, except with other authorized committees; Would have allowed the FEC to petition Supreme Court; If any provision of the act were held unconstitutional, the remainder of act and statute would have been unaffected. H.R. 6116 (Larson)—Fair Elections Now Act (Introduced September 14, 2010; referred to Committees on House Administration and Energy and Commerce; reported favorably by Committee on House Administration December 21, 2010) Public finance provisions: Would have applied to House candidates voluntarily participating in public financing; Would have provided base subsidy (allocation) of 80% of the national average of spending by winning House candidates in the previous two election cycles; base subsidy would have been adjusted to 40% of the base for primary elections; the remaining 60% would have been allocated to the general election; Would have provided matching funds equal to 400% (up to 200% of the base) of "small dollar" contributions (no more than $100 per individual contributor, per election); Would have provided recount funding in the amount of 25% of base allocation for relevant election; Would have provided lesser amounts of the benefits discussed above to minor-party candidates or those in uncontested or runoff elections; Participants would have qualified for public financing by raising qualifying contributions of no more than $100 (from state residents) to the lesser of: (1) at least $50,000 from at least 1,500 individuals; or (2) at least $50,000 from at least 0.25% of voting age population (VAP) in the state involved (according to the most recent decennial Census); Would have prohibited participating candidates from spending funds other than qualifying contributions, "small dollar" contributions, allocations from the proposed Fair Elections Fund, and limited amounts raised before becoming a publicly financed candidate; Would have limited the amount of party coordinated expenditures on behalf of publicly financed candidates to the lesser of 10% of the candidate's base allocation amount or established limits in FECA; Would have funded public financing through appropriations (unspecified amount), proceeds from fines and voluntary contributions; Would have created Fair Elections Oversight Board within the FEC to monitor functioning of congressional public financing program, including program benefits and limitations, and perform other duties delegated by the FEC; Would have established penalties for prohibited spending (or accepting prohibited contributions) by publicly financed candidates. Other provisions: Would have required participating candidates to participate in debates; Would have required participating candidates to accept public funds both during primary and general elections; Would have allowed leadership PACs associated with participating candidates to accept contributions from individuals if those contributions did not exceed $100 annually and disbursements did not benefit the participant's campaign; Would have prohibited participating candidates' authorized political committees (principal campaign committees) from establishing joint fundraising committees, except with other authorized committees; Would have allowed the FEC to petition Supreme Court; If any provision of the act were held unconstitutional, the remainder of act and statute would be unaffected. S. 752 (Durbin)—Fair Elections Now Act (Introduced March 31, 2009; referred to Committee on Rules and Administration) Public finance provisions: Would have applied to Senate candidates voluntarily participating in public financing; Participants would have qualified for public financing by raising qualifying contributions of no more than $100 per individual contributor (limited to state residents) to the sum of 2,000 plus 500 for each congressional district in the state, provided that the total dollar amount is at least 10% of the candidate's base allocation for the primary election; Would have provided base subsidy (allocation) of $750,000 plus $150,000 for each congressional district in the state; subsidy would be adjusted to 67% of the base for primary elections; Would have provided matching funds equal to 400% (up to 200% of the base) of "small dollar" contributions (no more than $100 per individual contributor, per election); For the general election, would have provided $100,000 in broadcast vouchers multiplied by the number of congressional districts in the state; Would have provided lesser amounts of the benefits discussed above to minor-party candidates or those in uncontested or runoff elections; Would have permitted participants to purchase additional broadcast time at 80% of the lowest unit charge (lowest unit rate) for 45 days before the primary and 60 days before the general election; Would have extended lowest unit charge to national parties Would have prohibited participating candidates from spending funds other than qualifying contributions, "small dollar" contributions, allocations from the proposed Fair Elections Fund, and broadcast vouchers; Would have limited the amount of party coordinated expenditures on behalf of publicly financed candidates to the lesser of 10% of the candidate's base allocation amount or established limits in FECA; Included sense of the Senate language calling for proceeds from a proposed 0.5% tax on government contacts of more than $10 million to be appropriated to fund Senate public financing [see separate funding legislation, S. 751 (Durbin)]; proceeds from fines and voluntary contributions would also fund Senate campaigns; Would have created Fair Elections Oversight Board within the FEC to monitor functioning of congressional public financing program, including program benefits and limitations, and perform other duties delegated by the FEC; Would have established penalties for prohibited spending (or accepting prohibited contributions) by publicly financed candidates. Other provisions: Would have required participating candidates to participate in debates; Would have required FCC to initiate a rulemaking to develop a standard form for broadcasters to report certain information about campaign advertising, which broadcasters would have had to make available via the Internet; Would have allowed leadership PACs associated with participating candidates to accept contributions from individuals if those contributions did not exceed $100 annually and disbursements did not benefit the participant's campaign; Would have prohibited participating candidates' authorized political committees (principal campaign committees) from establishing joint fundraising committees, except with other authorized committees; Would have allowed the FEC to petition Supreme Court; If any provision of the act were held unconstitutional, the remainder of act and statute would have been unaffected. H.R. 2056 (Tierney)—Clean Mo ney, Clean Elections Act of 2009 (Introduced April 22, 2009; jointly referred to Committees on House Administration, Energy and Commerce, Ways and Means, and Oversight and Government Reform) Public finance provisions: Would have established voluntary public financing system for House candidates; Would have provided full public subsidies, 30 minutes of free broadcast time in primary and 75 minutes in general election, and additional broadcast time at 50% of lowest unit rate for House candidates who participate in public financing system and spend no private funds beyond subsidy once qualified; Major-party candidates could have qualified for public financing by raising 1,500 $5 contributions from state residents; Would have allowed candidates, prior to qualification, to raise seed money (up to $50,000, in contributions of $100 or less); Subsidy would have equaled applicable percentage (60% for general election, 40% for major party candidate in primary, and 25% for other primary candidates) of 80% of base amount per election; Base amount would have been national average of winning House candidate expenditures in two most recent general elections, but not less than amount provided in previous election cycle (and would include annual adjustments based on media costs in the state in which the participating candidate is running); Would have reduced subsidy to 40% of amount otherwise determined for unopposed candidates; Would have provided additional subsidies to compensate for spending by opponents, opposing independent expenditures, and electioneering communications above specified thresholds; Would have denied lowest unit rate to non-participating House candidates; Would have created Clean Elections Review Commission to monitor functioning of House public financing program and make legislative recommendations; Would have authorized tax credits for contributions to the House Clean Elections Fund, subject to restrictions specified in the bill; Would have financed benefits from House of Representatives Election Fund using appropriated funds, qualifying contributions, unused seed money, and voluntary donations. Other provisions: In House races with at least one publicly financed candidate, would have limited party spending on behalf of a candidate to the lesser of 10% of general election candidate's subsidy or the coordinated party expenditure limit established in FECA; Would have amended "contribution" to include anything of value for purpose of influencing a federal election and that was coordinated with candidate; Would have set specific reporting requirements for participating and non-participating candidates, particularly in final weeks of election or when specified financial thresholds are met; Would have limited the amount of party coordinated expenditures on behalf of publicly financed candidates; Would have defined "payment made in coordination with a candidate" to include payments (1) in cooperation, consultation or concert with, or at request or suggestion of a candidate or agent; (2) using candidate-prepared materials; (3) based on information about campaign plans provided by candidate's campaign for purpose of expenditure; (4) by a spender who during that election cycle had acted in an official position for a candidate, in an executive, policymaking, or advisory capacity; and (5) by a spender who had used the same consultants as an affected candidate during election cycle; would have deemed payments made in coordination with a candidate as a "contribution" or "expenditure" (but exempted a payment by a party in coordination with a "clean money" candidate); Would have required electronic filing of disclosure reports; Would have prohibited preemption of House campaign broadcast ads, unless beyond broadcasters' control; Would have prohibited franked mass mailings from 90 days before a primary election period through general election, unless Member was not a candidate or mailing promotes public forum with candidate name only; Would have authorized imposition of civil penalties for excessive contributions or expenditures (penalty may not exceed 10 times amount of excessive contribution or expenditure); Would have set specific reporting requirements for participating and non-participating candidates, particularly in final weeks of election or when specified financial thresholds are met; Included statement of findings and declarations; Would have allowed FEC to petition Supreme Court; If any provision or act of this statute were held unconstitutional, the remainder of act and statute would have been unaffected; would provided for direct appeals to the Supreme Court. Appendix E. Public Finance Bills in the 112 th Congress: Summary of Key Provisions H.R. 1404 (Larson)—Fair Elections Now Act (Introduced April 6, 2011; referred to Committees on House Administration) Public finance provisions: Would apply to House candidates voluntarily participating in public financing; Would provide base subsidy (allocation) of 80% of the national average of spending by winning House candidates in the previous two election cycles; base subsidy would be adjusted to 40% of the base for primary elections; the remaining 60% would be allocated to the general election; Would provide matching funds equal to 500% (up to 300% of the base) of "small dollar" contributions (no more than $100 per individual contributor, per election); Would provide recount funding in the amount of 25% of base allocation for relevant election; Would provide lesser amounts of the benefits discussed above to minor-party candidates or those in uncontested or runoff elections; Participants would qualify for public financing by raising qualifying contributions of no more than $100 (from state residents) to the lesser of: (1) at least $50,000 from at least 1,500 individuals; or (2) at least $50,000 from at least 0.25% of voting age population (VAP) in the state involved (according to the most recent decennial Census); Would prohibit participating candidates from spending funds other than qualifying contributions, "small dollar" contributions, allocations from the proposed Fair Elections Fund, and limited amounts raised before becoming a publicly financed candidate; Would limit the amount of party coordinated expenditures on behalf of publicly financed candidates to the lesser of 10% of the candidate's base allocation amount or established limits in FECA; Would fund public financing through appropriations (unspecified amount), proceeds from fines and voluntary contributions; Would create Fair Elections Oversight Board within the FEC to monitor functioning of congressional public financing program, including program benefits and limitations, and perform other duties delegated by the FEC; Would establish penalties for prohibited spending (or accepting prohibited contributions) by publicly financed candidates. Other provisions: Would require participating candidates to participate in debates; Would require participating candidates to accept public funds both during primary and general elections; Would allow leadership PACs associated with participating candidates to accept contributions from individuals if those contributions did not exceed $100 annually and disbursements did not benefit the participant's campaign; Would prohibit participating candidates' authorized political committees (principal campaign committees) from establishing joint fundraising committees, except with other authorized committees; Would require electronic filing of FEC reports; Would allow the FEC to petition Supreme Court; If any provision of the act were held unconstitutional, the remainder of act and statute would be unaffected. S. 750 (Durbin)—Fair Elections Now Act (Introduced April 6, 2011, referred to Committee on Rules and Administration) Public finance provisions: Would apply to Senate candidates voluntarily participating in public financing; Participants would qualify for public financing by raising qualifying contributions of no more than $100 per individual contributor (limited to state residents) to the sum of 2,000 plus 500 for each congressional district in the state, provided that the total dollar amount is at least 10% of the candidate's base allocation for the primary election; Would provide base subsidy (allocation) of $750,000 plus $150,000 for each congressional district in the state; subsidy would be adjusted to 67% of the base for primary elections; Would provide matching funds equal to 500% (up to 300% of the base) of "small dollar" contributions (no more than $100 per individual contributor, per election); For the general election, would provide $100,000 in broadcast vouchers multiplied by the number of congressional districts in the state; Would provide lesser amounts of the benefits discussed above to minor-party candidates or those in uncontested or runoff elections; Would permit participants to purchase additional broadcast time at 80% of the lowest unit charge (lowest unit rate) for 45 days before the primary and 60 days before the general election; Would extend lowest unit charge to national parties; Would prohibit participating candidates from spending funds other than qualifying contributions, "small dollar" contributions, allocations from the proposed Fair Elections Fund, and broadcast vouchers; Would not limit coordinated party expenditures made on behalf of publicly financed candidates if the funds used for those expenditures came from individual contributions of no more than $500; Includes sense of the Senate language calling for proceeds from a proposed 0.5% tax on government contacts of more than $10 million to be appropriated to fund Senate public financing (see separate funding legislation, S. 749 (Durbin)); proceeds from fines and voluntary contributions would also fund Senate campaigns; Would create Fair Elections Oversight Board within the FEC to monitor functioning of congressional public financing program, including program benefits and limitations, and perform other duties delegated by the FEC; Would establish penalties for prohibited spending (or accepting prohibited contributions) by publicly financed candidates. Other provisions: Would require participating candidates to participate in debates; Would require FCC to initiate a rulemaking to develop a standard form for broadcasters to report certain information about campaign advertising, which broadcasters would have to make available via the Internet; Would allow leadership PACs associated with participating candidates to accept contributions from individuals if those contributions did not exceed $100 annually and disbursements did not benefit the participant's campaign; Would prohibit participating candidates' authorized political committees (principal campaign committees) from establishing joint fundraising committees, except with other authorized committees; Would allow the FEC to petition Supreme Court; If any provision of the act were held unconstitutional, the remainder of act and statute would be unaffected.
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To critics, public campaign financing, generally in conjunction with spending limits, is the ultimate solution to perceived problems arising from ever-growing costs of campaigns and the accompanying need for privately donated campaign funds. Public financing supporters maintain that replacing private funds with public money would most effectively reduce potentially corrupting influence from "interested" money. On the other hand, opponents of public financing question whether real or apparent corruption from private fundraising is as serious a problem as critics claim. They also argue that public financing would be an inappropriate use of taxpayer dollars and would compel taxpayers to fund candidates they find objectionable. In the early 1970s, supporters succeeded in enacting public financing in presidential elections, a system that has been available since 1976. In addition, many states and localities have provided public financing in their elections since the 1970s (or before). Today, 16 states offer some form of direct aid to candidates' campaigns through fixed subsidies or matching funds. Perceptions about the presidential and state public financing systems have shaped opinions about adding public financing to congressional elections. Also shaping that debate was the Supreme Court's landmark 1976 Buckley v. Valeo ruling, which struck down mandatory spending limits, but sanctioned voluntary spending limits accompanying public financing. Proposals for publicly funded congressional elections have been offered in almost every Congress since 1956; the issue was prominently debated in the mid-1970s and the late 1980s through early 1990s. Proposals were passed twice by the Senate in the 93rd Congress and by both the House and Senate in the 101st, 102nd, and 103rd Congresses. Only the 102nd Congress proposal was reconciled in conference but was vetoed by the President. Thus far in the 112th Congress, Senator Durbin and Representative Larson introduced the latest versions of the Fair Elections Now Act (FENA) on April 6, 2011. These include S. 750 and H.R. 1404; S. 749 is a separate measure that would finance the program proposed in S. 750. The two versions of FENA, S. 750 and H.R. 1404, are similar to three bills introduced during the 111th Congress (H.R. 6116, which superseded H.R. 1826, and S. 752). Like their predecessors, the current versions of FENA propose to provide participating candidates with a mix of base subsidies, matching funds, and broadcast vouchers. The current versions of FENA propose two changes in incentives for participating candidates compared with 111th Congress versions of the legislation. First, although the types of available funding remain consistent, participants would be eligible for larger funding amounts. Second, coordinated party expenditures would be unlimited if funds used for those expenditures came from individual contributions of less than $500. Appendix D and Appendix E at the end of the report summarize major provisions of legislation introduced in the 111th and 112th Congresses respectively. In addition to discussing recent legislation, this report reviews past proposals for, and debate over, congressional public financing. It also discusses experiences with the presidential and state public financing systems. Finally, the report offers potential considerations for Congress in devising a public financing system for its elections. The report will be updated periodically, on the basis of congressional and state activities.
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Severe Acute Respiratory Syndrome (SARS), a new, highly infectious viral disease, was firstidentified by the World Health Organization (WHO) in February 2003. It is believed to have hadits beginnings in China's Guangdong Province in November 2002. A respiratory disease that causesflu-like symptoms which may progress to pneumonia, SARS has an average fatality rate of 15%. Between November 2002 and July 2003, a total of 8,437 cases and 813 deaths were reported in 31countries. (1) While the overall numbers are not high by comparison with other serious infectious diseases, the speed and distance with which SARS spread raised an alarm over the potential risks tointernational public health. Containment appears to be working; however, there are fears thatanother SARS outbreak might take place during the regular influenza season later in 2003. Thisreport reviews the global response by WHO and those countries most affected. It also examines thechallenges that may lie ahead should another outbreak of SARS (or another unknown infectiousdisease) occur. (2) Since late February, when WHO first identified the outbreak of what later became known asthe Severe Acute Respiratory Syndrome (SARS), it has played a key role in the global response tothe disease. SARS is a striking example of the risks to international public health posed by suchinfectious diseases. It also highlights the need for appropriate mechanisms of containment,particularly as global travel has become the primary means of spreading the disease around theworld. Following its initial assessment, WHO made containment of SARS its main goal. "Despite the lack of understanding about the disease, its cause, and future evolution, the need was great tointroduce a series of emergency measures to contain SARS outbreaks in the affected areas andprevent further international spread, thus reducing opportunities for the new disease to establishitself." (3) Although WHO's representative in China,Henk Bekedam, reportedly said on June 5, 2003that the outbreak of SARS had reached its peak worldwide, (4) WHO continues to stress the importanceof sustaining international public health measures against SARS and working towards eliminatingit as a public health threat. The SARS outbreak may reveal valuable lessons about the effectivenessof WHO's surveillance and response systems, and its capacity to respond to similar outbreaks in thefuture. Examining the evolution of SARS also demonstrates the chains of transmission and role ofthe WHO in responding to unfolding events. Although WHO led an unprecedented global collaborative effort to contain SARS, the U.S. Centers for Disease Control and Prevention (CDC) also played a key role in the global partnership. For more information on the role of the CDC in relation to SARS, see CRS Report RL31937 , SARS:Public Health Situation and U.S. Response . The World Health Organization (WHO), established in 1948, is the U.N. system's authority on international public health issues. It assists governments in improving national health services andin establishing worldwide standards for foods, chemicals, and biological and pharmaceuticalproducts. WHO concentrates on preventive rather than curative programs, including efforts toeradicate endemic and other widespread diseases, stabilize population growth, improve nutrition,sanitation, and maternal and child care. WHO works through contracts with other agencies andprivate voluntary organizations. The United States has been a member of WHO since 1948. The WHO policy making body is the World Health Assembly, composed of all 192-member states. It meets annually in May to decide the overall direction of the Organization and the generalprogram for a specific period, and to adopt the two-year budget. Decisions are made by majorityvote, except for decisions on the budget that require a two-thirds vote. There is no veto provision. The Assembly elects the Director General as well as the 32 member states who designate personsto serve on the Executive Board. The Executive Board meets twice a year to review the work ofWHO in more detail and prepares issues for consideration by the Assembly. Ten to twelve membersof the Board are replaced every year. The United States has been a member on the Executive Boardthree out of every four years. The Global Outbreak Alert and Response Network (GOARN). In April 2000, WHO formally established the Global Outbreak Alertand Response Network (GOARN) which brought together 112 institutions and networks of peopleand technical resources to respond to disease outbreaks of international concern. This global healthsecurity network provides not only an operational framework, drawing on data, expertise, and skill,but also aims to standardize the international response. (5) It relies on its partners and agreed standardsof practice in responding to potential threats, which may include emerging diseases and theintentional use of biological agents. In four years, between January 1998 and March 2002, GOARNexamined 538 such cases in 132 countries. (6) The Global Public Health Intelligence Network (GPHIN). WHO also relies on the Global Public Health Intelligence Network(GPHIN), which is a customized search engine that tracks Internet communications. This systemproved to be very useful in picking up telecommunicated alerts in China. The system is also usefulto WHO in clarifying or refuting information that may create disruption or panic. Other tools includegeographical mapping technology and an event management and tracking system that provides anoverview of operations. It was clear that SARS presented a serious global threat. Lack of information about the cause and evolution of the new disease made its potential impact unknown. WHO concluded that the viruscomes from a strain likely to include frequent mutations and links to animal species, withimplications for the likelihood of establishing endemicity and underlining the importance of findingthe means to control or contain it. Several factors were deemed critical in this analysis: The symptoms are non-specific and common; The symptoms can be severe and some patients require intensive care forrespiratory failure; The disease spreads easily from one location to another via air travel asdemonstrated in transmission patterns from the initial outbreak in Asia to other regions, such asNorth America and Europe; There is no vaccine or treatment yet available and diagnostics tests are oflimited use. A number of antivirals are not effective; The causative agent is not well understood, so the potential for continuedspread remains; Certain cases may contribute to the rapid spread ofinfection; Hospital staff, who are a vital link to the control of infection, aredisproportionately affected as are other close contacts of the patients; The disease requires intensive treatment in isolation and is a burden on healthcare systems. (7) By comparison to SARS, except in the case of HIV/AIDS, other new diseases that have emerged in the last few decades have not presented the same combination of factors that pose sucha heavy global risk to international health. Some of these diseases have not sustained stronghuman-to-human transmission, others have relied on food or a vector (such as mosquitos) fortransmission, and still others have had an identifiable, often containable, geographic location. Once the severity of the disease was recognized, in February and March 2003, WHO took aggressive action. Examining the factors outlined above and the chronology of events unfolding inChina, Hong Kong, Vietnam, and Toronto, it identified international travel as a primary means ofspreading the virus. It also concluded at the time that some people might be highly infectious, or"super spreaders". Identifying these individuals could be critical to the control of the disease. (8) OnMarch 15, 2003, WHO issued emergency travel recommendations as a global alert and response tointernational travelers, health care professionals, and border authorities. Later in March itrecommended screening passengers at airports coming from areas with recent local transmission andgave advice to airlines on appropriate procedures if a case was suspected during flight. In April andMay, on several occasions, the WHO issued its most stringent travel advisories recommending thepostponement of all but essential travel to areas considered high risk for SARS,. (9) WHO also quickly moved to set up systems for -- and increase awareness of the need for -- immediate isolation and quarantine of those with or suspected of having SARS. In addition, it beganthe detailed work of contact tracing to find the source of the spread. These procedures along withsimple diagnostics and screening all contributed to the ongoing containment effort. The response to SARS placed heavy demands on WHO and its GOARN partners. Time was very much of the essence. WHO pulled together a comprehensive network, including mobilizinga response on the ground, providing resources and supplies, monitoring and reporting, andestablishing scientific and medical collaboration. The WHO issued travel procedures to prevent andmanage probable cases of SARS. (10) It establisheda collaborative multi-center research project onSARS and brought together clinicians for SARS diagnosis and treatment. (11) It also developedguidelines, recommendations, and descriptions concerning case definitions, case management,laboratories, biosafety, blood safety, epidemiology, mass gatherings, and goods and animals fromSARS-affected areas. (12) An urgent plan for the operational response to SARS was developed and implemented. This included providing expertise and supplies in SARS-affected areas and hospitals, and "in the air"through technology to bring the best minds to the collaboration required. This plan resulted in: A global alert Rapid case identification Global reporting system and verification Regular updates and advice International field support and logistics coordination Epidemiological and clinical networking Laboratory network (13) Through this network, and daily conference calls, epidemiologists were able to discuss cases, refine their definitions, examine chains of transmission, track progress, and increase theirunderstanding of what worked best where. Similarly, individuals working in the clinical networkwere able to share experiences with different forms of treatment, examine the possible reasons forthe range of individual responses to the disease, and develop guidelines for infection control. Thenetwork of the laboratories enabled many scientists to work together to come up with theidentification of the SARS virus. Scientists have much to learn about SARS, including understanding the evolution of the disease, designing early detection, prevention and treatment strategies, and establishing effectivesurveillance systems. Until then, containment may remain the most effective control tool. If SARSbecomes endemic, the WHO may find the application of models of response for other infectiousdiseases, such as malaria, meningitis and yellow fever useful in combating the disease anddeveloping therapies and vaccines. (14) WHO has issued an appeal for funding to support its surveillance and monitoring activities in Asia. It hopes to help those hardest hit by the disease economically, to continue with their effortsto control SARS, and ultimately to eliminate the disease as a global threat. (15) The WHO has anannual budget of nearly $850 million. It relies heavily on its 192 member states for resources andteams of experts. (16) The outbreak of SARS has raised many public health questions, including the application of international law. According to David P. Fidler, Professor of Law at Indiana School of Law inBloomington, the legal implications affect three main areas -- International Health Regulations(IHR); public health measures and civil and political rights; and principles of state responsibility inresponding to SARS. (17) This section will focuson the IHR because of its relevance to WHO. Overview of the International Health Regulations. In 1951, under Article 21 of the WHO constitution, member states adopted the International SanitaryRegulations, which in 1969 became known as the International Health Regulations (IHR). Amendments were made in 1973 and 1981. The main purpose was to control the spread of diseaseswith minimum impact on world traffic through the development of a global surveillance system, theuse of procedures at ports and airports, and the creation of disease-specific provisions. Some arguethat the regulations have not been effective in ensuring protection against diseases in a world ofincreasing trade and travel. Experts maintain that a key reason for ineffectiveness lies in the limitednumber of diseases to which the IHR applies. Originally, the regulation covered six diseases --smallpox, relapsing fever, typhus, cholera, plague, and yellow fever. (18) Today the IHR applies onlyto the last three diseases. Smallpox is considered to have been eradicated some years ago. Relapsingfever and typhus had been so successfully controlled that they were no longer considered a publichealth threat. The IHR do not apply to more recent infectious diseases such as HIV/AIDS andSARS. Member states were therefore under no obligation to report the outbreak of a new infectiousdisease nor were they required to restrict trade or travel even if it would benefit containment. (19) In the 1990s, the WHO initiated a revision of the IHR to address the limited scope of the diseases covered, increase its relevance to the kinds of infectious disease threats most prevalent orlikely today, and to manage the return of old diseases. These revisions are scheduled to be finalizedin 2005. (20) In 2001, the World Health Assembly adopted a resolution concerning member response to international public health emergencies and global health security with reference to epidemics. In2002, another resolution made the response more specific, and included health risks related not onlyto natural occurrence, but to accidental or deliberate use of biological and chemical agents. (21) The SARS outbreak added momentum to discussions about revising the IHL that were already well under way. As recently as January 2003, the 192 member states had been discussing the detailsof the new framework, with a resolution for completing the revised regulations. Although the IHRwere recognized as being outdated, the case of SARS highlighted the problems of transparency --China denied the problem existed for months, and the information provided from Toronto wascriticized by some as incomplete and not timely enough. The Fifty-Sixth World Health Assembly. Fidler argues that "the SARS epidemic may encourage WHO member states to accept a more robustinternational legal framework for global infectious disease control than has existed historically." (22) At the Fifty-Sixth World Health Assembly in May 2003, the member states adopted two resolutionsrelevant to the SARS outbreak, one specifically on SARS, the other on the revision of IHL. (23) TheSARS resolution focuses on eleven recommendations to WHO member states in addressing theSARS outbreak; it also requests the WHO Director General to take specific actions. None of theseare new obligations or binding on member states as earlier press reports might have suggested. Rather, they build on the role of the WHO and highlight the need for information sharing andinternational cooperation in combating an outbreak such as SARS. (24) The IHL Resolution takes an important political step in emphasizing the need for member states to cooperate with other states and the WHO in monitoring and responding to infectious diseases. Although the SARS outbreak highlighted the strong need for revision of the IHL, then WHODirector General Gro Harlem Brundtland also pointed out the difficult balance to be struck inrevising the regulations, such as state obligations to report sensitive health information, protectionof human rights and civil liberties in light of an international health threat, and the impact onimmigration policies and decisions. (25) The IHLResolution does not give WHO a significant increasein authority in terms of intervention during a potential public health threat, nor does it give WHOthe power to reprimand a state that does not comply. (26) However, the IHL Resolution lays thepolitical groundwork for states to respond appropriately, much of the encouragement to comply willlikely come from international pressure as the SARS case demonstrated. (27) The IHL resolution was adopted as an interim measure until the IHL revisions are finalized in 2005. The WHO opted for this two-step process rather than insisting that members immediatelyapprove the incorporation of the resolution into the IHL. (28) Some experts suggest that this resolutionwill encourage WHO collaboration within countries and also provide momentum for implementationof the measures outlined in the resolution. (29) TheU.S. delegation initially asked for a postponementof action on the proposed resolution, hoping to include it in a broader discussion, but later concededwhen it did not enlist member support. (30) Otherssuggested that this was a "negotiating tactic" usedto avoid too early a commitment by the United States. (31) The SARS virus rapidly spread to 30 countries, ultimately infecting 8,437 people, of whom 813died. (32) Each country handled the virus differently. Some countries, like Vietnam, immediatelycalled for international support. Others, like China, initially downplayed the severity of the viruswithin their borders. Although the United States reported 75 SARS cases it had no SARS-relateddeaths. (33) Countries experiencing five or moreSARS deaths are discussed in this section. Othercountries that reported SARS deaths include: France (1), Malaysia (2), Philippines (2), South Africa(1), and Thailand (2). Reports of SARS outbreak coverups surfaced in mainland China in April 2003. Many blamed China for the global SARS crisis, which seems to have started in southern China. Critics argued thathad China been forthright in proclaiming the extent of the SARS problem, the disease would nothave spread throughout the country, and eventually to other countries. (34) In response to international criticism about its complacency and cover-up in preventing the spread of the virus, the Chinese government took a number of steps to demonstrate transparency andvigilance in combating the spread of SARS. The Mayor of Beijing and the Minister of Health werefired. (35) Chinese authorities also quarantined thosewith symptoms of the disease and those withwhom they had contact, often thousands at a time. (36) Entire apartment buildings, markets, hospitals,universities, and schools were shut down. All schools in Beijing were closed for nearly threemonths. (37) Chinese authorities banned all touristvisits from the central part of the country andTibet. (38) China also closed some border crossings,including some between China and Mongolia andpostponed reopening the Khunjirap crossing between China and Pakistan. (39) Chinese officials enacted new laws to fight SARS. One of China's most controversial laws, calls for the imprisonment or execution of anyone found intentionally spreading the virus. The firstperson facing punishment under this law is Dr. Li Song. Authorities charge Dr. Li with vandalismand violating an infectious disease law. (40) Hospitalofficials argue that he left a hospital knowing hehad SARS, and ultimately spread the virus to his family and more than 100 others in the small townof Linhe. Dr. Li's mother, father and wife have died of SARS, while Dr. Li remains in jail. (41) Other laws sought to halt the spread of the virus through fines. Authorities in the southern town of Guangzhou began fining individuals who spit in public 50 yuan (about $6 US), a fine that manywill find difficult to pay. (42) In Shanghai, thosefound spitting, as well as throwing away cigarettestubs or fruit peels in public areas, and dumping garbage and sewage in the wrong places are subjectto a fine of 200 yuan (about $24 US), compared to 50 yuan prior to the SARS outbreak. (43) China's moves to address the spread of SARS have also included financial assistance. The Chinese Ministry of Finance allocated a total of 440 million yuan (about $53 million) to reinforcethe fight against SARS. (44) Provincial and localgovernments also offered assistance to those affectedby SARS. Assistance included the distribution of temporary subsidies, disinfectants, protectivesurgical masks and soap. One Beijing district, the Dongcheng District, reported that it decided toprovide 420 thousand yuan (about $51 thousand) to its low income residents, and Chaoyang Districtallocated 350 thousand yuan (about $42 thousand) towards the purchase of preventive aids. (45) Meanwhile officials in Hong Kong announced a $1.5 billion aid package, which included waivingwater and sewage charges for the general public for up to four months, increasing income taxrebates, waiving license fees for heavily affected industries, guaranteeing $450 million in loans toaffected businesses, increasing medical research spending, and reducing commercial rents for storesat public housing sites and other government controlled properties. (46) The Chinese Government alsoreserved $128 million for a Hong Kong marketing campaign now that the city has been removedfrom the WHO list of infected areas. (47) Accordingto the Chinese Government, the internationalcommunity donated about $76.6 million to aid its fight against SARS. (48) On June 10, the WHO sent a high-level team, including Dr. David Heymann, Executive Director for Communicable Diseases at WHO, to China to assess the current situation and plan astrategy for the future. They proposed steps for examining and detecting cases, defining proceduresfor contact tracing, and responding to local transmissions. WHO was particularly concerned aboutthe capacity of the Chinese rural health systems to deal with emerging infectious diseases, fromeffective monitoring and reporting to adequate hospital care. (49) However, it found that surveillancesystems in two key rural provinces were effective. (50) China has also surprised many with the speedwith which it brought its outbreak under control. Some studies suggest that the mortality rate mayhave been lower, and the cure rate higher, than in other parts of the world. Differences in incubationperiod and groups at highest risk may provide clues for fighting the disease. According to Dr.Heymann, "Long-term containment depends on finding answers to a long list of scientific questions. China has much to offer the rest of the world." (51) On June 24, 2003, WHO removed its recommendation that people should postpone all but essential travel to Beijing, China. Beijing was the last area in the world to have the travel warninglifted. Beijing, with a cumulative total of 2,521 probable cases and 191 deaths, has had the largestoutbreak of SARS anywhere in the world, followed by Hong Kong with 1,755 cases and 296 deaths,and Guangdong Province with 1,511 cases and 57 deaths. (52) The doubling of SARS deaths (53) in Taiwan prompted WHO to send a team to investigate theisland's SARS situation. The sharp increase in new cases and deaths surprised some as Taiwaninitially appeared successful in curtailing mortality, avoiding international community transmission,as well as maintaining a relatively low number of new cases compared to mainland China. Thegovernment of Taiwan took early steps to avoid a massive SARS outbreak, including imposingmandatory 10-day quarantines on all visitors arriving from China, Hong Kong, Singapore orToronto; cancelling more than 100 commercial flights; cancelling high school exams scheduled forthe end of May; and monitoring the temperature of visitors to many public buildings and hotels. (54) In May 2003, the President of Taiwan, who has been vocal in his desire to gain Taiwanese observer status to the WHO (55) , stated thatTaiwanese hospital officials from Taipei Municipal HopingHospital may have tried to cover up a SARS outbreak. (56) In response, Taiwanese authorities fired thesuperintendent of the hospital and relocated all 200 patients and 900 employees from HopingHospital to a designated SARS facility while the hospital was being disinfected. (57) Shortly after, theTaipei City Government fined the Hoping Hospital 1.1 million Taiwan dollars ($31,682 US) andfour other hospitals 1.5 million Taiwan dollars ($43,202 US) each for delaying reporting SARS casesto health authorities, and revoked the licence of the former Jen Chi Hospital superintendent, LiaoCheng-hsiung, accusing him of covering up a SARS outbreak while serving. (58) The Taiwan Ministerof Health, Dr. Twu Shiing-jer, voluntarily resigned on May 16, 2003, taking full responsibility forthe SARS spread. (59) Two days later, more than140 medical employees across the island reportedlyresigned to avoid dealing with SARS patients. (60) The medical workers charged that the governmenthad failed to provide sufficient protective gear. (61) WHO officials believe that lapses in infection control, particularly in emergency rooms, may have been one of the reasons for the rapid increase in cases. (62) Reports seem to support the assertionthat Taiwanese health officials may not have taken enough measures to limit the spread of the virusboth within and among the hospitals. The Dean of Hoping Municipal Hospital's RadiologyDepartment reported that, "Everything went wrong. There is no proper quarantine facility." It wasreported that hospital staff did not separate SARS patients from non-SARS patients, and did not askpatients about their medical history. Concern about Taiwan's ability to contain the virus washeightened when CDC officials announced on May 23, 2003 that an American doctor sent with theWHO/CDC team to investigate Taiwan's recent upsurge in SARS cases was suspected to havebecome infected with SARS and was returned to the U.S. to undergo treatment. (63) CDC officialsadded that Hoping Hospital made the critical mistake of sending SARS patients to other hospitalsfor treatment, unwittingly spreading the disease. (64) In addition to its collaborative efforts with CDC and WHO, Taiwan bolstered its quarantine efforts, strengthened its contact tracing capabilities, and improved its infection control practices. TheGovernment of Taiwan also released a $1.44 billion U.S. aid package, which sought to assist ailingbusinesses and families of SARS victims, establish SARS prevention mechanisms, and createeffective SARS contact tracing mechanisms. (65) Taiwan was removed from the WHO list of areaswith recent local transmission on July 5, 2003. Its last probable case was reported on June 19, 2003. To date, 671 people have contracted the virus, of whom 84 have died. Vietnam, the poorest of the SARS-affected countries, was the first country to contain the SARS virus. The WHO removed Vietnam from its list of affected countries less than five weeks after itrecorded its first SARS death. (66) Vietnam washailed as a success story largely because of its rapidresponse to the health crisis, and its cooperation with WHO and CDC officials who offered criticaltechnical assistance. (67) According to the WHO,Vietnam was fortunate to have had only one carrier,who spent less than three days among the general public prior to hospitalization. This limited thenumber of contacts that the man made. Some observers praised the success of the country with less resources than its SARS-affected neighbors to rapidly contain the virus. One Vietnamese health official explained that Vietnam'sresponse contrasted with China's initial response in that Vietnam did not seek to downplay thepotential impact of the disease and it welcomed international assistance. France quickly announcedthat it would offer more than $100,000 to help sterilize Hanoi French Hospital, where the first SARScase was detected. (68) The WHO and CDC donatedmasks, gowns and other equipment; Japancontributed two ventilators and other medical supplies; Doctors Without Borders sent a medicalteam; and Vietnamese medical workers were trained in infection control techniques. (69) Vietnamesedoctors also voluntarily quarantined themselves in Bach Mai hospital, the designated SARS hospital,to avoid spreading the virus to their families and the general community. The government of Vietnam ordered the establishment of provincial and municipal steering committees responsible for closing down any entity and isolating any individual who contractedSARS or was suspected to be infected with the virus. (70) It also trained medical workers, customsofficers, airline staff and those working in the tourism sectors. (71) The Finance Ministry spent about$2 million on medical equipment and activities related to SARS prevention (72) and targeted a littlemore than $1 million for Vietnam's border provinces tasked with preventing SARS from leaving orentering Vietnam. (73) The Government of Vietnamrecently announced that it intended to spend anadditional $3.3 million to prevent SARS from returning. (74) Johnny Chen, believed to have carriedSARS to Vietnam from China, died of SARS on March 13, 2003. A little more than a month lateron April 28, 2003, the WHO announced that Vietnam was the first country to have contained thedeadly virus. A total of 63 people contracted SARS in Vietnam, 5 of whom died. (75) Some civil libertarians criticized the Government of Singapore in its response to the SARS virus as being too harsh. However, the World Health Organization commended Singapore on itsresponse to the virus. Dr. David Heymann, Executive Director of communicable disease programsat the WHO described Singapore's actions as "exemplary", and stated that "Singapore has been oneof the most successful countries in its response to SARS." (76) The World Health Organizationremoved Singapore from the list of areas with local SARS transmission on May 30, 2003. (77) Singapore's actions against SARS were viewed as swift and widespread. For example, the Ministry of Education required all schools to provide students with a personal thermometer, and toteach them to check their own temperatures daily. All students taking the national language examsin June 2003, underwent temperature checks before entering testing sites. The Ministry also requiredthe Institutes of Higher Learning to segment their large campuses into smaller sections to reducemovement across the campus and to facilitate contact tracing. Singapore required all students andhouseholds to have thermometers by June 2003. Other steps taken to prevent the spread of SARSincluded: directing all SARS cases to one hospital, installing video cameras in the homes of allquarantined individuals, electronically tagging violators of quarantine orders, using body thermalscanners at airports, enforcing mandatory temperature checks for all individuals departing Singaporeand those arriving from SARS affected areas, requiring all food handlers to take their temperaturestwice a day, and applying mandatory temperature checks for entry to many public events. On March 24, 2003, the Singapore Ministry of Health invoked the Infectious Disease Act to isolate thoseinfected with SARS, and prevent the further spread of the virus. The act was amended on May 23,2003, by requiring all those who broke the home quarantine to be tagged, arrested, detained, and/orfined. The first offense is punishable by up to $10,000 or 6 months imprisonment and repeatoffenders can be fined up to $20,000 or 12 months. (78) The Government of Singapore also unveiled a $230 million SARS relief package on April 17, 2003. Key elements include: a Home Quarantine Allowance Scheme, which pays an allowance to the self-employed and to small business owners who have employees affected by home quarantineorders; (79) property tax rebates for commercial properties and touristhotels; 50% reduction in foreign worker levy for unskilled workers employed bytourist hotels; a Bridging Loan Program, which offers working capital loans totourism-related small- and medium-sized enterprises; a Skills Redevelopment Program and SARS Relief Tourism TrainingAssistance Program, which offers funds to employers who send their employees to certified trainingcourses in the tourism sector; diesel and road tax rebates for taxis, and operator licence feewaivers; rebates on aircraft landing fees and rental spaces atairports; 50% reduction in port dues for cruise ships; and dollar-for-dollar matching of funds for the Courage Fund, a tripartite fundestablished to help the victims of SARS and affected health care workers. The fund received nearly$10 million in just 7 weeks. (80) Singapore was removed from the list of areas with recent local transmission on May 31, 2003. To date, 206 people have contracted SARS in Singapore, and 32 have died of the virus. The lastprobable case was reported on May 18, 2003. When SARS first emerged in the country some criticized Canadian officials for waiting too long to quarantine 500 members of a prayer group widely believed to have been the source of thevirus in Canada. (81) WHO officials alsocomplained that the Canadian government had been slowto relay current information. Relations between the U.N. agency and Canadian authorities werestrained when the WHO decided to place a SARS travel advisory on Toronto. Canada appealed tothe WHO to remove the travel advisory, because officials claimed they could trace all occurrencesof the virus. (82) On May 14, 2003, two days afterthe 24th SARS victim died, the WHO removed thetravel advisory, citing 20 days had passed without new cases. However, on May 23, 2003 Torontohealth officials reported that four new suspected SARS cases were under close surveillance. (83) OnMay 26, 2003, the WHO placed Toronto back on its list of countries with recent local transmission,but it did not place a travel advisory on the city. Following criticism of bureaucratic delay, Canadian officials took a number of steps to contain the virus, including inviting the U.S. Centers for Disease Control (CDC) to monitor its hospitals,closing a number of hospitals and clinics, and quarantining those individuals suspected to haveSARS. Canada also undertook a number of initiatives to aid businesses and individuals adverselyaffected by SARS. On April 30, 2003, the Government of Canada passed the SARS Assistance andRecovery Strategy Act, which protects the jobs of people affected by SARS, and enables employeesto take unpaid leave of absence for SARS-related reasons. It also included $1.7 million in newfunding to help scientists develop a new test and possible vaccine for SARS. All tourist facilitiesin Toronto were also exempt from retail tax from May 1, 2003 to September 30, 2003, under theact. (84) Another government initiative implemented to assist Canadians affected by SARS is the SARS Grant Initiative. Eligible full-time and part-time health care workers affected by SARS can receive$400 per week and $200 per week, respectively. This initiative complements adjustments made tothe Employment Insurance (EI) Act, which allows up to 15 weeks of special benefits when aneligible claimant is unable to work because of illness, injury or quarantine. The Government ofCanada has adjusted the EI program so that those who become ill due to SARS are not immediatelyrequired to provide a medical certificate, and no longer have to wait two weeks to receive benefits. (85) Other SARS-related actions include: committing $10 million toward a marketing campaign; arranging special payment schedules or temporary deferral of mortgagepayment for those who find it difficult to pay mortgages due to SARS; extending tax due dates, establishing flexible payment schedules and waivingtax penalties or interest for those affected by SARS; and offering a four-month postponement of capital payments without penalty andsmall capital loans to small businesses affected by SARS. (86) In June 2003, health workers concerned about their safety, including hundreds of nurses, demonstrated in Canada to demand danger pay, protective suits, and a public investigation into thecause of the SARS resurgence. Some nurses claimed that hospital officials were slow to respondto their warnings that patients in other wards showed SARS-like symptoms. Still, some familypractitioners expressed concern that health officials failed to notify them when the virus firstresurfaced. As a result, some family practitioners fell ill with the virus. (87) When the virus resurfacedthirteen people died of SARS and thousands were quarantined. (88) Toronto was removed from the list of areas with recent local transmission on July 2, 2003. The last probable case was reported on June 12, 2003. To date, 250 people have contracted the virus and38 have died of SARS. The rapid spread of the SARS virus underscored the importance of establishing a database system that would allow rapid and accurate information sharing on emergent infectious diseases. The Senate FY2004 Labor, Health and Human Services (HHS) and Education appropriations billprovides over $370 billion for infectious disease control at CDC, including $25 million for SARSresearch, prevention and control. It also includes $50 million to develop a Global Disease DetectionSystem at the CDC that would enable the United States to effectively respond to a global infectiousdisease threat. The Senate bill also increases NIH funding for emerging infectious disease fromnearly $600 million in FY2003 to $1.7 billion. Congress has also recognized the need to strengthen state and local capacity to respond to a bioterrorist attack or infectious disease outbreak. The Senate bill proposes that CDC funds for thatpurpose be maintained at FY2003 levels, $940 million. Part of strengthening state and local capacityincludes the support of the Health Alert Network (HAN). Prior to HAN, one-half of local publichealth departments did not have e-mail. The HAN system has been used to share information aboutSARS. Forty million U.S. dollars have been reserved for this purpose in the Senate version of theFY2004 Labor, HHS, and Education appropriations bill. The rapid spread of the SARS virus has demonstrated the need to quickly and effectively respond to an intentional or natural infectious disease outbreak. Congress appropriated $77.5 millionto the CDC Epidemic Services and Response program in FY2003. The Senate version of theFY2004 Labor, HHS and Education appropriations bill increases funding for those efforts to $127.5million in FY2004. The CDC Epidemic and Response program provides resources and scientificexpertise for operating and evaluating surveillance systems; develops and refines research methodsand strategies for public health practitioners; and trains public health professionals who respond topublic health emergencies and outbreaks. The Senate version also directs over $578 million to theHealth Resources and Services Administration (HRSA) to combat bioterrorism. (89) The SARS outbreak has provided lessons that may have future application. The WHO/CDCintervention greatly increased the effectiveness of the global response. A number of factorsinfluenced the outcome, such as the system of global alerts and awareness, and access to immediate,high-level research and scientific collaboration. Coordinated efforts through the WHO/CDC,national governments, and the public health professionals also led to positive results, as in the caseof Vietnam. Dr. Julie Gerberding, Director of the Centers for Disease Control and Prevention, hadhigh praise for WHO's leadership during the crisis and emphasized communication and transparencyas key to responding to international health crises. Areas in which improvements have been calledfor in the global response to infectious disease threats include: Lack of transparency in promptly reporting and monitoring SARS outbreaks directly contributed to the spread of the disease worldwide and had wide-ranging impacts beyond the obvioushealth factors. The case of SARS demonstrated that state responsibility within a globalized worlddoes not end at its borders and that future containment relies on openness and cooperation in theinterests of all populations. The ability of public health systems and the availability of resources to deal with a threat like SARS were clearly inadequate. Addressing the need and ability to mobilize additional resources,both within the country itself, and through the WHO network during an emergency, would improvethe response to similar challenges in the future. Some have expressed concern about the impactSARS could have had if the outbreak had reached developing countries with minimal health careinfrastructures, particularly those already weakened by HIV/AIDS. Others have argued that SARShas underscored the importance of boosting aid efforts that offer structural support, such as aidingin the training of health care professionals, donating medical supplies and equipment, upgradinghealth technologies, and ensuring universal inoculation against resurgent diseases such astuberculosis. The WHO had to strike a balance. On the one hand it was pressed to give information, and use aggressive tactics of containment. On the other hand, the information about SARS may havecontributed to public panic and anxiety, discrimination in some cases, and other impacts, such aseconomic losses. Some argue that the WHO did not take into account the impact of itsdecision-making concerning travel advisories and global alert warnings and that the SARS risksometimes did not demonstrate the need for such a response. (90) Some governments in the future maybe hesitant rapidly and openly to share outbreak information, because they may want to avoidpotential negative economic impacts, such as job losses, hotel closures and flight cancellations asoccurred at the height of the SARS crisis. For example, 60,000 restaurant and hotel workers in HongKong lost their jobs or were placed on unpaid leave during the SARS outbreak. (91) In Singapore,year-by-year comparisons showed that tourist arrivals fell 15% in March 2003 and 67% in April2003, and hotels reported occupancy rates of only 10 to 30%, compared to usual occupancy rates of70% or more during the first quarter of the year. (92) The weakness of national surveillance systems and health networks within any one country can dramatically affect the area and rate at which a disease spreads. If the SARS virus had spread morerapidly and extensively throughout the affected countries and for a sustained period, it could havehad a significant impact on the health care systems, and other systems. Those in need of health care,such as those with cancer, requiring surgery, or those requiring immediate medical attention may nothave been able to receive care. In order to contain the SARS virus, hospital wards and, at times,entire hospitals were shut down for weeks at a time to decontaminate them. Significant resourceswere used to quarantine SARS-infected individuals, schools were closed, and other private facilitieswere adversely impacted. Such problems caused by SARS illustrate the need to develop effectivenational response systems. WHO officials and others have argued that there is a need for increased funding for laboratories and epidemiological research in the fight to contain diseases like SARS. Improvements to theexisting surveillance network and national capacity to address emergency health issues are also badlyneeded. For example, GOARN reportedly needs $200 million to reinforce its network. (93)
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Severe Acute Respiratory Syndrome (SARS), a new highly infectious disease, was first identified by the World Health Organization (WHO) in February 2003. While the overall numberof confirmed cases is not high by comparison with statistics for other infectious diseases, the distanceand speed with which SARS spread raised an alarm over the potential risks to international publichealth. Containment appears to be working; however, there are fears that another SARS outbreakcould take place during the regular influenza season later in 2003. The United States was instrumental in the global effort to contain the spread of SARS. Affected countries responded in different ways. Singapore and Taiwan acted quickly andencouraged international support in curbing the spread of the virus. China, on the other hand, hasbeen criticized for down-playing the magnitude of the problem, particularly in the early phase of thedisease. This, some analysts contend, ultimately enabled the virus to cross borders and in the caseof Canada, hemispheres. This report takes a retrospective look at the global response by WHO and by those countries most affected. It reveals some of the challenges that may lie ahead for the global health community,such as global interdependence and transparency, surge capacity, management of public fear andinformation disclosure, coordination of different national responses, and lack of funding. Examiningthe impacts of SARS and lessons learned may be useful in the response to future outbreaks orincidences of new diseases. This report will not be updated.
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Quality of care in long-term care settings has been, and continues to be, a concern for federal policymakers. The Long-Term Care (LTC) Ombudsman Program is a consumer advocacy program that aims to improve the quality of care and quality of life for residents in nursing facilities and other residential care settings by responding to the needs of those facing problems in such facilities. Among their many functions, ombudsmen provide services to assist residents in protecting their health, safety, welfare, and rights. Ombudsmen help to resolve residents' complaints about the quality of their care and protect resident rights. Ombudsmen provide information, education, and consultation to residents, families, and staff regarding resident interests. Ombudsmen also advocate for systemic changes to improve resident care and quality of life, such as representing residents before governmental agencies or recommending changes to current law or regulation. Ombudsmen are available to help all LTC facility residents, not just those residents in nursing facilities certified by Medicare and Medicaid. This includes residents in assisted living facilities, board and care homes, and other similar adult residential care settings. Resident-focused ombudsman services complement those of federal and state staff who enforce facility-focused quality standards that are required under statute or regulation. This report describes the LTC Ombudsman Program authorized under the Older Americans Act (OAA). The OAA Amendments of 2006 ( P.L. 109-365 ) authorized appropriations for OAA-funded activities, including the LTC Ombudsman Program, through FY2011 (authorizations of appropriations expired on September 30, 2011). However, Congress has continued to appropriate funding for OAA-authorized activities for FY2012 through FY2015. The 114 th Congress may choose to reauthorize the OAA. In doing so, federal policymakers may consider amending or deleting existing authorities under the Act or establishing new authorities, including those under the LTC Ombudsman Program. In addition, Congress will likely consider annual appropriations for LTC Ombudsman Program activities, as well as appropriations for authorities under the Elder Justice Act enacted in the Patient Protection and Affordable Care Act (ACA; P.L. 111-148 , as amended) that support the LTC Ombudsman Program. This report briefly describes the LTC Ombudsman Program's legislative history, administrative function and other activities, and funding. The report presents program data related to funding sources and types of facilities funded in 2013, the most recent year for which data are available. The report also provides findings from an Institute of Medicine (IOM) evaluation of the LTC Ombudsman Program and other studies related to the Program. Finally, it identifies further issues for Congress to consider regarding the LTC Ombudsman Program. The Appendix summarizes provisions that would amend the LTC Ombudsman Program under the Older Americans Act Reauthorization Act of 2015 ( S. 192 ). The ombudsman demonstration project was created in 1972 as a Public Health Service (PHS) demonstration project in five states. Authority for administering the project was transferred to the Administration on Aging (AoA) within the Department of Health and Human Services (HHS) in 1973. The results of the demonstration project led to statutory authority for the LTC Ombudsman Program under the Older Americans Act (OAA) in 1978 ( P.L. 95-478 ). In 1987, the program was given a separate authorization of appropriations ( P.L. 100-175 ), and in 1992 it was incorporated into a new Title VII of the OAA authorizing vulnerable elder rights protection activities ( P.L. 102-375 ). Also in 1992, a provision was added to the OAA requiring the AoA to establish a permanent National Ombudsman Resource Center. The most recent amendments to the OAA, in 2006 ( P.L. 109-365 ), made no major changes to the program. Finally, the Elder Justice Act (enacted as part of the ACA) included two elder justice-related activities that would directly assist state LTC Ombudsman Programs. The first aims to improve the capacity of Ombudsman Programs, while the second addresses ombudsman training with respect to elder abuse. Both authorize appropriations to fund these initiatives through 2014. To date, no funding has been provided for these authorized programs. There are 53 LTC Ombudsman Programs operating in all 50 states, the District of Columbia, Guam, and Puerto Rico, and 575 local programs as of 2013. The AoA's National Ombudsman Reporting System (NORS) compiles national statistics relating to ombudsman activities. This information includes the number, status, and type of cases reported to state and local Ombudsman Programs; data on staff, volunteers, and funding; and other ombudsman activities. The OAA requires State Units on Aging (SUAs) to establish an Office of the State LTC Ombudsman (the Office). The functions of the state Ombudsman Programs are mandated by law and include identifying, investigating, and resolving resident complaints; providing services to assist residents in protecting the health, safety, welfare, and rights of the residents; providing information to residents about long-term services and supports; representing the interests of residents before governmental agencies and seeking administrative, legal, and other remedies to protect residents; and analyzing, commenting on, monitoring, and recommending changes in laws and regulations that pertain to the health, safety, welfare, and rights of residents. Complaints investigated by ombudsmen relate to actions, inactions, or decisions of LTC providers or other agencies that adversely affect the health, safety, welfare, or rights of residents. Among its other responsibilities, the Office is to analyze and monitor federal, state, and local policies that affect residential LTC facilities. The federal law requires that a full-time ombudsman administer the program at the state level; local ombudsmen may be designated by the state and are considered to be representatives of the Office. According to the AoA, most state Ombudsman Programs (35 states, Puerto Rico, and Guam) are located within SUAs (either independent SUAs or within an SUA that operates under an umbrella government agency). Another four state Ombudsman Programs are located in another government agency outside the SUA, and three states have state Ombudsman Programs that exist inside state governments but operate as independent agencies. Another eight states and the District of Columbia have Ombudsman Programs that are located outside of state government in other organizations, such as a legal services agency or protection and advocacy agency. Variation in the organizational placement of Ombudsman Programs exists partly because the OAA gives each state discretion in determining many aspects of the Ombudsman Program. For example, states can decide where Ombudsman Programs may be located organizationally within the state, whether enabling legislation should be passed at the state level, and whether additional funding will be made available through state and local sources. These differences mean that the structure, operation, and effectiveness of Ombudsman Programs vary from state to state. Moreover, certain characteristics and features of state LTC Ombudsman Programs, by design, make the program different than other OAA programs and services, such as the Ombudsman Program's independence, strict disclosure requirements, and the responsibility to designate staff and volunteers to serve as representatives. While these unique features and state variation exist, there has been concern among policymakers and other stakeholders that these features have led to inconsistent interpretation of OAA provisions and ultimately issues of compliance. To provide needed clarification of the responsibilities set forth under the OAA, as well as to address state variation in how OAA statute is interpreted, AoA published a final rule for State LTC Ombudsman Programs on February 11, 2015, after a notice of proposed rulemaking and public comment period. Since placement of the LTC Ombudsman Program under Title VII of the Act in 1992, minimal regulations regarding the program's operation existed. In AoA's analysis of and responses to public comments on the rule, the agency noted that it received general support for the rule. Commenters expressing support indicated that the rule addressed a needed gap, in general, with the potential to benefit residents and improve program quality. Specifically, the rule addresses the following areas of program implementation: State Agency Policies —Requires that the state LTC Ombudsman be responsible for monitoring the files, records, and other information maintained by the program and prohibits the disclosure of identifying information of any complainant or LTC facility resident to individuals outside of the program, except as otherwise provided. Definitions —Defines the following terms: immediate family; Office of the State LTC Ombudsman; Representatives of the Office of the State LTC Ombudsman; resident representative; State LTC Ombudsman; State LTC Ombudsman Program; and willful interference. Establishment of the Office of the State LTC Ombudsman —Sets forth requirements in establishing the Office of the State LTC Ombudsman (the Office), including designation of the Office; Ombudsman selection; and development of policies and procedures regarding program administration, procedures for access, disclosure, conflicts of interest, systems advocacy, designation, a grievance process, and determinations of the Office. Functions and Responsibilities of the State LTC Ombudsman —Sets forth responsibilities of the Ombudsman, including specified functions; determination of local ombudsman entities; training requirements; management and disclosure of program information; fiscal management; annual reporting; state-level coordination with other entities regarding rights of LTC facility residents; and other activities as the Assistant Secretary determines appropriate. State Agency Responsibilities Related to the Ombudsman Program —Sets forth responsibilities of the state agency in ensuring that the Ombudsman complies with relevant provisions of the Act and this rule, including ensuring sufficient authority and access to facilities; providing training opportunities; providing personnel supervision and management; and providing performance and fiscal program monitoring, among other specified responsibilities. Responsibilities of A gencies H osting L ocal Ombudsman E ntities —States that host agencies are responsible for the personnel management, but not programmatic oversight, of representatives of the Office. Host agencies cannot have policies or practices that prohibit representatives of the Office from performing duties and other required activities. Duties of the Representatives of the Office —Authorizes the Ombudsman to designate local Ombudsman entities and employees or volunteers of the entity as representatives of the Office; also authorizes the designation of an employee or volunteer within the Office. Describes the duties of an individual designated as a representative of the Office and specifies requirements for complaint processing activities. Conflicts of Interest —Requires the state agency and the Ombudsman to identify organizational and individual conflicts of interest and, if identified, remove and remedy such conflicts. AoA expects that some states may need to update policies in order to operate programs that are consistent with the final rule. As a result, the effective date for the final rule is July 1, 2016. Accordingly, AoA indicates that the agency intends to provide technical assistance and training to states prior to the rule's effective date to allow states time to make adjustments to state laws, regulations, guidance, and other related policy. In addition to resolving resident complaints, providing education and information, and engaging in advocacy activities, Ombudsman Programs participate in a number of other federal initiatives. These activities range from involvement with quality improvement initiatives to informing nursing home residents and family members about various LTC options to having an expanded role in home care services. For example, the Centers for Medicare & Medicaid Services (CMS) encourages ombudsmen to communicate and work collaboratively with Quality Improvement Organizations (QIOs). Ombudsmen may assist QIOs in identifying and working with facilities on quality assessment and improvement efforts. They may assist residents and family members with the use of quality measures in selecting a nursing home, or they may work to improve resident assessment instruments used for care planning. Ombudsmen may also assist residents transitioning from nursing homes to private homes or other residential care facilities. In doing so, ombudsmen may refer residents and family members to community resources or monitor the discharge planning process. Some Ombudsman Programs are actively involved in federal nursing home transition initiatives such as the CMS Money Follows the Person Rebalancing Demonstration program. Ombudsman Programs may participate in state level coalitions and advisory committees that oversee these initiatives. In some states, ombudsmen have received training about such initiatives in order to better assist residents with transitions. In addition, some states that are piloting integrated Medicare and Medicaid service models (Duals Demonstrations) have expanded their LTC Ombudsman services to include assistance to individuals receiving services through the demonstration. Through a CMS funding opportunity, Duals Ombudsman Programs provide services to support beneficiaries, complaint investigation and resolution, and systems-level analysis and recommendations. Some states have also expanded their state LTC Ombudsman Programs to address LTC provided in home settings. However, one limitation in statute is that states cannot use federal funding designated for the LTC Ombudsman Program under OAA to serve individuals receiving home and community-based services (HCBS) in their own homes. As of 2013, twelve states and the District of Columbia had expanded their LTC Ombudsman Programs into HCBS through state laws or other provisions. These programs use grant funding, additional state funding, and other non-OAA federal funding to extend the program's jurisdiction. However, the role and function of home care ombudsmen varies, and no standardized best practices for home care ombudsman exist. State-based home care ombudsman programs cover complaints across a range of services, including home care services that may be privately funded, state funded, or funded through the OAA, home health agency services, adult day services, and hospice. Ombudsman program activities may also directly benefit the Medicaid program and in doing so may qualify for Medicaid administrative funding to the extent these expenditures can be allocated properly to state's Medicaid programs. In guidance issued by CMS, Medicaid administrative funds may support certain LTC Ombudsman Program activities, subject to the requirements for Medicaid administrative claiming. The following provides examples of activities that may be eligible for Medicaid administrative funding: Identifying and referring individuals who may be eligible for Medicaid services, as well as education and consultation to potential Medicaid enrollees on facilitating the enrollment process. Tracking and reporting to the state Medicaid enrollee requests for assistance in obtaining covered Medicaid services. Consultation and advocacy in transitioning individuals from Medicare Part A coverage into the Medicaid nursing facility benefit, or from private pay status into a Medicaid funded nursing facility or other services, such as home and community-based services. Consultation and advocacy to assist individuals participating in Medicaid home and community-based waiver programs. Identifying Medicaid-eligible residents who want to transition out of nursing facilities and connecting them with the appropriate entities to assist them in returning to the community. Identifying and reporting suspected instances of Medicaid fraud, waste, and abuse to federal and state agencies for further investigation and action. Other LTC Ombudsman Program activities that are necessary for the proper and efficient administration of the Medicaid state plan as determined by the HHS Secretary. LTC Ombudsman Program activities for which Medicaid administrative funding is not available include activities to assist individuals with gaining access to or coordination of non-Medicaid benefits or services, such as social, educational, vocational, legal, and advocacy services. State Medicaid agencies must have an interagency agreement or contractual arrangement with the state agency or other entity that administers the state LTC Ombudsman Program for expenditures to be claimable under Medicaid. The state Medicaid agency is the only entity that may submit claims to receive federal matching assistance. LTC Ombudsman Program activities receive a 50% federal matching rate similar to other general administration activities. The OAA Amendments of 2006 ( P.L. 109-365 ) authorized appropriations for the LTC Ombudsman Program through 2011(authorizations of appropriations expired on September 30, 2011). However, Congress has continued to appropriate funding for Ombudsman Program activities in subsequent fiscal years through FY2015. Ombudsman activities are authorized under two separate titles of the OAA: Title III—Grants for States and Community Programs on Aging, and Title VII—Vulnerable Elder Rights Protection Activities. Title III authorizes grants to states for supportive services and senior centers that provide for a wide range of social services, including ombudsman activities. Title VII authorizes grants to states for Chapter 2 (the LTC Ombudsman Program) and Chapter 3 (the Elder Abuse Prevention Program). Under Chapter 3, some states choose to perform elder abuse prevention activities through the LTC Ombudsman Program. Title VII programs received $20.7 million of federal funding in 2015. While the majority of federal funding for ombudsman activities comes from appropriations for Titles III and VII of the OAA, the program also receives substantial nonfederal support. Table 1 shows total support for ombudsman activities in 2013, the most recent year for which data on funding from all sources are available. Total 2013 funding for ombudsman activities from all sources combined (federal and nonfederal) was $92.5 million. Of that total, 55.8% represented funding from federal sources, with 30.0% from Title III funds, 21.3% from Title VII funds, and 6.7% from other federal funds. In 2013, nonfederal funding represented 44.2% of total support (37.3% state funding and 6.9% local funding). In 2003, the share of federal funding for LTC Ombudsman Program activities was 63%, while the proportion of funding at the state and local level was 28% and 9%, respectively. Since then, the share of federal funding has decreased to 56% in 2013, its lowest share over the past decade. The proportion of program funding from state governments increased to 37%, its highest share over the past decade, with a slight decrease in the proportion of funding from local governments (7%). Total funding for LTC Ombudsman Program activities in 2003 (nominal dollars) was $68.0 million (which was comprised of $42.9 million in federal funding, $19.1 million in state funding, and $6.1 million in local funding). In 2013, there were 1,233 paid staff (full-time equivalents) in state LTC Ombudsman Programs, an increase of 7% since 2003. Despite this increase, the program still relies heavily on volunteers to carry out program responsibilities. Nine out of every 10 ombudsman staff are volunteers. In 2013, there were just under 12,300 total volunteers; two-thirds (67%) were certified to investigate complaints, representing a decrease in the proportion of certified volunteers in the past five consecutive fiscal years. Over the past decade, the total number of volunteers has ranged from about 11,400 to over 13,800, with an average of 12,300 volunteers in a given year. In 2013, ombudsman programs in 48 states and the District of Columbia reported at least one certified volunteer. Two states (South Dakota and Wyoming) and Puerto Rico reported no volunteer activity during this period. The 1995 IOM evaluation, along with a study done by the Office of Inspector General (OIG) in HHS in 1991, acknowledged the importance of volunteers as a contributing factor to high complaint resolution rates in this program. However, the IOM evaluation advised that adequate methods for recruiting, training, and supervising volunteers are essential to utilizing Ombudsman Program volunteers. State programs have different procedures for certifying volunteers, varying from required classroom training to tests for certification. In 2013, ombudsmen reported over 16,500 nursing facilities and about 53,400 other residential LTC facilities operating nationwide. Since 2000, the total number of regulated facilities has increased 15% from about 61,000 to almost 70,000 in 2013 (see Figure 1 ). This change is due to an increase in assisted living facilities, board and care homes, and other similar facilities, which more than offset the decrease in nursing homes over this time period. Due to the requirement that ombudsmen investigate and resolve the complaints of all residents in residential LTC facilities, the workload of staff and volunteers is substantial, as shown by the reported ratio of staff to facilities and beds. The nationwide ratio of paid ombudsman to facilities was one ombudsman to every 56 facilities in 2013, a somewhat higher ratio than reported in 2003 (one ombudsman to every 53 facilities). Nationwide, there were a reported 2.99 million facility beds under the program's jurisdiction (almost 1.72 million nursing home beds and just over 1.27 million beds in other LTC facilities) in 2013. The nationwide ratio of full-time paid ombudsman to facility beds was about one ombudsman per 2,400 beds, a smaller ratio than reported in 2000 (one ombudsman per 2,800 beds). However, it is important to note that these ratios are nationwide, and each state has a unique ratio of paid ombudsman staff per facility bed. The 1995 IOM study recommended a standard staffing ratio of one paid full-time equivalent staff per 2,000 LTC facility beds. Despite the high number of facilities to be covered by each ombudsman, ombudsman staff and volunteers visited 70% of nursing homes on a regular basis (defined as at least quarterly) in 2013. These visits were not in response to a complaint. The percentage of nursing homes visited regularly by ombudsman staff was greater than visits by staff to other residential LTC facilities. The proportion of regular visits to assisted living and other LTC facilities was 29% in 2013. Over the past decade, the proportion of regular visits in both settings has declined from more than half of LTC facilities receiving at least a quarterly visit in 2003 (54%) to 39% in 2013. State ombudsman programs are responsible for training new and existing staff. The OAA contains only basic requirements for training and stipulates that the AoA is to develop model standards for training LTC ombudsmen, both paid and unpaid volunteers. Furthermore, the law stipulates that the state LTC Ombudsman is responsible for establishing procedures for training representatives of the local ombudsman program based on the AoA standards and that training is to be developed in consultation with representatives of citizen groups, LTC providers, and ombudsmen. In the absence of specific federal training requirements and/or required training materials, many states have developed their own standards. Several states provide the training directly through an individual responsible for conducting all of the training, while some states require local ombudsman programs to conduct training. State LTC Ombudsman Programs have received assistance in developing training programs from the National Long-Term Care Ombudsman Resource Center. As advocates for residents' rights in LTC facilities, ombudsmen work to resolve resident complaints. In 2013, AoA data show that ombudsmen opened about 125,000 new cases of resident complaints and closed almost 124,000 cases in all types of facilities. Compared to FY2012, the number of complaints decreased by less than 2%, from 194,000 to about 191,000 complaints. Over the past decade, the number of resident complaints has decreased overall by one-third (33%), from 286,000 complaints in 2003. The top five resident complaint categories in nursing homes for 2013 were 1. problems with discharge planning or eviction notification and procedures; 2. unheeded requests for assistance; 3. lack of dignity or respect for residents by staff; 4. resident conflict, including roommate conflict; and 5. problems with organization or administration of medications. These top five complaints have generally remained among the top 10 resident complaints in nursing homes over the past decade. Similarly, the top five resident complaint categories in other LTC facilities for 2013 have remained the same over the past decade: 1. lack of quantity, quality, variety, and choice in food; 2. problems with medication administration or organization; 3. inadequate discharge or eviction notice or procedure; 4. lack of dignity or respect for residents by staff; and 5. poor equipment or building conditions. In 2013, the top five resident complaints in nursing homes and other LTC facilities accounted for over one-fifth of all complaints for each facility type. The most recent national evaluation of the Ombudsman Program was conducted in 1995 by the IOM. Since then, various studies have examined factors associated with program effectiveness. Given the growth in the number of long-term care facilities over this time period and potential for increased demand in long-term services and supports with the aging of the baby-boom generation, findings and recommendations from these studies may still be relevant to the program implementation today. For example, the 1995 IOM study concluded that the program plays an important role in improving long-term services and supports but is understaffed and underfunded to carry out its broad and complex responsibilities. In March 1999, HHS's OIG recommended that AoA work with states to strengthen the program by developing guidelines for a minimum level of program visibility that include criteria for the frequency and length of regular visits, as well as the ratio of ombudsman program staff to LTC beds; further developing strategies for recruiting, training, and supervising more volunteers; and establishing ways in which ombudsman programs can enhance collaboration with the state nursing home survey and certification agencies, which are responsible for oversight of nursing home care quality. A 2000 study of state ombudsman programs reaffirmed the importance of several factors identified in the IOM evaluation as key to program effectiveness, including sufficient funding, staff, and volunteers; autonomy of the ombudsman program in terms of organizational placement within the state; a supportive political or social environment; and strong interorganizational relationships. A study of local ombudsman programs conducted in two states, California and New York, in 2004, found wide variation both across and within each state's program in terms of program location (area agency on aging versus nonprofit organization) and the number of paid staff versus volunteers. Despite reporting that their program budgets were inadequate to support their mandated requirements, program coordinators in both states perceived their programs as effective, more so in the nursing home setting than in board and care facilities. Program coordinators in both states similarly identified staffing, resident care, and residents' rights as the most pressing issues. A 2010 study of factors associated with the effectiveness of local LTC Ombudsman Programs in California and New York across five activities mandated by the OAA found that no single factor was associated with effective performance of local programs. However, researchers found patterns among categories they proposed were relevant to program effectiveness. The five mandated activities studied were complaint investigation, resident/family education, community education, monitoring laws, and policy advocacy. For example, perceived quality of training and organizational autonomy was associated with effectiveness for several mandated activities in both states. However, program size was associated with effectiveness in different ways across the two states, suggesting there may be a minimum amount of staffing and resources needed for effectiveness, but above which further gains are not uniformly achieved. In 2011, AoA awarded a contract to NORC at the University of Chicago to develop an evaluation study design to assess the effectiveness of LTC Ombudsman Programs. In collaboration with the ACL and a Technical Advisory Group created to guide and inform research objectives and design, NORC issued a report that describes an evidence-based approach and recommendations for a comprehensive study design that consists of process and outcomes evaluation activities. NORC states that proposed evaluation activities are adaptable and scalable depending on resource needs. As the nation prepares for an increase in the number of older individuals and an increase in demand for long-term services and supports among the frail elderly, ensuring quality of care in LTC facilities will likely remain a key issue for federal policymakers. The role of the LTC Ombudsman Program in providing resident and systems advocacy to improve quality of care may be a focus for the 114 th Congress. Specifically, Congress may want to consider efforts to understand resource adequacy, the role of the LTC Ombudsman Program in home and community-based service expansion, furthering efforts with respect to LTC Ombudsman training and prevention of elder abuse, and the reauthorization of the Older Americans Act. The increasing number of residential care facilities has placed pressure on state LTC Ombudsman Programs to monitor quality of care in these settings. Ombudsmen indicated that regular visitation to these facilities was often limited and in some cases nonexistent. In addition, federal funding appropriated for state LTC Ombudsman Programs in the annual Labor-HHS-Ed appropriations bill, unadjusted for inflation, has remained relatively flat over the past decade ($20.1 million in FY2006, compared to $20.7 million in FY2015). At the same time, the total number of facilities ombudsmen oversee has increased 9% in 10 years (by more than 6,000 facilities). That increase is entirely driven by the growth in residential care settings, which increased almost 12% over that time period, while nursing facilities decreased by more than 1%. In a study of LTC Ombudsman Programs in three states, coordinators reported a lack of resources (e.g., time, funding, and personnel), as well as the need to prioritize certain mandates over others (e.g., prioritizing complaint investigation over systems advocacy). Policymakers may choose to address greater ombudsman program oversight of residential care facilities through additional staffing and resources for ombudsman programs and specialized training on the needs of residents in these settings. The growth in home and community-based services, and the increase in demand for such services, has also drawn attention to potential problems with quality of care in home-based settings. Stakeholders have identified a perceived need for an in-home care ombudsman program to address quality of care issues among these LTC recipients. Policymakers may choose to consider extending ombudsman activities to older persons receiving LTC in their own home. These activities are not among those financed by the Older Americans Act. However, without additional staff or resources to expand ombudsman activities to home settings, federal expansion of the program may overwhelm an already strained system. Moreover, the number of additional staff and amount of resources needed to provide adequate ombudsman services to home care recipients is not known. Expanding the role of ombudsmen in quality improvement efforts, as well as assisting in transitions from nursing homes, emphasizes the need for a well-trained and informed ombudsman staff. However, most ombudsmen are volunteers, and ombudsman training procedures and standards vary by state. In order for the LTC Ombudsman Program to serve as a valued resource for outreach and referral to community services, the ombudsmen must be educated and informed about the financing and delivery of long-term services and supports (LTSS). Ombudsmen must also have well-developed communication and critical thinking skills in order to help resolve resident complaints. Policymakers may consider establishing federal training requirements or providing technical assistance for training, such as national or regional training institutes. The LTC Ombudsman Program plays a key role in identifying and investigating complaints regarding resident abuse and neglect. A study of national trends in reporting of abuse and neglect in nursing facilities from 2006 to 2013 using NORS data found that physical abuse by a nonresident was the most frequent complaint in each year reported. The same study found that over this time period, the total number of abuse and neglect complaints in nursing facilities decreased. Complaint reductions were observed for all types of abuse and neglect complaints, with the exception of financial exploitation. Overall, from 2006 to 2013 the number of total complaints, including those identified as abuse and neglect, in both nursing and other residential care facilities declined by one-third. These national trends point to a need for further understanding and research; enhancements to national data, such as NORS, that could examine reasons for a decline in reporting overall; and reporting among specific categories and within settings. Provisions enacted under the Elder Justice Act, if funded, could also provide additional resources to assist the LTC Ombudsman Program address elder abuse. On January 20, 2015, the Senate introduced a bipartisan bill to reauthorize the Older Americans Act for a three-year period. The Older Americans Act Reauthorization Act of 2015 ( S. 192 ) would authorize appropriations for most OAA programs through FY2018. It also would make various amendments to existing OAA authorities, including proposed changes to the LTC Ombudsman Program. On January 28, 2015, the Senate Health, Education, Labor, and Pensions (HELP) Committee ordered S. 192 reported favorably. On July 17, 2015 the bill was passed by voice vote in the Senate and subsequently received in the House and referred to the House Education and Workforce Committee. Key LTC Ombudsman Program provisions under S. 192 address state organization, procedures for access and disclosure, and conflicts of interest (see the Appendix for a summary of these provisions). To date, legislation to reauthorize OAA has not been introduced in the House. The Older Americans Act Reauthorization Act of 2015 ( S. 192 ) was introduced January 20, 2015, and would authorize appropriations for most OAA programs, including the LTC Ombudsman Program, through FY2018. Provisions that would amend the program under Section 8 of the bill (as reported to the Senate on February 3, 2015) are summarized below. Ombudsman Definitions The bill would amend the definition of the term "resident" to mean "an individual" who resides in a LTC facility instead of (as currently) an "older individual." Thus, it would eliminate explicit reference to "older" individuals, which would allow residents of any age who reside in LTC facilities to receive Ombudsman Program services, including investigating and resolving complaints. Ombudsman Programs The bill would require the state long-term care (LTC) Ombudsman to be responsible for the management, including the fiscal management, of the Office of the State LTC Ombudsman (hereinafter referred to as the "Office"). It would amend the functions of the Ombudsman to add language stating that the Ombudsman's functions include identifying, investigating, and resolving complaints that are made by, or on behalf of, residents with limited or no decision making capacity and who have no known legal representative. It would further specify that if such a resident is unable to communicate consent for an Ombudsman to work on a complaint involving the resident, the Ombudsman would be required to seek evidence to indicate what outcome the resident would have communicated and work to accomplish that outcome. It would also amend the duties of designated local ombudsman entities and representatives to identify, investigate, and resolve complaints made by or on behalf of residents with limited decision making capacity in similar circumstances. In addition to residents having regular and timely access to the Ombudsman's services, the bill would require that the Ombudsman ensure that residents have private and unimpeded access to such services. In providing technical support for the development of resident and family councils, the bill would require the Ombudsman to actively encourage and assist in the development of such councils. Similarly, it would also amend the duties of designated local ombudsman entities and representatives to actively encourage and assist in the development of such councils. It would further add that the Ombudsman, when feasible, continue to carry out specified functions on behalf of residents transitioning from a LTC facility to a home care setting. Procedures for Access The bill would amend the requirement that a state ensure representatives of the Office have "access" to LTC facilities and residents to specify that representatives have "private and unimpeded access." It would also amend the current law provision that requires representatives to have appropriate access to the medical and social records of a resident, subject to certain conditions, to provide that representatives have appropriate access to "all files, records, and other information" concerning a resident rather than (as currently) "files." It would amend current law to clarify that representatives must have appropriate access to review such information when a resident is "unable to communicate consent" to the review and has no legal representative, rather than (as currently) "unable to consent." Similarly, it would expand the requirement that representatives have access to the "records" as is necessary to investigate a complaint, to specify that representatives have access to the "files, records, and information" necessary. It would add that the Ombudsman and representatives of the Office would be considered a "health oversight agency" for purposes of Section 246(c) of the Health Insurance Portability and Accountability Act of 1996 (HIPAA, P.L. 104-191 ), including regulations issued under that section. Thus, the release of residents' individually identifiable health information to the Ombudsman could not be prevented from occurring under certain specified circumstances. Disclosure Current law requires the state agency to establish procedures for the disclosure of files maintained by the program by the Ombudsman or other ombudsman entities. The bill would strike the language "files and records" and replace it with "files, records, and other information" in each place the term appears under disclosure requirements. It would amend disclosure requirements pertaining to the identity of the complainant or resident to ensure that the Ombudsman may disclose information as needed in order to best serve residents with limited or no decision making capacity who have no known legal representative and are unable to communicate consent, in order for the Ombudsman to carry out functions and duties as described. Conflict of Interest The bill would replace the subsection on conflict of interest with a new subsection that separately describes individual and organizational conflict of interest. Individual Conflict of Interest The bill would require the state agency to ensure that no individual, or member of an immediate family of an individual, involved in the designation of the Ombudsman, or the designation of a local ombudsman entity or representative, is subject to a conflict of interest. Furthermore, the state agency would be required to ensure that no officer or employee of the Office, representative of a local Ombudsman entity, or member of the immediate family of the office, employee, or representative, be subject to a conflict of interest. The bill would also require the state agency to ensure that the Ombudsman does not have direct involvement in the licensing or certification of a LTC facility or provider of a LTC service; does not have an ownership or investment interest in a LTC facility or service; is not employed by, or participating in the management of, a LTC facility or a related organization, and has not been employed by such a facility or organization within one year before the date of the determination involved; does not receive, or have the right to receive, directly or indirectly, remuneration under a compensation arrangement with an owner or operator of a LTC facility; does not have management responsibility for, or operate under the supervision of an individual with management responsibility for adult protective services (APS); and does not serve as a guardian or in another fiduciary capacity for residents of LTC facilities in an official capacity. Organizational Conflict of Interest The bill would require the state agency to comply with specified requirements in a case where the Office poses an organizational conflict of interest, including a situation in which the Office is placed in an organization that is responsible for licensing, certifying, or surveying LTC services in the state; is an association of LTC facilities or any other residential facilities for older individuals; provides LTC services including those carried out under certain Medicaid waiver and other authorities; provides LTC case management; sets rates for LTC services; provides APS; is responsible for Medicaid eligibility determinations; conducts preadmission screenings for placement in LTC facilities; or makes decisions regarding admission or discharge of individuals to or from such facilities. The state agency would not be authorized to operate the Office or carry out the program, directly or by contract or other arrangement, in a case in which there is an organizational conflict of interest unless such conflict of interest has been identified by the state agency, disclosed by the state agency to the Assistant Secretary in writing, and remedied in accordance with certain requirements. In a case where potential or actual organizational conflict of interest involving the Office is disclosed or reported to the Assistant Secretary by any person or entity, the Assistant Secretary would require the state agency to remove the conflict or submit and obtain the approval of the Assistant Secretary for an adequate remedial plan that indicates how the Ombudsman will be unencumbered in fulfilling specified functions.
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Quality of care in long-term care settings has been, and continues to be, a concern for federal policymakers. The Long-Term Care (LTC) Ombudsman Program is a consumer advocacy program that aims to improve the quality of care, as well as the quality of life, for residents in LTC settings by investigating and resolving complaints made by, or on behalf of, such residents. Established under Title VII of the Older Americans Act (OAA), the Administration on Aging (AoA) within the Administration for Community Living in the Department of Health and Human Services (HHS) administers the nationwide program. As of 2013, there were 53 state LTC Ombudsman Programs operating in all 50 states, the District of Columbia, Guam, and Puerto Rico, and 575 local programs. Title VII programs received about $20.7 million in FY2015. Total 2013 funding for ombudsman activities from all sources combined (federal and nonfederal) was $92.5 million, the most recent year for which data on funding from all sources are available. Of that total, 55.8% ($51.6 million) represented funding from federal sources. Due to the requirement that ombudsmen investigate and resolve complaints of all residents in residential LTC facilities, the workload of staff and volunteers is substantial. In 2013, ombudsmen reported just over 16,500 nursing facilities and about 53,400 other residential LTC facilities operating nationwide. This translated to a nationwide ratio of one paid ombudsman for every 57 facilities and one paid ombudsman for every 2,400 resident beds. With respect to staffing, the program receives significant support from volunteers. In 2013, over 1,200 paid staff and about 8,300 certified volunteers investigated more than 190,000 resident complaints. Issues regarding residents' rights were the chief complaint in nursing homes, followed by residents' care issues in 2013. Among residents in other LTC facilities, the top complaint categories in 2013 were quality of life and residents' rights. The OAA Amendments of 2006 (P.L. 109-365) authorized appropriations for the LTC Ombudsman Program through FY2011 (authorizations of appropriations expired on September 30, 2011). Congress has continued to appropriate funding for OAA-authorized activities for FY2012 through FY2015. The 114th Congress may choose to reauthorize the OAA. In doing so, federal policymakers may consider amending or deleting existing authorities under the Act or establishing new authorities, including those under the LTC Ombudsman Program. In addition, Congress will likely consider annual appropriations for LTC Ombudsman Program activities, as well as appropriations for authorities enacted under the Elder Justice Act enacted in the Patient Protection and Affordable Care Act (ACA; P.L. 111-148, as amended) that support the program. This report describes the LTC Ombudsman Program, including the program's legislative history, administrative function, other resident advocacy activities, and 2013 funding amounts by source. It also identifies selected issues for federal policymakers, including staffing and resources, in-home care ombudsman, and specialized ombudsman training. The Appendix includes a summary of provisions included in S. 192, the Older Americans Reauthorization Act of 2015, that would amend the LTC Ombudsman Program.
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